Residential status: If a person is to be taxed, then his Residential status is seen first. Tax cannot be withdrawn without seeing the residential status of a person.
Residential status means whether a person is a resident of India or not. If you are resident or non-resident in India, that person’s tax will be calculated differently.
Apart from this, if you also file your Income Tax Return, then in that also you have to tell your Residential status first . Whether or not an income is taxable for you also depends on your Residential status.
Types of Residential status –
For the purpose of income tax in India, an individual is divided into different types, such as –
- Resident in India and
- NON- Resident in India
If an individual is a resident of India, it is further divided into 2 parts –
- Ordinary Resident (Ordinary Resident in India)
- Not Ordinary Resident (not a common resident in India)
Now if we see a person with the purpose of income tax, then we have 3 types of types –
- Resident But Ordinary Resident
- Resident But Not Ordinary Resident
- NON- Resident
To come in any of these types, an individual has to fulfill different conditions, which we will see separately.
Ordinary Resident and Not Ordinary Resident –
In the calculation of Residential status, first of all, we see whether the person is Resident or NON- Resident.
To become a resident of India, a person has to fulfill any one of these two basic conditions –
- The person may have lived in India for 182 or more days in the previous year.
- The person must have lived in India for 60 or more days in the previous year and in India for 365 or more days in the 4 years preceding the previous year.
If any one of these two basic conditions is fulfilled, then for the purpose of income tax, that person will be considered as resident in India.
Now if a person is a resident of India, then to find out whether he is a normal resident or not a common resident in India, we will look at further 2 additional conditions –
- That person must have been in India for at least 2 years in the 10 years preceding the previous year,
He must have been in India 730 days or more in the 7 years preceding the previous year.
Now if a person is fulfilling both these additional condition along with one or both basic condition , then that person will be considered as a common resident of India.
But a person who is fulfilling one basic condition, but is not fulfilling any additional condition or any additional condition, then that person will not be considered a normal resident of India.
NON – Resident (Non-Resident) –
If a person is not fulfilling a single basic condition, then that person will be considered non-resident in India.
In the Budget 2020 , some changes have been proposed in the terms of becoming a resident in India, according to which if a person is a citizen (citizen) of India and is not a resident in any other country, then that person will be treated as resident in India.
By doing this, many Indian citizens who live outside India and come to India for less than 182 days, due to which they are not able to fulfill the conditions of being resident in India and also do not live outside India. It will be a big shock.
Because considering them to be resident in India, they will have to pay tax in India on all their types of income, whether it is earned in India or not.
Some individuals for whom the rule is different for becoming resident in India (Exception) –
There are also some persons to whom a second basic condition does not apply to become a resident in India, i.e. such person will be considered resident in India only if he has been in India for 182 days or more in the previous year (previous year).
Such a person is –
- Any person who is a citizen of India but leaves India for employment outside India, or
- A person who is a citizen of India or a person of Indian origin and comes to visit India.
In both these cases, the person will not be given the option of second basic condition to become resident in India.
But, in the Budget 2020, if a person who is a citizen of India or is of Indian origin and comes to travel in India, then it has been recommended to apply a limit of 120 days instead of 182 days in the calculation of residential status.
Taxation of income – residential status
Whether or not an income is taxable for an individual depends on its residential status. In the table below , we will see which income is taxable for an individual and which is tax free.
| Particular | Resident but ordinary resident | Resident but not ordinary resident | Non- resident |
| Income received or deemed received in India | Taxable | Taxable | Taxable |
| Income earned or deemed income in India | Taxable | Taxable | Taxable |
| Outside India, it was deemed to have been earned or earned, but the first receipt of such income was made in India. | Taxable | Taxable | Taxable |
| Any income earned or deemed to have been earned outside India but that business and / or profession is in India or is under control | Taxable | Taxable | Not Taxable |
| Earned outside India and received income outside India | Taxable | Not Taxable | Not Taxable |
In the table above, you can see that a person who is an ordinary resident of India and he is earning income in India or anywhere outside India, then he has to pay tax on that income.
How to calculate the period of a person’s stay in India to become a resident in India?
The calculus of the period of a person’s stay in India is added to the total number of days he has lived in India. So it is not necessary that the person has been in India continuously, if he comes to India different times in a year, then all those days will be added.
Apart from this, it is not necessary that the person should stay at any one place in India. He can stay at any place in India.
In the calculus of days of stay in India, the days of that person coming and going in India will also be added.
Other points – Both a citizen of India and a resident of India have different concepts, a person can be a citizen of India but it is not necessary that he is also a resident of India. Similarly, a foreigner is not a citizen of India, but can be a resident of India if he fulfills the conditions of being resident in India.
Residential status is seen for each year. Therefore, it is not necessary that if a person is resident in a year, then he will remain a resident for the next year as well.
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