The laws
in this regard are quite complicated as these it does not define who
is nonresident.
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Residential status of an individual
or HUF or a company is of great importance in Indian Income Tax Act as the
liability to pay tax in India does not depend on the nationality or domicile of
the Tax payer but on his
residential status. Residential Status is determined on the basis
of physical presence i.e. the number of days of stay in India in any year.
There are three types of status based on the stay in India:-
(1)
Resident:
a.
An
individual is resident if any of the following conditions are satisfied:
(i) He
stayed in India for 182 days or more during the previous year, or
(ii) he
stayed in India for 365 days or more during the four preceding years and stays
in India for at least 60 days 9 182 days in case of an Indian citizen or a
person of Indian Origin coming on a visit to India or 182 days in
case of an Indian citizen going abroad for an employment) during
the previous year.
Stay in India for the above criteria may be continuous or intermittent.
b.
Hindu Undivided Family (HUF) or firm
or other Association of persons is resident of India except in cases where the
control and management of its affairs is wholly situated outside India in the
previous year
(c) A company is resident in India
if-
i.
it is an Indian company, or
ii. During the previous year, the
control and management is situated wholly in India.
iii.
A person resident in India, in
a previous year in respect of any source of income shall be deemed to
be resident in India in respect of his other sources of income.
(2)
Non-Resident
A person is
non-resident if he is not resident in India.
(3)
Resident but not ordinarily resident
An individual or an HUF is treated
to be not ordinarily resident in India in any previous year if he or the
manager of HUF-
a.
has not been resident in India in 9
out of 10 previous years preceding the previous year; or
b.
Has not during the seven previous
years preceding that year, been in India for a period of or periods amounting
in all to 730 days or more?
Thus according
to condition in clause (a) a newcomer to India would remain not ordinarily
resident in India for the first 9 years of his stay in India. Similarly, in
case where a person who is resident in India goes abroad and ceases
to be resident in India for at least 2 years, he would upon his return, be
treated as, not ordinarily resident for the next 9 years.
How the
residential status of a person is determined:-
i.
In case of Indian citizen who
leaves Indian during previous year for the purpose of employment :-
Such a person is resident
in India if he satisfies the following conditions:
a.
He stays in India for at least 182
days during the previous year.
b.
He is resident in India for at least
9 out of 10 years proceeding the previous year.
c.
He is resident in India for at least
730 days during 7 years proceeding the previous year.
d.
If such a person satisfies
condition (a) but does not satisfy either of the conditions at (b) or (c)
above, such a person would be resident but not ordinarily resident.
Such person would be non-resident if
he does not satisfy condition (a) stated above.
i.
In case of Indian citizen or a
person of Indian origin living abroad comes to India for a visit during
the previous year
The residential status of such a
person is to be determined after looking into the following.
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This Article is written by CMA Samir Biswal.
He can be reached at cmasamirbiswal@gmail.com.
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