Residential Status and Taxable Income in India

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Mar. 12 – Computing for taxable income for individuals in India is based on residential status and the amount of time an individual stays in the country in the relevant financial year and the following 10 years.

If an individual stays in India for 182 days or more during the tax year or 60 days or more during the relevant tax year and at least 365 days or more during the four preceding tax years then he is a resident.

For non-resident Indians or NRIs wherein an Indian citizen leaves the country for employment will need to outside India, the above 60 day period is changed to 182 days. For Indian citizens or a person of Indian origin coming to the country, the 60 day period is switched to 182 days.

If an individual is confirmed as a resident it needs to be further determined if he is an ordinary resident or not an ordinary resident. A non ordinary resident in India will have to have been a non-resident in India in nine out of the 10 previous years preceding the relevant tax year or he must have been in India for 729 days or less in the seven tax years preceding the relevant tax year.

An individual who is deemed an ordinary resident in India can be taxable based on his worldwide income notwithstanding the place of receipt or accrual of such income. This can include rental income, business income, interest, dividends, and capital gains, to name a few.

In the case of a person who is not an ordinary resident, income other than income accruing from outside India is taxable in India although if said income from outside India also invariably comes from a business established inside the country then it would also be taxable following  Indian laws.

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