RESIDENTIAL STATUS OF INDIVIDUAL AND INCOME TAX RATE OF INDIVIDUAL.

RESIDENTIAL STATUS OF INDIVIDUAL

The Residential Status of a Individual / HUF earning income is very much relevant for determining the tax liability of such income in his/her hands. Taxability of any Income depends on the two things, i.e. Residential Status of Individual / HUF & nature of Income.

As per Income Tax Act, 1961 Individual can have three type of residential status as under:

1 Residential Condition (1): He is in India for a period of  182 days or more in that year or

Condition (2): He is in India for a period of 60 days or more in the year and for a period of 365 days or more in 4 years immediately preceding the relevant year.

However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. The similar concession is provided to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.

(Refer Note:1)

2 Resident but Not Ordinary Resident A resident individual will be treated as resident and ordinarily resident in India during the year if he satisfies following conditions:

(1) He is resident in India for at least 2 years out of 10 years immediately preceding the relevant year.

(2) His stay in India is for 730 days or more during 7 years immediately preceding the relevant year.

(Refer Note:2)

3 Non Resident If the person is not resident, then he will be Non Resident.

Every year the residential status of taxpayer is to be determined in above manner, so each year residential status may differ then previous year or may be the same depends on the fulfillment of conditions.

Note-1:  However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. The similar concession is provided to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.

The Finance Act, 2020, w.e.f., Assessment Year 2021-22 has amended the above exception to provide that the period of 60 days as mentioned in (2) above shall be substituted with 120 days, if an Indian citizen or a person of Indian origin whose total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. 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).

Note: The Finance Act, 2020 has introduced new section 6(1A) to the Income-tax Act, 1961. The new provision provides that an Indian citizen shall be deemed to be resident in India only if his total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. For this provision, 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).

However, such individual shall be deemed to be Indian resident only when he is not liable to tax in any country or jurisdiction by reason of his domicile or residence or any other criteria of similar nature.

Note-2: However, w.e.f., Assessment Year 2021-22, the Finance Act, 2020 has inserted the following two more situations wherein a resident person is deemed to be ‘Not Ordinarily Resident’ in India:

a) An Indian Citizen or a person of Indian origin whose total income (other than income from foreign sources) exceeds Rs. 15 lakhs during the previous year and who has been in India for a period of 120 days or more but less than 182 days;

b) An Indian Citizen who is deemed to be resident in India as per new section 6(1A)​.

A resident individual who does not satisfy any of the aforesaid conditions or satisfies only one of the aforesaid conditions will be treated as resident but not ordinarily resident.

INCOME TAX RATE FOR INDIVIDUAL

New Tax Slab will applicable from FY 2020-21 (AY 2021-22) and have option to select rate for each year to Individual / HUF having Income other than Income from Business or Profession.

Income Old Regime Tax Rate New Regime Tax Rate
Upto 59 Years 60 to 79 Years 80 Years & more
Upto 250000/- NIL NIL NIL NIL
2.50.001 to 3,00,000 5% NIL NIL 5%
3,00,000 to 5,00,000 5% 5% NIL 5%
5,00,001 to 7,50,000 20% 20% 20% 10%
7,50,000 to 10,00,000 20% 20% 20% 15%
10,00,001 to 12,50,000 30% 30% 30% 20%
12,50,001 to 15,00,000 30% 30% 30% 25%
15,00,001 & More 30% 30% 30% 30%

Option to Select the New Tax Rate will be given to Individual / HUF only once. Once option exercise can’t change and if option withdraws in any subsequent year then the benefit of New Tax Rate will not be given to them in future years.

If select new Tax Rate, then the benefit of Exemption / Deduction not available like;

√ 50000/- standard deduction not available.

√ Deduction u/s 10 like Leave Travel Concession, House Rent Allowance, Family Pension Allowance etc are not available.

√ Chapter VI-A deduction i.e. u/s 80C 9LIC, PPF, NSC etc), u/s 80D (Mediclaim etc.) are not available.

√ Home Loan Interest deduction can’t be adjusted against other head of Income.

√ Previous Years Carried Forward Losses or Unabsorbed Depreciation should be forgone. 

Government Contribution u/s 80CCD(1) to New Pension Scheme is alo available in New Tax Regime also.

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Qualification: CA in Practice
Company: CA AMAR GIRISHKUMAR OZA
Location: JAMNAGAR, Gujarat, IN
Member Since: 31 Jul 2020 | Total Posts: 4

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