In India an assesse may earn his Income in India or in Abroad or in both, but not all of his income is included in his taxable income, India Law has set some guidelines according to which we can determine the residence status of an Individual and then we can see which income is taken into total income which is taxable.
An assesse residential status for tax is determine with reference to his residence in India in the during Previous Year (financial year not calendar year), Here you should note that Citizenship and Residence are both different things, An Indian Citizen may be non residence of India and an Foreigner may be residence of India.
Indian Government has divided residential status for tax as per following segment :-
Law has put some guidelines which determines the status of an individual, Let see those rules.
An individual is said to be resident of India if he satisfy following both Basic Conditions :-
- He should be India in the previous year for a period of 182 days or more, Or
- He has been in India for at least 365 days during four years preceding the previous year and has been in India for at least 60 or more during Previous Year.
You should note that here 182 or so on days doesn’t means he should be in India for continuously 182 days, he can be in India for 100 day then leave India, then come India for 2 days then again leave and then come for 80 days and so on. His total days in India is calculated it can be with gaps too.
Exception to the above 60 days rule :-
The Above said 60 days rule is not applicable if :-
- An individual who is a citizen of India and leaves India in any previous year for the purpose of employment or as an member of the crew of an Indian ship, then he must satisfy the 182 days condition. Or
- If any citizen of India or Foreign national to Indian Origin, who is living outside India comes on a visit to India in the previous year the has to satisfied 182 days condition not 60 days one.
Indian Origin means that either he or either his parents of grand parents was born in undivided India.
If an Individual satisfied any one of 2 basic conditions the he is said to he Resident of India in previous year, to become Ordinarily Resident he has to satisfied both below Additional Conditions :-
- He has been resident in India in at least 2 out of 10 previous years preceding the relevant previous year,
- He has been in India for at least 730 days in all during the 7 previous years preceding the previous year.
If an individual satisfy both Additional conditions too then he will become Ordinarily Resident of India, he satisfy any one basic condition but not Additional Conditions then he will be Not Ordinarily Resident of India, and If he fails to fulfill basic conditions too then he will will treated as Non-Resident of India.
ALSO READ :- Definition Of NRI As Per Direct Tax Code (DTC)
Tax incidence shows which income is taxable to which :-
Not Ordinarily Resident
|Income received in India whether accrued or arisen in India or outside India||Taxable||Taxable||Taxable|
|Income deemed to be received in India whether accrued or arisen in India or outside India||Taxable||Taxable||Taxable|
|Income accruing or arisen in India whether received in India or Outside India||Taxable||Taxable||Taxable|
|Income deemed to accrue or arise in India whether received in India or outside India||Taxable||Taxable||Taxable|
|Income received and accrued or arisen outside India from a business controlled in India||Taxable||Taxable||Not Taxable|
|Income received and accrued or arisen outside India from a business controlled out side India||Taxable||Not Taxable||Not Taxable|
|Income received and accrued or arisen outside India from any other sources||Taxable||Not Taxable||Not|
|Income accrued or arisen and received outside India in earlier years but later on remitted to India during the previous Year||Not Taxable||Not Taxable||Not Taxable|