Tax Liability and Residential Status of Individuals

By | July 21, 2015

Residential status plays very significant role and according to the income tax law is very important, as income tax law makes a massive difference in computation of income for all residential statuses. There is difference in slabs, tds rates, deductions that can be claimed from income. The extent of income which is covered under the income tax law is different for all residential statuses.

It very meaningful to say that it is the first step of income tax law to know your residential status. As all the computations to be made under different heads of income, are dependent on it.

Different residential statuses and its determination

Residential statuses are as follows

  1. Resident

           1.1 Ordinary Resident

           1.2 Not Ordinary Resident

  1. Non Resident

A person can be resident or non-resident. But once the person is resident then we further need to check whether he is ordinary resident or not ordinary resident.

Determination of residential status:

The residential status determination is based on the stay of that person in India. Residential status is determined for each year, separately. The stay of that person in India is calculated in Days.

Resident Individual Conditions to be satisfied:

1. He was in India for a period of 182 days or more in that financial year Or

2. He was in India for a period of 60 days or more in that financial year and he had a stay of 365 days or more during 4 financial years immediately preceding that financial year.

If any of the above conditions are satisfied then that person is said to be a resident individual.

And if both the above conditions are not satisfied then that individual is considered to be a Non-Resident Individual.

Ordinarily resident: 

Once a person is said to be an ordinarily resident then it is to be determined whether he is ordinarily resident or not ordinarily resident.

Conditions to be satisfied to be a Not-Ordinarily Resident are:

a)He has been a non-resident for 9 years in last 10 years. Or

b)He is been in India for a period of 729 days or less in last 7 years.

Any one of the above conditions is satisfied, that person is said to be a resident who is Not-ordinarily resident.

The person who does not satisfy any of the above conditions is known as Ordinarily Resident.

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