What is 'Tax Payer Status'?

In Indian tax law, taxpayer status refers to the residential status of the taxpayer. The amount of income tax payable varies based on whether the taxpayer is an Indian resident or a non-resident. Determination of taxpayer status is a very crucial step in calculating income taxes.

Tax Payer Status in Detail:

Based on residence, there are three categories of taxpayer status in India:

  • Resident
  • Non-Resident
  • Not Ordinary Resident

Resident

To qualify as a resident under Indian tax laws, an individual has to meet one of the two conditions:

  • The individual has to live in India for minimum 182 days in a financial year

Example 1: You are a business executive who has to travel frequently outside India for client meetings and business conferences. As long you have lived in India for a minimum of 182 days in a particular financial year, your status will be a resident for tax calculation purposes.

  • Individuals living in India for at least 60 days in a particular financial year, if they have lived in India for 365 days for four years before this financial year

Example 2: You are employed with an Indian company that plans to set up a new branch in Philippines. You are in charge of this project, and so for a large part of the financial year FY 2013-14, you were out of India, except for 60 days. However, during the previous four financial years say from FY 2009-10 to FY 2012-13, you have lived entirely in India. So for tax purposes, you will qualify as a resident taxpayer.

Non-resident

Anybody who has not met the above two criteria will be considered as a non-resident. For example, someone who has lived for only 90 days in India in a particular financial year will qualify as a non-resident.

Non-ordinary Resident

There are two scenarios for a taxpayer to qualify as a non-ordinary resident.

  • A person qualifies as a resident for a particular financial year, but has been a non-resident for nine out of ten years before this financial year
  • For seven years before the current financial year, the individual has lived in India for 729 days or less in total

Example 3: Let's say an NRI (non-residential Indian) has to live in India for eight months in a particular financial year for a family emergency. However, he's been a non-resident for nine years out of ten years prior to this financial year.

Example 4: You are a resident of New Zealand but have a business subsidiary in India, and so you have to travel frequently to India. However, in seven years before the current financial, you have not lived in India for not more than 729 days in total, you will qualify as a non-ordinary resident.

The highest tax is payable by resident and the lowest by non-residents with non-ordinary residents in the middle. It should be noted that based on their stay in India, the residential status of the same taxpayers can be different in two different financial years.

You can try our tax calculator to calculate your tax liabilities.

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