{"id":925,"date":"2022-08-25T09:31:16","date_gmt":"2022-08-25T09:31:16","guid":{"rendered":"http:\/\/localhost\/new\/uja-final\/?p=925"},"modified":"2022-08-25T09:31:16","modified_gmt":"2022-08-25T09:31:16","slug":"residential-status-of-an-individual-incidence-of-tax","status":"publish","type":"post","link":"https:\/\/uja.in\/it\/risk-and-compliance\/residential-status-of-an-individual-incidence-of-tax\/","title":{"rendered":"Residential Status of an Individual & Incidence of Tax"},"content":{"rendered":"\t\t
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Residential Status of an Individual & Incidence of Tax<\/span> <\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Taxation of individuals in India is primarily based on the number of days they have been in India during the relevant previous year & the preceding previous years. An exercise to determine if an individual is a resident in India or no is to be undertaken every year.
In India, following are the types of residential status for individuals:<\/p>

  • Resident & Ordinary Resident (ROR);<\/li>
  • Resident & Not Ordinarily Resident (RNOR);<\/li>
  • Non \u2013 Resident (NR)<\/li>
  • 1.6 of the Income Tax Act 1961 (\u2018ITA\u2019) lays down provisions relating to the residential status of an individual.<\/li><\/ul>

    Under s. 6(1) of the ITA, an individual is said to be a resident in India when\u00a0any one<\/em><\/strong>\u00a0of the following two conditions are satisfied:<\/p>

    • He is in India for a period of 182 days or more in the previous year; or<\/li>
    • He is in India for a period of 60 days or more during the previous year & 365 days or more during the 4 years in the immediately preceding previous year.<\/li><\/ul>

      If, none of the above two conditions are met, an individual shall qualify as a\u00a0Non \u2013 Resident\u00a0<\/strong>for the previous year.<\/p>

      The ITA is liberal on the provisions for a Person of Indian Origin (PIO) (i.e a foreign citizen who held an Indian passport at anytime or whose parents\/grandparents\/great grandparents were citizens of India) or an Indian citizen who leaves India for employment abroad.<\/p>

      • For an Indian Citizen who leaves India for employment abroad during the previous year, the period of \u201960 days\u2019 referred to in clause b above is substituted by 182 days;<\/li>
      • For an Indian citizen or a PIO having taxable income in India is less than INR 15 lakhs (i.e INR 1.5 million), the period of \u201960 days\u2019 referred to in clause b above is substituted by 182 days.<\/li><\/ul>

        Here, it is pertinent to note that w.e.f AY 2021 \u2013 2022, for an Indian citizen or a PIO having taxable income in India exceeding INR 15 lakhs (i.e INR 1.5 million),\u00a0 the period of \u201860 days\u2019 referred to in clause \u2018b\u2019 above is substituted by 120 days. Thus, for an Indian Citizen\/PIO having taxable income of more than 15 lakhs if his stay in India during the previous year exceeds 120 days & 365 days in the preceding previous four years, he qualifies as a resident.<\/p>

        • 6(6) of the ITA prescribes two additional conditions under which need to be satisfied for an individual to qualify as a \u2018resident & ordinarily resident\u2019<\/li>
        • He has been a resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year;<\/li>
        • He has been in India for a period of 730 days or more during the 7 years immediately preceding the relevant previous year<\/li><\/ul>

          Therefore, an individual is said to be a ROR when one of the conditions specified by s. 6(1) of the ITA are satisfied & both of the conditions specified in s. 6(6) of the ITA are satisfied.<\/p>

          Illustration<\/u><\/strong><\/p>

          Scenario I<\/strong><\/p>

          Mr. X is a person of Indian origin. His income in India during the Financial Year (\u2018FY\u2019) 2021 \u2013 2022 & FY 2020 \u2013 2021 is less than INR 15 lakhs (or INR 1.5 million). His number of days of stay in India for the period from FY 2012 \u2013 2013 to FY 2021 \u2013 2022 is as under:

          <\/p>

          Financial Year<\/strong><\/p><\/td>

          Number of Days of Stay in India<\/strong><\/p><\/td><\/tr>

          2021 \u2013 2022<\/p><\/td>

          167<\/p><\/td><\/tr>

          2020 \u2013 2021<\/p><\/td>

          131<\/p><\/td><\/tr>

          2019 \u2013 2020<\/p><\/td>

          139<\/p><\/td><\/tr>

          2018 \u2013 2019<\/p><\/td>

          141<\/p><\/td><\/tr>

          2017 \u2013 2018<\/p><\/td>

          164<\/p><\/td><\/tr>

          2016 \u2013 2017<\/p><\/td>

          168<\/p><\/td><\/tr>

          2015 \u2013 2016<\/p><\/td>

          174<\/p><\/td><\/tr>

          2014 \u2013 2015<\/p><\/td>

          162<\/p><\/td><\/tr>

          2013 \u2013 2014<\/p><\/td>

          139<\/p><\/td><\/tr>

          2012 \u2013 2013<\/p><\/td>

          143<\/p><\/td><\/tr><\/tbody><\/table>

          Analysis<\/u>:\u00a0<\/strong>Mr. X residential status for the period from FY 2017 \u2013 2018 to FY 2021 \u2013 2022 is as under:

          <\/p>

          Scenario II<\/strong><\/p>

          Mr. A (a foreign national, not being a person of Indian origin) comes to India for the first time for employment during FY 2018 \u2013 2019. His period of stay in India is as under :

          <\/p>

          Financial Year<\/strong><\/p><\/td>

          Number of Days of Stay in India<\/strong><\/p><\/td><\/tr>

          2021 \u2013 2022<\/p><\/td>

          202<\/p><\/td><\/tr>

          2020 \u2013 2021<\/p><\/td>

          189<\/p><\/td><\/tr>

          2019 \u2013 2020<\/p><\/td>

          301<\/p><\/td><\/tr>

          2018 \u2013 2019<\/p><\/td>

          186<\/p><\/td><\/tr><\/tbody><\/table>

          Analysis<\/u>\u00a0:\u00a0<\/strong>Mr. A\u2019s residential status for the period from FY 2018 \u2013 2019 to FY 2021 \u2013 2022 is as under:\u00a0

          <\/u><\/strong>Residential Status & Tax thereon<\/u><\/strong><\/p>

          To determine the tax implications on residential status, it is first essential to understand the type of income which will be taxable in India i.e Indian Income or Foreign Income.<\/p>

          Indian Income:<\/p>

          • Income received in India or accrued in India during the previous year;<\/li>
          • Income received in India but accrued outside India during the previous year;<\/li>
          • Income received outside India but accrued in India during the previous year.\u00a0<\/li><\/ul>

            Foreign Income: Income not received (or deemed to be received) or accrued (or deemed to accrue) in India during the previous year.

            <\/p>

            Incidence of Tax

            <\/u><\/strong><\/p>

            Residential Status<\/strong><\/p><\/td>

            Indian Income<\/strong><\/p><\/td>

            Foreign Income<\/strong><\/p><\/td><\/tr>

            Resident & Ordinarily Resident<\/p><\/td>

            Taxable in India<\/p><\/td>

            Taxable in India<\/p><\/td><\/tr>

            Resident but not Ordinarily Resident<\/p><\/td>

            Taxable in India<\/p><\/td>

            Following foreign income is taxable in India :
            \u2013 Business income derived from business wholly\/partly controlled in India;
            \u2013\u00a0 Income from profession which is set up in India.<\/p><\/td><\/tr>

            Non \u2013 Resident<\/p><\/td>

            Taxable in India<\/p><\/td>

            Taxable in India<\/p><\/td><\/tr><\/tbody><\/table><\/div><\/div>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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            Residential Status of an Individual & Incidence of Tax Taxation of individuals in India is primarily based on the number of days they have been in India during the relevant previous year & the preceding previous years. An exercise to determine if an individual is a resident in India or no is to be undertaken […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_header_footer","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[7],"tags":[],"class_list":["post-925","post","type-post","status-publish","format-standard","hentry","category-risk-and-compliance"],"_links":{"self":[{"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/posts\/925","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/comments?post=925"}],"version-history":[{"count":0,"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/posts\/925\/revisions"}],"wp:attachment":[{"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/media?parent=925"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/categories?post=925"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/uja.in\/it\/wp-json\/wp\/v2\/tags?post=925"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}