BASIS OF CHARGE

RESIDENTIAL STATUS AND INCIDENCE OF TAX

Residential status
Under the provisions of INCOME TAX 1961, the total income of a each person is based upon his residential status. section 6 divides assessable person into two categories i. Resident in India ii. Non- resident in India However in case of INDIVIDUAL OR HUF : I. Resident & Ordinary Resident II. Resident but not ordinary resident

RESIDENTS

RESIDENTS ORDINARY RESIDENT NOT ORDINARY RESIDENT

NON RESIDENT

 Basic rules
Residential status is determined for each previous year. Dual residential status is possible. Duty.

PERSONS
SEC.2(31) DEFINED PERSONTHAT INCLUDES An Individual H.U.F Firm Company AOP/BOI Local Authority Other artificial juridical person

Rules for determining residential status of an individual U/S 6(1)

Basic conditions:

a)He is in India for a period of 182 days or more.

OR
b)60 days or more +365 days or more during 4 years immediately preceding the relevant P.Y

 Additional conditions:
I)he has been resident in India at least for 2years out of 10 previous years immediately preceding the relevant previous year

&
ii)He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant P.Y

AT A GLANCE:conditions resident Ordinary resident BASIC CONDITION (A) OR (B) ADDITIONAL CONDITION (I) & (II) ANY 1 BOTH Not ordinary resident ANY 1 NONE NONE IRRELEVANT Non resident

Exceptions
TWO EXCEPTIONS: X-1 individual who is citizen and who leaves India in any P.Y for the purpose of employment outside India. The period is relaxed to 182 days X-2 individual who is citizen of India or foreign nation of Indian origin who being outside India in any P.Y the period is relaxed 182 days.

Important points
1. Meaning of stay in India 2. Stay may be continuous or intermittent 3. Stay need not to be at one place 4. Object of stay not important 5. Calculations of no. Of days

EXAMPLES..
Mr. X an Indian citizen. Leaves India for 1st time on 31st may 2008 Comes back on 15th may 2011 Again leaves India on 10th June 2012. Comes back on 14th Jan 2013 Living in India since then. Determine his residential status.

SOLN.
STAY IN P.Y 12-13: 1ST AP.2012 -10 JUNE 2012 =30 +31+10 =71 DAYS 14TH JAN 2013- 31 MAR 2013 =18+28+31 =77 DAYS TOTAL STAY IN P.Y= 71+77 =148 DAYS

BASIC CONDITION: (A) 182 DAYS : NOT FULFILLED (B) 60 DAYS : FULFILLED STAY IN 4 IMMEDIATELY PRECEEDIND P.Y 2011-2012 = 322 DAYS 2010-2011= NIL 2009-2010 =NIL 2008-2009 = 61 DAYS 383 DAYS

THUS RESIDENT ADDITIONAL CODITIONS: BOTH FULFILLED THUS MR.X IS ORDINARY RESIDENT

RESIDENTIAL STATUS OF HUF: U/S 6(2)

conditions resident Ordinary resident Control and mgmt. wholly/partially situated in India in P.Y ADDITIONAL CONDITION (I) & (II) fulfills Not ordinary resident fulfills NOT Non resident

BOTH

NONE

IRRELEVANT

Examples
A H.U.F carrying on business in India. head office in KNP. From whre it is controlled. Karta was out to kenya for business purpose in 2011 and 2012

SOLN.
Basic condition fulfilled so RESIDENT Additional: fulfilled so ORDINARY RESIDENT

RESIDENTIAL STATUS OF COMPANY: U/S 6(3)

CONDITION AN INDIAN CO. OR CONTROL OF MGMT. OF AFFAIRS IS WHOLLY IN INDIA RESIDENT CO. SATISFIES SSATISFIES NON RESIDENT CO. NOT SATISFIED NOT SATISFIED

RESIDENTIAL STATUS OF FIRM: U/S 6(4)

CONDITION RESIDENT NON RESIDENT NOT SATISFIED

If control and mgmt of SATISFIES affairs is wholly/partially situated in India during relevant P.Y

EXAMPLE
JKL Co. is a partnership firm registered in India. Mr. J its senior partner, was in U.K for more than 340 days during the year ended on 31st march 2013 for business purpose. Soln: RESIDENT