An individual's tax liability in India is determined by whether or not he resides in the country during any given fiscal year. The Indian income tax regulations are the source of the term" residential status," which should not be confused with citizenship. Even when someone is an Indian citizen, they could wind up living abroad for a specific year. In a similar vein, a foreign national may find themselves considered an Indian resident for income tax purposes during a specific year.

The section on charging is section 4. A person is subject to income tax based on their income. Income tax shall be levied at the rate or rates prescribed by the Annual Finance Act, or Central Act. Income tax is payable regardless of the Finance Act's passage, but no tax may be collected until the Finance Act is passed. The income from the prior year is what is being charged, not the income from the assessment year. In rare circumstances, income from the assessment year might be subject to taxation in that particular year.

The income tax is to be applied to the assessee's total income as determined by and pursuant to the requirements of this Act, including the rules for the levy of additional income tax. All exemptions and deductions allowed under the Act's different provisions (including those pertaining to the levy of supplementary income tax) must be fully implemented.

Determination Of Residential Status Of An Assessee:

The determination of an assessee's residential status is based on his prior year rather than the assessment year. Consequently, the residence from the previous year is considered, but the residence from the assessment year is not. Additionally, since the residential status is established for every year prior, an individual who was assessed as a resident in a prior year is not prohibited from arguing that he was not a resident in a subsequent year.

In other words, an individual may be a resident in one year prior to not being in the next. An assessee cannot have a separate residential status for the same assessment year under the current Income Tax Act. For all income sources, an assessee shall maintain the same residence status in accordance with Section 6(5).

Residence under the Income Tax Act is entirely different from the concept of "domicile" and "nationality".

The taxable entities may be separated into the following groups in order to determine their residential status:

• A citizen of India and a regular resident there
• A resident of India but not a regular resident
• A non-resident of India.

It should be emphasized, however, that the taxable entities are only split into two divisions:

1. Resident
2. Non-resident in all other circumstances

The taxable entities are separated into three categories (as mentioned above) when determining the residence status of an individual or a Hindu undivided family.

Residential Status Of An Individual:

A person will have been a resident of India in any prior year if any of the following conditions are met. They are :

1. He is in India for that year (that is, the year prior to the year in which the person's residence is being assessed) for the period or periods totaling 182 days or more.
2. He has resided in India for the four years prior to that year for a period or periods totaling at least 365 days, and has spent a period or periods totaling at least 60 days in India during that year.

However, the provisions shall apply with regard to that year as if the words "182 days" had been substituted for the words "60 days" occurring therein in the case of an individual who is an Indian citizen and leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of Section 3 of the Merchant Shipping Act, 1958, or for the purposes of employment outside India.

Each of the aforementioned requirements necessitates the person's prolonged physical presence in India during the relevant year. It is not necessary for the actual presence to remain constant, though. It doesn't matter why you are staying in India. An individual will be considered a resident of India if he meets one or more of the aforementioned requirements; if he does not, he will be considered a non-resident.

A person is considered to have been "not ordinarily resident" in India in any prior year under section 6 subsection (6) if they are –

a) A person who has not resided in India for nine of the ten years before to that year, or who has not spent a total of seven hundred and thirty days or more in India during the seven years prior to that year.

b) A person is considered to have been "not ordinarily resident" in India in any previous year if they have either been in the country for periods totaling less than seven hundred and twenty-nine days during the seven years prior to that year, or they have been nonresidents in the country for nine of the ten years prior to that year.

Residential Status Of A Hindu Undivided Family:

In all cases, a Hindu undivided family is considered to have resided in India in the preceding year, with the exception of those in where the family's entire administration and control is located outside of India. Put another way, a Hindu undivided family is considered a resident of India if all or a portion of its control and management is located there, and it is considered a non-resident if all or all of its control and management is located outside of India.

However, if the manager of a Hindu undivided family has not resided in India for nine out of the ten years prior to the year in question, or if he has not been in India for a period of time totaling seventy-three days or more during the seven years prior to the year in question, the family will be considered "a resident but not ordinarily resident" in India. With effect from 1-4-2004, an undivided Hindu family whose manager has either not resided in India for nine of the ten years prior to that year or has visited the country for periods totaling seven hundred and twenty-nine days or less during the seven years prior to that year

It is important to highlight the following conclusions reached by the Supreme Court in Subbayya Chettiar v. CIT :

Unless the assessee can provide evidence to the contrary, an undivided Hindu family is generally assumed to be living in India, with control and administration of its affairs located entirely outside of the country. The words "control and management" denote the ability to direct and govern, while the terms "head and brain" and "situated" suggest that this ability is used in a specific location that is somewhat permanent.

1. The term "affairs" refers to matters that are pertinent under the Income-tax Act and that are connected to the income that is being sought to be assessed.
2. If management and control are separated, they may each have multiple residences.
3. The mere operations in India would not be sufficient to sustain a conclusion that the seat of management and control had shifted or that a second center for such management and control had been established in India if the seat of management and control is located outside of the country.

These contentions also hold true in situations involving businesses and other associations.

Finally, the assumption that the administration and control of the operations of the Hindu undivided family of which he is a coparcener are located in India would not be justified merely because a coparcener joins a partnership in a company whose headquarters are in India was held in the case of CIT v Nandlal Gandalal .

Its rationale is that in this scenario, the Hindu undivided family is not a partner and the coparcener is, hence the firm's operations cannot be compared to those of the Hindu undivided family.

Residential Status Of A Firm Or Other Association Of Persons:

If a firm or other association of people has its control and management of its affairs partially or entirely within India, it will be considered a resident of India for the preceding year if it is located entirely outside of India, it will be considered a non-resident.

Residential Status Of Company:
A company is considered to have been a resident of India in any prior year, as per Section 6(3), if either:

• it is an Indian company or
• the control and administration of its activities is located entirely in India throughout that year.

Therefore, a non-Indian company is only considered a resident of India if its control and management are located entirely in India. Conversely, every Indian firm is considered a resident of India regardless of whether its control and management are located entirely or partially abroad.

It should be emphasized that a company's affairs are controlled and managed at the location of the directors' meetings, not the shareholders' meetings. Its reason is that the directors control and manage the company's affairs.

Finally, it should be noted that a company's residential status is established based on a specific prior year, even if its entire trading operation is conducted outside of India, provided that the non-Indian company's control and management of its affairs are entirely located in India was held in the case of Wallace Bros. Co. Ltd v CIT .

Consequently, a non-Indian firm that was based in India the year before might not be based there the following year due to a shift in the location of control and administration of its operations from India to another country.

Residential Status Of Every Other Person:

Section 6(4) states that, in all cases, every other person is considered to have resided in India in the previous year, unless their control and management of their activities was entirely located outside of India during that year.

The term "other person" in this context refers to any individual, Hindu undivided family, business, firm, or other group of people. Thus, everyone is covered by clause (4) of Section 6, with the exception of individuals, Hindu undivided families, businesses, firms, and other associations of people. For instance, this clause's requirements govern the residence status of statutory corporations, local authorities, idols, and deities.

Conclusion
Origin, nationality, birthplace, and residency are not significant factors in determining income tax. If an individual who is an Indian citizen meets the requirements for residency and is living in India, they can be considered residents of India for the purposes of income taxation and will be subject to taxes. Alternatively, the individual may not be a resident of India. Residents of India are subject to taxes on their worldwide income, which includes both money earned within and outside of the country.

When determining a person's residence status in India, we take into account their actual physical presence in the country during the course of the previous year. Nonetheless, a person's residence status varies from year to year. For example, if an individual meets the requirements to be a resident this year, they will not be eligible to do so the following year. For this reason, a taxpayer cannot file taxes again in the same year.