Income Tax

1. RESIDENTIAL
STATUS

2. IMPORTANT CONCEPTS
PERSON [SECTION 2(31)] : Income-tax is charged in respect of the total income of the previous year of every
person. Hence, it is important to know the definition of the word person. As per section 2(31), Person
includes : Individual : An individual is a natural human being i.e. male, female, minor or a person of sound
or unsound mind, Hindu Undivided Family (HUF), Company, AOP & BOI Firm & LLP, Local Authority Every
other Artificial and Judicial Person & partnership firm.

3. RESIDENTIAL STATUS –WITH CONDITIONS
The Residential Status of an Individual is determined on the basis of the period of his stay in
India
Resident
ordinary resident
– satisfies basic and additional conditions
non ordinary
resident
– satisfies basic but not the additional
conditions
Non-Resident
Not satisfies any of the Basics
Conditions
Satisfy Any of the Basic conditions:
i. Present in India for 182 days or more during the previous
year; OR
ii. Present in India for 60 days or more during the previous
year and 365 days or more during the 4 years immediately
The above Basic conditions (ii) are not applicable when:
a. An Indian citizen who leaves India during the previous year
for the purpose of employment outside India or as a member
of the crew of an Indian ship.
b. An Indian citizen or a person of Indian origin who, being
outside India, comes on a visit to India during the previous year.
Additional Conditions:
(i) He is a resident in at least 2 out of 10 previous years
preceding the relevant previous year &
(ii) His stay in India in the last 7 years preceding the relevant
previous year is 730 days or

4. RESIDENTIAL STATUS OF HINDU UNDIVIDED FAMILY(H.U.F.) (SEC. 6(2))
RESIDENT
If the Control and Management of a HUF’s affairs are situated wholly or partly in India during
the relevant Previous Year, the HUF is a resident in India during that period.
ORDINARILY RESIDENT
A Hindu undivided family is an ordinarily resident in India if the ‘Karta’ satisfies the both the
additional conditions of Ordinary Resident as an individual.
RESIDENT BUT NOT ORDINARILY RESIDENT
A HUF is ‘Not Ordinarily Resident’ in India, If its Karta or Manager satisfies one or none of the
additional conditions pf ordinarily resident as an individual
NON-RESIDENT
A Hindu undivided family is non-resident in India if control and management of its affairs is
wholly situated outside India.

5. RESIDENTIAL STATUS OF FIRM, ASSOCIATION OF PERSONS [SEC.6(2)]
AND EVERY OTHER PERSON (LOCAL AUTHORITY, ARTIFICIAL JUDICIARY
PERSON LIKE IDOLS ETC.) OTHER THAN A COMPANY [(SEC. 6(4))]
RESIDENT
A Partnership Firm, AOP or Every Other Person is resident in India if the ‘Control
and Management of its affairs’ is situated Wholly or Partly in India during the
relevant Previous Year.
NON-RESIDENT
All the Three type of Assesses i.e.., firm, AOP and any other person are non-
resident when the Control and Management of their affairs is situated outside
India. The Control and management of affairs must be ‘Wholly’ outside India to
make the assesses ‘Non-Resident’

6. RESIDENTIAL STATUS OF COMPANIES
INDIAN COMPANIES
RESIDENT
A Company is resident in India in
previous year, if it is an Indian Company.
An Indian Company is always a Resident
FOREIGN COMPANIES
RESIDENT
A Company is Resident in India when
Control and Management of its affairs are
situated wholly in India in during previous
year
NON-RESIDENT
A Company is Non-Resident in India
when the Control and Management are
situated Wholly or Partially outside India
in during Previous Year.

7. INCIDENT OF TAX AND RESIDENTIAL STATUS (SEC. 5)
This provides the scope of the total income of the assesses because the incidence of tax
on any person depends upon his residential status. The scope of total income of an
assesses depends upon the following three important considerations:
(i) The residential status of the assesses.
(ii) The place of accrual or receipt of income, whether actual or deemed and
(iii) The point of time at which the income had accrued to or was received by or on
behalf of the assesses.
The Income can be classified as
1. Indian Income (Received in India)
2. Income Not Received in India during Previous Year

8. TAX INCIDENCE - RESIDENTIAL STATUS OF ALL ASSESSES IS INDICATED IN THE FOLLOWING TABLE
WHERE TAX INCIDENCE ARISES IN CASE OF RESIDENT & ORDINARILY
RESIDENT
RESIDENT (ONLY FOR
INDIVIDUAL OR HUF)
NON-RESIDENT
INCOME RECEIVED IN INDIA (WHETHER
ACCRUED IN OR OUTSIDE INDIA) TAXABLE TAXABLE TAXABLE
INCOME DEEMED TO BE RECEIVED IN INDIA
(WHETHER ACCRUED IN OR OUTSIDE INDIA) TAXABLE TAXABLE TAXABLE
INCOME ACCRUING OR ARISING IN INDIA
(WHETHER RECEIVED IN INDIA OR OUTSIDE
INDIA)
TAXABLE TAXABLE TAXABLE
INCOME DEEMED TO ACCRUE OR ARISE IN
INDIA (WHETHER RECEIVED IN INDIA OR
OUTSIDE INDIA)
TAXABLE TAXABLE TAXABLE
INCOME RECEIVED AND ACCRUED OUTSIDE
INDIA FROM A BUSINESS CONTROLLED OR A
PROFESSION SET UP IN INDIA
TAXABLE TAXABLE NOT TAXABLE

9. INCOME RECEIVED AND ACCRUED OUTSIDE
INDIA FROM A BUSINESS CONTROLLED FROM
OUTSIDE INDIA OR A PROFESSION SET UP
OUTSIDE INDIA
TAXABLE NOT TAXABLE NOT TAXABLE
INCOME EARNED AND RECEIVED OUTSIDE INDIA
BUT LATER ON REMITTED TO INDIA (WHETHER
TAX INCIDENCE ARISES AT THE TIME OF
REMITTANCE)
NOT TAXABLE NOT TAXABLE NOT TAXABLE
DIVIDEND FROM AN INDIAN COMPANY OR
MUTUAL FUND SPECIFIED UNDER SECTION
10(23D)
EXEMPT U/S 10(34) AND 10(35) SUBJECTS TO SECTION 115BBDA
AGRICULTURAL INCOME IN INDIA EXEMPT U/S 10(1)
LONG TERM CAPITAL GAIN (ON SECURITIES ON
WHICH SECURITIES TRANSACTION TAX IS PAID) EXEMPT U/S 10(38) UP TO 1 LAKH
PAST UNTAXED PROFITS (OF EARLIER YEARS)
NOT TAXABLE
REMITTANCES (SECOND RECEIPT) TO INDIA
NOT TAXABLE
GIFTS FROM RELATIVE (ON ANY OCCASION) OR
GIFT ON MARRIAGE FROM ANY PERSON NOT TAXABLE

10. Reference:
IncomeTaxTheory, Law & Practice-T.S. Reddy & Hari prasad Reddy
Tax laws-ICSI Material