INCOME TAX-I

UNIT-3-RESIDENTIAL STATUS
 INTRODUCTION
• It is important for Income Tax Department to determine
the residential status of a tax paying individual or company.
It becomes particularly relevant during the tax filing
season. In fact, this is one of the factors based on which a
person’s taxability is decided. Let us explore the residential
status and taxability in detail.
 RESIDENTIAL STATUS-MEANING-
SEC 4 OF IT ACT
• According to Section 4 of I-T act, 1961, income-
tax is charged on the income of an assesse
earned in the previous year according to the
rates fixed by the Finance Act. The tax liability
is determined on the basis of his residence in
India in the previous year. The residential
status of an assesse need not be the same each
year. The rules determining the residential
status are not the same for all the assesses.
TYPES OF RESIDENTIAL STATUS
 Conditions for being a Resident: Section 6 (1)-BASIC
CONDITIONS

The above section lays down that if an individual assesse

fulfills any one of the following two conditions, he is said
to be a resident in India in the relevant previous year:
a. He has been in India in that year for a period or
periods amounting in all to 182 days or more; or
b. He has been in India for a period or periods
aggregating 365 days or more during 4 years preceding
the previous year and is in India for a period or periods
amounting in all to 60 days or more in the previous
year.
 Conditions for being a Resident: Section 6 (6)-
ADDITIONAL CONDITIONS

1. Being a citizen of India, who leaves India for

the purpose of employment abroad or who
leaves India as a member of the crew of an
Indian ship, he must have stayed for 182 days
instead of 60 days under condition (b) above
2. Being a citizen of India or a foreign national of
Indian origin is outside India and visits India
in the previous year, he must have stayed 182
days instead of 60 days under condition (b)
Ordinary Resident: Section 6 (6)

If an individual satisfies any one of the basic conditions

specified under Section 6 (1) and both the following
conditions, he is considered as ordinarily resident.
.
 Not Ordinarily Resident:

• In addition to fulfilling any one of the basic

conditions specified under Section 6 (1), if an
individual fails to satisfy both the above
conditions stated under Section 6 (6), he
becomes non ordinarily resident.
 Non Resident:

• If an individual fails to satisfy any one of the two

conditions stated under Section 6 (1), he is said to be a
non-resident.
 Steps in identifying residential status
1. Identifying previous year and assessment year
2. No of months in a year
3. Identification of leap year
4. Identifying number of days in a month
5. Identifying the total no of days stayed in India in previous
year.
6. Determination of residential status
i. Checking the basic condition
ii. Checking the additional condition
iii. Determining the status
 Problem 1

Mr. Prabhu an Indian citizen is living in Delhi since

1960, left for Japan on July 1, 2013. He comes
back to India on August 7,2017. Determine his
residential status for the assessment year 2018-
19.
Solution:
Step-1 PY-2017-18 and AY-2018-19
Step-2
Apri MaytoJune
step6
July Aug sep Oct Nov Dec Jan Feb Mar Total
no of
Calculation of his stay during previous year-2017-18days
nil nil nil nil 25 30 31 30 31 31 28 31 237
 Calculation of resident ship and stay in preceding previous year

YEAR NO OF DAYS OUT OF 4 OUT OF 7 YRARS RESIDENT

OF STAY YEARS STAY STAY
2007-08 366 YES
2008-09 365 YES
2009-10 365 YES
2010-11 365 1188 DAYS YES
(0+0+0+92+365+3
2011-12 366 66+365) YES
2012-13 365 YES
2013-14 92 92 DAYS YES
(0+0+0+92)
2014-15 0 NO
2015-16 0 NO
2016-17 0 NO
• In this problem Mr. Prbhu fulfills first basic
condition because he stays for 237 days in
previous year but fails to fulfill second basic
condition(60 days in PY and 365 in 4 PPY)
• And he fulfills both additional condition
i. He was in Indian for more than 7 years out of 10
years
ii. He was in India for more than 730 days in 7 PPY.
Hence as he fulfill one basic condition and both
additional condition he is called as Resident-
Ordinary Resident.
 Problem 2
Dr. Nagraj an Indian citizen and a professor in IIM, Lucknow, left India on September
15, 2017 for USA to take up professor job in MIT USA. Determine his Residential
Status for the assessment year 2018-19
• Solution:
Step-1 PY-2017-18 and AY-2018-19
Step-2 to 6
Calculation of his stay in India during PF from 1st April 2017 to 15th Sep 2018

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar total
30 31 30 31 31 15 Nil Nil Nil Nil Nil Nil 168 dy
Note:
1.He does not satisfy the first basic condition and
2. Second basic condition is not applicable as he is Indian citizen and
leaving India for the purpose of employment
As the basic condition is not fulfilled additional conditions are not
applicable. There fore he Non Resident
Problem 3: Mr. R is a foreign citizen. Determine his residential status for the AY 2018-
19 on the assumption that during financial years from 2003-04 to 2017018, he was
present in India as follows in the following previous year.

YEAR NO OF DAYS
2003-04 300
2004-05 40
2005-06 20
2006-07 180
2007-08 200
2008-09 150
2009-10 300
2010-11 30
2011-12 150
2012-13 90
2013-14 200
2014-15 75
2015-16 275
2016-17 85
2017-18 185
 Solution: Step-1 2017-18 PY and 2018-19 AY
Step-2-5 (PY days are already given so preparation first table is not required and 2-5 steps also not required.

Year No of days stay Stay-4 years Stay-7 years Resident

2007-08 200 Yes
2008-09 150 Yes
2009-10 300 Yes
2010-11 30 905 days No
2011-12 150 (85+275+75+200 Yes
+90+150+30)
2012-13 90 Yes
2013-14 200 635 days Yes
2014-15 75 (85+275+75+200)
Yes
2015-16 275 Yes
2016-17 85 Yes
 Explanation:Step-6
• Basic conditions
a) His stay in India during PY 2017-18 is 185 days (more than 182 days)-
Satisfied
b) His stay in India during the PY 2017-18 is 185 days (more than 60 days)
and 635 days (more than 365 days) in 4 years PPY-Satisfied
• Additional Condition
a) He is resident for 5 years out of 10 PPYs (more than 2 years)-Satisfied
b) His stay in India is 905 days (more than 730 days) in 7 years PPY-Satisfied
There fore as he satisfies both basic conditions and both additional
condition he is called as Resident and Ordinary Resident
 Problem 4: Mr. C, a Japanese citizen left India after staying 10 years on
1.7.2015. during the financial year 2016-17, he comes to India for 46 days.
Later, he returns India for 1 year on 10-10-2017. Determine his residential
status for the AY 2018-19

• Solution:
Step-1 PY-2017-18 and AY-2018-19
Step-2 to 6
Calculation of his stay in India during PF from 10th Oct 2017 to 31st March 2018

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar total
Nil Nil Nil Nil Nil Nil 22 30 310 310 28 31 173dy
s
Calculation of resident ship and stay during the
proceeding PPY

Year No of days Stay-4 years Stay-7 years Resident

stay
2007-08 366 Yes
2008-09 365 Yes
2009-10 365 Yes
2010-11 365 1964 days Yes
2011-12 (365+366+365
366 +365+365+92 Yes
2012-13 365 +46) Yes
2013-14 365 868 days Yes
2014-15 (365+365+92+
365 46) Yes
2015-16 92 Yes
2016-17 46 No
• Basic conditions
a) His stay in India during PY 2017-18 is 173 days (more
than 182 days)- Does not Satisfied
b) His stay in India during the PY 2017-18 is 173 days
(more than 60 days) and 869 days (more than 365 days)
in 4 years PPY-Satisfied
• Additional Condition
a) He is resident for 8 years out of 10 PPYs (more than 2
years)-Satisfied
b) His stay in India is 1965 days (more than 730 days) in 7
years PPY-Satisfied
There fore as he satisfies one basic conditions and both
additional condition he is called as Resident and
Ordinary Resident.
 Problem 4: Mr. D an Indian Citizen, leaves India on 22.9.2017
for the first time, to work as an officer of a company in France.
Determine his residential status for the AY 2018-19

• Solution:
Step-1 PY-2017-18 and AY-2018-19
Step-2 to 6
Calculation of his stay in India during PF from 1st April 2017 to 22th Sep 2018

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar total
30 31 30 31 31 22 Nil Nil Nil Nil Nil Nil 173dy
s
1.He does not satisfy the first basic condition and
2. Second basic condition is not applicable as he is Indian citizen and leaving India for
the purpose of employment
As the basic condition is not fulfilled additional conditions are not applicable. There
fore he Non Resident
 Problem 4: Mr. Jimmy a foreign national comes to India for the first time on 22nd
August 2013 and he left for Tokyo on 5th may 2017. He once again arrived to India
on 26-1-2018 and left for Australia on 20-3-2018. determine his residential status
for the AY 2018-19.

Solution:Step-1 PY-2017-18 and AY-2018-19

Step-2 to 6
Calculation of his stay in India during PY from 26-1-2018 to 20-3-2018
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar total
Nil Nil Nil Nil Nil Nil Nil Nil Nil 6 28 30 64 DAYS
 Calculation of resident ship and stay during the
proceeding PPY
Year No of days stay Stay-4 years Stay-7 years Resident
2007-08 0 No
2008-09 0 No
2009-10 0 No
2010-11 0 988 days No
(0+0+0+233+36
2011-12 0 5+365+35) No
2012-13 0 No
2013-14 233 988 days Yes
2014-15
(233+365+365
365 +35) Yes
2015-16 365 Yes
2016-17 35 No
• Basic conditions
a) His stay in India during PY 2017-18 is 64 days (less than
182 days)- Does not Satisfied
b) His stay in India during the PY 2017-18 is 64 days (more
than 60 days) and 988 days (more than 365 days) in 4
years PPY-Satisfied
• Additional Condition
a) He is resident for 3 years out of 10 PPYs (more than 2
years)-Satisfied
b) His stay in India is 988 days (more than 730 days) in 7
years PPY-Satisfied
There fore as he satisfies one basic conditions and both
additional condition he is called as Resident and not
Ordinary Resident.
 Problem 7: Mr. Ram went to England for studies on 5th August 2017 and came back to
India on 25-2-2018. He had never been out of India before. What is his residential
status. What is the difference it will make if he had gone out of India for the sake of
employment rather than studies?

Solution:Step-1 PY-2017-18 and AY-2018-19

Step-2 to 6
Calculation of his stay in India during PY from 26-1-2018 to 20-3-2018

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar total
30 31 30 31 05 nil Nil Nil Nil Nil 4 31 162 days
 Calculation of resident ship and stay
during the proceeding PPY
Year No of days stay Stay-4 years Stay-7 years Resident
2007-08 366 Yes
2008-09 365 Yes
2009-10 365 Yes
2010-11 365 2556days Yes
(365+366+365
2011-12 366 +365+365+366 Yes
2012-13 365 +365) Yes
2013-14 365 1461 days Yes
2014-15
(365+366+365
365 +365) Yes
2015-16 366 Yes
2016-17 365 Yes
• Conclusion:
• Basic conditions
a) His stay in India during PY 2017-18 is 162 days (less than 182 days)- Does not
Satisfied
b) His stay in India during the PY 2017-18 is 162 days (more than 60 days) and 988
days (more than 365 days) in 4 years PPY-Satisfied
• Additional Condition
a) He is resident for 10 years out of 10 PPYs (more than 2 years)-Satisfied
b) His stay in India is 2556 days (more than 730 days) in 7 years PPY-Satisfied
There fore as he satisfies one basic conditions and both additional condition he is
called as Resident and not Ordinary Resident.
If he was out of India for the purpose of employment then second basic condition
is not applicable and as he failed to satisfy both the basic condition he is Non
Resident
Problem 8: Mr. Manoj a citizen of India went to England on
2.10.2011 for higher studies for a period of two years.
After he came back he was employed in a multinational
company in India. The company sent him for 6 months
training to Germany on 1-3-2014. he was transferred to
company head office in New York on 15-8-2015. How ever
he left India on 2-10-2015 and reported to duty on 2-10-
2015. He visited India during the month of November and
December 2016. the company transferred him back to his
original post on India and he returned to India on 26th Jan
2018. Determine his residential status for the P Y 2017-18.
 Solution:Step-1 PY-2017-18 and AY-2018-
19
Step-2 to 6
Calculation of his stay in India during PY from 26-1-
Apr
2018 to 31-3-2018
May Jun Jul Aug Sep Oct Nov Dec Jan Fe Mar total
b
Nil Nil Nil Nil Nil Nil Nil Nil Nil 6 28 31 65 days
 Calculation of resident ship and stay
during the proceeding PPY
Year No of days stay Stay-4 years Stay-7 years Resident
2007-08 366 Yes
2008-09 365 Yes
2009-10 365 Yes
2010-11 365 1160 days Yes
2011-12 185 Yes
2012-13 0 No
2013-14 151 609 days Yes
2014-15 212 Yes
2015-16 185 Yes
2016-17 61 Yes
• 2011-12 calculation
• From 1-4-2011 to 2-10-2011
(30+31+30+31+31+30+2)=185 days
• 2012-13 not in India
• 2013-14
From 2-10-2013 to 1-3-2014 (30+30+31+31+28+1)151
days
• 2014-15
From 2-9-2014 to 31-3-
2015(30+31+30+31+31+28+31)=212 days
• 2015-16
From 1-4-2015 to 2-10-2015(30+31+30+31+31+30+2)=185
• 2016-17
Nov and dec(30+31)=61 days
• Conclusion:
• Basic conditions
a) His stay in India during PY 2017-18 is 65 days (less than 182 days)-
Does not Satisfied
b) His stay in India during the PY 2017-18 is 65days (more than 60 days)
and 988 days (more than 365 days) in 4 years PPY-Satisfied
• Additional Condition
a) He is resident for 9 years out of 10 PPYs (more than 2 years)-Satisfied
b) His stay in India is 1160 days (more than 730 days) in 7 years PPY-
Satisfied
There fore as he satisfies one basic conditions and both additional
condition he is called as Resident and not Ordinary Resident.
 Problem 9: Mr. X is a foreign citizen(not being a person of Indian origin). Since 1981, he visits India every year in the
month of April for 200 days. Find out the residential status of X for the assessment year 2018-19? What if he visits India
every year for 90 days?

Case 1-if he visits 100 days every year

Basic condition
a) His stay in India during PY 2017-18 is 100 days (less than 182 days)- Does
not Satisfied
b) His stay in India during the PY 2017-18 is 100days (more than 60 days)
and 400 days (more than 365 days) in 4 years PPY-Satisfied
Additional Condition
c) He is resident for 10 years out of 10 PPYs (more than 2 years)-
Satisfied
d) His stay in India is 700 days (less than 730 days) in 7 years PPY-
Not Satisfied
He satisfies one basic condition and one additional condition
therefore he is Resident and not ordinary resident
Case 1-if he visits 90 days every year
Basic condition
a) His stay in India during PY 2017-18 is 90 days (less than 182 days)- Does
not Satisfied
b) His stay in India during the PY 2017-18 is 90 days (more than 60 days)
and 360 days (less than 365 days) in 4 years PPY- Not Satisfied
As he is not satisfied both the basic condition the additional condition
are not applicable therefore he is Non resident.
 Problem 10: what is the residential status of Mr. Ganesh for the AY 2018-19, who is an
Indian citizen working abroad came to India during previous year for 182 days and his
stay in India during follows financial year were as follows.

PY 2009-10 2010-11 2011- 2012-13 2013-14 2014- 2015-16 2016-17

12 15

No of 36 44 12 155 210 28 55 77
days
 Impact of Residential Status on Tax Incidence
Particulars Tax incidence
Resident Resident Not- Non
Ordinary Ordinary Resident
Resident Resident

a) Income received or deemed to be received in India by YES YES YES

him or on his behalf (whether accrued in India or out side
India)
b) Income accruing or arising or deemed to accrue or arise YES YES YES
in India (whether received in India or out side India)
c) Income which is accurse or arises in India and received in YES YES YES
India
d) Income which accrue or arises outside India and received YES YES NO
outside India from a business controlled from India
e) Income which accrues or arises outside India and YES NO NO
received outside India in Previous year from any other
sources
f) Income which accrues or arises outside India and received NO NO NO
outside India during the year preceding previous year and
remitted to India during previous year (i.e. Past untaxed
income brought to India)
 Problem: 1 Mr. Ram furnishes his
income for previous year 2-17-18
1. Income accrued in America but received in India Rs. 19000
2. Interest earned on UK government securities(1/3 received in India)
Rs.15000
3. Salary received in India for service rendered in Germany Rs. 28000
4. Income from agriculture in Bangladesh received and spent there only Rs.
16000
5. Income from profession in China, received there. The profession is set up
in India Rs. 12000
6. Income accrued in India but received in China Rs. 16000
7. Income received outside India in PPY but remitted in India during
previous year Rs. 36000
8. Gift in foreign currency from a relative Rs. 10000 received in India
Compute the total income of Mr. Ram for the Assessment Year 2018-19 if he
is R-OR, R-NOR and NR