Chapter 2: Residential Status
Dr. Gurpreet Kaur
Residential status of the FIRM and AOP
Control and Management of Affairs
Wholly in India Resident
Wholly Outside India Non-Resident
Partly in India and Partly outside India Resident
Incidence of Tax
Income received in India (whether
1 accrued/arisen in India or outside India) Taxable Taxable Taxable
2 Income deemed to be received in India
(whether accrued/arisen in India or Taxable Taxable Taxable
outside India)
3 Income accruing or arising in India
(whether received in India or outside Taxable Taxable Taxable
India)
4 Income deemed to accrue or arise in India
Taxable Taxable Taxable
5 Income received and accrued/arisen
Taxable Taxable Not
outside India from a business controlled in
Taxable
or profession set up in India
6 Income received and accrued/arisen
Not Not
outside India from a business controlled Taxable
Taxable Taxable
from outside India or profession set up
outside India
7 Income received and Taxable Not Taxable Not Taxable
accrued/arisen outside
India from any other
sources
8 Income accrued/arisen Not Taxable Not Taxable Not Taxable
outside India in earlier
year but later remitted
to India during PY
1. Income deemed to be received in India
(Sec. 7)
• This refers to income which may not actually be received in hand, but
the law treats it as received in India in the year of accrual. Examples:
• Employer’s contribution to Recognized Provident Fund in excess of
the prescribed limit.
• Interest credited to Recognized Provident Fund above the notified
rate.
• Any amount transferred from unrecognized provident fund to a
recognized provident fund.
• Annual accretion (interest, dividend, etc.) deemed to be received by
an employee.
• 👉 In short: Even if the taxpayer hasn’t physically got the money, the
law says it is “received” in India.
2. Income accruing or arising in India (Sec.
5(2)(b) read with Sec. 9)
• Examples:
• Business connection in India (profits attributable to operations in
India).
• Salary earned in India (service rendered in India).
• Salary payable by Government of India to a citizen of India, even if
services are rendered outside India.
• Dividend paid by an Indian company.
• Income from property, asset, or source of income located in India (e.g.,
rent from property in Delhi).
• Capital gains arising from transfer of a capital asset situated in India.
In short: Income is considered to accrue or arise in India if the source of
income is in India.
Mr. A, an Indian citizen, left India for the first
time to take up employment in the USA on 1st
September 2024. He was in India for 190 days
during the Previous Year 2024–25.
👉 Determine his residential status for AY 2025–
26.
Mr. B, an Indian citizen, visited India during PY
2024–25 and stayed for 150 days. He was in
India for 310 days in the 4 preceding years and
1,200 days in the 7 preceding years.
👉 Determine his residential status for AY 2025–
26.
Problem 3
Mr. C, a foreign national, comes to India for the first time on 1st
August 2024 and stays continuously till 31st March 2025.
👉 Determine his residential status for AY 2025–26.
Problem 4
Mr. D, an Indian citizen, goes abroad for employment on 1st July
2024. During PY 2024–25, he was in India for 110 days. In the 4
preceding years, his stay was 500 days, and in the 7 preceding
years, it was 1,000 days.
👉 Determine his residential status for AY 2025–26.
Problem 5
Mr. E, a foreign national, visits India every year.
During PY 2024–25, he stayed for 100 days. In
the preceding 4 years, his stay was 390 days, and
in the preceding 7 years, his stay was 800 days.
👉 Determine his residential status for AY 2025–
26.
Mr. A, an employee of XYZ Ltd., has a Recognized
Provident Fund (RPF). During PY 2024–25, the
employer contributed ₹3,00,000 to his RPF
account. The prescribed limit is ₹2,50,000.
👉 How much will be treated as income deemed
to be received in India?
Mr. B, a foreign national, works in USA for a US
company. For 2 months in FY 2024–25, he came
to India and worked remotely while staying in
Bangalore. His salary for these 2 months was
credited to his US bank account.
👉 Is this salary taxable in India?
Mr. C, a non-resident, owns a flat in Delhi which
is given on rent to an Indian resident. The rent of
₹30,000 per month is directly deposited into Mr.
C’s Dubai bank account.
👉 Is this income taxable in India?
Interest credited to Mr. D’s Recognized Provident
Fund account during FY 2024–25 is ₹60,000. The
exempt limit is interest @9.5% p.a. but excess
works out to ₹15,000.
👉 How much will be deemed to be received in
India?
Mr. E, a non-resident, sells his agricultural land
situated in Punjab for ₹50 lakhs. Capital gain is
computed at ₹12 lakhs. The buyer makes
payment in London.
👉 Is this gain taxable in India?