Visit Days of NRIs to be Excluded for Finding Residential Status

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Sept. 21 – Once an individual become resident in India as per the Income Tax Act, 1961 (IT Act), the individual’s international income becomes taxable. If an individual is a non-resident Indian (NRI), his/her income earned outside India is not taxable. Therefore, for a non-resident, there is always danger of taxation of global income if their stay is more than the specified numbers of days in India.

A very interesting interpretation in favor of all NRIs by ITAT, Bangalore has been confirmed by the Karnataka High Court on the question of whether the visiting period of an NRI preceding his/her return to India should be excluded from the total stay of NRI. The decision says that for determining the residential status of an individual, visits to India should be excluded while computing the period of 60 days in India as mentioned in Section 6(1)(c) of the IT Act. Furthermore, for the purpose of computing the period of 60 days as mentioned in section 6(1)(c) of the IT Act, the day of arrival to India would be excluded.

Implication on NRIs
The two ways a person becomes resident in India are:

  1. If you are in India for 183 days [Section 6(1) (a) of the Act], or
  2. You are in India 60 days in the year for which residential status is being found out and in preceding four years to that year, you are in India for 365 days in aggregate [Section6(1)(c) of the Act].

Exception to aforesaid second Rule of stay in 60 days

There are two exemptions to the rule of 60 days (plus 365 days in aggregate). These are:

If a person satisfies any of the following situations, one can stay up to 182 days instead of 60 days in the previous year for which residency is checked.

  1. Indian resident leaves India during previous years for the purpose of employment outside India.
  2. Indian citizen or person of Indian origin, being outside India, comes on a visit to India.

The decision of Karnataka High Court favors NRIs because the Court apprehended that if an NRI comes on visit to India, the numbers of days he/she comes to visit should be excluded from computation of 60 days for the purpose of determination of residency.

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