RESIDENTIAL STATUS Particulars Pa No IMPORTANT AMENDMENTS/ Basics of Residential Status 22 NOTIFICATIONS/CIRCULARS Residential Status is determined for 22 Residential Status for Other Assessee 22 Particulars } Residential Status of Individual 22 Residential Status of Individual Residential Status of HUF 24 Residential Status of Company 24 ‘Scope of Total income & tax incidence 24 Deemed to receive or accrue 25 ‘Sec 9() Income from Business Connection 25 Circular 13/2017 20 “ BE TEACHABLE WA you are not always RIGHT ” CA CS VIJAY SARDA (@) +91 8956651954 www.vlearnclasses.comeT NS ee) NN) ta] |. Total income af an Assessee cannot be computed unless we know ee residential status of the assessee during PY 2.RS is determined foreach category of person separately 3. RS always determined for PY because we have fo determine the total iher Aesessce nl income a the PY only covered inthe 3. 4 Its calculated for every year because it may change year to year [elon citizen who leaves naa PY a3 5. person can be resident of mare than one eountry for any PY ‘hip crow moniter of an la ship ofr the 6 Citizenship of a country & RS ofthat country ere different concept ie purpose of employment ouside India 1. Onus of Proot "They would be eated as Reside they stayin nda for 12 days or more la PY TndividvaVcompany [Burden lies on the Department 2 naan Cizen/Person of inlan Origin who anode thane shen sauces || Seistestee cis hoor! ia sin oat Be aot Hedaya” || “aovledtitesl ssn toy Seteeis eae nian satis | “Retro edocnaet ne RSet arson aa) fain ccadParson of ncn On wh, NPY total ncome ater than foreign Tnaividuat ft) Income) exceesingItakh nyo fliowing condition. HUF FiemLLP ther Assesses they stayin nda fr 182 days or mre HUF 2) Givers sé) ne pea tye 0 dys mare uring the PY AND 368 days or mare ring te yr mediately preceding PY Company 63) — —— TE [Plo Raving nome exceeding 5LE Tip Pesan nea ccssca or er Resident Sec] Non-Resident Control & Management ontrol & Management aero ees Wholly or partly Wholly Situated Outside India vor 6&6 situated in Indio CA CS VIJAY SARDA (@ +91 8956651954 www-vlearnclasses.com‘Notwithstanding anything contained in See 6(), Non = Resident Ian individual does not satisty any of the above basic condition then, fhe will be treated as Non-resident It must be noted thatthe fulfillment an individual, being citizen of inant PIO), having total income, other than they any stake shone conatins (0) Pi 8g sou able wat eke oe Income from foreign sources, exceeding 15,00,000 during the PY shal bbe deemed tobe resident in ina in that PY ihe isnot able to tax in any other county / territory by reason of his domicile / residence / any other erteria of similar nature {sper Sec 6(6) It person is deemed Resident as per Sec 614) he ‘shall deem toe RNOR, ther Points Ita person is resident as per Sec 6(), then Sec 1A) shall not apply. ‘Sec (1A) does not apply to an individual whois nota cizen of Inia but a person of indian Origin, Person of Indian Origin ‘person is deemed tobe of Indian origin ithe, or ether of his parents ‘or any of his grandparents, was born in Undivided India It may be ‘oted that grandparents include both maternal and paternal grand parents. Resident & Ordinarily Resident (ROR) [in individual may become » ROR in Inga if he satisfy both following Conditions given u/s 68) Besides satisfying any one af the above ‘mentioned conditions: a) he is a resident in atleast any two out ofthe ten PYs immediately receding the relevant PY, and ‘he has been in india for 730 days or more during the 7 PYs ‘immediately preceding the relevant PY Resident but Not Ordinarily Resident (RNOR) ‘an individual i RNOR in any PY i a) he has been a NR in India in 9/10 PYs preceding that year, or ') he has during the 7PYs preceding that year been in India for period ‘of oF periods amounting inal to, 729 days or less ).a citizen of Indl, of a person of indian origin, having total income, ‘ther than income fram foreign saurees, exceeding 1500.00 during the PY, whe has been in India fora period or periods amounting inal to 120 days or more but less than 182 days; oF 4) a chizn of India who is deemed tobe resident in India ~ clause (Ia) Individual resident in India for tax purposes. Further it isto be noted that these contions are alternative & not cumulative in thelr application Important Notes: ‘Te fact that an assessee is resident in India in respect of one year does not automatically mean that he would be resident inthe receding or succeeding years a8 well. Consequently the residential ‘Status of the assessee should be determines for each year separately ‘nis sin view af the fact that a person resident in one year may ‘become NA or RNOR in another year and vice versa ‘The stay may be anywhere in India and for any length of time at each place in cases where the stay in India is at mare places than one, what {s required is the total period of stay should not be less than the ‘number of days specified in each condition Wile determining residential status the day of leaving and returning tollndia should be considered ae 2 stayin India Where the exact arrival and departure time isnot available then the fay he comes to india and the day he leaves India is counted as stay i India means territory of india, its territorial waters, continental shelf, Exclusive Economic Zone (upto 200 nautical mils) and airspace above its territory and territorial waters. Exception tothe basic condition: ‘being actzen of Indl, who leaves India in any PY as a member of, the erew ofan Indian ship as defined in sec (1) ofthe Merchant ‘Shipping Act, 1958, or forthe purposes of employment outside India Rule 26 Computation of period of stayin India in certain cases ~ {An Individual, being 2 citizen of Inca and a member ofthe crew of a ‘ship the period of stay in india in respect ofan eligible voyage shall ‘ot include the period beginning from the date of joining ti the date ‘of signing af ag mentioned in the Continuous Discharge Certificate Lnder the Merchant Shipping Act, 1958 “eligible voyage’ shall mean a voyage undertaken bya ship engaged in the carriage of passengers or freight in international CA CS VIJAY SARDA @) +91 8956651954 wwwwlearnclasses.comtrate wnere- for the voyage having originated from any port in Indi, has as its ion any port outside nla & for the voyage having originated from any port outside In Its destination any port in Ind, being citizen of India/ person of Indian origin within the meaning of expl to see TISC(e), who, being ouside India, comes on visit t india Inany Pv RESIDENTIAL STATUS OF HUF ‘ Sy ocead et # ett nna ae Sec 6(2)- A HUF, tem of other association af persons is sai to be Fesident in India in ay PY in every case except where during that year the control & management of is affairs is situated wholly autsie India. ‘Adsitional Conditions 2) Karta of resident HUF shouldbe resident in atleast 2/10 PY Immediately preceding relevant PY. 1) Stay of Karta during 7 PY immediately preceding relevant PY should be 730 days or more. BO Se ae es Indian Company Foreign Company POEM in india ‘Then Resident POEM outside India ‘Then NR ‘Always Resident ‘sec 6(2) - A company is said tobe a resident n naa in any. Yt itis an indian company or its place of etective management, in that year, sin India, Explanation - For the purposes of this clause “place of effective management” means 2 place where key management and commercial decisions that are necessary forthe conduct of business of an entity ‘a8 a whole are in substance made, POEM: Place of Effective Management Indian Income 1. Received in India 2 Deemed tobe Received in India [See 7 & 8) 5. Accrued in nia 1 Deemed tobe accrued or arise in india [Sec 9] Foreign Income Income is not received oF not deemed to be received in ina Income whieh does not accrue af arse in Ina, Remittance of Income ‘Approved mode — Exempt in nia Unapproved Mode — Taxable In India Pst Foreign Untaxed income brought to India - Not taxable in India CA CS VIJAY SARDA [@) +91 8956651954 wwwwlearnclasses.comINCIDENCE OF TAX FOR INDIVIDUAL & HUF Nate Income from business/profession which s set up i India INCIDENCE OF TAX FOR OTHERS RESDENT aE Texable in naa Taxable in Inala Foreign Taxable inindia ‘Not Taxable In| India Pann cs ences or eer nina [S929] Deemed tobe received in india See: 2) Contention made by the mover {0 RPF beyond 12% of he salary [Up 2% ExematReter Setar) 8) interest reed to Employee beyond 9.5% pa. Ret Salary) (1 Tranter tram URPF to RPF Rendered ouside na 1) Contribution 1 pension fund us 01 80000 (eter Salary) ‘income ou of Business 2) Salary eared in aia 5) Salary rom gevenment to anindian etizan for series fond rom neon > income rom terest oabie ‘by spcited person come tom Royalty income rom Terns sees 1 Ausiness Comecton {9 ncons rom ProperyAssts 3. Not a Business Conracon income amt ot 1 omen) BLOM Penance nue ‘The fllowing incomes shall be deemed to accrue or arise in india — Sec 900) - All income accruing or arising, whether directly/indrectly, ‘rough or from any business connection in india or through/rom any property inna or through or from any asset / source of income in [dla o through the transer of acaptal asset situate i Inala, Explanation 1- Not a business connection For the purposes of this claus 8) in the cage ofa business other than the business having business Eonnestion it India on account of sigh ‘the operations are not TNRvno income shalt be de him through or from operations which are confined fat goods in india forthe purpase af export being a person engaged in the business of running a news agency ar 8 publishing newspapers, magazines or fournal inthe case of NR, bein (an individual who ts nota citizen of india: or (2) a'irm which does not have any parner who isa citizen of Inia/ wh i= resident in Indi oF (@) 3 company which does not have any shareholder who is @ itizen of India oF whe fs resident in ini. no income shall be daemed fo accrue from aperations which are Confined tothe shooting af any cneratograph film In Indl «) inthe case of 2 foreign company engaged in the business of mining a dsrmonds, no income shall be deemed to accrue or arse In India {ait through ar from the activities which are confined to the display ot uncut and unascorted diamond in any special zone notified by the {inthe Official Gazette inthe Beha Explanation 2 - Meaning of business connection “Business connection” shal include any business. tivily carried out through a person who, acting on behalf ofthe NR, 2) Has and sin India, an authority to conclude tually concludes b) Has no such authority, but habitually maintains in india a stock of {goods of merchandise ram which he regularly delivers goods or merchandise an behalf of the non-resident, or CA.CS VAY SARDA (@) +91 8956651954 www.vlearnclasses.com‘habitually secures orders in India, mainly or wholly forthe NR oF for that non-resident and other non-residents controlling, controlled by oF subject tothe same common contol, as that non-resident Ifa broker, general commission agent or anyother agent having an independent status then there is no Buisness connection. Explanation 2A - Deemed Business Connection - Significant Economic. Presence - Significant economie presence ofa NR in India shall constitute, It Means | Transaction in respect of any goods, services or property carried out by NR with any person in India including provision of download of cata ‘of software in India i the aggregate of payments arising from such ‘ransaction oF transactions during the PY exceeds Rs 2crore or 2 systematic and continuous soliciting of business actvities/engaging in interaction with such number of users in Ind ‘Transactions or activities shall constitute significant economic presence in india, whether or not— () Agreement for such transactons/actvities is entered in India; or (ip NR has a residence or place of business in ind (iy NR renders services in inl ‘ctvities carried out i Inia shall be deemed to accrue or arise in ina Explanation 34: The income attributable tothe operations carried out in India, 98 Shall include income trom— 42) such advertisement which targets a customer who resides in India or ' customer who accesses the advertisement through internet protocol address located in incla: b) sale of data collected from a person who resides in India or from a person who uses internet protocol address located in india: and Eale of goods or services using data collected from a person who Fesides in india or from a person who uses internet protocol address, Tocated in na, Provisions contained inthis Explanation shal also apply tothe income ‘stributable tothe transactions ar acivies refered ton Explanation 2A Explanation 5 - For the removal of doubts, itis hereby clarified that an ‘asset ora capital asset being any share oF interest ina company or ‘enlty registered or incorporated outside inca shal be deemed to be ‘and shall always be deemed to have been situated in India, the share ar interest derwes, directy or indirectly its value substantially from the ‘Bese located in india Declaration ofcvidend by foreign company outside nia does not have effect of transfer of any underlying Assets located In India would net, deemed to be accrue oF arse in Inala Sec (0) = Salary Earned in india Income which falls under the head "Salaries" iit is earned in india. Elanatian = lary payable forthe rest period or leave period which is preceded and succeeded by services rendered in India and forms part of {he service contract of employmentshall be regarded as income earned in ina Sec (0 = Salary Earned Outside India income chargeable under the head "Salaries" payable by the Government. However allowances or perquiste payable outside India, ‘would be exempt u/s 107) Sec (0() = Dividend From An Indian Company A dividend pais by an Indian company outsise India; ‘Sec 9(0(0) = Interest payable to NR would be deemed to accrue in India itpaid by {2 Government oF for the purposes of business or profession carried on by him outside india or forthe Burposes of making rearing any income rom ay oure outside ©) Nin respect of deb incured or moneys borrowed and used, forthe purposes ofa business or profession carried on by such person in Inia. Exception: Interest on money borrowed by the NR for any purpose in India other than for Business or profession, will not be deemed to accrue or are in India, CA CS VIJAY SARDA +91 8956651954 wwwwlearnclasses.com‘Sec (i) = Reyaly payable to NR by 2) Government: or 1) Person who is resident, Excoption: where its payable in respect for transfer of any right or the use of any property or information used or forulisation of ‘services forthe purposes of a business or profession carried an by him outside India or for the purposes of making or earning any income from any source ouside Indi; oF ) NRin respect of royalty payable in respect of any right, property oF Information used of services utilised for the purpose of business oF profession carried on by such person in India, Note: 1. Lumsum Royalty mde by resident for transfer of al or any right {including grant of license ) in respect of computer software supplied bby NR manufacturer along with computer hardware under any scheme atroved by Govt shall not be regarded as Royalty accrued or arised nina, 2. Meaning of Royalty: Royalty” means Consideration (including any ump sum consideration but excluding any Consideration which would be the income of the recipient chargeable Under the head "Capital gains") for— 2) the transfer of all or any rights (including the granting of a license) In respect ofa patent, invention, model, design, secret formula or process of trade mari or similar property: ') the imparting of any information concerning the working of oF the ‘se ofa patent, invention, model, design, secret formula or process. or trademark or similar property the use of any patent, invention, model, design, secret formula or process of trade mark or similar property: £6) the imparting of any information concerning technic commercial or selentie knowledge, experience or ski ‘the use or right to use any industria, ‘equipment but nat including the amounts referred to in section 4488; the transfer ofall or any rights (including the granting ofa licence) in respect of any copyright, literary, artistic or scentife work including {lime of video tapes for Use in connection with television ar tapes for ‘sein connection with radio broadcasting, nclising constrain for the sale, dstribution or exhibition of einematographie ims or the rendering of any services in connection with the activities refered ton sub-clauses() to (v), va) ana () 3. Consideration for use or Right to use computer software is Royalty. [Explanation 4] 4, Royalty Includes: Consideration In respect of any right whether or not 23) the possession or control of such right, property or information is, with the payer, 'b) uch right property oF information is used directy by the payer, the location of such right, property or lformation is ln [Explanation 5] 5. Meaning of "process": Process includes & shall be deemed to have ‘always Included transmission by satelite (including up-tnking, amplification, conversion for down-linking of any signa cable, optic fibre or by any other similar technology, whether or nt such process: is secret, ‘Soe il = FTS any fees for technical services pad 0 NR by— 2) Government; oF 1) Person who is resident, Excopion: where i is payable in respect for technical services Ltlised for the purposes ofa business or profession carried on by him outsie india or forthe purposes of making or earning any income from any source outside India: or ) NRin respect of FIS payable in respect of services utlised for the purpose af business or profession carried on by such person in Ina Explanation 2 - “Fees for technical services" means any cansieration (including ary lump sum consideration fr rendering of any managerial, technical/consultancy services (including provision of services of technicaV/other personnel but does not include consideration for any construction, assembly, ining or lke project undertaken by the Fecipient or consideration whieh would be income of the recipient ‘chargeable under the head "Salaries" Sec 9()(vld- Income arising ouside India, being any sum of money pai or/after the Sth day of July, 209 by a person resident in India to non-resident, not being a company, orto foreign compan, ‘Salary accrued to NR sea fare for service rendered outside India on 2 foreign going ship (with indian flag/nat) shall be nt included in Total Income nearly because the salary is credited in NRE a/c with Indian nk CA CS VIJAY SARDA (@) +91 8956651954 www.vlearnclasses.com