s.6(1A) — Deemed residence of an Indian citizen
A citizen whose income other than income from foreign sources exceeds fifteen lakh rupees is deemed resident if not liable to tax elsewhere by reason of domicile or residence, and is then not ordinarily resident.
Income-tax Act, 1961
s.6(1A)
Income-tax Act, 2025
s.6(7) and (8)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 6(7) of the Income-tax Act, 2025, which governs tax year 2026-27 onwards, deems an individual resident in India for a tax year, irrespective of sub-sections (2) to (6), if he is a citizen of India, is not liable to tax in any other country or territory due to his domicile, residence, or similar criteria, and has total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the year; section 6(8) excludes an individual resident under sub-sections (2) to (6), section 6(13)(c) makes him not ordinarily resident, and section 6(14) defines income from foreign sources. For years up to 2025-26 the rule is section 6(1A) of the Income-tax Act, 1961, inserted by section 4(b) of the Finance Act, 2020 with effect from 1 April 2021, in the same terms save that it applies notwithstanding clause (1), measures the income for the previous year, and asks whether the citizen is liable to tax elsewhere by reason of his domicile or residence or any other criteria of similar nature. The Explanation added by section 4(I)(b) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, from the same date, declares that the clause does not apply to an individual resident under clause (1). The provision needs no days in India and does not reach a person of Indian origin who is a foreign national. A citizen deemed resident is not ordinarily resident (section 6(6)(d) of the 1961 Act), so his income accruing outside India is not included under section 5(1)(c) of the 2025 Act, or under clause (c) of section 5(1) of the 1961 Act by its proviso, unless it is derived from a business controlled in or a profession set up in India. The Ministry of Finance's press release of 2 February 2020 described the proposal as an anti-abuse provision aimed at citizens who shift their stay to low or no tax jurisdictions, said it was not intended to tax bona fide workers in other countries, and stated that income earned outside India would not be taxed unless derived from an Indian business or profession. Income from foreign sources is income accruing or arising outside India, except income derived from a business controlled in or a profession set up in India, and which is not deemed to accrue or arise in India (section 6(14) of the 2025 Act; the Explanation to section 6(6) of the 1961 Act).
What the provision does
Deems a citizen resident, without any count of days, where his Indian income measured by the section exceeds fifteen lakh rupees and he is not liable to tax elsewhere by reason of domicile, residence or a similar criterion, and makes him not ordinarily resident. It does not apply to a person of Indian origin who is not a citizen, to an individual already resident on days, or to a citizen who is liable to tax in another country on a residence-type criterion; and it does not by itself bring his foreign salary or other foreign income into the charge.
Threshold questions
- Is the individual a citizen of India
- Is he resident on days under section 6(2) to (6) of the 2025 Act or section 6(1) of the 1961 Act, so that the deeming does not arise
- Does his total income other than income from foreign sources exceed Rs 15 lakh, computed item by item
- Is he liable to tax in any other country or territory by reason of domicile, residence or a similar criterion, and what does that country's law say
- If deemed resident, is any of his foreign income derived from a business controlled in or a profession set up in India
In practice
The recurring disputes.
Whether a citizen living in a country with no personal income tax is liable to tax there
The Revenue's case is that the section was enacted for exactly such citizens, and that the Supreme Court in Azadi Bachao Andolan (7 October 2003) concluded that the words liable to taxation in the treaty are intended to act as words of limitation. The assessee relies on the same judgment's holding that liability to taxation is a legal situation and payment of tax a fiscal fact, on the Mumbai Tribunal's view in Green Emirate Shipping and Travels (30 November 2005) that liability means the State's right to tax whether or not it is exercised, and on the Authority for Advance Rulings in Mohsinally Alimohammed Rafik (23 December 1994), which treated a Dubai individual as resident for the treaty; the contrary ruling in Cyril Eugene Pereira (19 May 1999) was not accepted in Azadi. Section 6(7)(b) of the 2025 Act keeps the test of liability, which the assessee will stress, but its words, due to his domicile, residence, or similar criteria, no longer follow the treaty's by reason of any other criterion of a similar nature, which the Revenue will say makes the treaty decisions carry over less readily than they would to section 6(1A) of the 1961 Act. All of these decisions construe treaties, not the section. Our view is that where the other State taxes individuals by reason of residence the citizen is outside section 6(7) and section 6(1A), and that where it has no tax on individuals' income at all the Revenue's reading, with the press release, is likely to prevail. The point is open under both Acts.
Who has to prove that the citizen is not liable to tax elsewhere
The assessee argues that the Department, which invokes a deeming provision, must establish each of its conditions, including the negative one. The Revenue answers that the citizen's position under the other country's law is a fact especially within his knowledge, and that an individual who produces nothing risks the finding going against him on the onus. Our view is that the Department must establish the negative, but the file should carry the foreign law and the individual's position under it, so that the burden does not decide the case.
How the Rs 15 lakh is measured
The assessee reads total income, other than the income from foreign sources, as the income computed under the Act on which tax is charged, after deductions and excluding exempt income. The Revenue reads the phrase as a measure of economic connection with India and resists a reading that lets claims and set-offs keep an individual under the line. The definition of income from foreign sources was narrowed from 1 April 2021 by the words and which is not deemed to accrue or arise in India, so that income deemed to accrue in India is counted on the Indian side. Our view is that the assessee's reading follows the text, the amendment having been made to the excluded income and not to the measure; the point is open.