Did you know that your tax liability is determined based on your residential status? Learn more about how your stay in India affects your tax returns and more with the top chartered accountant firms in Gurgaon. We'll discuss residential status and its impact on taxability in India, and what you should do:
For the average Indian citizen, the taxation landscape is complex and difficult to understand. It's common for people to feel confused about the laws and regulations related to what is and what is not taxable in India.
To help you clear the confusion, the top tax consultant in Gurgaon will explain the importance of residential status in India and how an individual's citizenship in India affects tax liability. Read more to understand residential status and its importance for income tax purposes:
The residential status of an individual in India is important to calculate or determine the taxability of the individual. This means, based on your stay in India for a period of time, you will have to file your income tax returns. The term residential status was coined for the Income Tax law. Any person of Indian origin or a foreigner who is now a citizen of India will need to follow a set of instructions for tax filing in India. To understand the residential status meaning in more depth, read the following section.
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For Income tax purposes, India classifies taxable individuals into three categories:
You can use the following chart to understand the income tax residential status categories more clearly:
Every individual has a different source of income, irrespective of their residential status in India. So, how to determine whether your income is taxable based on your residential status? Let's find out:
There is no provision for dual citizenship in India. This is why you will find no mention of dual resident for tax purposes. For income tax filing, only citizens of India are eligible for taxability.
Read Also: Income Tax for NRI in India: Everything You Need to Know
Clear your doubts and queries!
The residential status of an individual determines their tax liability in India under the Income Tax Act. Based on whether an individual is a resident of India or a non-resident Indian, their income will be taxed. A resident in India has to pay taxes for every type of income, while a non-resident only has to pay taxes on income earned within India. This is why it is important to understand your residential status.
Under the Income Tax Act, an individual’s residential status is determined based on their duration of stay or physical presence in India. An individual is considered a resident of India if they meet one of the following conditions: they have been physically present in India for at least 182 days during the current financial year, or if they are in India for at least 60 days during the current financial year and 365 days in the preceding four years. You can check other criteria in the sections above.
The residential status of an individual affects the taxability of an individual's income because it helps to determine whether the income source should be taxed or not based on their physical stay in India. A resident in India is taxed on income from any source, while a non-resident Indian is only liable to tax on income generated within India.
Yes, foreign income is taxable for residents in India. However, this is an exception to this rule. If you are an NRI, then your income is taxable only if the income's source is from India.
Yes, your residential status in India can change based on how long you stay within the country.
There are three types of residential status in India: (1) Resident and Ordinarily Resident, (2) Resident but Not Ordinarily Resident, and (3) Non-Resident Indian.
Read More: Why Foreign Direct Investment (FDI) in India Matters - Benefits
The residential status of an individual is crucial for understanding their tax liability in India. It helps you to understand whether your income is taxable based on your residential status and source of income.
Our tax consultants provide personalized guidance to help you navigate the complex taxation landscape within India. Reach out to our chartered accountant firm in Gurgaon today!
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