RESIDENTIAL STATUS FOR INCOME TAX

As indicated by the Income Tax Act, 1961, the residential status of an individual is one of the significant rules in deciding the tax implications. The residential status of an individual can be arranged into Resident and Ordinarily Resident (ROR), Resident however Not Ordinarily Resident (RNOR), and Non-Resident (NR). 

It is significant for the Income Tax Department to decide the private status of a duty-paying individual or organization. It turns out to be especially important during the tax recording season. Indeed, this is one of the elements depending on which an individual's taxability is chosen.

The taxability of a person in India relies on his private status in India for a specific financial year. The term residential status has been authored under the income tax laws of India and should not be mistaken for an individual's citizenship in India. An individual might be a resident of India however may wind up being a non-resident for a specific year. Also, an unfamiliar resident might wind up being a resident of India for personal expense purposes for a specific year.

Who is a resident of India as per the Income Tax Act?

A resident/inhabitant citizen is a person who fulfills any of the accompanying conditions: 

Dwells in India for at least 182 days in a year, or 

Dwelled in India for at least 365 days in the promptly going before four years and for at least 60 days in the current monetary year.

A person who is a resident of India leaves India for work during an FY, he will qualify as the resident of India in particular on the off chance that he remains in India for 182 days or more. Such people are permitted a more extended time more prominent than 60 days and under 182 days to remain in India. Be that as it may, from the monetary year 2020-21, the period is diminished to 120 days or more for a particular person whose complete pay (other than unfamiliar sources) surpasses Rs 15 lakh. 

In one more critical revision from FY 2020-21, a person who is a resident of India who isn't liable to tax in some other nation will be considered to be a resident of India. 

It is important for the Income Tax Department to determine the residential status of a tax-paying individual or company. It becomes particularly relevant during the tax filing season. In fact, this is one of the factors based on which a person’s taxability is decided.

• Individuals who are visiting India on a business trip or in some other connection should not stay in India for more than 181 days in the year and no more than 364 days in the preceding four years to enjoy non-resident status.
• If an individual is in India for more than 364 days during the preceding four years then he should avoid staying in India for more than 59 days in a year. If he wants to stay more than 59 days then he may come in such a manner that no more than 59 days come in a year for e.g. he may come after 2nd Feb and leave before 29 May. so that no more than 59 days period is covered in both years.
• Similarly, Indian citizen or a person of Indian origin should plan their trip such that no more than 181 days will fall in one year.
• A non-resident should not receive any income directly in India even if the business is controlled directly from India. He should first receive income outside India and then remit it to India, in such a way no tax is leviable on such income.
• Similarly a non ordinarily resident should receive his income outside India which is earned outside India and from a business controlled outside India.

Resident and Ordinarily Resident (ROR) and Resident but Not Ordinarily Resident (RNOR)

There is a further grouping under the occupant status – Resident and Ordinarily Resident (ROR) and Resident however Not Ordinarily Resident (RNOR).

 Notwithstanding the basic conditions, if both the below conditions are met, he will be a ROR: He has lived in India for somewhere around 2 out of 10 years.

He has lived in India for somewhere around 730 days in seven years.

Non Resident

The person who will not satisfy the following conditions will be considered as the Non-Resident of India-

The state of least 60 days stay in the current monetary year will get reached out to 182 days in every one of the cases if: 

An individual is a resident of India and leaves India with the end goal of work during the current monetary year. 

From FY 2020-21, a citizen of India or a person of Indian origin who leaves India for employment outside India during the year will be a resident and ordinarily resident if he stays in India for an aggregate period of 182 days or more. However, this condition will apply only if his total income (other than foreign sources) exceeds Rs 15 lakh. Also, a citizen of India who is deemed to be a resident in India (w.e.f FY 2020-21) will be a resident and ordinarily resident in India.

Any individual who will not satisfy the conditions stated below will be considered a non-resident :

1. In a financial year if an Individual stay in India for less than 181 days and
2. In a financial year If an Individual stay in India for not more than 60 days
3. If an Individual stays in India which exceeds 60 days in a financial year but doesn’t exceed 365 days or more during the 4 previous financial years.

An individual who stays outside India, being a resident of India or a Person of Indian Origin (PIO), and comes on a visit to India during the year.

Taxability Imposed on Residents, ROR AND RNOR 

Citizen: An occupant will be charged tax in India on his worldwide pay for example pay procured in India just as pay acquired from external India. 

NR and RNOR: Their tax liability in India is confined to the pay they procure in India. They need not pay any duty in India on their unfamiliar pay. Additionally note that for a situation of twofold tax assessment from pay where a similar pay is getting taxed in India just as abroad, one might turn to the Double Taxation Avoidance Agreement (DTAA) that India would have gone into with the other country to kill the chance of paying charges twice.

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