Determination of Residential Status of an individual & Incidence of Tax – Problems.

1. Mr.Chethan.S
Asst. Professor, Dept. ofMgt., AIGS
1
V SEMESTER BBA -INCOME TAX - 1
Chapter-3 [Residential Status and Incidence of Tax]
RESIDENTIAL STATUS
INTRODUCTION:-
Tax is charged on the Income of the assessee. Under the Income Tax Act, 1961, the total
income of every person is computed based upon his/her Residential Status. For the purpose of
determining the Residential status, assessee is classified into the following categories:
1. Individual.
2. HUF.
3. Firms.
4. Companies.
5. Any other person.
It is important for the Income Tax Department to determine the residential status of a tax
paying individual or company. It becomes particularly relevant during the tax filing season.
In fact, this is one of the factors based on which a person’s taxability is decided.
MEANING OF RESIDENTIAL STATUS OF AN INDIVIDUAL
It refers to the status of an individual, which is determined on the basis of his/her, total stay in
India.
HOW TO DETERMINE RESIDENTIAL STATUS?
For the purpose of income tax in India, the income tax law in India classifies taxable persons
as:
1. A resident (R)
2. A resident not ordinarily resident (RNOR)
3. A non-resident (NR)
The taxability differs for each of the above categories of taxpayers. Before we get into
taxability, let us first understand how a taxpayer becomes a resident, an RNOR or an NR.

2. Mr.Chethan.S
Asst. Professor, Dept. ofMgt., AIGS
2
Resident Fulfills at least one Basic Condition
Non-Resident Fulfills none of the Basic Conditions
Resident and Ordinarily Resident Fulfills both Additional Conditions
Resident but not ordinarily Resident Fulfills one or none of the Additional Conditions
CONDITIONS
Basic Conditions
[sec 6(1)]
1. Individual assessee must be in India for at least 182 days
or more during the previous year.
2. Individual assessee must be in India for at least 60 days or
more during the P.Y and 365 days or more during 4 years
immediately preceding the previous year.
Additional Conditions
[sec 6(6)]
1. Resident in India for 2 years out of 10 previous years
proceeding the previous year.
2. Stay in India for 730 days or more during 7 previous
years immediately proceeding the Previous year.

3. Mr.Chethan.S
Asst. Professor, Dept. ofMgt., AIGS
3
RESIDENT
A taxpayer would qualify as a resident of India if he satisfies one of the following 2
conditions:
1. Stay in India for a year is 182 days or more or
2. Individual assessee must be in India for at least 60 days or more during the P.Y and
365 days or more during 4 years immediately preceding the previous year.
In the event an individual who is a citizen of India or person of Indian origin leaves India for
employment during an FY, he will qualify as a resident of India only if he stays in India for
182 days or more. Such individuals are allowed a longer time greater than 60 days and less
than 182 days to stay in India. However, from the financial year 2020-21, the period is
reduced to 120 days or more for such an individual whose total income (other than foreign
sources) exceeds Rs 15 lakhs.
In another significant amendment from FY 2020-21, an individual who is a citizen of India
who is not liable to tax in any other country will be deemed to be a resident in India. The
condition for deemed residential status applies only if the total income (other than foreign
sources) exceeds Rs 15 lakh and nil tax liability in other countries or territories by reason of
his domicile or residence or any other criteria of similar nature.

4. Mr.Chethan.S
Asst. Professor, Dept. ofMgt., AIGS
4
RESIDENT NOT ORDINARILY RESIDENT
If an individual qualifies as a resident, the next step is to determine if he/she is a Resident
ordinarily resident (ROR) or an RNOR. He will be a ROR if he meets both of the following
conditions:
1. Has been a resident of India in at least 2 out of 10 years immediately previous years
and
2. Has stayed in India for at least 730 days in 7 immediately preceding years
Therefore, if any individual fails to satisfy even one of the above conditions, he would be an
RNOR.
From FY 2020-21, a citizen of India or a person of Indian origin who leaves India for
employment outside India during the year will be a resident and ordinarily resident if he stays
in India for an aggregate period of 182 days or more. However, this condition will apply only
if his total income (other than foreign sources) exceeds Rs 15 lakhs. Also, a citizen of India
who is deemed to be a resident in India (w.e.f FY 2020-21) will be a resident and ordinarily
resident in India.
NOTE: Income from foreign sources means income which accrues or arises outside India
(except income derived from a business controlled in India or profession set up in India).
NON-RESIDENT
An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR
for the year.
TAXABILITY
Resident (R): A resident will be charged to tax in India on his global income i.e. income
earned in India as well as income earned outside India.
NR and RNOR: Their tax liability in India is restricted to the income they earn in India.
They need not pay any tax in India on their foreign income. Also note that in a case of double
taxation of income where the same income is getting taxed in India as well as abroad, one
may resort to the Double Taxation Avoidance Agreement (DTAA) that India would have
entered into with the other country in order to eliminate the possibility of paying taxes twice.

5. Mr.Chethan.S
Asst. Professor, Dept. ofMgt., AIGS
5
PROBLEMS ON RESIDENTIAL STATUS
PROBLEM-01
What is the residential status of Mr. Robert for the Assessment Year 2021-22, who was in
India as follows?
Previous Year Presence in India
2020-21 182 Days
2019-20 55 Days
2018-19 28 Days
PROBLEM-02
Mr. Peter, a foreign cricketer comes to India for 100 days every year since the financial year
2010-11. Find out his residential status for the Assessment year 2021-22.
PROBLEM-03 (w.e.f. Finance Act 2020)
Mr. Ramesh is a Citizen of India comes to India on 20-3-2020. On 01-09-2020, he left India
and went to Nepal on a Business trip. Again he comes back to India on 10-03-2021 on a visit.
Determine his residential status for the Assessment year 2021-22, if his taxable Indian
Income for the Previous year is Rs.18,00,000 and he was in India for 1,107 days during 4
P.Y. Preceding the P.Y.
PROBLEM-04
Mrs. Mangala, a citizen of India went to England on 2-10-2014 for higher studies for a
period of two years. After she came back, she was employed in a multinational company in
India. The company sent for 6 months training to Germany on 1-03-2017.
She was transferred to the company’s head office in New York on 15-08-2018. However, she
left India on 2-10-2018 and reported for duty on 5-10-2018. She visited India during the
months of November and December 2019. The company transferred her back to her Original
post in India and she returned to India on 26-01-2021.
Determine her Residential status for the Assessment Year 2021-22.

6. Mr.Chethan.S
Asst. Professor, Dept. ofMgt., AIGS
6
PROBLEM-05 (w.e.f. Finance Act 2020)
Mr. Eshwar an Indian citizen leaves India for the first time in the last 20 years on November
20th, 2018. During the calendar year 2019 he comes to India on 1st September and stays for a
period of 30 days. During the calendar year 2020, he does not visit India at all but comes to
India on January 16th, 2021, and stays for 730 days. Determine his residential status for the
assessment year 2021-22, if his taxable income other than foreign income for the P.Y. is
Rs.20, 00,000 and he is not liable to pay tax in any other country.
PROBLEM-06
Mr. Kishore went to England for studies on 15-08-2020 and came back to India on
25-02-2021. He had never been out of India before. What is his residential status for the
A.Y.2021-22?
PROBLEM-07
Mr. Prakash a foreigner came to India from Poland for the first time on 1-4-2014. He stayed
here continuously for 3 years and went to France on 1-4-2017. He however returned to India
on 1-7-2017 and went to Poland on 1-12-2018. He again came back to India on 25-1-2021 on
a service in India. What is his residential status for the A.Y. 2021-22.
PROBLEM-08
Mr. Tom Cruise a foreign national and a person of Indian origin comes for the first time on
22-8-2016 and left for Tokyo on 5-5-2019. He once again arrived in India on 26-1-2021 and
left for Australia on 30-3-2021. Determine his residential status for the assessment year
2021-22.
PROBLEM-09
Mr. Sathish an employee of PQR Co Ltd. Mysore, has left India for the first time on 16-7-
2020 for higher training in U.K. calculate his residential status for the assessment year
2021-22.
PROBLEM-10
Mr. Clinton an American came to India for the First time on 01-01-2017. He stayed here
continuously for 2 years. He went back to New York on 01-01-2020. Again he came to India
on 01-02-2021 on a two years job Assignment with a multinational company in India.
Determine his Residential status for the previous year’s 2019-20 and 2020-21.