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How to determine the residential status for tax purposes?

Video Transcription

 

Residential status is the most important thing to determine while deciding the taxation of a person. This is because the income earned is taxable in different ways for a resident and a non-resident. So, let us understand how do you determine the residential status of a person for tax purposes.

The basic conditions to be satisfied for you to be a resident in India are

  • You should have stayed in India for 182 days or more during the financial year;
  • You should have stayed in India for 60 days or more during the financial year and 365 days or more during 4 years immediately preceding to that financial year.

Example:

If you have stayed in India in the year 2016-17 from 20th April 2016 until 31st October 2016 then you will qualify as a resident since these days add up to more than 182 days. However, if you stay until only 5th October 2016, you will not cross the threshold limit of 182 days and you will not qualify to be a resident individual in India.
A step further into this you also need to decipher whether you are an ordinary resident (R-OR) or not ordinary resident (R NOR) in India.

If you fulfil any one of the following criterion then you are not an ordinary resident in India

  • You are a non-resident in India for 9 years out of 10 years immediately before relevant financial year
  • You are in India for a period less than 729 days during 7 years immediately before the relevant financial year.

Example:

In the previous scenario if you are in India for more than 182 days but have been out of India for most part of the previous 9 years and hence have been an NRI in 9 out of 10 previous years to the FY 2016-17 then you qualify as a R-NOR for tax purposes.

There are however some exceptions to this. At H&R Block we have a team of dedicated tax experts who will make sure that they make you understand every complication of residential status. We hope you found this useful.

To know more on such topics visit hrblock.in