Indians going abroad & Taxation thereof

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Indians going abroad & Taxation thereof

Number of students & others going abroad is on the rise. The question arises as to its taxability. Tax liability is depend upon the residential status. There is Basic conditions to check whether you are Resident, Non Resident and Non ordinary resident. Residential Status is important from taxation perspective.  The same is detailed as under:

I.                   RESIDENT:

Section 6 deals with the residential status. It has to clauses (a) and (b) which reads as under: 

 

a.      Stay in India for 182 days or more :
If an individual is to become resident of India during any previous year, his/her personal stay in India during that year is a must. It means that if an individual does not stay in India at all in any previous year, he cannot be resident of India in that year.
Stay in India means that the individual should have stayed in Indian territory, in any cities, villages, hills, even Indian territorial waters for such number of days as specified.
The period of 182 days need not be at a stretch in one go. It is aggregate of 182 days in the relevant previous year. The status of resident is not linked with any particular place or town or house. Onus is on the assessee to prove if he desires to be taxed as non-resident or not ordinarily resident that his presence is not worth considering him as resident assessee.

b.     Presence for 365 days during the four preceding previous years :
I
ndians or other citizens may be on frequent visitor to India in which case also he may be considered as resident. In such cases, residential status will be determined on the basis of his presence in India for 365 days in four years immediately preceding the relevant previous year. Additionally, presence for 60 days during the relevant previous year is another essential condition to be fulfilled. The purpose, object, reason etc of visit to and stay in India has nothing to do with the determination of residential status.
In short, if an individual does not stay in India at all in any previous year, he cannot be resident of India in that year. Stay in India means that the individual should have stayed in Indian territory in any way.

For Indian citizen going abroad on a job or as a member of crew of an Indian ship [Explanation (a)]

In case of an Indian citizens,
(a) Who is going outside India for a job and his contract for such employment outside India has been approved by the Central Government ; or

(b) He is a member of crew of an Indian ship;

Conditions specified in 1 above i.e., (a) u/s 6(1) remains the same but the conditions specified in 2 above i.e., 60 days have been replaced by 182 days.

A person shall be deemed to be of Indian origin if he or either of his parents or any of his grand parents was born in India or undivided India [Section 115 (c) explanation to clause (c)]

 

II.               Resident But Not Ordinarily Resident:

An individual who is Resident u/s 6(1) can be subdivided into two categories :
(a) Ordinary Resident ; or (b) Not ordinarily Resident

An individual who is resident u/s 6(1) can claim the beneficial status of Resident but not ordinary resident:

(a) He was non-resident in India for 9 previous years out of 10 previous years preceding the relevant previous year.

OR

(b) He was in India for a period or periods aggregating in all to 729 days or less during seven previous years preceding the relevant previous year.

 

In short,

Ordinary Resident = Satisfying any one of two conditions given u/s 6(1) + Satisfying both the additional conditions of Sec. 6(6)(a) & (b)

Not Ordinarily Resident = Satisfying any one of the two conditions u/s 6(1) + Satisfying none or any one of the additional conditions

 

 

III.            Non-resident [Section 2(30)]:

Under section 2(30) of the Income-tax Act, 1961 an assessee who does not fulfil any of the two conditions given in section 6(1)(a) or (b) would be regarded as ‘Non-resident’ assessee during the relevant previous year for all purposes of this Act.

 

SOME IMPORTANT TERMS:

–         Meaning of Stay in India –

It means stay any where within Indian geographical territory, i.e., any where in Indian villages, towns, cities, waters or mountains.

 Stay may be continuous or in installment:

Stay in India for specified days should not necessarily be continous. It means a person is not required to stay 182 days at a stretch as per Sec. 6(1), i.e., a person stays in India in the months of April, May and June and then left India and stayed for 5 months in a foreign country and then came back and stayed in India upto 31st March. In such a case the stay in India will be counted by adding stay in India on each different occasion.

Calculation of ‘period of stay’ in India:

Stay of 24 hours will be taken as stay of one day and total hourly stay in India will be converted into days. If a person stays in India for a part of the day (i.e., for certain hours etc. only) then period of stay in India is to be calculated on hourly basis. The ‘period of stay’ in India is to be calculated on the basis of actual stay of an individual in India during the relevant previous year. However, if detail of hourly stay in India is not available then period of stay in India is to be calculated in days. It is important to note that while calculating the period of stay in India (in days), both the day of departure from India and the day of arrival in India are to be counted as stay in India.

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