DETERMINATION OF RESIDENTIAL STATUS

In continuance to my general discussion on my last blog in respect of income arising to a person in India  being a Non Resident from different sources such as interest, property, agricultural, long term/ short term profits on sale of movable or immovable assets or income on transfer of funds from abroad and it is natural and obvious that once there is an income in India they are duty bound to pay income tax under the provisions of Indian Income Tax Act 1961.

Here my subject is Taxation in India for persons living abroad who are in legal language  termed as Non Residents under the Indian Income Tax Act 1961 and incidence of tax on such persons in India while having income in Home town as well as abroad on the basis of days of residence. The basic tests of residence  are given as under:

Resident and Ordinarily Resident

1. Indian citizen stayed in India for more than 60 days in the previous year and in the four preceding years stay is more than 365 days R& OR
2. Indian citizen stayed in India for more than 182 days R& OR
3. A resident individual is treated as R&OR if he satisfies the following two conditions :
   1. he has been resident in India in a least 2 out of 10 previous years immediately preceeding the relevant previous year AND
   2. he has been in India for a period of 730 days or more during 7 immediately preceeding the relevant previous year R& OR
4. Indian Citizen left for employment or crew member of sIndian Ship and his stay in India is more than 182 days R& OR
5. An Indian citizen or a person of Indian origin who is abroad Who comes to India on a visit during the previous and stays for more than 182 days R& OR

From the reading of all five conditions as enumerated above in nutshell the position will be as under:

A person will be R&OR if he satisfies at least  one of  conditions at Serial no 1 and 2 And both the conditions at Serial no( a) and (b) of Serial no 3

Resident but  Not Ordinarily Resident

A person will be Resident  but Not Ordinarily Resident if he satisfies at least  one of  conditions at Serial no 1 and 2 And one or none of  the conditions at Serial no( a) and (b) of Serial no 3

Non Resident:

Should not satisfy any of the basic conditions at Serial no 1 and 2.

Once the status of a person is determined on the basis of stay , the incidence of tax will apply on the income which is earned, accrued and received by a person which I will discuss in my next blog.

The criteria of stay in India gives a clear picture of a person’s status for the previous year and the relevant  coloumn is to be ticked in the Income tax return.

Till next time .

Thanks

Vijay Bansal