Residential Status for Individuals (As Amended by Finance Act, 2020)

Residential status of any person is the most important factor in determining the Scope of Income which is chargeable to tax. 

Section 5 of the Income Act, 1961 states that the scope of Total Income i.e., it explains what nature of Income to be considered in the total income as per the Residential status of the person. Following table summaries the Scope of Total Income

Sec 6(1) of the Income Tax Act, 1961 states the rules for determining the residential status for Individual. 

Individual is said to be resident in India, if any of the following conditions is satisfied 

There are three exceptions for the above rule, they are

1. An Indian citizen leaving India for employment,
2. A person from Indian origin (undivided India) or Citizen of India comes to India on visit and having Total Income in India of less than 15 Lakhs excluding Income from Foreign Sources (i.e, Income accrue or arises outside India)   and
3.  A member of crew of an Indian Ship.

In these exceptions only the first basic condition is applicable.

Amendment to Clause b – Explanation 1 to Section 6(1) 

For a person from India Origin (Undivided India) or Citizen of India comes to India on Visit and having Total Income of more than 15 Lakhs excluding Income from Foreign Sources (i.e, Income accrue or arises outside India), then instead of 182 days, if he/she stays in India for more than 120 days, he/she shall be resident in India.

If none of the above condition is fulfilled then he/she is a Non-resident 

Further, Sec 6(6) of the Income Tax Act, 1961 further gives the rules for classification as ordinary resident or not-ordinary resident. 

If he/she satisfy all the following conditions in conjunction then the individual shall be resident and Ordinary resident 

If both the conditions are not in satisfied then the person shall be resident but not ordinary resident 

Insertion of  Clause c of Section 6(6) : 
For a person from India Origin (Undivided India) or Citizen of India comes to India on Visit and having Total Income of more than 15 Lakhs excluding Income from Foreign Sources (i.e, Income accrue or arises outside India) and he stays in India for more than 120 days and 
1. if such person stays in India for upto 182 days then he/she shall be resident and not ordinary resident. 
2.  if such person stays in India for more than 182 days then he/she shall be resident and ordinary resident. 

Insertion of  Clause d of Section 6(6) : 
Citizen of India who is deemed to be resident in India as per the new clause (1A) of Section 6 shall always be Resident and not ordinary resident.