Overview of Tax Residence in India under Income Tax

Table of Contents

1. Residence in India

2. “Non-resident”, defined [s. 2(30)]

3. Provisions regarding residential status are intra vires

4. Determination of residential status of a person

4.1 General principles

5. Onus to prove residential status

6. Person resident for any source of income deemed to be resident for each of his other sources of income

6.1 Provisions of s. 6(5) are no longer of practical importance

Residential Status of an Individual [s. 6(1), 6(1a) & 6(6)]

7. Types of residential status of an individual and its determination under Income-tax Act, 1961

8. When an individual be treated as resident in India

8.1 When an individual be treated as ROR

8.2 When an individual be treated as RNOR

9. When an individual be treated as non-resident in India

9.1 Non-discrimination provision under UN Model Tax Convention

10. Counting of days, general principles of the General Clauses Act, 1897

10.1 Involuntary stay in India not to be included

10.2 Period of visit to India to be excluded for computing 60 days in case of deputation outside India

11. Special COVID-19 clarification in respect of residency of an individual for PY 2019-20 and PY 2020-21

12. Special provisions for certain Indian citizens or persons of Indian origin (PIO)

12.1 Certain Indian citizens leaving India during the PY [Explanation 1(a) to s. 6(1)]

12.2 Certain Indian citizens or PIO visiting India during the PY [Explanation 1(b) to s. 6(1)]

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1. “Resident”, defined [s. 2(42)]

Unless the context otherwise requires, as per s. 2(42), “resident” means a person who is resident in India within the meaning of s. 6.

2. “Non-resident”, defined [s. 2(30)]

Unless the context otherwise requires, as per s. 2(30), “non-resident” means a person who is not a resident.

Furthermore, for the purposes of ss. 92, 93 and 168, “non-resident” includes a person who is not ordinarily resident within the meaning of s. 6(6).

3. Provisions regarding residential status are intra vires

Where Parliament has conferred a power to legislate on a particular topic, it is permissible and important in determining the scope and meaning of the power to have regard to what is ordinarily treated as embraced within that topic in the legislative practice of the country. Income-tax legislation in India proceeded on the lines that there is subjected to income-tax all income arising within the country and some, but not all, income arising abroad belonging to a person resident in India. The resulting general conception as to the scope of income-tax is that, given a sufficient territorial connection between the person sought to be charged and the country seeking to tax him, income-tax may properly extend to that person in respect of his foreign income. That general conception finds a place in the phrase “taxes on income” as used in the Government of India Act, 1935. Therefore, the principle “sufficient territorial connection”, not the rule giving effect to that principle, residence, is implicit in the power conferred by the Government of India Act, 1935 [Wallace Brothers & Co. Ltd. v. CIT, (1948) 16 ITR 240 (PC)].

4. Determination of residential status of a person

For the purposes of levy or incidence of income-tax on any person, determining the residential status is of utmost relevance.

For this purpose, one has to look into the provisions of s. 6 of the 1961 Act. Residential status is always determined for the PY (and not with respect to AY) because the assessee has to determine the total income of the PY only. In other words, as the tax is on the income of a particular PY, the determination of the residential status must confine to the facts obtaining in that PY.

Furthermore, if such person is a resident of both the Countries (including India) and India has DTAA with that other country u/s. 90 or 90A, then the residential status of such person is to be determined following the Tie-Breaker Rules provided in the respective DTAAs.

4.1 General principles

The following are some of the other general principles regarding determining the residential status of a person:—

(1) It is not necessary that the stay in India should be for a continuous period.

(2) It is also not necessary that the stay should be only at one place in India.

(3) Citizenship of a country is not to be confused with the residential status of that country as these are separate concepts. A person may be an Indian National or Indian Citizen but he may not be a resident in India or vice versa.

(4) A person assessed as resident for a PY is not precluded from contending that he was not a resident in a subsequent PY.

(5) The determination of residential status can only be made after the information is furnished and it is considered after giving opportunity to the assessee in case of regular/scrutiny assessment cases. And it shall also form part of the assessment order so that the same can be examined and scrutinised in the appeal [Vijay Mallya v. Asstt. CIT, (2004) 134 Taxman 146 (Cal) = (2004) 266 ITR 329].

5. Onus to prove residential status

The onus of proving lay upon the Department that the assessee was in India. But if the conditions were established or admitted, then the onus lay upon the assessee to prove that his visits in the PY were occasional or casual [CIT v. B. K. Dhote, (1967) 66 ITR 457 (SC)].

6. Person resident for any source of income deemed to be resident for each of his other sources of income

The provisions of s. 6(5) creates a deeming fiction that if a person is resident in India in a PY relevant to an AY in respect of any source of income, then he shall be deemed to be resident in India in that PY relevant to the AY in respect of each of his other sources of income. Also see, CWT v. P. R. Shanmugam, (1985) 23 Taxman 371 (Mad).

Therefore, the abovesaid deeming provision cannot be ignored by stating that a person is resident in respect of some of the sources of income but not in respect of others.

6.1 Provisions of s. 6(5) are no longer of practical importance

This section is one of the few provisions which have remained intact since the Income-tax Act, 1961, is enacted, but ironically this s. 6(5) itself is redundant since long time, because for and from AY 1989-90, previous year is uniform for all sources of income and for all assessees, i.e., FY immediately preceding the AY. Until that time, it was possible for an assessee to have different PYs for different sources of income, e.g., calendar year for business income and financial year for income form salaries, and, therefore, it was possible to have different residential status for different sources of income, because the number of days of presence in India was to be seen vis-à-vis the relevant PYs and those PYs, in some cases, could cover different period (even as AYs for all those previous years remained the same). With the uniformity of PYs, such a situation is no longer possible, and the legal provision is incapable of any application. If this legal provision still exists on the statute, it can only be explained by inertia of the law makers in weeding out redundant legal provisions [Arvind Singh Chauhan v. ITO, (2014) 42 taxmann.com 285 (Agra—ITAT) = (2014) 147 ITD 509 = (2014) 31 ITR 105].

Residential Status of an Individual [s. 6(1), 6(1a) & 6(6)]

7. Types of residential status of an individual and its determination under Income-tax Act, 1961

Residential status of an individual can either be one of the following:—

(1) Resident and ordinarily resident (ROR); or

(2) Resident but not ordinarily resident (RNOR) [including deemed resident]; or

(3) Non-resident.

Residential status, in case of an individual, is to be determined solely on the basis of number of days [i.e., physical presence in India] as prescribed under the provisions and other facets such as economic presence, etc., are irrelevant unless such individual becomes resident of both the Contracting States.

It has to be clarified that the provisions of s. 6(1) applies equally to all individuals including foreigners as well as Indians (including Hindus, Christians, Muslims, Parsis, etc.), whatever may be the caste or creed or colour or religion or sex.

8. When an individual be treated as resident in India

An individual is said to be resident in India if any one of the following two basic conditions gets fulfilled:—

(i) He has been in India for a period(s) of 182 days or more in the relevant PY [s. 6(1)(a)]; or

(ii) (a) He has been in India for a period(s) of 60 days or more in the relevant PY [s. 6(1)(c)]; and

(ii) (b) He has been in India for a period(s) of 365 days or more (in aggregate) in the 4 PYs immediately preceding the relevant PY [s. 6(1)(c)].

An individual resident in India can either be:—

(1) Resident and ordinarily resident (ROR); or

(2) Resident but not ordinarily resident (RNOR) [including deemed resident].

In this regard, it is quite pertinent to note that one needs to delve into the question whether an individual is a ROR and RNOR only after it is found that he is resident in India. On the other hand, if it is ascertained that the individual is a non-resident, then no such inquiry is needed at all.

8.1 When an individual be treated as ROR

An individual is said to be resident and ordinary resident (ROR) if both the following conditions gets satisfied:—

(i) He has been resident in India in at least 2 PYs out of 10 PYs immediately preceding the relevant PY [s. 6(6)(a)]; and

(ii) He has been in India for a period(s) of 730 days or more (in aggregate) in the 7 PYs immediately preceding the relevant PY [s. 6(6)(b)].

8.2 When an individual be treated as RNOR

An individual is said to be resident but not ordinary resident (RNOR) if any of the following conditions gets satisfied:—

(i) He has been non-resident in India in 9 PYs out of 10 PYs immediately preceding the relevant PY [s. 6(6)(a)]; or

(ii) He has been in India for a maximum period(s) of 729 days (in aggregate) in the 7 PYs immediately preceding the relevant PY [s. 6(6)(b)]; or

(iii) He, being an Indian citizen or a person of Indian origin (PIO), having total income [excluding income from foreign sources] exceeding Rs. 15 lakhs during the PY, has been in India for a period(s) of 120 days or more but less than 182 days [s. 6(6)(c)]; or

(iv) He, being an Indian citizen, is deemed to be an Indian resident [s. 6(6)(d)].

From the above, it is evident that the word used in each of the clauses is “or” and, hence, all the conditions are alternative to each other but not cumulative. The fulfilment of any of the above conditions would be sufficient to treat an individual RNOR in India for that relevant PY.

9. When an individual be treated as non-resident in India

An individual is said to be non-resident in India if none of the following two basic conditions gets fulfilled:—

(i) He has not been in India for a period(s) of 182 days or more in the relevant PY; or

(ii) (a) He has not been in India for a period(s) of 60 days or more in the relevant PY; and

(ii) (b) He has not been in India for a period(s) of 365 days or more (in aggregate) in the 4 PYs immediately preceding the relevant PY.

9.1 Non-discrimination provision under UN Model Tax Convention

In this regard, it is to be noted that Article 24(1) of the UN Model Tax Convention pertaining to non-discrimination specifically provides that Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which Nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

This Article deals with the elimination of tax discrimination in certain precise circumstances. All tax systems incorporate legitimate distinctions based, for example, on differences in liability to tax or ability to pay. The non-discrimination provisions of the Article seek to balance the need to prevent unjustified discrimination with the need to take account of these legitimate distinctions. For that reason, the Article should not be unduly extended to cover so-called “indirect” discrimination. This Article establishes the principle that for purposes of taxation discrimination on the grounds of nationality is forbidden, and that, subject to reciprocity, the nationals of a Contracting State may not be less favourably treated in the other Contracting State than nationals of the latter State in the same circumstances.

The expression “in the same circumstances” refers to taxpayers (individuals, legal persons, partnerships and associations) placed, from the point of view of the application of the ordinary taxation laws and regulations, in substantially similar circumstances both in law and in fact. The expression “in particular with respect to residence” makes clear that the residence of the taxpayer is one of the factors that are relevant in determining whether taxpayers are placed in similar circumstances. The expression “in the same circumstances” would be sufficient by itself to establish that a taxpayer who is a resident of a Contracting State and one who is not a resident of that State are not in the same circumstances. The expression “in the same circumstances” can in some cases refer to a person’s tax situation. This would be the case, for example, where a country would subject its nationals, or some of them, to a more comprehensive tax liability than non-nationals (this, for example, is a feature of the United States tax system). As long as such treatment is not itself a violation of Article 24(1), it could not be argued that persons who are not nationals of that State are in the same circumstances as its nationals for the purposes of the application of the other provisions of the domestic tax law of that State with respect to which the comprehensive or limited liability to tax of a taxpayer would be relevant (e.g., the granting of personal allowances).

If a Contracting State, in giving relief from taxation on account of family responsibilities, distinguishes between its own Nationals according to whether they reside in its territory or not, that State cannot be obliged to give nationals of the other State who do not reside in its territory the same treatment as it gives its resident nationals but it undertakes to extend to them the same treatment as is available to its nationals who reside in the other State. Similarly, Article 24(1) does not apply where a National of a Contracting State who is also a resident of that State is taxed less favourably in the other Contracting State than a national of that other Contracting State residing in a third State (for instance, as a result of the application of provisions aimed at discouraging the use of tax havens) as the two persons are not in the same circumstances with respect to their residence.

Likewise, the provisions are not to be construed as obliging a State which accords special taxation privileges to its own public bodies or services as such, to extend the same privileges to the public bodies and services of the other State. Neither are they to be construed as obliging a State which accords special taxation privileges to private institutions not for profit whose activities are performed for purposes of public benefit, which are specific to that State, to extend the same privileges to similar institutions whose activities are not for its benefit.

Furthermore, Article 24(1) has been deliberately framed in a negative form. By providing that the nationals of a Contracting State may not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of the other Contracting State in the same circumstances are or may be subjected, this paragraph has the same mandatory force as if it enjoined the Contracting States to accord the same treatment to their respective nationals. But since the principal object of this clause is to forbid discrimination in one State against the nationals of the other, there is nothing to prevent the first State from granting to persons of foreign nationality, for special reasons of its own, or in order to comply with a special stipulation in a double taxation convention, such as, notably, the requirement that profits of permanent establishments are to be taxed in accordance with Article  7, certain concessions or facilities which are not available to its own nationals. As it is worded, Article 24(1) would not prohibit this.

Subject to the foregoing observation, the words “…shall not be subjected…to any taxation or any requirement connected therewith which is other or more burdensome…” mean that when a tax is imposed on nationals and foreigners in the same circumstances, it must be in the same form as regards both the basis of charge and the method of assessment, its rate must be the same and, finally, the formalities connected with the taxation (returns, payment, prescribed times, etc.) must not be more onerous for foreigners than for nationals.

In view of the legal relationship created between the company and the State under whose law it is constituted, which from certain points of view is closely akin to the relationship of nationality in the case of individuals, it seems justifiable not to deal with legal persons, partnerships and associations in a special provision, but to assimilate them with individuals under Article 24(1).

Notwithstanding anything contained in the above provision, as per Article 24(6), the above provisions of Article 24(1) shall apply to taxes of every kind and description.

10. Counting of days, general principles of the General Clauses Act, 1897

It is well-known maxim that the law disregards fractions. By the Calendar, the day commenced at midnight and most nations reckon in the same manner. The English do it in this manner. We too have adopted the same. In the space of a day, all the twenty-four hours are usually reckoned; the law generally rejects all fractions of a day in order to avoid disputes. If anything is to be done within a certain time of, from, or after the doing or occurrence of something else, the day on which the first act or occurrence takes place is to be excluded from computation unless the contrary appears from the context. The ordinary rule is that where a certain number of days are specified, they are to be reckoned exclusive of one of the days and inclusive of the other.

In Praveen Kumar v. Sunder Singh Makkar, decided on 27-9-2007, it has been held that if the word “from” is used, then the first day in a series of days will stand excluded and if the word “to” is used, then it will include the last day in a series of days or any other period of time. In this regard, for the purposes of s. 6, when one has to compute the period for which an assessee is in India, one has to start the counting from a particular day and to end the same with specific day. The period is to be counted from the date of arrival of the assessee in India to the date he leaves India. Thus, the words “from” and “to” are to be inevitably used for ascertaining the period though these words are not mentioned in the statute.

Therefore, as per s. 9 of the General Clauses Act, 1897, the first day in a series of a day is to be excluded if the word “from” is used. Since for computation of the period, one has to necessarily import the word “from” and, hence, accordingly, the first day is to be excluded [Manoj Kumar Reddy v. ITO (International Taxation), (2009) 34 SOT 180 (Bang), affirmed in DIT v. Manoj Kumar Reddy Nare, (2011) 12 taxmann.com 326 (Karn) = (2011) 201 Taxman 30].

To summarize, the date of arrival of an assessee as that being not a complete day (particularly late in the day) should be excluded while calculating/counting the number of days of stay in India for the purpose of determining the residential status of an assessee in view of the above Karnataka High Court decision and the following decisions:—

(1) ITO v. Dr. R. K. Sharma, (1987) SOT 1 (Jaipur—ITAT);

(2) ITO v. Fausta C. Cordeiro, (2012) 24 taxmann.com 193 (Mum—ITAT) = (2012) 53 SOT 522;

(3) Pradeep Kumar Joshi v. ITO, (2021) 133 taxmann.com 283 (Ahmd—ITAT) = (2022) 192 ITD 577.

Contrarily, in Petition No. 7 of 1995, In Re, (1997) 90 Taxman 62 (AAR) = (1997) 223 ITR 462, it has been held that the calculation relevant for the purposes of s. 6(1) is that of the number of days during the PY in which the applicant was present in India. For this purpose, the days on which the applicant entered India as well as the days on which he left India have to be taken into account. It is no doubt true that for some hours on these dates, the applicant can be said to have been out of India also but, equally, it cannot be doubted that the applicant was in India on these dates for howsoever short a period it may be.

10.1 Involuntary stay in India not to be included

Involuntary stay of assessee in India due to unauthorized impounding of passport by Government agencies rendering him unable to travel outside India against his will held to be excluded while determining residential status [CIT v. Suresh Nanda, (2015) 57 taxmann.com 448 (Del) = (2015) 233 Taxman 4 = (2015) 375 ITR 172].

10.2 Period of visit to India to be excluded for computing 60 days in case of deputation outside India

Since the assessee was on deputation to USA from April 2004 to January 2005 and his stay in India from 18-8-2004 to 6-9-2004 was in respect of a visit to India, therefore, this period is to be excluded while considering the applicability of s. 6(1)(c) [DIT v. Manoj Kumar Reddy Nare, (2011) 12 taxmann.com 326 (Karn) = (2011) 201 Taxman 30].

11. Special COVID-19 clarification in respect of residency of an individual for PY 2019-20 and PY 2020-21

Vide Circular No. 11/2020, dated 8-5-2020, for the purpose of determining the residential status during the PY 2019-20 in respect of individuals who have come to India on a visit before 22-3-2020 and—

(a) Unable to leave India on or before 31-3-2020—His period of stay in India from 22-3-2020 to 31-3-2020 shall not be taken into account; or

(b) Quarantined in India on account of Novel Corona Virus on or after 1-3-2020 and has departed on an evacuation flight on or before 31-3-2020 (or has been unable to leave Indian on or before 31-3-2020)—His period of stay in India from the beginning of his quarantine to his date of departure (or 31-3-2020) shall not be taken into account; or

(c) Departed on an evacuation flight on or before 31-3-2020—His period of stay in India from 22-3-2020 to his date of departure shall not be taken into account.

Vide Circular No. 2/2021, dated 3-3-2021, since the CBDT has received various representations for relaxation in determination of residential status for PY 2020-21 from individuals who had come on a visit to India during the PY 2019-20 and intended to leave India but could not do so due to suspension of international flights, CBDT has examined the said matter and following facts have emerged:—

(1) Short stay will not result in Indian residency—There may be a situation where a person, who was a non-resident during the PY 2019-20, gets stranded in India by reason of the COVID-19 pandemic for some time during the PY 2020-21. In such situations, there are less chances that the person would acquire residence status in India during the PY 2020-21 only for this reason as explained below:—

(A) A citizen of India or a person of Indian origin may become resident in India only in one of the following situations—

• • • • if his total income from Indian sources (i.e., other than the income from foreign sources) does not exceed Rs. 15 lakhs in PY 2020-21 and he stays in India for 182 days or more during the PY 2020-21; or
      • if his total income from Indian sources (i.e., other than the income from foreign sources) exceed Rs. 15 lakhs in PY 2020-21 and he stays during PY 2020-21 for 182 days or more; or
      • if his total income from Indian sources (i.e., other than the income from foreign sources) exceed Rs. 15 lakhs in PY 2020-21 and he stays during the PY 2020-21 for 120 days or more and also stays for 365 days or more in preceding 4 PYs.

(B) An individual who is not citizen of India or a person of Indian origin may become resident in India only in one of the following situations—

• • • • if he stays during PY 2020-21 for 182 days or more; or
      • if he stays during the PY 2020-21 for 60 days or more and also stays for 365 days or more in preceding 4 PYs.

Thus, generally, a person will become resident in India for the PY 2020-21 only if he stayed in India for 182 days or more unless he is covered by the exceptions discussed above.

(2) Possibilities of dual non-residency in case of general relaxation—Most of the countries have the condition of stay for 182 days or more for determining residency. Thus, a person in most situations will be resident in only one country since there are 365 days in a year. In fact, if general relaxation for the stay period of 182 days is provided, there may be cases of double non-residency. In such situation, a person may not become a tax resident in any country in PY 2020-21 even after staying for more than 182 days or more in India resulting in double non-taxation and end up not paying tax in any country.

(3) Tie breaker rule as per Double Taxation Avoidance Agreement (DTAA)—As discussed above, a person may become resident in India in some cases even if he stays for less than 182 days in India. In that situation, there may be a case of dual residency. However, due to applicability of DTAA, such person will become resident of only one country as per the “tie breaker rule” in the DTAA. It is also relevant to note that even in cases where an individual became resident in India due to exceptional circumstances, he would most likely become not ordinarily resident in India and hence his foreign sourced income shall not be taxable in India unless it is derived from business controlled in or profession set up in India.

(4) Employment income taxable only subject to conditions as per DTAA— Further, Article related to employment income in the DTAA with different countries governs the taxation of employment income. The DTAA distributes the taxation rights between the employee’s jurisdiction of residence and the place where the employment is exercised. Salaries, wages and other similar remuneration are taxable only in the country in which the employee is resident unless the employment is exercised in the other country. Generally, as per the DTAAs, such other country (the source jurisdiction) has taxation rights only if the employee is present in that country for more than 183 days or the employer is a resident of the source jurisdiction, or the employer has a PE in the source jurisdiction that bears the remuneration. Accordingly, if a USA resident under employment of a USA corporation has got stranded in India and performs employment from India, its salary will not be taxable in India unless he is present in India for 183 days or more during the PY 2020-21 or if the salary is borne by Indian PE of such USA corporation.

(5) Credit for the taxes paid in other country—Further, a resident person in India shall be entitled to claim credit of the taxes paid in any other country in accordance with the Rule 128.

(6) International experience—In this connection, in the OECD Policy Responses to Coronavirus (COVID-19), OECD Secretariat analysis of tax treaties and the impact of COVID-19, version 3-4-2020, the following guidance has been provided in this matter:—

Despite the complexity of the rules, and their application to a wide range of potentially affected individuals, it is unlikely that the COVID-19 situation will affect the treaty residence position. Two main situations could be imagined which are as follows:—

(A) A person is temporarily away from their home (perhaps on holiday, perhaps to work for a few weeks) and gets stranded in the host country by reason of the COVID-19 crisis and attains domestic law residence there—In this scenario, it is unlikely that the person would acquire residence status in the country where the person is temporarily because of extraordinary circumstances. There are, however, rules in domestic legislation deeming a person to be a resident if he or she is present in the country for a certain number of days. But even if the person becomes a resident under such rules, if a tax treaty is applicable, the person would not be a resident of that country for purposes of the tax treaty. Such a temporary dislocation should therefore have no tax implications.

(B) A person is working in a country (the “current home country”) and has acquired residence status there, but they temporarily return to their “previous home country” because of the COVID-19 situation. They may either never have lost their status as resident of their previous home country under its domestic legislation, or they may regain residence status on their return—In this scenario also, it is again unlikely that the person would regain residence status for being temporarily and exceptionally in the previous home country. But even if the person is or becomes a resident under such rules, if a tax treaty is applicable, the person would not become a resident of that country under the tax treaty due to such temporary dislocation.

Thus, it has been recognised by the OECD that DTAAs contain the necessary provisions to deal with the cases of dual residency arising due to COVID-19 situations.

A study of the measures taken by different countries reveals that there is mix response some of the countries have provided relief for certain number of days subject to the satisfaction of prescribed conditions whereas some of the countries have not provided any relief. For example, USA have provided relief up to a maximum of 60 days subject to the satisfaction of certain conditions and furnishing of information in specified Form. Similarly, UK has provided relief of 60 days in exceptional circumstances depending on fact and circumstances of each case. Similarly, Australia issued guidelines for allowing relief by examining facts and circumstances. Germany has clarified that in the absence of a risk of double taxation, there is basically no factual inequity if the right to tax is transferred from one contracting state to another due to changed facts.

From the above discussion, it can be seen that OECD as well as most of the countries have clarified that in view of the provisions of the domestic income tax law read with the DTAAs, there does not appear a possibility of the double taxation of the income for PY 2020-21. As explained above, the possibility of double taxation does not exist as per the provisions of the 1961 Act r/w the DTAAs. However, in order to understand the possible situations in which a particular taxpayer is facing double taxation due to the forced stay in India, it would be in the fitness of things to obtain relevant information from such individuals. After understanding the possible situations of double taxation, the CBDT shall examine that whether any relaxation is required to be provided in this matter; and if required, then whether general relaxation can be provided for a class of individuals or specific relaxation is required to be provided in individual cases.

Therefore, if any individual is facing double taxation even after taking into consideration the relief provided by the respective DTAAs, he may furnish the information in Form-NR¹⁵ to this circular by 31-3-2021. This Form shall be submitted electronically to the PCCIT (International Taxation) at https://nicforms.mp.nic.in/nicforms_designer/nic_form_selector.php?form_id=enRhYmxlNjAzZWY2NmIzZGI3NiIwMjEwMzAzMTg=.

12. Special provisions for certain Indian citizens or persons of Indian origin (PIO)

Generally, the residential status of an individual is to be determined following the above principles, however, the residential status of certain Indian citizens or persons of Indian origin (PIO) is to be determined following the special criteria. Persons to whom special provisions applicable are:—

(1) An Indian citizen who leaves India in any PY as a member of crew of Indian ship [as defined in s. 3(18) of the Merchant Shipping Act, 1958 (44 of 1958)] [Explanation 1(a) to s. 6(1)];

(2) An Indian citizen who leaves India in any PY for the purposes of employment outside India [Explanation 1(a) to s. 6(1)];

(3) An Indian citizen or a person of Indian origin (PIO) [as defined in Explanation to s. 115C(e)] who, being outside India, comes on a visit to India in any PY [Explanation 1(b) to s. 6(1)];

(4) An Indian citizen or a person of Indian origin (PIO) [as defined in Explanation to s. 115C(e)] who, being outside India, comes on a visit to India in any PY having total income [excluding income from foreign sources] exceeding Rs. 15 lakhs during the PY [Explanation 1(b) to s. 6(1)].

12.1 Certain Indian citizens leaving India during the PY [Explanation 1(a) to s. 6(1)]

An individual, being an Indian citizen, who leaves India during the PY as a member of crew of an Indian ship [as defined in s. 3(18) of the Merchant Shipping Act, 1958 (44 of 1958)] or for the purposes of employment outside India is said to be resident in India if he has been in India for a period(s) of 182 days or more in the relevant PY.

Therefore, it can be seen that the above provisions are only applicable in that PY when an Indian citizen leaves India.

As per Rule 126, in the case of an individual, being an Indian citizen and a member of crew of a ship, the period beginning on the date entered into the Continuous Discharge Certificate (CDC) [as defined in the Merchant Shipping (Continuous Discharge Certificate-cum-Seafarer’s Identity Document) Rules, 2001 made under the Merchant Shipping Act, 1958 (44 of 1958)] in respect of joining the ship by the said individual for the eligible voyage and ending on the date entered into the CDC in respect of signing off by that individual from the ship in respect of such voyage shall not be included in the period of abovesaid 182 days even though he has stayed in India during such period.

“Eligible voyage” shall mean a voyage undertaken by a ship engaged in the carriage of passengers or freight in international traffic where:—

(a) for the voyage having originated from any port in India, has as its destination any port outside India; and

(b) for the voyage having originated from any port outside India, has as its destination any port in India.

12.1.1 “For the purposes of employment”, meaning of

The expression cannot be considered as equivalent to “in connection with employment”. If somebody was already in employment, came to India either during the relevant PY or in the immediately preceding PY, stayed here for some time and again departed from India to rejoin his employment, such a case could not be considered to be falling under this provision [ITO v. Dr. M. P. Konanhalli, (1995) 55 ITD 266 (Bang)].

12.1.2 “Employment outside India”, meaning of

It includes self-employment like business or profession taken up by the assessee abroad but not for other purposes such as a tourist or for medical treatment or for studies or the like [CIT v. O. Abdul Razak, (2011) 10 taxmann.com 4 (Ker) = (2011) 198 Taxman 1 = (2011) 337 ITR 350].

An individual need not be an unemployed person who leaves India for employment outside India [British Gas India (P.) Ltd., In Re, (2006) 155 Taxman 326 (AAR) = (2006) 285 ITR 218].

Where the assessee had gone out of India to explore business probabilities, it could not be held that he had gone out for the purposes of ‘employment outside India’ [Ziaulla Sheriff v. Asstt. CIT (International Taxation), (2008) 116 TTJ (Bang) 76].

When the law mandates that an Indian citizen can go abroad for the purpose of seeking employment or business, there is no room to misconstruction to assume that assessee’s larger presence/business investment/family ties are in India than abroad. This amounts to a guess work contrary to settled propositions [Suresh Nanda v. Asstt. CIT, (2012) 23 taxmann.com 386 (Del—ITAT) = (2012) 53 SOT 322, affirmed in CIT v. Suresh Nanda, (2013) 35 taxmann.com 199 (Del)].

12.2 Certain Indian citizens or PIO visiting India during the PY [Explanation 1(b) to s. 6(1)]

An individual, being an Indian citizen or a person of Indian origin (PIO), who, being outside India, comes on a visit to India during the PY is said to be resident in India if he has been in India for a period(s) of 182 days or more in the relevant PY.

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1. Omitted by the Finance Act, 1982, w.e.f. 1-4-1983.

2. Substituted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990. Original Explanation was inserted by the Finance Act, 1978, w.e.f. 1-4-1979 and later amended by the Finance Act, 1982, w.e.f. 1-4-1983.

3. Explanation renumbered as Explanation 1 by the Finance Act, 2015, w.e.f. 1-4-2015.

4. Inserted by the Finance Act, 1990, w.e.f. 1-4-1990.

5. Substituted for “fifty” by the Finance Act, 1994, w.e.f. 1-4-1995.

6. Inserted by the Finance Act, 2020, w.e.f. 1-4-2021.

7. Substituted for “the citizen or person of Indian origin” by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021.

8. Inserted by the Finance Act, 2015, w.e.f. 1-4-2015.

9. Inserted by the Finance Act, 2020, w.e.f. 1-4-2021.

10. Inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021.

11. Substituted by the Finance Act, 2016, w.e.f. 1-4-2017. Prior to its substitution, clause (3) read as under :

“(3) A company is said to be resident in India in any previ­ous year, if—

(i) it is an Indian company ; or

(ii) during that year, the control and management of its affairs is situated wholly in India.”

Amendment to section 6(3) by the Finance Act, 2015, w.e.f. 1-4-2016 was omitted by the Finance Act, 2016, w.e.f. 1-4-2016.

12. Substituted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its substitution, clause (6) read as under :

‘(6)  A person is said to be “not ordinarily resident” in India in any previous year if such person is—

(a) an individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more; or

(b) a Hindu undivided family whose manager has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more.’

13. Inserted by the Finance Act, 2020, w.e.f. 1-4-2021.

14. Inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021.

15. For this Form-NR, refer Taxmann’s Master Guide to Income-tax Act, 32nd Edition, 2022, page 3.26.

Also Read:
All-About the Residential Status under the Income-tax Act