RESIDENTIAL STATUS – SECTION 6
- The tax incidence on a Person, depends upon the Residential Status of such person.
- Resident taxpayers are liable to pay tax on their global income (i.e., Indian income and foreign income).
- However, the non-resident taxpayers are taxable only for their India sourced income.
RESIDENTIAL STATUS – THREE CATEGORIES – SECTION 6
TAXPAYERS ARE CLASSIFIED INTO THREE BROAD CATEGORIES ON THE BASIS OF THEIR RESIDENTIAL STATUS : –
- Resident and ordinarily Resident (“ROR”)
- Resident but not ordinarily Resident (“RNOR”)
- Non- Resident
RESIDENTIAL STATUS OF AN INDIVIDUAL
As per Section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one of the following basic conditions : –
- He has been in India during the previous year for a total period of 182 days or more; or
- He has been in India during the 4 years immediately preceding the previous year
for total period of 365 days or more and has been in India for at least 60 days in the previous year .
IF THE INDIVIDUAL DOES NOT SATISFY ANY OF THE BASIC CONDITIONS, HE IS SAID TO BE NON – RESIDENT.
Exceptions to basic conditions for determination of residential status are given as under :-
EXCEPTIONS : – Basic condition b) is not taken into consideration in two special cases : –
CASE I : –
Indian citizen, who leaves India in any previous year for the purpose of employment outside India or
An Indian citizen, who leaves India in any previous year as a member of the crew of an Indian ship for the purposes of employment outside India
CASE II : –
Indian citizen or a person of Indian origin, who, being outside India and comes on a visit to India in any previous year.
A PERSON IS SAID TO BE OF INDIAN ORIGIN if he or either of his parents or either of his grandparents were born in undivided India.
In these two cases, an individuals will be considered as a resident, only if the period of their stay during the relevant previous year in India is 182 days or more.
The individual shall not be treated as resident even if he was in India for 365 days during the 4 preceding years and 60 days in the relevant previous year.
RESIDENTIAL STATUS – RESIDENT AND ORDINARILY RESIDENT
A person is said to be RESIDENT AND ORDINARILY RESIDENT if he satisfies both the additional conditions specified under section 6(6).
ADDITIONAL CONDITIONS TO DETERMINE RESIDENTIAL STATUS: –
CONDITION I : –
Individual has been resident in India in 2 out of 10 previous years immediately
preceding the relevant previous year.
CONDITION II : –
Individual has during the 7 previous years preceding the relevant previous year been in India for a period of 730 days or more.
RESIDENT BUT NOT ORDINARILY RESIDENT
- An individual is said to be a resident but not ordinarily resident (RNOR) if he fails to satisfy any of the additional conditions.
- Only Individuals and HUFs can be RNOR/ROR. All other classes of Assessee can be either
- Resident or
|POINTS TO CONSIDER|
|· Residential status is to be determined on year to year basis
· The term “stay in India” includes stay in the territorial waters of India (i.e. 12 nautical miles into the sea from the Indian coastline). Even the stay in a ship or boat moored in the territorial waters of India would be sufficient to make the individual resident in India.
· The residence of an individual for income-tax purpose has nothing to do with citizenship, place of birth or domicile. An individual can, therefore, be resident in more countries than one even though he can have only one domicile.
· For the purpose of counting the number of days stayed in India, both the date of departure as well as the date of arrival are considered to be in India.
· It is not necessary that the period of stay must be continuous or active nor is it essential that the stay should be at the usual place of residence, business or employment of the individual.
RESIDENTIAL STATUS OF A HUF – ROR OR RNOR
ROR/RNOR : –
- An HUF, which is resident in India, can be a ROR or RNOR, depending on whether the Karta of Resident HUF satisfies the additional conditions applicable to Individuals : –
ADDITIONAL CONDITIONS : – BOTH CONDITIONS SATISFIED, HUF IS A ROR
- Karta of Resident HUF should be resident in at least 2 previous years out of 10 previous years immediately preceding relevant previous year.
- Stay of Karta during 7 previous year immediately preceding relevant previous year should be 730 days or more.
NOTE : –
- HUF which fails to satisfies any of the additional condition would be Resident but not ordinarily resident in India.
- Firms, Association of persons, Local Authorities and other artificial juridical persons can be either resident or non-resident.