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Residential Status and incidence of Tax under income tax act

                                                                            Residential Status:

Section 6 of income Tax Act, 1961 deals with the residential Status of Person.

There are three types of Residential status: (a) Resident (b) Resident but not ordinary resident (c) Non Resident

                                                                                                      Resident:

                                                                        Individuals[Sec 6(1), 6(1A)]

[sec-6(1)]: An individual is said to be resident in India in any P.Y, if he satisfies any one of the following conditions:
(a) He has been in India during the Previous year for a total period of 182 days or more, or
(b)He has been in India during the 4 years immediately preceding the P.Y for a total period of 365 days or more and has been in India for at least 60 days in the Previous Year.
Exceptions: Following Categories of Person has to satisfy Point (i) [i.e Point (ii) will not be taken into Account for Determining their residential status.]:
(i) Indian citizen, who leaves India in any P.Y as a member of the Crew of an Indian ship or purpose of employment outside India, or
(ii) Indian citizen or person of Indian origin engaged outside India in an employment or a business or profession or in any other vocation, who comes on a visit to India in any P.Y.    

[Sec-6(1A)]Notwithstanding anything contained in clause (1), an individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

Explanation.—For the removal of doubts, it is hereby declared that this clause shall not apply in case of an individual who is said to be resident in India in the previous year under clause (1).



                                                                                       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.
If the HUF is resident, then the status of the karta determines whether it is resident and ordinary resident or resident but not ordinary resident.

                                                                                              Company[sec 6(3)]

A company is said to be resident in India if-

(a) It is an Indian Company, or

(b) Its Place of Effective Management, in that year is in India. (for other than Indian company)  
Explanation to section 6(3) defines “place of effective management” to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as whole are, in substance made.


                                                Firm/AOP/Local Authorities/Artificial Juridical Person:[sec 6(4)]                                                                                             

Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

Sec-6(5) If a person is resident in India in a previous year relevant to an 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.

                                                  Resident but not Ordinary Resident:

 sec 6(6) :A person is said to be “not ordinarily resident” in India in any previous year if such person is—

  (a) an individual who has been a non-resident in India in nine (9) out of the ten (10) previous years preceding that year, or has during the seven (7) previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days (729) or less; or

  (b) a Hindu undivided family whose manager satisfy the condition above

  (c) a citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, as referred to in clause (b) of Explanation 1 to clause (1), who has been in India for a period or periods amounting in all to one hundred and twenty days(120) or more but less than one hundred and eighty-two days(180); or

  (d) a citizen of India who is deemed to be resident in India under clause (1A).

Explanation.—For the purposes of this section, the expression “income from foreign sources” means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India) and which is not deemed to accrue or arise in India.

                                                                            Incidence Of Tax [Sec-5]

(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which—

 (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or

 (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or

 (c) accrues or arises to him outside India during such year :

Provided that, in the case of a person not ordinarily resident in India within the meaning of  sec6(6)  the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which—

 (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or

 (b) accrues or arises or is deemed to accrue or arise to him in India during such year.

Explanation 1.—Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.

Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.

 

                                                                                                                                                                             Residential Status 

Categories of Income

Resident /Ordinary resident

Not ordinary Resident

Non Resident

Income which is deemed to be accrued in India

Taxable

Taxable

Taxable

Accrued income in India

Taxable

Taxable

Taxable

Income which is deemed to be received in India

Taxable

Taxable

Taxable

Income received in India

Taxable

Taxable

Taxable

Income generated from a business, which is situated in India

Taxable

Taxable

Non-taxable

Any income which is earned from outside India

Taxable

Not-Taxable

Not-taxable

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