Dear Pupil: This presentation includes the Residential Status and Tax liabilities -Incidence of Tax.

2. VIVEKANANDA COLLEGE
POST GRADUATE & RESEARCH DEPARTMENT OF
COMMERCE

3. Dr.k.chellapandian
Assistant Professor of
Commerce
Vivekananda College

4. Income Tax - Law & Practice - I

5. Unit – III
Determination of Residential Status and Tax Liabilities –
Incidence of Tax.

6. Residential Status
&
Tax liability
(Basis of Charge)

7. BASIS OF CHARGE – SEC .4
Income tax is to be charged on the total income of
the previous year of a person at the rate fixed for the
assessment year by the Annual Financial Act.
The total income of a person is determined in
accordance with the provisions of the Income Tax Act;
but the tax is charged according to the Financial Act
which is passed by the Parliament every year.
An assessee may earn his income in India or outside
India or at both the places. Which income is assessable
in India depends on the residential status of an assessee.

8. Introduction:
An assessee may earn his income in India or
outside India or at both places.
Which income is assessable in India depends
on the residential status of an assessee.

9. Residence of assessees - Sec 5
➢ The scope of total income of an assessee along
with his residential status is determined with
reference to his residence in India in the
previous year.
➢ Residence and citizenship are two different
aspects.
➢ The incidence of tax has nothing to do with
citizenship.
➢ In other words, the total income of each person
is based upon his residential status.

10. ➢ An Indian may be non-resident and a
foreigner may be resident for income tax
purposes.
➢ The residence of a person may change from
year to year but citizenship cannot be
changed every year.
➢ A person may be resident in more than one
country for the same previous year.

11. Different Types of Residents (Sec. 6)
On the basis of residence the assessees
are divided into three categories, viz.
(1) Persons who are resident in India,
popularly known as ordinarily resident.
(2) Persons who are not ordinarily resident
in India.
(3) Persons who are non-resident.

12. Residential Status of an Individual
(Sec - 6)
Resident
Sec. 6 (1)
Ordinarily Resident
Not Ordinarily
Resident Sec. 6 (6)
(Only for Individual &
HUF)
Non – Resident
Sec. 2 (30)

14. There are separate rules for determining
the residence of different kinds of assessees.
The different kinds of assessees are
individuals, Hindu undivided families, firms, an
association of persons, companies, local
authorities and artificial juridical persons.
Residential Status

16. RESIDENTIAL STATUS OF INDIVIDUAL
The residence of an individual is
determined on the basis of the rules
stated hereunder:
1. Basic Conditions u/s 6(1)
2. Additional Conditions u/s 6(6)

17. Basic Conditions u/s 6(1)
(Resident or Non Resident)
Basic conditions are two, in this two conditions
the individual may satisfies any one of the conditions.
➢ This conditions for whether individual as Resident
or Non Resident
➢ If individual satisfies any one of the two
conditions Resident (R)
➢ If individual not satisfies any one of the conditions
Non Resident (NR)
.

18. Basic Conditions u/s 6(1)
(Resident or Non Resident)
An individual is said to be resident in India in any
previous year if he satisfies any one of the following
basic conditions:
(1) He is in India in the pervious year for a period of
182 days or more; or
(2) He has in India for at least 365 days during the
four years immediately preceding the previous years and is
in India for at least 60 days during the previous year.

19. Explanation 1. Exceptions to the above rules of 60 days' stay in India: .
(i) An individual who is a citizen of India and leaves
India in any previous year for the purpose of employment
or as a member of the crew of an Indian ship must have
stayed in India for at least 182 days during the previous
year instead of 60 days;
(ii) If any citizen of India or a foreign national of
Indian origin, who is living outside India, comes on a visit to
India in the previous year, he must have stayed in India
for at least 182 days during the previous year instead of
60 days.

20. In other words, in the case of individual covered by the above
two exceptions only condition (a) is to be satisfied to become a
resident in India and condition (b) has no significance at all.
In exception (i) 'employment' includes self employment like
business or profession taken up by assessee abroad.
'Indian origin' means that either he or either of his parents
or any of his grand parents was born in undivided India. Further,
'comes on a visit to India in the previous year' means that he may
come to India for any purpose, whatsoever. It may be business
purpose or personal purpose of any nature or he may come to meet his
relations or he may come for a pleasure trip only.

21. Explanation 2. An individual who is a citizen of India and a
member of the crew of a foreign bound ship leaving India,
the period or periods of stay in India shall, in respect of
such voyage, be determined as may be prescribed.
(a) Stay in India for 182 days or more
(b) Stay in India for at least 365 days during the four
years receding the previous year and for at least 60 days
or 182 days, as the case may be, during the previous year

22. Basic Conditions u/s 6(1)
(Resident or Non Resident)
If an individual satisfies any one of the aforesaid basic
conditions (a) and (b) stated under the head 'Resident‘ he is said to
be Resident. In this case additional conditions are irrelevant.
If an individual satisfies none of the aforesaid basic
conditions (a) and (b) stated under the head 'Resident‘ he is said to
be Non-Resident. In this case additional conditions are irrelevant.

23. Additional Conditions u/s 6(6)
(Ordinarily Resident or Not Ordinarily Resident )
➢ This conditions only applicable to individual as
Resident.
➢ This conditions for whether resident as ordinarily or not
ordinarily
➢ Additional conditions are two, this two conditions are
compulsory.
➢ If resident satisfies this two conditions = ROR
➢ If resident not satisfies that two conditions = RNOR

24. Additional Conditions u/s 6(6)
(Ordinarily Resident or Not Ordinarily Resident )
In fact, in order that an individual may become
ordinarily resident in India, he is to satisfy both the following
conditions besides satisfying anyone of the above mentioned
basic conditions: [Sec. 6(6)(a)]
(i) He has been resident in India in at least two out of the ten
previous years preceding the relevant previous year, and
(ii) He has been in India for at least 730 days in all during
the seven previous years preceding the relevant previous year.

25. Additional Conditions u/s 6(6)
(Ordinarily Resident or Not Ordinarily Resident)
If an individual satisfies anyone of the above basic
conditions (a) or (b) and satisfy the aforesaid two additional
conditions, he is said to be ‘Resident and Ordinarily
Resident'. [Sec. 6(6)(a)]
If an individual satisfies anyone of the above basic
conditions (a) or (b) but does not satisfy the aforesaid two
additional conditions, he is said to be ' Resident but Not
Ordinarily Resident'. [Sec. 6(6)(a)]

26. RESIDENTIAL STATUS OF INDIVIDUAL
The residential status of individual will be determined as under-
Assessee Basic Condition Additional
Condition
1. Resident
He must satisfy at any one of
the basic conditions.
Not required.
2. Non-Resident
Should not satisfy any one of
the basic conditions.
Not required.
3. Ordinarily Resident
He must satisfy at least one
of the basic conditions.
He must satisfy both the
additional conditions
given u/s 6(6).
4. Not Ordinarily
Resident
He must satisfy at least one
of the basic conditions.
He not satisfy either both
the additional conditions
given u/s 6(6).

27. RESIDENTIAL STATUS OF FIRM AND AOP
The residential status of Firm and AOP depends upon the control
and management of its affairs.
 Resident : If the control and management of the affairs of
Firm and AOP is situated wholly or partly in India then is said
to be Resident in India.
 Non- Resident : If the control and management of the
affairs of Firm and AOP is situated wholly outside India then
is said to be Non- Resident in India.
 Ordinarily or Not Ordinarily Resident : Firm and AOP can
not be Ordinarily or Not Ordinary Resident.

28. Residential Status of Company
I. Resident
A company is said to be resident in India in any previous year, if :
(i) it is an Indian company; or
(ii) Its place of effective management, in that year, is in India.
II. Not Ordinarily Resident
A Company is never 'not ordinarily resident'.
III. Non-resident
If a company does not satisfy both the aforesaid conditions of
residence, it is said to be a 'non-resident' company. It means neither
the company is an Indian company nor the place of its effective
management is in India.

29. INCIDENCE OF TAX
INCIDENCE OF TAX ON A TAX-PAYER DEPENDS ON HIS RESIDENTIAL STATUS AND ALSO ON PLACE AND TIME OF
ACCRUAL OR RECEIPT OF INCOME.
Income
Whether Taxable or Not
O.R N.O.R N.R
1. Income received in India whether accrued or arisen in India or
outside India.
Yes Yes Yes
2. Income deemed to be received in India whether accrued or
arisen in India or outside India.
Yes Yes Yes
3. Income accruing or arising in India whether received in India
or outside India.
Yes Yes Yes
4. Income deemed to be accruing or arising in India whether
received in India or outside India.
Yes Yes Yes
5. Income received and accrued or arisen outside India from a
business controlled in or a profession set -up in India.
Yes Yes No
6. Income received and accrued or arisen outside India from
business controlled from outside India or a profession set up
outside India.
Yes No No
7. Income received and accrued or arisen outside India from any
other source.
Yes No No
8. Income accrued or arisen and received outside India in earlier
year but later on remitted to India during the previous year.
No No No
9. Past untaxed profit brought into India. No No No