In my last blog I discussed about the status of a person on the basis of stay. In India as in many other countries, the charge of income tax and the scope of taxable income varies with the factor of residence. In this talk I will discuss about Important points to be borne in mind while determining the Residential Status of an Individual which are summarily as under:
- Residential status is always determined for the Previous Year because the assessee has to determine the total income of the Previous Year only. In other words, as the tax is o n the income of a particular Previous Year, the enquiry and determination of the residence qualification must confine to the facts obtaining in that Previous Year.
- If a person is resident in India in a Previous 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 sources of Income.
- Relevant Previous Year means, the Previous Year for which residential status is to be determined
- It is not necessary that the stay should be for a continuous period.
- It is not necessary that the stay should be at one place in India.
- Both the day of entry and the day of departure should be treated as the day of stay in India
- Presence in territorial waters in India would also be regarded as stay in India.
- A person is said to be of Indian Origin if he or either of his parents or any of his grand parents was born in undivided India
- Official tours abroad in connection with employment in India shall not be regarded as employment outside India.
- A person may be resident of more than one country for any Previous Year.
- Citizenship of a country and residential status of that country are two separate concepts. A person may be an Indian national/Citizen but may not be a resident in India and vice versa.
- Previous Year is period of 12 months from 1st April to 31st March. Number of days stay in India is to be counted during this period.
- Both the Day of Arrival into India and the Day of Departure from India are counted as the days of stay in India (i.e. 2 days stay in India).
- Dates stamped on Passport are normally considered as proof of dates of departure from and arrival in India.
- It is advisable to keep several photocopies of the relevant passport pages for present and future use.
- Ensure that date stamped on the passport is legible.
- Keep track of no. of days in India from year to year and check the same before making the next trip to India.
- It is advisable to maintain a chart for the number of days stay in the current and in the preceding seven (7) previous years.
- In the 1st year of leaving India for employment outside India, ensure that you leave before 29th September. Otherwise total income of the financial year (including the foreign income) will be taxable in India if it exceeds the basic exemption limit.
- During the last year of stay abroad, on transfer of residence to India, ensure to come back on or after Feb 1st (or Feb 2nd in case of a leap year). Since arrival before this date will result in stay in India exceeding 59 days. However, a person whose stay in India in preceding four (4) previous years does not exceed 365 days, he may return after September 30th of the relevant year without loss of non-resident status.
Next time an allied topic.
Thanks
Vijay Bansal
