Residential Status Under Income Tax Act

residential status

The residential status of an assessee for income tax purpose is determined on the  basis of days stayed in India. Income Tax Act does not prescribe continuous staying in India. The incidence of tax on any assessee depends on  his residential status under Section 6 of  Income Tax Act, 1961.

Residential Status of Individuals

The residential status of an assessee can be divided into following categories.

residential status

Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions:

  • He is in India for a period of 182 days or more in the previous year                               

                                                                   OR

  • He is in India for 60 days or more during the previous year and has been in India for 365 days or more during the 4 years immediately preceding the previous year.

If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non-resident.

Exceptions to Residential Status

The 2nd condition stated above shall not be applicable to the following categories of individuals and only the 1st condition of 182 days or more would be applicable.

  • Indian citizens, who leave India in any previous year as a member of the crew of an India ship or for purposes of employment outside India.
  • An Indian citizen or person of Indian origin engaged outside India in an employment or a business or profession or in any other vocation, who comes to visit India in any previous year.

Classification of Ordinary Resident and Not Ordinary Resident

As per section 6(6) an individual shall not be ordinary resident in India if he satisfies any one of the following conditions:-

  • He has been a non-resident in 9 out of 10 previous years preceding the relevant previous year,

                                                  OR

  • He has been in India for a period 729 days or less in 7 previous years preceding the relevant previous year.

If any one of the above conditions is satisfied, the person is said to be resident but not ordinary resident in India. However, if none of the above conditions is satisfied, the person is said to be Resident and Ordinary Resident in India.

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Residential Status of HUF

An HUF would be resident in India if the control and management of its affairs are situated wholly or partially in India. If the control and management of the affairs are situated wholly outside India it would become a non-resident.

Residential Status of Firms and Association of persons

A firm and an AOP would be resident in India if the control and management of its affairs are situated wholly or partly in India. Where the control and management of the affairs are situated wholly outside India, the firm would become a non-resident.

Residential Status of Companies

A company would be resident in India in any previous year, if-

  • it is an Indian company;

                                        OR

  • its place of effective management, in that year, is in India.

Explanation to section 6(3) defines ‘place of effective management’ to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.

Determination of residential status of a company

Residential Status

Residential Status of Local Authorities and Artificial juridical Persons

Local authorities and artificial juridical persons would be resident in India if the control and management of its affairs are situated wholly or partly in India. Where the control and management of the affairs are situated wholly outside India, they would become non-residents.

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