Professional Documents
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c. non-resident in India
All other assessees (viz., a firm, an association of persons, a joint stock company and every
other person) can either be:
a. resident in India; or
b. non-resident in India.
The table given below highlights these pointsCategory
Category 1
Resident in India
Category 2
Resident in India
Ordinarily resident
Not-ordinarily resident
Non-resident in India
Non-resident in India
YES
NO
Resident
YES
NO
(ii).An Indian citizen or a person of Indian origin comes on visit to India during the
previous year.
For this purpose, a per son is said to be of Indian origin if either he or any of his parents or
any of his grandparents was born in undivided India.
In both the above cases, an individual needs to be present in India for a minimum of 182 days
or more to become resident in India instead of 60 days.
If the individual satisfies any of the two conditions, he is a resident in India and if he does not
satisfy any of the conditions, he is a non - resident during that particular assessment year.
ordinarily resident in India in any assessment year if he satisfies BOTH of the following two
conditions Viz he has been: -
1) Resident in India in at least 2 out of 10 previous years according to the above basic
conditions immediately preceding the relevant previous year. AND
2) In India for a period of 730 days or more during 7 years immediately preceding the
relevant previous year.
3. Resident and Not Ordinarily Resident [R&NOR]:
A resident individual, who does not satisfy BOTH of the above conditions given above,
will be a Resident but Not Ordinarily Resident in India.
In other words, an individual becomes resident but not ordinarily resident in India
If he
Satisfies at least one of the basic conditions but satisfies NONE of the additional conditions
OR
Satisfies ONLY ONE of the two additional conditions.
4. Non Resident:
An individual is a non - resident in India if he satisfies none of the basic conditions . It must
be noted that if a person satisfies the additional conditions but does not satisfy the basic
conditions, he will still be treated as Non - Resident. In such a case, additional conditions are
not relevant.
SUMMARY
From the above discussion it is brought out that an individual can either be:
(a) Resident and Ordinarily Resident in India;
(b) Resident but Not Ordinarily Resident in India or
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i. Official tours abroad in connection with employment in India shall not be regarded as
employment outside India.
j. A person may be resident of more than one country for any Previous Year.
k. Citizenship of a country and residential status of that country are two separate
concepts. A person may be an Indian national/Citizen but may not be a resident in
India and vice versa.
Points to be Considered by NRIs
Previous Year is period of 12 months from 1st April to 31st March. Number of days stay in
India is to be counted during this period.
Ensure that date stamped on the passport is legible.
Keep track of no. of days in India from year to year and check the same before making the
next trip to India. It is advisable to maintain a chart for the number of days stay in the current
and in the preceding seven (7) previous years.
In the 1st year of leaving India for employment outside India, ensure that you leave before
29th September. Otherwise total income of the financial year (including the foreign income)
will be taxable in India if it exceeds the basic exemption limit.
During the last year of stay abroad, on transfer of residence to India, ensure to come back
on or after Feb 1st (or Feb 2nd in case of a leap year). Since arrival before this date will result
in stay in India exceeding 59 days. However, a person whose stay in India in preceding four
(4) previous years does not exceed 365 days, he may return after September 30th of the
relevant year without loss of non-resident status.
3.1CHARGEABLE INCOME:
Section 5 of the Income-tax Act lays down the scope of total income of any previous year of
any person. The section reads as follows:
(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
sub-section (6) of Section 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
ILLUSTRATION:
Mr. C, a Japanese citizen left India after a stay of 10 years on 1-06-2010. During the financial
year 2011-12, he comes to India for 46 days. Later, he returns to India for 1 year on 10-102012.
Determine his residential status for the A.Y. 2013-14.
SOLUTION:
During the previous year 2012-13, Mr.C was in India for 173 days(i.e. 22 + 30 + 30 +31 + 28
+ 31 days). His stay in the last 4 years is:
2011-12
---
46
2010-11
---
62
(i.e. 30 + 31 + 1)
2009-10
---
365
2008-09
---
365
838
Mr. C is a resident since his stay in the previous year 2012-13 is 173 days and in the last 4
years is more than 365 days.
For the purpose of being ordinarily resident, it is evident from the above calculations, that
(i)
(ii)
His stay in the last 7 years is more than 730 days and
Since he was in India for 10 years prior to 1-6-2010, he was a resident in the least
2 out of the last 10 years preceding the relevant previous year.
(0% in India)
Resident
Non Resident
1 Resident:
As per Section 6(2), a Hindu Undivided Family (HUF) will be Resident in India if
control and management of its affairs is wholly or partly situated in India and conversely, a
HUF will be non resident in India if control and management of its affairs is situated
wholly outside India. This position can be summarized as follows:
Control or Management
Status
Resident
Non resident
Control and management means de facto (actual) control or manage but not merely the right
to control or manage. Control and management is situated at a place where the head, the seat
and the directing power are situated.
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A HUF can will be Resident and Ordinarily Resident if its Karta satisfies both the
conditions given in section 6(6) that is the Karta has been present in India: In at least 2 out of 10 previous years according to the basic condition mentioned
immediately preceding the relevant previous year and
For a period of 730 days or more during 7 years immediately preceding the previous year.
4 Non Resident:
A HUF will be non - resident in India if control and management of its affairs is
situated wholly outside India. It is not the basic conditions but the control and the
management of HUF which is relevant to whether the HUF is Resident or Non - Resident.
However, to determine ROR status the two additional conditions will be applicable with
reference to its Karta.
Summary:
Thus, like an Individual a HUF may be either:(a) Resident and ordinarily in India, or
(b) Resident but not ordinarily resident in India or
(c) Non - resident in India.
ILLUSTRATION:
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The business of a HUF is transacted from Australia and all the policy decisions are taken
there. Mr.E, the Karta of the HUF, who was born in Kolkata, visits India during the P.Y.201213 after 15 years. He comes to India on 1-4-2012 and leaves for Australia on 1-12-2012.
Determines the residential status of Mr. E and the HUF for A.Y.2013-14.
SOLUTION:
(i)
During the P.Y.2012-13, Mr. E has stayed in India for 245 days (i.e. 30 + 31 + 30
+ 31 + 31 + 30 + 31 + 30 + 1days). Therefore, he is a resident. However, since he
has come to India after 15 years, he cannot satisfy any of the condition for being
ordinarily resident.
Therefore, the residential status of Mr.E for the P.Y.2012-13 is resident but not
(ii)
ordinarily resident.
Since the business of HUF is transacted from Australia and nothing is mentioned
regarding its control and management, it is assumed that the control and
management is also wholly outside India. Therefore, the HUF is a non-resident for
the P.Y.2012-13.
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Indian company
Foreign company
Wholly in India
(100% in India)
Resident
Non Resident
As per section 6(3), residential status of a company is based on its place of registration
and control and management. Indian companies are always treated as resident irrespective of
where their control or management is. Other companies will be resident if their control and
management is wholly in India. Even if the part of the management or control is outside
India, the foreign company would be treated as non -resident in India.
ILLUSTRATION:
A company is registered in Dubai, having its head office there. However, the majority of the
directors and managers resided in India. Sales contracts and other important business
functions were controlled by directors in India. What is the residential status of the company?
SOLUTION:
A foreign company is resident in India only if, during the previous year control and
management of its affairs is situated wholly in India. Control in not necessarily situated in the
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country in which the company is registered. Usually control and management of a company
is situated at the place where meetings of the directors are held. In the given case directors
and managers are residing in India. Hence, important decisions are taken India. So this
company is a resident.
Control or Management
Status
Resident
Non resident
Thus, any such person will be Resident in India if control and management of its affairs is
wholly or partly situated in India and conversely, it will be non resident in India if control
and management of its affairs is situated wholly outside India.
Control and management means de facto (actual) control or manage but not merely the
right to control or manage. Control and management is situated at a place where the head, the
seat and the directing power are situated.
2 Non Resident:
AOP, BOI and Firms will be non - resident in India if control and management of its
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affairs is situated wholly outside India. These persons can only be either resident or not
resident but not ordinarily residents as depicted in the following diagram:
MISCELLANEOUS:
Following points are noteworthy:
A. Residential status for each previous year:
Residential status a person shall be determined for each previous year independently.
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If a person is a resident for one source of income in a previous year, he shall be deemed
to be a resident for all other sources of income also. [Section 6(5)]
Indian income
Resident and
Non-resident
ordinarily resident
Ordinarily
in India
in India
resident in India
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Taxable in India
Foreign income
- If it is business income
and business is controlled
India
Taxable in India
Taxable in India
Taxable in India
Not taxable in
India
Taxable in India
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Not taxable in
India
outside India
- Any other foreign
Taxable in India
Not taxable in
India
Any other taxpayer (like company, firm, co-operative society, association of persons,
body of Individual, etc
Resident in India
Non-resident in India
Indian income
Taxable in India
Taxable in India
Foreign income
Taxable in India
The admit of total income of the three classes of assessees would be as follows:
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3. Non-resident in India
A person is assessable to tax in respect of income which
i. Is received or deemed to be received in India by him or on his behalf
ii. Accrues or arises or deemed to accrue or arise to him in India
Other points:
Received in India means first receipt in India. If an income is received first outside India
and then subsequently remitted to India, it shall be treated as received outside India.
Past untaxed profits shall not be considered to be income of the current year in any case.
Particulars of Income
ROR
RNOR
NR
Taxable
Taxable
Taxable
Taxable
Taxable
Taxable
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Taxable
Category.
1) Resident & Ordinarily Resident
2) Resident & Not Ordinarily
3)Resident in India (RNOR)
is
a
Not
Taxable
Taxed in India
World Income.
Indian Income.
Income from business
Outside India controlled
From India.
4) Non-Resident.
Indian Income.
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II.
III.
IV.
II.
III.
resident.
Secures orders in India for the non - resident and other non - resident, controlling,
controlled by or subject to the same common control as that of non - resident.
2. Salary earned in India i.e. salary payable for services rendered in India . It also includes
salary paid for the rest period or leave period preceded and succeeded by services rendered in
India and forms part of service contract of employment.
3. Salary received by Indian national from the government in respect of services rendered out
of India. However any allowance or any perquisite paid abroad is fully exempt from tax
under Section 10(7)
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5.Interet payable by the government or a resident person unless such interest is payable in
respect of borrowed funds used for a business or profession carried out of India, or by a non resident person on funds borrowed for the business or profession carried in India
6. Royalty payable by the government or a resident person unless such royalty is in respect of
any right of property or services utilised for a business or profession carried out of India for
the purpose of earning any income out of India or by a non - resident person in respect of any
right of property or services utilised for the purpose of business or profession carried in India
or for the purpose of earning any income in India).
Exception:
(i)
Royaltys payable for the transfer of any data, drawings, etc. outside India or
imparting of information outside India under an approved agreement by the
(ii)
7. Fees for technical services payable by the government or a resident person unless such fees
are payable in respect of services utilised in a business or profession for earning any income
out of India or by a non - resident person for services utilised in a business or profession
carried on by him in India or for earning any income from any source in India..
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Exception: fees are payable under agreement made before the 1st day of April, 1976 and
approved by the Central Government.
The income of a non - resident is deemed to accrue or arise in India under any of the above
clauses, shall be included in the total income of the non - resident, whether or not, the non resident has -
(i)
(ii)
ILLUSTRATION:
Mr. Mannu had the following incomes during the previous year ended 31st March, 2013:
(1)
(2)
(3)
(4)
(5)
(6)
Particulars
Professional fees received in India for three months
Payment for the services rendered in India
Income from business in Bangladesh, being controlled from India
Income from agriculture in Indonesia
Interest received in Paris in respect of securities in French companies
Amount brought into India out of the past untaxed profits earned in
Amount
18,000
16,000
14,000
12,000
Germany
10,000
8,000
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SOLUTION:
NAME OF THE ASSESSEE: Mr. MANNU.
PREVIOUS YEAR
: 2012-13.
ASSESSMENT YEAR
: 2013-14.
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Item of income
1. Professional fees.
2. Received in U.K for
Nature of income
Income received in India
ROR
18,000
NOR
18,000
NR
18,000
16,000
16,000
16,000
Foreign Income
14,000
14,000
Nil
Foreign Income
12,000
Nil
Nil
Foreign Income
10,000
Nil
Nil
Nil
Nil
Nil
70,000
48,000
34,000
services in India.
3. Income from businesses in
Bangladesh, controlled
from India.
4. Income from agriculture
in Indonesia.
5. Interest received in Paris
on French securities.
6. Amount brought in India
out of past profits.
TOTAL INCOME
8.1REFERENCE:
www.indialiaison.com/residential_status.htm
www.du.ac.in
taxguru.in
220.227.161.86/18879sm_dtl_finalnew_cp2.pdf
ww.wiziq.com
www.mu.ac.in
and
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