Residential status of an Entity
Income tax liability depends on residential status of a person. Income tax liability of a person depends on the residential status. Assessees are either resident in india. Or non-resident in india. A firm, an association of persons, a company and every other person can be either a resident a non-resident. In the case of individuals and HUF, If they are residents, they can be either resident or ordinarily resident, or resident but not ordinarily resident. Let’s learn more about Residential status of an Entity:
1. Residential status of an individual’s: An individuals is residents in India in any previous year, if he satisfies at least one of the following conditions.
- He is in India in the previous year for a period of 182 days or more.
- He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately proceeding the previous year.
2. Residential status of the firm and association of persons: A partnership firm and an association of persons will be resident in India if control and management of their affairs are wholly or partly situated within India during the relevant previous year. If control and management of their affairs are situated wholly outside India, it will be non-resident in India.
3. Residential status of a company: A company incorporated in India is an Indian company. It will always be resident in India. A foreign company (i.e. company incorporated abroad), is resident in India only if, during the previous year, control and management of its affairs is situated wholly in India.
4. Residential status of every other person: Every other person will be resident in India if control and management of his affairs is wholly or partly situated within India during the relevant previous year. If control and management of his affairs is wholly situated outside India, it will be non-resident .
5. Residential status of a HUF: In case of HUF, if control and management of its affairs is wholly or partly situated in India, it will be resident in India. If control and management of its affairs is wholly out of India, it will be non-resident in India. A resident Hindu undivided family (HUF) can be either ordinarily resident or not ordinarily resident. A resident Hindu undivided family will be ‘ordinarily resident in India’ if the karta or manager of the family (includes successive karta).
- Has been resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year and
- Has been present in India for a period of 730 days or more during 7 years immediately preceding the previous year.
If even one of the conditions is not satisfied, the HUF will be resident but not ordinarily resident in India.
