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March 2024

Residential Status – Whether Employment Includes Self Employment

By Mayur B. Nayak | Tarunkumar G. Singhal | Anil D. Doshi | Mahesh G. Nayak, Chartered Accountants
Reading Time 15 mins

In the context of determination of the residential status of an individual, a question or dispute arises as to whether for the purposes of Explanation 1(a) section 6(1) of the Income-tax Act, 1961 (“the Act”), the term ‘employment’ in the phrase ‘for the purposes of employment outside India’ includes ‘self-employment’ or not.

In this article, we are discussing certain nuances relating to the above dispute.

A. BACKGROUND

Section 6(1) of the Act deals with the residential status of an individual and provides for alternative physical presence tests for residents in India.

Clause (a) of section 6(1) provides that an individual is said to be resident in India in any previous year if he is in India in that year for a period or periods amounting in all to 182 days or more.

Alternatively, clause (c) of section 6(1) provides that an individual is said to be resident in India in any previous year if he has, within 4 years preceding the relevant year, been in India for a period of 365 days or more and, is in India for a period or periods amounting in all to 60 days or more in the relevant year.

Explanation 1(a) to Section 6(1) extends the period of 60 days to 182 days in case of a citizen of India who has

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