Question 1 OR (b)
Once resident, always resident? Residential status is fixed year by year (as set, 1961 Act, AY 2022-23)
5.5 marks
- Time to write
- About 11 minutes
From an older CBCS paper
Question
Question 1 OR (b) · 5.5 marks"Where an individual is resident in India in any previous year, he is to be deemed resident for the subsequent years as well." Comment on the above statement by describing the provisions of relevant provisions.
Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2022-23 (previous year 2021-22), with the dates as printed. No marks are printed for this part; 5.5 inferred (11 for the OR, two short parts of 5.5). "provisions of relevant provisions" stands as printed.
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- CommentA statement to judge: take a stand on it in your first line, and come back to it at the end.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Status decided year by year 1 mark 2 min
- 2 The two basic conditions and the Explanation 2 marks 3 min
- 3 Ordinarily resident and not ordinarily resident 1½ marks 2 min
- 4 Example and conclusion 1 mark 2 min
- Check: every ask answered, key terms underlined 1 min
Short on time? Trim steps 2 and 3 evenly rather than skip one: each is capped at its own marks. End with step 4 in a line or two.
Try it first. About 11 minutes for 5.5 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Residential status is decided separately for every previous year (section 6). An individual who is resident in one year may be a non-resident in the next, depending on how long he is in India in that year (and, for the second test, in the years just before it). Nothing in the Act carries a status forward.
The tests for each previous year
An individual is resident in India in a previous year if he meets either of the basic conditions (section 6(1)):
- he is in India for 182 days or more in that year (section 6(1)(a)); or
- he is in India for 60 days or more in that year and for 365 days or more in the four years before it (section 6(1)(c)).
For the second test, the 60 days become 182 days for a citizen of India who leaves India in the year for employment abroad or as a crew member of an Indian ship, and for a citizen or person of Indian origin who lives outside India and comes on a visit (Explanation 1 to section 6(1)). If neither condition is met, he is a non-resident for that year. From assessment year 2021-22 two changes apply (Finance Act, 2020, section 4): for a visiting citizen or person of Indian origin whose total income, other than income from foreign sources, exceeds ₹15,00,000, the 60 days become 120 days instead of 182; and a citizen with such income above ₹15,00,000 who is not liable to tax in any other country by reason of domicile, residence or a similar test is deemed resident (section 6(1A)). Both depend on the facts of that year alone.
Resident and ordinarily resident, or not ordinarily resident
A resident is not ordinarily resident in a year if he was a non-resident in nine of the ten years before it, or was in India for 729 days or less in the seven years before it (section 6(6)(a)), or, from assessment year 2021-22, falls in section 6(6)(c) or (d), inserted by the Finance Act, 2020, section 4; otherwise he is ordinarily resident. The history of earlier years therefore matters, but only as one input into the status of the year in question: it does not make a person resident.
Example (our own): Mr. Arjun, a Canadian engineer, works in Bengaluru from 1 April 2019 to 31 December 2020 and then leaves India. In 2019-20 he is resident (366 days); in 2020-21 he is resident (275 days); in 2021-22 he spends only 40 days in India on a holiday and is a non-resident, because 40 days is below both 182 days and 60 days. His residence in the two earlier years does not carry over.
Being resident in one previous year does not make an individual resident in later years. Each year is tested afresh under section 6, and the status found decides the scope of his taxable income for that year (section 5).
Where the 5.5 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Status decided year by year | 1 |
| 2 | The two basic conditions and the Explanation | 2 |
| 3 | Ordinarily resident and not ordinarily resident | 1.5 |
| 4 | Example and conclusion | 1 |
| Total | 5.5 |
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