Scope of Total Income and Residential Status

Definition of Income: Total income means total amount of income referred to

in Section 5, computed in the manner laid down in the Income Tax Act.
The Total Income is computed under the five heads of Income, namely:
1. Income from Salary
2. Income from House Property
3. Income from Business
4. Income from capital gains
5. Income from other sources
Income computed under each head is aggregated and the aggregate amount is
known as Gross Total Income. From Gross total Income certain deductions are
allowed under Section 80C to 80 U and the balance income after deduction is
known as Total Income.
Scope of Total Income/ Incidence of Tax [Section 5]
The Total Income of an assessee cannot be computed unless we now his
Residential Status in India during the previous year. According to the
residential status , the assessee can either be:
(i) Resident in India
(ii) Non Resident in India
However, an Individual and HUF cannot be simply called resident in India. If
Individual is a resident in India he will be either:
(a) Resident and Ordinarily Resident in India; or
(b) Resident but not ordinarily Resident in India
Other categories of persons shall ONLY be either Resident in India or Non
Resident in India.
Scope of Total Income according to Residential Status is as under:
In case of Resident and Ordinarily Resident in India [Individual or HUF]
[Section 5(1)]: The following incomes from whatever source derived form part
of Total Income in case of Resident and Ordinarily Resident In India:
a) Any income b) Any income c) Any income
which is received which accrues or which accrues or
 or is deemed to arises or is arises outside
be received in deemed to accrue India during the
India in the or arise in India relevant previous
relevant previous during the year.
year by or on relevant previous
behalf of such year;
person

In case of Resident but not Ordinarily Resident in India [Individual or HUF]

[Section 5(1)]: The following incomes from whatever source derived form part
of Total Income in case of Resident but not Ordinarily Resident In India:
a) Any income b) Any income c) Any income
which is received which accrues or which accrues or
or is deemed to arises or is arises outside
be received in deemed to accrue India during the
India in the or arise in India relevant previous
relevant previous during the year if it is
year by or on relevant previous derived from a
behalf of such year; business
person controlled in or
profession set up
in India.

In case of Non Resident [Section 5(2)] : The Following Income from whatever
source derived form part of Total Income in case of Non Residents in India:
a) Any Income which is received b) Any income which accrues or
or is deemed to be received in arises or is deemed to accrue
India during the relevant or arise in India during the
previous year by or on behalf relevant previous year.
of such person

Please note the following things:

 Incomes described in Items a) and b) in all the three cases above are to be
included in total income of all the three categories of the assesses in the same
manner.
1. The income described in item c) i.e income which accrue or arise outside
India is:
(i) Not includible in the total income at all in case the assessee is
non-resident in India.
(ii) Includible in the total income of Resident but not ordinarily
resident in India only when it is derived from a business controlled
in India or a profession set up in India.

Therefore, we can say that the incidence of tax is highest in case of resident
and ordinarily resident, a little less in case of resident but not ordinarily
resident, a least in case of non-resident in India, if the assessee has various
incomes both inside and outside India.