Residential Status

Introduction

The residential status of an assessee decides the extent of his total taxable income. The incidence of liability to income-tax depends upon the residential status and source of income of the assessee. It is determined solely on the basis of his/her physical presence and / or other prescribed criterion as against nationality or domicile of a person. It is determined for every previous year separately. A person may be resident in one previous year and non-resident in next year. Residential status once determined will be same for all sources of income of that person for that AY. Section 6 of Income Tax Act prescribes the tests to be applied to determine the residential status of all tax payers.

Residential status has considerable bearing for charging of income tax. In case a person is ‘resident’ in India, he is required to pay income tax on his entire income whether earned in India or abroad. But in case of the other two categories i.e. ‘not ordinarily resident’ and ‘non resident’, the entire income is not subject to tax in India, particularly the incomes earned beyond the boundaries of India.

For Individual:

Individual may either be:

• Resident and ordinarily resident;
• Resident but not ordinarily resident;
• Non-resident.

Basic Conditions {Section 6(1)}:

1. Stay in India in relevant previous year for at least 182 days i.e. 182 days or more,
2. Stay in India in relevant previous year for at least 60 days (60 days or more) and 365 days or more during 4 years, immediately preceding the relevant previous year.

 However, in the following cases, an individual shall be treated as resident only if he is in India for a period of 182 days or more during the relevant previous year (i.e. 60 days stated in (2) shall be taken as 182 days):

1)Indian citizens leaving India in previous year as crew member of an Indian Ship,

2)For Indian citizens leaving India in previous year for the purpose of employment outside India,

3)For Indian citizens or a person of Indian Origin who are residing outside India comes on a visit to India in previous year.

Note: A person is deemed to be of Indian origin, if he or either of his parents or any of his  grand parents, was born in undivided India.

Additional/Dependent Conditions {Section 6(6)}:

1)If an individual satisfy at least one of the Basic conditions available , as specified above, of  resident in India , for  at least 2 years  out of 10  previous years immediately preceding the relevant previous year ; and

2)Stay in India for 730 days or more in 7 years immediately preceding the relevant previous year.

Note:

• It is to be noted that the stay of 182 days, 365 days, 60 days or 730 days as the case may be, need not be continuous. Days of stay may or may not be continuous. It is sufficient if an individual stay in India for such minimum number of days in total in the respective previous year or years.
• One day means 24 hours stay in India. When a person is in India for part of a day, the calculation is to be made on an hourly basis. In case hourly data is not available, the both days i.e. day of arrival and day when any individual has left India shall be counted and taken into account as stay in India.

 In case of individuals covered under exceptions--

Huf may either be:

• Resident and ordinarily resident;
• Resident but not ordinarily resident;
• Non-resident.

Note The expression ‘Control and Management’ refers to the functions of decision-making and issuing directions but not the places where from business is carried on.

For       Company :  Section 6(3) 

         COMPANY may either be:

• Resident in India;
• Non-resident in India     

       ‘Control and Management’ is situated at the place where the meetings of the directors are held. 

For        For Other assesses (AOP, FIRM, and BOI etc.)

Ma           May either be -

• Resident;
• Non-resident.