Residential status sec 6 (1)
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Residential status sec 6 (1) Residential status sec 6 (1) Document Transcript

  • Compiled by Prof. M.B. Thakoor RESIDENTIAL STATUS PERSON Legal Status Residential Status Resident Non ResidentLegal Status1. Individual Resident & Resident but2. Firm Ordinarily Resident not Ordinarily3. Companies Resident4. Institution5. Local Authorities6. H.U.F.7. A.O.P.8. B.O.I. Page No. 1
  • Compiled by Prof. M.B. Thakoor RESIDENTIAL STATUS: SEC. 6 (1)After determining the legal status of an Assessee u/s. 2 (31)the Residential Status of an Assessee is to be determined.1. Determined of every PREVIOUS YEAR: Residential Status is determined for every previous year. It depends on the number of days a person is in India during the concerned previous year.2. Different terms of Citizenship An Individual may be a Citizen of Britain, but a resident in India. In the same way a Citizen of India may be a non-resident of India.3. Residential Status is important in deciding whether Foreign Income of a person is Taxable or not.TEST OF RESIDENCE1. For an INDIVIDUAL Basic 2 conditions An Individual is said to be resident when he satisfies any one of the basic 2 conditions. 1. He must be in India for 182 days or more in that relevant pervious year. OR 2. a. He must be in India for 365 days or more during 4 previous year immediately preceeding the relevant previous year. AND b. He must be in India during that relevant previous year for a period of 60 day or more. Page No. 2
  • Compiled by Prof. M.B. ThakoorEXCEPTION: FOLLOWING ARE THE TWOEXCEPTIONS TO RULE OF STAY IN INDIAFOR A PERIOD OF 60 DAYS IN THE SECONDCONDITION ABOVE.1. If a citizen of India or a member of a crew of an Indian ship leaves India in the previous year for the purpose of employment then he becomes resident if the 60 days are replaced by 182 days. Employment : Self Employment Salaried Employed Professional Non-professional i.e. he becomes resident only if he stays in India for 182 days or more and not 60 days or more.2. A citizen of India or a person of Indian Origin staying outside India, come on a visit to India in the previous year, then the 60 days must be replaced by 182 days. i.e. he become resident only if he stay’s in India for 182 days and not 60 days.Note: A person is deemed to be of an Indian origin, if he or his parents or any of his grand parents were born in Undivided India. (i.e. India, Pakistan, Bangladesh)For Current ASSESSMENT YEARAn Individual will become a resident in India in the P.Y.2006-2007 i.e. for current assessment year 2007-2008 if hesatisfies any one of the following 2 basic conditions.1. He is in India for 182 days or more in the previous year 2006-2007. OR Page No. 3
  • Compiled by Prof. M.B. Thakoor2. He is in India for 365 days or more during the period 1.04.2002 to 31.03.2006 AND He is in India for 60 days or more in the pervious year 2006-2007.EXCEPTIONS1. If a citizen of India, or a member of crew of Indian ship, leaves India in 2006-2007 for the purpose of employment will became a resident only if he stays in India for 182 days or more & not 60 days during 2006-2007 and he must be in India for 365 days or more during 4 pervious years preceeding the P.Y. 2006-2007 i.e. He must be in India for 365 days or more from 01/04/2002 to 31/03/2006.2. A citizen of India or a person of Indian Origin, who is staying outside India comes on a visit to India in 2006-20074 becomes a resident only if he stays in India for 182 days or more (and not 60 days) during 2006-2007 and he must be in India for 365 days or more during 4 previous year preceeding the previous year 2006-2007 i.e. He must be in India for 365 days or more from 1.04.2002– 31.03.2006.NON-RESIDENT FOR AN INDIVIDUALNon-resident is a person who is not a resident. An Individualwho does not satisfy the test laid down in Sec (1) above iscalled a non-resident i.e. An individual who do not satisfy anyof the basic conditions above is called a non-resident. Page No. 4
  • Compiled by Prof. M.B. Thakoor RESIDENT & ORDINARILY RESIDENT - Sec 6 (6)If an Individual satisfies the test of Resident then further 2tests are to be made i.e. If an Individual is a Resident in India,he may be either Resident and Ordinarily Resident orResident but not ordinarily resident.An Individual may be Resident and Ordinarily Resident if hesatisfies following 2 conditions.1. He has been resident in India for at least 2 out of 10 years immediately preceeding the previous year. AND2. He has been present in India for a period of 730 days or more during 7 years immediately preceding the previous year.Current A.Y. 2007-2008Thus during the current Assessment Year 2007-2008 aResident Individual is tested as an Ordinary resident. If1. He has been a resident in India for at least 2 out of 10 years immediately preceeding the P.Y. 2006-2007. 1. 1996-1997 2. 1997-1998 3. 1998-1999 4. 1999-2000 5. 2000-2001 6. 2001-2002 7. 2002-2003 8. 2003-2004 9. 2004-2005 10. 2005-2006i.e. from 1st April 1996 to 31st March 2006 for these 10 yearshe must have been a resident for 2 years i.e. from1.04.1996-31.03.2006. Page No. 5
  • Compiled by Prof. M.B. Thakoor2. He has been physically present in India for a period of 730 days or more during 7 years immediately preceeding the previous year 2006-2007. 1. 1999-2000 2. 2000-2001 3. 2001-2002 4. 2002-2003 5. 2003-2004 6. 2004-2005 7. 2005-2006i.e. He must have stayed in India physically for 730 days from1.04.1999 – 31.03.2006.If both the above conditions are satisfied then the Individual isResident and Ordinarily Resident. But if the additional 2tests are not satisfied by an Individual then he is said to beResident but not Ordinarily Resident.Counting of DaysWhile counting of number of days in all the above cases thefollowing points are to be noted.1. The stay need not be at the same place.2. The stay need not be continuous.3. Where the stay is for part of the day, physical presence should be calculated on timely basis. Stay of 24 Hrs. will be counted as stay for 1 day. Where such information is not available, both the days of entry and exit will be counted as full days.4. A stay in a boat anchored in territorial area of India, is treated as stay in India. Page No. 6
  • Compiled by Prof. M.B. Thakoor RESIDENTIAL STATUS FOR HUF SEC 6 (2)A Hindu Undivided Family (HUF), is said to be resident inIndia IF ITS CONTROL AND MANAGEMENT ISSITUATED IN INDIA either WHOLLY OR PARTLY duringthat PREVIOUS YEAR.A Resident HUF is an ORDINARILY RESIDENT if theKARTA or MANAGER of the Family is a Resident andOrdinarily Resident.A Hindu Undivided Family (HUF), is said to be ‘NONRESIDENT’ in India. IF ITS CONTROL ANDMANAGEMENT IS SITUATED WHOLLY OUTSIDEINDIA during that PREVIOUS YEAR.CONTROL AND MANAGEMENT IS SITUATED AT APLACE WHERE THE HEAD/BRAIN, THE SEAT OF THEDIRECTING POWER IS SITUATED.RESIDENT BUT NOT ORDINARY RESIDENT Sec.(6) (g)A HINDU UNDIVIDED FAMILY IS SAID TO BE ‘NONORDINARILY RESIDENT IN INDIA in any previous year ifits Manager is treated as an ‘NOT ORDINARILYRESIDENT’ in India during that previous year. Page No. 7
  • Compiled by Prof. M.B. Thakoor RESIDENTIAL STATUS FOR A COMPANY Sec. 6 (3)A COMPANY SAID to be ‘Resident in India’ in any previousyear if –1) It is an INDIAN COMPANY OR2) DURING THAT YEAR THE CONTROL AND MANAGEMENT OF ITS AFFAIRS IS SITUATED WHOLLY IN INDIA.THUS AN INDIA COMPANY IS ALWAYS RESIDENT IFCONTROL & MANAGEMENT IS IN INDIA OR OUTSIDEINDIA.FOREIGN COMPANY IS ALWAYS RESIDENT IFCONTROL & MANAGEMENT OF ITS AFFAIRS ISSITUATED WHOLLY IN INDIA, DURING THAT YEAR.CONTROL & MANAGEMENT indicates THE HEAD ANDBRAIN WHICH DIRECT THE AFFAIR OF THECOMPANY IN RESPECT OF ITS POLICY, FINANCE,DISPOSAL OF PROFIT, MANAGEMENT ETC. i.e. PLACEWHERE THE MEETING OF ITS BOARD OF DIRECTORARE HELD. Page No. 8
  • Compiled by Prof. M.B. ThakoorRESIDENTIAL STATUS OF A FIRM OR AN ASSOCIATIONOF PERSON EVERY OTHER PERSON S 6(4) A PARTNERSHIP FIRM OR AN ASSOCIATION OFPERSONS (AOP) OR EVERY OTHER PERSON IS SAIDTO BE A RESIDENT IN INDIA IF THE CONTROL ANDMANAGEMENT OF ITS AFFAIRS ARE SITUATED ININDIA EITHER WHOLLY OR PARTLY during thatpervious year. A PARTNERSHIP FIRM OR AN ASSOCIATION OFPERSONS (AOP) or every other person is SAID TO BENON RESIDENT IN INDIA IF ITS CONTROL ANDMANAGEMENT IS SITUATED WHOLLY OUTSIDEINDIA during THAT PREVIOUS YEAR.“CONTROL AND MANAGEMENT IS SITUATED AT APLACE WHERE THE HEAD/BRAIN THE SEAT OF THEDIRECTING POWER IS SITUATED”. Page No. 9