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Chapter-2 Chapter Status
Residential -2 Part- I

Residential Status

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Chapter-2 Residential Status Part- I

Basic Concepts
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 nonresidents 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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Chapter-2 Residential Status Part- I

Determination of Residential Status of

Different Kind of Assesses
Resident
Basic conditions u/s 6(1): If either or both the following
conditions are fulfilled, then assessee is said to be resident of
India for that previous year
a) He was in India during the previous year for a period of
182 days or more, or
b) He was in India during the previous year for a period of 60
days or more and 365 days or more during four previous years
immediately preceding the relevant previous year.
Non Resident
An assessee who does not satisfy both the basic conditions
mentioned in Sec. 6(1) shall be treated as a nonresident in India
for the relevant previous year.

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Chapter-2 Residential Status Part- I

Residential Status of Individual

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Chapter-2 Residential Status Part- I

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

A HUF would be resident in India if the control and
management of its affairs is situated WHOLLY OR PARTLY in
India.

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Chapter-2 Residential Status Part- I

Residential Status of a Firm or

Association of Persons (AOP) [Sec. 6(2)]
A Firm & AOP will be resident in India if the Control &
Management of its affairs is situated wholly or partly in India.

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Chapter-2 Residential Status Part- I

Residential Status of a Company

Assessee [Sec. 6(3)]
A company is treated as Resident in India if:
1. It is an Indian company.
2. In case of company other than Indian Company, the control and
management of its affairs is situated wholly in India during the previous
year.

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Chapter-2 Residential Status Part- I

Residential Status of Body of Individual (BOI) /

Artificial Judiciary Person (AJP) / Local
Authority (LA) [Sec. 6(4)]
A BOI/AJP/LA will be resident in India if the control &
management of its affairs is situated wholly or partly in India.

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Chapter-2 Residential Status Part- I

Scope of Total Income with Respect to

Residential Status (Sec. 5)

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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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Chapter-2 Residential Status Part- I

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.
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.

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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.

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Exception
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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End of Chapter-2

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