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Residential Status and Scope of Total Income Notes

Residential Status [Section 6] and Scope of Total Income [Section 5]

RESIDENTIAL STATUS [SECTION 6]

Individuals

The residential status of an individual is determined on the basis of the period of his stay in India.

Basic conditions:

(i) He must be present in India for a period of 182 days or more during the previous year
(ii) He must be present in India for a period of 60 days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year.

Cases where condition (ii) is not applicable:

(a) Where an Indian citizen who leaves India during the previous year for the purpose of employment outside India or as a member of the crew of an Indian ship;
(b) Where an Indian citizen or a person of Indian origin who, being outside India, comes on a visit to India during the previous year [whose total income (excluding income from foreign sources) does not exceed Rs. 15 lakhs].

Additional condition:

(1) He is a resident in at least 2 out of 10 previous years preceding the relevant previous year;
(2) His stay in India in the last 7 years preceding the relevant previous year is 730 days or more.

Resident and ordinarily resident [ROR] Resident but not ordinarily resident [RNOR] Non-resident [NR]
Must satisfy at least one of the basic conditions [(i) or (ii)] and both the additional conditions [(1) & (2)] Must satisfy at least one of the basic conditions [(i) or (ii)] and one or none of the additional conditions [(1) or (2) or neither] Must not satisfy either of the basic conditions [neither (i) nor (ii)]

An Indian citizen or a person of Indian origin who, being outside India, comes on a visit to India during the previous year (having total income, other than the income from foreign sources), exceeding Rs. 15 lakhs during the previous year would be resident if his period of stay is

  • 182 days or more during the previous year [First condition]; or
  • 120 days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year [Second condition].

Such individual would, however, be resident but not ordinarily resident if he satisfies only the second condition mentioned above but not the first condition (i.e., the period of his stay in India during the relevant previous year is ≥120 days but < 182 days).

If he satisfies the first condition, he would be-

  • Resident and ordinarily resident (ROR), if satisfies both the additional conditions [(1) & (2)] and
  • Resident but not ordinarily resident (RNOR) if satisfies one or none of the additional conditions [(1) or (2) or neither].

Note – “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.

Deemed resident in India [Section 6(1A)] – An individual, being an Indian citizen, having total income, other than the income from foreign sources, exceeding Rs. 15 lakhs during the previous year would be deemed to be resident but not ordinarily resident in India in that previous year, if he 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.

This provision would not apply in case of an individual who is said to be resident in India in the previous year under section 6(1).

HUF

A HUF would be resident in India if the control and management of its affairs is situated wholly or partly in India.

If the control and management of the affairs is situated wholly outside India, it would become a non-resident.

If the HUF is resident, then the satisfaction or otherwise of additional conditions by Karta would determine whether the HUF is ROR or RNOR.

If Karta satisfies both the additional conditions [(1) & (2)] in (I) above, then the HUF would be ROR. Otherwise, the HUF would be RNOR.

Firms , AoPs and BoIs [Resident/Non-resident]

(i) A firm, AoP or BoI would be resident in India if the control and management of its affairs is situated wholly or partly in India.
(ii) If the control and management of the affairs is situated wholly outside India, they would become a non-resident.

Companies [Resident/Non-resident]

(i) A company would be resident in India in any previous year if it is an Indian company or its place of effective management (POEM) in that year is in India.
(ii) If the company is not an Indian Company and its POEM is also not in India in that year, it would become a non-resident for that year.

SCOPE OF TOTAL INCOME [SECTION 6]

Resident and Ordinarily Resident Resident but not Ordinarily Resident Non-Resident
Income received/ deemed to be received/accrued or arisen/deemed to accrue or arise in or outside India

In short, the global income is taxable.

Income which is received/ deemed to be received/ accrued or arisen/ deemed to accrue or arise in India;

AND

Income which accrues or arises outside India being derived from a business controlled in or profession set up in India.

Income received/ deemed to be received/accrued or arisen/deemed to accrue or arise in India.

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