Direct Tax Planning ARUN’S
RESIDENTIAL STATUS AND TAX INCIDENCE:
Residential Status:
The residential status of a person as referred in Sec. 2(31) of the Act for each
Assessment Year under consideration to determine the scope of Total Income.
Salient Features:
The following are the salient features of this study on “Residential Status”:
i. A person can have different residential status in different years.
ii. A person can have different residential status in different countries.
iii. In the same year an assessee cannot have different residential status for
different source of income.
iv. Residential status once decided, shall continue to be applied during the
previous year under consideration.
The concept of Residential Status could be understood in the following
categories:
Importance:
1. Total income of an assessee cannot be determined without knowing his
residential status.
2. The residential status shall be determined for every person for each
Previous Year independently.
3. The onus of responsibility to prove the residential status is on the
assessee.
RESIDENTIAL STATUS OF AN INDIVIDUAL [SEC. 6(1)]:
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Direct Tax Planning ARUN’S
Steps to ascertain Residential Status:
BASIC CONDITIONS:
(a) If the Individual stayed in India for a period of 182 DAYS OR MORE
during the Relevant Previous Year (RPY), he is Resident of India;
(OR)
(b) If he stayed in India for a period of 60 DAYS OR MORE during Relevant
Previous Year (RPY) and 365 DAYS OR MORE during the four preceding
Previous Years, he is Resident of India.
If the assessee fails to satisfy either of the above basic conditions, as applicable,
then the assessee is a Non-Resident for that Relevant Previous Year.
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Direct Tax Planning ARUN’S
Special exceptional situations: For the following persons, condition mentioned
in 1(a) above shall only apply to determine their Residential Status:
I. Individual, an Indian citizen, leaving India for employment outside India,
or
II. Indian Citizen being a crew member of an Indian ship leaving India, or
III. Individual, an Indian citizen or a person of Indian origin, visiting India, or
IV. Individual, an Indian citizen and a member of the crew of a foreign bond
ship leaving India.
Additional Conditions: Sec. 6(6) (a):
Resident in India for at least 2 years out of the preceding 10 Previous
Years,
OR
Physically present in India for at least 730 days during the 7 preceding
Previous Years.
Status of an Individual Basic condition Additional condition/(s)
Resident and ordinarily Satisfied Satisfied both the conditions
Resident u/s 6(6)
Resident but not Satisfied May or may not satisfy any of
ordinarily Resident u/s the additional condition
6(6)
Non Resident Fails to satisfy Not required to check the
additional condition/(s)
RESIDENTIAL STATUS OF HUF [SEC. 6(2) READ WITH SEC. 6(6)]:
A Hindu Undivided Family (HUF) is either resident in India or non-resident in
India. A resident Hindu undivided family is either ordinarily resident or not
ordinarily resident
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Direct Tax Planning ARUN’S
When a Hindu Undivided Family is Resident or Non-Resident:
If the control and management of the affairs of a HUF is Residential Status
Wholly or partly in India Resident
Wholly outside India Non-resident
RESIDENTIAL STATUS OF FIRM/AOP/LLP/EVERY OTHER PERSON
(OTHER THAN AN INDIVIDUAL, HUF & COMPANY) [SEC. 6(2)
READ WITH SEC. 6(4)]:
While determining residential status of a Firm/AOP/LLP/Every other person
(other than an Individual, HUF & Company), the residential status of the
partners/members that Firm/AOP/LLP/Every other Person is not relevant. The
Firm/AOP/LLP/Every other Person can only be either Resident or Non-
Resident. There is no scope for further classification of resident for these
assesees.
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Direct Tax Planning ARUN’S
When a FIRM/AOP/LLP/EVERY OTHER PERSON is Resident or Non-
Resident:
When a FIRM/AOP/LLP/EVERY OTHER PERSON is Resident or Non-
Resident:
If the control and management of the affairs of a Residential Status
FIRM/AOP/LLP/Every other Person [other than
Individual, HUF & Company]
Wholly or partly in India Resident
Wholly outside India Non-resident
RESIDENTIAL STATUS OF A COMPANY [SEC. 6(3)]:
Indian Company Resident
Other Companies – Companies place of effective Resident
management, in the year, is in India
Other Companies – Companies place of effective Non-Resident
management, in the year, is in Outside India.
TAX INCIDENCE FOR AN INDIVIDUAL AND HUF:
Tax incidence in case of
Resident but not
Particulars of Income Non
Resident Ordinarily
Resident
Resident
Income received in India whether
Yes Yes Yes
accrued in India or outside India.
Income deemed to be received in India
Yes Yes Yes
whether accrued in India or outside
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Direct Tax Planning ARUN’S
India.
Income accruing or arising in India
whether received in India or outside Yes Yes Yes
India.
Income deemed to accrue or arise in
India, whether received in India or Yes Yes Yes
outside India.
Income received and accrued outside
India from a business controlled or Yes Yes No
profession set up in India
Income received and accrued outside
India from a business controlled from
Yes No No
outside India or profession set up
outside India.
Income earned and received outside
No No No
India but later on remitted to India
TAX INCIDENCE FOR COMPANY, FIRM, AOP, HUF & EVERY
OTHER PERSON (OTHER THAN AN INDIVIDUAL & HUF):
Nature of income Resident Non resident
Income received in India (irrespective of Taxable Taxable
whether the income was earned)
Income earned in India (irrespective of Taxable Taxable
whether the same was received)
Income earned and received outside India Taxable Non-Taxable
from a source controlled from India
Income earned and received outside India Taxable Non-Taxable
from a source not controlled from India
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