The residential status under Income Tax plays a vital role for considering taxation of certain incomes. It has no nexus with citizenship of India.
How to determine Residential Status ?
The residential status of a taxpayer is determined on the basis of tenure of his stay in India during the Financial Year. There are 3 types of Residential status for an Individual as explained below.
A] Resident:- Person shall be treated as ‘Resident’, if he satisfies any of the following basic conditions:-
1) If a person is in India for at least 182 days during the Financial Year OR
2) If a person is in India for at least 60 days during the Financial Year and for at least 365 days during the last 4 Financial Years.
Resident Individuals are further sub-divided into following 2 categories :
a] Ordinary Resident:- Person shall be treated as ‘Ordinary Resident’, if he satisfies both the additional conditions.
1) If a person is resident of India for any 2 out of last 10 Financial Years AND
2) If a person is in India for at least 730 days during the last 7 Financial Years.
b) Not Ordinary Resident:- If any of the additional conditions specified above are not satisfied then that person is treated as ‘Not Ordinary Resident’ for that Financial Year.
B] Non-Resident:- If none of the basic conditions are satisfied then person is treated as ‘Non-Resident’ for that Financial Year.
How dose Residential Status affects taxes ?
Taxability of Income in India as per Residential Status-
|Particulars||Ordinary Resident||Not Ordinary Resident||Non Resident|
|1. Income received in India||Taxable||Taxable||Taxable|
|2. Income accrue or arise in India and received in India||Taxable||Taxable||Taxable|
|3. Income accrue or arise outside India but received in India||Taxable||Taxable||Taxable|
|4. Income accrue or arise outside India and received outside India|
|a) Foreign Business income where business is controlled from India||Taxable||Taxable||Not taxable|
|b) Foreign Professional Income where Profession is set up in India||Taxable||Taxable||Not taxable|
|c) Any Other Foreign income||Taxable||Not taxable||Not taxable|
What if Person is going abroad for Job or as a crew member of a ship?
If a person is leaving India due to his employment or as a crew member of Indian ship during a current financial year, then he shall be treated as Resident only if-
He was in India at least for 182 days during a current financial year and also he was in India atleast for 365 days during last four financial years.
- Eg. Mr. Prakash got a job in Spain. He left India for the very first time on 1st July, 2014. He was in Spain till March end. Find out the residential status of Mr. Prakash for a financial year 2014-15?
- Solution:- Since Mr. Prakash left India for the very first time, he was in India atleast for 365 days during last four financial years. However during the current financial year 2014-15, he was in India only upto 1st July i.e. for 92 days.
- As the condition states he should be at least for 180 days during 2014-15.
- Mr. Prakash is treated as Non- resident for a financial year 2014-15.