Before starting the discussion on Income tax chargeable on income of non-residents let’s first understand who are ordinary resident, resident but not ordinary resident and who are non resident as per Income Tax Act, 1961.
Definition of residential status has been provided in section 6 of the Income Tax Act, 1961.
As per section 6: In case of an individual one would be called as resident and ordinary citizen of India if both the conditions are fulfilled:
Condition 1
“1. He/she is in India for the period of 182 days or more during the previous year i.e. the financial year for which we are calculating the residential status” or
“2. He is in India during the previous year for 60 days or more and he is in India for 365 days or more during previous four year”
Provided if the assessee is going out of India as a member of crew of Indian Ship or for employment purpose then the words in point 2 would be read as 182 days instead of 60 days.
Condition 2
“1. He should be a resident of India for atleast 2 out of 10 preceding year” and
“2. He has been in India for 730 days or more during the last 7 preceding years.”
If condition no. 2 is not fulfilled then the person would be considered as Resident but not ordinary resident.
If the assessee cannot even satisfy condition 1 then he would be a non- resident.
Now let’s see in brief the amount which would be taxable based on Residential status of Individual:
| Type of Income | Resident | Resident but not ordinary | Non- resident |
| Income received or deemed to be received in India | Taxable | Taxable | Taxable |
| Income Accrue/ arising or deemed to accrue/ arise in India | Taxable | Taxable | Taxable |
| Income (other than above) earned outside India from Business or profession wholly controlled from India | Taxable | Taxable | Non-taxable |
| Any Other Income | Taxable | Non-taxable | Non-taxable |
However all the above taxability of Income are subject to DTAA between various countries in case the Income is subject to double taxation in two countries.
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