Residential Status of an Assessee

Need to determine Residential Status?

The total income is different in case of a person resident in India and a person non-resident in India. Further, in case of an individual and HUF being "not ordinarily resident in India", the meaning of total income shall be slightly different. Since the total income of an assessee varies according to his residential status in India, the incidence of tax shall also vary according to such residential status in India.

Tax is levied on total income of assessee. Under the provisions of Income-tax Act, 1961 the total income of each person is based upon his residential status. Section 6 of the Act divides the assessable persons into three categories

1. Ordinary Resident;
2. Resident but Not Ordinarily Resident; and
3. Non-Resident.

Residential status is a term coined under Income Tax Act and has nothing to do with nationality or domicile of a person. An Indian, who is a citizen of India can be non-resident for Income-tax purposes, whereas an American who is a citizen of America can be resident of India for Income-tax purposes. Residential status of a person depends upon the territorial connections of the person with this country, i.e., for how many days he has physically stayed in India.

The residential status of different types of persons is determined differently. Similarly, the residential status of the assessee is to be determined each year with reference to the “previous year”. The residential status of the assessee may change from year to year. What is essential is the status during the previous year and not in the assessment year.

Important Points:

1. Residential Status in a previous year. Residential status is to be determined for each previous year.
   It implies that—

   1. Residential status of assessment year is not important.

   2. A person may be resident in one previous year and a non-resident in India in another previous year, e.g., Mr. A is resident in India in the previous year 2018-19 and in the very next year he becomes a non-resident in India.

2. Duty of Assessee. It is assessee’ s duty to place relevent facts, evidence and material before the Income Tax Authorities supporting the determination of Residential status.

3. Dual Residential Status is possible. A person may be resident of one or more countries in a relevant previous year e.g., Mr. X may be resident of India during previous year 2018-19 and he may also be resident/non-resident in England in the same previous year. The emergence of such a situation depends upon the following

   1. the existence of the Residential status in countries under considerations

   2. the different set of rules having laid down for determination of residential status.

Determination of Residential status of different ‘Persons’ :

As we know that Income tax is charged on every person. The term ‘Person’ has been defined under section 2(31) includes :

1. An individual

2. Hindu Undivided Family

3. Firm

4. Company

5. AOP/BOI

6. Local authority

7. Every other artificial juridical person not falling in preceding six sub-classes.

Therefore, it is essential to determine the residential status of above various types of persons and now we shall learn the calculation of residential status of each type of person.