Residential Status and Incidence of Tax
Why Study Residential Status?
(1) The residential status determines the taxability of various income of a person on the basis of his/her residential status in India in the previous year. Thus Tax incidence on an assessee depends on his residential status.
(2) For instance, whether an income, accrued to an individual outside India, is taxable in India depends upon the residential status of the individual in India.
(3) Similarly, whether an income earned by a foreign national in India or outside India is taxable in India depends on the residential status of the individual, rather than on his citizenship.
(4) Therefore, the determination of the residential status of a person is very significant in order to find out his tax liability.
(5) The residential status of an assessee may not necessarily be the same in each year, he/she may be a resident in one year and a non-resident in the next. As such, clear identification of residential status is necessary for each Previous Year separately.
A taxable entity (Person) can be:
An Individual, A Hindu Undivided Family (HUF), A Firm, An Association of Persons (AOP) or A Body Of Individuals (BOI), A Joint stock company, A Local Authority or an Artificial Judicial Person.
Residential Status of An individual
Resident in India: Satisfying any one of two BASIC conditions given u/s 6(1). Further classified into two parts: a Resident and Ordinarily Resident: Satisfying One of the Basic Conditions [6(1] + Both the Additional Conditions [6(6)(a)&(b) b Resident but not Ordinarily Resident: Satisfying One of the Basic Conditions [6(1] + Not satisfying any of the Additional Conditions [6(6)(a)&(b)
Non – Resident [Sec. 2(30)]: Not satisfying any of the Basic Conditions u/s [6(1)].
Basic Conditions Under section 6(1): a He/ She must be in India for 182 days or more during the relevant P/Y, or b He/ She must be in India for At least 60 days during the relevant P/Y + 365 days during the four years preceding that
(1) The residential status determines the taxability of various income of a person on the basis of his/her residential status in India in the previous year. Thus Tax incidence on an assessee depends on his residential status.
(2) For instance, whether an income, accrued to an individual outside India, is taxable in India depends upon the residential status of the individual in India.
(3) Similarly, whether an income earned by a foreign national in India or outside India is taxable in India depends on the residential status of the individual, rather than on his citizenship.
(4) Therefore, the determination of the residential status of a person is very significant in order to find out his tax liability.
(5) The residential status of an assessee may not necessarily be the same in each year, he/she may be a resident in one year and a non-resident in the next. As such, clear identification of residential status is necessary for each Previous Year separately.
A taxable entity (Person) can be:
An Individual, A Hindu Undivided Family (HUF), A Firm, An Association of Persons (AOP) or A Body Of Individuals (BOI), A Joint stock company, A Local Authority or an Artificial Judicial Person.
Residential Status of An individual
Resident in India: Satisfying any one of two BASIC conditions given u/s 6(1). Further classified into two parts: a Resident and Ordinarily Resident: Satisfying One of the Basic Conditions [6(1] + Both the Additional Conditions [6(6)(a)&(b) b Resident but not Ordinarily Resident: Satisfying One of the Basic Conditions [6(1] + Not satisfying any of the Additional Conditions [6(6)(a)&(b)
Non – Resident [Sec. 2(30)]: Not satisfying any of the Basic Conditions u/s [6(1)].
Basic Conditions Under section 6(1): a He/ She must be in India for 182 days or more during the relevant P/Y, or b He/ She must be in India for At least 60 days during the relevant P/Y + 365 days during the four years preceding that