INSTITUTE-UNIVERSITY SCHOOL OF

BUSINESS
DEPARTMENT OF COMMERCE
Bachelors of Commerce
Income Tax Law and Accounts
CMT-344

Residential status
DISCOVER . LEARN . EMPOWER
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Residential
status

Course Outcome
CO Title Level
Number

CO1 The student would be able to identify and calculate the Remember
income of five different heads as per Income Tax
CO2 The student would be able to plan his tax liability using Understand
various deductions and provisions available
CO3 The student would be to calculate the tax liability of Understand
Individual.

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Residential status

NOT Ordinary Resident

NON RESIDENT
How to determine residential
status of Companies?
Practical question
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For Indian citizen going abroad on a job or as a member of crew of an Indian ship

• In case of an Indian citizen:

• ♦ Who is going outside India for a job and his contract for such
employment outside India has been approved by the Central
Government; or
• ♦ He is a member of crew of an Indian ship;

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For Indian citizens and persons of Indian origin

• case of an individual being a citizen of India, or a person of Indian

origin, who being outside India, comes on a visit to India in any
previous year’
• *A person shall be deemed to be of Indian origin if he or either of his
parents or any of his grandparents was born in India or undivided
India

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Test C – RESIDENT (NOT Ordinary Resident) – “RNOR”

• After fulfilling one of the above two tests i.e TEST A, an

individual becomes resident of India. Further to become, Resident but
NOT ordinary resident (‘RNOR’) an individual has to in addition to Test
A fulfill ANY the following two conditions:
• An individual who is resident u/s 6(1) Test A can claim the beneficial
status of RNOR, if he can prove that:
• 1. He was a non-resident in India for 9 previous years out of 10
previous years preceding the relevant previous year.
• OR
• 2. He was in India for a period or periods aggregating in all to 729 days
or less during seven previous years preceding the relevant previous year.
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Cont……….
• Resident (Ordinary Resident) = Satisfying any one of two
conditions given u/s 6(1) Test A + Satisfying both the additional
conditions of Test B
• Resident but Not Ordinarily Resident = Satisfying any one of the
two conditions u/s 6(1) Test A + Satisfying any one of the additional
conditions of Test C

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NON RESIDENT

• Under section 2(30) of the Income-tax Act, 1961 an assessee who

does not fulfill any of the two conditions given in section 6(1) (a) or
(b) i.e. TEST A would be regarded as ‘Non-resident’ assessee
during the relevant previous year for all purposes of this Act.

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Important note regarding Residential
Status
• Excepting Individual and HUF, all other
persons are classified either as resident or
non resident
Place of Control
Of Family
•Wholly in India
Wholly Out of India
•Partly in India and partly
outside India
Residential Status Ordinarily Resident Or
Not
Resident If Karta has been resident in
India of 2 out of 10 previous yrs
immediately preceding the
previous year AND 730 days or
more during 7 years preceding
the relevant previous yrs.
Non-Resident ---
If Karta has been resident in
Resident India of 2 out of 10 previous yrs
immediately preceding the
previous year AND 730 days or
more during 7 years preceding
the relevant previous yrs.
RESIDENTIAL STATUS OF FIRM AND
ASSOCIATION OF PERSON
PLACE OF CONTROL RESIDENTIAL STATUS
• WHOLLY IN INDIA • RESIDENT

• WHOLLY OUT OF INDIA • NON- RESIDENT

• PARTLY IN INDIA AND • RESIDENT

PARTLY OUTSIDE INDIA
How to determine residential status of
Companies?
• The residential status of a company is to be determined on the basis of
its incorporation or registration. Section 6(3) provides the following
tests in this connection.

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RESIDENT

• A company is resident in India if:

• a) it is an India company, or
• b) Place of effective management ‘POEM’, during that year is in
India.
• In other words, the residential status of companies which are not
incorporated under the corporate laws of India, would be determined
by the concept of “POEM”.

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NON RESIDENT

• A company shall be ‘non-resident’ if it is not resident in India during

the relevant accounting year. It means that, a company whose POEM
during that year is outside India, it will be non-resident company.

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RESIDENTIAL STATUS OF EVERY
OTHER PERSON
• Every other person is resident in India if control and management of
his affairs is, wholly or partly, situated within India during the
relevant previous year.
• On the other hand, every other person is non-resident in India if
control and management of its affairs is wholly situated outside
India.
INCIDENCE OF TAX

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Compute the total income

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Cont………

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19
Cont……

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Cont………

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 summary
• NOT Ordinary Resident
• NON RESIDENT
• How to determine residential status of Companies?
• Practical question

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Assessment Pattern

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 References
Suggestive Readings
• Buy at Amazon.B. B. Lal and N. Vashist : Direct Taxes, Income Tax, Wealth Tax and Tax Planning; Darling
Kindersley (India) Pvt. Ltd., 482, FIE, Patparganj, Delhi.-110092 (Edition based on provisions applicable for
AY 2014-15)
• 1.Buy at amazon Dr. V. K. Singhania : Students Guide to Income-tax including Service Tax/VAT; Taxmann
Publications Pvt. Ltd., 59/32, New Rohtak Road, New Delhi – 110 005 (Edition based on provisions
applicable for AY 2014-15
• 2. Buy at Amazon GirishAhujaand : Systematic Approach to Income-tax, Service Tax and VAT; Bharat Law
Ravi Gupta House, T-1/95, Mangolpuri Industrial Area, Phase I, New Delhi-110 083. (Edition based on
provisions applicable for AY 2014-15)
• 3Buy at Amazon. B. B. Lal and N. Vashist : Direct Taxes, Income Tax, Wealth Tax and Tax Planning; Darling
Kindersley (India) Pvt. Ltd., 482, FIE, Patparganj, Delhi.-110092 (Edition based on provisions applicable for
AY 2014-15)

4.BUY at Amazon Income Tax Law and Accounts , Mehrotra H.C, Sahitya Bhawan Publications.
• 5.BUY AT FLIPKART MaheshChandra, D.C Shukla; Income Tax Law and Practice: Pragati Publications.

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 APPLICATION
• Application of Direct Tax can be as follows:

• Residential Status for Income Tax – Individuals & Residents

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THANK YOU

For queries
Email: pooja.usb@cumail.in