Income Tax - Residential Status And Tax Incidence PDF

to the following excepBions 24.1-la EXCEPTIONS - The aforesaid rule of residence is subject one (Special Case 1) -In Special Case 1, the period of "60 days" referred to in (b) abrwe BException...

to the following excepBions 24.1-la EXCEPTIONS - The aforesaid rule of residence is subject one (Special Case 1) -In Special Case 1, the period of "60 days" referred to in (b) abrwe BException 1(a) to section 6(1). However, Special Cae has been extended to 182 days by virtue of Explanation leaves India during the previous year for the lis available in the case of an Indian citizen who India during the previous year purpose of employment outside India or an Indian citizen who leaves leaving India as a member of the crew ofan Indian ship. For this purpose, the requirement is not employment (the but leaving India for the purposes ofindividual for taking employment outside India outside need ngt employment may be in India or may be India). To put it differently, the 155 Taxman 326 (AAR - New be an unemployed person--British Gas India (P.) Ltd, In re (2006] the previous year on a foreign Delhi). He may be employed in India and leave India during to take up any emplov. assignment of his employer company. Travelling abroad on business visa condition-K. Sambasiva ment or for any business carried outside India, is sufficient to prove thisan unemployed person who Rao v. ITO(2014]42taxmann.com 115 (Hyd.). Alternatively, he may be goes outside India to take an employment outside India. In Special Case 1, an individual will be resident in India only if he is in India during the relevant previous year for at least 182 days. Exception two (Special Case 2) - In Special Case 2, the period of "60 days" referred to in (b) above has been extended to 182 days by virtue of Explanation 1(b) to section 6(). However, Special Case 2 covers an Indian citizen or a person of Indian origin who comes on a visit to India during the previous year. Aperson is deemed to be of Indian origin if he, or either of his parents orany ofhs grand-parents, was born in undivided India. It may be noted that grand-parents include both maternal and paternal grand-parents. t Vide Circular No. 2/2021, dated March 3, 2021, CBDT has provided that if any individual is facing double taxalhN even after taking into account the relief provided by the relevant Double Taxation Avoidance Agreement (DTAA, she may furnish the specified information by March 31, 2021 in Form-NR annexed to the said Circular. This torms be submitted electronically to the Principal Chief CIT (nternational Taxation). tln the case of an individual, beinga citizen of India and a member of the crew ofa foreign bound ship leaving the period or periods of stay in India shall, not include the period given in rule 126. Under rule l26, the period beg on the date entered into the Continuous Discharge Certificate in respect of joining the ship by the said individualfo the eligible voyage and ending on the date entered into the Continuous Discharge Certificatein respect of sigrie by that individual from the ship in respect of such voyage, shall not be included in theperiodof stay in India  49 Non-resident Para 24.3 In Special Case 2, an individual will be resident in India only if he is in lndia during the relevant previous year for at least 182 davs, Exception three-Exception three is given by section 6( 1A), It is 021-22. For the provisions of this section, see para 24.3-1. applicable from the assessment year 4.1-2 ADDITIONAL CONDITIONS TO TEST WHENA RESIDENT Cection 6(6), a resident individual is treated as 'residentINDMDUAL IS ORDINARILY RESIDENT IN INDIA - Under and ordinarily resident" in Indiaif he satisfies the following two additional conditions Additional condition () He has been residentt in India in at least 2 out of 10 previous vears preceding the relevant previous year. immcdiately Additional condition (i) He has been in India for a period of 730 days or more during 7 years inrnediately preceding the relevant previous year. In brief it can be said that an individual becomes satisfies at least one of the basic conditions and theresident and ordinarily resident in India if he two additional conditions (Le., () and (i)) Exceptions - For a few exceptions, see para 24.3-1. 24.1-3 OTHER POINTS - In determining the residential status of an assessee, the propositions have to be borne in mind: following settled Stay at the same place not necessary -It is not essential that the stay Kinloch v. IRC 14 TC 736. It is equally not necessary that the stay should should be at the same place place of stay or purpose of stay is not material. be continuous. Similarly Stay in territorial waters A stay by an individual on a yacht India would be treated as his presence in India for the purposemoored of this in the territorial waters of Burt 5 TC 667. section-Baryard Brown v. Presence for a part of a day -Where a person is in India only for a part of a day, the calculation of physical presence in India in respect of such broken period should be made on an hourly basis. A total of 24 hours of stay spread over a number of days is to be counted as being stay of one day-Walkie v. IRC 1 AER 92. IE, however, data is not availableequivalent to the to calculate the period of stay of an individual in India in terms of hours, then the day on which he enters India as well as the day on which he leaves India shall be taken into account as stay of the individual in India- Advance Ruling P. No.7 of 1995, In re 90 Taxman 62 (AAR - New Delhi). Involuntary stay -Involuntary stay of a person in India caused by unauthorized impounding of passport must be excluded for determining his residential status under section 6-CIT V. Suresh Nanda (2015] 233 Taxman 4 (Delhi). 24.2 Resident but not ordinarily resident (Sec. 6(1), 6(6)(a)]- An individual who satisfies at least one of the basic conditions mentioned in para 24.1-1 but does not satisfy the two additional conditions [ie., conditions () and (i) mentioned in para 24.1-21, is treated as a resident but not ordinarily resident in India. In other words, an individual becomes resident but not ordinarily resident in India in any of the following circumstances : Case I If he satisfies at least one of the basic conditions [ie, condition (a) or (b) of para 24.1-1] but none of the additional conditions [ie, () and (i) of para 24.1-2]. Case 2 If he satisfies at least one of the basic conditions [ie, condition (a) or () of para 24.1-1) and one of the two additional conditions [ie, () and (i) of para 24.1-2). Exceptions -For a few exceptions, see para 24.3-1. Non-resident-An individual is anon-residentin India if he satisfies none of the basic conditions Para 24.1-1], In the case of non-resident, the additional conditions (Le., () and (i) of para 24.1-2] are not relevant. Para hision 24.3-1. is subject to one exception. It is applicable from the assessment year 2021-22. For this exception, see cording to basic conditions given in para 24.1-1.  Para 24.3 Income-tax - Residential status und tux incidence 24.3-1 EXCEPTIONS -Even if an individual satisfies none of the two basic conditions, he is deemed t, be resident but not ordinarily resident in the cases given below - First exception -This exception is given under section 6(|A) read with section 6(6X d) and applicabile from the assessment year 2021-22. Underthisexception an individual shall be deemed to be residenm but not ordinarily resident in India, if he satisfies the following 3conditions he is an Indian citizen; b. his total income (other than the income from foreign sources) exceeds Rs. 15,00,000' during the relevant previous year, and c he is not liable to tax in any other country or territory by rcason of his domicile or residence or any other criteria of similar nature. This exception is not applicable in the case of aforeign citizen, even if he is aperson of Indian origin. Second exception -This exception is given by section 6(6\) read with Explanation I(b) to section 6(1) and applicable from the assessment year 2021-22. Under this exception, an individual shal be deemed to be resident but not ordinarily resident in India if he satisfies the following 4 conditions - a. he is an Indian citizen ora person of Indian origin; b. his total income (other than the income from foreign sources) exceeds Rs. 15,00,0001 during the relevant previous year; c. he comes to India on a visit during the relevant previous year, and d he is in India for 120 days (or more but less than 182 days) during the relevant previous year and 365 days (or more) during 4years immediately preceding the relevant previous year. 24.3-1a OTHER POINTS -For the aforesaid two exceptions, the following should be kept in view How to find out total income of Rs. 15,00,000 -Total income for the ceiling of Rs. 15,00,000 is calculated after ignoring income from foreign sources. "Incomne from foreign sources' means income which accrues or arises outside India (except income derived from abusiness controlledin or a profession set up in India). Income which is deemed to accrue or arise in India shall be included in computation of the ceiling of Rs. 15,00,000. Liable to tax -"Liable to tax" (in relation to a person and with reference to a there is an income-tax liability on such person under the law of that country country) means that for the time being in force and shall include a person who has subsequently being exempted from such liability under the law of that country. Person of Indian origin -A person is deemed to be of Indian origin if he, or either of his or any of his grandparents, was born in undivided India. parents 24.4 Rule of residence in brief- The Table given below assessment year 2022-23- summarises the rule of residence for the RULE OF RESIDENCE Who is resident and ordinarily Hemust satisfy at least one of the resident in India basic conditions (fie. (a) and/or (b)', At the same time, he should also satisfy the two additional conditions. Who is resident but not He must satisfy at least one of the basic conditions (ie, (a) ordinarily resident in India satisfy one or none of the additional conditions. and/or (b)) He may Who is non-resident resident He satisfies none of the basic conditions [ie, he does in India not satisty basic conditionu and basic condition (b)'1, Additional conditions are not relevant in the caseof anon resident. 'In the two special cases mentioned in para 24.1-1, basic condition (b) is not relevant. t For con mpuing Ks.nif it S00000, tion even only taxable inincome is derived/received India. shall be considered. If income is exempt ia shall not be taken inlo  Clarification in respect of residency Para 24. BASIC CONDITIONS AT A GLANCE who In the case of an Indian citizen or a In the cuse of an ciizen personn of Indian origin (who is individunl ndian during ofan thepreviousyear abroad) who comes to India on a visit fother than thut menluwd in ol employmen or tumns (/) anl (2)/ during the previous year Rse of member of the tdnship tisasa (2) (3) (U a. Presence for at least 182 days in in a Presence for at least 182 days in least182days India during the previous year rseneforat previous year India during the previous year the 2021-22. 2021-22. a during b. Not functionalt b. Presence in India for at least 6) No amional days during the previous year 2021-22 and 365 days duriny 4 years immediately preceding the previous year (ie, during Aprl 1,2017 and March 31,2021) ADDITIONAL CONDITIONS AT AGLANCE Resident in India in at least 2 out of 10 years immediately preceding the previous year (ie, he must satisfy at previous vears neof the basic conditions, in 2 out ot 10 immediately preceding previous years (ie, during 201011 and 2019-20) least 730 days during 7years immediately preceding - Presence in India for at 2020). the previous year (ie, during April 1.2013 and March 31, 45 Clarification in respect of residency under section 6-In order to avoid genuine hardship due to suSDension of international flights, CBDT vide Circular No. 11/2020, dated May 8, 2020 has decided that for the purpose of determining the residential status under section 6 during the on a visit before March 22, oresjous vear 2020-21 in respect of an individual who has come to India 2021 and - period of stay in India from March a has been unable to leave India on or before March 31,2021, his 22, 2021 to March 31, 2021 shall not be taken into account; or 1,2021 and b. has been quarantined in India on account of outbreak of COVID-19 on or after March March 31,2021 orhas been unable to leave India has departed on an evacuation flight on orbeforefrom on or before March 31, 2021, his period of stay the beginning of his quarantine to his date be taken into account; or ot departure or March 31, 2021, as the case may be, shall not has departed on an evacuation flight on or before March 31, 2021, his period of stay in India from c departure shall not be taken into account. Marchh:22, 2021 to his date of