1.1. 120 days to substitute 182 days only if total income exceeds
Rs. 15 lakhs
[Applicable from Assessment Year 2021-22]
Section 6 of the Income-tax Act defines parameters to
determine the residential status of an assessee. The residential status of an
individual is determined by the number of days of his stay in India. As per
existing section 6(1), an individual is considered as resident in India in a financial year if:
a) he is in India for 182 days or more during the year; or
b) he has been in India for
365 days or more during the 4 immediately preceding years and for 60 days or more during the
financial year.
Explanation 1(b) to section 6 provides that in respect of an Indian citizen and a person of Indian origin who visits India
during the year, the period of 60 days
as mentioned in (b) above shall be substituted with 182 days. Explanation 1(a) to section 6 also
provides similar concession to the Indian citizen who leaves India in any
previous year as a crew member or for
the purpose of employment outside
India.
The Finance Bill, 2020 has proposed an amendment to the Explanation 1(b) that the concession in
the period of stay in India, for an Indian citizen and a person of Indian
origin, shall be reduced from 182 days to 120 days. No amendment has been
proposed in Explanation 1(a).
The Finance Bill, 2020 (as passed by the Lok Sabha) has
restricted the application of amended provisions of Explanation 1(b) only to that Indian citizen or a person of Indian
origin whose total income, other than income from foreign sources, exceeds Rs.
15 lakhs during the previous year. For this provision, income from foreign
sources means
income which accrues or arises outside India (except
income derived from a business controlled in or a profession set up in India).
1.2. Provision of ‘Deemed
Resident’ applicable if total income exceeds Rs. 15 lakhs
[Applicable from Assessment
Year 2021-22]
The Finance Bill, 2020 has proposed to insert a new clause (1A) to section 6 of the
Income-tax Act to provide that an Indian citizen shall be deemed to be resident
in India if he is not liable to tax in any country or jurisdiction by
reason of his domicile or residence or any other criteria
of similar nature. This change was proposed as it was noticed that some Indian
citizens shift their stay in low or no tax jurisdiction to avoid payment of tax
in
India.
To avoid any misinterpretation and to give benefit to bonafide persons working in abroad, the
CBDT has issued a clarification on 02-02-2020 that in case of an Indian citizen
who becomes deemed resident of India under this proposed provision, income
earned outside India by him shall not be taxed in India unless it is derived
from an Indian business or profession.
The Finance Bill, 2020 (as passed by the Lok Sabha)
reintroduces section 6(1A). The new provision provides that an Indian citizen
shall be deemed to be resident in India only if his total income, other than
income from foreign sources, exceeds Rs. 15 lakhs during the previous year. For this provision, income from foreign
sources means income which accrues or arises outside India (except income
derived from a business controlled in or a profession set up in India).
Other conditions proposed in the Finance Bill, 2020 have
been kept same, inter-alia, such
individual shall be deemed to be
Indian resident under the new provision only when he is not liable to tax in
any country or jurisdiction by reason of his domicile or residence or any other
criteria of similar nature.
Thus, from Assessment Year 2021-22, an Indian Citizen
earning total income in excess of Rs. 15 lakhs (other than from foreign
sources) shall be deemed to be resident in
India if he is not liable to pay tax in any country. The residential
status of such person shall of a ‘Not Ordinarily Resident’ due to new
sub-clause (d) added to Section 6(6). Accordingly, he would be liable to pay
tax in India on his global income other
than the income not derived from a business controlled
in or a profession set up in India.
1.3. Deemed resident to be treated as ‘Not Ordinarily Resident’
[Applicable from Assessment
Year 2021-22]
As per Section 6, a resident individual or a Hindu
Undivided Family (HUF) is deemed as Not Ordinarily Resident in India, if he
satisfies any of the following conditions:
a) Individual or Karta of HUF has been a non-resident in India for at
least 9 years out of 10 years preceding the previous year; or
b) Individual or Karta of HUF has been in India for 729 days or less
during the period of 7 years preceding the previous year.
The Finance Bill, 2020 has proposed to rationalize these
conditions by providing just one condition that an Individual/HUF shall be
deemed to be Not Ordinarily Resident if he/Karta of HUF has been a non-resident
in any 7 out of the 10 immediately preceding years. The second condition has
been proposed to be removed.
This proposed amendment has been withdrawn by the
Finance Bill, 2020 (as passed by the Lok Sabha). Thus, the existing
conditions as contained under section 6(6) of the Income-tax Act shall
continue. However, the Finance Bill, 2020 (as passed by the Lok Sabha) has
inserted the following two more situations wherein a resident person is deemed
to be ‘Not Ordinarily Resident’ in India:
a) An Indian Citizen or a person of Indian origin whose total income
(other than income from foreign sources) exceeds Rs. 15 lakhs during the
previous year and who has been in India for a period of 120 days or more but less than 182 days;
b) An Indian Citizen who is deemed to be resident in India as per new Section 6(1A).
1.4. Overview
|
Class of Individual
|
Total income (excluding income from foreign sources)
|
Minimum no. of days of stay in India during the relevant
year to be considered as
‘Resident
in India’
|
Whether liable to pay
tax in any other country?
|
Residential
Status if stay in India is less than no. of days mentioned in condition (b)
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
|
Indian citizen going outside India as a crew member or
for employment
|
Not exceeding
Rs. 15
lakhs
|
182
days
|
Yes
|
Non-resident
|
|
Not exceeding
Rs. 15
lakhs
|
182
days
|
No
|
Non-resident
|
|
|
Exceeding
Rs.
15 lakhs
|
182
days
|
Yes
|
Non-resident
|
|
|
Exceeding
Rs.
15 lakhs
|
182
days
|
No
|
Not
Ordinarily
Resident*
|
|
|
Indian citizen visiting India
|
Not exceeding
Rs. 15
lakhs
|
182
days
|
Yes
|
Non-resident
|
|
Not exceeding
Rs. 15
lakhs
|
182
days
|
No
|
Non-resident
|
|
|
Exceeding
Rs.
15
lakhs
|
120 days (and
365 days in
last 4
years)
|
Yes
|
Non-resident
|
|
|
Exceeding
Rs.
15
lakhs
|
120 days (and
365 days in
last 4
years)
|
No
|
Not Ordinarily Resident*
|
|
Any other Indian citizen (does not visit India during
the year)
|
Not exceeding
Rs. 15
lakhs
|
-
|
Yes
|
Non-resident
|
|
Not exceeding
Rs. 15
lakhs
|
-
|
No
|
Non-resident
|
|
|
Exceeding
Rs.
15 lakhs
|
-
|
Yes
|
Non-resident
|
|
|
Exceeding
Rs.
15 lakhs
|
-
|
No
|
Not
Ordinarily
Resident
|
|
|
Person of Indian origin visiting India
|
Not exceeding
Rs. 15
lakhs
|
182
days
|
-
|
Non-resident
|
|
Exceeding
Rs.
15
lakhs
|
182 days (and
365 days in
last 4
years)
|
-
|
Not Ordinarily Resident*
|
|
|
Exceeding
Rs.
15
lakhs
|
120 days (and
365 days in
last 4
years)
|
Yes
|
Non-resident
|
|
|
Exceeding
Rs.
15
lakhs
|
120 days (and
365 days in
last 4
years)
|
No
|
Non-resident
|
* The period of stay in India should be 120 days or more but less
than 182 days
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