Relationship between Incidence of Tax and Residential Status
Incidence of Tax or Income Tax depends on the residential status and also on place and time of accrue and receipt of income.

Determination of Residential Status

Section 6 of income tax act talks about conditions which are needed to determine the residential status of a person.

There are two types of conditions are given:

• Basic Conditions
• Additional Conditions

Basic Conditions are as following:

• He has been in India in previous year for at least 182 days or more,
• He has been in India at least for 365 days during 4 years preceding the previous year.

There are two additional condition as following:

• He has been resident of India for at least 2 years of the 10 previous year preceding to the relevant previous year,
• He has been resident of India for at least 730 days in all during the 7 previous years preceding to relevant previous year.

Resident can be divided into three categories:

1. Ordinary resident
2. Non- ordinary resident
3. Non resident

Ordinary resident
Ordinary residents are those who fulfills at least on basic condition and both the additional condition.

Non- ordinary resident
Non- ordinary resident are those individuals who only fulfill any of the basic condition but do not fulfills both the additional conditions.

Non resident
Nonresident are those who neither fulfill basic nor additional conditions.
 

Incidence of Tax on the basis of residential status:

Incidence of Tax of an individual can be determined by following 8 circumstances:

• In case where income received in India whether accrued or arise in India or outside India. In this case ordinary resident, non- ordinary resident and nonresident all are taxable.
• In case where Income deemed to receive in India, whether accrued or arise in India or outside India. All three type of residents are taxable.
• In case where income accruing or arising in India whether received in India or outside India. All three type of residents are taxable.
• In case where income deemed to accrue or arise in India or outside India. All three type of residents are taxable.
• In case where income received and accrued or arise outside India from a business controlled in or profession set up in India. Ordinary resident and Non ordinary resident are taxable but nonresidents are not taxable.
• In case where income received and accrued or arisen outside India from a business controlled from outside India or a profession set up outside India. Only ordinary residents are taxable.
• In case where income received and accrued outside India from any other sources. Only ordinary residents are taxable.
• In case where income accrued or arisen outside India in earlier year but later on limited to India during the previous year. None of the residents are taxable.