RESIDENTIAL STATUS AND SCOPE OF TOTAL INCOME

 

RESIDENTIAL STATUS- SECTION-(6)

The incidence of tax on any assesses depends upon his residential status under the 

income tax Act 1961. For all purposes of income tax, taxpayers are classified into three 

broad categories on the basis of their residential status-

a) Ordinarily Resident

b) Not Ordinarily Resident/ Extra Ordinarily Resident

c) Non-Resident.

Topic discussion

1. Residential status of individuals- Section 6(1)
2. Residential status of HUF- Section 6(2)
3. Residential status of firm and AOP – Section 6(2)
4. Residential status of companies- Section 6(3)

Residential status of individuals- Section 6(1)

An individual is said to be resident of India in any previous Year, if he satisfies any one of the BASIC CONDITIONS:

A. He has been stay in India during the previous year at least 182 days.

Or

B. He has been stay in India during the 4 Years immediately proceeding the previous year at least 365 days and has been in India for at least 60 days in the previous year.

If the individual satisfies any one of the BASIC CONDITION, he is a resident.

If he not satisfies any BASIC CONDITIONS the Individual is a non-resident.

NOTE:

 The term “stay in INDIA” means stay in any where Indian Territory includes territorial waters of India.

 It is not necessary that the period of stay must be continuous and usual place.

 For the purpose of counting number of days stay in India, both the date of departure as well as the date of arrival are considered to be in India.

 The residence of an individual for income tax purpose has nothing to do with citizenship or domicile.

Exceptions of the rule of 60 days-

1. Indian citizen, who leave India in any previous year as a member of the crew of an Indian ship.

2. Indian citizen, who leave India in any previous year for purposes of employment outside India.

3. Indian citizen or person of Indian Origin, who comes on a visit to India in any previous year.

An individual is said to be ordinarily resident of India in any previous year, if he satisfies both of the Additional Conditions specified under section 6(6)

I. His total stay in India in the last 7 years preceding the relevant previous year is 730 days or more.

AND

II. He is a resident of India at least 2 Years out of the last 10 years preceding the relevant previous more.

If the individual satisfies both of the additional conditions, he is a Ordinarily Resident 

but if not satisfies both of the Additional Conditions, the individual is a Not Ordinarily Resident.

Residential status of HUF- Section 6(2)

HUF is said to be resident of India if control and management of its affairs is situated wholly or partially in India.

Meaning of the term “control and management”

The control and management of affairs refers to the controlling and directing power. It means that decision making power for vital affairs is situated in India. The control and management means de-facto control and management and not merely the right to control or mange.

Ordinarily resident – If “Karta” of HUF fulfill both of the Additional condition given condition given under section 6(6), the HUF is not ordinarily resident of India.

Not ordinarily resident- If “Karta” of HUF do not fulfill both of the Additional 

condition given condition given under section 6(6), the HUF is not ordinarily resident of India.

Residential status of firm and AOP – Section 6(2)

Resident: A firm and an AOP would be resident in India if the control and management of its affairs is situated wholly or partly in India.

Non-resident: Where the control and management of the affairs is situated wholly outside India, the firm and AOP would become a non-resident.

Residential status of companies- Section 6(3)

A company would be resident in India in any previous in any previous year, if-

1) It is an Indian company; or

2) Its place of effective management, in that year, is in India.

If company does not fulfill the conditions of resident then he is non-resident.

Computation of Gross Total Income

Scope of total Income	Ordinarily resident	Not ordinarily resident	Non- resident
Income earn or accruing or arising in India	Yes	Yes	Yes
Income receive or deemed to be received in India	Yes	Yes	Yes
Income earn or accruing or arising outside India and receive outside India	Yes	No	No
Income from business situated outside India but controlled form India	Yes	Yes	No
Past untaxed income brought to India during the previous year	No	No	No
Exempted Income	No	No	No
Income from business situated in India or income receive in India	Yes	Yes	Yes

Ignore-:

 Brought to India

 Remittance to India

 Transfer to India

 Deposit in Any bank of India

 Investment of Income