Determination of Residential Status of An Assessee | ROR, RNOR and NRI

[Residential Status of an Assessee, Residential Status of Individual, HUF, Company, Firm, BOI, AOP, Resident in India, Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), Non - Resident in India (NRI)]

Q. How Residential Status of the following is Determined:

Ø  Individual

Ø  HUF

Ø  Company

Ø  Firm

Ø  AOP and BOI

Residential Status of an Assessee

Tax incidence on an assessee depends on his residential status. The residential status of an assessee is determined concerning his residence in India during the previous year. Therefore, the determination of the residential status of a person is very significant to find out his tax liability. Residence and citizenship are two different things. The incidence of tax has nothing to do with citizenship.

Residential Status of Individual (Basic and Additional Conditions)

As per section 6, an individual may be (a) resident in India or (c) non-resident in India. Further, an individual resident in India is again divided into two categories: ordinarily resident in India and Not ordinarily resident in India. The following are the two sets of conditions for determining the residential status of an individual:

Basic conditions:

a) He is in India in the previous year for 182 days or more

OR

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

Exceptions to the Second Basic Condition: In the following two cases, an individual needs to be present in India for a minimum of 182 days or more to become resident in India:

(a) An Indian citizen who leaves India during the previous year to take employment outside India or an Indian citizen leaving India during the previous year as a member of the crew of an Indian ship.

(b) An Indian citizen or a person of Indian origin who comes on a visit to India during the previous year (a person is said to be of Indian origin if either he or any of his parents or any of his grandparents was born in undivided India).

Additional Conditions:

(i) He has been resident in India in at least 2 out of 10 previous years [according to basic condition noted above] immediately preceding the relevant previous year.

AND

(ii) He has been in India for 730 days or more during 7 years immediately preceding the relevant previous year.

Resident in India (Ordinarily and Not Ordinarily)

An individual is said to be resident in India if he satisfies any one of the basic conditions.

Resident and Ordinarily Resident: An individual is said to be resident and ordinarily resident in India if he satisfies any one of the basic conditions and both of the additional conditions.

Resident but Not Ordinarily Resident: An individual is said to be resident but not ordinarily resident in India if he satisfies any one of the basic conditions but not satisfies both of the additional conditions.

Non Resident in India (NRI)

Non-Resident: An individual is a non-resident in India if he satisfies none of the basic conditions.

Residential Status of a Hindu Undivided Family

As per section 6(2), a Hindu undivided family (like an individual) is either resident in India or non-resident in India. A resident Hindu undivided family is either ordinarily resident or not ordinarily resident.

HUF: Resident or Non-Resident

A Hindu undivided family is said to be resident in India if control and management of its affairs are wholly or partly situated in India. A Hindu undivided family is non-resident in India if control and management of its affairs are wholly situated outside India.

A resident Hindu undivided family is an ordinarily resident in India if the Karta or manager of the family (including successive Karta) satisfies the following two additional conditions as laid down by section 6(6)(b).

Additional condition (i) Karta has been resident in India in at least 2 out of 10 previous years [according to the basic condition mentioned in immediately preceding the relevant previous year)

Additional condition (ii) Karta has been present in India for 730 days or more during 7 years immediately preceding the previous year.

If the Karta or manager of a resident Hindu undivided family does not satisfy the two additional conditions, the family is treated as resident but not ordinarily resident in India.

Residential Status of Firm and Association of Persons (AOPs)

As per section 6(2), a partnership firm and an association of persons are said to be resident in India if control and management of their affairs are wholly or partly situated within India during the relevant previous year. They are, however, treated as non-resident in India if control and management of their affairs are situated wholly outside India.

Residential Status of a Company

Residential status of a company is determined on the basis of its incorporation. As per section 6(3), an Indian company is always resident in India. A foreign company is a resident in India only if, during the previous year, control and management of its affairs are situated wholly in India. However, a foreign company is treated as non-resident if, during the previous year, control and management of its affairs are either wholly or partly situated out of India.

Residential Status of any other person including artificial judicial persons

In case of every other person, which has its control and management wholly India during the relevant previous year is said to be resident in India. But if the control or management of such persons is wholly outside India during the relevant previous year, such a person is called NRI.

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