Residential Status Under Income Tax Act
It is critical for the Income Tax
Department to establish a taxable individual’s or company’s residence status.
It is especially important during the tax filing season. In reality, this is
one of the variables used to determine a person’s taxability.
Residential Status for Income Tax
An individual’s taxability in India is
determined by his residential status under the income tax act in India for any
given fiscal year. The phrase “residential status” was coined by India’s income
tax rules and should not be confused with an individual’s citizenship in India.
An individual may be an Indian citizen but
become a non-resident for a certain year. Similarly, a foreign citizen may
become a resident of India for income tax purposes in a given year.
It is also worth noting that the
residential status as per income tax differs to sorts of people, such as an
individual, a corporation, a company, and so on, decided differently.
Income Tax Law has divided the residence
status of an individual in India into three categories based on the length of
time he or she has lived in India. An individual’s residential status will
include his or her current fiscal year as well as previous years of stay.
The following categories are used to
classify an individual’s residence status.
Resident (ROR)
Resident but Not Ordinarily Resident (RNOR)
Non-Resident (NR)
Resident and Ordinarily Resident
Individuals are deemed to be residents of
India under Section 6(1) of the Income Tax Act if they meet the following
conditions: If he/she stays in India for 182 days or more in a fiscal year, or
if he/she stays in India for 60 days or more in a fiscal year, and if he/she
stays in India for 365 days or more in the four years immediately before the
previous year and comes under ordinary resident in income tax.
According to section 6(6) of the Income Tax
Act of 1961, there are two criteria under which an individual will be
considered a “Resident and Ordinarily Resident” (ROR) in India.
If he or she spends 730 days or more in
India in the seven years preceding the current year.
If he/she has resided in India for at least
two of the ten prior fiscal years before the current year.
Resident but Not Ordinarily Resident
When an assessee meets the following
fundamental requirements, he or she will be regarded as RNOR: If an individual
stays in India for a time of 182 days or more in a fiscal year; or if he/she
stays in India for a period of 60 days in a fiscal year and 365 days or more in
the four preceding fiscal years.
An Assessee, on the other hand, will be
classified as a Resident but Not Ordinarily Resident (RNOR) if they meet one of
the following fundamental conditions:
If he/she stays in India for 730 days or
more in the previous fiscal year.
If he/she was a resident of India for at
least 2 out of 10 days in the previous fiscal year.
Non-Resident
An individual will be eligible for
Non-Resident (NR) status if he or she meets the following criteria:
If an individual spends less than 181 days
in India within a fiscal year.
If an individual stays in India for no more
than 60 days in a fiscal year.
If an individual stays in India for more
than 60 days in a fiscal year but does not remain for 365 days or more in the
preceding four fiscal years.
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