The scope of total income is determined on the basis of residential status of the assessee. For the purposes of Income Tax Act, there can be three residential status. Residential status is determined on the basis Basic conditions and Additional conditions
- Resident and ordinarily resident
- Resident but not ordinarily resident
- Non resident.
RESIDENTIAL STATUS OF AN INDIVIDUAL
Resident and Ordinarily Resident [ROR]
An individual is said to be resident in India if he satisfies anyone of the basic conditions and both of the additional conditions.
Resident but Not Ordinarily Resident [RNR]
An individual is said to be resident but not ordinarily resident in India if he satisfies anyone of the basic conditions but does not satisfies both of the additional conditions.
Non Resident [NR]
If an individual does not satisfies any of the basic conditions he is said to be non resident in India
Basic conditions | Additional conditions |
| A stay of 182 days or more during the current previous year 2008-09 OR A stay of 60 days or more in the current PY 2008-09 and a total stay of 365 days or more in the 4 years immediately preceding the current PY | He should be resident in India in at least 2 out of 10 years immediately preceding the current PY AND A stay of 730 days or more during the 7 years immediately preceding the current PY 2008-09 |
Basic Conditions:
(a) He is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(b) He has been in India for a period or periods amounting in all to three hundred and sixty-five days or more within the four years proceeding the previous year, and has been in India for a period or periods amounting in all to sixty days or more in the previous year.
In the following cases the period of 60 days in clause (b) above will be substituted by 182 days.
- An individual who leaves India in any previous year as a member of the crew of an Indian ship for the purposes of employment outside India.
- An individual who is a citizen of India, or a person of Indian origin, who, being outside India, comes on a visit to India in any previous year
Additional Conditions:
(a) He has been resident in India in two out of the ten previous years preceding the relevant previous year, and
(b) He has been in India a period, or periods amounting in all to, seven hundred and thirty days or more during the seven previous years preceding the relevant previous Year.
Individual’s stay in India during the previous year need not necessarily be a continuous one and at the same place. The period of stay may be a broken period. The calculation of his stay in India shall be made on an hour basis. A total of 24 hours stay in India shall be counted as one day. The place and the purpose of the stay are also immaterial.
RESIDENTIAL STATUS OF HUF [SEC 6 (2)]
HUF is a separate tax entity apart from its members and therefore, it is liable to pay tax on income earned by it in the previous year.
Resident | Non Resident |
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When control and management is wholly situated outside India
- If the Karta satisfies the additional conditions of individual then the HUF is resident and ordinarily resident
- If the Karta does not satisfies the additional conditions of individual then the HUF is resident but not ordinarily resident
Resident and Ordinarily Resident:
A HUF is said to be resident in India if the control and management of its affairs is situated wholly or partly in India. And the manager or Karta satisfies the the following additional conditions
(a)He has been resident in India in two out of the ten previous years preceding the relevant previous year, and
(b) He has been in India a period, or periods amounting in all to, seven hundred and thirty days or more during the seven previous years preceding the relevant previous Year.
Not Ordinarily Resident:
A HUF is not ordinarily resident in India, if control and management of its affairs is situated wholly or partly outside India but the manager or Karta does not satisfies the additional conditions.
Non Resident:
HUF is non resident if the control and management of its affairs is situated wholly outside India.
RESIDENCE OF A COMPANY [SEC 6(3)]
Resident | Non Resident |
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A company can be either resident or non resident. A company is said to be resident in any previous year if, it is an Indian company or during that year, the control and management of its affairs is situated wholly in India.
If a company is neither an Indian company nor the control and management of its affairs is situated wholly in India it is said to be non resident India.
SCOPE OF TOTAL INCOME/ INCIDENCE OF TAX
The residential status of an assessee determines the scope of total income. The total income liable to tax vary according to the residential status The incidence of tax is highest on resident, a little lower on not ordinarily resident and lowest on non resident assessee.
Income | Whether taxable or not | ||
O.R | N.O.R | N.R | |
| Income received or deemed to be received in India in the PY | Taxable | Taxable | Taxable |
| Income which arises or accrues or is deemed to accrue or arise to the assessee in India in the PY | Taxable | Taxable | Taxable |
| Income received outside India from a business or profession controlled from India | Taxable | Taxable | Taxable |
| Income received outside India from a business or profession controlled from outside India | Taxable | Not Taxable | Not Taxable |
| Income received outside India from any other source apart from business | Taxable | Not Taxable | Not Taxable |
| Past untaxed profit brought into India | Not Taxable | Not Taxable | Not Taxable |
| Income earned outside India in earlier years but later on remitted to India | Not Taxable | Not Taxable | Not Taxable |
| salary drawn outside India from an Indian company | Taxable | Taxable | Not Taxable |
| salary drawn outside India from an Indian company for service rendered within India | Taxable | Taxable | Taxable |
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