Residential Status & Incidence of Tax PDF

Residential Status and Incidence of Tax Residence and Scope of Total Income Residential Status Scope of Total Income [Section 6] [Section 5]...

Residential Status and Incidence of Tax Residence and Scope of Total Income Residential Status Scope of Total Income [Section 6] [Section 5] Resident Individual/HUF Firm/LLP/ and Resident but Non- AOP/BOI/ ordinarily not ordinarily resident company resident resident etc. Resident Non- Deemed resident resident Global Income which Resident (Individual) income is is received/ and deemed to be Resident taxable in Income ordinarily received/ resident India received/ accrued or arisen/ deemed to be deemed t o received/ Non-resident accrue or Resident accrued arise in India but not or arisen/ ordinarily deemed resident to accrue or arise in India Income which accrues or arises outside India being derived from a business controlled in or profession set up in India  1. RESIDENTIAL STATUS [SECTION 6] The incidence of tax on any assessee depends upon his residential status under the Act. For all purposes of income-tax, taxpayers (individuals and HUF) are classified into three broad categories on the basis of their residential status viz. (1) Resident and ordinarily resident (2) Resident but not ordinarily resident (3) Non-resident Taxpayers (other than individuals and HUF) are classified into two broad categories on the basis of their residential status viz. (1) Resident (2) Non-resident Resident Resident and ordinarily resident Deemed Resident but Individual/HUF resident not ordinarily (Individual) resident Non-resident Residential Status (Section 6) Resident Firm/AOP/Local Authority/Company etc. Non-resident The residential status of an assessee must be ascertained with reference to each previous year. A person who is resident and ordinarily resident in one year may become non-resident or resident but not ordinarily resident in another year or vice versa. The provisions for determining the residential status of assessees are: 1.1 Residential Status of Individuals 1. Residential status on the basis of number of days of stay in India - Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions: (i) He has been in India during the previous year for a total period of 182 days or more, or (ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the relevant previous year. If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non-resident. Exceptions: The following categories of individuals will be treated as resident in India only if the period of their stay during the relevant previous year amounts to 182 days or more. In other words, even if such persons were in India for 60 days or more (but less than 182 days) in the relevant previous year, they will not be treated as resident due to the reason that their stay in India was for 365 days or more during the 4 immediately preceding years. (1) Indian citizen, who leaves India during the relevant previous year as a member of the crew of an Indian ship or for purposes of employment outside India, or (2) Indian citizen or person of Indian origin1 who, being outside India comes on a visit to India during the relevant previous year. However, such person having total income, other than the income from foreign sources [i.e., income which accrues or arises outside India (except income from a business controlled in or profession set up in India) and which is not deemed to accrue or arise in India], exceeding Rs. 15 lakhs during the previous year will be treated as resident in India if - - the period of his stay during the relevant previous year amounts to 182 days or more, or - he has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India  for at least 120 days in the previous year. Stay in India for 120 days in the relevant P.Y. is not a standalone condition. This condition requires stay in India for 120 days in the relevant P.Y. + 365 days in the 4 years immediately preceding the P.Y. A person is said to be of Indian origin if he or either of his parents or either of his grandparents was born in undivided India. 2. ADDITIONAL CONDITIONS TO TEST AS TO WHEN A RESIDENT INDIVIDUAL IS ORDINARILY RESIDENT IN INDIA - Under section 6(6), a resident individual is treated as ―resident and ordinarily resident‖ in India if he satisfies the following two additional conditions – Additional He has been resident† in India in at least 2 out of 10 previous years condition (i) immediately preceding the relevant previous year. Additional He has been in India for a period of 730 days or more during 7 years condition (ii) immediately preceding the relevant previous year. In brief, it can be said that an individual becomes resident and ordinarily resident in India if he satisfies at least one of the basic conditions [i.e., (a) or (b)] and the two additional conditions [i.e., (i) and (ii)]. 3. Deemed resident [Section 6(1A)] – An individual, being an Indian citizen, having total income, other than the income from foreign sources [i.e., income which accrues or arises outside India (except income from a business controlled in or profession set up in India) and which is not deemed to accrue or arise in India], exceeding Rs. 15 lakhs during the previous year would 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. However, this provision will not apply in case of an individual who is a resident of India in the previous year as per section 6(1). Meaning of “liable to tax” – Liable to tax, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force. It also includes a person who has subsequently been exempted from such liability under the law of that country.  Only Indian citizen can be deemed resident. An individual who is not an Indian citizen but a person of Indian Origin cannot be deemed resident u/s 6(1A).  Stay in India is not necessary for being a deemed resident u/s 6(1A). Resident and ordinarily resident/Resident but not ordinarily resident Only individuals and HUF can be ―resident but not ordinarily resident‖ in India. All other classes of assessees can be either a resident or non-resident. A not- ordinarily resident person is one who satisfies any one of the conditions specified u/s 6(6). (i) If such individual has been non-resident in India in any 9 out of the 10 previous years preceding the relevant previous year, or (ii) If such individual has, during the 7 previous years preceding the relevant previous year, been in India for a period of 729 days or less, or (iii) If such individual is an Indian citizen or person of Indian origin (who, being outside India, comes on a visit to India in any previous year) having total income, other than the income from foreign sources [i.e., income which accrues or arises outside India (other than income derived from a business controlled in or profession set up in India) and which is not deemed to accrue or arise in India], exceeding Rs. 15 lakhs during the previous year, who has been in India for 120 days or more but less than 182 days during that previous year, or (iv) If such individual is an Indian citizen who is deemed to be resident in India under section 6(1A). A deemed resident u/s 6(1A) is always RNOR. ILLUSTRATION 1 Mr. B, a Canadian citizen, comes to India for the first time during the P.Y. 2019-20. During the financial years 2019-20, 2020-21 2021-22, 2022-23 and 2023-24, he was in India for 55 days, 60 days, 90 days, 150 days and 70 days, respectively. Determine his residential status for the A.Y. 2024-25. SOLUTION During the P.Y. 2023-24, Mr. B was in India for 70 days and during the 4 years preceding the P.Y. 2023-24, he was in India for 355 days (i.e. 55+ 60+ 90+ 150 days). Thus, he does not satisfy the basic condition under section 6(1). Therefore, he is a non- resident for the P.Y. 2023-24. ILLUSTRATION 2 Brett Lee, an Australian cricket player visits India for 100 days in every financial year. This has been his practice for the past 10 financial years. (a) Find out his residential status for the assessment year 2024-25. (b) Would your answer change if the above facts relate to Srinath, an Indian citizen who resides in Australia and represents the Australian cricket team? (c) What would be your answer if Srinath had visited India for 120 days instead of 100 days every year, including P.Y.2023-24? SOLUTION (a) Determination of Residential Status of Mr. Brett Lee for the A.Y. 2024-25:- Period of stay during previous year 2023-24 = 100 days Calculation of period of stay during 4 preceding PYs (100 x 4 = 400 days) 2022-23 100 days 2021-22 100 days 2020-21 100 days 2019-20 100 days Total 400 days Mr. Brett Lee has been in India for a period more than 60 days during previous year 2023-24 and for a period of more than 365 days during the 4 immediately preceding previous years. Therefore, since he satisfies one of the basic conditions under section 6(1), he is a resident for the A.Y. 2024-25. Computation of period of stay during 7 preceding previous years = 100 x 7 = 700 days 2022-23 100 days 2021-22 100 days 2020-21 100 days 2019-20 100 days 2018-19 100 days 2017-18 100 days 2016-17 100 days Total 700 days  Since his period of stay in India during the past 7 previous years is less than 730 days,he is a not-ordinarily resident during the A.Y. 2024-25 (See Note below). Therefore, Mr. Brett Lee is a resident but not ordinarily resident during the previous year 2023-24 relevant to the assessment year 2024-25. Note: An individual, not being an Indian citizen, would be not-ordinarily resident person if he satisfies any one of the conditions specified under section 6(6), i.e, (i) If such individual has been non-resident in India in any 9 out of the 10 previous years preceding the relevant previous year, or (ii) If such individual has during the 7 previous years preceding the relevant previous year been in India for a period of 729 days or less. In this case, since Mr. Brett Lee satisfies condition (ii), he is a not-ordinarily resident for the A.Y. 2024-25. (b) If the above facts relate to Mr. Srinath, an Indian citizen, who residing in Australia, comes on a visit to India, he would be treated as non-resident in India, irrespective of his total income (excluding income from foreign sources), since his stay in India in the current financial year is, in any case, less than 120 days. (c) In this case, if Srinath’s total income (excluding income from foreign sources) exceeds Rs. 15 lakh, he would be treated as resident but not ordinarily resident in India for P.Y.2023-24, since his stay in India is 120 days in the P.Y.2023-24 and 480 days (i.e., 120 days x 4 years) in the immediately four preceding previous years. If his total income (excluding income from foreign sources) does not exceed Rs. 15 lakh, he would be treated as non-resident in India for the P.Y.2023-24, since his stay in India is less than 182 days in the P.Y.2023-24. ILLUSTRATION 3 X comes to India, for the first time, on April 16, 2021. During his stay in India up to October 5, 2023, he stays at Delhi up to April 10, 2023 and thereafter remains in Chennai till his departure from India. Determine his residential status for the assessment year 2024-25. Solution : During the previous year 2023-24, X was in India for 188 days (i.e., April 2023 : 30 days ; May 2023 : 31 days; June 2023 : 30 days ; July 2023 : 31 days ; August 2023 : 31 days ; September 2023 : 30 days and October 2023 : 5 days). He is in India for more than 182 days during the previous year and, thus, he satisfies basic condition (a). Consequently, he becomes resident in India. A resident individual is either ordinarily resident or not ordinarily resident. To determine whether X is ordinarily resident or not, one has to test the two additional conditions as laid down by section 6(6)(a). Additional Condition (i) - This condition requires that X should be resident in India in at least 2 years out of 10 years preceding the relevant previous year. X is resident in India for the previous years 2021-22 and 2022-23. Additional Condition (ii) - This condition requires that X should be in India for at least 730 days during 7 years immediately preceding the previous year. X is in India from April 16, 2021 to  March 31, 2023 (i.e., 715 days). X satisfies one of the basic conditions and only one of the two additional conditions. X is, therefore, resident but not ordinarily resident in India for the assessment year 2024-25. Note : In order to determine the residential status, it is not necessary that a person should continuously stay in India at the same place. Therefore, the information that X is in Delhi up to April 10, 2023 is irrelevant. ILLUSTRATION 4 X, an Indian citizen, leaves India for the first time on September 20, 2020 for the purpose of employment. He comes to India for a visit of 146 days on April 10, 2022. He finally comes back on May 16, 2023. Find out the residential status of X for the assessment year 2024-25. Solution : During the previous year 2023-24 (and the ten preceding years) X is in India as follows — Previous year Presence in India (number of Resident (R) or non- Presence for minimum days) resident (NR) days to become resident 2023-24 320 R — 2022-23 146 NR 182 2021-22 173 NR 182 2020-21 365 R — 2019-20 366 R — 2018-19 365 R — 2017-18 365 R — 2016-17 365 R — 2015-14 366 R — 2014-15 365 R — 2013-14 365 R — Since X is in India for a period of 320 days during the previous year 2023-24, he is resident in India. Besides, he is in India for 2,145 days during 7 years prior to 2023-24 (i.e., during April 1, 2016 and March 31, 2023). Moreover, he is resident in India for 8 years out of 10 years. He is, Therefore, resident and ordinarily resident in India for the assessment year 2024-25 (X satisfies two additional conditions). ILLUSTRATION 5 X is an Indian citizen. Currently, he is in employment with an overseas company located in Dubai. During different Years, he is in India as follows – Previous year Presence in Previous year Presence in Previous year Presence in India India India 2023-24 55 days 2020-21 55 days 2017-18 55 days 2022-23 190 days 2019-20 190 days 2016-17 190 days 2021-22 200 days 2018-19 200 days 2015-16 200 days  For the previous year 2023-24, X is not taxable in Dubai or any other country/territory by reason of his domicile or residence. Income of X (other than income from foreign sources) for the previous year 2023-24 is Rs. 16,00,000. Find out the residential status of X for the assessment year 2024-25. Solution: X is in India for 55 days during the previous year 2023-24. He is unable to satisfy any of the basic condition given by section 6(1). However, he satisfies the following conditions given by section 6(1A)- A. X is an Indian Citizen B. His total income (other than the income from foreign sources) exceeds Rs. 15,00,000 during the relevant previous year. C. 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. So, He is deemed to be resident but not ordinarily resident in India for the previous year 2023-24. ILLUSTRATION 6 X is an Indian citizen. Currently, he is in employment with a multinational company and posted in Singapore. During the previous year 2023-24, he comes to India for a visit of 145 days. In earlier 4 years, He is in India for more than 900 days. X wants to know his residential status for the assessment year 2024-25. His annual income for the previous year 2023-24 is a follow – Income from salary, rent, consultancy and interest earned and received in 29,00,000 Singapore Income from business (accrued and received outside India, controlled from 21,00,000 Singapore) Income from another business (accrued and received outside India, controlled 8,00,000 from India) Interest on bank fixed deposit in India 11,00,000 Any other income in India or outside India Nil Life insurance premium in India 2,60,000 Solution: in the previous year 2023-24, X is in India for 145 days. Total income of X (other than income from foreign sources) is Rs. 17,50,000. [Rs. 8,00,000 +Rs. 11,00,000 – deduction under section 80C as per old tax regime :1,50,000] X satisfies 4 conditions of second exception as follows- A. X is an Indian Citizen or a person of Indian origin B. His total income (other than the income from foreign sources) exceeds Rs. 15,00,000 during the relevant previous year. C. He comes to India on a visit during the previous year 2023-24. D. He is in India for 145 days (. i.e. his Indian visit is for 120 days or more but less than 182 days) during the relevant previous year and 365 days or more during 4 years immediately preceding relevant previous year. So, He is deemed to be resident but not ordinarily resident in India for the previous year 2023-24. 1.2 Residential status of HUF Resident: A HUF would be resident in India if the control and management of its affairs is situated wholly or partly in India. Non-resident: If the control and management of the affairs is situated wholly outside India, it would become a non-resident. Resident and ordinarily resident/ Resident but not ordinarily resident If Karta of resident HUF satisfies both the following additional conditions (as applicable in case of individual) then, resident HUF will be resident and ordinarily resident, otherwise it will be resident but not ordinarily resident.  Karta of resident HUF should be resident in at least 2 previous years out of 10 previous years immediately preceding relevant previous year.  Stay of Karta during 7 previous years immediately preceding relevant previous year should be 730 days or more. ILLUSTRATION 7 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. 2023-24 after 15 years. He comes to India on 1.4.2023 and leaves for Australia on 1.12.2023. Determine the residential status of Mr. E and the HUF for A.Y. 2024-25. SOLUTION (a) During the P.Y. 2023-24, Mr. E has stayed in India for 245 days (i.e. 30+31+30+31+31+30+31+30+1 days). Therefore, he is a resident. However, since he has come to India after 15 years, he does not satisfy the condition for being ordinarily resident. Therefore, the residential status of Mr. E for the P.Y. 2023-24 is resident but not ordinarily resident. (b) Since the business of the HUF is transacted from Australia and policy decisions are taken there, it is assumed that the control and management is in Australia i.e., the control and management is wholly outside India. Therefore, the HUF is a non- resident for the P.Y. 2023-24.  Note – If the control and management is in India, even partially, then, the HUF would be resident in India. In such a case, the residential status of HUF would be resident but not ordinarily resident, since the Karta’s stay in India is for less than 730 days in the 7 previous years immediately preceding the relevant previous year. Residential Status of a HUF Is the control and management of its affairs situated wholly or partly in India? YES NO Is Karta resident in India atleast in any 2 PYs out of 10 HUF is PYs preceding the relevant PY? Non- resident (+) Is his stay in India for 730 days or more during the 7 PYs preceding the relevant PY? YES NO HUF is ROR HUF is RNOR 1.3 Residential status of firms, AoPs and BoIs Resident: A firm, AoP and BoI would be resident in India if the control and management of its affairs is situated wholly or partly in India. Non-resident: Where the control and management of the affairs is situated wholly outside India, the firm, AoP and BoI would become a non-resident. The residential status of the partners/ members is immaterial while determining the residential status of a Firm/AOP/BOI. 1.4 Residential status of companies A company would be resident in India in any previous year, if- (i) it is an Indian company; or (ii) its place of effective management, in that year, is in India. “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 a whole are, in substance made [Explanation to section 6(3)]. Determination of residential status of a company Is the company an Whether POEM of the The company is a No No Indian company? company is in India in non-resident for the relevant P.Y.? the relevant P.Y. Yes Yes The company is a resident in India for the relevant P.Y. Note – The guidelines issued by CBDT for determination of POEM of a foreign company and transition mechanism for a company which is incorporated outside India, which has not been assessed to tax in India earlier and has become resident in India for the first time due to application of POEM, has been provided in Chapter XII-BC. The same will be dealt with at the Final level.  1.5 Residential status of local authorities and artificial juridical persons Resident: Local authorities and artificial juridical persons would be resident in India if the control and management of its affairs is situated wholly or partly in India. Non-resident: Where the control and management of the affairs is situated wholly outside India, they would become non-residents. 2. SCOPE OF TOTAL INCOME / INCIDENCE OF TAX Section 5 provides the scope of total income in terms of the residential status of the assessee because the incidence of tax on any person depends upon his residential status in India. The scope of total income of an assessee depends upon the following three important considerations: (i) the residential status of the assessee; (ii) the place of accrual or receipt of income, whether actual or deemed; and (iii) the point of time at which the income had accrued to or was received by or on behalf of the assessee. The ambit of total income of the three classes of assessees would be as follows: (1) Resident and ordinarily resident (ROR) The total income of an ROR would, under section 5(1), consist of: (i) income received or deemed to be received in India during the previous year; (ii) income which accrues or arises or is deemed to accrue or arise in India during the previous year; and (iii) income which accrues or arises outside India even if it is not received or brought into India during the previous year. In simpler terms, an ROR has to pay tax on the total income accrued or deemed to accrue, received or deemed to be received in or outside India during the relevant previous year. (2) Resident but not ordinarily resident (RNOR) Under section 5(1), the total income of an RNOR would consist of – (i) income received or deemed to be received in India during the previous year; (ii) income which accrues or arises or is deemed to accrue or arise in India during the previous year; and (iii) income derived from a business controlled in or profession set up in India, even though it accrues or arises outside India. Note – All other income accruing or arising outside India which is not received or deemed to be received or deemed to accrue or arise in India would not be included in his total income. (3) Non-resident A non-resident’s total income under section 5(2) includes: (i) income received or deemed to be received in India in the previous year; and (ii) income which accrues or arises or is deemed to accrue or arise in India during the previous year. Note: All assessees, whether resident or not, are chargeable to tax in respect of their income accrued, arisen, received or deemed to accrue, arise or to be received in India whereas a resident alone (resident and ordinarily resident in the case of individuals and HUF) is chargeable to tax in respect of income which accrues or arises outside India. Residential Status and Scope of Total Income: Whether the following incomes are to be included in Total Income? Scope of total Resident and Resident but not Non-Resident Income Ordinarily Ordinarily Resident Resident (ROR) (RNOR) Income received Yes Yes Yes or deemed to be received in India during the previous year Income accruing Yes Yes Yes or arising or deeming to accrue or arise in India during the previous year Income accruing Yes, even if such Yes, but only if No or arising outside income is not such income is India during the received or derived from a previous year brought into India business controlled during the in or profession set previous year up in India; Otherwise, No. ILLUSTRATION From the following particulars of income furnished by Mr. Anirudh pertaining to the year ended 31.3.2024, compute the total income for the A.Y. 2024-25, if he is: (i) Resident and ordinary resident; (ii) Resident but not ordinarily resident; (iii) Non-resident Particulars ` (a) Gains on sale of shares of an Indian Company, received in Germany 15,000 (b) Dividend from a Japanese Company, received in Japan 10,000 (c) Rent from property in London deposited in a bank in London, later on 75,000 remitted to India through approved banking channels (d) Dividend from RP Ltd., an Indian Company 6,000 (e) Agricultural income from land in Nepal 25,000 SOLUTION Computation of total income of Mr. Anirudh for the A.Y. 2024-25 Resident & Resident Non- Particulars ordinarily but not Resident resident ordinarily ` resident ` ` 1) Gains on sale of 15,000 15,000 15,000 shares of an Indian company, received in Germany 2) Dividend from a Japanese company, 10,000 - - received in Japan 3) Rent from property in London 75,000 - - deposited in a bank in London 4) Dividend from RP Ltd., an Indian 6,000 6,000 6,000 Company 5) Agricultural income from land in Nepal 25,000 - - Total Income 1,31,000 21,000 21,000 ILLUSTRATION Compute the total income in the hands of an individual aged 35 years, being a resident and ordinarily resident, resident but not ordinarily resident, and non- resident for the A.Y. 2024- 25, assuming that he has exercised the option of shifting out of the default tax regime provided under section 115BAC(1A)– Particulars Amount (`) Interest on UK Development Bonds, 50% of interest received in India 10,000 Income from a business in Chennai (50% is received in India) 20,000 Short term capital gains on sale of shares of an Indian company, 20,000 received in London Dividend from British company received in London 5,000 Long term capital gains on sale of plant at Germany, 50% of gains are 40,000 received in India Income earned from business in Germany which is controlled in 70,000 Delhi (Rs. 40,000 is received in India) Profits from a business in Delhi but managed entirely from London 15,000 Income from house property in London deposited in a Bank at 50,000 London, brought to India (Computed) Interest on debentures in an Indian company, received in London 12,000 Fees for technical services rendered in India but received in London 8,000 Profits from a business in Mumbai, managed from London 26,000 Income from property situated in Nepal received there (Computed) 16,000 Past foreign untaxed income brought to India during the previous year 5,000 Income from agricultural land in Nepal, received there and then 18,000 brought to India Income from profession in Kenya which was set up in India, received there 5,000 but spent in India Interest on savings bank deposit in State Bank of India 12,000 Income from a business in Russia, controlled in Russia 20,000 Dividend from Reliance Petroleum Limited, an Indian Company 5,000 Agricultural income from a land in Rajasthan 15,000 SOLUTION Computation of total income for the A.Y. 2024-25 Resident Resident Non- Particulars and but not resident ordinarily ordinarily resident resident ` ` ` Interest on UK Development Bonds, 50% of 10,000 5,000 5,000 interest received in India Income from a business in Chennai (50% is 20,000 20,000 20,000 received in India) Short term capital gains on sale of shares of 20,000 20,000 20,000 an Indian company, received in London Dividend from British company received in 5,000 - - London Long term Capital gains on sale of plant at 40,000 20,000 20,000 Germany, 50% of gains are received in India Income earned from business in Germany 70,000 70,000 40,000 which is controlled in Delhi, out of which Rs. 40,000 is received in India Profits from a business in Delhi but 15,000 15,000 15,000 managed entirely from London Income from house property in London 50,000 - - deposited in a Bank at London, later on remitted to India Interest on debentures in an Indian 12,000 12,000 12,000 company, received in London Fees for technical services rendered in India 8,000 8,000 8,000 but received in London Profits from a business in Mumbai, 26,000 26,000 26,000 managed from London Income from property situated in Nepal and 16,000 - - received there Past foreign untaxed income brought to - - India during the previous year Income from agricultural land in Nepal, 18,000 - received there and then brought to India - Income from profession in Kenya which was 5,000 5,000 set up in India, received there but spent in India - Interest on savings bank deposit in State 12,000 12,000 12,000 Bank of India Income from a business in Russia, 20,000 - - controlled in Russia Dividend from Reliance Petroleum Limited, 5,000 5,000 5,000 an Indian Company Agricultural income from a land in Rajasthan [Exempt under section 10(1)] - - Gross Total Income 3,52,000 2,18,000 1,83,000  LET US RECAPITULATE (I) Residential status of an individual (1) (2) (3) (4) (5) (6) Section 6(1) 6(1) 6(1) 6(1) 6(1A) Main conditions All individuals Indian citizen Indian citizen or PIO Indian citizen or PIO Deemed resident – [Other than leaving India residing outside residing outside India Indian citizen whose (3), (4) and (5)] in relevant India visiting India visiting India during the total income (excl. [Either (a) or P.Y. for during the relevant relevant P.Y. and having Income from foreign (b) should be employment P.Y. and having total total income (excl. sources) > Rs. 15 satisfied for or as member income (excl. Income from foreign lakh, who is not being a of crew of Income from foreign sources) > Rs. 15 lakh liable to resident] Indian ship sources) ≤ Rs. 15 lakh tax in any other √ country (a) ≥182 days in the relevant √ √ √ X P.Y. (b) ≥ 60 days in the (OR) ≥ 120 days in the relevant P.Y. + ≥ 365 relevant P.Y. days in 4 immediately + preceding PYs √ x x ≥ 365 days in 4 x immediately preceding PYs Additional conditions Section 6(6) Section 6(6) Section 6(6) (i) ≥ 730 days in in 7 If both (i) and (ii) are satisfied, ROR. By default RNOR, if By default RNOR immediately preceding Otherwise RNOR individual becomes PYs i.e., if either (i) or (ii) are satisfied or neither (i) nor (ii) are resident due to the (ii) Resident for ≥ 2 years satisfied, RNOR. fulfillment of modified out of the 10 second condition above immediately preceding PYs Notes - (1) Section 6(1A) would not apply in case of an individual who is said to be resident in India in the previous year under section 6(1). (2) A person is said to be of Indian origin if he or either of his parents or either of his grandparents was born in undivided India (3) “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. (II) HUF [ROR/RNOR/non-resident] 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 [(i) & (ii)] in (I) above, then, the HUF would be ROR. Otherwise, the HUF would be RNOR. (III) 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. (IV) 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. Section 5 [Scope of Total Income] Resident and Resident but not Ordinarily Non-Resident Ordinarily Resident Resident Income received/ Income which is received/ Income received/ deemed to be deemed to be received/ accrued deemed to be received/accrued or or arisen/ deemed to accrue or received/accrued arisen/deemed to arise in India; or arisen/deemed accrue or arise in or to accrue or arise AND outside India in India. Income which accrues or arises In short, the global outside India being derived from income is taxable. a business controlled in or profession set up in India. **************************