Residential status and Tax liability

The scope of total income is determined on the basis of residential status of the assessee. For the purposes of this Act, there can be three residential status. Residential status is determined on the basis Basic conditions and Additional conditions

  1. Resident and ordinarily resident
  2. Resident but not ordinarily resident
  3. Non resident.

RESIDENTIAL STATUS OF AN INDIVIDUAL

Resident and Ordinarily Resident [ROR]

                An individual is said to be resident in India if he satisfies anyone of the basic conditions and both of the additional conditions.

Resident but Not Ordinarily Resident [RNR]

                An individual is said to be resident but not ordinarily resident in India if he satisfies anyone of the basic conditions but does not satisfies both of the additional conditions.

Non Resident [NR]

                If an individual does not satisfies any of the basic conditions he is said to be non resident in India

Basic conditions

Additional conditions

A stay of 182 days or more during the current previous year 2008-09

OR

A stay of 60 days or more in the current PY 2008-09 and a total stay of 365 days or more in the 4 years immediately preceding the current PY

He should be resident in India in at least 2 out of 10 years immediately preceding the current PY

AND

A stay of 730 days or more during the 7 years immediately preceding the current PY 2008-09

Basic Conditions:

                    (a)   He is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or

                    (b)   He has been in India for a period or periods amounting in all to three hundred and sixty-five days or more within the four years proceeding the previous year, and has been in India for a period or periods amounting in all to sixty days or more in the previous year.

                    In the following cases the period of 60 days in clause (b) above will be substituted by 182 days.

  1. An individual who leaves India in any previous year as a member of the crew of an Indian ship for the purposes of employment outside India.
  2. An individual who is a citizen of India, or a person of Indian origin, who, being outside India, comes on a visit to India in any previous year

Additional Conditions:

(a) He has been resident in India in two out of the ten previous years preceding the relevant previous year, and

(b) He has been in India a period, or periods amounting in all to, seven hundred and thirty days or more during the seven previous years preceding the relevant previous Year.

                Individual’s stay in India during the previous year need not necessarily be a continuous one and at the same place. The period of stay may be a broken period. The calculation of his stay

in India shall be made on an hour basis. A total of 24 hours stay in India shall be counted as one day. The place and the purpose of the stay are also immaterial.

RESIDENTIAL STATUS OF HUF [SEC 6 (2)]

                HUF is a separate tax entity apart from its members and therefore, it is liable to pay tax on income earned by it in the previous year.

Resident

Non Resident

  1. When control and management is wholly situated in India
  2. When control and management is partly situated in India and partly situated outside India
 

When control and management is wholly situated outside India

  1. If the Karta satisfies the additional conditions of individual then the HUF is resident and ordinarily resident
  2. If the Karta does not satisfies the additional conditions of individual then the HUF is resident but not  ordinarily resident

 

 

Resident and Ordinarily Resident:

                A HUF is said to be resident in India if the control and management of its affairs is situated wholly or partly in India. And the manager or Karta satisfies the the following additional conditions

(a)He has been resident in India in two out of the ten previous years preceding the relevant previous year, and

(b) He has been in India a period, or periods amounting in all to, seven hundred and thirty days or more during the seven previous years preceding the relevant previous

Year.

Not Ordinarily Resident:

                A HUF is not ordinarily resident in India, if control and management of its affairs is situated wholly or partly outside India but the manager or Karta does not satisfies the additional conditions.

Non Resident:

                HUF is non resident if the control and management of its affairs is situated wholly outside India.

RESIDENCE OF A COMPANY [SEC 6(3)]

Resident

Non Resident

  1. When the control and management is fully situated in India
  1. When the control and management is partly situated in India and partly situated outside India
  2. When control and management is fully situated outside India

 

A company can be either resident or non resident. A company is said to be resident in any previous year if, it is an Indian company or during that year, the control and management of its affairs is situated wholly in India.

                If a company is neither an Indian company nor the control and management of its affairs is situated wholly in India it is said to be non resident India.

SCOPE OF TOTAL INCOME/ INCIDENCE OF TAX

                The residential status of an assessee determines the scope of total income. The total income liable to tax vary according to the residential status The incidence of tax is highest on resident, a little lower on not ordinarily resident and lowest on non resident assessee.

Income

Whether taxable or not

O.R

N.O.R

N.R

Income received or deemed to be received in India in  the PY

Taxable

Taxable

Taxable

Income which arises or accrues or is deemed to accrue or  arise to the assessee in India in the PY

Taxable

Taxable

Taxable

Income received  outside India from a business or profession controlled from India

Taxable

Taxable

Taxable

Income received  outside India from a business or profession controlled from outside India

Taxable

Not

Taxable

Not Taxable

Income received  outside India from any other source apart from business

Taxable

Not Taxable

Not Taxable

Past untaxed profit brought into india

Not

Taxable

Not

Taxable

Not

Taxable

Income earned outside India in earlier years but later on remitted to india

Not

Taxable

Not

Taxable

Not

Taxable

salary drawn outside India from an Indian company

Taxable

Taxable

Not

Taxable

salary drawn outside India from an Indian company for service rendered within india

Taxable

Taxable

Taxable

 Reference: Scribd.com

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