Residential Status under the Income Tax Act, 1961​.

An Individual is said to be Resident in India if (he/ she) has satisfied at least one
of the two basic conditions laid down u/s 6(1) given hereunder :-

a) he/she is in India in the previous year for a period or periods amounting to

all for 182 days or more; ​OR
b) he is in India for a period of 60​* days or more during the previous year ​and
365 days or more during the four years immediately preceding the previous
year.

* ​the period of “60 days” referred to herein above will be considered as 182
days in following situations :-

(i) An Indian Citizen who leaves 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
(ii) An Indian Citizen ​or a Person of Indian Origin who comes to
India on a visit during the previous year. (here a Person is
deemed to be an Indian Origin if he or either of his parents or
any of his grand-parents, was born in undivided India).

Having decided on the Residential status of an Individual, one has to further

ascertain whether the said Resident is “ Resident and Ordinarily Resident ” ​OR
“ Resident but not ordinarily Resident ”. For this purpose, one has to study
additional conditions mentioned u/s 6(6).

The additional conditions are given below:-

I. he has been resident in India in at least 2 out of 10 previous years

immediately
preceding the relevant previous year ​and

II. he has been in India for a period of 730 days or more during 7 years
immediately
preceding the relevant previous year.

To recapitulate the Rule of Residence one should remember :-

For Resident and Ordinarily Resident – assessee must satisfy any one of the
Basic conditions mentioned here in above (i.e. a or b) and both the conditions
under sec 6(6) i.e. I and II above.
For Resident But Not Ordinarily Resident – assessee must satisfy ​any one of the
basic conditions mentioned hereinabove (i.e. a or b) ​and ​any ​one or none of
the additional conditions ​laid down u/s 6(6) i.e. I and II above.

Let us understand the rule for residential status for various categories of
person:-

1. For an Individual Rule laid down under Sec. 6(1) & 6(6) discussed herein
above would be applicable.

2. For a Hindu Undivided Family (HUF) provisions of Sec 6(2) would be

applicable. The residential status for HUF depends on the facts. The HUF
would be resident & ordinarily resident of India - if the control and
management of it’s affairs are wholly or partly situated in India during the
previous year. The Karta of HUF is considered as exercising Control &
management of HUF. As per the No. of days limitations specified in Sec. 6(1)
& 6(6) the duration of stay in India is satisfied by the Karta and if Karta is
having de-facto control & management over HUF then the residential status
would be governed accordingly - depending upon the Kart’s status.

3. For a Firm or for an Association of persons (AOP):- Sec. 6(4) governs the law.
With respect to a Firm or an AOP it is said to be Resident in India if it’s control
and management is situated wholly or partly in India. If the control and
management is situated wholly outside India then the Firm or an AOP would
be considered as Non-resident. For Firm or an AOP control and management
would mean the decision making partner/s or the decision making authority.

4. For a limited Company –sec. 6(3) As regards residential status of the

Company an Indian Company (i.e. company may it be private or public
limited – incorporated under Companies Act, 1956 or now under 2013 Act) it
is held as Resident of India. However, in respect of a foreign Company (i.e.
company incorporated under the laws of a foreign country) operating in India,
is considered as Resident of India – if it’s control & management of it’s affairs
is situated wholly in India during the previous year. As regards the Company
it’s control & management of the affairs is said to be a place where the Board
of Directors’ meeting is held. Effectively the decisions are reached and
concluded at the Board Meetings of the Company.