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RESIDENTIAL STATUS
The determination of the residential status of
a person is very significant in order to find
out his tax liability
whether an income, accrued to an individual
outside india, is taxable in india depends upon the
residential status of the individual in india.
Similarly, whether an income earned by a foreign
national in india (or outside india) is taxable in india,
depends on the residential status of the individual,
rather than on his citizenship..
YOUNGMINDSCLUB
Different taxable entities
⚫ An individual;
⚫ A Hindu Undivided Family(HUF);
⚫ A firm or an Associations Of Persons (AOP);
⚫ A Joint Stock Company;&
⚫ Every other person.
DIFFERENT RESIDENTIAL STATUS:
FOR INDIVIDUAL AND A
HINDU UNDIVIDED
FAMILY
FIRM, COMPANY, LOCAL
AUTHORITY,ARTIFICIA
L PERSON,AOP/BOI
• ordinarily
Residen
t in India
• Resident in India; or
• Resident but not
• Non-resident in India.
ordinarily resident
• Non-resident in India.
RESIDENTIAL STATUS OF
THE INDIVIDUAL
Step
1
First find out whether such
individual is “Resident” in India
Step
2
If such individual is “Resident” in
India, then find out whether he is
“ordinarily resident” in India.
Residence -Individual
⚫AnIndividual is said to be resident in India in any
previous year,if he satisfies at least one of the following
conditions:
⚫1) He is in India in the previous year for aperiod of 182
daysor more.
⚫2) a) He is in India for aperiod of 60 daysor more
during the previous year
⚫ and
⚫ b) 365 daysor more during 4 yearsimmediately
preceding the previous year.
Exception
iii)
⚫ Period 60 Daysis extended to 182 daysin the
following cases.
i) AnIndian citizen who leaves India during the previous
year for the purpose of employment outside India
ii) Indian citizen who leaves India during the previous
year as amember of crew of Indian ship.
Indian citizen or person of Indian origin who comes
on avisit to India during the previous year.
CONDITIONS TO TEST AS TO WHEN A RESIDENT
INDIVIDUAL IS ORDINARILY RESIDENT IN INDIA
Supplemen
t ary
Condition 1
He must been resident in India
in at least 2 py out of 10
previous years immediately
preceding the relevant previous
year
Supplemen
t ry
Condition 2
He has been in India for a
period of 730 days or more
during 7 previous years
immediately preceding the
relevant previous year
CONDITIONS TO TEST AS TO WHEN A
RESIDENT BUT NOT ORDINARILY RESIDENT
[SEC. 6(1),(6)(A)]
Situation 1 If he satisfies at least one of the
basic conditions u/s 6(1), but
none of the supplementary
conditions
Situation 2 If he satisfies at least one of the
basic conditions “AND” one of
the two supplementary
conditions
RESIDENTIAL
STATUS OF A
HINDU
UNDIVIDED
FAMILY
PLACE OF
BUSINESS
CONTROL
RESIDENTIAL
STATUS OF HUF
ORDINARILY
RESIDENT OR NOT
Wholly in India
Wholly Out of India
Partly in India and partly
outside India
Resident
Non-Resident
Resident
1)If Karta or Manager has
been resident in India of
2 out of 10 previous yrs
immediately preceding
the previous year
And
2)730 days or more during
7 years preceding the
relevant previous yrs.
Same
AND ASSOCIATION OF PERSON
[SEC 6 (2)]
Place of Control Residential Status
Of Firm
Wholly in India
Wholly Out of India
Partly in India and partly
outside India
Resident
Non-Resident
Resident
COMPANY [SEC 6 (3)]
NOTE: A COMPANY CAN NEVER BE "ORDINARILY"
OR "NOT ORDINARILY RESIDENT" IN INDIA
PLACE OF
CONTROL
AN INDIAN
COMPANY
A COMPANY
OTHER THAN
INDIAN
COMPANY
Wholly in India
Wholly Out of India
Partly in India and
partly outside India
Resident
Resident
Resident
Resident
Non-Resident
Non-Resident
RESIDENTIAL STATUS OF
EVERY OTHER PERSON [SEC.
6(4)]
Every other person is resident in India if control
and management of his affairs is, wholly or
partly, situated within India during the relevant
previous. On the other hand, every other person
is non-resident in India if control and
management of its affairs is wholly situated
outside India.
RELATIONSHIP BETWEEN
RESIDENTIAL STATUS AND
SCOPE OF TAX [SEC. 5]
Inordertounderstandtherelationshipbetweenresidentialstatus andtaxliability,
oneunderstand thedifferencebetween“IndianIncome”and“ForeignIncome”
1.INDIAN INCOME
2.FOREIGN INCOME
PROVISIONS IN BRIEF
WHETHER INCOME IS
RECEIVED (OR
DEEMED TO BE
RECEIVED) IN
INDIA DURING THE
RELEVANT YEAR
WHETHER INCOME
ACCRUES (OR ARISES
OR IS DEEMED TO
ACCRUE OR ARISE) IN
INDIA DURING THE
RELEVANT YEAR
STATUS OF INCOME
Yes Yes Indian Income
Yes No Indian Income
No Yes Indian Income
No No Foreign Income
INCIDENCE OF TAX FOR
DIFFERENT TAX PAYERS
INDIVIDUAL and HUF
PARTICULARS
RESIDENT
AND
ORDINARI
L Y A
RESIDENT
IN INDIA
RESIDENT
BUT NOT
AND
ORDINARI
LY A
RESIDENT
IN INDIA
NON-
RESIDEN
T IN
INDIA
Indian
Income
Taxable in
India
Taxable in
India
Taxable in
India
PARTICULARS AND
ORDINARIL
Y A
RESIDENT
IN INDIA
BUT NOT
AND
ORDINARIL
Y A
RESIDENT
IN INDIA
RESIDENT
IN INDIA
Foreign Income
-If it is business income and
business is controlled wholly
or partly from India
- If it is income from
profession which is set up
in India
- If it is business income and
business is controlled outside
India
- If it is income from
profession which is set up
outside India
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Taxable in
India
Taxable in
India
Not Taxable
in India
Not Taxable
in India
Not Taxable
in India
Not Taxable
in India
Not Taxable
in India
Not Taxable
in India
Not Taxable
in India
Not Taxable
in India
FOR TAX PAYERS
RESIDENT
IN INDIA
NON-
RESIDENT
IN INDIA
INDIAN
INCOME
Taxable in
India
Taxable in
India
FOREIGN
INCOME
Taxable in
India
Not taxable
in India
RECEIPT OF INCOME
Income received in India is taxable
in all cases irrespective of
residential status of an assessee.
CONNOTATION OF ACCRUE OR ARISE AND
DEEMED TO ACCRUE OR ARISE
INCOME FROM BUSINESS
CONNECTION
[SEC.9(1)(I)]
THE FOLLOWING CONDITIONS SHOULD BE
SATISFIED
⚫CONDITION ONE– TheT
ax Payer Has a
“Business Connection” in India
⚫ CONDITIONTWO – ByVirtue of “Business
Connection” in India, IncomeActuallyArises Outside
India.
WHAT IS BUSINESS
CONNECTION???
He Exercises In IndiaAnAuthorityTo
Conclude Contracts On BehalfOfThe
Non Resident.
ACTIVITY TWO
He HasNo SuchAuthority but Habitually
Maintains in India aStock of Goods or
Merchandise FromWhich
ACTIVITY THREE
He HabituallySecures Orders in India for
the Non-resident non- Residents Under
the SameManagement
Independent Brokers /Agents are
EXCLUDED
Operations not taken as
BUSINESS
CONNECTION???
YOUNGMINDSCLUB
⚫Where all operationsare not carried out in India.
⚫Purchase of goods for export(in caseof non-resident)
⚫Collection of news &views in India for transmission out of India.
⚫Shooting of cinematograph films in India.
YOUNGMINDSCLUB
OTHER IMPORTANT POINTS TO
BE NOTED
⚫IncomeThroughOr FromAnyProperty,asset Or SourceOf IncomeIn
India.[Sec.9 (1)(i)]
⚫IncomeThroughthe TransferofCapitalAssetSituatedin India[Sec.9
(1)(i)]
⚫Income Under the Head“Salaries”[sec.9(1)(ii)]
⚫Salary PayableAbroad bythe Government to aCitizen of India [Sec.9
(1)(iii)]
⚫Dividend Paidbyan Indian Company[SEC.9 (1)(iv)
⚫Income byW
ayof Interest [Sec.9 (1)(v)]
⚫Income bytheW
ayof Royalty [Sec.9 (1)(vi)]
⚫Income byWayof FeesforTechnical Services[sec.9 (1)(vii

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Residential Status and Tax Liability

  • 2. The determination of the residential status of a person is very significant in order to find out his tax liability whether an income, accrued to an individual outside india, is taxable in india depends upon the residential status of the individual in india. Similarly, whether an income earned by a foreign national in india (or outside india) is taxable in india, depends on the residential status of the individual, rather than on his citizenship.. YOUNGMINDSCLUB
  • 3. Different taxable entities ⚫ An individual; ⚫ A Hindu Undivided Family(HUF); ⚫ A firm or an Associations Of Persons (AOP); ⚫ A Joint Stock Company;& ⚫ Every other person.
  • 4. DIFFERENT RESIDENTIAL STATUS: FOR INDIVIDUAL AND A HINDU UNDIVIDED FAMILY FIRM, COMPANY, LOCAL AUTHORITY,ARTIFICIA L PERSON,AOP/BOI • ordinarily Residen t in India • Resident in India; or • Resident but not • Non-resident in India. ordinarily resident • Non-resident in India.
  • 6. Step 1 First find out whether such individual is “Resident” in India Step 2 If such individual is “Resident” in India, then find out whether he is “ordinarily resident” in India.
  • 7. Residence -Individual ⚫AnIndividual is said to be resident in India in any previous year,if he satisfies at least one of the following conditions: ⚫1) He is in India in the previous year for aperiod of 182 daysor more. ⚫2) a) He is in India for aperiod of 60 daysor more during the previous year ⚫ and ⚫ b) 365 daysor more during 4 yearsimmediately preceding the previous year.
  • 8. Exception iii) ⚫ Period 60 Daysis extended to 182 daysin the following cases. i) AnIndian citizen who leaves India during the previous year for the purpose of employment outside India ii) Indian citizen who leaves India during the previous year as amember of crew of Indian ship. Indian citizen or person of Indian origin who comes on avisit to India during the previous year.
  • 9. CONDITIONS TO TEST AS TO WHEN A RESIDENT INDIVIDUAL IS ORDINARILY RESIDENT IN INDIA Supplemen t ary Condition 1 He must been resident in India in at least 2 py out of 10 previous years immediately preceding the relevant previous year Supplemen t ry Condition 2 He has been in India for a period of 730 days or more during 7 previous years immediately preceding the relevant previous year
  • 10. CONDITIONS TO TEST AS TO WHEN A RESIDENT BUT NOT ORDINARILY RESIDENT [SEC. 6(1),(6)(A)] Situation 1 If he satisfies at least one of the basic conditions u/s 6(1), but none of the supplementary conditions Situation 2 If he satisfies at least one of the basic conditions “AND” one of the two supplementary conditions
  • 12. PLACE OF BUSINESS CONTROL RESIDENTIAL STATUS OF HUF ORDINARILY RESIDENT OR NOT Wholly in India Wholly Out of India Partly in India and partly outside India Resident Non-Resident Resident 1)If Karta or Manager has been resident in India of 2 out of 10 previous yrs immediately preceding the previous year And 2)730 days or more during 7 years preceding the relevant previous yrs. Same
  • 13. AND ASSOCIATION OF PERSON [SEC 6 (2)] Place of Control Residential Status Of Firm Wholly in India Wholly Out of India Partly in India and partly outside India Resident Non-Resident Resident
  • 14. COMPANY [SEC 6 (3)] NOTE: A COMPANY CAN NEVER BE "ORDINARILY" OR "NOT ORDINARILY RESIDENT" IN INDIA PLACE OF CONTROL AN INDIAN COMPANY A COMPANY OTHER THAN INDIAN COMPANY Wholly in India Wholly Out of India Partly in India and partly outside India Resident Resident Resident Resident Non-Resident Non-Resident
  • 15. RESIDENTIAL STATUS OF EVERY OTHER PERSON [SEC. 6(4)] Every other person is resident in India if control and management of his affairs is, wholly or partly, situated within India during the relevant previous. On the other hand, every other person is non-resident in India if control and management of its affairs is wholly situated outside India.
  • 16. RELATIONSHIP BETWEEN RESIDENTIAL STATUS AND SCOPE OF TAX [SEC. 5] Inordertounderstandtherelationshipbetweenresidentialstatus andtaxliability, oneunderstand thedifferencebetween“IndianIncome”and“ForeignIncome” 1.INDIAN INCOME 2.FOREIGN INCOME
  • 17. PROVISIONS IN BRIEF WHETHER INCOME IS RECEIVED (OR DEEMED TO BE RECEIVED) IN INDIA DURING THE RELEVANT YEAR WHETHER INCOME ACCRUES (OR ARISES OR IS DEEMED TO ACCRUE OR ARISE) IN INDIA DURING THE RELEVANT YEAR STATUS OF INCOME Yes Yes Indian Income Yes No Indian Income No Yes Indian Income No No Foreign Income
  • 18. INCIDENCE OF TAX FOR DIFFERENT TAX PAYERS
  • 20. PARTICULARS RESIDENT AND ORDINARI L Y A RESIDENT IN INDIA RESIDENT BUT NOT AND ORDINARI LY A RESIDENT IN INDIA NON- RESIDEN T IN INDIA Indian Income Taxable in India Taxable in India Taxable in India
  • 21. PARTICULARS AND ORDINARIL Y A RESIDENT IN INDIA BUT NOT AND ORDINARIL Y A RESIDENT IN INDIA RESIDENT IN INDIA Foreign Income -If it is business income and business is controlled wholly or partly from India - If it is income from profession which is set up in India - If it is business income and business is controlled outside India - If it is income from profession which is set up outside India Taxable in India Taxable in India Taxable in India Taxable in India Taxable in India Taxable in India Taxable in India Not Taxable in India Not Taxable in India Not Taxable in India Not Taxable in India Not Taxable in India Not Taxable in India Not Taxable in India Not Taxable in India
  • 22. FOR TAX PAYERS RESIDENT IN INDIA NON- RESIDENT IN INDIA INDIAN INCOME Taxable in India Taxable in India FOREIGN INCOME Taxable in India Not taxable in India
  • 24. Income received in India is taxable in all cases irrespective of residential status of an assessee.
  • 25. CONNOTATION OF ACCRUE OR ARISE AND DEEMED TO ACCRUE OR ARISE
  • 27. THE FOLLOWING CONDITIONS SHOULD BE SATISFIED ⚫CONDITION ONE– TheT ax Payer Has a “Business Connection” in India ⚫ CONDITIONTWO – ByVirtue of “Business Connection” in India, IncomeActuallyArises Outside India.
  • 29. He Exercises In IndiaAnAuthorityTo Conclude Contracts On BehalfOfThe Non Resident.
  • 30. ACTIVITY TWO He HasNo SuchAuthority but Habitually Maintains in India aStock of Goods or Merchandise FromWhich
  • 31. ACTIVITY THREE He HabituallySecures Orders in India for the Non-resident non- Residents Under the SameManagement
  • 33. Operations not taken as BUSINESS CONNECTION???
  • 34. YOUNGMINDSCLUB ⚫Where all operationsare not carried out in India. ⚫Purchase of goods for export(in caseof non-resident) ⚫Collection of news &views in India for transmission out of India. ⚫Shooting of cinematograph films in India.
  • 36. ⚫IncomeThroughOr FromAnyProperty,asset Or SourceOf IncomeIn India.[Sec.9 (1)(i)] ⚫IncomeThroughthe TransferofCapitalAssetSituatedin India[Sec.9 (1)(i)] ⚫Income Under the Head“Salaries”[sec.9(1)(ii)] ⚫Salary PayableAbroad bythe Government to aCitizen of India [Sec.9 (1)(iii)]
  • 37. ⚫Dividend Paidbyan Indian Company[SEC.9 (1)(iv) ⚫Income byW ayof Interest [Sec.9 (1)(v)] ⚫Income bytheW ayof Royalty [Sec.9 (1)(vi)] ⚫Income byWayof FeesforTechnical Services[sec.9 (1)(vii