Residential status of an individual

1. 1
TOPIC : RESIDENTIAL STATUS OF AN INDIVIDUAL -
(Resident and Ordinarily Resident)
Prepared by
Dr.R.Sangeetha
Assistant Professor
PG & Research Department of Commerce with International Business
Hindusthan College of Arts and Science, Coimbatore.

2. 2
INDIVIDUAL
ASSESSEE
RESIDENTIAL STATUS OF AN INDIVIDUAL
RESIDENT
NON-RESIDENT
ORDINARILY
RESIDENT
NOT ORDINARILY
RESIDENT
DEEMED
RESIDENT
Finance Act 2020 dated 23.03.2020 amends Section 6 of the Income Tax Act. The concept of deemed resident is
introduced vide the Finance Act, 2020. The said amendment will come into effect from April, 2021.

3. 3
Purpose of determining the Residential status
 Determination of the residential status is one of the basic and important
aspects to determine the nature and the scope of the income of the persons
which comes under the tax net.
 The residential status of person can be broadly be classified into three
categories such as Resident, Non Resident and Deemed Resident.
 The Resident is further sub classified as Resident Ordinary Resident and Non
Ordinary Resident.
 The concept of deemed resident is introduced vide the Finance Act, 2020.
 For an ordinary Resident all Income is taxable in India including the income
earned outside India.
 For a non ordinary Resident the Income earned or accrued in India is alone
taxable.
 The resident who does not fall into the category of not ordinary resident will
come under the category of resident.
 For Deemed Resident, income earned or accrued in India exceeding 15 lakhs is
taxable.
 For Non- Resident income is not taxable.
{Accrue or arise – right to receive the Income}

4. 4
Status of Individual [Section 6 (1)]
Individual will have any one of the following status in the previous year.
1. Resident or Ordinary Resident
2. Not Ordinarily resident
3. Non-resident
Basic condition and additional conditions are the two conditions, which should be
applied in order to identify the status of the individual. The following table will
clearly explain about how to calculate the residential status of an individual.

5. 5
Rules and Regulations
Basic condition Additional Conditions
1. A stay of 182 days or more during the
current previous year 2019-2020
(OR)
2. A Stay of 60** days or more in the
current previous year 2019-2020 and a
total stay of 365 days or more in the 4
years immediately preceding the current
previous year.
1. He should be resident in India in at
least 2 out 10 years immediately
preceding the current previous year
2019-2020.
AND
2. A Stay of 730 days or more during the 7
years immediately preceding the current
previous year 2019-2020.
** Note
1. In case an Indian citizen who goes abroad in the previous year for employment or as a
member of the crew of an Indian ship 60 days should be taken as 182 days.
2. In case an Indian citizen who stays abroad comes on a visit to India during the previous
year 60 days should be taken as 182 days.
In case of Basic conditions it is enough if only one condition is satisfied.
In case of Additional conditions it is compulsory that both the conditions should be satisfied.

6. 6
STATUS
a. Resident (R) – who satisfies any one of the basic conditions.
b. Ordinary Resident (OR) – Who satisfies any one of the basic condition and
both the additional conditions.
c. Not Ordinary Resident (NOR) – Who satisfies any one of the basic conditions
but does not satisfy one or none of the additional conditions.
d. Non-Resident (NR) – who does not satisfy basic condition itself.
 Individuals have three status namely – Ordinary resident, not ordinary resident
and non-resident.
 The day of arrival and the day of departure are considered as separate day
irrespective of the time of arrival or departure.

7. 7
Status in a Nutshell
Sl.no Status Basic Conditions Additional Conditions
1 Resident √ -
2 Resident and Ordinary
resident
√ √
3 Resident and Not Ordinary
Resident (NOR)
√ X
4 Non-Resident (NR) X -
Note :
√ = Satisfy
X = Does not satisfy
- = Not to consider
2020 is a Leap year and February has 29 days

8. 8
Guidelines for Calculating Residential Status
(1) Computation of number of days stay in India during the Previous Year :
(a) Departure during the year : In this case number of days stay is computed from
the first day of PY till the date of departure of assessee from India.
(b) Person Entering India during the year : In this case number of days stay is
computed from the date on which the assessee enters India.
(2) Where a person is in India only for a part of a day : The calculation of presence
in India shall be inclusive of the day on which the person enters India as well as the
day on which he leaves India. Thus the day on when the person enters India and
the day of departure shall be taken as stay of the Individual in India.
(3) Indian citizen or a person of Indian origin who comes on a visit to India
during the previous year : Unless otherwise mentioned, it is to be assumed that
they are returning to settle in India (to apply exception of 2nd basic condition).

9. 9
Residential Status of Individuals
(A)Resident and Ordinarily Resident
1). Mr.Rajendran left for USA along with his family, for the first time, on 14.10.2019.
He returned to India on 31.05.2020. Determine his residential status for the
assessment year 2020-2021.
Solution : Determination of Residential Status of Mr.Rajendran
Assessment year : 2020-2021; Previous year : 2019-2020
(a) Stay in India during the P.Y.
From 01.04.2019 to 14.10.2019:
30 + 31 + 30 + 31 + 31 + 30 + 14 = 197 days
First Basic condition under sec.6(1) of 182 days or more stay is satisfied.
Rajendran is ‘Resident’.

10. 1
(b) (i) Stay in India during 10 years preceding the previous year :
Since he left India for the first time on 14.10.2019, he would have been residing in
India for the 10 years preceding the previous year.
Additional condition (i) of being resident for 2 out of 10 years preceding the
previous year is satisfied.
(ii) Stay in India for 730 days during 7 years preceding the previous year:
Since he left India for the first time on 14.10.2019, he would have stayed for 730
days or more in preceding 7 years. Additional condition (2) of stay for 730 days
during 7 years preceding the previous year is also satisfied.
Conclusion :
Rajendran is ‘Resident’ and ‘Ordinarily resident’ under sec 6 (1) for the assessment
year 2020-2021.
Note : The day on which the assessee leaves India shall be taken into account as to stay of
the individual in India.

11. 1
2). Shri.Venkatesh, who was born and brought up in India, went to U.K. for further
studies on 1st February 2018 and came back to India on 1st October 2019. Ascertain
his residential status for the previous year 2019-2020.
Solution : Determination of Residential status of Venkatesh
Assessment year : 2020-2021 Previous year : 2019-2020
(a) Stay in India during the previous year :
From 01.10.2019 to 31.03.2020 : 31+30+31+31+28+31 = 182 days
First basic condition under sec.6(1) of 182 days or more stay is satisfied.
Shri.Venkatesh is ‘Resident’.
(b) (i) Stay in India during 10 years preceding the previous year :
In the previous year 2018-2019 i.e., : 01.04.2018 to 31.03.2019
He left India on 01.02.2018 and returned only on 01.10.2019, thus not staying even
for a day in India. He was ‘Non-Resident’.

12. 1
In P.Y.2017-18 i.e.,: 01.04.2017 to 31.03.2018
He stayed from 01.04.2017 to 01.02.2018 in India.
Since the stay was more than 182 days.
He was ‘Resident’.
In the 8 previous years prior to 2017-18
He was ‘Resident’ because he was born and brought up in India and left for further
studies only in Feb.2018.
Additional condition (1) of being resident for 2 out of 10 years preceding the
previous year is satisfied.
(ii) Stay in India for 730 days during 7 years preceding the previous year :
Since he left India only in Feb.2018, he would have stayed for 730 days during the 7
preceding years.
Additional condition (2) of stay for 730 days is also satisfied.

13. 1
Conclusion :
Shri.Venkatesh is ‘Resident’ and ‘Ordinarily Resident’ under Sec.6(1) for the
previous year 2019-2020.
Note : The day on which the assessee enters India shall be taken into account as stay of the individual in
India.

14. 14
3) On 01.06.2017 ‘B’ a Malaysian citizen left India after a continuous stay of
10 years. During the financial year 2018-19, he came back to India and stayed for a
period of 46 days and left. In the previous year 2019-20, he came back to India on
10.10.2019 and stayed here thereafter for one year.
Determine ‘B’s residential status for the assessment year 2020-21.
Solution : Determination of Residential status of Mr.B
Assessment year : 2020-21; Previous year : 2019-20.
(a) (1) Stay in India during the previous year :
From 10.10.2019 to 31.03.2020 : 22 + 30 +31 +31 +28 +31 =173 days
First basic condition under Sec. 6(1) of 182 days stay is not fuflfilled.
(2) Stay in India during the 4 years preceding the previous year :
2018-19 : 46 days 2016-17 : 365 days
2017-18 : 62 days 2015-16 : 365 days

15. 15
Second basic condition under Sec.6(1) of 60 days stay in the previous year and 365
days or more in the preceding 4 years is satisfied.
Mr.B. is ‘Resident’.
(b) (i) Additional condition (1) of being resident for 2 out of 10 years preceding the
previous year is satisfied, since he left India only on 01.06.2017. He is a non-
resident for the P.Y.2018-19 but resident for all the preceding years.
(ii) Additional condition (2) of stay for 730 days during 7 years preceding the
current previous year is also satisfied because of 838 days of stay
(46+62 +365+365) in the previous 4 years alone.
Conclusion :
Mr.B is ‘Resident’ and ‘Ordinarily resident’ under Sec.6(1) for the assessment year
2019-20.