20-04-2022

9:44 AM

Part-II

Residential Status
&
Taxability
AY 2022-23

Classroom Deliberations

CA. Dr. Prithvi Ranjan Parhi

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Residential status
• Computation of Total Income depends on
Residential Status.

• Income is different in case of a person

resident in India & a person not resident
in India.

• Residential status is to be determined for

every PY.
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Residential Status
7
Person Categories

Assessee

Individual / HUF All other assessee

Resident in India Deemed

Non-Resident Resident Non-Resident
Individual: 182 d in PY or Resident
in India in India in India
60d in PY & 365 in 4 preceding PY (Individual)

Resident & Resident but not

Ordinary resident Ordinary resident
in India in India
Individual : Resident 2/10 PY +
730 days in 7 PY immediately
Preceding the relevant PY © CA (Dr) Prithvi R Parhi 3 /42

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Residential Status : Individual : Sec 6(1)
• An individual is said to be resident of India if
he satisfies any 1 of the following 2
Conditions;
If at least
1. He is in India for a period or periods
amounting in all to 182 days or more in the any one of
relevant PY ; the both
conditions is
or not
satisfied,
2. He is in India for 60 days or more during the the
relevant PY individual is
and a non-
resident.
has been in India for 365 days or more during
4 previous years immediately preceding the
relevant PY.
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Stay In India
• The term “stay in India” includes stay in the
territorial waters of India (i.e. 12 nautical miles into
the sea from the Indian coastline).
– Even the stay in a ship or boat moored in the territorial
waters of India would be sufficient to make the
individual resident in India.

• The residence of an individual for income-tax

purpose has nothing to do with citizenship, place of
birth or domicile.
– An individual can, therefore, be resident in more
countries than one even though he can have only one
domicile.

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EX # 1 : AY 2022-23
PY Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7

2021-22 365 182 180 80 50 188 180

2020-21 365 0 365 100 365 10 40

2019-20 365 0 365 140 365 14 60

2018-19 365 0 365 70 365 70 90

2017-18 365 0 365 160 365 16 30

Resident Resident Resident Resident Non Resident Non

Resident Resident

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EX # 1 : AY 2022-23
PY Case 8 Case 9 Case 10 Case 11 Case 12 Case 13 Case 14

2021-22 181 181 60 60 59 180 180

2020-21 365 0 5 4 365 5 4

2019-20 365 1 15 10 365 15 10

2018-19 365 9 50 50 365 50 50

2017-18 365 50 300 300 365 300 300

Resident Non Resident Non Non Resident Non

Resident Resident Resident Resident

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Exceptions :
1. An individual who is a citizen of India & who leaves India in any
PY for the purpose of employment

2. An individual who is a citizen of India & who leaves India in any

PY as a member of a crew in any Indian ship,

3. *An individual who is a citizen of India or is a person of Indian

origin who being outside India comes on a visit to India in any PY
,

• the period of 60 days mentioned supra will be read as

182 days

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Residential Status : Individual

1. He is in India for a period or periods amounting in all to 182 days

or more in the relevant PY ;

or

2. He is India for 182

60 days or more during the relevant PY
and

has been in India for 365 days or more during 4 previous years
immediately preceding the relevant PY.

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An individual who is a citizen of

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India or is a person of Indian
origin who being outside India
*Total Indian Income
comes on a visit to India in any > Rs. 15 Lakh
PY

• However, such person having total income, other than the income
from foreign sources, 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.

Income From Foreign Sources :

Income which accrues or arises outside India (except income from a
business controlled from or profession set up in India) and which is
not deemed to accrue or arise in India.
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Residential Status : Individual coming on a
visit: Total Indian Income > Rs.15 L
,
1. He is in India for a period or periods amounting in all to 182 days
or more in the relevant PY ;

or

2. He is India for 60
120 days or more during the relevant PY
and

has been in India for 365 days or more during 4 previous years
immediately preceding the relevant PY.

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Deemed Resident [Section 6(1A)]

• An individual, being an Indian citizen, having total
income, other than the income from foreign sources Indian Citizen
• exceeding Rs.15 lakhs during the previous year would
be deemed to be resident in India in that previous
year, if he is Indian Total
Income
• not liable to pay tax in any other country or territory
• by reason of his domicile or residence or any other
> Rs.15 Lakh
criteria of similar nature.

However, this provision will not apply in case of an Not Liable to

individual who is a resident of India in the previous year pay Tax in
as per section 6(1). other
country
Income From Foreign Sources :
Income which accrues or arises outside India (except income from a business
controlled from or profession set up in India) and which is not deemed to
accrue or arise in India.

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Residential Status : Individual

Indian origin
• He, any of his parents or grand
parents were born in undivided
India.

Days
• Both arrival & departure days will
be included.
• Stay need not be continuous

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Counting Days

• If data regarding Time is not available, both the

arrival date & departure date shall be included.

• If time of arrival and departure is available , it

shall be considered on 24 hour = 1 day basis.

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Q #1
• Find residential status of
Mr X in the following
situations;

Came to India for the

first time on 6th June of
the PY and departed on
4th December.

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Q #2
• Find residential status of
Mr X in the following
situations;

Came to India for the

first time on 6th June at
8 am of the PY and
departed on 4th
December at 7 pm.

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• Mr Obama , a US citizen comes

Ex -3
to India for the 1st time during
Financial year 2017-18.

• During the Financial year

2017-18,2018-19,2019-20,
2020-21 and 2021-22 he was
in India for 55 days,60 days,80
days, 160 days and 70 days
respectively.

• Determine his residential

status for AY 2022-23

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Ex -4
• Mr X, A software professional
left India for London on 15th
March 2021 for taking
practical training.
• He returned to India on 24th
January 2022.
• Determine his residential
status for AY 2022-23 if the
practical training is;

a) Not for employment.

b) For employment

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Resident & Ordinary Resident : Individual

1
• If he satisfies both the additional conditions.
1. He has been resident in at least 2 previous 2
years out of 10 previous years immediately
3
preceding relevant previous year. 730 R
4 days R
2. His stay in India during 7 previous years 5
immediately preceding relevant previous
year should be 730 days or more. 6

7
Not ordinary Resident
8
• If he does not satisfy both / any of the 9
additional conditions.
10

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Resident but Not-ordinarily Resident
• A not-ordinarily resident person is one who satisfies any one of the
conditions specified u/s 6(6).
1. If such individual has been non-resident in India in any 9 out of the 10
previous years preceding the relevant previous year, or

2. 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

3. 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 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

4. If such individual is an Indian citizen who is deemed to be resident in India

under section 6(1A)

[Note: A deemed resident will always be a resident but not ordinarily

resident].

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Ordinarily Resident

• When he is not a : “Not Ordinarily Resident”.

• When none of the previous 4 conditions are

satisfied.

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Ex #2 : Residential status for AY 2022-23

PY Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7
2021-22 365 182 180 80 50 188 180
2020-21 365 0 365 100 365 10 40
2019-20 365 0 365 140 365 14 60
2018-19 365 0 365 70 365 70 90
2017-18 365 0 365 160 365 16 30
2016-17 365 0 0 90 365 15 365
2015-16 365 0 0 100 365 17 365
2014-15 365 0 0 150 365 18 365
2013-14 365 0 0 200 365 18 365
2012-13 365 0 0 200 365 365 365
2011-12 365 0 0 160 365 365 365
ROR NOR ROR ROR NR NOR NR
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Q #4
• On 1st
June 2019 , Mr X , a Malaysian citizen
leaves India after a stay of 10 years.
• During the financial year 2020-21, he comes to
India for a period of 46 days .
• Latter he returns to India for 1 year on 10th
October 2021.
• Determine his residential status for AY 2022-23

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Residential Status :HUF

Resident :

• When the business is wholly or partly controlled and

managed in India.

Non Resident :
• When the business is wholly controlled and managed
outside India

• Residential status of Karta for the previous year is

irrelevant.
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Control And Management

• The expression ‘control and management’ refers to the central control
and management and not to the carrying on of day-to-day business by
servants, employees or agents.

• The business may be done from outside India and yet its control and
management may be wholly within India. Therefore, control and
management of a business is said to be situated at a place where the
head and brain of the adventure is situated.

• The place of control may be different from the usual place of running
the business and sometimes even the registered office of the assessee.
This is because the control and management of a business need not
necessarily be done from the place of business or from the registered
office of the assessee.

• But control and management do imply the functioning of the

controlling and directing power at a particular place with some degree
of permanence.
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Ordinary Resident : HUF

1
• If Karta / manager satisfies both the additional
conditions.
2
1. Karta of resident HUF should be resident in at least 2
previous years out of 10 previous years immediately 3
preceding relevant previous year. 730 R
4 days R
2. Stay of Karta during 7 previous years immediately
preceding relevant previous year should be 730 days or 5
more.
6
Not ordinary Resident
7
• If Karta / manager does not satisfy both / any of the 8
additional conditions.
9
• Residential status of Karta for the previous year is irrelevant; but for
preceding 10 years is relevant.
10

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Q#
• 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. 2021-22 after 15 years.

• He comes to India on 1.4.2021 and leaves for Australia

on 1.12.2021.

• For A.Y. 2022-23 determine the residential status of

a) Mr. E and
b) the HUF for

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A#
• During the P.Y. 2021-22, 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. 2021-22 is resident
but not ordinarily resident.

• 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. 2021-22.

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Company : Definition
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• Section 2 (17) of IT Act defines a company to mean:

a) Indian Co
b) Body corporate incorporated by / under any law
outside India
c) Institution ,association, body assessed as company on
or before 01-04-1970.
d) Institution ,association, body declared by CBDT as a
company.

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Indian company- Sec 2(26)
• Means a company formed and registered under the Companies Act, 2013 and
includes—
1. A company formed and registered under any law relating to companies
formerly in force in any part of India (other than the State of Jammu and
Kashmir[and the Union territories specified in sub-clause (iii) of this clause]) ;
2. A corporation established by or under a Central, State or Provincial Act ;
3. Any institution, association or body which is declared by the Board to be a
company under clause (17) ;]

4. in the case of the State of Jammu and Kashmir, a company formed and
registered under any law for the time being in force in that State ;
5. in the case of any of the Union territories of Dadra and Nagar Haveli, Goa,
Daman and Diu, and Pondicherry, a company formed and registered under any
law for the time being in force in that Union territory :]

• Provided that the registered or, as the case may be, principal office of the
company, corporation, institution, association or body in all cases is in India ;
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Company related points

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• Deemed to be a company only for such assessment year or assessment years

as may be specified in the declaration.

• Company under liquidation is also a company.

• Company need not have share capital~ Limited by guarantee.

• Not for profit Companies / Section 8 Cos

• Statutory corporations established under Act of Parliament or state

legislature.
• Interrelated companies are separate company.
• In case of discontinuance need to inform to AO within 15 days .
• CBDT may declare a foreign association / body as company.
• Dividend received from a company earning agricultural income is not an
agricultural income in the hands of shareholder
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Residential Status of a Company -Sec 6 (3)

Resident in India Non-Resident in India

Not an Indian Co,

An Indian Co, And
or During the previous year, its
During the previous year, its place of
place of effective management,
effective management, at any time, is not in India
at any time, is in India

(Foreign Company whose

Turnover or Gross Receipt > Rs. 50 Crore) Foreign Company whose Turnover or
Gross Receipt < Rs. 50 Crore shall be a
Non Resident
34 /42
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Foreign Company whose Turnover

or Gross Receipt < Rs. 50 Crore
shall be a Non Resident

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Place of effective management (POEM)

Explanation to section 6(3)

• Means 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.

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Residential Status of a Firm/AoP/BoI/AJP/Local
Authority
Resident :

• When the business is wholly or partly

controlled and managed in India.

Non Resident :

• When the business is wholly controlled and

managed outside India

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Taxability

Resident / Resident but

Resident & Not Ordinarily Resident Non Resident
Ordinarily Resident

Any Income; Any Income; Any Income;

1. Received in India 1. Received in India 1. Received in India
2. Deemed to be received 2. Deemed to be received 2. Deemed to be received
in India in India in India
3. Accrues or arises in India 3. Accrues or arises in India 3. Accrues or arises in India
4. Deemed to accrue or arise 4. Deemed to accrue or arise 4. Deemed to accrue or arise
in India. in India. in India.

5. Any income which 5. Any income which

accrues or arises accrues or arises
outside India. outside India.*

9:44 AM * If it is derivedfrom a business controlled in or a 38

profession set ©
upCAin(Dr) Prithvi R Parhi
India.

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Thank You
CA. Dr. Prithvi Ranjan Parhi
Mail: [email protected]

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