Residential Status

SYBBI (Sem 3) / TYBFM (Sem 5) / M.Com.
(Sem 3) Income Tax Act, 1961

Direct Taxation Introduction & Residential Status
INCOME TAX ACT, 1961
Section 2(7) : Assessee
Assessee means a person by whom any tax or any other sum of money is payable
under the Income Tax Act, 1961.
Section 2(31) : Person
Individual
Hindu Undivided
Family
Company
Firm
Person
Association of
Persons
Body of
Individuals
Local Authority
Artificial
Juridical Person
Compiled for reference by

CS Swapnil Shenvi Only for academic purposes
1
SYBBI (Sem 3) / TYBFM (Sem 5) / M.Com. (Sem 3) Income Tax Act, 1961
Sr.
Person Legal Status
No.
1. Shahrukh Khan
2. Mr. Rohit – a person of

unsound mind
3. Darsheel Safari – minor
4. Ram, his wife Sita and 2 sons

– Luv and Kush
5. M/s. Rohit & Mohit – two
chartered accountants in
partnership
6. Reliance Industries Limited
7. Tata Memorial Trust
8. Bandra Cricket Club
9. Joint Venture between Hero

and Honda
10. S, R and K, individuals,
constructed a Cinema Theatre
jointly and share the rent
11. BMC
12. Municipal Corporation of

Delhi
13. Bombay Port Trust
14. Mumbai University
15. Roha Gram Panchayat
16. Tirupati Devsthanam
17. Bank of Baroda Ltd.
18. Shankar Niwas Co-operative

Housing Society
19. Parle Tilak Vidyalaya
Association

2
Section 2(8) : Assessment
Assessment is the process of determining
• The income or the loss of an assessee

• The tax liability on the income so determined
• The tax payable by or refund due to the assessee
The term assessment includes re-assessment
Sec 2(9) Sec 3

Assessment Year Financial Year
Period of 12 months commencing on the The financial year immediately
1 day of April every year
st preceding the assessment year
Q. A new business is set up by Mr. Shah on 1st June 2018. What will be the
financial year under the Income Tax Act, 1961?
A. Financial Year:
Assessment Year:
Q. Mr. Dutt, earlier unemployed, gets a job on 1st August 2018. What will be the
relevant financial year?
A. Financial Year:
Assessment Year:
Section 2(24) : Income
Income includes:
• Profits or Gains from business or profession

• Dividend Income
• Voluntary contributions received by trust
• Income from house property
• Income from salary
• Perquisites in the hands of the employee
• Special allowance or benefit granted to a person
• City compensatory allowance / dearness allowance
• Benefit / perquisites to a director of a company
• Capital gains
• Winnings from lottery
• Amount received under Keyman Insurance Policy
• Gifts exceeding Rs 50000
• Other income

3
Residential Status of an Individual
A person becomes a Resident in India if he fulfils any of the following basic

conditions:
Basic Conditions:
1. He is in India in the PY for a period of 182 days or more OR
2. He is in India for a period of 60 days or more during the financial year

and 365 days or more during the four years immediately preceding the
financial year
Exceptions:
The period of 60 days referred to in (2) above would be extended to 182 days
in the following two circumstances:
1. An Indian Citizen who leaves India during the PY for the purpose of
employment outside India or an Indian Citizen who leaves India
during PY as a member of the crew of an Indian ship.
2. Indian Citizen or a Person of Indian Origin (PIO) who comes on a visit

to India during the PY
{Person is deemed to be of Indian origin if he or either of his parents or

any of his grandparents were born in undivided India}
Additional Conditions for a Resident:
A resident individual is treated as “Resident and Ordinarily Resident” in

India if he satisfies the both following two conditions:
1. He has been resident in India at least 2 out of 10 financial years

immediately preceding the relevant financial year AND
2. He has been in India for a period of 730 days or more during 7 years
immediately preceding the relevant financial year

4
Summary 1:
Residential Status of
Individual
Resident Non Resident
Must satisfy 1 of the 2 Does not satisfy both

basic conditions the basic conditions
Resident and Resident but not

Ordinarily Resident Ordinarily Resident
Fails to satisfy either

Must satisfy both the
or both the additional
additional conditions
conditions
Summary 2:
R & OR Resident and Ordinarily Should satisfy one of the basic conditions
Resident and both additional conditions
R & NOR Resident but Not Satisfies one of the basic conditions but does
Ordinarily Resident not satisfy any additional conditions
NR Non Resident Does not satisfy any of the basic conditions
Summary 3:
If both the basic conditions not

Non-Resident
satisfied
Additional Conditions not relevant
If any one of the basic conditions
Resident
satisfied
Proceed further to see if both the additional conditions are satisfied
If both additional conditions
Ordinarily Resident
satisfied
Even if one additional condition not
Not ordinarily Resident
satisfied

5
NOTE:
1. It is not essential that the stay should be at the same place. It may be at
different places.
2. It is equally not necessary that the stay should be continuous.
3. If data regarding the number of hours of stay in India is not available, then
the day on which he enters India as well as the day on which he leaves India
shall be taken into account as stay of the individual in India.
4. Any person in India for 182 days or more will always be a Resident in India.
5. Any person in India for 59 days or less will always be a Non-Resident of
India.
6. Number of days in February will be 29 in a leap year.
Q 1. Mr. Nawaz Shareef leaves India for the first time on May 20, 2013. During the
financial year 2018-19, he came to India once on May 27 for a period of 53
days. Determine his residential status for the assessment year 2019-20.
Q 2. Miss Rinku comes to India for the first time on April 1, 2018. During her stay
in India upto October 5, 2018, she stays at Mumbai upto April 10, 2018 and
thereafter remains in Kanpur till her departure from India. Determine her
residential status for the assessment year 2019-20.
Q 3. Mr. Sunder Pichai, an Indian citizen, who is appointed as CEO of Google by

the Government of USA, leaves India for the first time on March 26, 2018 for
joining his duties in USA. During the financial year 2018-19, he comes to India
for 176 days. Determine the residential status of Mr. Sunder Pichai for the AY
2019-20.
Q 4. Mr. Chintu comes to India for the first time on April 16, 2015. During his stay
in India, he stays in Delhi upto April 10, 2018 and thereafter remains in Goa
till his departure from India on October 2, 2018. Determine his residential
status for the AY 2019-20.
Q 5. Mr. Subramaniam, an Indian citizen gets a job in Dubai and leaves India on
July 1, 2018. Determine his residential status for the AY 2019-20.
Q 6. Gary Kirsten, a South African citizen, comes to India as the coach of Indian
Cricket team. During the FY 2018-19, he stayed in India for 95 days. Before
that, he was in India for more than 365 days during the 4 years prior to 2018-
19. Will he be a Resident or Non-Resident in India?

6
Q 7. Siddharth Mallya, an Indian citizen, was born in London. He came to India

while he was aged 15 and never went outside till he was aged 25. He left for
Geneva in May 2015 for further studies and again came back to India on
March 2018. He again leaves India in August 2018 for taking up a job in UK.
What is his residential status for AY 2019-20?
Q 8. Mr. A, a young Indian, went abroad for the first time on 10th March 2016 for
his higher studies. He returned to India on 28th March 2018 and started his
own business in Mumbai.
He went to USA on 12th April 2018 for a negotiation of Foreign Collaboration

and returned to India on 27th April 2018. His other visits to USA for business
purpose were as under:
Date of departure from India Date of return to India

02/5/2018 09/7/2018
26/8/2018 09/9/2018
03/1/2018 25/3/2019
Determine the residential status of Mr. A for the AY 2019-20 and give your
reasons for the same.
Q 9. Mr. Thomas, a citizen of USA came to India for the first time on his
appointment as a Manager of Thomas Cook & Co. on 1st April 2014. On 1st
February 2015, he was transferred to Singapore for 3 years. He comes back to
India on 2nd February 2018 and joins his original firm. Since then, he is in
India. Determine his residential status for AY 2019-20.
Q 10. Prabhas, an Indian film actor, gives the following information of his stay
outside India for film shooting.
Period Place
12th April 2018 to 27th April 2018 USA
5th May 2018 to 11th July 2018 Sri Lanka
26th August 2018 to 9th September UK
2018
20th September 2018 to 11th October New Zealand
2018
3rd January 2019 to 25th March 2019 South Africa
He made his debut in international films on 10th March 2016 and went to
Hollywood for 2 years and returned to India on 28th March 2018.
Determine his residential status with reasons for AY 2019-20.

7
HUF
Resident Non-Resident
Either entire control When no part of its

and management is in control or
India or a part of it is management is in
in India India
Resident and Resident but Not

Ordinarily Resident Ordinarily Resident
When its Karta is non-

Only when its Karta is
resident or resident
ordinarily resident for
but not ordinarily
the PY of HUF
resident
Residential
Status of Indian
Company
Always Resident

8
a non-Indian
Company
Resident Non-resident
When its control and

When its control and
management is
management is
partially or totally
completely in India
outside India
Firm / BOI / AOP /

Local Authority /
Artificial Juridical
Person
Resident Non-Resident
When control and When control and

management is management is
completely or partially completely outside
in India India

9
Summary 4:
Control and Management of the affairs of

Person other than individual
the Person are
Partially in
India and
Wholly in Wholly
Partially
India outside India
outside
India
HUF R NR R
Firm R NR R
AOP R NR R
Indian Company R R R
Non-Indian Company R NR NR
Artificial Juridical Person R NR R
SCOPE OF TOTAL INCOME
Nature of Income R & OR R but NOR NR

Indian Income
Income received in India Taxable Taxable Taxable
Income deemed to be received Taxable Taxable Taxable
in India
Income accrued in India Taxable Taxable Taxable
Income deemed to be accrued Taxable Taxable Taxable
in India
Foreign Income
Income arising outside India Taxable Taxable Not taxable
from a business controlled in
India
Income arising outside India Taxable Not taxable Not taxable
from a business controlled
outside India
Any other foreign income Taxable Not taxable Not taxable
Summary 5:
1. Indian Income is always taxable

2. Foreign Income of R & OR is fully taxable
3. Foreign Income of R but NOR is taxable only if business is controlled in India
4. Foreign Income of NR is not taxable at all
5. Everything is taxable to R & OR

10
Q 11. Mr. Tom had the following incomes during the year ended 31st March, 2019:
Sr.
Incomes Rs.
No.
1. Income from House Property in India 15000
2. Income from property in Rome 10000
3. Interest from bank account in India 1200
4. Income from business in Bangladesh, being controlled 16000
from India
5. Interest on bank account in USA 11000
6. Salary earned and received in Tokyo 12000
7. Income earned and received in London 13000
8. Dividend from British Company received in India 17000
Compute his total income for the AY 2019-20 if he is resident and ordinarily
resident, resident but not ordinarily resident and non-resident.
Q 12. Compute total income of Mr. X if he is R & OR, R but NOR and NR:
Sr.
Incomes Rs.
No.
1. Income from business in India 20000
2. Income earned in India but received in UK 12000
3. Professional fees received in India 5000
4. Income from House Property in India 40000
5. Income from Bank Account in India 3000
6. Income from Bank Account in USA 10000
7. Salary earned and received in Singapore 20000
8. Income from business in Sri Lanka which is controlled 22000
from India
9. Dividend from British Company received in India 7000
10. Income accrued in Switzerland and not received in India 15000
11. Income from business in Singapore which is controlled 26000
from Hong Kong (the amount has been brought to
India)
12. Income earned in USA in past but brought in India 45000
during the year
13. Income from House Property in Sweden 25000
14. Profits of business in India controlled from India 25000
15. Pension received in India 10000
16. Income from business in Sweden controlled from 50000
Sweden
17. Income from business in Italy controlled from India 75000
18. Salary earned in India but deposited directly in the bank 30000
in London
19. Professional fees earned and received in New York but 10000

11
later remitted to India

20. Income accrued in UK and brought to India 3000
21. Salary earned in India out of which Rs 10000 was 25000
received abroad
22. Salary earned abroad out of which Rs 30000 was 100000
received in India
23. Income from let out house property situated in India out 40000
of which Rs 12000 was received abroad
24. Income from let out house property situated abroad out 75000
of which Rs 15000 was received in India
25. Dividend on shares of Indian Companies received in 100000
India Rs 11000 and received abroad Rs 89000
26. Dividend on shares of Foreign company received 100000
abroad Rs 79000 and received in India Rs 21000
27. Income from business in UK controlled from India out 50000
of which Rs 9000 received in India
28. Income from business in Dubai controlled from Dubai 70000
out of which Rs 19000 was received in India
29. Income from business deemed to be received in India 50000
30. Income from profession deemed to accrue or arise in 25000
India

12
Q 13. Following are the details of Mr. A. Compute his total income for the AY 19-20
if he is R & OR, R but NOR and NR.
Sr.
Particulars Rs.
No.
1. Income earned from business in Kolhapur 10000
2. Income earned from business in France 25000
3. Income earned from UK but received in
35000
India
4. Income earned and received in US 45000
5. Income from business in Sri Lanka controlled
100000
from India
6. Income from business in Spain controlled
50000
from Spain
7. Income from business in Iran controlled from
150000
Dubai
8. Past profits brought to India 70000
9. Income received in US later remitted to India 100000
10. Income from business in Italy controlled
from India (out of the total amount, Rs 10000 50000
was received in India)
11. Income from Kuwait controlled from Dubai
75000
out of which Rs 20000 was received in India
12. Income from agriculture in India 10000
13. Income earned in India but received in
15000
France
14. Income from agriculture in Bangladesh 20000
15. Dividend from British Company 10000
16. Dividend from US Company received in
5000
India

13
Exclusion from Total Income : Exempt Incomes under Sec 10
Section Exempt Income

10(1) Agricultural Income in India
10(2) Share received from HUF
10(2A) Share of profit of a partner from a partnership firm
10(10) Gratuity received
10(10A) Commuted pension
10(10AA) Leave Salary
10(10B) Retrenchment Compensation
10(10C) Amount received in Voluntary Retirement
10(10D) Amount received under Life Insurance Policy
10(11) Any amount received from PF
10(12) Any amount received from recognised PF
10(13A) House Rent Allowance
10(15) Interest on capital investment bonds,
National Defence Gold Bonds,
Special Bearer Bonds,
Post Office Savings Bank A/c etc
10(16) Scholarship granted to meet the cost of education
10(17) Daily allowance to MP & MLA
10(17A) Any award received in cash or kind, issued by CG or SG in public
interest
10(32) Income of minor upto Rs 1500
10(34) Dividend from Indian Company
10(35) Income from Mutual Fund / UTI

14
Employer – Employee
Salary
Relationship
House Property House let out
Profit from sale of house

property, shares,
Heads of Income Capital Gains
debentures, MF, gold, art
and artifacts
Business / Profession Owner of a business
Income other than the

Other Sources
previous 4 incomes
State whether the following are true or false:
1. Income Tax in India is governed by the Income Tax Act, 1961

2. The Constitution of India empowers Central Government to levy tax on
income
3. Financial year is always of 12 months
4. Assessment year is always of 12 months
5. For a newly set up business, financial year can be of less than 12 months
6. In assessment year, income of financial year is assessed
7. Income can be in cash or in kind
8. The definition of income is inclusive definition
9. Awards received by professional sportspersons in nature of gift is liable to tax
10. The financial year immediately succeeding the assessment year is the financial
year
11. Residential status has nothing to do with citizenship
12. Residential status of the assessee depends on the stay of the assessee in India
during the financial year

15
13. Past untaxed profits brought into India is always taxable

14. Incomes which accrue or arise outside India but are received directly into
India are taxable only in case of Resident
15. Income which accrues or arises outside India from a business controlled from
India is taxable in case of only not ordinarily resident
16. Gratuity paid to Government employees is always fully exempt from tax
17. Gift received by a lawyer from his client is income as per Income Tax Act,
1961
18. Gift received by son on his birthday from parents is income as per Income Tax
Act, 1961
19. Money received by dependant parents from their son is income as per Income
Tax Act, 1961
20. Income received from smuggling activity is income as per Income Tax Act,
1961
21. Reimbursement of actual travelling expenses to an employee is income as per
Income Tax Act, 1961
22. Man of the Match prize received by MS Dhoni is income as per Income Tax
Act, 1961
23. Once a person is a resident in a financial year, he shall be deemed to be
resident for subsequent financial years
24. A resident in India cannot become resident in any other country for the same
assessment year
25. A person is deemed to be of Indian origin, if his father was born in Pakistan
26. A person is deemed to be of Indian origin, if his father was born in Nepal
27. A person is deemed to be of Indian origin, if his father was born in
Bangladesh
28. A person is deemed to be of Indian origin, if his father was born in Sri Lanka
29. While counting the number of days for determining residential status, a stay
in a cruise boat anchored in the Mumbai Port is treated as stay in India
30. All heads of income as defined u/s 14 are mutually exclusive

16
Choose the most appropriate answer:
1. Income tax is a tax on ___________

a. Income
b. Profit
c. Turnover
d. Expenditure
2. Residential Status of an individual depends on the stay of assessee in India
during the _________________
a. Calendar Year
b. Assessment Year
c. Accounting Year
d. Financial Year
3. A person by whom any tax is payable under Income Tax Act, 1961 is called as
a. Individual
b. Person
c. Assessee
d. None of the above
4. The financial year in which the income is earned
a. Assessment Year
b. Present Year
c. Financial Year
d. Current Year
5. The term “person” includes
a. HUF
b. AOP
c. BOI
d. All
6. Income tax Act extends to
a. Whole of India
b. Whole of India except Jammu & Kashmir
c. Whole of Maharashtra
d. None of these
7. AOP should consist of
a. Individuals only
b. Persons other than individuals only
c. Both
d. None
8. Body of Individuals should consist of
a. Individuals only
b. Persons other than individuals only

17
c. Both
d. None
9. In which year is the income tax liability computed?
a. Assessment year
b. Financial Year
c. Financial Year
d. Accounting Year
10. Income earned during what period is taxed?
a. Assessment year
b. Financial year
c. Financial year
d. Accounting year
11. Whose income is chargeable to income tax?
a. Income of only Indian Citizens
b. Income of only residents
c. Income of all persons
d. Income of only assesses
12. One who is liable to pay income tax in India
a. Indian citizen
b. Indian Resident
c. Any person
d. An assessee
13. The rates on Income Tax are laid down by
a. The Income Tax Act
b. The Income Tax Rules
c. Finance Act 1994
d. Finance Act passed by the Parliament every year

18
Fill in the blanks:
1. Financial year means _____________________________ year immediately

preceding the assessment year
2. If the assessee does not satisfy the basic condition, then he will be treated as
___________________________
3. If the assessee satisfies the basic condition, then he will be treated as
___________________________
4. Total income of a person is determined on the basis of
_____________________________________ in India
5. Residential status is determined based on the number of days stay in
________________________ year
6. Agricultural income is _________________ from tax
7. There are ________ heads of income under Income Tax Act, 1961
8. Share of income received by a member of HUF is ______________ income
9. An income which does not fall under first 4 heads of income is taxable under
the head _________________________________________
10. The rules for implementation of income tax are contained in Income Tax
Rules, ___________
11. Charge of Income Tax is laid down in Section _____
12. Section _________ of the Income Tax Act defines the scope of income
13. Section _________ of the Income Tax Act defines the residential status of a
person
14. Income computed under each head when added together is called
______________________________________________________
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19

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SYBBI (Sem 3) / TYBFM (Sem 5) / M.Com.

(Sem 3) Income Tax Act, 1961

INCOME TAX ACT, 1961

Section 2(7) : Assessee

Section 2(31) : Person

Compiled for reference by

2. Mr. Rohit – a person of

4. Ram, his wife Sita and 2 sons

7. Tata Memorial Trust

8. Bandra Cricket Club

9. Joint Venture between Hero

12. Municipal Corporation of

14. Mumbai University

15. Roha Gram Panchayat

16. Tirupati Devsthanam

17. Bank of Baroda Ltd.

18. Shankar Niwas Co-operative

Compiled for reference by

Section 2(8) : Assessment

Assessment is the process of determining

• The income or the loss of an assessee

The term assessment includes re-assessment

Sec 2(9) Sec 3

Section 2(24) : Income

• Profits or Gains from business or profession

Compiled for reference by