Residential Status for the purpose of Income Tax

Residential status and Taxability of Income
Residential status and Taxability of Income

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The residential status of a person is required to be determined for each assessment year in order to determine the scope of total income. As per Section 6 of the Income Tax Act, an Individual can be classified into following categories –

1. Resident

a) Resident and Ordinary Resident

b) Resident and Not Ordinary Resident

2. Non Resident

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A. Determination of Residential Status [Section 6]

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1. Basic Conditions

An individual is said to be resident in India in any previous year if he fulfills any one of the following two basic conditions:

a)   He is in India in that year for a period or periods amounting in all to 182 days or more;

b) He is in India for a period or periods amounting in all to 60 days or more during the previous year and 365 days or more during the 4 years preceding that previous year.

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2. Additional Conditions

a)   He has been a non-resident (ie. he doesn’t satisfy even one of the basic conditions) in India in 9 out of the 10 preceding previous years; or

b)   He has been in India for a period not exceeding 729 days during the 7 preceding previous years.

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3. Residential Status

Resident Resident and Not Ordinary Resident Resident and Ordinary Resident Non Resident
Satisfies – Any one of the Basic Conditions Satisfies -Any One basic condition+

Any one Additional Condition

Satisfies -Any one basic condition+

No Additional Condtion

Does not satisfy even one basic condition

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B. Indian Income and Foreign Income

Status of Income Whether income is received (or deemed to be received) in India during the relevant years Whether income accrues (or arises is deemed to accrue or arise) in India during the relevant years.
Indian Income Yes Yes
Indian Income Yes No
Indian Income No Yes
Foreign Income No No

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C. Residential Status and Taxability of Income [Section 5]

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In case of Individual & HUF

Particulars Resident and ordinarily resident Resident but not ordinarily resident Non-resident
Indian Income Taxable Taxable Taxable
Foreign Income
-     If it is business income and business is controlled wholly or partly in from India Taxable Taxable Not taxable
-     If it is income from profession which is set up in India Taxable Taxable Not taxable
-     If it is business income and business is controlled from outside India Taxable Not taxable Not taxable
-     If it is income from profession which is set up outside India Taxable Not taxable Not taxable
-     Any other foreign income (like salary, rent, interest etc.) Taxable Not taxable Not taxable

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In case of Company, Firm, AOP, BOI

Resident Non-resident
Indian Income Taxable Taxable
Foreign Income Taxable Not taxable

 

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