Presentation on Residential Status of Individual as per Income Tax Act, 1961 ( Finance Act 2020) with illustrations

1. Priya Saxena
SECTION 6(1)
RESIDENTIAL STATUS OF INDIVIDUAL
An Individual is said to be Resident in India in any Previous Year if :-
(A) Indian Citizen
• Leaves India as Member
of Crew of an Indian
Ship OR
• Leaves India for
Employment outside
India
• Stay during PY= 182
Days or More
(B) Indian Citizen
OR
Person of Indian Origin
• Prior to Finance Act
2020,
Outside India comes on
a visit to India
• Stay during PY = 182
Days or More
(C) Others Not covered
by (A) and (B)
• Any one of the two
conditions to be satisfied :-
• (i) Stay during PY = 182
Days or More
OR
• (ii) Stay during 4
immediately preceding
PYs is 365 Days or More
AND 60 Days or More
during PY.

2. Priya Saxena
Amendment by Finance Act 2020
(Explanation 1 to Section 6(1)(b)
Indian Citizen OR Person of Indian Origin being Outside India
comes to a visit in India in that PY AND
Total Income (Other than Income from Foreign Sources)
• Rs. 15 Lakhs or Less Resident if Stay during PY is 182
Days or More.
• Exceeds Rs. 15 Lakhs
Resident if any one of the
conditions is satisfied:-
(i) Stay during PY 182 Days or More
(ii) Stay during 4 immediately
preceding PYs is 365 Days or More
AND 120 Days or More during
that PY.

3. Priya Saxena
ILLUSTRATIONS
Illustration 1. Mr. John is living in Dubai since 1985. He comes to India to meet
his parents on 01.06.2020 (Assume that stay in India from 01.04.2016 to
31.03.2020 is more than 365 Days) and leaves India for Dubai on:
CASE I : 30th September, 2020
CASE II : 30th November, 2020
He has the following incomes:-
Incomes Situation I Situation
II
Income arising in India 6,00,000 6,00,000
Income received abroad but deemed to accrue or arise in India
as per Section 9
7,00,000 7,00,000
Income from Business outside India controlled from India 10,00,000 NIL
Income in Dubai not deemed to accrue or arise in India 40,00,000 40,00,000

4. Priya Saxena
Solution
Total Income other than Income from Foreign Sources
Situation 1 : 6,00,000+7,00,000+10,00,000 = 23, 00,000
Situation 2 : 6,00,000+7,00,000+NIL = 13,00,000
CASE I & SOLUTION I
Income other than Income from Foreign Sources exceeds 15,00,000
Stay in India during PY 2020-21 from 01.06.20 to 30.09.20 = 122 Days
Stay in India from 01.04.16 to 31.03.20 is more than 365 Days
As per Amendment to FA 2020, Explanation 1 to Section 6(1)(b) Mr. John is
Resident.
However, since his stay in India is less than 182 Days during PY 2020-21, as per
Section 6(6), he shall be Resident but not Ordinary Resident.
Taxable Income in India in PY 31.03.21 = 6,00,000+7,00,000+10,00,000
= Rs.23, 00,000

5. Priya Saxena
CASE I & SITUATION II
Total Income other than Income from Foreign Sources is not exceeding Rs. 15 Lakhs
Amendment to FA 2020 is Not Applicable
Stay in India in PY 2020-21 is 122 Days i.e. Less than 182 Days
Mr. John is a Non – Resident.
Taxable Income in India PY 31.03.21 = 6,00,000+7,00,000 = Rs. 13,00,000
CASE II & SITUATION I & SITUATION II
Stay in India during PY 2020-21 is 183 Days (i.e. 182 Days or More)
As per Section 6(1) Mr. John is a Resident.
It is irrelevant whether his Total Income other than Income from Foreign Sources
exceeds Rs. 15,00,000 or Not.
Mr. John shall be RNOR if he (Assumed to be RNOR in this case)
(i) is Non Resident in any 9 out of 10 previous preceding PY 31.03.21
(ii) during the 7 previous years preceding the PY 31.03.21 has been in India for
729 Days or less.

6. Priya Saxena
Taxable Income in India PY 31.03.21 (if assumed Mr. John is
RNOR)
Situation I : 6,00,000+7,00,000+10,00,000 = Rs. 23,00,000
Situation II : 6,00,000+7,00,000 = Rs. 13,00,000
Taxable Income in India PY 31.03.21 (if assumed Mr. John is
ROR)
Situation I : 6,00,000+7,00,000+40,00,000+10,00,000
= Rs.63,00,000
Situation II : 6,00,000+7,00,000+40,00,000 = Rs.53,00,000

7. Priya Saxena
Section 6(1A) : Deemed Resident
Tax Stateless Persons
 Applicability: Individual Indian Citizen but NOT
Person of Indian Origin.
 Total Income (other than Income from Foreign
Sources) exceeds Rs. 15 Lakhs
 Income is Not Liable to tax in any country(ies) or
territory(ies) in which he resides (Tax Haven)
 Deemed Resident even if not stayed in India for a
single day.
 If Individual is Resident as per Section 6(1), then
Section 6(1A) shall not apply.

8. Priya Saxena
SECTION 6(6) : ROR/RNOR
Condition 1: Resident in any 2 years or more out of last 10 previous
years preceding the relevant previous year.
Condition 2: Total Stay in India in Last 7 years is 730 Days or More.
If either Condition 1 or Condition 2 (i.e. any one of the above two conditions) is
satisfied then Individual is said to be
Resident but Not Ordinary Resident (RNOR)
If Condition 1 and Condition 2, Both are Satisfied then Individual is said to be
Resident and Ordinary Resident (ROR)

9. Amendment by Finance Act 2020
Section 6(6)
Section 6(1A) :
Deemed Resident
RNOR
Stay in India during PY
>= 120 Days or more <182
Days
AND
365 Days or more during 4
preceding PYs
Explanation 1 to Section
6(1)(b)
RNOR

10. Priya Saxena
Illustration 2
Mr. Jhakaria is living in Cyprus (a Tax Haven). He is a citizen of India and
left India in 1972. Since then, he has not returned to India for a single day.
Details of his income for the PY 2020-21 are as follows:-
Income Situation 1 Situation 2
Income arising in India 6,00,000 6,00,000
Income received abroad but
deemed to accrue or arise in India
as per Section 9
7,00,000 7,00,000
Income arising in Cyprus and not
deemed to accrue or arise in India
40,00,0000 40,00,000
Income arising in Cyprus from a
business controlled from India
10,00,000 NIL

11. Priya Saxena
SOLUTION
Total Income other than Income from Foreign Sources
Situation 1 : 6,00,000+7,00,000+10,00,000 = 23, 00,000
Situation 2 : 6,00,000+7,00,000+NIL = 14,00,000
Situation 1
Since, Mr. Jhakaria is not taxable anywhere in the world by reason of his domicile in
Cyprus, a Tax Haven, he is deemed as Resident as per Section 6(1A) as his total
income excluding income from foreign sources exceeds Rs.15 Lakhs.
Further, as per Section 6(6), he shall be deemed as Resident but not Ordinary
Resident.
Taxable Income in India during PY = 6,00,000+7,00,000+10,00,000 = 23, 00,000
Situation 2
Section 6(1A) is not applicable since his total income excluding Foreign Sources does
not exceed Rs.15 Lakhs. He is a Non-Resident.
Taxable Income in India during PY = 6,00,000+7,00,000=13,00,000

12. Priya Saxena
Illustration 3
What will be the Residential Status and Taxable Income if Mr.
Jhakaria was born in Cyprus and his parents were born in India?
Solution: Mr. Jhakaria is a Person of Indian Origin and is not a
Citizen of India. Section 6(1A) shall not be applicable. He shall
be therefore, a Non-Resident in both the situations and shall be
liable to pay tax on Rs.13,00,000 in both the situations.

13. Priya Saxena
Residential Status and Scope of
Total Income
Source of Income ROR RNOR NR
Income Received or deemed to be received in
India
Taxable Taxable Taxable
Income accrue or arise or deemed to accrue or
arise in India
Taxable Taxable Taxable
Income accrues or arises to him or received
outside India from
• A business controlled from India; or
• A Profession set up in India
Taxable Taxable Not Taxable
Income accrues or arises or received outside
India
Taxable Not Taxable Not Taxable

14. Priya Saxena
Income which accrue or arise outside India but
shall not include :-
Income which are deemed to accrue or arise in
India by virtue of Section 9
Income derived abroad from a business
controlled from India.
Income derived abroad from a profession set up
in India.

15. Priya Saxena
Definitions
1. Person of Indian Origin : If He or either of his
parents or any of his grandparents, was born in
Undivided India.
2. Liable to Tax : There is a liability of tax on that
person under the law of any country and will
include a case where subsequent to imposition of
such tax liability, an exemption has been provided.