Deemed Resident in India

From 1 April 2020, a new concept of “deemed resident” is introduced by way of section 6(1A) in the Income-tax Act, 1961.

An individual will be deemed to be resident in India in any previous year if the following conditions are fulfilled:
a. the individual is a citizen of India;
b. his total income (excluding foreign sources) exceeds Rs 15 lakhs during the previous year;
c. he is not liable to tax in any other country or territory and
d. he is not liable to tax for the reason of (i) domicile (ii) residence or (iii) any other criteria of similar nature.

The individual who satisfies the aforesaid conditions would be deemed to be a resident even if has not stayed in India for a single day in the relevant previous year. A deemed #resident is eligible for the benefit of choosing the slabs under section 115BAC (with exemptions or without exemptions).

Even if the tax paid by an individual anywhere outside India is very low (even if less than 1%), it will be considered as liable to tax in another country and accordingly, the status of such individual will not be treated as deemed resident in India.

The move is intended to curb the arrangements made by the individuals in such a manner to arrange their affairs in such a fashion that they are not liable to tax in any country or jurisdiction during a year. By any such arrangements, many individuals in previous year(s) have managed to avoid paying taxes to any country/jurisdiction on income they earn. The introduction of such provision in India is also a move to support the current developments in the global tax environment where avenues for double non-taxation are being systematically closed.

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