To determine the residential status of an , section 6(1) prescribes tests. An individual who fulfils any one of the following two tests is called Resident under the provisions of this . These tests are :
(a) If he is in India during the relevant previous year for a period amounting in all to 182 days or more.
(b) If he was in India for a period or periods amounting in all to 365 days or more during the four years preceding the relevant previous year and he was in India for a period or periods amounting in all to 60 days or more in that relevant previous year.
(a) In case of individual being a citizen of India who leaves India in any previous year as a member of the crew of an Indian ship as defined i.n clause (18) of section 3 of the Merchant Shipping Act 1958 (44 of 1958) or for the purposes of outside India the provisions of sub clause (b) as given above shall relation to that year as if the words “sixty days” Substituted by “182 days “.
(b) In case of an individual being a citizen of India, or a person of Indian origin within the meaning of explanation to clause (e) of section 115 C, who being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (b) shall apply in relation to that year as if for he words. ‘Sixty days occurring therein the words One hundred and eighty two days had been substituted.’
After fulfilling one of the above two tests, an individual becomes resident of India but to become an ordinary resident of India an individual has to fulfill both the following two conditions :
(1) He has been resident of India (fulfilling at least one test given above) in at least 2 previous years out of 10 previous years immediately prior to the previous year in .
(2) He has stayed in India for at least 730 days in 7 previous years immediately preceding the previous year in question.
This means that an individual will not become an ordinary resident of India by simply staying in India for a period of 182 days or more in a previous year. He will become ordinary resident only if. he fulfills one of these two tests and was also fulfilling one of the tests in at least 2 previous years pieceding the relevant previous year and did stay in India for at least 730 days in 7 previous years preceding the relevant previous year.
While number of days for stay in India, day of departure was not included. But now as per decision of Authority for Advance Rulings, both, day of departure from India and day of arrival in India are to be counted as stay in India.
Test No. 1. Stay in India for 182 days or more :
If an individual is to become resident of India during any previous year, his/her personal stay in India during that year is a must although the number of days of stay differs in the two tests. It means that if an individual does not stay in India at all in any previous year, he cannot be resident of India in that year. Stay in India means that the individualshould have stayed in Indian territory and anywhere (cities, villages, hills, even Indian territorial waters) for such number of days.
The period of 182 days need not be at a stretch. But physical presence for an aggregate of 182 days in the relevant previous year is enough. of resident is not linked with any particular place or town or house.
The onus to prove the number of days of stay in India lies on the assessee. It is for him to prove, if he desires to be taxed as non-resident or not ordinarily resident.
Test No. 2. Presence for 365 days during the four preceding previous years :
A person may be a frequent visitor to India. In his case, the residential status will be determined on the basis of his presence in India for 365 days in four years immediately preceding the relevant previous year. Along with this his presence for 60 days during the relevant previous year is another essential condition to be fulfilled. The purpose, object or reason of visit to and stay in India has nothing to do with the determination of residential status.
For Indian citizen going abroad on a job or as a member of crew of an Indian ship [Explanation (a)]
In case of an Indian citizen :
(a) Who is going outside India for a job and his contract for such employment outside India has been by the Central Government ; or
(b) He is a member of crew of an Indian ship ;
test (a) u/s 6(1) remains the same but in test (b) 60 days have been replaced by 182 days.
The effect of this explanation is that in case of persons of Indian citizenship going abroad on a job approvedby the Central Government only test (a) is to be applied during the year he is leaving India.
For Indian citizens and persons of Indian origin [Explanation (b)]
For such persons test (a) remains the same but in test (b) words ‘60 days’ have been replaced by 182 days.
The practical effect of this provision is that those persons who are Indian citizens or persons of Indian origin living outside India and when they come to visit India only test (a) of 6 (1) is to be applied.
A person shall be deemed to be of Indian origin if he or either of his parents or any of his grand parents was born in India or undivided India [Section 115 (c) explanation to clause (c)]
An individual who is resident u/s 6(1) can claim the beneficial status of N.O.R. if he can prove that :
(a) He was non resident in India for 9 previous years out of 10 previous years preceding the relevant previous year.
(b) He was in India for a period or periods aggregating in all to 729 days or less during seven previous years preceding the relevant previous year.
An individual who is Resident u/s 6(1) can be subdivided into two categories :
(a) Ordinary Resident ; or (b) Not ordinarily Resident
To Summarise :
Ordinary Resident = Satisfying any one of two conditions given u/s 6(1) + Satisfying both the additional conditions of Sec. 6(6)(a)&(b)
Not Ordinarily Resident = Satisfying any one of the two conditions u/s 6(1) + Satisfying none or any one of the additional conditions
Under section 2(30) of the Income-tax Act, 1961 an assessee who does not fulfil any of the two conditions given in section 6(1)(a) or (b) would be regarded as ‘Non-resident’ assessee during the relevant previous year for all purposes of this Act.
(i) Meaning of Stay in India
It means stay any where within Indian geographical territory, i.e., any where in Indian villages, towns, cities, waters or mountains.
(ii) Stay may be continuous or intermittant
Stay in India for specified days should not necessarily be continous. It means a person is not required to stay 182 days at a stretch as per Sec. 6(1), i.e., a person stays in India in the months of April, May and June and then left India and stayed for 5 months in a foreign country and then came back and stayed in India upto 31st March. In such a case the stay in India will be counted by adding stay in India on each different occasion.
(iii) Stay need not be at one place
A person must stay within Indian territory and where he stays is not an important cods4deration.
(iv) Object of stay is not important
It is immaterial whether he stays in India for business purposes or on a personal purposes or visits India as a tourists.
(v) Calculation of ‘period of stay’ in India
The ‘period of stay’ in India is to be calculated on the basis of actual stay of an individual in India during the relevant previous year. Thus, if a person stays in India for a part of the day (i.e., for certain hours etc. only) then period of stay in India is to be calculated on hourly basis. Thus, a stay of 24 hours will be taken as stay of one day and total hourly stay in India will be converted into days.
However, if detail of hourly stay in India is not available then period of stay in India is to be calculated in days. It is important to note that while calculating the period of stay in India (in days), both the day of departure from India and the day of arrival in India are to be counted as stay in India. [As per the decision of Authority for Advance Rulings—P.No. 7 of 1995).
Wednesday, April 8, 2015
Residential Status Of An Individual
Residential Status Of An Individual