RESIDENTIAL STATUS AND

INCIDENCE OF TAX
What is Residential Status?
A Person can be a Resident or a Non-Resident depending
upon his stay in India.
What is Incidence of Tax?
Burden of tax
What is the need of calculating Residential
Status (RS) of any person?
Because the burden of tax falls more on a Resident than a
non- resident.
Is calculation of residential status of every
person category same?
NO
(1) RESIDENTIAL STATUS OF AN
INDIVIDUAL

On the
basis of
Non- Resident his stay
Resident
(NR) in the
previous
year
Resident
and Resident But
Ordinarily Not Ordinarily
Resident Resident On the basis of
(ROR) (RBNOR) his stay in the
preceding
previous years
ANY ONE OF THE TWO BASIC
CONDITIONS TO BE SATISFIED TO
BE A RESIDENT

He should stay in India for at least

182 days in the previous year
OR
He should stay in India for at least
60 days in the previous year and
365 days in the four years
immediately preceding relevant
previous year.
For example:-
Mr. Shahrukh Khan, the Indian actor,
went to U.S. for the shooting of one
of his films on May 4, 2014 and
returned on July 5, 2015. Determine
his residential status for the A.Y.
2015-16.
Ans- Since Mr. Shahrukh Khan dint
return in the previous year, his stay
in India is 34 days. He is a Non-
Resident for the A.Y. 2015-16.
EXCEPTIONS TO BASIC CONDITIONS
An Indian Citizen (IC) /Person of
Indian Origin (PIO) visiting India during
the previous year.
An Indian Citizen (IC) leaving India for
the purpose of employment outside India
during the previous year.
An Indian Citizen (IC) leaving India as a
member of crew of an Indian ship during
the previous year.
For these persons, the second basic
condition is of no use. They need to satisfy
the first basic condition only in order to be
a RESIDENT in India i.e. they must
For example,
X, an Indian citizen, who is appointed as senior
taxation officer by the Government of Nigeria,
leaves India, for the first time , on September
26,2014 for joining his duties in Nigeria.
Determine his residential status for A.Y. 2015-16.
Ans- Stay in P.Y. 2014-15 -179 days
Stay in Preceding four years- more than
365 days
Even though Mr. X is satisfying the second basic
condition of completing a stay of minimum 60
days in previous year 2014-15 and at least 365
days in four years immediately preceding the
relevant previous year, Mr. X will be a Non-
Resident in India for the A.Y. 2015-16 since
he is an Indian citizen leaving India for the
purpose of employment and will be treated as a
 In the last question, if Mr. X comes to India in the
previous year 2015-16 for 176 days . Determine
his residential status for the A.Y. 2016-17.

Ans- Stay in P.Y. 2015-16- 176 days

Stay in preceding four years- more than
365 days
Again, even though he satisfies the second basic
condition, he will be treated as a Non-Resident
for the A.Y. 2016-17 since he is falling in
another exception for the A.Y. 2016-17 i.e. he is
an Indian citizen who comes on a visit to India
during the P.Y. 2015-16 and will be treated as a
Resident only if he has been in India in that year
for at least 182 days .
 ADDITIONAL CONDITIONS
TO BE SATISFIED TO BE A ROR
He must be a RESIDENT in India for
at least 2 out of 10 years
immediately preceding the relevant
previous year.
AND

He must stay in India for at least

730 days in seven years
immediately preceding the relevant
If any one or both the additional
conditions are not satisfied, the
resident individual becomes
Resident But Not Ordinarily
Resident (RBNOR)
 Now give this a shot..!
Mr. X and Mrs. X are Indian citizens. They come to
India on October 15, 2014 for a visit of 170 days.
In the earlier previous years, they were in India as
follows: X Mrs. X
2013-2014 365 days 240 days
2012-2013 20 days 340 days
2011-2012 15 days NIL
2010-2011 120 days 118 days
2009-2010 5 days 350 days
2008-2009 8 days 190 days
2007-2008 15 days 160 days
2006-2007 18 days 332 days
2005-2006 140 days 192 days
2004-2005 10 days 221 days
Ans- Since Mr. X and Mrs. X are Indian
citizens and they both are coming to
India on a visit of 170 days in the
previous year, they will be termed as
Resident of India only if they satisfy a
stay of at least 182 days in this year
(one of the exceptions to basic
conditions). Therefore, Mr. X and Mrs.
X are Non Residents for the A.Y.
2015-16.
 INCIDENCE OF TAX
ROR RBNO NR
R
Income received in India weather
accrued/arise in India or not


Income accrued/ arise in India weather
received in India or not

Income deemed to be received in India

Income deemed to accrue/ arise in indiaF

Income accrued/arise/received outside India

but from a business/ profession which is
carried on from inside India

Income arrued/arise/received outside India
from a source which is outside India.
 INCOME DEEMED TO
ACCRUE/ARISE IN INDIA
(Sec-9)
In total, there are 7 incomes which are deemed
to accrue/arise in India:
Income from Business Connection
Income from any property, asset or source of
income in India
Income through transfer of capital asset
situated in India
Income under the head salaries
Salary payable abroad by the Government to
a citizen of India.
Dividend paid by an Indian company
Income by way of Interest, royalty and
 INCOME FROM BUSINESS
CONNECTION (Sec-9 (1)(i))
WHAT IS BUSINESS CONNECTION?
1. When a Non-Resident maintains a branch
office in India for sale or purchase of goods
2. When a Non-resident appoints an agent in
India for regular purchase of raw material, or
for sale of non-residents goods or other
business purposes.
3. When a NR erects a factory in India where
raw- material purchased locally is turned into
exportable goods.
4. When a NR parent company forms a local
subsidiary company to sell its own products.
 POINTS TO REMEMBER
Sec-9(1) (i) is applicable only for a
NON-RESIDENT who has a business
connection in India
Any income earned by the Non-
Resident outside India but because of
this business connection in India, will
be deemed to be accrued/arise in
India.
The above mentioned definition is
inclusive rather than exhaustive. A
NR could have more than these
business connections in India in other