An individual is said to be Resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or
(b) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
NRI, NOR and Resident Status
Most Governments across the world determine the Taxability based on the Country of Residence. Hence, determining the Country of Residence is of critical importance to both the Governments as well as the Tax Payers. Numerous, legislations have been drafted to clearly explain and determine the Resident Status and hence the Tax implications.
In India, an Individual can possesses any one of the following Residential Status’:
- ROR - Resident and Ordinarily Resident
- NR - Non-resident
- RNOR - Resident but not Ordinarily Resident
What is the Residential Status?
The statute for determining the Residential Status for Income Tax purpose is laid out in Section 6 of the Income Tax Act, 1961.
An individual is said to be Resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or
(b) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
Exceptions in case of an Individual are as follows:
(a) being a citizen of India, who leaves India in any previous year [as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (b) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted ;
(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and [eighty-two] days” had been substituted.]
A person is said to be Not Ordinarily Resident in India in any previous year if such person is— an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less;
A Non-Resident means a person who is not a “resident” includes a person who is “not ordinarily resident”.
What is the Tax implication of Residential Status?
The Taxability will be determined by:
- Residential Status
- Place where the Income has been earned
Hence, the taxability is as follows:
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Residential status
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Nature of Income taxable
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Resident and Ordinarily Resident
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All Income whether earned in India or outside India
All incomes :- 1. which is received or is deemed to be received in India
2. which accrues or arises or is deemed to accrue or arise in India, and
3. which accrues and arises outside India which means the world income is taxable in case of a resident
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Resident but not Ordinarily Resident
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All income earned in India and all income earned outside India if the same is derived from a business which is controlled in India or from a profession which is set up in India.
Income outside India is not liable to Tax.
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Non Resident
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All income earned in India is Taxable.
Income outside India is not liable to Tax.
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This is a general article, academic in nature and may or may not be specifically applicable to you. It is advisable that you consult a qualified and experience consultant before making decisions on taxability.
TaxAssist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.
Happy taxes!
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