Updates and details for Residential Status and Tax Incidence:
Residential status is determined on the basis of the physical presence of an individual in India during the relevant FY and the last 10 FYs.
Basic conditions: An individual may qualify as a resident of India if he satisfies any one of the following basic conditions.
- Stay in India during the FY is 182 days or more, or
- Stay in India during the FY is 60 days or more and in the 4 years immediately preceding the FY is 365 days or more.
- The individual qualifies as a resident of India in at least 2 FYs out of the 10 FYs preceding the relevant FY
- Stay in India during the 7 FYs preceding the relevant FY is 730 days or more.
If “NONE” of the above-mentioned conditions is fulfilled, then the person is to be Non-resident in India.
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 at least for 365 days during last four financial years.
- Eg. Mr. Raju got a job in Spain. He left India for the very first time on 1st July 2016. He was in Spain till March end. Find out the residential status of Mr. Raju for the financial year 2016-17?
- Solution:- Since Mr. Raju left India for the very first time, he was in India at least for 365 days during last four financial years. However, during the current financial year 2016-17, he was in India only up to 1st July i.e. for 92 days.
- As the condition states, he should be at least for 180 days during 2016-17.
- Mr. Raju is treated as Non- resident for the financial year 2016-17.
Classification of Ordinary Resident & Non-Ordinary Resident:
As per Section 6(6), a person shall be not ordinary resident in India if he satisfies any one of the following conditions:
- He has been a non-resident in 9 out of 10 years immediately preceding the Financial Year.
- He has been in India for a period of 729 days or less in 7 previous years immediately preceding the Financial year.
If any 1 of 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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