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Saturday, October 26, 2013

UGC - NET: Commerce (08)

Residential Status of an Assessee

Residential status of an assessee is important in determining the scope of income on which income tax has to be paid in India. Broadly, an assessee may be resident or non-resident in India in a given previous year.
Residential Status of An individual
Ø  Resident in India: Satisfying any one of two BASIC conditions given u/s 6(1). Further classified into two parts:
a)      Resident and Ordinarily Resident: Satisfying One of the Basic Conditions [6(1] + Both the Additional Conditions [6(6)(a)&(b)

b)      Resident but not Ordinarily Resident: Satisfying One of the Basic Conditions [6(1] + Not satisfying any of the Additional Conditions [6(6)(a)&(b)

Ø  Non – Resident [Sec. 2(30)]: Not satisfying any of the Basic Conditions mentioned in [6(1)].
Remember: Ordinarily Resident and Resident but not ordinarily residential status is Applicable to individual and HUF Only

Basic Conditions Under section 6(1):
a)      182 days or more during P/Y, or
b)      At least 60 days during the relevant P/Y  + 365 days during the four years preceding that P/Y subject to following exceptions:
Ø  Individual + Citizen of India + Leaving India during P/Y + For Employment
Ø  Individual + Citizen of India + Leaving India during P/Y + As Crew member of India Ship
Ø  Individual + Citizen of India or Person of India Origin + Visit India during P/Y
Here, Person of Indian Origin: Himself + Parents + Grandparents (maternal and paternal grandparents) Born in Undivided India

Additional Conditions section 6(6):
a)      Resident in India in at least 2 out of 10 previous years (according to basic conditions noted above) preceding the relevant previous year;
b)      In India for a period of at least 730 days during 7 years proceeding the relevant previous year.

Residential Status of Firm [Sec. 6(2)]
Ø  Resident in India: Any Part of control and management of its affairs is in India during P/Y.
a)      Resident and Ordinarily Resident: Must be Resident in India + Both the Additional Conditions [6(6) (a) & (b) must be satisfied by KARTA or MANAGER.

b)      Resident but not Ordinarily Resident: Must be Resident in India + Not Satisfying any of the Additional Conditions [6(6) (a) & (b) by KARTA or MANAGER.

Ø  Non – Resident [Sec. 2(30)]: NO Part of control and management of its affairs is in India during P/Y.(Wholly Outside India)

Residential Status of Firm and AOP, or BOI [Sec. 6(2)]
Ø  Resident in India: Any Part of control and management of its affairs is in India during P/Y.
Ø  Non – Resident [Sec. 2(30)]: NO Part of control and management of its affairs is in India during P/Y. (Wholly Outside India)

Residential Status of Company [Sec. 6(3)]
Indian Company:
Ø  Resident in India: Registered in India + Deemed Company under any law of our country.
Foreign Company:
Ø  Resident In India: 100% Control and Management of its affairs in India.
Ø  Non Resident in India: Any part of Control and Management of its affairs outside India.

Residential Status of Local Authority and Artificial Judicial Person [Sec. 6(4)]
Ø  Resident in India: Any Part of control and management of its affairs is in India during P/Y.
Ø  Non – Resident [Sec. 2(30)]: NO Part of control and management of its affairs is in India during P/Y. (Wholly Outside India)