Determination of Residential Status

Total income of an assessee cannot be computed unless we know his residential status in India during the previous year. According to the residential status, the assessee can either be:

  • Resident in India
  • Non-resident in India

However individual and HUF cannot be simply called resident in India. If individual is a resident in India, he will be either:

  • Resident and Ordinarily resident in India, or
  • Resident but not Ordinarly resident in India.

In order to understand the residential status, there are several rules for its determination. Read till end to learn it at your tips!

Residential Status of an Individual

An individual is said to be resident in India if he satisfies any one of the following two conditions:


He is in India for a period or periods amounting in all to 182 days or more in the relevant previous year,

OR

He is in India for 60 days or more during the relevant previous year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant previous year.


If an individual is resident, the another thing to do is to determine whether individual is resident and Ordinarily resident in India. For this the condition is:


He has been resident in India for at least 2 out of 10 previous years immediately preceding the relevant previous year,

And

He has been in India for 730 days or more during seven previous years immediately preceding the relevant previous year.


Exceptions/Concessions:

  • In case of individual, who is a citizen of India and who leaves India in any previous year for the purpose of employment outside India, the basic condition of resident, i.e, period or periods amounting in all to 182 days or more should be satisfied.
  • This exemption is also applicable on individual who in previous year had left India as a crew member of an Indian ship.

Residential Status of Hindu Undivided Family(HUF)

A HUF is said to be resident in India in any previous year where the control and management of its affairs is situated in India. If it is managed wholly outside India, then it will be Non-resident. Means even the single decision of business by Karta(Owner of HUF) taken in India makes that HUF eligible for the resident of india.

Once the HUF is a resident in India, it is to be further determined whether it is resident and Ordinarily resident or resident but not Ordinarly resident. For this the rule is as under:


Karta must be resident in at least 2 out of 10 previous years immediately preceding previous year.

And

He must be in India for at least 730 days during 7 previous years immediately preceding previous year.


Residential Status of Firm, Association of person (AOP), Body of Individuals (BOI) and of other person(except companies)

Just like HUF, a Firm, AOP, etc is said to be resident in India where in previous year the control and management of its affairs is situated in India. If the control and management is situated wholly outside India, then it will be Non-resident.

Residential Status of Company:

A company is said to be resident in India when

  • It is an Indian Company, or
  • Its place of effective management(POEM), in that year, is in India.

When the above condition is not satisfied, then that company is non-resident.