The Income-tax Law has its own set of provisions for determining the residential status of a person.
The residenstal status depends on a person earning income is very much relevant for determining the taxability of such income in his hands.
Hence, residential status plays a vital role in determining the taxability of the income.
The following chart highlights the tax incidence in case of different persons:
|Nature of income||Residential status|
|ROR (*)||RNOR (*)||NR (*)|
|Income which accrues or arises in India||Taxed||Taxed||Taxed|
|Income which is deemed to accrue or arise in India||Taxed||Taxed||Taxed|
|Income which is received in India||Taxed||Taxed||Taxed|
|Income which is deemed to be received in India||Taxed||Taxed||Taxed|
|Income accruing outside India from a business controlled from India or from a profession set up in India||Taxed||Taxed||Not taxed|
|Income other than above (i.e.,income which has no relation with India)||Taxed||Not taxed||Not taxed|
* Where ROR stands for resident and ordinarily resident. RNOR means resident but not ordinarily resident. NR means non-resident.
Incomes are treated as incomes deemed to be received in India:
- Interest credited to recognised provident fund account of an employee in excess of 9.5% per annum.
- Employer's contribution to recognised provident fund in excess of 12% of the salary of the employee.
- Transferred balance in case of reorganisation of unrecognised provident fund.
Source: IncomeTax Site