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Principal Residence

Reviewed by Komal | Updated on Sep 30, 2020

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Introduction

Under the income tax provisions, the principal/primary residence is the place where a taxpayer is taxed. Taxation in India is primarily based on their residential status in a particular financial year. The primary residence of the taxpayer is decided independently every year and is determined on the basis of the physical presence of a taxpayer in India during a financial year.

What is Principal Residence?

An individuals primary residence is considered to be in India during a financial year if either of the following holds good: 1. He is present in India for a period of 182 days or more in a financial year. 2. He is present in India for a period of 60 days or more during a financial year and 365 days or more in an aggregate of 4 preceding financial years.

Also, there is a concept of ordinary resident under the Indian income tax provisions. An individual will be considered as a resident and an ordinary resident if he fulfils any of the following criteria: 1. He has been a resident of India for 9 out of 10 previous financial year. 2. He was present in India for more than 729 days during the preceding seven financial years.

Otherwise, he will be considered as a resident but not an ordinary resident.

Who is eligible to pay?

The taxation of any income depends on whether India is a principal residence to any taxpayer or not. 1. For a resident individual whose principal residence is India, all the income received or earned worldwide will be taxed under income tax laws. 2. For a resident but not an ordinary resident, the income accrued/arouse or deemed to be accrued/arise in India or received or deemed to be received in India will be taxed in the hands of such individual. 3. For the individuals who are non-residents of India, income which accrues/ arises or deemed to accrue/ arise or is received or deemed to be received in India will be taxed.

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