INCOME-TAX - LECTURE IV PIMSR

RESIDENCE OF THE ASSESSEE

The assessees are basically divided into two classes Residents and Non-residents. Resident Individuals and HUF are again subdivided as Ordinary Residents and Not Ordinary Residence. Thus Individuals and HUF are three classes Residents and Ordinary Residents (R&OR); Residents but Not Ordinary Residents (RNOR); Non-Residents. Other assessees are either Residents or Non-Residents. Residence is to be decided for every assessment year.

Rules of Residence
If an individual satisfies either of the following conditions, he is a resident for that AY: a) He is in India for a period of 182 days or more in the previous year; b) He is in India for 60 days or more in the PY and also in India for 365 days or more during the four years immediately preceding the PY.

Examples
A person, working in an IT Company, left for a better job in Dubai on 1st November, 2007. A foreigner came to India for the first time on 1st November 2007 and left on 31st August 2008. What is his residential status. Mr. Ramlal a resident of Mumbai left India to settle down in London on 1st of June 2008. Had he left on 30th of May, as originally planned, would it make any difference.

SOME EXCEPTIONS
From AY 1995-96 onwards, if the assessee is an Indian or a person of Indian Original, the 60 days should be read as 182 days. An Indian citizen who leases India during the previous year for the purpose of employment outside India or an Indian citizen who leaves India during the previous year as a member of the crew of an Indian Ship, the 60 days should be read as 182 days.

ORDINARY RESIDENCE
An Individual is treated as an ordinary resident, if he satisfies both the following conditions: a) He has been a resident in at least 2 years* out of 10 previous years immediately preceding the relevant previous year; and B) He has been in India for a period of 730 days or more in the immediately preceding seven years; (The question of ordinary residence need not be seen if he is a non-resident) (*For Ays 2003-04 and before, 9 years instead of 2 years out of preceding 10 PY.)

RESIDENTIAL STATUS OF HUF

A Hindu Undivided Family is said to be resident in India if the control and management of its affairs is wholly or partly situated in India. The Management means the de facto control and management not merely the de jure management, i.e. the right to control. The Ordinary residence of the HUF, if the Karta or manager satisfies the conditions of ordinary residence.

RESIDENTIAL STATUS OF AOP, BOI OR FIRM

An AOP, BOI or FIRM is said to be resident in India if the control and management of its affairs is wholly or partly situated in India. The Ordinary residence of AOP, BOI or FIRM need not be seen.

RESIDENTIAL STATUS OF COMPANY

An Indian Company is always resident in India. A foreign company is resident only if the control and management of its affairs is wholly situated in India. Even part management is from outside India, it would be treated as non-resident. Control and management is situated there, where the Board Meetings take place.

INCIDENCE OF TAX
The income of a Resident and Ordinary Resident, income accrues or arises in India or outside India is taxable in India. The income of Resident but Not Ordinary Resident is taxable in India, if it is accrued, arose or received in India, or foreign income out of business controlled from India or Profession set up in India.