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‘How do I get foreign exchange for my foreign trip?’, ‘How can I pay subscription to a foreign magazine in US dollars?’ Am I liable to pay income tax in India?
These questions require a determination of your ‘residence’ status. An understanding of ‘Residence’ will help you understand your legal status and reduce any legal risk that could arise out of your transactions.
WHAT IS ‘RESIDENCE’?
‘Residence Status’ in India is determined under the Foreign Exchange Management Act (FEMA) and the Income Tax Act.
WHAT IS ‘FEMA’?
Under Section 2(v) of FEMA, ‘Person resident in India’ means-
a person who resided in India for more than 182 days in the previous financial year (April to March), but does not include
(i) a person who has gone out of India or who stays outside India for employment, business or vocation outside India or for any other purpose that indicates his intention to stay outside India for an uncertain period
(ii) a person who has come to, or stays in, India on a temporary basis, i.e. not for employment, business or vocation in India, or for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period.
An understanding of ‘Residence’ will help you understand your legal status and reduce any legal risk that could arise out of your transactions.
Thus, a person is a resident if he satisfies both the test of stay of more than 182 days in the previous financial year and does not fall under either of the exceptions listed above.
Your dealings in transactions involving foreign exchange or acquisition or transfer of immovable property in India is affected by your ‘residence’ status under FEMA.
INCOME TAX ACT
Under the Income Tax Act, a person is resident in India if s/he has:
stayed in India for more than 182 days in the financial year or
has stayed in India for 365 days or more in the immediately 4 preceding years and 60 days or more in the relevant financial year.
The liability to pay income tax in India is determined by a person’s ‘residence’ status under the Income Tax Act.
Depending on the stay of a person, s/he may be resident in one year and non-resident in another year under the FEMA and Income Tax Act.
The liability to pay income tax in India is determined by a person’s ‘residence’ status under the Income Tax Act. Depending on the stay of a person, s/he may be resident in one year and non-resident in another year under the FEMA and Income Tax Act.
RESIDENCE CERTIFICATE
Also referred to as a Domicile Certificate, it is a proof of permanent residence of a citizen in a village, town or ward and is issued on the basis of an individual’s stay at a place or permanent employment.
It is required to enable an individual to get local preference, get admission in an educational institution where local residents are preferred, obtain a ration card or apply for State Government jobs where residents are preferred.
In Goa, it can be obtained from the Mamlatdar’s office by submitting an application with documents like birth certificate, previous residence certificate, educational qualification certificate like school leaving certificate or bonafide certificate, proof of identity, marriage certificate (for married women).
The above rules need to be kept in mind when filling the ‘Residence’ column of KYC forms etc.
This article seeks to present, in simple words, legal issues and doubts that we face in our day-to-day lives. It should not be taken as a substitute for a lawyer.
(The writer is a lawyer and company secretary with a focus on education, legal issues and governance, and enjoys working with individuals and organisations towards enhancing their effectiveness).
