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 Residential Status

RESIDENTIAL STATUS



Sec. 6 provides the test for residential status for the persons which can be categorized as under -


 General points to be kept in mind regarding residential status of a person

  • Residential status of a person may vary from one previous year to another previous year.

  • A person can have only one residential status for a previous year i.e. he cannot be a resident for one source of income and non-resident for another source.

  • Citizenship and residential status are two different concepts. A citizen of India may not be a resident in India .

  • A person can have same residential status in more than one country.

Determination of Residential Status

Assessee

Condition to be a Resident

Condition to be an Ordinarily resident

Individual

Assessee satisfies any one condition of sec. 6(1) i.e.  

a) He is in India in the previous year for a period of 182 days or more; or

b) He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 previous years immediately preceding the relevant previous year.

Exceptions

In the following cases, (b) is irrelevant:  

  • An Indian citizen, who leaves India during the previous year for employment purpose.

  • An Indian citizen, who leaves India during the previous year as a member of crew of an Indian ship.

  • An Indian citizen or a person of Indian origin, who normally resides outside India , comes on a visit to India during the previous year

Assessee satisfies both the conditions of sec. 6(6)

a) He has been resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year; and

b) He has resided in India for a period of 730 days or more during 7 previous years immediately preceding the relevant previous year.

HUF

Management is wholly or partly situated in India

Karta satisfies both the conditions of sec. 6(6)

Company


 

- Indian Co.

Always resident

Not applicable

- Other Co.

Management is wholly situated in India

 

Firm

Management is wholly or partly situated in India

  Not applicable

AOP

BOI

Other person

Incidence of Tax [Sec. 5]
The following chart highlights the provisions of tax incidence in brief:

Nature of Income

Tax incidence in the case of

Resident & ordinarily resident

Resident but not ordinarily resident

Non resident

Income accrued or deemed to be accrued and received or deemed to be received in India

Taxable

Taxable

Taxable

Income accrued outside India but received or deemed to be received in India .

Taxable

Taxable

Taxable

Income accrued or deemed to be accrued in India but received outside India

Taxable

Taxable

Taxable

Income accrued and received outside India from a business controlled in or profession set-up in India .

Taxable

Taxable

Not taxable

Income accrued and received outside India from a business controlled or profession set-up outside India .

Taxable

Not taxable

Not taxable

Income accrued and received outside India in the previous year (it makes no difference if the same is later remitted to India ).

Taxable

Not taxable

Not taxable

Income accrued and received outside India in any year preceding the previous year and later on remitted to India in current financial year.

Not taxable

Not taxable

Not taxable

Note : In case of resident assessee like company, firm etc. (other than Individual and HUF) in which there is no classification as Resident but not ordinarily resident', income accrued and received outside India from a business controlled or profession setup outside India shall be taxable.

Income received in India
Income received in India is taxable in all cases (whether accrued in India or elsewhere) irrespective of residential status of the assessee, therefore it is significant to know the meaning of income received in India . If the place, where the recipient gets the money ( on first occasion ) under his control, is in India , it is said to be income received in India .

Income deemed to be received in India

Following incomes shall be deemed to be received in India and taxable in hands of all assessee irrespective of their residential status -

  • The annual accretion in the previous year to the balance at the credit of an employee participating in a recognized provident fund, to the extent provided in Rule 6 of part A of the IV schedule i.e.-

    1. Employer's contribution to the recognised provident fund in excess of 12% of salary.

    2. Interest credited on the above balance by a rate exceeding 9.5% [Sec. 7(i)]

  • The transferred balance in recognised provident fund, to the extent liable to income tax [Sec. 7(ii)]

  • The contribution made, by the employer in the previous year, to the account of an employee under a pension scheme notified u/s 80CCD [Sec. 7(iii)]

  • Tax Deducted at source [Sec. 198]

  • Deemed profit. 

Income deemed to accrue or arise in India [Sec. 9]
Following incomes are deemed to accrue or arise in India:

Income from connection in India

Salary earned in India

Salary from Govt. by an Indian citizen for services rendered outside India

Income from dividend paid by an Indian company

Income form interest payable by specified person

Income form royalty

Income from technical services

Sec. 9(1)(i)

Sec. 9(1)(ii)

Sec. 9(1)(iii)

Sec. 9(1)(iv)

Sec. 9(1)(v)

Sec. 9(1)(vi)

Sec. 9(1)(vii)

Income deemed to be accrued in India [Sec. 9]

Following incomes are deemed to accrue or arise in India :

  • Income from business arising through business connection in India

  • Income from any property/asset if such property/asset is located in India

  • Income on transfer of a capital asset situated in India

  • Income from salaries (including salary for rest period or leave period), if service is rendered in India

  • Income from salaries received from the Government by an Indian citizen for services rendered outside India

  • Income from dividend paid by an Indian company even though such dividend is received outside India

  • Income from interest payable by the Government or by any other person in certain circumstances

  • Income by way of royalty payable by the Government or by any other person in certain circumstances

  • Income by way of fees for technical services payable by the Government or by any other person in certain circumstances

However, following income shall not be considered as income accrued in India :

  1. Business activity confined to purchase of goods: In the case of a non-resident, no income shall be deemed to accrue or arise in India to him from operations, which are confined to the purchase of goods in India for the purpose of export.

  2. Business activity of a news agency confined to collection of news, etc .: In the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspaper, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities, which are confined to the collection of news and views in India for transmission out of India.

  3. Business activity confined to shooting: In the case of a non-resident, being -

- An individual who is not a citizen of India ; or

- A firm which does not have any partner, who is a citizen of India or who is resident in India ; or

- A company, which does not have any shareholder who is a citizen of or resident in India ;

no income shall be deemed to accrue or arise in India through or from operations, which are confined to the shooting of any cinematography film in India .