December 14, 2018

Residential Status

RESIDENTIAL STATUS

To levy tax on Assessee Residential status of an Assessee is very important because there are different slab rates for Resident or Non Resident.

Assessee(Section2(7))

  • It means a person by whom income tax or other sum of money is payable under this Act.
  • It includes every person in respect of whom any proceeding for assessment of his income or
  • loss has been taken place under this Act and the amount of refund due to him

Person Includes

  • Individual
  • Hindu Undivided Family(HUF)
  • Company
  • Firm
  • Association of Persons(AOP) or Body of Individuals
  • Local Authority
  • Every artificial juridicial person not falling in any of above categories 

     

Residential Status of Individual

Resident

An individual is said to be Resident in India, if he satisfies any of one condition

  • If he stays 182 days or more in India during the previous year

OR

  •  If he stays 60 days or more in India during the previous year

AND

               he stays 365 days or more in India during the four immediately preceding the relevant previous        years

Exception:

  • An individual who is Citizen of India who leaves India during the previous year for the purpose of employment outside India(employment may be in India(e.g: Foreign assignment) or may be outside India).
  • Individual who is Citizen of India who leaves India during the previous year as a member of crew of Indian ship.
  • If an Individual who is Citizen of India or person of Indian Origin who comes to India for visit during the previous year

In these three exceptions only one condition need to satisfied i.e. if he stays period of 182 days or more during the previous year then he is Resident in India

 Non Resident

An individual is said to be Non-Resident in India, if he satisfies none of above two condition

 

Important Points

  • Residential Status is determined for each year separately.
  • If an assessee is resident for one source of Income then he is resident for other source of Income also
  • In computing the period of stay for the purpose of residential status, there is no requirement that an individual should stay continuous period.
  • The day of coming to India and day of leaving India should also be included in computing the period of stay
  • There is no requirement that the individual should stay only in one place in India, he can stay in other place also

 

Resident and Ordinarily Resident(ROR)

If an individual is Resident in India, then he needs to satisfy both additional conditions for Resident and Ordinarily Resident(ROR)

  • He is Resident in India in at least 2 years out of 10 immediately preceding the relevant previous years.

And

  •  He stays in India 730 days or more in India during the seven immediately preceding the relevant preceding previous year.

If he does not satisfy both the conditions then he will be Resident but Not Ordinarily Resident(RNOR)

 

Residential Status of HUF

Resident

A HUF is said to be Resident in India, if the control and management of its affairs are wholly or partially situated in India

If HUF is Resident in India, then the Karta or Manager of HUF needs to satisfy both additional conditions for Resident and Ordinarily Resident(ROR)

  • He is Resident in India in at least 2 years out of 10 immediately preceding the relevant previous years.

And

  •  He stays in India 730 days or more in India during the seven immediately preceding the relevant preceding previous year.

 

If he does not satisfy both the conditions then he will be Resident but Not Ordinarily Resident(RNOR)

Non Resident

HUF will be Non-Resident in India, if control and management of its affairs are wholly situated outside India.

 

Residential Status of Firm, AOPs

Resident

A firm or AOP is Resident in India, if the control and management of its affairs are wholly or partially situated in India

Non Resident

A firm or AOP is Non-Resident in India, if control and management of its affairs are wholly situated outside India.

 Residential Status of Company

  • Indian Company:

Indian Company is always Resident in India

  • Foreign Company:

 Upto Assessment Year 2016-17

A Foreign Company is resident in India only if during the previous year the control and management of its affairs are situated wholly in India

A Foreign Company is non- resident in India only if during the previous year the control and management of its affairs are situated wholly or partially situated outside India.

 

From Assessment Year 2017-18

A Foreign Company will be resident in India only if its Place Of Effective Management(POEM) during the previous year in India.

Place of Effective Management means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are taken

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