The Income Tax Act is a crucial piece of legislation that governs how income tax is levied in India. One of the key sections of this Act is Section 6(1), which outlines the tax liability of individuals who are considered residents in India. In this blog, we will explore the key provisions of Section 6(1) and understand what it means for taxpayers in India.
What is Section 6(1) of the Income Tax Act?
Section 6(1) of the Income Tax Act defines who is considered a resident in India for tax purposes. According to this section, an individual is considered a resident in India if he or she satisfies any of the following conditions:
- The individual is in India for at least 182 days in the previous financial year; or
- The individual is in India for at least 60 days in the previous financial year and has been in India for at least 365 days in the four years preceding the previous financial year.
If an individual satisfies either of these conditions, he or she is considered a resident in India for tax purposes. However, if an individual does not satisfy either of these conditions, he or she is considered a non-resident.
What is the tax liability for residents in India?
Once an individual is classified as a resident in India, he or she is subject to tax on his or her worldwide income. This means that any income earned by the individual, whether in India or outside India, is subject to tax in India.
In addition, residents in India are also subject to tax on any income earned or received in India. This includes income from salary, business, profession, capital gains, and any other sources.
What is the tax liability for non-residents in India?
Non-residents, on the other hand, are only subject to tax on income earned or received in India. This means that any income earned by a non-resident outside India is not subject to tax in India.
However, non-residents are still required to file an income tax return in India if they have earned any income in India during the financial year. This is necessary to determine their tax liability in India.
Conclusion
Section 6(1) of the Income Tax Act is an important provision that defines who is considered a resident in India for tax purposes. This section has a significant impact on the tax liability of individuals in India, as residents are subject to tax on their worldwide income, while non-residents are only subject to tax on income earned or received in India. It is important for taxpayers in India to understand the provisions of Section 6(1) to ensure that they comply with the tax laws and avoid any penalties or legal issues
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q.1 What is Section 6(1) of the Income Tax Act?
Answer: Section 6(1) of the Income Tax Act defines who is considered a resident in India for tax purposes.
Q.2 How is an individual classified as a resident in India under Section 6(1)?
Answer: An individual is considered a resident in India for tax purposes if he or she satisfies any of the following conditions:
The individual is in India for at least 182 days in the previous financial year; or
The individual is in India for at least 60 days in the previous financial year and has been in India for at least 365 days in the four years preceding the previous financial year.
Q.3 What is the tax liability for residents in India under Section 6(1)?
Answer: Once an individual is classified as a resident in India, he or she is subject to tax on his or her worldwide income. This means that any income earned by the individual, whether in India or outside India, is subject to tax in India.
Q.4 What is the tax liability for non-residents in India under Section 6(1)?
Answer: Non-residents are only subject to tax on income earned or received in India. This means that any income earned by a non-resident outside India is not subject to tax in India.
Q.5 Do non-residents need to file an income tax return in India under Section 6(1)?
Answer: Yes, non-residents are required to file an income tax return in India if they have earned any income in India during the financial year. This is necessary to determine their tax liability in India.
Q.6 Are there any exemptions for non-residents under Section 6(1)?
Answer: Yes, there are certain exemptions available for non-residents under Section 6(1). For example, non-residents are exempt from tax on income earned from certain sources, such as interest on specified securities or dividends from Indian companies.
Q.7 What are the penalties for non-compliance with Section 6(1)?
Answer: Non-compliance with Section 6(1) can lead to penalties and legal issues. For example, if a non-resident fails to file an income tax return in India, he or she may be subject to penalties and interest on the outstanding tax liability. It is important for taxpayers to comply with the provisions of Section 6(1) to avoid any penalties or legal issues.
