Understanding Residential Status for Income Tax Purposes
Tax is levied on the total income of an individual based on their residential status as per the Income-tax Act, 1961. The Act classifies assessable persons into Ordinary Resident, Resident but not Ordinarily Resident, and Non-Resident. Residential status is determined by the physical presence of an individual in a country and is not related to nationality. Different criteria apply to Ordinary Resident and Non-Ordinary Resident status, impacting tax liabilities. It is essential to understand these distinctions for accurate tax assessments.
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Presentation Transcript
BASIS OF CHARGE BASIS OF CHARGE OR OR RESIDENTIAL STATUS RESIDENTIAL STATUS
Tax is levied on total income of assessee. Under the provisions of Income-tax Act, 1961 the total income of each person is based upon his residential status. Section 6 of the Act divides the assessable persons into three categories : (i) Ordinary Resident; (ii) Resident but Not Ordinarily Resident; and (iii) Non-Resident. INTRODUCTION
Residential status is a term coined under Income Tax Act and has nothing to do with nationality or domicile of a person. An Indian, who is a citizen of India can be non-resident for Income-tax purposes, whereas an American who is a citizen of America can be resident of India for Income-tax purposes. Residential status of a person depends upon the territorial connections of the person with this country, i.e., for how many days he has physically stayed in India. MEANING OF RESIDENTIAL STATUS
Residential Status in a previous year. IMPORTANT POINTS TO BE NOTED Duty of Assessee. Dual Residential Status is possible. Same Residential Status for all sources of income.
ORDINARY RESIDENT ORDINARY RESIDENT = satisfying any one of conditions given u/s 6(1) + satisfying both the additional conditions of sec 6(6)(a)&(b) At a glance NON-ORDINARY RESIDENT NON-ORDINARY RESIDENT = conditions given u/s 6(1) + not satisfying any one or both the additional conditions of sec 6(6)(a)&(b) satisfying any one of
PERSON BASIS FOR RESIDENTIAL STATUS INDIVIDUAL Stay in India HUF Control and management of affairs + stay of karta in India Control and management of affairs FIRM Basis of COMPANY Place of effective management + place of Incorporation Control and management of affairs determination of residential status AOP/BOI LOCAL AUTHORITY Control and management of affairs OTHER PERSONS Control and management of affairs
