Residential Status of Individual – Base of Taxability in India

Section 6 of the Income-tax Act [Residential Status]

In order to determine the residential status under Income-tax Act, number of days of stay in India is to be calculated in previous year for which residential status is to be determined.

Following are the scenarios in order to determine the primary residential status of an Individual:

1. As per section 6(1) of the Income-tax Act, an Individual is said to be resident if his stay in India in that year is

182 days or more  

or 

60 days or more in that year & 365 days or more in last four previous year preceding that year for which residential status is to determine.

2. As per explanation 1(a) to section 6(1), in the case of an Individual being a citizen of India who leaves India in any previous year as a member of crew of Indian ship or for the purpose of employment outside India, will be treated as resident if his stay in India in that year is

182 days or more  

or 

182 days or more in that year & 365 days or more in last four previous year preceding that year for which residential status is to determine.

3. As per explanation 1(b) to section 6(1), in the case of an Individual being a citizen of India or person of Indian origin who stays outside India comes to visit India in any previous year, will be treated as resident if his stay in India in that year is

182 days or more  

or 

182 days or more in that year & 365 days or more in last four previous year preceding that year for which residential status is to determine.

4. As per explanation 1(b) to section 6(1), in the case of an Individual being a citizen of India or person of Indian origin who stays outside India comes to visit India in any previous year & having total income other than income from foreign sources exceeding Rs. 15 lakhs, will be treated as resident if his stay in India in that year is

182 days or more  

or 

120 days or more in that year & 365 days or more in last four previous year preceding that year for which residential status is to determine.

5. Notwithstanding anything contained in section 6(1), as per section 6(1A), in the case of an Individual being a citizen of India having total income other than income from foreign sources exceeding Rs. 15 lakhs and he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature, will be deemed to be treated as resident if his stay in India in that year.

Further, in case an Individual treated as resident u/s 6(1), then provisions contained in section 6(1A) does not apply.

After an Individual is determined as resident as per the provisions contained in section 6(1) & 6(1A). Provisions contained in section 6(6) needs to be checked in order to determine whether the Individual is ordinary resident or not.

As per section 6(6), any of the following two conditions needs to be satisfied in order to treat the Individual as RNOR:

1. An Individual who has been non-resident in India for 9 out of 10 previous years preceding that year for which residential status is to be determined or

2. An Individual who has been in India for 729 days or less in 7 previous years preceding that year for which residential status is to be determined.

Further, an Individual covered under the conditions contained in explanation 1(b) to section 6(1) is said to be RNOR, if stay of such individual in India is 120 days or more but less than 182 days.

Further, an Individual covered under the conditions contained in section 6(1A) is said to be RNOR.

Note:

1. Person of Indian Origin – A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India. [Explanation to clause (e) of section 115C]

2. Income from Foreign Sources – means income which accrues or arises outside India except income derived from a business controlled in or a profession set up in India and which is not deemed to accrue or arise in India.

3. As per Citizenship Act, 1955, a person can be provided citizenship in India by the following ways :

a. By Birth

b. By Descent [origin or background of a person in terms of family or nationality]

c. By Registration

s. By Naturalisation

Section 5 of the Income-tax Act [Scope of Total Income]

 ROR – Resident and Ordinary Resident

RNOR – Resident but Not Ordinary Resident

NR – Non Resident

Disclaimer – Above article is only meant for educational purpose. Kindly consult a competent person before taking any view on the basis of above article and the author is not responsible for any views taken on the basis of above article.