This document discusses residential status for tax purposes in India. It defines resident and non-resident status for individuals, HUFs, firms, companies and other persons. For individuals, residential status can be resident and ordinarily resident, resident but not ordinarily resident, or non-resident. The criteria for each status is explained, such as being in India for a certain number of days. The tax treatment of income differs based on residential status, such as residents paying tax on worldwide income and non-residents paying tax on India-source income. Specific types of income that are considered to accrue or arise in India are also outlined.

1. Resident Status
Lecture 2

2. Why Study Residential Status
• Tax incidence on an assesse depends on his
residential status.
• E.g. An income, accrued to an individual outside
India, is taxable in India, depends upon the
residential status of the individual in India
• Income earned by a foreign national in India or
outside India is taxable in India depends on the
residential status of the individual in India, rather
than the citizenship.

3. Different taxable entities
All taxable entities are divided in the following
categories for the purpose of determining
residential status:
a. An individual;
b. A Hindu undivided family;
c. A firm or an association of persons;
d. A joint stock company; and
e. Any other person.

4. Categorization of the entities
• Individual / HUF
- Resident = Ordinary/ Non Ordinary
- Non Resident
• Others included in definition of “Person”
 Resident = Ordinary/ Non Ordinary
 Non Resident

5. RESIDENTIAL STATUS OF AN
INDIVIDUAL
• As per section 6, an individual may be
(a)resident and ordinarily resident in India,
(b)resident but not ordinarily resident in India,
(c)non-resident in India.
• RESIDENT AND ORDINARILY RESIDENT
As per section 6(1), in order to find out whether an individual is
“resident and ordinarily resident” in India, one has to proceed as
follows:
• Step 1 First find out whether such individual is “resident” in India.
• Step 2 If such individual is “resident” in India, then find out whether
he is “ordinarily resident” in India. However, if such individual is a “non-resident”
in India, then no further investigation is necessary

6. WHO IS A ‘RESIDENT’ FOR TAX
PURPOSES
• INDIVIDUAL
• Basic Conditions Sec 6 (1 )
–An individual is considered as a ‘resident’ if he
is
• in India for 182 days or more in a previous year
OR
• in India for 365 days or more in 4 years immediately
preceding a previous year and 60 days or more in a
previous year .

7. Exception to conditions (2)
• Period 60 Days is extended to 182 days in the
following cases.
i) An Indian citizen who leaves India during the
previous year for the purpose of employment
outside India
ii) Indian citizen who leaves India during the previous
year as a member of crew of Indian ship.
iii) Indian citizen or person of Indian origin who
comes on a visit to India during the previous year.

8. • A person is deemed to be of Indian origin if
he, or either of his parents or any of his grand-parents
was born in undivided India.

9. Resident and Ordinarily Resident – u/s 6(6)
• Individual is treated as Resident and Ordinarily
Resident in India if he satisfies the following
additional conditions:
i) He has been resident in India in at lest 2 out of 10
previous year immediately preceding the previous
year.
ii) He has been in India for a period of 730 days or
more during 7 years immediately preceding the
relevant previous year.

10. RESIDENT BUT NOT ORDINARILY
RESIDENT
 As per section 6(1), an individual who satisfies at least one of the basic
conditions[Basic condition (a)He is in India in the previous year for a period of
182
days or more. Basic condition (b)He is in India for a period of 60 days or more
during the previous year and 365 days or more during 4 years immediately
preceding the previous year]
but does not satisfy the two additional conditions
1.An Indian citizen who leaves India during the previous year for the purpose of
taking employment outside India or an Indian citizen leaving India during the
previous year as a member of the crew of an Indian ship.
2. An Indian citizen or a person of Indian origin who comes on visit to India
during the previous year (a person is said to be of Indian origin if either their
any of his parents or any of his grand parents was born in undivided India)], is
treated as a resident but not ordinarily resident in India.

11. Resident and Not Ordinarily Resident – u/s 6(6)
• Individual who satisfies at least one of the
basic conditions u/s 6 (1) but does not satisfy
the additional conditions under u/s 6 (6)

12. Non Resident
Non Resident
•Individual who does not satisfy at least one of
the basic conditions u/s 6 (1).

13. Hindu Undivided Family: u/s 6(2)
• As per section 6(2), a Hindu undivided family (like an
individual) is either resident in India or non-resident in India.
A resident Hindu undivided family is either ordinarily resident
or non resident
1. A Hindu undivided family is said to be resident in India if
control and management of its affairs is wholly or partly
situated in India.
2. A Hindu undivided family is said to be non-resident in India if
control and management of its affairs is situated wholly
outside India.
• Residential status of Karta is considered for determining
whether a Resident family is ordinarily Resident.

14. Hindu Undivided Family: u/s 6(2)
• HUF- When ordinarily resident in India
A resident Hindu undivided family is an ordinarily resident in
India if the karta or manager of the family (including successive
kartas) satisfies the following two additional conditions as laid
down by section 6(6)(b):
• Additional condition (i)Karta has been resident in India in at least
2 out of 10previous years immediately preceding the relevant
previous year.
Additional condition (ii)Karta has been present in India for a period
of 730 days or more during 7 years immediately preceding the
previous year.
If the Karta or manager of a resident Hindu undivided family does
not satisfy the two additional conditions, the family is treated as
resident but not ordinarily resident in India

15. Firm and Association of Person.: u/s 6(2)
• A partnership firm and a association of persons are
said to be resident in India if control and
management of their affairs are wholly or partly
situated within India during the relevant previous
year.
• They are, however, treated as Non Resident in India
if control and management of their affairs are
situated wholly outside India.

16. Company u/s 6 (3)
• Indian company is always resident in India.
• Foreign company is resident in India only if, during
the previous year, control and management of its
affairs is situated wholly in India.
• Foreign company is Non resident in India only if,
during the previous year, control and management
of its affairs wholly or partly situated out of India.

17. Residential Status of Every Other Person
• Every Other person is said to be resident in
India if control and management of his affairs
are wholly or partly situated within India
during the relevant previous year.
• However they are treated as Non Resident in
India if control and management of their
affairs are situated wholly outside India.

18. SCOPE OF INCOME
Residential Status Income Chargeable to tax in India
Resident World income liable for tax in India
Non-resident  Income which accrues or arises or deemed to accrue
or arise in India and
 Income received or deemed to be received in India is
liable to be taxed in India
Resident but Not ordinary
resident
 Income received or deemed to be received in India
and
Income accruing or arising or deemed to accrue or
arise in India and
Income accruing or arising outside India from
business controlled in India or profession set up in
India will be liable to be taxed in India.

19. INCIDENCE OF TAX FOR
DIFFERENTTAXPAYER
Tax incidence of different taxpayers is as follows:-

20. Continue:

21. Income Deemed to Accrue or Arise in India
• Income from house property (residential or commercial) in India
• Income from any other asset in India
• Capital gain from asset located in India
• Income from business connection in India
• Salary from services rendered in India
• Salary from services rendered by a citizen for government of
India outside India
• Interest income or royalty/fee income from government of India
• Interest income or royalty/fee income received from a resident
Indian (for purpose other than overseas business)
• Interest income or royalty/fee income received from a non-resident
Indian for running business in India

22. Thank You