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The basics of a clause of determining a resident under the Indian Income-tax Act and the understanding of the same are necessary to determine whether the recognition of the individual’s rankings under the taxable income net or is excluded from the same. Types of residential status may be primarily of three types: citizens (split as ordinary and extraordinary ones), non-residents, and deemed residents of India inhabitants. The basics of assessing ‘What are the criteria for determining a deemed Resident status?’ are discussed here. 

The basic understanding of a sought to be deemed residential status

The Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India.

The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.

In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession.

The taxability of the income groups in our country primarily depends upon the residential status criterion viewing. Section 6 of the income tax act provides supporting information about the clauses of deemed residency under Indian income tax.

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