Residential Status for Income Tax Purposes – How to Check Easily?

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From the perspective of income tax, determining the taxability status of a person in India is very important. If a person is a resident of India, he has to pay taxes to the IT Department and if not, then he is not liable to pay any taxes to the aforesaid authority. So to calculate tax as per Income Tax ACT India, you have to determine your residential status. In order to determine a resident’s status in India, the Income Tax Department of India has prescribed certain guidelines which easily allow us to determine whether a person is a resident of India or not. Let us take a look at those guidelines.

Resident in India

The status of residents in India is mainly determined by the number of days they stay in India. If a person satisfies any of the given conditions, then the person is said to be a resident of India.

Condition A– The person lived in India for 182 or more days during a financial year, or

Condition B– The person is in India for 60 days or more during the current financial year along with living for more than 365 days or more in the immediate previous 4 years.

If any of the above mentioned condition is met, then a person is necessarily a resident of India. To make things clear, let us take up an example.

Suppose, Mr. Suresh lived in India for 180 days in the current year and had previously lived in India for 400 days in the last 4 years. So, if we look at the first condition, we will be observe that Mr. Suresh has not complete 182 days in India during the current year. However, when you look at the second condition, we find that his stay in India during the current year is 180 days and previously he had spent more than 365 days in India in the last 4 years. Therefore, he will be treated as a resident of India and is liable to pay taxes.

Non-Resident of India

When a person doesn’t meets any of the basic requirements as given under the ‘resident in India’ section, the person is said to be a non-resident. To make things crystal clear, let us take the same example, but with a little twist. Let, Mr. Suresh live in India for 180 days in the current year. But this time, he lived in India for only 200 days in the last 4 years. So, in the current scenario, his would be treated as a non-resident of India. This is because he neither meets the Condition A or Condition B mentioned above.

Not-Ordinary Resident in India

To understand this status, you need to remember both the conditions which have been mentioned under ‘Resident in India’. Now to elaborate, the IT Department of India maintains a scope for people who are not ordinary residents of India. Their status is computed by determining two situations:

Situation I: 9 out of 10 times, a person has been a non-resident of India in immediate preceding FYs, Or
Situation II: His total stay in India has been equal to or less than 729 days in the past 7 years.

Under Situation I, computation of a person’s residential status would be made using the same conditions as in ‘Resident in India’.

Any person who falls under the ‘Resident in India’ category, but does not meets the requirements of ‘Not-Ordinary Resident’ will be treated as ‘Ordinary Resident of India’. To simplify, the whole fulcrum of residential status can be illustrated as below:

If you still have some queries or are facing some issues with respect to understanding the residential status of a person, feel free to ask us.

 

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