R E S I D E N T I A L S TAT U S A N D I N C I D E N C E O F TA X

BASIS OF CHARGE

Residential status

Under the provisions of INCOME TAX 1961, the total income of a each person is based upon his residential status.

section 6 divides assessable person into two categories

i. Resident in Indiaii. Non- resident in IndiaHowever in case of INDIVIDUAL OR HUF :I. Resident & Ordinary ResidentII. Resident but ‘not ordinary resident’

RESIDENTS

RESIDENTS NON RESIDENT

ORDINARY RESIDENT

NOT ORDINARY RESIDENT

• Basic rules

• Residential status is determined for each previous year.• Dual residential status is possible.• Duty.

“PERSONS”

• SEC.2(31) DEFINED PERSONTHAT INCLUDES• An Individual• H.U.F• Firm• Company• AOP/BOI• Local Authority• Other artificial juridical person

Rules for determining residential status of an individual U/S 6(1)

Basic conditions:

a)He is in India for a period of 182 days or more.

ORb)60 days or more +365 days or more during 4 years immediately preceding the relevant P.Y

•Additional conditions:I)he has been resident in India at least for 2years out of 10 previous years immediately preceding the relevant previous year

&ii)He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant P.Y

AT A GLANCE:-

conditions resident Non resident

Ordinary resident

Not ordinary resident

BASIC CONDITION(A) OR (B)

ANY 1 ANY 1 NONE

ADDITIONAL CONDITION(I) & (II)

BOTH NONE IRRELEVANT

Exceptions

• TWO EXCEPTIONS:• X-1 individual who is citizen and who leaves India in any P.Y for the purpose of employment outside India. The period is relaxed to 182 days• X-2 individual who is citizen of India or foreign nation of Indian origin who being outside India in any P.Y the period is relaxed 182 days.

Important points

1.Meaning of stay in India2.Stay may be continuous or

intermittent3.Stay need not to be at one

place4.Object of stay not important5.Calculations of no. Of days

EXAMPLES…..

• Mr. X an Indian citizen.• Leaves India for 1st time on 31st may 2008• Comes back on 15th may 2011• Again leaves India on 10th June 2012.• Comes back on 14th Jan 2013• Living in India since then.• Determine his residential status.

SOLN.

• STAY IN P.Y 12-13:• 1ST AP.2012 -10 JUNE 2012 =30 +31+10• =71 DAYS• 14TH JAN 2013- 31 MAR 2013 =18+28+31• =77 DAYS• TOTAL STAY IN P.Y= 71+77• =148 DAYS

• BASIC CONDITION:• (A) 182 DAYS : NOT FULFILLED• (B) 60 DAYS : FULFILLED• STAY IN 4 IMMEDIATELY PRECEEDIND P.Y• 2011-2012 = 322 DAYS• 2010-2011= NIL• 2009-2010 =NIL• 2008-2009 = 61 DAYS• 383 DAYS

• THUS RESIDENT• ADDITIONAL CODITIONS:• BOTH FULFILLED• THUS MR.X IS ORDINARY RESIDENT

RESIDENTIAL STATUS OF HUF: U/S 6(2)

conditions resident Non resident

Ordinary resident

Not ordinary resident

Control and mgmt. wholly/partially situated in India in P.Y

fulfills fulfills NOT

ADDITIONAL CONDITION(I) & (II)

BOTH NONE IRRELEVANT

Examples

• A H.U.F carrying on business in India. head office in KNP. From whre it is controlled.• Karta was out to kenya for business purpose in

2011 and 2012•

SOLN.

Basic condition fulfilled so RESIDENTAdditional: fulfilled so ORDINARY RESIDENT

RESIDENTIAL STATUS OF COMPANY: U/S 6(3)

CONDITION RESIDENT CO. NON RESIDENT CO.

AN INDIAN CO.ORCONTROL OF MGMT. OF AFFAIRS IS WHOLLY IN INDIA

SATISFIES

SSATISFIES

NOT SATISFIED

NOT SATISFIED

RESIDENTIAL STATUS OF FIRM: U/S 6(4)

CONDITION RESIDENT NON RESIDENT

If control and mgmt of affairs is wholly/partially situated in India during relevant P.Y

SATISFIES NOT SATISFIED

EXAMPLE

• JKL Co. is a partnership firm registered in India. Mr. J its senior partner, was in U.K for more than 340 days during the year ended on 31st march 2013 for business purpose.• Soln: RESIDENT

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