2 RESIDENTIAL STATUS

Different Taxable Entities

All taxable entities are divided in the following categories for the purpose of determining
residential status:
1. Individual
2. Hindu Undivided Family
3. Company
4. Firm or any other Person

Residential Status
An individual and a Hindu undivided family can either be:
1. Resident and ordinarily resident in India; or
2. Resident but not ordinarily resident in India; or
3. Non-resident in India

Types of Residents

Resident Non-Resident

Ordinarily Not Ordinarily

Resident Resident

All other assessees (viz., a firm, a company and every other person) can either be:
a. Resident in India; or
b. Non-resident in India.
 INCOME TAX 29

Types of Residents

Resident Non-Resident

Rules to determine Residential Status of an Individual

Basic Conditions to test when an Individual is said to be Resident in India [Sec. 6(1)]
An individual is said to be resident in India in any previous year, if he satisfies any one of
the following basic conditions:
(a) He is in India in the previous year for a period of 182 days or more.
(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.

Exceptions
The period of “60 days” referred to in Basic Condition (b) above has been extended to 182
days in case of:
1. An Indian citizen who leaves India during the previous year for the purpose of
employment outside India or an Indian citizen who leaves India during the previous
year as a member of the crew of an Indian ship.
2. Indian citizen or a person of Indian origin who comes on a visit to India during the
previous year.

However, such person having total income other than foreign income exceeding ` 15 lakh
during the previous year, period of “60 days” shall be substituted with “120 days”.

Note
1. Purpose of employment does not mean leaving India for taking employment outside
India but leaving India for the purposes of employment (the employment may be in
India or may be outside India). Thus, the individual need not be an unemployed person
who leaves India for taking employment outside India.
2. 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. It may be noted that grand-parents include
both maternal and paternal grand-parents.
3. It is not essential that the stay should be at the same place or continuous.
4. The place of stay or the purpose of stay is not material.
 30 RESIDENTIAL STATUS

5. In case a person is in India only for a part of a day, the calculation of number of days of
stay in India in respect of part of day should be made on an hourly basis. A total of 24
hours of stay considering both day of entry and departure is to be counted as
equivalent to the stay of one day.
6. If, information is not available to calculate the period of stay of an individual in India in
terms of hours, then both the days (i.e. the day of entry and departure) shall be taken as
stay of the individual in India.
7. The term “Stay in India” includes stay in the territorial waters of India (i.e. 12 nautical
miles into the sea from the Indian coastline).
8. According to Rule 126, for the purposes of section 6(1), in case of an individual, being a
citizen of India and a member of the crew of a ship, the period or periods of stay in
India shall, in respect of foreign bound ships where destination of voyage is outside
India, not include the following period:
Period to be excluded
Period commencing from Period ending on
The date entered into the and The date entered into the Continuous
Continuous Discharge Certificate in Discharge Certificate in respect of
respect of joining the ship by the signing off by that individual from the
said individual for the eligible ship in respect of such voyage.
voyage.

Indian Citizens to be considered as deemed resident of India [Sec. 6(1A)]

Indian citizen having total income, other than the foreign income exceeding ` 15 lakh during
the previous years will be deemed to be a resident of India and consequently liable to pay
tax on global income, if such Indian citizen claims that he is not liable to tax in any other
country by reason of his domicile/ residence or any other criteria of similar nature. The
objective of this amendment has been stated to tax such Indian citizens who claim
themselves as stateless persons as it is possible for an individual to arrange his affairs i.e.
stay in the various countries in the manner that he does not become resident of any country
during the year and hence not liable to pay tax on its income in any of the country.

If tax has not been paid on any part of the global income, then Income Tax Officer can ask
why the same has not been paid and if such Indian non resident claims that he has not been
paid tax because he has earned income in a country where it is not taxable and if he is not
resident of that country, then this clause may get invoked. The clarification issued by CBDT
states that “in case of an Indian citizen who becomes deemed resident of India under this
provision, income earned outside India, shall not be taxed in India unless it is derived from
an Indian business or profession”.
 INCOME TAX 31

Non-Resident
An individual is a non-resident in India if he satisfies none of the basic conditions [i.e.,
condition (a) or (b)].

Additional Conditions to test when a Resident Individual is said ordinarily Resident

in India [Sec. 6(6)]
A resident individual is treated as “resident and ordinarily resident” in India if he satisfies
both the additional conditions:
(i) He has been resident in India in at least 2 out of 10 previous years immediately
preceding the relevant previous year.
(ii) He has been in India for a period of 730 days or more during 7 years immediately
preceding the relevant previous years.

Resident but not Ordinarily Resident

An individual who satisfies at least one of the basic conditions [i.e., condition (a) or (b)] but
does not satisfy both the additional conditions [i.e., conditions (i) and (ii)], is treated as a
resident but not ordinarily resident in India.
However the following resident is always “resident but not ordinarily resident”-
1. Indian citizen or person of Indian origin who comes on a visit to India during the
previous year having total income, other than foreign income exceeding ` 15 lakh
during the previous year.
2. Indian Citizen who is deemed to be resident in India u/s 6(1A).

Rules to determine Residential Status of an HUF [Sec. 6(2)]

Place of Control Residential Status of
Family
Control and management of the affairs of a HUF is:
Wholly in India Resident
Wholly out of India Non-resident
Partly in India and Partly outside India Resident
Control and management is situated at a place where the decisions concerning the affairs of
the family are taken. Although, it is karta who normally has control and management of the
affairs of a Hindu Undivided Family yet any other coparcener can control and manage the
affairs.

When a Resident Hindu Undivided Family is Ordinarily Resident in India

A resident Hindu Undivided Family is an ordinarily resident in India if Karta of the HUF
satisfies both the following additional conditions:
(i) Karta has been resident in India in at least 2 out of 10 previous years immediately
preceding the relevant previous year
 32 RESIDENTIAL STATUS

(ii) Karta has been present in India for a period of 730 days or more during 7 years
immediately preceding the previous year.

When a Resident Hindu Undivided Family is not Ordinarily Resident in India

If karta of a resident Hindu Undivided Family does not satisfy both the additional
conditions, the family is treated as resident but not ordinarily resident in India.

Rules to determine residential status of Companies [Sec. 6(3)]

A person being a company shall be said to be resident in India in any Previous year if −
1. It is an Indian Company, or
2. Its place of effective management at any time in that year, is in India.

Note:
1. A company cannot be “ordinarily” or “not ordinarily resident”.
2. Place of Effective management to mean the place where key management and
commercial decisions that are necessary for the conduct of the entity’s business as a
whole, are, in substance made.

Rules to determine residential status of Firm, AOP, BOI [Sec. 6(2)] or any other
person [Sec. 6(4)]
Place of Control Residential Status
Control and management of the affairs of a firm/ other persons
is:
Wholly in India Resident
Wholly outside India Non-resident
Partly in India and partly outside India Resident

Note:
1. A firm/ other persons cannot be “ordinarily” or “not ordinarily resident”.
2. The residential status of the partners/ members of the firm/ association is not relevant
in determining the status of the firm/ association.
3. Control and management is situated at a place where the decisions concerning its
affairs are taken. In the case of a firm, control and management is vested in partners
and in case of an AOP/BOI it is vested in Principal Officer.

Relationship between residential status and incidence of tax

Incidence of tax on a taxpayer depends on his residential status and type of income.
 INCOME TAX 33

Type of Income
Indian Income
If income is received (or deemed to be received) in India during the previous year or
accrues (or arises or is deemed to accrue or arise) in India during the previous year or
received and accrues both in India during the previous year is said to be Indian Income.
Any income chargeable under head salary payable by Government of India to a citizen of
India for his services outside India shall be deemed to accrue or arise in India.

Foreign Income
If income is neither received (or not deemed to be received) in India; nor it accrue or arise
(or not deemed to accrue or arise) in India is said to be foreign income.

Incidence of tax for different taxpayers

Resident and Resident but not Non-resident in
ordinarily ordinarily resident in India
resident in India India
Indian Income Taxable in India Taxable in India Taxable in India
Foreign Income Taxable in India Taxable in India if business Not taxable in
is controlled wholly or India
partly from India or the
profession is set up in India.
Royalty, Interest Taxable in India Taxable in India Taxable in India
& Fee for
Technical
Services
received from
Indian Company
or government
of India

Illustration 1: Different situations are covered in the table given below:

Conclusion – Is it taxable in India
for the AY 2021-22
Resident Resident Non
Nature of Income Reasons
and but not resident
ordinarily ordinarily
resident resident
1. Rental income of It is Indian income. Yes Yes Yes
` 36,000 is received Indian income is
in India on May 10, always taxable.
2020 (it may accrue
 34 RESIDENTIAL STATUS

outside India or in
India).

2. Interest income of It is Indian income. Yes Yes Yes

` 46,000 accrues in Indian income is
India on March 31, always taxable.
2021 (it may be
received in India or
outside India).
3. Income of ` 56,000 is It is Indian income. Yes Yes Yes
deemed to be Indian income is
received in India on always taxable.
April 20, 2020 (it may
accrue outside India
or in India).
4. Income of ` 66,000 is It is Indian income. It Yes Yes Yes
deemed to accrue or is always taxable.
arise in India during
the previous year
2020-21 (it may be
received in India or
outside India).
5. Business income/ It is foreign income. It Yes No No
professional income is taxable in the case
of ` 76,000 is of resident and
received and accrued ordinarily resident
outside India during taxpayer. It is not
the previous year taxable in the case of a
2020-21 (business is non-resident. Since it
controlled from is business/profession
outside India or income and business
profession is set up is controlled from
outside India). outside India or
profession is set up
outside India, it is not
taxable in the case of
resident but not
ordinarily resident
taxpayer.
INCOME TAX 35

6. In situation 5, It is foreign income. Yes Yes No

suppose business is Since it is
controlled from India business/professional
or profession is set up income and the
in India. business is controlled
from India or
profession is set up in
India, it is taxable in
all cases except non-
resident.
7. Rental income or It is foreign income. It Yes No No
salary income of is taxable in the case
` 86,000 is received of resident and
outside India in the ordinarily resident
previous year 2020- taxpayer. It is not
21 and at the same taxable in the case of
time it accrues or non-resident. Since it
arises outside India. is foreign income
which is neither
business income nor
professional income, it
is not taxable in the
case of resident but
not ordinarily
resident.
8. Gift of ` 2 lakh It is foreign income. It Yes No No
received outside is taxable in the case
India by an individual of resident and
on November 6, 2020 ordinarily resident
from a friend. taxpayer. It is not
taxable in the case of
non-resident. Since it
is foreign income
which is neither
business income nor
professional income,
is not taxable in the
case of resident but
not ordinarily
resident.
 36 RESIDENTIAL STATUS

9. Gift of ` 1 lakh It is Indian income. It Yes Yes Yes

received in Delhi by is taxable.
an individual on
November 30, 2020
from a friend.
10. Income of ` 96,000 This income pertains No No No
earned and received to the previous year
outside India in 2016- 2016-17. It cannot be
17 but later on taxed at the time of
remitted to India in remittance in 2020-
2020-21. 21.

Illustration 2: For the previous year 2020-21, X reports the following income.
`
Fees for technical services paid by a non-resident company for a project
situated outside India (Income is received outside India and later on it is 97,000
gifted to Mrs. X)
Income from a profession set up in India, service is rendered from India but 1,24,000
amount is received in USA (later on remitted to India)
Rental income from house property situated in Kenya (amount is received in 80,000
USA which is entirely used for the education of his daughter in USA)
Agricultural income from Bhutan (received in Nepal and agricultural 2,00,000
operations are controlled from India) 70,000
Agricultural income from Kerala
Rental income of property situated in Kenya pertaining to the previous year 75,000
2019-20 is remitted to India in the current year
Technical fees paid by Government of India for a foreign project (amount is 90,000
received outside India)
Find out the income of X chargeable to tax for the Assessment Year 2021-22 if X is (i)
resident and ordinarily resident; (ii) resident but not ordinarily resident and (iii) non-
resident in India.

Solution:
Nature of Resident Not Non
income ` ordinarily resident
resident `
`
Fees for technical services Foreign income 97,000 Nil Nil
Profession set up in India Indian income 1,24,000 1,24,000 1,24,000
House property in Kenya Foreign income 80,000 Nil Nil
Agricultural income from Bhutan Foreign income 2,00,000 2,00,000 Nil
 INCOME TAX 37

Agricultural income from Kerala Exempt income Nil Nil Nil

Income of earlier year remitted to Net income of
India Current Year Nil Nil Nil
Technical fees by Government of
India Indian income 90,000 90,000 90,000
Net Income 5,91,000 4,14,000 2,14,000

Illustration 3: From the following information given by X, determine his net income for the
Assessment Year 2021-22 assuming that X is (i) resident but not ordinarily resident; or (ii)
non-resident in India:

1. Remuneration for consultancy service rendered by X in Singapore: ` 9,50,000. Out of

which ` 5,00,000 is directly received in India. Remaining ` 4,50,000 is received in
Singapore and later on gifted by X to Mrs. X in Singapore. Mrs. X has utilized this gifted
money for purchasing jewellery in Singapore.
2. Income from business in Singapore received in Singapore: ` 11,35,000. The business is
partly controlled from India and partly from outside India.
3. Gift received in Singapore from brother of his father-in-law: ` 2,00,000.
4. Interest on deposit in a bank of Singapore: ` 37,25,000. It is received in Singapore.
5. Pension for services rendered in India: ` 7,24,000. He retired from service during 2017-
18. Pension is paid to him in Singapore.
Solution: Computation of income of X for the Assessment Year 2021-22.
Nature of income Resident but Non
Not ordinarily resident
resident `
`
Remuneration for consultancy service
in Singapore, received in India Indian income 5,00,000 5,00,000
Remuneration for consultancy service
in Singapore, received in Singapore
and later on gifted to Mrs. X Foreign income -- --
Business income in Singapore Foreign income 11,35,000* --
Gift received in Singapore Foreign income Nil# Nil
Bank interest Foreign income Nil Nil
Pension from service rendered in
India Indian income 7,24,000 7,24,000
Net income 23,59,000 12,24,000
* It is business income and business is wholly or partly controlled from India.
# It is neither income from a business controlled from India nor it is income from a
profession set up in India).
 38 RESIDENTIAL STATUS

Illustration 4: The following information is given by X pertaining to the previous year

ending March 31, 2021:
`
Technical fees received from A Inc., a company incorporated in Spain (for a
manufacturing project to be set up in India, project will be set up by the foreign
company in India in 2022) (amount is paid to X in foreign currency in UK) 9,32,000
Honorarium received from the Kerala Government (` 19,000 is incurred as
travelling expenditure) 3,00,000
Profit earned from a business Kerala controlled from Spain 2,75,000
Technical fees received from Kerala Government (for a manufacturing
Project to be set up by Kerala Government in Bangladesh) (amount is paid to X
in foreign currency outside India) 9,43,000
Profit earned from a business in Karachi, controlled from Karachi (paid in UK
which is immediately remitted to India on the next day) 24,50,000
Dividend from a UK company credited to his account in Spain 7,69,000
Agricultural income from Bhutan (received in Bhutan but later on remitted to
India, agricultural activity is controlled from Uttar Pradesh) 12,15,000
Determine the net income of X for the Assessment Year 2021-22 if X is a (i) resident and
ordinarily resident (Case 1), (ii) resident but not ordinarily resident (Case 2), and (iii) non-
resident in India (Case 3).
Solution: Income of X will be calculated as follows:
Nature of Case 1 Case 2 Case 3
income ` ` `
Technical fees for an Indian project Indian Income 9,32,000 9,32,000 9,32,000
Honorarium from Kerala Government Indian Income 2,81,000 2,81,000 2,81,000
Profit from Kerala business Indian Income 2,75,000 2,75,000 2,75,000
Technical fees from Kerala government Indian Income 9,43,000 9,43,000 9,43,000
Profit from Karachi business Foreign Income 24,50,000 Nil Nil
Dividend from UK company Foreign Income 7,69,000 Nil Nil
Agricultural activity in Bhutan Foreign Income 12,15,000 12,15,000* Nil
Net income 68,65,000 36,46,000 24,31,000
* Business is controlled from India.

Illustration 5: Mr. Peter, a foreigner, came to India from Poland for the first time on 1st
April, 2014. He stayed here continuously for 3 years and went to France on 1st April, 2017.
He, however, returned to India on 1st July, 2017 and went to Poland on 1st Dec., 2018. He
again came back to India on 25th January, 2021 on a service in India. What is his residential
status for the A.Y. 2021-22?
Solution:
Assessment Year 2021-22 (Previous Year 1.4.2020 to 31.3.2021)
(i) He is in India from 25.1.2021 to 31.3.2021, i.e. 7 + 28 + 31 = 66 days.
 INCOME TAX 39

(ii) In the preceding four years his stay in India is as under:

1.4.2019 to 31.3.2020 – Nil
1.4.2018 to 31.3.2019– 30+31+30+31+31+30+31+30+1=245 days
1.4.2017 to 31.3.2018 – 31+31+30+31+30+31+31+28+31=274 days
1.4.2016 to 31.3.2017 – 365 days.
Thus, in all he remained in India for 245 + 274 + 365 = 884 days during the four years and
in PY for more than 60 days (i.e., 66 days), hence he is resident for the Assessment Year
2021-22, as per basic condition (b).
Now let us see whether he is ordinarily resident or not.
He was resident in India for more than two out of ten previous years preceding the previous
year and also stayed for more than 730 days during the preceding 7 previous years thus he
is ordinarily resident in India for the A.Y. 2021-22.

Illustration 6: Mr. John, a foreign national came to India for the first time on June 15, 2015.
During the financial years 2015-16, 2016-17, 2017-18, 2018-19, 2019-20, & 2020-21 he
stays in India for 120 days, 115 days, 15 days, 191 days, 124 days and 80 days respectively.
Determine his residential status for the Assessment Year 2021-22.
Solution: During the previous year 2020-21 his stay in India was for only for 80 days, so he
does not satisfy the first condition of becoming a resident as he was not in India for at least
182 days during the previous year. He was, however, in India for more than 365 days during
the four years preceding the previous year, i.e., his stay during the previous years 2016-17
to 2019-20 was for 445 days and during the previous year 2020-21 he stayed in India for
more than 60 days (i.e., 80 days), he is resident for the Assessment Year 2021-22 as per
basic condition (b).
Now let us see whether he is ordinarily resident or not.
Mr. John did not stay in India for more than 730 days preceding the previous year; hence he
is not ordinarily resident in India for the Assessment Year 2021-22.

Illustration 7: Mr. Hilton, foreign cricketer comes to India for 100 days every year since the
financial year 2008-2009. Find out his residential status for the assessment year 2021-22.
Solution: During the previous year 2020-21 he did not stay in India for 182 days; but
during the four years preceding the previous year he remained in India for (100 x 4) = 400
days (i.e., more than 365 days) and during the previous year 2019-20 he has been in India
for more than 60 days. Hence, basic condition (b) is fulfilled and he is resident in India for
the Assessment Year 2021-22.
He has not been in India for more than 729 days during 7 years preceding the previous year.
He will not be ordinarily resident in India for the A.Y. 2021-22.

Illustration 8: A Hindu Undivided Family carries on the business of export of dry fruits
from Afghanistan, and for this purpose it has a permanent office there which is controlled
by the younger brother of the karta of the family who resides there permanently. The karta
permanently resides in India but sometimes visits his office in Afghanistan for a few days.
 40 RESIDENTIAL STATUS

The Policy decisions are taken by the karta but in emergency his younger brother can also
take decision himself. Day to day affairs are, however, controlled by the younger brother.
What is the residential status of the family?
Solution: As the control and management of the family business is, at least, partially
situated in India and as the karta permanently resides in India but only sometimes visits
Afghanistan for a few days, he becomes resident and ordinarily resident in India. Hence, the
family is ordinarily resident in India.

Illustration 9: X, a German tourist, comes to India for the first time on June 20, 2020. He
leaves India on August 10, 2020. Determine his residential status for the Assessment Year
2021-22. Does it make any difference if he comes to India on a business trip or if he is an
Indian citizen?
Solution: X is a foreign citizen. He is not a person of Indian origin. During the previous year
2020-21, he is in India from June 20, 2020 to August 10, 2020 (i.e., June 2020: 11 days + July
2020: 31 days + August 2020: 10 days = 52 days). He is unable to satisfy any of the basic
conditions. Consequently, he is non-resident in India. The answer will remain the same even
if X comes to India on a business trip or X is an Indian citizen.

Illustration 10: X, an Italian citizen, comes to India for the first time (after 30 years) on
April 2, 2020 and stays up to November 26, 2020*. Determine his residential status for the
Assessment Year 2021-22.
Solution: During previous year 2020-21, X is in India for a period of 239 days as follows:
April 2020 29 days August 2020 31 days
May 2020 31 days September 2020 30 days
June 2020 30 days October 2020 31 days
July 2020 31 days November 2020 26 days
By satisfying the first basic condition, X becomes resident in India. However, he is unable to
satisfy any of the additional condition, as he comes to India for the first time in last 30 years
on April 2, 2020. He satisfies one of the basic conditions and none of the additional
conditions. He is, therefore, resident but not ordinarily resident in India for the previous
year 2020-21.

Illustration 11: X, a foreign citizen, comes to India for the first time on July 27, 2020. On
November 10, 2020, he leaves India for Burma on a business trip. He comes back on
February 15, 2021. He maintains a dwelling place in India from the date of his arrival in
India (i.e., July 27, 2020 till February 27, 2021 when he leaves for Kuwait). Determine his
residential status for the Assessment Year 2021-22. Does it make any difference if X is a
person of Indian origin?
Solution: During the PY 2020-21, X is in India for a period of 120 days as follows:
July 2020 5 days October 2020 31 days
August 2020 31 days November 2020 10 days
September 2020 30 days February 2021 13 days
 INCOME TAX 41

He satisfies none of the basic conditions and consequently he is non-resident in India for the
Assessment Year 2021-22.
As X is in India for only 120 days in A.Y. 2021-22, so he is non-resident even if he is a person
of Indian origin.

Illustration 12: X, a foreign citizen (not being a person of Indian origin), comes to India for
the first time on May 2, 2015. From May 2, 2015 to March 31, 2022, he is present in India
for 962 days (2015-16: 190 days; 2016-17: 300 days; 2017-18: 90 days; 2018-19: 10 days;
2019-20: 200 days; 2020-21: 72 days and 2021-22: 100 days. Determine the residential
status of X for the Assessment Year 2021-22.
Solution: During the previous year 2020-21, X is in India for 72 days and during earlier 4
years he is in India for 600 days. He satisfies one of the basic conditions and consequently
he is resident in India. A resident individual is either ordinarily resident or not ordinarily
resident.
Previous years Presence in India (number of Resident (R) or non-
days) resident (NR)
2019-20 200 R
2018-19 10 NR
2017-18 90 R
2016-17 300 R
2015-16 190 R
First Additional Condition: This condition requires that an individual should be resident
in India for at least 2 out of 10 years preceding the relevant previous year. X, in the present
case, is resident in India for 4 years out of 10 years. He, thus, satisfies this condition.

Second Additional Condition: This condition requires that an individual should be present
in India for at least 730 days during 7 years preceding the relevant previous year. X is in
India for 790 days during last 10 years. X satisfies one of the basic conditions and two
additional conditions. He is, therefore, resident and ordinarily resident in India for the
Assessment Year 2021-22.

Illustration 13: Mr. X came to India for the first time on 1st November, 2019. During his
stay in India upto 30th October, 2020 he stayed at Mumbai upto 10th May, 2020, and
thereafter remained in Bangalore till his departure from India. Determine his residential
status for the Assessment Year 2021-22.
Solution: During the previous year 1st April, 2020 to 31st March, 2021, Mr. X stayed in India
for 213 days.
April, 2020 30 days
May, 2020 31 days
June, 2020 30 days
July, 2020 31 days
 42 RESIDENTIAL STATUS

August, 2020 31 days

September, 2020 30 days
October, 2020 30 days
213 days
Mr. X satisfies the first basic condition of being present in India for more than 182 days
during the previous year. Hence he is resident. However, he has not been resident in India
during the 10 previous years preceding 2020-21, thus he is resident but not ordinarily
resident in India.
INCOME TAX 43

MCQ

1. If Anirudh has stayed in India in the P.Y. 2020-21 for 181 days, and he is non-
resident in 9 out of 10 years immediately preceding the current previous year and
he has stayed in India for 365 days in all in the 4 years immediately preceding the
current previous year. His residential status for the A.Y. 2021-22 would be-
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident
(d) Cannot be ascertained with the given information

2. Raman was employed in Hindustan Lever Ltd. He received a salary at ` 40,000 p.m.
from 1.4.2020 to 27.9.2020. He resigned and left for Dubai for the first time on
1.10.2020 and got salary of rupee equivalent of ` 80,000 p.m. from 1.10.2020 to
31.3.2021. His salary for October to December 2020 was credited in his Dubai bank
account and the salary for January to March 2021 was credited in his Bombay
account directly. He is liable to tax in respect of –
(a) Income received in India from Hindustan Lever Ltd;
(b) Income received in India and in Dubai;
(c) Income received in India from Hindustan Lever Ltd. and income directly credited
in India;
(d) Income received in Dubai

3. A company, other than an Indian company, would be a resident in India for the P.Y.
2020-21 if, during that year,
(a) Its Place of Effective Management is in India.
(b) Its control and management is wholly in India.
(c) Its control and management is partly in India.
(d) Majority of its directors are resident in India.

4. Income accruing in London and received there is taxable in India in the case of –
(a) Resident and ordinarily resident only
(b) Both resident and ordinarily resident and resident but not ordinarily resident
(c) Both resident and non-resident
(d) Non-resident

5. Incomes which accrue or arise outside India but received directly in India are
taxable in case of-
(a) Resident and ordinarily resident only
44 RESIDENTIAL STATUS

(b) Resident but not ordinarily resident

(c) Non-resident
(d) All the above

6. R Ltd. is an Indian company whose place of effective management is outside India. R

Ltd., shall be:
(a) Resident in India
(b) Non-resident in India
(c) Not ordinarily resident in India
(d) Resident and ordinarily resident only

7. Fees for technical services paid by the Central Government will be taxable in case of-
(a) Resident and ordinarily resident only
(b) Resident but not ordinarily resident
(c) Non-resident
(d) All the above

8. Profit on sale of shares of an Indian company received in Australia is taxable in case

of-
(a) Resident and ordinarily resident only
(b) Resident but not ordinarily resident
(c) Non-resident
(d) All the above

9. Income from a business in Canada, controlled from Canada is taxable in case of-
(a) Resident and ordinarily resident only
(b) Resident but not ordinarily resident
(c) Non-resident
(d) All the above

10. Dividend Income from Australian company received in Australia in the year 2017,
brought to India during the previous year 2020-21 is taxable in case of-
(a) Resident and ordinarily resident only
(b) Resident but not ordinarily resident
(c) Non-resident
(d) None of the above
INCOME TAX 45

11. Who among the following will qualify as non-resident for the previous year 2020-
21?
- Mr. Joey, an Italian designer came on visit to India to explore Indian handloom
on 03.09.2020 and left on 15.12.2020. For past four years, he visited India for
fashion shows and stayed in India for 100 days each year.
- Mr. Sanjay born and settled in Canada, visits India each year for three months to
meet his parents and grandparents, born in India in 1946, living in Mumbai. His
Indian income is ` 15,20,000.
- Mr. Chang, a Korean scientist left India to his home country for fixed employment
there. He stayed in India for study and research in medicines from 01.01.2016
till 01.07.2020.
Choose the correct answer:
(a) Mr. Joey and Mr. Chang
(b) Mr. Sanjay
(c) Mr. Sanjay and Mr. Chang
(d) Mr. Chang

12. Aashish earns the following income during the P.Y. 2020-21:
• Interest on U.K. Development Bonds (1/4th being received in India): ` 4,00,000
• Capital gain on sale of a building located in India but received in Holland:
` 6,00,000
If Aashish is a resident but not ordinarily resident in India, then what will be amount
of income chargeable to tax in India for A.Y. 2021-22?
(a) ` 7,00,000
(b) ` 10,00,000
(c) ` 6,00,000
(d) ` 1,00,000

13. Mr. Sumit is an Indian citizen and a member of the crew of an America bound Indian
ship engaged in carriage of freight in international traffic departing from Chennai on
25th April, 2020. From the following details for the P.Y. 2020-21, What would be the
residential status of Mr. Sumit for A.Y. 2021-22, assuming that his stay in India in the
last 4 previous years preceding P.Y. 2020-21 is 365 days and last seven previous
years preceding P.Y. 2020-21 is 730 days?
• Date entered in the Continuous Discharge Certificate in respect of joining the
ship by Mr. Sumit: 25th April, 2020
• Date entered in the Continuous Discharge Certificate in respect of signing off the
ship by Mr. Sumit: 24th October, 2020
Mr. Sumit has been filing his income tax return in India as a Resident for the
preceding 2 previous years.
(a) Resident and ordinarily resident
46 RESIDENTIAL STATUS

(b) Resident but not-ordinarily resident

(c) Non-resident
(d) Deemed resident but not-ordinarily resident

14. Mr. Square, an Indian citizen, currently resides in Dubai. He came to India on a visit
and his total stay in India during the F.Y. 2020-21 was 135 days. He is not liable to
pay any tax in Dubai. Following is his details of stay in India in the preceding
previous years:

Financial Year Days of stay in India

2019-20 100
2018-19 125
2017-18 106
2016-17 83
2015-16 78
2014-15 37
2013-14 40
What shall be his residential status for the P.Y. 2020-21 if his income (other than
income from foreign sources) is ` 10 lakhs?
(a) Resident but Not Ordinary Resident (RNOR)
(b) Resident and Ordinary Resident
(c) Non-resident
(d) Deemed resident but not ordinarily resident

15. Mr. Nishant, a resident but not ordinarily resident for the previous year 2019-20 and
resident and ordinarily resident for the previous year 2020-21 has received rent
from property in Canada amounting to ` 1,00,000 during the P.Y. 2019-20 in a bank
in Canada. During the financial year 2020-21, he remitted this amount to India
through approved banking channels. Is such rent taxable in India, and if so, how
much and in which year?
(a) Yes; ` 70,000 was taxable in India during the previous year 2019-20.
(b) Yes; ` 1,00,000 was taxable in India during the previous year 2019-20.
(c) Yes; ` 70,000 was taxable in India during the previous year 2020-21.
(d) No; such rent is not taxable in India either during the previous year 2019-20 or
during the previous year 2020-21.
 INCOME TAX 47

Unsolved Exercise

Q1. Mr. A, who was born in Uganda, is currently residing in London. His grandmother was
born in India in 1948 and his grandfather was born in India in 1945. He visits India
during the previous year 2013-2014, 2016-2017 and 2019-20 – 135 days, 190 days and
200 days respectively. He didn’t visit India in any of the other previous year for the past
10 years.
Determine his residential status, if for the previous year 2020-21, he was in India for
175 days and his Indian Income was ` 12 lakhs.
[Ans. NR]

Q2. Mr. X was born in Pakistan in 1945. His son Y was born in India in 1970. He left India on
1.6.20 for employment in UK. His stay in India during 19-20 was 70 days, in 18-19 80
days, in 17-18 90 days & in 16-17 130 days. Determine his status during P/Y 2020-21.
[Ans. RNOR]

Q3. X a foreign citizen, comes to India for the first time on June 20, 2020. On September 6,
2020, he leaves India for Burma on a business trip. He comes back on January 1, 2021.
He maintains a dwelling place in India from the date of his arrival in India (i.e., June 20,
2020) till January 15, 2021 when he leaves for Kuwait. Determine his residential status
for the A/Y 2021-22. Does it make any difference if X is a person of Indian origin?
[Ans. NR, No]

Q4. X, a foreign citizen (not being a person of Indian origin) leaves India for the first time in
the last 12 years, on June 15, 2018. During the calendar year 2019, he comes to India on
November 20 for a period of 46 days. During the calendar year 2020, he does not come
to India at all. He finally comes back on January 30, 2021 at 10.30 p.m.
Determine his residential status for the A/Y 2021-22.
[Ans. ROR]

Q5. X is a foreign citizen. Since 1981, he comes to India every year in the month of April for
105 days. Find out the residential status of X for the A/Y 2021-22 if:
(i) X is not a person of Indian origin;
(ii) X was born in Lahore on March 8, 1940;
(iii) Grand mother of X was born in Dhaka in 1870; or
(iv) X was born in Poona in 1941.
[Ans. ROR, NR, NR, NR]
 48 RESIDENTIAL STATUS

Q6. The Head Office of XY, a Hindu Undivided Family, is situated in Hong Kong. The family
is managed by Y (Since 1980) who is resident in India in 4 out of 10 years immediately
preceding the previous year 2020-21 and stayed for more than 729 days in preceding 7
previous years. Determine the status of the family for the A/Y 2021-22 if affairs of
family business are
(i) Wholly controlled from Hong Kong;
(ii) Partly controlled from India.
[Ans. NR, ROR]

Q7. Determine residential status in the following cases for the Assessment Year 2021-22:
(i) The control and management of a HUF is situated in India. The manager of the
HUF visited England with his wife from 14-8-20 to 30-6-21. Earlier to that he was
always in India.
(ii) A company, whose registered office is in America, had place of effective
management for sometime in India.
(iii) In a partnership firm, there are three partners namely A, B and C. A and B reside in
India while C lives in Germany. The firm is fully controlled by C. During the
previous year Mr. C stayed for 6 months in India.
(iv) A V.I.P. Club is in India, whose director Mr. X belongs to Bangladesh. The Club is
controlled fully by Mr. X. In the previous year, Mr. X did not come for a single day
to India.
[Ans. ROR, R, NR, NR]

Q8. X is a citizen of Bangladesh. His grandmother was born in a village near Dhaka in 1940.
He came to India for the first time since 1981 on 3-10-2020 for a visit of 190 days.
Determine the residential status of X for the A/Y 2021-22. Assuming that wife of X is a
resident but “not ordinarily resident in India” for the same year.
[Ans. NR, NR]

Q9. U was born in 1975 in India. His parents were also born in India in 1948. His grand
parents were, however, born in England. ‘U’ was residing in India till 15-3-2018.
Thereafter he migrated to England and took the citizenship of that country on
15-3-2020. He visits India during 2020-21 for 90 days. Determine the residential status
of ‘U’ for A/Y 2021-22.
[Ans. ROR]

Q10. M an Indian citizen left India for the first time on 24-9-2019 for employment in USA.
During the previous year 2020-21, he comes to India on 5-6-2020 for 115 days.
Determine the residential status of ‘M’ for A/Y 2020-21 and 2021-22.
[Ans. NR, NR]
 INCOME TAX 49

Q11. Mr. Kohli, a citizen of India, is an export manager of Arjun Overseas Limited, an Indian
company, since 1-5-2016. He has been regularly going to USA for export promotion. He
spent the following days in USA for the last five years.
Previous Year ended No. of days spent in USA
31.3.2017 319 days
31.3.2018 150 days
31.3.2019 270 days
31.3.2020 310 days
31.3.2021 295 days
Determine his residential status for A/Y 2021-22. Assuming that prior to 1-5-2016 he
had never travelled abroad.
[Ans. ROR]

Q12. R Ltd. and S Ltd. companies are registered in Nepal and India respectively. All
meetings of Board of Directors of R Ltd. were held in India, whereas all board meetings
of S Ltd. were held in Nepal during the previous year 2020-21. Determine the
residential status of both the companies for the A/Y 2021-22.
[Ans. Both are Resident]

Q13. During the P/Y 2020-21, R and sons HUF was partly controlled from India by its Karta
R who is citizen of India but stays outside India. For the purpose of managing the
affairs of the HUF, R has been regularly visiting India. Determine the residential status
of the HUF for the A/Y 2021-22 if R has been visiting India for 100 days every year for
the last 12 years.
[Ans. RNOR]

Q14. X, a German national, came to India for the first time on 1-7-2014. During the period
from 1-7-2014 to 31-3-2021, he stayed in India as follows– from 1-7-2014 to
31-10-2014, from 1-5-2015 to 31-10-2015, from 1-11-2016 to 31-12-2016 and from
1-7-2019 to 31-8-2020. During the P/Y ended on 31-3-2021, X’s income consisted of:
(i) Business in India: ` 40,000
(ii) Interest from an Indian company: ` 2,000
(iii) Dividend from non-Indian co received in Germany but remitted to India: ` 5,000
(iv) Business in Germany (controlled from India): ` 25,000
(v) Income from house property in Germany: ` 8,000
Determine, giving full reasons, the gross total income of X for the A/Y 2021-22 after
ascertaining his residence for the purpose of Income Tax.
[Ans. NR; ` 42,000]