Prepared by:

Sikha Sadani
Assistant Professor, IITM
 Income tax is a tax levied directly on the
personal income.
 Taxable entity –
An Individual
A Hindu Undivided Family
A firm
Association of Persons
Joint stock company and
any other person
 Assessment Year – Means the period of 12
months commencing from the first day of
April. Tax is levied in each assessment year
w.r.t total income earned by assesse in the
previous year.

 Previous Year – The financial year preceding

the Assessment Year. Income tax is payable
on the income earned during previous year
and is assessed in the immediately
succeeding Financial Year.
 Assessment Year – 2016-17
Previous Year – 2015-16

Question :-
For the Assessment Year 2016-17, Calculate
Previous Year-
1.Mr.X started business on 27.02.2016
2.Mr.A received remuneration of Rs.50,000/-
for the first time on 01.03.2016
 Residential Status is determined for each
category of person separately.
 Residential Status is always determined for
the Previous Year.
 Residential Status of a person is determined
for every Previous Year because it may
change from year to year.
 A person can be resident for more than one
country.
 Citizenship of a country and residential status
of that country are separate concepts.
WHEN AN INDIVIDUAL IS SAID TO BE RESIDENT
IN INDIA :-
If any one of the following two conditions is
satisfied-
1. He is in India for 182 days or more during
the relevant previous year.
2. He is in India for a period of 60 days or
more during the previous year and 365 days
or more during 4 years immediately
preceding the previous year.
Eg. Relevant PY-2016-17=1.4.16 to 31.03.17
4PYs=2012-13, 2013-14, 2014-15, 2015-16
In the following two cases, an individual needs to be
present in India for a period of 182 days or more in
order to become resident in India:

1. An Indian citizen who leaves India during the

previous year for the purpose of taking employment
outside India.
2. An Indian citizen leaving India during the previous
year as a member of the crew of an Indian ship.
3. An Indian citizen or a person of Indian origin who
comes on visit to India during the previous year (a
person is said to be of Indian origin if either he or
any of his parents or any of his grand parents was
born in undivided India).
 It is not necessary that the stay should be for
continuous period. Only total no. of days of
stay is relevant.
 It is not necessary that the stay should be
only at one place.
 While calculating 182 days- the day individual
enters India and the day he leaves India
should both be treated as stay in India.
 Place and purpose of stay is immaterial.
WHEN AN INDIVIDUAL IS SAID TO BE RESIDENT
& ORDINARILY RESIDENT IN INDIA :-
Section 6(6): If an individual is to qualify as an
ordinary resident of India, he has to fulfill both
of the following two conditions in addition to
fulfilling the criteria as provided in section 6(1):

1. He has been resident in India in at least 2

out of 10 previous years immediately
preceding the relevant previous year.
2. He has been in India for a period of 730
days or more during 7 years immediately
preceding the relevant previous year.
1). A citizen of USA has been
staying in India since 1990. He
leaves India on 16.7.2012 on a visit
to USA and returns on 04.01.2013.
Determine residential status for
previous year 2012-13.
SOLUTION:
STEP 1. Find out if he is resident.
April 2012- 30 days Oct 2012-0
May 2012 – 31 days Nov 2012- 0
June 2012 – 30 days Dec 2012 - 0
July 2012 – 16 days Jan 2013 – 28 days
August 2012 – 0 Feb 2013 – 28 days
September 2012-0 March 2013-31days

Since total stay = 194days>182 days. He is a

resident .
STEP 2:Find out if he is ordinarily resident.
a) Ten previous years to the relevant P/Y are-
2002-03 to 2011-2012. During these he has
always been in India.
b) 7 years prior to relevant previous year-
2005-06 to 2011-12.

Both the conditions are satisfied. He is a

resident and ordinarily resident in India.
2). Indian citizen Mr. X who resides in
Jaipur, went to Germany for purpose of
employment on 15.08.2012 and came
back to India on 10.11.2013. He has
never been out of India in the past.
Determine his residential status for the
assessment year 2013-14.
SOLUTION:
Assessment Year – 2013-14
Previous Year – 2012-13.
He was in India from 1.4.2012 to 15.08.2012
30+31+30+31+15 = 137 days <182 days. He
does not satisfy first condition. Second
condition is not applicable as left because of
employment outside India. Thus, not a
resident.
3). Mr. Y an Australian cricketer has been
coming to India for 100 days every year since
2000-01:
a) Determine his residential status for
assessment year 2013-14.
b) Will your answer be different if he has been
coming to India for 110 days instead of
100 days every year.
SOLUTION:
a) He is a resident. He satisfies 2nd condition
because he is in India for more than 60 days
during relevant PY 2012-13 and for 400 dats
during 4 yrs immediately preceding 2012-13.

-Finding out if he is ordinarily resident:

Although he satisfies 1st condition of being
resident for atleast 2/10 years preceding PY
but he does not satisfy 2nd condition as during
7 years preceding PY, he is in India for only
700 days<730 days. Thus, he is a resident but
not ordinarily resident in India.
b) In this case he will be resident and
ordinarily resident in India. He satisfies both
conditions as he was in India for 770
days>730 days in the 7 previous years
preceding the relevant PY.
4) R, German National, comes to India
for the first time during 2008-09.
During the previous years 2008-09;
2009-10; 2010-11; 2011-12 he was in
India for 156 days, 72 days, 183 days
and 161 days respectively. Further
during the previous year 2012-13 he
was in India for 84 days.
Determine the residential status of R
for the assessment year 2013-14.
SOLUTION:
Relevant PY – 2012-13
Step 1: Resident or not
2012-13=84<182 days(condition 1 not
satisfied)
2012-13=84>60 days
Stay during preceding 4 years=
156+72+183+61=572>365 days
(Condition 2 satisfied)
R is a resident in India
Step 2: Ordinarily Resident or not
Condition (1): Resident in at least 2/10 PYs
immediately preceding relevant PY

Previous Year – 2011-12= 161 days>60 days

2010-11=183 days
2009-10=72 days
2008-07=156 days
2007-06= NIL
Total stay during 4 years= 411 days>365 days
R is resident for this relevant year.
Previous Year 2010-11 : 183 days>182days
Condition 1 satisfied. So, he is a resident in
this year also.

Condition (2)- He should be in India for at least

730 days in 7 PYs immediately preceding the
relevant PY-2012-13.
His stay from 2005-06 to 2011-12
= 572days<730 days.
He does not satisfy this condition. Thus, he is a
resident but not ordinarily resident in India.
WHEN IS HUF SAID TO BE RESIDENT IN INDIA?
Section 6(2): A Hindu undivided family is said
to be resident in India if control and
management of its affairs is wholly or partly
situated in India. A Hindu undivided family is
non- resident in India if control and
management of its affairs is wholly situated
outside India.
Control and management is situated at a
place where the decisions regarding the affairs
of HUF are taken.
WHEN HUF IS SAID TO BE RESIDENT &
ORDINARILY RESIDENT IN INDIA?
Section 6(6)(b): A resident Hindu undivided
family is an ordinarily resident in India if the
karta or manager of the family business
satisfies the following two additional
conditions:
1. He has been resident in India in at least 2
out of 10 previous years immediately
preceding the relevant previous year.
2. He has been in India for a period of 730
days or more during 7 years immediately
preceding the relevant previous year.
As per section 6(2), a firm, AOP, BOI, others
except company are said to be resident in India
if control and management of their affairs are
wholly or partly situated within India during the
relevant previous year.
They are, however, treated as non-resident in
India if control and management of their affairs
are situated wholly outside India.
As per section 6(3), a company is said to be
resident in India, if any of the following two
conditions are satisfied:
1. It is an Indian company.
2. A foreign company only if, during the
previous year, control and management of
its affairs is situated wholly in India.
 However, a foreign company is treated as
non- resident if, during the previous year,
control and management of its affairs is
either wholly or partly situated out of India.
 Particulars of Income R & OR R & NOR NR
Income received or deemed to be Yes Yes Yes
received in India or elsewhere.
Income which accrues or arises or is Yes Yes Yes
deemed to accrue or arise in India
during the previous year, whether
received in India or elsewhere.
Income which accrues or arises outside Yes Yes No
India and received outside India from a
business controlled from India.
Income which accrues or arises outside Yes No No
India and received outside India in the
previous year from any other source.
 Particulars of Income R & OR R & NOR NR
Income which accrues or arises No No No
outside India and received outside
India during the years preceding the
previous year and remitted to India
during the previous.
1) Received in India: Any income which is
received in India, during the PY by any
assessee, is liable to tax in India, irrespective
of the residential status of the assessee and
the place of accrual of such income.
2) Income deemed to be received in India :
a) Contribution made by employer to the RPF in
excess of 12% of the salary of the employee
b) Interest credited to the RPF of the employee
which is in excess of 9.5% p.a.
c) Transfer balance from URPF to a RPF.
d) Contribution made by the Central Govt. or
any other employer in the PY, to the account
of an employee under a notified contributory
scheme.
Incomes which accrue or arise in India or are
deemed to accrue or arise in India
1) Accrue or arise in India
2) Deemed to accrue or arise in India:
a) Income from a business connection in India.
b) Income from any property, asset or source
of income situated in India.
c) Income from the transfer of any capital asset
situated in India.
d) Any income which falls under the head
“salaries” if it is earned in India.
e) Salary payable by the Govt. to an Indian
Citizen /national for services rendered
outside India.
Q.) The following are the particulars of income
of R for the previous year 2015-16:
a) Rent from a property in Delhi received in
USA – 80,000
b) Income from a business in USA controlled
from Delhi – 120,000
c) Income from a business in Bangalore
controlled from USA. – 180,000
d) Rent from a property in USA received there
but subsequently remitted to India – 60,000
e) Profits for the year 2014-15 of a business in
USA remitted to India during the PY 2015-16
(not taxed earlier) – 75,000
f) Gifts received from his parents – 45,000.
Compute his income for the AY 2016-17 if he
is:
- R & OR
- R & NOR
- NR
 Particulars R & OR R & NOR NR
Rent from property in Delhi 80,000 80,000 80,000
Income from business in 180,000 180,000 180,000
Bangalore
Income from business in USA 120,000 120,000 -
Rent from property in USA 60,000 - -
Q) X earns the following income during 2015-
16:
a) Pension from former employer in India
received in USA – 180,000
b) Profits earned from a business in Paris
which is controlled in India, half of the
profits being received in India. – 200,000
c) Income from agriculture in Bhutan and
remitted to India. – 125,000
d) Income from property in England received
there. – 400,000
e) Past foreign income brought to India –
10,000
Compute his income for AY 2016-17
 Particulars R & OR R & NOR NR
Pension from employer in India 180,000 180,000 180,000
Profits from business in Paris 200,000 200,000 100,000
Income from agriculture in 125,000 - -
Bhutan
Income from property in 400,000 - -
England
THANK YOU