1. RESIDENTIAL STATUS OF AN INDIVIDUAL
Tax Management Concepts
Presented By: Rashmi Gowda KM

2. Tax Management Theory
■ Assessment Year [Section 2(9)]
1. Period starting from April1 and ending on March 31 of the next year.
2. Income of previous year of an assessee is taxed during the next following
assessment year.
3. It is always a period of 12 months.
■ Previous year [Section 2(34)]
1. The first previous year commences on the date of setting up of the
business/profession or the date on which the source of income newly comes into
existence and ends on the immediately following March 31.
2. The first previous year is a period of 12 months or less than 12 months. It can never
exceed 12 months.
3. The second and subsequent previous years are always of 12 months each (i.e. April
to March.)
Rule – Income of a previous year is taxable in the immediately following assessment
year.

3. Exceptions to the rule of Previous year –( When the income earned by the Assessee is taxed in
the same year?)
1. Income of a non-resident from shipping. [Section 172]
(7.5% is taxable portion)
2. Income of persons leaving India either permanently or for a long period of time. [Section
174]
3. Income of bodies formed for short durations. [Section 174A]
4. Income of a person trying to alienate his assets with a view to avoiding payment of tax; and
[Section 175]
5. Income of a discontinued business. [Section 176]

4. ■ Assessee [Section 2(7)]
“Assessee” means a person by whom income tax or any other sum of money is
payable under this Act, and includes-
(a) Every person in respect of whom any proceeding under the Act has been
taken for the assessment of his income or the income of any other person in
respect of which he is assessable;
(b) Every person who is deemed to be an Assessee, or
(c) Every person who is an Assessee in default under any provision of this Act.
■ Determination Of Residential Status
{What are the different categories into which the assessees are divided
regarding residence and how is the residence of assessees determined for
income-tax purposes? Explain.}
Total income of an assessee cannot be computed unless the person’s
residential status in India during the previous year is known.

5. Section 6 of the Income-tax Act prescribes the tests to be applied to determine the residential
status of all tax payers for the purposes of income-tax. According to the provisions relating to
residential status, a person can either be;
(i) Resident in India or
(ii) Non-resident in India
However, individual and HUF cannot be simply called resident in India. If individual or HUF is a
resident in India, they will be either;
(a) Resident and ordinarily resident in India (ROR) or
(b) Resident but not ordinarily resident in India (RNOR or NOR).
Persons other than individual and HUF will be either resident in India or non-resident in India.

6. Residential Status of Individual
Basic Conditions
1. Stay of Individual in India should be 182 days or more during relevant
Previous Year (PY); OR
2. Stay of Individual in India should be 60 days or more during relevant PY and
365 days or more during 4 PYs immediately preceding relevant PY.
Exception to Basic Conditions
In following cases, only 1st Basic condition needs to be checked:
1. Indian Citizen
- who comes on a visit to India during relevant PY; or
- who is a crew member of an Indian Ship; or
- who goes abroad for employment purposes.
2. Person of Indian Origin (who himself or his parents or his grandparents
were born in undivided India) who comes on a visit to India during relevant PY

7. Additional conditions
1. Individual should be resident (by satisfying any of the two basic conditions or Conditions first
basic condition, if falls in exception to basic conditions) in at least 2 PYs out of 10 PYs
immediately preceding relevant PY; and
2. Stay of Individual in India should be 730 days or more during 7 PYs immediately preceding
relevant PY.
NOTE:
■ Non-Resident : if the person doesn’t satisfy at least anyone of the basic condition
■ ROR: should satisfy at least any one of the basic condition, and should satisfy both the
additional condition
■ RNOR: Should satisfy any one of the basic conditions, and if doesn’t satisfy both or any one
of the additional conditions

8. Steps to be followed for determination of Residential status of a Person
Step 1: Check whether an Individual falls under any exception to basic conditions.
Step 2: If yes, check only first basic condition, otherwise check both the basic conditions. If he
satisfies any one of the basic conditions (only first in case of exception), then he would be
resident in India, otherwise he would be Non-resident in India.
Step 3: If an Individual is resident in India, then check whether he is ROR or RNOR.
Step 4: If Individual satisfies both the additional conditions, then he is ROR. Otherwise, he
would be RNOR.