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How to determine Residential Status of Individual?



Determine Residential StatusWe all are aware of the fact that tax is charged on total income and the Individual income is taxed based on his residential status . Ultimately, Incidence of tax on the income depends upon the residential status . So, now, let us truly describe the Primary & secondary condition for determination of residential status of an Individual.Residential StatusThere are normally two primary classifications – Resident & Non- Resident.

Again, Resident is divided into two sub-categories (secondary classification) - Ordinarily & Not-ordinarily Resident.

PRIMARY CONDITION:

An Individual is said to be Resident in India, if he satisfies at least one of the basic condition:

  1. He is in India for at least 182 days in the previous year (PY).
  2. He is in India for at least 60 days in PY & for 365 days or more during 4 years immediately preceding PY.

NOTE:  Both days i.e. the day when one left & the day on which he came to India is considered for Number of days of stay in India.

Exceptions:

Condition 2 is not applicable when Indian citizen during PY

  • Leaves India for employment outside India.
  • Leaves India as he is a crew member of an Indian ship.
  • Comes to visit India.

SECONDARY CONDITION:

When it is determined that a person is resident then the further process to determine whether he is an ordinarily or non-ordinarily resident takes place.

An individual is said to be not-ordinarily resident if he satisfies any one of the following conditions:

He is a resident in India:

  1. For at least 2 years out of 10 previous years preceding the relevant PY.
  2. For at least 730 days during 7 years immediately preceding the relevant PY.

Let’s understand it with an Example:

Mr. X is an Indian citizen went to Canada for employment. He leaves India for first time on Sep 26, 2010. During the PY 2011-12 he comes to India for 175 days. Now, we have to determine his residential status for AY 2011-12 & AY 2012-13.

Determination:

An Individual is said to be resident in India as per primary conditions mentioned above:

In the given example, since Mr. X is an Indian citizen, leaving India for employment, therefore condition 2 is not operative. But condition 1 will get satisfied if he stays in India for at least 182 days in PY.

Number of days of stay of Mr. in India in the PY 2010-11.

MONTH

NO. OF DAYS

APRIL

30

MAY

31

JUNE

30

JULY

31

AUGUST

31

SEPTEMBER

26

TOTAL

179

Since Mr. X stays for less than 182 days (179 days) in India, so he is a Non-Resident in AY 2011-12. Also, in AY 2012-13, he stays for 175 days in India which is less than 182 days, so he is a non-resident for AY 2012-13 also.

About: 

Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.

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