INTRODUCTION
An assessee is subject to taxation on the basis of his/her residential status. Residential Status is not subject to citizenship. For example, a person who has received his income outside India can be subject to taxation in India on the basis of his residential status. Even the taxability of income earned by a foreigner in India depends on his residential Status in India.
RESIDENTIAL STATUS OF AN INDIVIDUAL
An individual assessee can be a resident or non resident in India, and this residence status is considered while assessing his tax incidence. As per Section 6(1) of the Income Tax Act, 1961, a person is said to be resident in India in any previous year, if he satisfies any one of the following conditions:
1. He/she was in India for a period of 182 days or more in the Previous Year
2. He/She was in in India for a period of 60 days in the previous year and for a period of 365 days or more in the immediately preceeding 4 previous years.
If an individual satisfies any of the above conditions, then he is considered to be a resident in India, irrespective of Citizenship. Now a resident can either be ordinarily resident or not ordinarily resident.
As per Section 6(6) of the Income Tax Act, 1961, a resident is considered to be ordinarily resident, if and only if he satisfies the following two conditions:
1. He has been a resident in India in atleast 2 out of 10 Previous Years, immediately preceding the relevant Previous Years.
2. He has been in India for a period of 729 days or more in the 7 years, immediately preceding the relevant Previous Years.
Only if an individual satisfies the above conditions he is said to be resident and ordinarily resident (ROR). If he doesnot he is said to be Resident but not Ordinarily Resident (RNOR)
For ROR, both Indian income and Foreign Income are taxable in India. However, for RNON only Indian income is taxable and foreign income is not taxable, except when the business from where the income has been derived is wholly/partly in India or when the profession from where the income has been derived is set up in India.
For Non-Residents, only Indian Income are taxable and foreign incomes are not taxable under any condition.
| PARTICULARS | ROR | RNOR | NON RESIDENT |
| Income received/deemed to be received/accrues/ deemed to accrue in India, irrespective of whether received in India or Not | YES | YES | YES |
| Income received/deemed to be received/accrues/ deemed to accrue outside India, from a business controlled from India | YES | YES | NO |
| Income received/deemed to be received/accrues/ deemed to accrue outside India, from a any source | YES | NO | NO |
| Income received/deemed to be received/accrues/ deemed to accrue outside India, in the preceding Previous Years but remitted to India in the relevant Financial Year | NO | NO | NO |
RESIDENTIAL STATUS OF HUF
If the control and management of the HUF is completely outside India, then it is non resident. However if the control and management of the HUF is partly/wholly in India, then it is a resident. If the HUF is resident, then wether it is ROR or RNOR, it depends on the ROR or RNOR status of Karta. If the Karta is ROR, then HUF is also ROR. If the karta is RNOR , then the HUF is also RNOR.
RESIDENTIAL STATUS OF COMPANY
If the company is an Indian company, then it is always resident. However, if the company is not India, the residential status depends on the Place of Effective Management (POEM). If POEM is in India, then the company is resident, But if POEM is outside India, then the company is non resident.
IN CASE OF COMPANY, FIRM OR ASSOCIATION OF PERSON, JOINT STOCK COMPANY ETC.
If the following are resident in India, then both Indian Income and Foreign Income are Taxable. Bur if the following are non-resident in India, then only Indian Income is taxable and foreign income is not taxable.
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