RESIDENTIAL STATUS

SOUMENDRA ROY NIMS

TYPES OF RESIDENTIAL STATUS

The different types of residential status are:Resident and Ordinarily Resident in India(ROR) Resident but not Ordinarily Resident in India(NOR)

Non-Resident in India (NRI)

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RESIDENTIAL STATUS OF INDIVIDUAL

The residential status of individual will be determined as underAssessee
Resident and Ordinarily Resident in India (R)

Basic Condition

Additional Condition
additional

He must satisfy at least one Both the of the basic conditions. conditions

He must satisfy either one Resident but not Ordinarily He must satisfy at least one or none of the additional Resident in India (NOR) of the basic conditions. conditions given u/s 6(6).

Should not satisfy any of Non-Resident in India (NRI) Not required. the basic conditions.
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RESIDENTIAL STATUS OF INDIVIDUAL

Basic Conditions u/s 6(1):
i. He must be in India for a period of 182 days or more during the previous year; or ii. He must be in India for a period of 60 days or more during the previous year and 365 days or more during the four years immediately preceding the previous year.

Additional Conditions u/s 6(6):

i. He must be a resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year; or ii. He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.
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BASIC CONDITIONS AT A GLANCE

In the case of an Indian citizen who leaves India during the P.Y. for the purpose of employment (or as a member of a crew of an Indian ship) (1) In the case of an Indian citizen or In the case of an Individual (other a person of Indian origin (who is than those mentioned in columns abroad) who comes on a visit to (1) and (2) India during the P.Y.

(2)

(3)

1.

2.

Presence of atleast 1. 182 days in India during the P.Y. 200910 Non-functional 2.

Presence of atleast 1. 182 days in India during the P.Y. 200910 Non-functional 2.

Presence of atleast 182 days in India during the P.Y. 200910 Presence of atleast 60 days in India during the P.Y. 2009-10 and 365 days during 4 years immediately preceding the relevant P.Y.

RESIDENTIAL STATUS OF HUF [Sec. 6(2)]

The residential status of HUF depends upon the control and management of its affairs. Resident HUF: If the control and management of the affairs of HUF is situated wholly in India then HUF is said to be Resident in India. Non- Resident HUF: If the control and management of the affairs of HUF is situated wholly outside India then HUF is said to be NonResident in India. Not Ordinarily Resident HUF: A resident HUF is said to be Not Ordinarily Resident in India if Karta or manager thereof, satisfies any of the additional conditions u/s 6(6) or none and Resident but Ordinarily Resident if he satisfies both the additional condition.
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RESIDENTIAL STATUS
According to section 6(3) an Indian Company is always Resident in India. A foreign Company will be resident in India if Control or Management of its affairs is wholly situated in India. Residential Status of a firm or AOP or other person depends upon control and management of its affairs. Resident: If the control and management of the affairs of a firm or AOP or other person is situated wholly or partly in India then such a firm or AOP or other person is said to be resident in India. Non-Resident: If the control and management of the affairs of a firm or AOP or other person is situated outside India then such a firm or AOP or other person is said to be non-resident in India.

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RELATIONSHIP BETWEEN RESIDENTIAL STATUS AND INCIDENCE OF TAX

Incidence of tax on a taxpayer depends on his residential status and also on the place and time of accrual or receipt of income INDIAN INCOME: 1. If income is received (or deemed to be received) in India during the previous year and at the same time it accrues (or arises or is deemed to accrue or arise) in India during the previous year 2. If the income is received (or deemed to be received) in India during the previous year but it accrues (or arises) outside India during the previous year

RELATIONSHIP BETWEEN RESIDENTIAL STATUS AND INCIDENCE OF TAX

3. If the income is received outside India during the previous year but it accrues (or arises) in India during the previous year FOREIGN INCOME a. Income is not received (or not deemed to be received) in India b. Income does not accrue or arise (or does not deemed to accrue or arise) in India

INCIDENCE OF TAX FOR DIFFERENT TAXPAYERS

Individual and HUF
Resident and Ordinarily Resident in India Resident but not Ordinarily Resident in India Non-resident in India

Indian Income Foreign income

Taxable in India Taxable in India

Taxable in India

Taxable in India

Only two types* of Not taxable in India foreign incomes are taxable in India. Any other foreign income is not taxable in India

* 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

PROVISION ILLUSTRATED
Nature of Income Reasons
Conclusions Is it taxable in India for the A.Y. 2010-11 ROR
Rental Income of Rs 36,000 is received in It is Indian income. Indian income Yes India on May 10, 2009 (it may accrue is always taxable. outside India or in India) Interest income of Rs 46,000 accrues in It is Indian income. Indian income Yes India on mar 31, 2010 (it may be received in is always taxable. India or outside India) Income of Rs 56,000 is deemed to be It is Indian income. Indian income Yes received in India on April 20, 2009 (it may is always taxable. accrue outside India or in India) Income of Rs 66,000 is deemed to accrue or It is Indian income. Indian income Yes arise in India during the P.Y. 2009-10 (it may is always taxable. be received in India or outside India) Business income/professional income of Rs It is foreign income. It is taxable Yes 76,000 is received and accrued outside in the case of resident and India during the P.Y. 2009-10 ordinarily resident taxpayer. It is not taxable in the case of a nonresident.

NOR
Yes

NR
Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Nature of Income

Reasons

Conclusions Is it taxable in India for the A.Y. 2010-11 ROR NOR NR

(business is controlled from outside Since it is business /profession India or profession is set up outside income and business is controlled India) from outside India or profession is set up outside India. It is not taxable in the case of resident but not ordinarily resident taxpayer.

In the earlier situation, suppose It is foreign income. Since it is Yes business is controlled from India or business /profession income and profession is set up in India business is controlled from India or profession is set up in India. It is taxable in all cases except nonresident
Rental income or salary income or interest income of Rs 86,000 is received outside India in the P.Y. 2009-10 and at the same time it accrues or arises outside India It is foreign income. It is taxable in Yes the case of resident and ordinarily resident taxpayer. It is not taxable in the case of a non-resident. Since it is foreign income which is neither business income nor professional income, it is not taxable in the case of resident but not ordinarily resident

Yes

No

No

No

Nature of Income

Reasons

Conclusions Is it taxable in India for the A.Y. 2010-11 ROR NOR

No

NR
No

Gift of Rs 2 lakh received outside India It is foreign income. It is taxable in Yes by an individual on November 6, 2009 the case of resident and ordinarily from a friend resident taxpayer. It is not taxable in the case of a non-resident. Since it is foreign income which is neither business income nor professional income, it is not taxable in the case of resident but not ordinarily resident

Gift of Rs 1 lakh received in Delhi by an It is Indian income. Indian income is Yes individual on November 30, 2009 from always taxable. a friend
Income of Rs 96,000 earned and This income pertains to the P.Y. 2003- No received outside India in 2003-04 but 04. It cannot be taxed at the time of later on remitted to India in 2009-10 remittance in 2009-10

Yes

Yes

No

No

INCOME DEEMED TO ACCRUE OR ARISE IN INDIA Whether income is Nature of income deemed to accrue
or arise in India in the hands of recipient Income from business connection in India Income from any property, asset or source of income in India Yes Yes

Capital gain on transfer of a capital asset situated in India

Income from salary if service is rendered in India

Yes
Yes

Income from salary (not being perquisite/allowance) if service is rendered outside Yes India (provided the employer is GOI and the employee is a citizen of India) Income from salary if service is rendered outside India (not being a case stated above) Dividend paid by the Indian company No Yes

Nature of income

From whom income is received

Payers source of income

Whether income is deemed to accrue or arise in India in the hands of recipient Yes No

Interest Interest

Government of India A person resident in India

Any Borrowed capital is used by the payer of interest for carrying on business/profession outside India or earning any income outside India Borrowed capital is used by the payer of interest for any other purpose

Yes

Interest

A person nonresident in India

Borrowed capital is used by the payer of interest for carrying on business/profession in India

Yes

Borrowed capital is used by the payer of interest for any other purpose
Royalty/fees for technical services Government of India Any

No

Yes

Nature of income

From whom income is received

Payers source of income

Whether income is deemed to accrue or arise in India in the hands of recipient No

Royalty/fees for technical services

A person resident in India

Payment is relatable to a business or profession or any other source carried by the payer outside India Payment is relatable to any other source of income

Yes Yes

Royalty/fees for technical services

A person nonresident in India

Payment is relatable to a business or profession or any other source carried by the payer in India Payment is relatable to any other source of income

No