We all know Tax is imposed on the total income of a person. Under the provisions of the Income-tax Act, 1961 the total income of each person is based upon his residential status. But what is residential meaning?
Residential Status is confirmed for each individual category of person separately. Similarly, the resident status of the person is to be determined each year with reference to the “previous year”. The residential status of the person may change from year to year. This can be classified as the meaning of resident. Further, the Residential status is divided into different categories as:
Residential Status of an Individual Sec 6(1)
Residential Status of HUF – Sec 6(2)
Residential Status of Firms which include AOP, BOI etc – Sec 6(2), 6(4)
Residential Status of Companies – Sec 6(3)
Residential Status of Every Other Person
Residential Status of an Individual Sec 6(1)
Under this Section of the Act divides the assessable persons into three categories:
1} Resident But Not Ordinarily Resident;
2} Ordinary Resident
3} Non-Resident.
Resident but Not Ordinarily Resident
An individual is a bonafide resident in India if he completes any one of the below described two conditions:
Condition (1)
a. His stay is in India for 182 days or more in the relevant previous year or
b. His stay is in India for 60 days or more during the relevant previous year and for 365 days or more for 4 years immediately preceding the previous year.
Condition (2)
The above does not apply to the below cases (means in following cases a person shall be resident of India only when his stay is in India for around 182 days or more in the previous year):
a. If Indian Citizen goes abroad and/or leaves India during the past year for employment outside India or as a worker and employee of an Indian Ship
b. If Indian bonafide citizen or person of Indian origin visits India during the past year.
Ordinary resident
An individual will be considered an ‘ordinary resident’ if he qualifies as a resident Indian (according to the criteria identified above) for at least 2 out of the 10 years that immediately precede the relevant financial year. If he has spent 730 days or more in India which consist of the time suring the 7 financial years immediately before the relevant one, the status will be that of an ‘ordinary resident’.
Non-Resident: If an individual does not satisfy any of the above conditions, she will be considered a non-resident in India.
Residential Status of HUF – Sec 6(2)
A HUF is said to be residing in India when during the period of that year control and management is situated as a part of India. And it said to be non-resident when year control and management is completely out of India.
A resident HUF is said to be resident and ordinarily resident in India if the Karta of the HUF Follows and completes the following terms:
Condition(1)
He has been a resident in India for at least 2 out of 10 past years immediately preceding the relevant years.
Condition(2)
The person has been living or visiting India for 730 days or more during 7 past years immediately before the relevant previous year or years. If the Karta of HUF does not fullfill any or both of the above conditions, then HUF shall be resident but not ordinarily resident in India.
Residential Status of Firms which are AOP, BOI etc – Sec 6(2), 6(4)
A Firm which is either AOP, BOI etc is said to be resident in India when during that year control and management is situated in full or in part in India. To put it simply, it will be non-resident in India if no part of the control and management of affairs is situated in India. Control and management lie at the place where the decision regarding the affairs of the firms etc are taken.
Residential Status of Companies – Sec 6(3)
A firm or company gets the status of resident if it fulfils the following:
a. The company belongs to India and is Indian
b. Effective management of the company for that relevant place is India in that year
Residential Status of Every Other Person
Every other person is resident in India if control and management of its affairs are, wholly or partially, situated in India during the relevant previous year. On the other hand, a person is non-resident in India if the control and management of its affairs are, wholly situated outside India.
