Section 6(1)(c) of Income Tax Act: Resident Status Explained

One of the most crucial aspects of income taxation in India is determining whether a person is a resident or a non-resident for tax purposes. The residential status is the deciding factor for how much of a person’s income will be taxed in India. Section 6 of the Income Tax Act lays down the rules, and specifically, Section 6(1)(c) deals with cases where an individual can be classified as a resident.

This provision becomes especially important for Non-Resident Indians (NRIs), expatriates, and citizens of India working abroad but visiting frequently. Many taxpayers get confused about the “number of days” test, and hence end up facing unnecessary tax complications. Let’s decode Section 6(1)(c) in detail.

Understanding Section 6(1)(c)

Section 6(1)(c) specifies a test of physical presence in India. According to this rule:

👉 An individual will be considered a resident in India if he/she is present in India for a total of at least 365 days during the four years immediately preceding the current financial year, & for at least 60 days in the relevant financial year.

This condition is often called the “60 days 365 days test.”

It is meant to capture cases where a person is not permanently based abroad but spends a significant amount of time in India."

Example to Understand

Let’s say Mr. A has been living abroad but visits India frequently:

• In the last four years, he spent 400 days in India.
• In the current financial year, he stayed in India for 75 days.

Since he meets the condition of 365 days in the last four years 60 days in the current year, he will be treated as a resident in India under Section 6(1)(c).

Relevance for Citizens and Persons of Indian Origin

The law gives special consideration to certain individuals. For a citizen of India, or a person of Indian origin, having a total income (other than income from foreign sources) exceeding ₹15 lakh, the rules change slightly. In their case, the 60-day requirement is replaced with a 182-day condition in order to prevent unintended taxation for short visits.

This means:

• An NRI visiting India for less than 182 days in a year will generally remain non-resident, provided his Indian income does not cross the threshold.
• However, if income in India exceeds ₹15 lakh, then even stays of 120 days or more can trigger residency.

Also Read: Do You Qualify as a Resident? Discover How a Simple Clause Can Decide Your Tax Fate

Key Conditions Summarized

1. Basic Rule: Stay of 60 days in the current year 365 days in the preceding 4 years.
2. Exception for Citizens/Persons of Indian Origin: The 60 days is replaced with 182 days if Indian income is less than ₹15 lakh.
3. Special Relaxation: For crew members of Indian ships & certain government employees posted abroad, modified rules apply.

Thus, Section 6(1)(c) ensures that individuals cannot avoid Indian taxation simply by limiting their stay to just below 182 days each year while still spending considerable time in the country over multiple years.

Why is Section 6(1)(c) Important?

1. Prevents Tax Avoidance: Without this rule, individuals could spend a few months every year in India & still escape residency classification."
2. Clarifies NRI Taxation: Helps NRIs know exactly when they cross the threshold.
3. Impact on Global Income: Once classified as a resident, worldwide income becomes taxable in India, not just Indian income.

Implications of Being Classified as Resident

The classification as “resident” has a major impact on taxation:

• Resident: Taxed on global income, i.e., income earned in India income earned outside India.
• Non-Resident: Taxed only on income earned or received in India.

So, the difference between being a resident and a non-resident can mean paying tax only on Indian salary or on your foreign salary, investments, and rental income too.

Section 6(1)(c) vs Section 6(1)(a)

Both provisions under Section 6 deal with residency, but with different conditions:

• Section 6(1)(a): Stay of 182 days or more in India during the relevant financial year.
• Section 6(1)(c): Stay of 60 days in the current year 365 days in the preceding 4 years.

This dual test ensures that both long-term & medium-term stayers are captured as residents.

Practical Challenges for Taxpayers

1. Tracking Days Accurately: Even a few days’ difference can change residency status.
2. Frequent Flyers: Individuals working on overseas projects but making multiple visits often get trapped in Section 6(1)(c).
3. Income Threshold Confusion: Many NRIs are unaware of the ₹15 lakh Indian income condition.
4. Double Taxation Issues: Residency under Section 6(1)(c) can lead to tax conflicts with other countries.

Double Taxation Relief

If a person is treated as a resident in India under Section 6(1)(c) but is also considered a resident in another country under their domestic laws, Double Taxation Avoidance Agreements (DTAAs) come to the rescue.

India has treaties with over 90 countries to ensure individuals are not taxed twice on the same income. The “tie-breaker rules” under DTAA determine the final country of residence for tax purposes.

Also Read: Tax Relief on Foreign Retirement Income for Indian Residents

FAQs on Section 6(1)(c)

Q1: Does Section 6(1)(c) apply to foreigners?
Yes, it applies to any individual, not just citizens. Foreigners staying long-term in India can also become residents.

Q2: How does it affect NRIs with Indian investments?
If their stay exceeds the limits, they may become residents & their global income may be taxed.

Q3: Is Indian income below ₹15 lakh always safe?
Yes, if total Indian income is below ₹15 lakh, shorter stays up to 182 days do not trigger residency.

Q4: Does the law count partial days of stay?
Yes, even part of a day spent in India is usually counted as one full day."

Conclusion

To sum up, Section 6(1)(c) of Income Tax Act is a crucial provision that decides when an individual should be treated as a resident for tax purposes. The law clearly states that an individual will be considered a resident in India if he/she is present in India for a total of 365 days or more in the last four years and at least 60 days in the current year. For a citizen of India, or a person of Indian origin, having a total income above ₹15 lakh, stricter residency conditions apply.

👉 Confused about your residential status and global tax liability? Visit Callmyca.com today to get expert guidance and ensure you stay compliant without overpaying tax.