According to the residential status, the assessee can either be:
(i) Resident in India; or
(ii) Non-Resident in India.
However, individual and HUF cannot be simply called resident in India. If individual is a resident in India he will be either:
(a) Resident and Ordinarily resident in India; or
(b) Resident but not Ordinarily resident in India.
Other categories of persons shall either be Resident in India or Non-Resident in India. There is no further classification into ordinarily resident or not ordinarily resident in their case.
![Residential Status of an Individual [Section 6(1)] Residential Status of an Individual [Section 6(1)]](Residential-Status.jpg)
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An individual is said to be resident in India if he satisfies any one of the following two conditions:
(1) He is in India for a period or periods amounting in all to 182 days or more in the relevant previous year;
Or
(2) He is in India for 60 days or more during the relevant previous year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant previous year.
Modification of Residency Provisions [Section 6] [ W.e.f. 2021-22]
A citizen of India or person of Indian origin, who had been in India for 365 days or more in the 4 preceding previous years and who undertakes a visit to India in any previous year, and
(a) whose total income other than income from foreign source does not exceed Rs. 15 lakh shall not be a resident in India if he stays in India upto 181 days in the relevant previous year; or
(b) whose total income other than income from foreign source exceeds Rs. 15 lakh shall not be a resident in India if he stays in India upto 119 days in the relevant previous year.
The moment he stays in India for 182 days or 120 days as the case may be, he shall be treated as resident in India.
There are two exceptions/concession to the above rule:
(a) In case of an individual, who is a citizen of India and who leaves India in any previous year for the purposes of employment outside India, the condition No. 2 supra (mentioned above) shall not be applicable for the relevant previous year in which he leaves India. In other words, for that particular previous year in which he leaves India for the purposes of employment outside India he shall be called resident only when he satisfies the condition No. 1 mentioned above.
Similarly in case of an individual who is a citizen of India and who leaves India in any previous year as a member of the crew of an Indian ship, the condition No. 2 supra shall not be applicable.
(b) In case of an individual, who is a citizen of India, or is a person of Indian origin, who, being outside India, comes on a visit to India in any previous year, the condition No. 2 mentioned above in his case also shall not be applicable. In other words, he shall not be a resident in India unless his stay in India is at least 182 days during the relevant previous year in which he visits India.
Note :
1. The above conditions, with exceptions/concessions may be called as category 'A' conditions.
2. A person is said to be of Indian origin if he, or either of his parents or any of his grandparents was born in undivided India i.e. before India was partitioned. [Explanation to section 115C(e)].
3. In case of an individual, bring a citizen of India a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed. |
>> Relevant previous year means the previous year for which the residential status is being determined.
>> In computing the period of stay in India, it is not necessary that the stay should be for a continuous period. What is to be seen is the total number of days' stay in India during the relevant previous year.
>> It is also not necessary that the stay should be only at one place. e.g., he may stay at Bombay for 90 days and then go out of India. On return in the same previous year, he may stay at Delhi for 120 days during the same previous year. His total stay in India will be 210 days for that previous year.
>> In computing the period of 182 days, the day the individual enters India and the day he leaves India should both be treated as stay in India.
>> Place and purpose of stay in India is immaterial. Presence in territorial waters of India would also be regarded as presence in India.
Meaning of employment : The term employment is not defined in the Income-tax Act.
A man may employ himself so as to earn profits in many ways. Thus he can set up an independent practice abroad or businessman can shift his business activities to a foreign country. A person merely undertaking tours abroad in connection
An individual who is resident in India, shall be resident and ordinarily resident in India if he satisfies both the following conditions—
(1) He has been resident in India for at least 2 out of 10 previous years immediately preceding the relevant previous year.
This means that he must have satisfied any one of the conditions, with exceptions/concession (given above) for being a resident for at least 2 out of 10 previous years immediately preceding the relevant previous year.
And
(2) He has been in India for 730 days or more, during seven previous years immediately preceding the relevant previous year.
An individual who is resident in India is said to be "not ordinarily resident in India" if he does not satisfy any or both of the conditions as mentioned -
(1) He has been resident in India for at least 2 out of 10 previous years immediately preceding the relevant previous year.
This means that he must have satisfied any one of the conditions, with exceptions/concession (given above) for being a resident for at least 2 out of 10 previous years immediately preceding the relevant previous year.
And
(2) He has been in India for 730 days or more, during seven previous years immediately preceding the relevant previous year.
Modification of provisions of "Not Ordinarily Resident" [Section 6(6)] [W.e.f. A.Y. 2021- 22]
Section 6(6) provides for situations in which an individual who is resident in India shall be “not ordinarily resident” in a previous year.
Section 6(6)(a) provides that if the person is an individual who has been non-resident in 9 out of the 10 previous years preceding that year,
or
has during the 7 previous years preceding that year been in India for an overall period of 729 days or less,
he shall be deemed to be not ordinarily resident in India.
The above Section 6(6) has been further enlarged to include the following individuals also as not ordinarily resident in India:-
(i) a citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding Rs. 15 lakh during the previous year, as referred to in clause (b) of Explanation 1 to Section 6(1), who has been in India for a period or periods amounting in all to 120 days or more but less than 182 days; or
(ii) a citizen of India who is deemed to be resident in India under Section 6(1A)
An individual is said to be a non-resident, if he is not a resident in India i.e., none of the conditions (with exception/concession) mentioned -
(1) He is in India for a period or periods amounting in all to 182 days or more in the relevant previous year;
Or
(2) He is in India for 60 days or more during the relevant previous year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant previous year.
The following basic rules must be kept in mind while determining the residential status:
>> Residential status is determined for each category of persons separately e.g. there are separate set of rules for determining the residential status of an individual and separate rules for companies, etc.
>> Residential status is always determined for the previous year because we have to determine the total income of the previous year only.
>> Residential status of a person is to be determined for every previous year because it may change from year to year. For example A, who is resident of India in the previous year 2019-20, may become a nonresident in previous year 2020-21.
>> If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other source of income. [Section 6(5)]
>> A person may be a resident of more than one country for any previous year. If Y is a resident in India for previous year 2019-20, it does not mean that he cannot be a resident of any other country for that previous year.
>> Citizenship of a country and residential status of that country are separate concepts. A person may be an Indian national/citizen, but may not be a resident in India. On the other hand, a person may be a foreign national/citizen, but may be a resident in India.
>> It is the duty of the assessee to place all material facts before the assessing officer to enable him to determine his correct residential status. |