An individual's residential status determines their tax liability in India. There are three residential statuses: resident and ordinary resident, resident but not ordinary resident, and non-resident. An individual's residential status depends on the number of days they spent in India in the last year and last few years. Additionally, an individual must meet further criteria to be considered an ordinary resident. The residential status principles are also applied to HUFs, firms, companies, and other entities to determine their tax obligations. An individual or entity's residential status then dictates whether their global income is subject to tax in India.

1. RESIDENTIAL STATUS AND ITS TAX EFFECT
Tax incidence on an assessee depends on his residential status. For
instance, whether an income, accrued to an individual outside India, is
taxable in India depends upon the residential status of the individual in
India. Similarly, whether an income earned by a foreign national in India
(or outside India) is taxable in India depends on the residential status of
the individual, rather than on his citizenship. Therefore, the determination
of the residential status of a person is very significant in order to find out
his tax liability.
Different Taxable Entity:
1. Individual
2. Hindu Undivided Family
3. A firm or an association of persons
4. a joint stock company
5. every other person
Residential status:
1. Resident and ordinary resident in India
2. Resident but not ordinary resident in India
3. Non-resident in India.
Different residential Status for different Taxable entity:
Category
Individual/ Hindu undivided
Family
Firm/association of
persons, joint stock
company and every
other person.

2. Category 1
Ordinary
resident
Resident
In India
Non-ordinary
resident
Resident in India
Category 2 Non resident in India Non resident in India
Residential status is to be determined for each previous year. A person can
be a resident of two countries at once. Whether a person is a resident or
non-resident is a question of fact and its duty of the assessee to place all
relevant fact in front of the assessing officer
Residential status of individual (sec 6):
Basic conditions:
To be an Indian resident a person should satisfy atleast one of the two
conditions as under:
1. He is in India in the previous year for a period of 182 days or more.
2. He is in India for 60 days or more during the previous year and 365
days or more during 4 years immediately preceding the previous
year.

3. Exceptions:
In the following two cases a person will be a resident if he satisfies only the
first condition, the second condition is not applicable.
1. In case of an Indian citizen who leaves India for the purpose of
employment or as a member of the crew of an Indian ship.
2. In the case of an Indian citizen or a person of Indian origin who
comes on a visit to India in the previous year.
Additional Conditions:
For a resident to be classified as an ordinary resident the following two
additional conditions should be fulfilled. In case any one of them is not
fulfilled then the person will be under the category of resident but not an
ordinary resident.
1. He should be resident in India for at least 2 years out of the preceding
10 years.
2. He should be in India for at least 730 days out of the immediately
preceding 7 years.
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 182days 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

4. 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.
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)
Non Resident
• Individual who does not satisfy at least one of the basic conditions
u/s 6 (1).
Residential Status of a Hindu undivided Family sec 6(2):
HUF is classified as a resident and non resident according to its control and
management status. Control and management means the de facto control
and management and not just the right to control and manage.
Place of control
Residential
status of HUF
Ordinary
resident or
not
Control and management is wholly
in India
Resident Next table
Control and management is wholly
outside India
Non-resident --
Control and management is partly
in India and partly outside India
Resident Next table

5. Condition for being ordinary resident:
Add
condition 1
Karta has been resident in India at least 2 out of 10
previous years immediately preceding the relevant
previous year.
Add
condition 2
Karta has been present in India for a period of 730
days or more during the 7 years immediately
preceding the previous year.
If karta or manager of a resident HUF does not satisfy the above two
conditions then it would be treated as resident but not ordinary resident.
Residential status of firm and association of persons: sec6 (2)
Place of control Residential
status
Control and management of the affairs of a
firm/association of persons is-
· Wholly in India
· Wholly outside India
· Partly in India and Partly outside India
Resident
Non-resident
Resident
Residential status of a company sec 6(3):

6. Place of control Residential status
Indian
Company
Other
company
Control and management of the
affairs of the company is situated-
· Wholly in India
· Wholly outside India
· Partly in India and Partly
outside India
Resident
Resident
Resident
Resident
Non resident
Non resident
The term control and management refers to head and brain that directs the
affair of policy, finance, disposal of profits and vital things regarding the
management of a company.
Residential status of every other person sec 6(4):
Place of control Residential status
Control and management of his affairs are
situated-
· Wholly in India
· Wholly outside India
· Partly in India and Partly outside India
Resident
Non- resident
Resident
Incidence of Tax for different Taxpayers:
Incidence of tax on taxpayers depends on his residential status and also on
the place and time of accrual and receipt of his income.
Tax incidence on Individual and HUF is as under:

7. Resident and
ordinary
resident
Resident but
not ordinary
resident
Non resident
Indian Income
Foreign Income
· Business is
controlled wholly or
party from India
· Income from
profession set up in
India
· Business is
controlled from
outside India
· Profession is set up
outside India
· Any other foreign
Income
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Taxable in
India
Taxable in
India
Taxable in
India
Not taxable in
India
Not taxable in
India
Not taxable in
India
Taxable in
India
Not taxable in
India
Not taxable in
India
Not taxable in
India
Not taxable in
India
Not taxable in
India
Tax incidence on any other taxpayer (company, firm etc) as under:
Resident in India Non- resident in
India
Indian Income
Foreign income
Taxable in India
Taxable in India
Taxable in India
Not Taxable in
India