Are you a Tax Payer?



You are required to pay income tax and to file your income tax return only when your taxable income exceeds the basic exemption limit of Rs.2, 50,000 in the financial year 2015-2016 relevant to the A.Y. 2016-2017.

Similarly, there are certain situation which are dependent on your period of residence in India during the year will determine whether you are liable to pay income tax in India on your Indian or foreign income, or on both. All such situations are discussed in this chapter to help you determine whether you are a tax payer or not.

CLASSIFICATION OF A TAX PAYER BASED ON RESIDENTIAL STATUS

The tax liability of a person is determined by reference to his residence in India in the previous year. For this purpose, assessees are divided into the three classes, namely;

  • A. Resident but not ordinarily resident;
  • B. Resident and Ordinarily resident and
  • C. Non-Resident

INDIVIDUAL TAX PAYER AND HIS RESIDENTIAL STATUS


A. Resident but not ordinarily resident;

An Individual is a resident but not ordinarily resident in India in any previous year if he fulfills any one of the following two conditions:

  • a) That he is in India in that year for 182 days or more, or
  • b) That he has been in India for at least 365 days in the four years immediately proceedings that year, and is in India for 182 days or more in that year, subject to some conditions.

B. Resident and ordinarily resident or “ordinary resident’ – Section 6 (6)


A person is said to be “not ordinarily resident” in India in any previous year if such person is-

a) An individual who ahs been a non-resident in India in nine out of the ten previous years preceding’s that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or

b) A Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding’s that year in India for a period of, or periods amounting in all to seven hundred and twenty-nine days or less.

Thus an “Ordinary resident” would be a resident who is outside the purview of the above definition. The above definition is as per the amendment made by the Finance Act, 2003. Prior to this amendment there was a separate definition up to the AY 2003-04. The above new definition is applicable on and from the Assessment Year 2004-05.

c) Non-Resident


An Individual is non resident in India in any year, If he des not fulfill any of the above mentioned condition in para (A)


RESIDENTIAL STATUS OF OTHER ASSESSEES FOR INCOME TAX


1. A Hindu Undivided Family (HUF) is resident in India if any portion of the control and management of its affairs is situated in the country. Conversely, it is non-resident if the control and management of its affairs is situated wholly outside India. It becomes ordinarily resident if it fulfills condition (b) of para (B) above.

2. A firm or other association of person is resident in India if any portion of the control and management of its affairs is situated here. If this is so, it also becomes ordinarily resident. If the control and management of its affairs is situated wholly outside India, it becomes non-resident.

3. A company is resident in India if any one of the following two condition is fulfilled:
a) The control and management of its affairs is situated wholly in India, or
b) It is an Indian Company, A company is ordinarily resident if it is resident in India.

4. Every other person is resident in India unless the control and management of his affairs is situated wholly outside India. Tax payers are required to pay advance tax on their income which they expect to earn during the current year. Tax comprises of a major form of revenue for most of the Governments. Taxes are levied and spent by government for the development of our country like healthcare, infrastructure, defence services etc.


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