author

How Is The Residential Status Of An Individual Determined For Income Tax?

  • The residential status of a taxpayer plays an important role in determining the scope of taxable income for a financial year in India, and thereby the tax payable.
  • For an individual, the residential status is determined solely by the number of days of his/her physical presence in India during the financial year.
  • Any income earned by a taxpayer from sources in India or received in India (first receipt) is taxable in India. In order to determine the taxable income, the residential status of an individual is also to be noted.
  • Under Income Tax Act, taxpayers are divided into the three categories of residential status, namely:
  • (1) Resident but not ordinarily resident.
  • (2) Resident and ordinarily resident.
  • (3) Non-resident.
  • Step-1-Under the Income-tax Law, an individual will be treated as a resident in India for a year if he satisfies at least one of the following conditions:
  • 1.He is in India for a period of 182 days or more during the previous year ; or
  • 2. He is in India for a period of 60 days or more during the previous year and for a period of 365 days or more in 4 years immediately preceding the relevant previous year.
  • Step-2 -A resident individual will be treated as resident and ordinarily resident in India during the year if he satisfies following conditions:
  • 1. He is resident in India for at least 2 years out of 10 years immediately preceding the relevant year.
  • 2. His stay in India is for 730 days or more during 7 years immediately preceding the relevant year.
  • A resident individual who does not satisfy any of the aforesaid conditions or satisfies only one of the aforesaid conditions will be treated as resident but not ordinarily resident.
  • If the individual satisfies no conditions mentioned in Step (1), then he will become a non-resident.

Don't forget to share this pointer!

View more comments +