A Unified Statutory Decision Framework under the Income-tax Act, 1961
By CA Surekha S Ahuja
Questions around residential status, ₹15 lakh triggers, deemed residency, and Tax Residency Certificate (TRC) often arise because these provisions are read in isolation.
The Act, however, operates as a sequenced legal mechanism.
Residency determines TRC eligibility.
Direction of DTAA relief determines TRC relevance.
This framework integrates Section 6, Section 90 / 90A, Rule 21AB, and judicially accepted principles into a single decision path.
Residential Status — The Only Legal Starting Point
Residential status must be determined exclusively under Section 6, without reference to DTAA, tax rates, or TDS.
Compact Residency Decision Matrix
| Trigger Condition | Statutory Result |
|---|---|
| Physical stay in India 182 days or more | Resident |
| Indian citizen / PIO visiting India for 120–181 days and Indian income > ₹15 lakh | Resident |
| Indian citizen with Indian income > ₹15 lakh and not liable to tax in any other country | Deemed Resident u/s 6(1A) |
| Indian income > ₹15 lakh without satisfying 182 / 120 days or deemed residency | Non-Resident |
Key Legal Clarification
The ₹15 lakh threshold does not independently confer residency.
It only activates the 120-day rule or deemed residency.
Absent these statutory gateways, residential status does not change, regardless of tax paid or income quantum.
Consequence of Residency — TRC Eligibility
TRC is governed by Rule 21AB and is not discretionary.
| Residential Status | Indian TRC Eligibility |
|---|---|
| Resident | Eligible |
| Deemed Resident | Eligible |
| Non-Resident | Not eligible |
An Indian TRC merely certifies fiscal residence in India for a specified period.
It does not adjudicate taxability, PE, source rules, or DTAA articles.
DTAA Relief — Direction Matters More Than Residency
After residency is determined, the direction in which treaty relief is claimed becomes decisive.
DTAA Direction & TRC Relevance Flow
DTAA relief claimed outside India
-
Claimant must be resident / deemed resident of India
-
Application through Form 10FA
-
Issuance of Indian TRC (Form 10FB)
-
TRC used only in the foreign jurisdiction
DTAA relief claimed in India
-
Claimant must be a non-resident
-
Indian TRC is neither relevant nor permissible
-
Foreign TRC (and Form 10F, where applicable) is mandatory
Indian TRC cannot be issued merely because:
-
income arises in India,
-
tax is deducted in India, or
-
DTAA benefit is sought within India.
Deemed Residency — Its Limited but Critical Role
Section 6(1A) creates residency only to prevent stateless taxation.
A deemed resident:
-
is treated as resident for TRC and DTAA outward claims,
-
is not automatically RNOR or ROR — that classification follows separately,
-
cannot use Indian TRC to claim treaty relief inside India.
Deemed residency expands India’s right to tax, but does not rewrite treaty mechanics.
Final Integrated Legal Position
The law follows a strict statutory order:
Residency under Section 6 → TRC eligibility → Direction of DTAA relief
Any analysis that:
-
begins with DTAA,
-
relies solely on ₹15 lakh income,
-
or treats TRC as evidence of taxability,
is legally unsound.
The correct compliance lens is always:
-
Am I resident under Section 6?
-
Where is treaty relief being claimed — inside or outside India?
Once these two questions are answered, TRC relevance resolves itself automatically.
