How different is the Residential Status of an Individual Under Income Tax Act and Under FEMA?

How different is the Residential Status of an Individual Under Income Tax Act and Under FEMA? discussed by CA. (IP) Vivek Khurana.
Residentail Status as per Income Tax Act / FEMA:-
Resident ??? Non Resident??? NRI???
How does the residential status of an individual determine his or her tax liability?

This question becomes relevant to every individual every time they enter or leave India.

The criteria to determine residential status in India are different under Income Tax (IT) Act and Foreign Exchange Management Act (FEMA).

Residential Status of an Individual - Sec. 6 of Income Tax Act:-
Basic Conditions :-
(a) He is in India in the previous year for a period of 182 days or more.
(b) He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.

Additional Conditions :-
(i) He has been resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year.
(ii) He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.

Residential Status of an Individual under FEMA:
Residence under FEMA is defined as
“Person resident in India” under section 2(v)
“Person resident outside India” under section 2(w)

Person Resident in India under FEMA:-
“Person resident in India” under section 2(v)

A person residing in India for more than one hundred and eighty-two days during the course of the preceding Financial Year.
but does not include
(A) a person who has gone out of India or who stays outside India, in either case :—
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c)for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
Summary
(If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a person resident outside India from the day he leaves India for such purpose.)

(B) a person who has come to or stays in India, in either case, otherwise than—

(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
Summary
If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a person resident in India from the day he comes to India for such purpose.

Person Resident Outside India under FEMA:-
“Person resident outside India” under section 2(w)

"Person resident outside India" means a person who is not a resident of India

Residentail Status as per Income Tax Act / FEMA:-
The key difference in determining residential status as per Income Tax Act and FEMA are that
under Income Tax Act,
there is only one residential status for the relevant year,
while under FEMA
there can be more than one residential status for the relevant year.

The Income-tax Act requires the physical presence of 182 days or more, whereas, FEMA requires 183 days or more

Residency status as per Income Tax Act determines taxability of the total income and it is also relevant for filing Income Tax Return (ITR).

Residency status under FEMA doesn’t affect tax liability because in this case an individual’s residency changes from a particular date and may not be the same for the full year.

Under FEMA, the residency status mainly impacts cross border payments and who can exercise the liberalised remittance scheme (LRS) as it is not allowed to non-residents.

#casansaar #incometax #fema #resident #nonresident #nri #nritaxation #nonresident

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This Video is for the purposes of information / knowledge and shall not be treated as solicitation in any manner or of for any other purposes whatsoever.

It shall not to be used for any legal advice /opinion and shall not to be used to rendering any professional opinion. Viewers are advised to kindly go through to original Government publications / notifications and published case laws or judicial pronouncements.

The statements and opinions expressed in video are those of the speaker and do not necessarily reflect those of the CA Sansaar or any of its employees. CASansaar Team does not take any responsibility for the views of the Speaker.

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