RESIDENTIAL

STATUS and 1

Tax Incidence
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 S No. CO Learning Outcome KL PO

CO1
Students will be able to illustrate the K2 PO4
1. basic concepts of Residential Status
like
• RESIDENTIAL STATUS
• DIFFERENT TYPES OF
RESIDENTIAL STATUS
• RESIDENTIAL STATUS OF
INDIVIDUAL
• DETERMINATION OF
RESIDENTIAL STATUS OF A
PERSON
2

• DETERMINATION OF
RESIDENTIAL STATUS OF A
PERSON
• Tax Incidence
• Surcharge
• Cess

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BBA 301
 • RESIDENTIAL STATUS
• DIFFERENT TYPES OF RESIDENTIAL STATUS
• RESIDENTIAL STATUS OF INDIVIDUAL
• STEPS TO BE FOLLOWED FOR DETERMINATION OF
RESIDENTIAL STATUS OF A PERSON

CONTENTS
• Q&A
• RESIDENTIAL STATUS OF HUF, FIRM, AOP/BOI, LOCAL
AUTHORITY, AJP
• RESIDENTIAL STATUS OF COMPANY
• WHAT IS INCIDENCE OF TAX
• RULES OF INCIDENCE OF TAX
• SLAB RATES OF INDIVIDUAL
3 • SLAB RATES OF SENIOR CITIZEN
• SLAB RATES OF SUPER SENIOR CITIZEN
• SURCHARGE
• HEALTH AND EDUCATION CESS

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 Residential Status

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 Section
Residential Status
6
• TOTAL INCOME OF AN ASSESSEE CANNOT BE COMPUTED UNLESS THE PERSON’S RESIDENTIAL STATUS
IN INDIA DURING THE PREVIOUS YEAR IS KNOWN.
• INCOME EARNED AND RECEIVED OUTSIDE INDIA IS TAXABLE IN INDIA ONLY IF THE PERSON IS RESIDENT
OF INDIA.
• IT MEANS THE SCOPE OR TAX INCIDENCE IS HIGHER ON RESIDENT ASSESSEE AND MOREOVER ONE CAN
PLAN HIS RESIDENTIAL STATUS AS ONE OF THE BASIC TOOL OF TAX PLANNING IN THE HANDS OF THE
ASSESSEE TO REDUCE HIS TAX BURDEN.
• ACCORDING TO THE PROVISIONS RELATING TO RESIDENTIAL STATUS, A PERSON CAN EITHER BE;
• (I) RESIDENT
5
IN INDIA OR
• (II) NON-RESIDENT IN INDIA
• HOWEVER, INDIVIDUAL AND HUF CANNOT BE SIMPLY CALLED RESIDENT IN INDIA. IF INDIVIDUAL OR HUF
IS A RESIDENT IN INDIA, THEY WILL BE EITHER;
• (A) RESIDENT AND ORDINARILY RESIDENT IN INDIA (ROR) OR
• (B) RESIDENT BUT NOT ORDINARILY RESIDENT IN INDIA (RNOR OR NOR).
• PERSONS OTHER THAN INDIVIDUAL AND HUF WILL BE EITHER RESIDENT IN INDIA OR NON-RESIDENT IN
INDIA.
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Different types of residential Status

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 Residential Status of Individual
Resident If satisfies any one of the two basic conditions.

Non Resident If does not satisfy any one of the two basic conditions.

Basic Conditions 1. Stay of Individual in India should be 182 days or more during relevant Previous Year (PY); OR
2. Stay of Individual in India should be 60 days or more during relevant PY and 365 days or more during 4 PYs
immediately preceding relevant PY.

Exception to Baisc In following cases, only 1st Basic condition needs to be checked:
Conditions
1. Indian Citizen -
who comes on a visit to India during relevant PY; or
who is leaving India as a crew member of an Indian Ship during the relevant previous year; or
who goes abroad for employment purposes during the relevant previous year
2. Person of Indian Origin (who himself or his parents or his grandparents were born in undivided India) who
comes on a visit to India during relevant PY

[Section 6(1) and

7
ROR If Resident Individual satisfies both the additional conditions 6(6)]

RNOR If Resident Individual does not satisfy both the additional conditions.

Additiona 1. Individual should be resident (by satisfying any of the two basic conditions or Conditions first basic
condition, if falls in exception to basic conditions) in at least 2 PYs out of 10 PYs immediately
preceding relevant PY; and
2. Stay of Individual in India should be 730 days or more during 7 PYs immediately preceding relevant PY

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Steps to be followed for determination of Residential status of a Person
• Check whether an Individual falls under any exception to basic conditions.
• If yes, check only first basic condition, otherwise check both the basic conditions.
If he satisfies any one of the basic conditions (only first in case of exception), then
he would be resident in India, otherwise he would be Non-resident in India
• If an Individual is resident in India, then check whether he is ROR or RNOR
• If Individual satisfies both the additional conditions, then he is ROR.
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• Otherwise, he would be RNOR

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Question :

Solution :

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 Conclusion :

A is ROR in India during

relevant previous year

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 Question :

Solution :

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 Conclusion :

A is ROR in India during

relevant previous year.
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Question :

13

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 Residential Status of HUF, Firm, AOP/BOI, Local Authority,
AJP
Determining Factor Control and Management of the affairs of the business (from where major decisions relating
to business are taken).

Resident If Control and Management of the affairs of the business is wholly or partly in India

Non-Resident If Control and Management of the affairs of the business is wholly outside India

ROR in case of HUF If Karta of Resident HUF satisfies both the additional conditions as applicable in case of an
Individual. 14

Additional Conditions Karta should be resident in at least 2 PYs out of 10 PYs immediately preceding relevant PY; and Stay
of Karta in India should be 730 days or more during 7 PYs immediately preceding relevant PY

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 Residential status of Company
Indian Company : Always resident in India Foreign Company
Foreign Company :
i) Residential status of a foreign company (whose turnover/gross receipts in the
previous year is more than Rs 50 crore) depends upon place of effective
management “POEM”(Circular No.8/2017, dated February 23, 2017).
ii) Residential status of a foreign company (whose turnover/gross receipts in the
previous year is less than Rs 50 crore) will always be non-resident in India.
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Resident : POEM of the business is situated wholly in India

Non-Resident : POEM of the business is situated wholly or partly outside India

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 Incidence of Tax

• The incidence of a tax refers to the extent to

which an individual or organization suffers from
the imposition of a tax - it may fall on the
consumer, the producer, or both.
• The incidence is also called the 'burden' of
taxation.
• Incidence of tax means the shift of economic tax
burden from buyer to sellers
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and vice versa due
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‹#› to changes in the elasticity of demand and
 Incidence of Tax
RESIDENTIAL STATUS
Types
OR NOR NR

TAXABLE TAXABLE TAXABLE

INCOME RECEIVED OR DEEMED TO BE RECEIVED IN INDIA

INCOME EARNED IN INDIA TAXABLE TAXABLE TAXABLE

INCOME EARNED AND RECEIVED OUTSIDE INDIA FROM A TAXABLE TAXABLE NOT
BUSINESS CONTROLLED OR PROFFESSIONAL SETUP IN TAXABLE
INDIA.

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Particulars of Income Whether Taxable
Resident Resident Non Resident
and ordinarily but not ordinarily

Income received or deemed to be received in Yes Yes Yes

India whether earned in India or elsewhere Yes Yes Yes
Income which accrues or arises or is deemed to accrue or Yes Yes No Yes No No No No No
arise in India during the previous year, whether received in
India or elsewhere.
Income which accrues or arises outside India and received
outside India from a business controlled from India.
Income which accrues or arises outside India and received
outside India in the Previous year from any other source.
Income which accrues or arises outside India and Received outside
India during the years preceding the previous year and remitted to
India during the previous year.

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‹#›
 INCOME EARNED AND RECEIVED OUTSIDE INDIA TAXABLE NOT NOT
FROM A BUSINESS CONTROLLED OR TAXABLE TAXABLE
PROFFESSIONAL SETUP OUTSIDE INDIA.

INCOME EARNED AND RECEIVED OUTSIDE INDIA TAXABLE NOT NOT

FROM ANY OTHER SOURCES. TAXABLE TAXABLE

INCOME EARNED AND RECEIVED OUTSIDE INDIA IN THE NOT NOT NOT
YEAR PRECEDING THE PREVIOUS YEAR..IF SAME IS TAXABLE TAXABLE TAXABLE
REMITTED TO INDIA DURING THE CURRENT PREVIOUS
YEAR.
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‹#›
 Slab Rates
Tax rates for individuals (other than senior and super senior citizens) or HUF

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‹#›
 Slab Rates
Tax rates for senior citizens (i.e., an individual whose age is 60 years or more at any time
during the previous year but less than 80 years on the last day of the previous year)

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‹#›
 Slab Rates
Tax rates for Super senior citizens (i.e., an individual whose age is 80 years or more at any
time during the previous year)

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‹#›
 Surcharge :

Note: 1) The enhanced surcharge of 25% & 37%, as the case may be, is
not levied, from income chargeable to tax under sections 111A, 112A and
115AD. Hence, the maximum rate of surcharge on tax payable on such
incomes shall be 15%. 2) From Assessment Year 2023-24 onwards: o The
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maximum rate of surcharge on tax payable on dividend income or capital
 Contd.
However, marginal relief is available from surcharge in following manner
a) in case where net income exceeds Rs. 50 lakh but doesn’t exceed Rs. 1 Crore, the amount payable as
income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs
50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs.
b) in case where net income exceeds Rs. 1 crore but doesn’t exceed Rs. 2 crore, marginal relief shall be
available from surcharge in such a manner that the amount payable as income tax and surcharge shall not
exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of
income that exceeds Rs. 1 crore.
c) in case where net income exceeds Rs. 2 crore but doesn’t exceed Rs. 5 crore, marginal relief shall be
available from surcharge in such a manner that the amount payable as income tax and surcharge shall not
exceed the total amount payable as income-tax on total income of Rs. 2 crore by more than the amount of
income that exceeds Rs. 2 crore. d) in case where net income exceeds Rs. 5 crore, marginal relief shall be
available from surcharge in such a manner that the amount payable as income tax and surcharge shall not
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exceed the total amount payable as income-tax on total income of Rs. 5 crore by more thanthe amount of
income that exceeds Rs. 5 crore.
 Health and Education Cess
Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.
AMT : In the case of a non-corporate taxpayer to whom the provisions of Alternate Minimum Tax
(AMT) applies, tax payable cannot be less than 18.5% (+HEC) of "adjusted total income" computed
as per section 115JC. For provisions relating to AMT refer tutorial on “MAT/AMT” in tutorial section.
Notes: W.e.f. Assessment Year 2019-20, In case of a unit located in an IFSC which derives its
income solely in convertible foreign exchange, the rate of AMT shall be at the rate of 9% instead of
existing rate of 18.50%. W.e.f. Assessment Year 2023-24, the rate of AMT shall be 15% instead
of existing rate of 18.5% in case of a co-operative society. Note: A resident individual (whose net
income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from
income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or
Rs. 12,500, whichever is less.

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 In addition to the Income Tax amount
calculated, based on the above-
mentioned tax slabs, individuals are
required to pay Surcharge and Cess.
Surcharge: 10% of income tax, where
total income exceeds Rs.50 lakh up to
Rs.1 crore.
• Surcharge: 15% of income tax,
where the total income exceeds
Rs.1 crore.
• Health & Education Cess: 4% of
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‹#›
 Learning Outcome
Students will Learn to compute residential status
and incidence of tax

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