Residential Status

The Finance Act, 2020 brought the following changes in the criteria for determining the residential status of an individual:

• Currently, for an Indian Citizen or a Person of Indian Origin (PIO) being outside India and coming to India on visits, amongst other conditions, the period of stay in India to trigger residency, is extended from 60 to 182 days or more during the Financial Year (FY).
  
• In continuation to the existing provisions of the Act, the Finance Act, 2020 now also provides that an Indian Citizen or PIO having total income, other than income from foreign sources*, exceeding INR 1.5 million, would qualify as Resident and Not Ordinary Resident in India, if he is present in India for 120 days or more but less than 182 days during the relevant FY.
  
• The Finance Act, 2020 provides that an Indian citizen would be deemed to be Resident and Not Ordinary Resident in India if such individual is not liable to tax in any other country or territory by reason of residence or domicile (or any other prescribed criteria of similar nature) in that country and his total income, other than income from foreign sources*, exceeds INR 1.5 million in the relevant FY.
  
• In the Finance Act, 2021 a new section 2(29A) has been added which defines “Liable to tax”, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country.

*The Finance Act, 2020 explains that ‘Income from Foreign Sources’ for the purpose of ascertaining residential status would mean income which accrues or arises outside India except income derived from a business controlled in or a profession set up in India.