Deemed resident (Section 6(1A))
Also written Deemed resident · Section 6(1A) resident
An Indian citizen treated as resident purely because Indian income exceeds Rs 15 lakh and no other country taxes them by domicile or residence — regardless of how many days they actually spent in India.
In plain language
Ordinarily, residential status turns on how many days a person spent in India during the year. Section 6(1A), added with effect from Financial Year 2020-21, adds a category that ignores day-counting altogether: the deemed resident.
How it works
An Indian citizen is deemed resident in India, irrespective of his stay in India, if both conditions are met:
- His total income, excluding income from foreign sources ("Indian Income") exceeds Rs 15 lakh during the previous year.
- He is not liable to tax in any other country or territory by reason of his domicile, residence, or any similar criterion.
"Income from foreign sources" here means income accruing or arising outside India — except income from a business controlled in, or a profession set up in, India — and which is not deemed to accrue in India.
The classification that follows automatically. A person caught by Section 6(1A) is always treated as Resident but Not Ordinarily Resident (RNOR) — never as fully Resident and Ordinarily Resident. This matters because an RNOR's foreign income generally stays outside the Indian tax net, unlike a fully ordinarily-resident person's.
A worked example
Illustrative figures.
Mr Sethi, an Indian citizen, works as a consultant based in a country that does not tax him on residence or domicile grounds (a tax haven, in effect). In a given financial year, he spends very little time physically in India — well short of the usual day-count thresholds for residency — but earns Rs 22 lakh of Indian-sourced consulting income, routed through an Indian entity.
Because his Indian income (Rs 22 lakh) exceeds the Rs 15 lakh threshold, and he is not taxed anywhere else by domicile or residence, Section 6(1A) deems him resident in India for that year, regardless of how few days he physically spent here. He is automatically classified as Resident but Not Ordinarily Resident, not as fully resident.
Why NISM asks about it
Chapter 7 (Concepts of Taxation), section 7.4, on determining residential status, introduces Section 6(1A) as an "additional test" alongside the ordinary day-count categories. Expect a question applying the Rs 15 lakh Indian-income threshold and the "not taxed elsewhere by domicile/residence" condition, and one testing that a deemed resident is always RNOR.
Common exam traps
- Section 6(1A) applies only to Indian citizens, not to any foreign national or other person.
- The Rs 15 lakh threshold is on Indian income only, excluding income from foreign sources — do not apply it to worldwide income.
- Both conditions must be met — high Indian income alone is not enough; the person must also escape tax elsewhere by domicile or residence.
- A Section 6(1A) deemed resident is always RNOR, never Resident and Ordinarily Resident — a frequently tested consequence.
- Effective from FY 2020-21, following the Finance Act, 2020's broader overhaul of residential-status provisions.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Control and managementThe test that fixes a Hindu Undivided Family's residential status: a HUF is resident in India unless the control and management of its affairs is situated wholly outside India.
- Non-ResidentAn assessee who fails every residency test in section 6 — taxable in India only on income received, accruing or deemed to accrue in India, and on nothing that arises abroad.
- Resident and Ordinarily ResidentThe residential status under which an individual's worldwide income is taxable in India — reached by being resident and failing both of the not-ordinarily-resident tests.
- Resident but Not Ordinarily ResidentA middle residential status for income tax: the person is a resident of India, yet foreign income unconnected with an Indian business or profession stays outside the Indian tax net.
- Residential statusThe classification — resident (ordinarily or not ordinarily), deemed resident or non-resident — that decides which income is taxable in India. Citizenship alone is not the test.
- Indian incomeThe Income-tax Act's shorthand for total income excluding income from foreign sources — the figure tested against Rs 15 lakh in the deemed resident and 120-day residence rules.
- Income from foreign sourcesIncome accruing or arising outside India, other than income from a business controlled in or a profession set up in India, and not deemed to accrue or arise in India.