Residential Status of An Individual- Section 6

 

Residence Status for an Individual Section

Sections 5 and Section 6 in Section 5 and 6 of the Income Tax Act, 1961 are the primary sections for taxes on income for any taxpayer who is in India. Section 5 under the Income Tax Act deals with the "Scope of income" while section 6 assists in determining the residence status of any taxpayer living in India. The determination of the status of a resident in Section 5 of the Income Tax Act plays an important part in determining whether an individual's income is tax-deductible within India as well. This article we will review the guidelines for the determination of the residential status of an individual taxpayer. We will also review different changes to the residential status that were that were made by the Finance Act, 2021 & 2022. The purpose of determining the residence status. Determining residence status of an assessee is the most important job for determining the tax-free income of this assessee in India. In accordance with section 6 of the law, the residence status of any taxpayer is divided into two categories: (a) Resident (b) Non-Resident. In the case of an individual being individual assessment, the resident could also be classified under "Resident and ordinarily resident" (ROR) as well as "Resident But non-resident ordinarily" (RNOR). In the case of other individuals there are two kinds of categories, i.e. residents and those who are not. Section 6(1): BASIC CONDITIONS to be categorized as Resident.

A person is considered to have resided in India during any year prior to that in the event that he:

• In that year the duration of his stay in India is 182 or more days (say "C1") or
• In that year the duration of his staying in India is at least 60 days and for the four previous years prior to the prior year, his staying in India is greater than 365 days (say "C2")

In order to achieve this for the above purpose, the period for the purpose of staying in India includes the date on which the person arrives or leaves India.

In another way, an individual is considered to be a resident in India when he meets either two C1. C1 is a fairly simple text. One must determine whether he's been in India in the past calendar year, for greater than 180 days, or not. If he was able to stay in India, then he is a in India. In the event that he is not resident, he will need to go through C2 for the determination of his residential status. C2 lays out two conditions that must be met to declare an individual a resident in the preceding year. First, we must determine if the duration of residence in India is 60 or more days in the course of the entire year. If the first requirement is met then we should verify that the period of time spent in India over the preceding four years was 365 days or more. If both these requirements are true, then he is classified as a resident. If the C1 and C2 conditions are not fulfilled the applicant will be regarded as a non-resident for the previous year. In addition, according to the explanation in section 6, just C1 is applicable, and it is not necessary to look for the requirements as stated on C2 which is described in the following order:

• Citizens of India who has left India in the previous year to join the the crew on one of the Indian Ship, or
• Citizens of India who leave India to seek working outside of India, (However, after the amendments introduced through the Finance Act, 2020; in the case of an individual with a total income that exceeds 15 Lakh Rupees 120 days are considered instead of 182. Citizens of India or a person of Indian origin who is employed in an work or business outside of India and who has visited India in the preceding year.

Furthermore, the Finance Act, 2020 has included provisions that any person is a citizen of India and is not subject to tax in another country is deemed to reside of India. The requirement for deemed resident status only applies when the total amount of income (other that foreign sources) exceeds the threshold of Rs 15 lakh , and there is no tax obligation in any other country or territories due to the place of residence or domicile, or any other criteria that is similar to in nature. This provision was introduced after it was realized that some individuals were taking advantage of this relaxation as a tax-evasion measures and were planning to visits and stays in India in order to not meet the minimum that is 182 calendar days. Section 6(6): ADDITIONAL CONDITIONS For RNOR/ROR If a person is declared a resident, we must verify whether the individual is as ordinarily resident in India (ROR) as well as is not normally living in India (NOR). To be considered to be RNOR further conditions must be fulfilled, which are as follows:

• If you were a non-resident in India during 9 out of 10 previous years prior to the relevant prior period (say C3) or
• Have not in the seven prior years preceding the relevant year spent during the year in India at least 729 or longer days (say C4)

If an individual meets any of the requirements C3 or C4 it is considered to be a 'not ordinarily resident' in the previous year. If not the person will be treated as a normal resident.

To conclude the previous important to know the residence status of an individual has to be evaluated for every prior year. Before determining the tax obligation of an individual it is necessary to first determine his residency status to be able to accurately determine the amount of taxes owed to him from different sources.