Tax Residency for Individuals in India

Shreya Srivastava | Symbiosis Law School, Hyderabad | 4th July 2020

Tax Residency for Individuals in India

Tax assessment from an individual relies upon his private status in the nation. Segment 6 sub-segment (1) of the Income Tax Act, 1961 gives the conditions under which an INDIVIDUAL is supposed to be Resident in India. When the INDIVIDUAL is supposed to be an inhabitant in India, at that point we have to see whether he fits the bill to be a ‘NOT ORDINARY RESIDENT’ under sub-segment (6) of area 6. This is because the extent of complete payment with the end goal of tax collection is diverse for RESIDENT, NOT ORDINARY RESIDENT, and NON-RESIDENT. 

The Finance Bill, 2020 presented in India on Feb. 1, 2020, had a condition to burden “stateless” people. This prompted a great deal of disarray and in this manner, the MOF of the GOI, in its Press Release dated Feb. 2, 2020, explained that: 

To keep away from any distortion, it is explained that in the event of an Indian resident who gets esteemed occupant of India under this proposed arrangement, pays earned outside India by him will not be burdened in India except if it is gotten from an Indian business or calling. Fundamental explanation, whenever required, will be consolidated in the applicable arrangement of the law. 

The Finance Act, 2020 which got the Presidential consent on March 27, 2020, has tended to the issue. These arrangements are appropriate from AY 2021-22. 

Inhabitant: 

FOR AY:2020-21 

A. An INDIVIDUAL is supposed to be RESIDENT IN INDIA on the off chance that he is in India for 182 days or more during the earlier year. 

Or on the other hand 

B. An INDIVIDUAL is supposed to be RESIDENT IN INDIA if he is in India for 60 days or more during the earlier year AND he is in India for 365 days or more in 4 going before earlier years. 

Or then again 

B-1. Where a Citizen of India, leaves India, as an individual from a group of Indian boat or for work outside India – An INDIVIDUAL is supposed to be RESIDENT IN INDIA on the off chance that he is in India for 182 days or more during the earlier year AND he is in India for 365 days or more in 4 going before earlier years. 

(For Citizen of India who leaves India, as an individual from a group of outside bound boat departing India, the period went into Continuous Discharge Certificate (CDC) as joining and closing down by the person, of the qualified journey which has either beginning port or the goal port in India, is barred, to decide the time of remain in India – Rule 126) 

Or on the other hand 

B-2. Where a Citizen of India, or PIO, visits India – An INDIVIDUAL is supposed to be RESIDENT IN INDIA on the off chance that he is in India for 182 days or more during the earlier year AND he is in India for 365 days or more in 4 going before earlier years. 

Or on the other hand 

From AY: 2021-22 

B-3. Where a Citizen of India, or PIO, having Indian source pay surpassing Rs. 15 lakhs during the earlier year, visits India – An INDIVIDUAL is supposed to be RESIDENT IN INDIA on the off chance that he is in India for 120 days or more during the earlier year AND he is in India for 365 days or more in 4 going before earlier years. 

C. Esteemed RESIDENT: (NO stay in India required.) 

From AY: 2021-22 

Singular Citizen of India having Indian source salary surpassing Rs. 15 lakhs during the earlier year, if not at risk to burden outside India because of his home, living arrangement, or comparable standards, will be Deemed to be RESIDENT IN INDIA, for that earlier year. 

NOT ORDINARY RESIDENT: 

FOR AY:2020-21 

A. An INDIVIDUAL is supposed to be NOT ORDINARY RESIDENT IN INDIA on the off chance that he is an NRI in 9 out of 10 earlier years going before that earlier year. 

Or then again 

B. An INDIVIDUAL is supposed to be NOT ORDINARY RESIDENT IN INDIA on the off chance that he is in India for 729 days or less during 7 going before earlier years. 

Or then again 

From AY: 2021-22 

C. Where a Citizen of India, or PIO, having Indian source pay surpassing Rs. 15 lakhs during the earlier year, visits India – An INDIVIDUAL is supposed to be NOT ORDINARY RESIDENT IN INDIA if he is in India for 120 days or more yet under 182 days during the earlier year. 

Or then again 

From AY: 2021-22 

D. A Citizen of India is said to be NOT ORDINARY RESIDENT IN INDIA on the off chance that he is DEEMED RESIDENTas above. 

An individual who is not a RESIDENT is a NON-RESIDENT in India [section 2(30)] 

Taxability of Total Income of an Individual in India relies upon his private status under the Income Tax Act, 1961. 

Further, once the payment is burdened on gathering premise, the equivalent will not again be burdened on receipt premise. 

Presently let us see what is the pay considered to be gotten in India and pay regarded to accumulate or emerge in India. 

Pay DEEMED TO BE RECEIVED IN INDIA:[Section 7] 

(a) Contribution to perceived opportune reserve. 

(b) Employer commitment to national benefits conspires u/s 80CCD. 

Pay DEEMED TO ACCRUE OR ARISE IN INDIA:[Section 9] 

(1) All pay to collect or emerging, regardless of whether legitimately or in a roundabout way, 

• through or from any business association in India, or 
• through or from any property in India, or 
• through or from any benefit or wellspring of salary in India, or 
• through the exchange of a capital resource arrange in India. 

But where a non-inhabitant  

• purchases the merchandise in India with the end goal of Export. 
• not being a Citizen of India, from shooting of any cinematography film in India. 

(2) “Pay rates” earned in India. 

(3) Dividend paid by an Indian organization outside India. 

(4) Interest, Royalty, and Fees for specialized administrations payable by Govt. of India 

(5) Interest, Royalty, and Fees for specialized administrations payable by Resident of India except obligation used outside India or winning source outside India. 

(6) Interest, Royalty, and Fees for specialized administrations payable by a non-inhabitant on obligation used in India or procuring source in India. 

(Note: This article portrays an extremely expansive structure for residency test and tax assessment for “People” in India under its duty arrangements. The perspectives communicated are close to home and need not be acknowledged by any assessment experts in any State. Perusers are anyway encouraged to take lawful conclusion before finishing up a particular exchange.)