Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Thursday, September 1, 2016

RESIDENTIAL STATUS OF AN INDIVIDUAL

The income tax rates in India are same for resident and non - resident assessees but for whether some income is chargeable to tax or not  and for certain deductions are also allowed to residents only. It is very important to know the residential status of an Individual.
The law is like this:
As per Sec 6(1) of the Income Tax Act, 1961, an individual is resident in India in any previous year, if he satisfies at least one of following basic conditions:
a) He was in India in the previous year for a period of 182 days or more.
b) He was in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately proceeding the previous year.
Further, in the following Special Situations condition (a) to Section 6(1) shall only be checked to determine the residential status for any previous year:
(i) Individual, being Indian Citizen, leaving for employment outside India during the relevant previous year, or
(ii) Indian Citizen being a Crew Member of an Indian Ship, leaving India during the relevant previous year, or
(iii) Individual, being India Citizen or person of Indian Origin engaged outside India in an employment or a Business or Profession or in any other vocation, and visiting India during the Previous Year.
To check whether an individual is resident and ordinary resident in India, he should fulfill two additional conditions mentioned below: 
i) He has been resident in India in at least 2 out of 10 previous year immediately preceding the relevant previous year and
ii) He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.

For Example :
Query : What is the N.R.I. Status of an individual for Fin Year 2015 - 2016 if he has stayed as given here under: 
 1) China - 28 Days from 28.04.2015 to 25.05.2015
 2) Sri Lanka - 20 Days from 09.06.2015 to 28.06.2015
 3) Italy and Europe - 27 Days from 11.07.2015 to 07.08.2015
 4) Italy - 181 Days from 24.09.2015 to 22.03.2016

Total Days out of India : 231 days

Solution
In the present case, he was in India for only 143 (365-231) days. Therefore, he fulfills the condition no. (b) to Sec 6(1), as his stay in India is for more than 60 days in FY 2015-16 and assuming he was in India for 365 days or more during 4 years immediately preceding the previous year i.e. FY 2014-15, 2013-14, 2012-13 and 2011-12. So he is Resident in India for the FY 2015-16 as per Income Tax Act, 1961.

He qualifies the above mentioned conditions. So his status in India is Resident And Ordinarily Resident In India for the FY 2015-16.

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