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Residential Status Under Income Tax Act, 1961

HindiIncome taxAccounting

Before calculating taxable income first thing is the need that we should know about the residential status of persons. Residential Status plays important role in income tax act. Residential status determines the taxable income which generated from activity performing in India or another country.

Types of Residential status

  • Residents
1) Ordinary residents  2) Non-ordinary residents
  • Non-residents

Note:-Only individual and HUF can be ordinary or Non-ordinary residents.All other classes of assessees can be either a resident or non-resident.


Primary Conditions:-

The residential status of Individual/HuF

An Individual is said to be Resident in India if he satisfies at least one basic conditions:
  • He is in India at least 182 days in previous years (Financial Year)
Or

  • He is in India for 60 days or more during that financial year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant financial year.

Note:-Both days i.e. the day when one left the day on which he came to India is considered for Number of days of stay in India. (For Example:- Mr. X enter in India on 23 January 2018 at 7:30am and Mr. Y entered in India on 23 January 2018 at 11:30pm in both case assuming that X and Y stay in India for the whole day.)

Secondary Conditions:-

After determining that a person is a resident then the further process to determine whether he is an ordinary or non-ordinary resident takes place.
An individual is said to be non-ordinary resident if he satisfies any one of the following conditions:
He is a resident in India:
For at least 2 years out of 10 preceding previous years after the relevant PY.

Or
For at least 730 days during 7 years immediately preceding the relevant PY.


Note:-A Hindu Undivided Family is said to be residents if ,
The control and management of its affairs is situated wholly or partly in India.

And

Note:-If the karta is Resident but Ordinarily resident, then the HUF is Resident but Ordinarily Resident. Learn more

Exceptions:

The second condition is not applicable when Indian citizen during the financial year.

  • Leave India for employment outside India.
  • Leave India as he is a crew member of an Indian ship.
  • Comes to visit India.


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