Residential Status for Income Tax
The length of time a person has spent living in India during the preceding five years determines their residence status. The amount of income tax owed by a taxpayer depends on whether they were residents during the tax year and the four years before it. Additionally, while filing income tax returns, the person must disclose the pertinent resident status. The Income Tax Act divides taxpayers into three groups according to their place of residence:
- He is a resident, but not a frequent one.
- Normally residing.
Resident but Not Ordinarily Resident
An individual is a resident but not normally resident in India in any financial year if the assessee fits one of the following two criteria:
- the taxpayer is in India for 182 days or more in that year, or
- the taxpayer has been in India for at least 365 days in the four years immediately preceding that year and is in India for 182 days or more in that year.
A person is said to be “not ordinarily resident” in India in any financial year if they are:
A non-resident in India in nine of the ten previous financial years preceding that year, or has been in India for a period of, or periods totalling, seven hundred and twenty-nine days or less during the seven financial years preceding that year; or
Hindu Undivided Family (HUF)– whose management has been a non-resident in India for nine of the 10 financial years before the relevant financial year, or has been in India for seven hundred and twenty-nine days or fewer during the seven financial years preceding that year. As a result, someone who does not fit the previous definition is referred to as an “ordinary dweller.”
If a taxpayer does not meet any of the aforementioned resident requirements yet is not a generally resident or an ordinary resident for a given financial year, they are assumed to be a non-resident in India.
Anyone who doesn’t meet both of the aforementioned requirements will be considered a non-resident for the preceding year.
However, the 60-day limit indicated in (2) above will be replaced with 182 days in the case of an Indian citizen and a person of Indian descent who visits India throughout the year. Indian citizens who left India as crew members or for job purposes outside of India in any preceding year were given the same privilege.