Residentail Status as per Income Tax Act / FEMA:-

How does the residential status of an individual determine his or her tax liability?

This question becomes relevant to every individual every time they enter or leave India.

The criteria to determine residential status in India are different under Income Tax (IT) Act and Foreign Exchange Management Act (FEMA).

Residential Status of an Individual - Sec. 6 of Income Tax Act:-

Basic Conditions :-

(a) He is in India in the previous year for a period of 182 days or more.

(b) He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.

Additional Conditions :-

(i) He has been resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year.

(ii) He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.

Resident :- (satisfies at least one of the basic conditions)

Resident & Ordinarily resident (ROR) :- (satisfies at least one of the basic conditions and the two additional conditions)

Resident but Not Ordinarily resident (NOR) :- (satisfies at least one of the basic conditions but does not satisfy the two additional conditions)

Non Resident :- (satisfies none of the basic conditions)

Exceptions in Basic Conditions:-

•An Indian citizen who leaves India as a member of the crew of an Indian ship or for taking employment abroad will qualify as a resident of India only if physically present in India for 182 days or more during that tax year.

•An Indian citizen or a person of Indian origin having taxable India-sourced income not exceeding INR 1.5 million and who, being outside India, comes on a visit to India will qualify as a resident of India only if physically present in India for 182 days or more during that tax year.

•However, as per Finance Act, 2020, for those with an annual income above ₹15 lakh, the period of staying in the country has been reduced to 120 days or more.

Residential Status of an Individual under FEMA:-

“Person resident in India” under section 2(v)

“Person resident outside India” under section 2(w)

“Person resident in India” under section 2(v)

A person residing in India for more than one hundred and eighty-two days during the course of the preceding Financial Year.

but does not include

(A) a person who has gone out of India or who stays outside India, in either case :—

(a) for or on taking up employment outside India, or

(b) for carrying on outside India a business or vocation outside India, or

(c)for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

Summary

(If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a person resident outside India from the day he leaves India for such purpose.)

(B) a person who has come to or stays in India, in either case, otherwise than—

(a) for or on taking up employment in India, or

(b) for carrying on in India a business or vocation in India, or

(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;

Summary

If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a person resident in India from the day he comes to India for such purpose.

Person Resident Outside India under FEMA:-

“Person resident outside India” under section 2(w)

"Person resident outside India" means a person who is not a resident of India

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