Presentation on residence status by shashikant

PRESENTATION ON
RESIDENCE STATUS
PRESENTED BY- SHASHIKANT

RESIDENCE OF ASSESSEESS
•The scope of the total income of an assessee along with his residential status is
determined with reference to his residence in India in the previous year.
Residence and citizenship are two different aspects. The incidence of tax has
nothing to do with citizenship. (Sec. 5)
•An Indian may be non-resident and a foreigner may be resident for income
tax purposes. The residence of a person may change from year to year but
citizenship cannot be changed every year.
•A person may be a resident in more than one country for the same previous
year

DIFFERENT TYPES OF RESIDENT
On the basis of residence, the assessees are divided into three categories, viz. :
Persons who are resident in India, popularly known as ordinarily resident.
Persons who are not ordinarily resident in India.
Persons who are non-resident.
Types of residents can be illustrated with the help of the following chart :
Resident Non-Resident
Ordinary Resident Non-Ordinary Resident
Types of resident

INDIVIDUAL
The residence of an individual is determined on the basis of the rules stated hereunder :
(I)Resident (Ordinarily Resident)
An individual is said to be resident in India in any previous year if he satisfies any one of the following
basic conditions :
a) he has been in India in the previous year for a period of 182 days or more, or [Sec. 6(1)]
b) he has been in India for at least 365 days during the four years preceding the previous year and
is in India for at least 60 days during the previous year.

Exceptions to the above rules of 60 days' stay in India :
i. An individual who is a citizen of India and leaves India in any previous year for the purpose of
employment or as a member of the crew of an Indian ship must have stayed in India for at least 182 days
during the previous year instead of 60 days;
ii. If any citizen of India or a foreign national of Indian origin, who is living outside India, comes on a visit to
India in the previous year, he must have stayed in India for at least 120 days [if total income (other than
income from foreign sources) exceeding 15 lakh
₹ during the previous year and if total income (other than
income from foreign sources) up to 15 lakh
₹ during the previous year, he must have stayed in India for at
least 182 days] during the previous year instead of 60 days.

Deemed to be Resident
An Indian citizen, who is not liable to pay tax in any other country or territory by reason of his domicile or
residence or any other criteria of similar nature, shall be deemed to be resident in India. The condition for
deemed residential status applies only if the total income (other than income from foreign sources) exceeds
₹15 lakh during the previous year. [Sec. 6(1A)]
Additional Conditions : In fact, in order that an individual may become ordinarily resident in India, he has to
satisfy both the following conditions besides satisfying any one of the above mentioned basic conditions :
[Sec. 6(6)(a)]
i. he has been resident in India in at least two out of the ten previous years preceding the relevant previous
year, and
ii. he has been in India for at least 730 days in all during the seven previous years preceding the relevant
previous year.

 ( Il) Not-ordinarily Resident
If an individual satisfies any one of the above basic conditions (a) or (b) but does not satisfy the a
foresaid two additional conditions, he is said to be 'Not-ordinarily resident’. [Sec. 6(6)(a)]
It means that in order to be classified as not ordinarily resident a to prove that either he has been
resident in India in less than two out of the ten previous years preceding the relevant previous year or
has been in India for less than 730 days during the seven previous years preceding the relevant
previous year.
In other words, an individual is said to be "Not-ordinarily resident" in India in any of the previous year
if :
I. he has been a non-resident in India in nine out of the ten previous years preceding that year, or
II. he has during the seven years preceding that year been in India for a period of, or periods
amounting in all to, seven hundred and twenty-nine days or less, or
III. A citizen of India, or a person of Indian origin, having total income, other than income from
foreign sources, exceeding 15 lakh during the previous year, who has been in India for a period
₹
or periods amounting in all to 120 days or more but less than 182 days, or
IV. A citizen of India who is classified as deemed to be resident u/s 6(1A).
Since the incidence of tax is lesser in the case of a not ordinarily resident as compared to an ordinarily
resident it is for the assessee to prove that he does not satisfy at least one of the additional conditions
in order to be called Not-ordinarily Resident.

HINDU UNDIVIDED FAMILY, FIRM OR
ASSOCIATION OF PERSONS [Sec. 6(2)]
 I. Resident
 A Hindu Undivided Family, firm or Association of Persons are resident in India in any previous year if the
control and management of its affairs is situated wholly or partly in India during the relevant previous year,
i.e., even if a part of their control and management is situated in India during the previous year, they will be
called resident in India. A resident H.U.F. will be ordinarily resident only when its Karta satisfies both the
additional conditions of ordinarily resident as an individual.
 In this context, the clause 'control and management' need clarification. The expression, control and
management of affairs' mean de facto and not merely the right to control and manage. The place of
control and management is the place where the head and seat and directing power are situated. It is not
necessary that the control and management must be situated at the place where the business or
profession is being carried on. The place of business can be different from the place of its control and
management. The control and management of affairs must be situated wholly outside India in order to
make them non-resident.

 Il. Not-ordinarily Resident
Firm and Association of persons cannot be 'not-ordinarily resident’.
A Hindu Undivided Family is 'not-ordinarily resident' in India, if, its Karta or manager does
not satisfy both the following additional conditions :
• He has been resident in India (according to the rules applicable to an individual) in two
out of ten years, preceding that previous year, i.e ., he fulfilled at least one of the basic
conditions to become resident for at least two years; and
• He has been in India, during the seven years preceding that previous year, for a period
amounting in all to at least 730 days.
In other words, a H.U.F. is ordinarily resident only when its Karta satisfies both the above
conditions. If the Karta satisfies either only one or none of the above conditions the family
becomes not ordinarily resident. [Sec. 6(6)(b)]
 III. Non-resident
All the three types of assesses (i.e. , H.U.F., Firm or A.O.P.) are 'non-resident' only when the
control and management of their affairs is situated wholly outside India. [Sec. 6(3)]

COMPANIES
 I. Resident
A company is said to be resident in India in any of the previous year, if :
I. it is an Indian company; or
II. Its place of effective management, in that year, is in India.
Explanation : 'Place of effective management' means a place where key management and commercial decisions
that are necessary for the conduct of business of an entity as a whole are, in substance made.
 II. Not-ordinarily Resident
A Company is never 'not-ordinarily resident'.
 III. Non-resident
If a company does not satisfy both the aforesaid conditions of residence, it is said to be a 'non-resident'
company. It means neither the company is an Indian company nor the place of its effective management is in
India.

EVERY
OTHER
PERSON
[Sec. 6(4)]
 Every other person (local authority, artificial juridical
person, e.g ., Idols) is said to be resident in India in any
previous year in every case, except where during that year
the control and management of its affairs is situated
wholly outside India.
 It means the residence of 'every other person' is
determined in the same manner as of a firm or
association of persons.
 In brief, only an individual and a H.U.F. can be ordinarily
resident, not-ordinarily resident or non-resident in India.
All other persons can be either resident or non-resident in
India.
 If a person is resident in India in a previous year relevant
to the assessment year in respect of any source of
income, he shall be deemed to be resident in India in the
previous year relevant to the assessment year in respect
of each of his other sources of income. Thus, different
residential status for different sources of income for the
same assessment year is not possible. [Sec. 6(5)]
 It is the duty of assessee to prove before the Assessing
Officer whether he is a resident or non-resident.

Presentation on residence status by shashikant

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