Residential Status

The term residential status has been coined under the income tax laws of India and must not
be confused with an individual’s citizenship in India. The taxability of an individual in India
depends upon his residential status in India for any particular financial year.
An individual may be a citizen of India but may end up being a non-resident for a particular
year. Similarly, a foreign citizen may end up being a resident of India for income tax purposes
for a particular year.
Residential Status of an assessee determines the scope of chargeability of his income.
Residential Status of an Individual

Resident of India Non Resident of India

Ordinary Deemed Resident but

Resident Resident Not Ordinary Resident
Basic Condition [Sec 6(1)]
An individual is said to be resident in India, if he satisfies any one of the following condition
• He is in India in the previous year for a period of 182 days or more [Sec 6(1)(a)]
OR
 • He is in India for a period of 60 days or more during the previous year and for 365 or more
days during 4 preceding previous year. [Sec 6(1)(c)]
Exceptions to the above rule
In the following cases, condition (ii) of Sec 6(1) is irrelevant:
• An Indian citizen, who leaves India during previous year for employment purpose.
• An Indian citizen, who leaves India during the previous year as a member of crew of an
Indian ship.
• An Indian citizen or a person of Indian origin, who normally resides outside India, comes
on a visit to India during previous year.

However, such person having total income, other than the income from foreign sources [i.e.,
income which accrues or arises outside India (except income from a business controlled from
or profession set up in India) and which is not deemed to accrue or arise in India], exceeding `
15 lakhs during the previous year will be treated as resident in India if -
- the period of his stay during the relevant previous year amounts to 182 days or more, or
- he has been in India during the 4 years immediately preceding the previous year for a total
period of 365 days or more and has been in India for at least 120 days in the previous year
Additional Condition
He has been resident in India [as per sec 6(1)] in at least 2 out of 10 previous years immediately
preceding the relevant previous year;
AND
He has resided in India for a period of 730 days or more during 7 previous years immediately
preceding the relevant previous year.
Hindu Undivided Family [Sec 6(2)]
An HUF can be either a resident or non-resident in India. Again, a resident HUF can further be
classified as 'Ordinarily resident' and 'Not ordinarily resident.
Resident HUF: When the control & management of affairs of HUF is wholly or partly situated in
India during the relevant previous year, then it is treated as resident in India.
Non-resident HUF: An HUF is non-resident in India if the control & management of its affairs is
wholly situated outside India.
Ordinarily resident in India: If the 'karta’ or manager of a resident HUF satisfies both additional
conditions given u/s 6(6), HUF is said to be an ordinarily resident.
Control & management means –
• Controlling & directive power;
• Actual control & management (mere right to control & manage does not amount to
control & management);
• Central control & management and not the carrying out of day to day affairs.
 Company [Sec 6(3)]
Resident Company: An Indian Company is always a resident in India.
A Non-Indian company is said to be a resident in India, if its place of effective management, in
that year, is in India. "Place of effective management" means a place where key management
and commercial decisions that are necessary for the conduct of the business of an entity as a
whole, are in substance made.
Non-Resident Company: If place of effective management, in that year, is not in India, the said
company is non-resident in India for the relevant previous year.
Stress: In case of company, there is no sub-division like 'Ordinarily resident' or Not ordinarily
resident'.
Firm or an Association of Persons (AOP) or Body of Individuals (BOI) [Sec.6(4)]
Resident : A firm or an AOP or BOI is said to be a resident in India, if control & management of
its affairs are wholly or partly situated in India during the relevant previous year.
Non-resident: If control & management of its affairs are situated wholly outside India, then itis
a non-resident in India.
Any other Person
Resident: Any other assessee will be treated as resident in India if the control and management
of its affairs is situated wholly or partly in India.
Non Resident: If Control and management of affairs of the assessee, are situated wholly
outside India, it is a non resident in India.

Incidence of Tax [Sec 5]

Nature of Income Resident and Resident but Non

Ordinarily not ordinarily Resident
Resident resident
Income accrued or deemed to be accrued and Taxable Taxable Taxable
received or deemed to be received in India
Income accrued or deemed to be accrued Taxable Taxable Taxable
outside India but received or deemed to be
received in India.
Income accrued or deemed to be accrued in Taxable Taxable Taxable
India but received or deemed to be received
outside India
Income accrued and received outside India Taxable Taxable Not
from a business controlled or profession set Taxable
up in India.
Income accrued and received outside India Taxable Not Taxable Not
from a business controlled or profession set Taxable
up outside India
Income accrued and received outside India in Taxable Not Taxable Not
the previous year (it makes no difference if Taxable
the same is later remitted to India)
Income accrued and received outside India in Not Taxable Not Taxable Not
any year preceding the previous year and Taxable
later on remitted to India in current year

1. Sunil provides following details of income, calculate the income which is liable to be taxed
in India for the A.Y. 2020-21 assuming that-
• He is an ordinarily resident
• He is not an ordinarily resident
• He is a non-resident.
Particulars Amount (₹)
Salary received in India from a former employer of London 1,40,000
Income from tea business in Nepal being controlled from India 10,000
 Interest on Company deposit in Canada(1/3rd received in India) 30,000
Profit from a Business in Mumbai controlled from China 100,000
Profit for the year 2010-11 from a business in Tokyo remitted to India 200,000
Income from a property in India but received in USA 45,000
Income from a property in London but received in Patna 1,50,000
Income from a property in London but received in Bangkok 2,50,000
Income from a business in Italy but controlled from Turkey 10,000

Solution:
Particulars OR RNOR NRI
Salary received in India from a former employer of London 1,40,000 1,40,000 1,40,000
Income from tea Business in Nepal being controlled from 10,000 10,000 10,000
India
Interest on company deposit in Canada 10,000 10,000 10,000
1/3rd received in India
 2/3rd received outside India 20,000 Nil Nil
Profits from a business in Mumbai controlled from China 1,00,000 1,00,000 1,00,000
Profits of earlier year from a business in Tokyo remitted to Nil Nil Nil
India
Income from a property in India but received in USA 45,000 45,000 45,000
Income from a property in London but received in Patna 150,000 150,000 150,000
Income from a property in London but received in Bangkok 250,000 Nil Nil
Income from a business in Italy but controlled from Turkey 10,000 Nil Nil
Taxable Income 7,35,000 4,55,000 4,45,000

2. Mr Ajnabi provides following information regarding his income of PY 2019-20. Compute

income liable to be charged in India in the following cases:
(a) Ordinarily Resident (b) Not Ordinarily resident (c) Non-Resident
Particulars Amount
(₹)
Business income from USSR received in India 10,000
 Business income earned in India received in Pakistan 20,000
Salary received from a company of UK situated in India 15,000
Interest on German Bond(2/5th received in India) 60,000
Income from agriculture in Nepal received there but later on remitted to India 181,000
Income from property in Jakarta received outside India 86,000
Income earned from business in UAE which is controlled from Delhi (15,000 65,000
received in Delhi)
Past untaxed profit of 05-06 brought to India during previous year 10,43,000
Profit from a business in Madras and managed from outside India 27,000
Profit on a sale of a building in India but received in Sri Lanka 14,80,000
Pension from a former employer in India received in USSR 36,000

Solution:
Particulars OR RNOR NRI
Business income from USSR received in India 10,000 10,000 10,000
Business Income earned in India received in Pakistan 20,000 20,000 20,000
Salary income from a company of UK situated in India 15,000 15,000 15,000
Interest on German Development Bond
- 2/5th received in India 24,000 24,000 24,000
- 3/5th Received outside India 36,000 - -
Income from agriculture in Nepal 181,000 - -
Income from property in Jakarta received outside India 86,000 - -
Income earned from Business in UAE being controlled
from Delhi 15,000 15,000 15,000
- Received in India 50,000 50,000 -
- Received outside India
Past Untaxed Profit brought to India - - -
Profit from a Business in Madras and managed from 27,000 27,000 27,000
outside India
Profit on a sale of a Building in India 14,80,000 14,80,000 14,80,000
Pension from a former employer in India received in 36,000 36,000 36,000
USSR
Taxable Income 19,80,000 16,77,000 16,27,000