Determine Tax Residency Status of an Individual or Company

For the purposes of filing your income tax return, you should educate yourself on your tax residency status in India. It differs depending on whether you are an individual or a company

1. Individual : Tax Residency status of an individual depends upon the number of days stay in India.
2. Company: Tax Residency status in any other case depends upon the place of incorporation (in case of company) and place of control & management.

This document covers

1. Classification of Tax Residency
2. Steps in determining the tax residency status of an individual
3. Determining Tax residency status in any other case
4. Tax Residency status of HUF
5. Tax Residency status of a Company
6. Tax Residency status of firms & association of persons

1. Classification of Tax Residency

2. Steps in determining the residential status of an individual

1. Firstly, determine whether he is resident or non resident
2. If he is a resident, then determine whether he is a resident and ordinarily resident, or resident and not ordinarily resident
3. An individual is said to be a resident of India, if he satisfies any one of the following two basic conditions
   • He is in India in the previous year for a period of 182 days or more *
     (OR)
     
   • He has been in India for a period of at least 60 days or more * during the relevant previous year and 365 days * or more during 4 years immediately preceding the relevant previous year.
4. An individual is said to non resident of India if he doesn’t satisfy both the basic conditions mentioned above.
5. While calculating the period of stay in India, stay need not be for a continuous period, aggregate period of stay even in breaks have to be considered, and stay can be at any place such as place of residence, business, etc.
6. There are certain exceptions to basic condition 2 where instead of 60 days 182 days will be considered while determining the residential status of following persons.
   • An Indian citizen who is going outside India for a job and his contract for such employment outside India has been approved by central government.
     (OR)
     
   • He is a member of crew of an Indian ship.
7. To determine whether an individual is resident and ordinarily resident (ROR) or resident and not ordinarily resident (RNOR) two additional conditions mentioned below must be checked.
   • He has been resident of India in at least 2 out of 10 previous years immediately preceding the relevant previous year.
     (OR)
     
   • He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant previous year.
8. An Individual is said to resident and ordinarily resident (ROR) if he satisfies any one of the basic condition and both the additional conditions mentioned above.
9. An Individual is said to resident and not ordinarily resident (RNOR) if he satisfies any one of the basic condition and doesn’t satisfy both the additional conditions mentioned above.

3. Determining residential status in any other case

1. As said earlier above, the residential status of any other person other than individual depends upon the place of incorporation (in case of company) and place of control & management.
2. Control and management does not mean carrying out day to day business functions by servants, employees, or agents. It means the business may be done outside India and yet its control and management may be wholly with in India.
3. Control and management of a business is said to be situated at a place where the controlling and decision making power of the business is exercised.

4. Residential status of HUF

1. A HUF would be resident in India if the control and management of its affairs is situated wholly or partly in India.
2. If HUF is resident then residential status of KARTA determines whether the HUF is ROR or RNOR.
3. If KARTA is ROR then HUF is ROR and if KARTA is RNOR then HUF is RNOR

5. Residential status of a Company

A Company is Said to be resident in India if

• It is an Indian company as defined under section 2(26).
  (OR)
  
• Its control and management is situated wholly in India during the accounting year.

6. Residential status of firms & association of persons (AOP)

A Firm or an AOP would be resident in India if the control and management of its affairs is situated wholly or partly in India.