State the rules for determining residential status of an assessee for income tax purpose.
Answers
Residential Status under Income Tax Act
Residential status of an Individual
Tax Planning in respect of Residential Status by Individual
Residential Status of HUF
Residential Status of a Firm of Association or Persons (AOP)
Residential Status of Company
Residential status is very important in Income Tax Act as the determination of tax liability depends much on it.
An assessee is either (a) resident in India; or (b) non-resident in India. However resident individual and HUF may be (a) resident and ordinarily resident; or (b) resident but not ordinarily resident.
All other assessess are either resident or non resident.
RESIDENTIAL STATUS OF AN INDIVIDUAL
A person who has never gone out of India is always a resident and ordinarily resident in India.
Determining whether he/she is resident in India –
A person is said to be resident in India if he satisfies at least one of the following conditions-
(i) he is in India for a period of 182 days or more in the year
(ii) he is in India for a period of 60 days or more during the year and 365 days or more during the four years immediately preceding the previous year.
The aforesaid period of 60 days is extended to 182 days in case of an Indian citizen who leaves India during the year for the purpose of employment outside India or an Indian citizen who leaves India during the year as a member of the crew of an Indian ship. For this purpose the requirement is leaving India for purposes of employment ( the employment may be in India or may be outside India).
The aforesaid period of 60 days is extended to 182 days also if Indian citizen or a person of Indian origin comes to a visit in India. A person is deemed to be of Indian origin if he, or either of his parents or any of his grand parents, was born in undivided India.
If a person doesn’t satisfies any of the above two conditions then he is non resident.
Determining whether he/she is ordinarily resident or not ordinarily resident
A resident individual is treated as Resident and ordinarily resident in India if he satisfies condition of resident as stated above and also satisfies both of the following conditions-
(i) he has been resident in India in at least 2 out of 10 years immediately preceding the relevant year
(ii) he has been in India for a period of 730 days or more during 7 years immediately preceding the relevant year.
The person who doesn’t satisfies both of the above conditions is a resident but not ordinarily resident.