Income Tax 2025

Appearance

Section 6: Residence in India ​

6(1) ​

For the purposes of this Act, residence of a person in India shall be determined as per this section.

6(2) ​

An individual shall be resident in India in a tax year, if he––

  • (a) is in India for a total period of one hundred and eighty-two days or more in that tax year; or
  • (b) is in India cumulatively for sixty days or more during that year and has been in India cumulatively for three hundred and sixty-five days or more in the four years preceding such tax year.

6(3) ​

The provisions of sub-section (2)(b) shall not apply in the case of an individual who is a citizen of India and leaves India in any tax year––

  • (a) as a member of the crew of an Indian ship, as defined in section 3(18) of the Merchant Shipping Act, 1958; or
  • (b) for employment outside India.

6(4) ​

The provisions of sub-section (2)(b) shall not apply in the case of an individual––

  • (a) who is a citizen of India or a person of Indian origin; and
  • (b) who being outside India, comes on a visit to India in any tax year;

6(5) ​

Where the person referred to in sub-section (4) has a total income exceeding fifteen lakh rupees during that tax year (other than the income from foreign sources), sub-section (2)(b) shall apply as if the words “sixty days” had been substituted with “one hundred and twenty days” for that year;

6(6) ​

For the purposes of sub-section (2), if the individual is––

  • (a) a citizen of India; and
  • (b) a member of the crew of a foreign-bound ship leaving India, the total number of days in India, in respect of that voyage, shall be determined in such manner and subject to such conditions, as prescribed.

6(7) ​

Irrespective of the provisions of sub-sections (2) to (6), an individual shall be deemed to be resident in India for a tax year, if he––

  • (a)is a citizen of India;
  • (b)is not liable to tax in any other country or territory due to domicile, residence, or similar criteria; and
  • (c)has total income exceeding fifteen lakh rupees during the tax year (other than the income from foreign sources).

6(8) ​

sub-section (7) shall not apply to an individual, who is resident in India for a tax year under sub-sections (2) to (6).

6(9) ​

A Hindu undivided family, firm or other association of persons shall be resident in India in any tax year unless the control and management of its affairs is situated wholly outside India during such tax year

6(10) ​

  • (a)A company is resident in India in any tax year, if—

    • (i) it is an Indian company; or
    • (ii) its place of effective management is in India in that tax year; and

  • (b)for the purposes of this sub-section, “place of effective management” means a place where key management and commercial decisions necessary for the conduct of business of the company as a whole are, in substance, made.

6(11) ​

Every other person is resident in India in any tax year unless the control and management of its affairs is situated wholly outside India in that year.

6(12) ​

If a person is resident in India in a tax year for any source of income, he shall be deemed to be resident in India in that tax year for each of the other sources of income.

6(13) ​

A person is not ordinarily resident in India in any tax year, if that person is—

  • (a) an individual who has been, or a Hindu undivided family, whose manager has been–– (i) a non-resident in India in nine out of the ten tax years preceding that year; or (ii) has been in India cumulatively for seven hundred and twenty-nine days or less in seven tax years preceding that year; or

  • (b) a citizen of India or a person of Indian origin,––

    • (i) whose total income excluding income from foreign sources exceeds fifteen lakh rupees during the tax year, as mentioned in sub-section (5); and
    • (ii) who has been in India cumulatively for one hundred and twenty days or more but less than one hundred and eighty-two days; or

  • (c) a citizen of India who is deemed to be resident in India under sub-section (7).

6(14) ​

In this section, “income from foreign sources” means the income, which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India) and which is not deemed to accrue or arise in India.

Explanation

Section Summary: ​

Section 6 of the Income Tax Act defines the criteria for determining whether a person (individual, HUF, firm, company, etc.) is considered a resident of India for tax purposes. The section outlines specific conditions based on the number of days spent in India, employment status, income thresholds, and other factors. It also introduces the concept of "not ordinarily resident" status, which applies to certain individuals and HUFs.

Key Changes: ​

  1. Residency Rules for Individuals:

    • The 60-day rule in sub-section (2)(b) is relaxed to 120 days for Indian citizens or persons of Indian origin with total income exceeding ₹15 lakh (excluding foreign income).
    • A new provision (sub-section 7) deems an Indian citizen as a resident if they are not liable to tax in any other country and have total income exceeding ₹15 lakh (excluding foreign income).

  2. Not Ordinarily Resident (NOR) Status:

    • The criteria for NOR status have been expanded to include Indian citizens or persons of Indian origin with income exceeding ₹15 lakh (excluding foreign income) and who stay in India for 120–182 days.

  3. Place of Effective Management (POEM):

    • For companies, residency is determined by whether the "place of effective management" is in India, clarifying where key business decisions are made.

  4. Exemptions for Specific Groups:

    • Indian citizens leaving India for employment or as crew members of Indian ships are exempt from the 60-day rule under sub-section (2)(b).

Practical Implications: ​

  1. For Individuals:

    • Indian citizens or persons of Indian origin with high income (above ₹15 lakh, excluding foreign income) must carefully track their days in India to determine residency status.
    • Those not liable to tax in any other country and earning above ₹15 lakh (excluding foreign income) will be deemed residents, even if they spend fewer than 182 days in India.

  2. For Companies:

    • Companies must ensure that their "place of effective management" is clearly defined, as this determines their residency status for tax purposes.

  3. For HUFs, Firms, and Associations:

    • These entities will be considered residents unless their control and management are entirely outside India.

  4. Compliance Burden:

    • Taxpayers must maintain detailed records of their days spent in India and income sources to accurately determine residency status.

Critical Concepts: ​

  1. Resident vs. Not Ordinarily Resident (NOR):

    • A resident is taxed on global income, while an NOR is taxed only on Indian income and foreign income derived from an Indian business or profession.

  2. Place of Effective Management (POEM):

    • Refers to the location where key management and commercial decisions are made for a company.

  3. Income from Foreign Sources:

    • Income earned outside India, excluding income from a business or profession controlled or set up in India.

Compliance Steps: ​

  1. Track Days in India:

    • Maintain a log of days spent in India, especially if you are an Indian citizen or person of Indian origin with income exceeding ₹15 lakh.

  2. Determine POEM for Companies:

    • Companies should document where key decisions are made to establish their residency status.

  3. Review Income Sources:

    • Separate Indian and foreign income to determine applicability of residency rules.

Examples: ​

  1. Example 1:

    • An Indian citizen earns ₹20 lakh in India and ₹5 lakh from foreign investments. They spend 150 days in India during the tax year. Under sub-section (5), the 60-day rule is relaxed to 120 days, making them a resident.

  2. Example 2:

    • An Indian citizen works in the UAE and is not liable to tax there. They earn ₹18 lakh (excluding foreign income) and spend 100 days in India. Under sub-section (7), they are deemed a resident because they are not taxed elsewhere and their income exceeds ₹15 lakh.

  3. Example 3:

    • A company’s board meetings and key decisions occur in Singapore, but operational decisions are made in India. The "place of effective management" is likely Singapore, making the company a non-resident.

This section ensures clarity on residency rules, particularly for high-income individuals and companies with global operations, while introducing stricter compliance requirements.