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RESIDENTIAL STATUS The tax incidence in India is based on the residential status of the assessee.

Section 5 deals with tax incidence and Section 6 deals with how to determine the residential status. Section 7 deals with the Income deemed to be received in India and Section 9 deals with the Incomes that are deemed to accrue or arise in India. Provisions relating to Residential Status 1. Determination of Residential status (Section 6) Residential status of an assessee depends on whether he satisfies the conditions specified in Section 6. An individual can either be a. Resident and Ordinary Resident (R and OR) b. Resident but Not Ordinary Resident ( R BUT NOT OR) c. Non Resident 2. Residential status of an Individual There are two sections, 6(1) and 6(6) relevant for determination of Residential status. Both sections contain two conditions each. Conditions of Section 6(1) 1. Stay in India for 182 days or more during the previous year. 2. Stay in India for 60 days or more during the previous year and 365 days or more during the preceding 4 previous years. Condition 2 will not be applicable in the following situationsa. For citizens leaving India for the purpose of taking up employment outside India. b. For citizens leaving India as a member of crew of an India ship. c. For Indian citizens or person of an Indian origin residing outside India if they come on a visit to India. If an individual satisfies either of these conditions (with respect to the exemptions for the second condition), then he/she becomes a RESIDENT. If an individual does not satisfy either of the conditions, then he/she becomes a NON-RESIDENT. Conditions of Section 6(6) 1. Non-Resident in India in atleast 9 out of 10 Preceding previous years. 2. Has stayed in India for 729 days or less during the preceding previous 7 years. If a resident satisfies atleast one of the conditions in Section 6(6), then he becomes a NOT OR. If a resident does not satisfy any of the conditions in Section 6(6), then he becomes an OR. Section 6(6) is applicable only if an individual satisfies atleast one of the conditions in Section 6(1). Summary Of Provisions - INDIVIDUAL 1. Satisfies at least one condition of Section 6(1) and at least one condition of Section 6(6). R but not OR

2. Satisfies at least one condition of Section 6(1) and does not satisfy any of the conditions in Section 6(6).

R and OR

3. Satisfies none of the conditions of Section 6(1). Summary Of Provisions HUF

NON RESIDENT

If the control & management is wholly situated outside India

If the control & management is wholly or partly situated in India and Karta or Manager of the family satisfies at least one of the condition of Section 6(6)

If the control and management is wholly or partly situated in India and Karta or Manager of the family fails to satisfy both the conditions of Section 6(6). R and OR

Non Resident R but not OR Residential Status of Firms, AOPs, BOPs, etc SECTION 6(2) If the Control and Management is wholly situated outside India Non Resident

If the Control and Management is wholly or partly situated in India. Resident

Residential Status of a Company SECTION 6(3) It depends upon the fact if the Company is an India company or a Foreign Company. A. An Indian CompanyWill be regarded as Resident in India irrespective of control and management. B. A Foreign CompanyIf the Control and Management is wholly situated in India RESIDENT If the Control and Management is wholly situated outside India NON-RESIDENT

RESIDENTIAL STATUS AND TAX INCIDENCE Section 5 Different kinds of Incomes Income received or deemed to be received in India. Immaterial whether earned in India or Foreign country. Income earned in India whether received, paid in India or outside India. Income earned and received outside India from a business controlled in India. May not be remitted in India. Income earned and received outside India from a business controlled outside India. Income earned and received outside India from a business controlled outside India from any other source. PROBLEMS 1. Mr. Gatting, a foreign citizen, leaves India for the first time in the last twenty years on November 25, 2007. During the calendar year 2008, he comes back to India on September 1 and stays for a period of OR Taxable Taxable Taxable Taxable Taxable NOR Taxable Taxable Taxable Not Not NR Taxable Taxable Not Not Not

twenty days. During the calendar year 2009 he does not visit India at all but comes to India on January 15, 2010. Determine the residential status of Mr. Gatting for the assessment year 2010-11 2. Mr.K.V.Rao, a senior scientist goes to Nigeria, on a job approved by central govt, for a period of 3 years on 15th sept.2009.he has never been out of India before. Determine his residential status for the previous year 2009-10 3. Mr. Singh, an Indian citizen, went to U.S.A on 10 th Oct, 2001 and returned after two years stay from there. Again on 10th oct.2005 he went to Iran but returned on 10 th May 2009.he made another attempt to go abroad and finally succeeded to go to Canada. He left Delhi for Canada on 10 th Feb, 2010.Find out his residential status for the assessment year 2009-10 and 2010-11. 4. Mr. Vinayaka came to India from the U.S.A for the first time on 30th September 2002 to join an American concern as General Manager. After reporting for duty he left for Japan on 2nd October 2003 to finalize the companys transaction. He returned to India on 10th October 2003 and stayed in India till 31st July, 2008.what is his residential status for the previous year 2009-10? Give reasons? 5. Mr. B a married citizen of India left for Germany for the first time on 15-9-2008 on a business trip. He returned to India on 5-6-2009.during his absence from India he maintained a dwelling house for himself in Calcutta. What will be his residential status for the assessment year 2010-11? 6. Dr.K.S.Sinha , an Indian national is working in U.S.A.every year he comes to India on leave and stays with his parents who are staying in Calicut.what would be the Residential status of Dr.K.S.Sharma during the assessment year 2010-11 under the following circumstances: a) He came to India on 19th December 2008 and stayed up to 5th February 2010.his total stay during the preceding 7 years was 300 days. b) He came to India on 20th September 2009 and stayed up to 31st march 2010.his total stay during the preceding 7 years was 500 days. He had left India on 31-3-2002. 7. Mr A an engineer left India for London on 15 th March 2009 for taking training in a firm there. He returned to India on 28th March 2010. He was never out of India in the past. State giving reasons why will be residential status of Mr. A for prev. yr. 2009-2010? 8. a)Mr. Misra an Indian citizen, who is appointed as a taxation adviser by the govt. of Uganda leaves India for the first time on March 25, 2007 for joining his duties in Uganda. During the prev. yr. 20092010 he comes to India on leave for 85 days. Determine residential status for assessment yr. 2010-11? b) X came to India for the first time from USA on 30th june 2003. He stayed in India for 3 years left for Japan on 1st July 2006. He returned to India on 1st April 2007, and remained in India till 31st July 2009 when he went back to USA. He again came to India taking up an employment with an American concern on 21st January 2010. What is his residential status? c) An individual left India for Iran on 15 th july, 2007, for taking up a job in engineering firm there. He returned to India on 15th September 2009. He was never out of India in the past. State giving reasons what his residential status will ne for the prev. yr. 2009-10? 9: A person after about 26 yrs. stay in India, retired to England in April 2008 and returned to India on 15th February 2010 to take up a salaried appointment. What is his residential status for the previous yr. 2009-10 10: Mr. Ford an American national was appointed as Senior Scientific Officer in India on 1 st April 2001. On 31st January 2007 he went to Sri Lanka on deputation for a period of 3 yrs. but left his wife and children in India. On 1st May 2008, he came to India and took with him his family to Sri Lanka on 30th June 2008. He returned to India and joined his original job on 20 th Dec 2009. What would be the status of Mr. Ford for the assessment years 2007-08, 2008-09, 2009-10 and 2010-11? 11. Mr. Prashant went to Germany for diploma course on 5th Aug 2009 and came back to India on 25th February 2010. His family remained in India . He had never been out of India in the past. What is his residential status for the yr. ending 31st March 2010? 12. Mr. Vishal an MBA in IB , who is engaged in export business visits France very frequently. From particulars given below determine his residential status for the previous year 2009-2010? Previous year Stay in france 2002 -03 187

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

140 305 65 70 225 306 283

13. X is a foreign citizen. During the financial year 2009-10 he was in India for 101 days. Determine his residential status for the assessment year 2010-11 on the assumption that during the financial years 199596 to 2008-09 he was present in India as follows: 1995-96 85 days 2002-03 16 days 1996-97 310 days 2003-04 160 days 1997-98 106 days 2004-05 281 days 1998-99 172 days 2005-06 305 days 1999-2000 20 days 2006-07 165 days 2000-01 280 days 2007-08 210 days 2001-02 265 days 2008-09 220 days 14. What is the residential status of an individual for the assessment year 2010-11 who came to India for the first time in 2007-08 and was in India as follows: PREVIOUS YEARS PRESENCE IN INDIA 2009-10 185 days 2008-09 15 days 2007-08 26 days 15. I) during the previous year 2009-10 Mr.X, an Indian citizen, comes to India on a visit of 143 days. Determine his residential status for the assessment year 2010-11 on the basis of the following information: a) During 2005-06 X is present in India for 365 days. b) During 2006-07 to 2008-09 Mr.X is in Japan for 360 days, 80 days and 345 days respectively. c) Mrs.X is a Non-Resident in India for the assessment year 2010-11. II) Does it make any difference if X is an American citizen? 16. Head office of XY, a Hindu Undivided Family, is situated in Hong Kong. The family is managed by Y who is resident in India only in 1 previous year out of 10 previous years preceding the relevant previous year 2009-10 and his stay during these seven years was 720 days. Determine the residential status of family for the assessment year 2010-11 if the affairs of the family business are (a) Wholly controlled from Hong Kong; and (b) Partly controlled from India. 17. Determine the residential status of the following assesses under the Income-Tax Act for the previous year 2009-10 giving reasons for your answer:

a) Mr.M.M Agarwal came to India for the first time from Kuwait on 25th September, 2003.He stayed
here for four years and left for U.K on deputation for the government of India on 26th September, 2007.He returned to India on 1st May 2008 and again went to U.K for a job offered by a English company on 1st December, 2008.He came to India for permanent settlement on 26 th September, 2009.

b) Mr.A.B Sen Left India for West Germany for higher studies on 1 st December, 2006.He
maintained dwelling house for him in Delhi throughout the period he was in West Germany. During winter vacations he came to India twice, once on 4 th January, 2008 and stayed for 30 days and again on 25th December, 2008 and stayed for 28 days. After completing his studies he came back to India for good on 28th November, 2009. c) A Hindu Undivided Family is carrying on a family business in India. The business is having its head office in Kanpur from where it is controlled. The Karta of the family was in Kenya for business purposes throughout the years ended on 31st March, 2008 and 2009 d) JKL Co. is a partnership firm registered in India and is controlled from India .Mr.J its senior partner was in U.K for more than 340 days during the year ended 31 st March, 2010 for business purposes. 18. X, an Indian citizen, is posted in the Indian high commission at London during the previous year 2009-10.His emoluments consists of basic pay: Rs.6000 per month and overseas allowance: Rs.2000 per month. Besides, he is entitled for airfare for going from and coming to India and free use of governments car at London. Is claim of X justified that since he is a Non-Resident during previous year 2009-10,he is not liable to pay tax on salary earned and received outside India? Does it make any difference if X is a foreign citizen? 19. Show how the following incomes are to be assessed in the hands of the assessee who is (a) resident, (b) non resident, (c) not ordinarily resident 1. Salary drawn during the year for employment outside India from Government of India 93,50 0 2. Salary drawn for the employment in London office of an Indian company for three 18,00 months 0 3. Profits earned abroad and received in India 25,000 4. Profit earned from a business transactions outside india and kept in bank there 18,00 0 5. Dividend received from an Indian company 3,000 20. Following are the incomes of Sri Amarnath for the financial year 2009-10 1. Interest on saving bank deposit in Allahabad bank, Delhi 2. Income from agriculture in Africa invested in Nepal 3. Dividend received in U.K. from an American company, a part of which Rs. 2,000 remitted to India 4. Pension received in Belgium for services rendered in India with a Limited company 1,200 10,00 0 10,00 0 20,000

You are required to compute his gross total income for the assessment year 2010-11 if he is a (a) resident, (b) non resident, (c) not ordinarily resident 21. Following are the incomes of Sri. Rathnam for the previous year 2009-10 1. Profit from business in Bangalore 10,00 0 2. Income accrued in India but received in Japan 4,000 3. Profit from business in Canada but received in India 5,000 4. Income from house property in Karachi received in Bombay 4,000 5. Profit from business established in England and deposited there, the business being controlled 20,000 from India 6. Income from house property in America and deposited there 2,000 7. Past untaxed income brought into India during the previous year 10,00

0 Compute the total income of Shri Rathnam for the assessment year 2010 -11 is he is (a) resident, (b) non resident, (c) not ordinarily resident 22. The following are the incomes of Mr Salman for the previous year 2009-10 1.Profit on sale of machinery in Bangalore but received in Australia 30,00 0 2. Profit from business in Canada, the business being controlled from India (one third is received 42,00 in India) 0 3. Income from house property in Iran 20,000 4. Agricultural income in England and was received there but later brought into India 8,000 5. Past untaxed foreign income brought into India during the previous year 2009-10 6,000 Compute the total income of Mr. Salman for the assessment year 2010-11 if he is (a) resident, (b) non resident, (c) not ordinarily resident 23. Following are the particulars of income of Mr. RTM for the assessment year 2010-11. 1. Income from business in Mumbai 2. Income from house property in Pune 3. Pension from former employer for service rendered in India but received in U.K 4. Profit from business in UK but controlled from Mumbai Out of this Rs.20,000 were received in India 5. Dividend from an Indian company but received in UK 6. Income from agricultural in Nepal: received there but later on remitted to India 7. Interest on bonds issued by UK Government out of which 50% us received in India 8. Past untaxed income of 2006 -07 to 2008 -09 brought into India during 2009 -10 9. Income from house property in UK and donated there to a notified charitable institution 80,000 20,000 24,000 1,60,00 0 18,000 60,000 40,000 4,00,00 0 20,000

Compute the total income of Mr. RTM for the assessment year 2010-11 if he is (a) resident, (b) non resident, (c) not ordinarily resident 24. The following are the incomes of Shri Kiran for the previous 2009-10 1. Profit from business in Dharwad 7,00 0 2. Income accrued in India but received in Italy 6,00 0 3. Profit from business in England received in India 5,00 0 4. Income from house property in Africa received in India 4,00 0 5. Profit from business established in Iran and deposited in a bank there, the business being 3,00 controlled in India 0 6. Income from house property in Pakistan and deposited in bank there 2,000 7. Past untaxed foreign income brought in to India during this previous year 1,00 0 Compute the total income of Mr. RTM for the assessment year 2010-11 if he is (a) resident, (b) non resident, (c) not ordinarily resident 25. a) i) X, a non resident individual purchases goods in India and then exports them to a foreign country. Discuss whether any part of profit made by him is chargeable to Indian income-tax on the basis of deemed accrual in this country.

ii) Y, not an ordinary resident individual, receives dividend from companies registered outside India but deriving its entire profits from this country. The dividend is declared and paid outside India. Discuss Ys liability, to Indian income tax on divided. b) i) A sum equivalent to Rs. 40000 was earned from a business in the UK but the profit has been remitted to India. the assessee used to attend to the business only, when he was in the UK ii) Remuneration of Rs.20000 due to him for services rendered in Singapore was credited to bank account in Singapore and immediately thereafter to India. 26. For the previous year ended 31st March 2010 Mr. Z had the following incomes: 1. Honorarium received from Govt of India [expenses incurred Rs. 5000] 10,00 0 2. Profits earned from business in Kerla controlled from Canada 5,000 3. Profits earned from business in USA controlled from West Bengal 6,000 4. Profits earned from a business in Bangaladesh, controlled in Karachi and credited to his 4,000 personal account in the bank there 5. Dividend from Italian company credited to his account in Switzerland 2,000 6. Agricultural income from Thailand not remitted to India 6,000 Compute the total income of Mr. Z for the assessment year 2010-11 if he is i) Resident, ii) Not Ordinary Resident, iii) Non Resident 27. From the following particulars of income of Sh. K.K. Katyal for the previous year2009-2010 compute his taxable income assuming Mr. Katyal as i) Ordinary Resident, ii) Not Ordinary Resident, iii) Non Resident 1. Profit earned from a business in Delhi 2. Profit of a business established in UK but controlled from India amount deposited in bank there 3. Salary received in UK for services rendered in India 4. Profit from business in Nepal and controlled from there but received in India 5. Income from house property in UK received in India 6. Income from house property in Nepal 7. Past untaxed foreign income brought into India during the year 44,00 0 20,000 10,00 0 12,000 4,000 5,000 5,000

28. From the following particulars compute the total income of Mr. C. A for the assessment year 2010-11 if he is as i) Ordinary Resident, ii) Not Ordinary Resident, iii) Non Resident Income from house property in India [computed] Loss from house property in France Income from house property in England received there and deposited in bank there Business income from India Loss from business in England Profits from business in England which was controlled from there Interest on debentures of a Indian company Income from profession set up in India received in England for services rendered in India 32,000 (60,000) 90,000 2,60,000 (1,20,000) 1,00,000 10,000 2,00,000