Residential Status

The Residential status of the assessee as defined in the IT. Act, 1961 is important to determine his tax liability. This is so because, in the case of residents, all incomes are brought to tax regardless of where they are received or where they accrue or arise. In the case of non-residents or persons who are resident but not ordinarily resident, only the following incomes are taxable. I. Income received in India or deemed to have been so received; II. Income accruing or arising in India or deemed to have so arisen or accrued; III. Income accruing or arising outside India if derived from a business controlled in or a profession set up in India (applicable only in the case of persons who are residents but not ordinarily residents).
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Determination of Residential Status of Different Kind of Assesses

Residential Status of an Individual

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

Residential Status of a Firm or Association of Persons (AOP) [Sec. 6(2)]

Residential Status of a Company Assessee [Sec. 6(3)]

Residential Status of Body of Individual (BOI) / Artificial Judiciary Person (AJP) / Local Authority (LA) [Sec. 6(4)] 4

Income Received or Deemed to be Received

Meaning of Received Received for this purpose means the FIRST RECEIPT i.e when the recipient gets the money under his control.

Income Deemed to be Received (Sec. 7)

Income deemed to be received in India means that in the following case income deemed to be received in India irrespective of whether he has actually received or not. Employer Contribution in excess of 12 % of Salary Interest Credited in excess of 9.50% Transfer Balance from URPF to RPF Contribution by CG of any other employer under Pension Scheme u/s 80CCD
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Income Deemed to be Accrue or Arise in India [Sec. 9]

Some of the income has been specifically assumed to accrue or arise in India even though it is not actually accrue or arise in India. 1. Accrue/arise at any place outside India directly or indirectly. a) Through or any business connection in India b) Through or any Property in India c) Through or from any asset or source in India d) Transfer of Capital asset situated in India 2. Income which falls under the head salary if it is earned in India.
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3. Income from Salary which is payable by Government of India to the Citizen of India for rendering services outside India. 4. Dividend paid by Indian Company outside India. 5. Interest 6. Royalty 7. Fees for Technical Services.

Meaning of Royalty
Royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains) for
(A) The transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (B) The imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property.

(C) The use of any patent, invention, model, design, secret formula or process or trade mark or similar property.
(D) The imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. 8

Business Connection in India

It shall include any business activity carried out through a person who acting on behalf of the Non Resident

1. He must have an authority to conclude contract on behalf of the Non-Resident, but does not include, if his activities are limited to the purchase of goods on behalf of Non-Resident
2. Has no such authority but habitually maintains in India stock of goods from which he regularly delivers goods on behalf of Non-Resident 3. Where he habitually secures order in India mainly or wholly for the Non-Resident
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Exception
Business connection shall not include any business activity carried out through a broker, General commission agent or any other agent having an independent status and activity in the ordinary course of business Income from Property, Asset or Source of Income Any income which arises from any property situated in India deemed to accrue or arise in India. Income from Transfer of Capital Asset Capital gain arises from the transfer of a capital asset situated in India would be deemed to accrue or arise in India. Income from Salary Salary would be deemed to accrue or arise in India if it is in respect of services rendered in India.

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Exceptions

1. Pension payable outside India by the Govt to its officials & Judges who permanently resides outside India.
2. Salary of an employee in UNO.

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