Let’s start with a note that being a citizen of a country and being a tax resident are two different things. A citizen might not be a tax resident of a country or a non-resident might become a tax resident of a country. Further, it is important to note here that the discussion in this post is going to be around Income tax Act and the meaning and definition Non-resident can be different under Income tax act and FEMA regulations.
Let’s start with the definition of non-resident under Income tax act:
Section 2(30) of the Income Tax Act defines Non-resident as under:
““non-resident” means a person who is not a “resident”, and for the purposes of sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6;”
The above definition is a very generic definition and one cannot use this definition to find out whether he/ she is a resident or non-resident for Indian Income tax law.
Thus, as per the above definition anyone who is not resident will be considered as non-resident. Hence, now let’s move to section 6 of the Income tax Act which provides various conditions based on which one could decide whether he/ she will be considered as resident or non-resident in India. Section 6(1) of the Income tax act is as under:
“An individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.“
Thus, as per above definition we can take two important points:
- One needs to check whether or not he is a resident for Income tax purpose every year.
- One would be considered as non-resident in India if he/she fulfills both the above condition i.e. he is not in India for 182 days and he is not in India for 60 days in previous year and 365 days in past 4 years before that.
There are various relief also under Income tax act for non-resident who are citizen of India or person of Indian origin which are as under:
Explanation 1 to sub-section 1 of section 6 states that if a person being a citizen of India leaves India as a crew member of ship or for employment then 60 days in third clause above will be read as 182 days.
However, if a citizen of India or person of India origin visits India from outside India then the limit mentioned above of 60 days will be changed to 182 days but if the person earns more than 15 lakhs from India (which excludes foreign income*) then in that case such limit will only be increased to 120 days instead of 182 days.
Now, a new provision under Income tax act has been introduced whereby a person will be deemed to be a resident of India even without visiting or residing in India and which makes any non-resident deemed not ordinary resident and the provisions are as under:
As per sub-section 1A of section 6 if a an individual, being a citizen of India, having total income from India (which excludes foreign income*), exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.
*Foreign income is described as under:
“income which accrues or arises outside India except income derived from a business controlled in or a profession set up in India and which is not deemed to accrue or arise in India.
Now we have understood who will be considered as non-resident in India. Later we shall understand the income which shall be taxable in India for non-resident.
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