INCOME TAX NOTES

My residential status under income tax act 1961 - notes and examples

My residential status under income tax act 1961 - notes and examples


Income Tax Act 1961




Section 5


Section 5 Scope of income

5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which—
(a)  is received or is deemed to be received in India in such year by or on behalf of such person ; or
(b)  accrues or arises or is deemed to accrue or arise to him in India during such year ; or
(c)  accrues or arises to him outside India during such year :
Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6)* of Section 6 the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.
(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which—
 (a)  is received or is deemed to be received in India in such year by or on behalf of such person ; or
(b)  accrues or arises or is deemed to accrue or arise to him in India during such year.
Explanation 1.—Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.
Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.


Section 6


Section 6 Residence in India.

6. For the purposes of this Act,—
Individual
(1)  An individual is said to be resident in India in any previous year, if he—
    (a)  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)  [***]
    (c)  having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

Explanation. 1—In the case of an individual,—
     (a)  being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted ;
     (b)  being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted.
Explanation 2.—For the purposes of this clause, in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed. (Rule 126)

Resident = a. 182 days or more in PY.
or 
b. 60 days in PY and 365 days in Preceding PY

But Exemption of Condition (b.) 
Indian Citizen member of crew
or 
outside India purpose of employment 
or
Indian citizen or person of Indian origin come in India for any purpose (ex- employment, Business or profession, in any other Vocation, or visit to india)



Rule-126, Income-tax Rules
Rule 126. Computation of period of stay in India in certain cases.
(1) For the purposes of clause (1) of section 6, in case of an individual, being a citizen of India and a member of the crew of a ship, the period or periods of stay in India shall, in respect of an eligible voyage, not include the period computed in accordance with sub-rule (2).

(2) The period referred to in sub-rule (1) shall be the period beginning on the date entered into the Continuous Discharge Certificate in respect of joining the ship by the said individual for the eligible voyage and ending on the date entered into the Continuous Discharge Certificate in respect of signing off by that individual from the ship in respect of such voyage.

Explanation : For the purposes of this rule,—
(a) "Continuous Discharge Certificate" shall have the meaning assigned to it in the Merchant Shipping (Continuous Discharge Certificate-cum-Seafarer's Identity Document) Rules, 2001 made under the Merchant Shipping Act, 1958 (44 of 1958);
(b) "eligible voyage" shall mean a voyage undertaken by a ship engaged in the carriage of passengers or freight in international traffic where—
   (i) for the voyage having originated from any port in India, has as its destination any port outside India; and
   (ii) for the voyage having originated from any port outside India, has as its destination any port in India.]




HUF
(2)  A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.

Company
(3)  A company is said to be a resident in India in any previous year, if—
      (i)  it is an Indian company; or
     (ii)  its place of effective management, in that year, is in India.
Explanation.—For the purposes of this clause "place of effective management" means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.]

Firm and Association of Person
(4)  Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

Residential Status of Local Authority and Artificial Juridical Person
(5)  If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.

Individual ordinary or not ordinary resident Condition:
(6)  A person is said to be "not ordinarily resident" in India in any previous year if such person is—
     (a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
     (b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.