Determination of residential status of person as resident or non-resident
Under the existing provision of the finance act,1994 the taxable entities are broadly divided into three groups, viz. , Individual , Company and all other persons such as Hindu Undivided Family , Firm, Association of Persons, etc.
These taxable entities are divided into three categories depending upon their residential status. These categories are:-
- Resident but not ordinary resident and
- Non – Resident
An individual is a ‘ resident ‘ in any previous year:
1) If he has been in India during the previous year for 182 days or more.
2) If the individual (not being one of the categories mentioned in para 3 below ) has been in India during the previous year for less than 182 days but has been in India for an aggregate of 365 days or more in the four years preceding the previous year and his stay in India during the previous year is 60 days or more.
3) The categories of person mentioned above are :
- A citizen of India who has left India during the previous year as a member of the crew of an Indian Ship or for the purpose of employment outside India , and
- A citizen of India or a person of Indian origin* who, being outside India, has come to India on a visit during the previous year.
Persons falling under Para 3 are resident only if their stay in India during the previous year is 182 days or more even where the duration of their stay in India during the earlier four years is 365 days or more.
* A person of Indian origin is one if he, or either of his parents or any of his grandparents, was born in undivided India.
Individuals, who are not resident in accordance with the above, are treated as non-resident under the Service Tax Act.
A company is a non resident if it is neither an Indian company nor a company the control and management of whose affairs during the previous year, is situated wholly in India.
Every other person:
Every other person is a non resident if, during a previous year, the control and management of its affairs is wholly situated outside India. In respect of any source of service in any previous year, he shall be deemed to be resident in India in respect of his other sources of service in the previous year.