TRINITY INSTITUTE OF PROFESSIONAL STUDIES

Sector – 9, Dwarka Institutional Area, New Delhi-75Affiliated Institution of G.G.S.IP.U, Delhi

Taxation Laws

BBA- 212 and

BBA(B & I)-311

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

RESIDENTIAL STATUS AND INCIDENCE OF TAX

• What is Residential Status? A Person can be a Resident or a Non-Resident depending upon his stay

in India.• What is Incidence of Tax?

Burden of tax• What is the need of calculating Residential Status (RS) of any

person? Because the burden of tax falls more on a Resident than a non- resident.• Is calculation of residential status of every person category

same?NO

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

(1) RESIDENTIAL STATUS OF AN INDIVIDUAL

Resident Non- Resident (NR)

On the basis of

his stay in the

previous year

Resident and Ordinarily

Resident (ROR)

Resident But Not Ordinarily Resident (RBNOR) On the basis of his

stay in the preceding previous years

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

ANY ONE OF THE TWO BASIC CONDITIONS TO BE SATISFIED TO BE A RESIDENT

• He should stay in India for at least 182 days in the previous year

• He should stay in India for at least 60 days in the previous year and 365 days in the four years immediately preceding the relevant previous year.

OR

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

For example:-Mr. Shahrukh Khan, the Indian actor, went to

U.S. for the shooting of one of his films on May 4, 2014 and returned on July 5, 2015. Determine his residential status for the A.Y. 2015-16.

Ans- Since Mr. Shahrukh Khan dint return in the previous year, his stay in India is 34 days. He is a Non- Resident for the A.Y. 2015-16.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

EXCEPTIONS TO BASIC CONDITIONS

• An Indian Citizen (IC) /Person of Indian Origin (PIO) visiting India during the previous year.

• An Indian Citizen (IC) leaving India for the purpose of employment outside India during the previous year.

• An Indian Citizen (IC) leaving India as a member of crew of an Indian ship during the previous year.

For these persons, the second basic condition is of no use. They need to satisfy the first basic condition only in order to be a RESIDENT in India i.e. they must complete a stay of at least 182 days to be a RESIDENT of India.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

For example,X, an Indian citizen, who is appointed as senior taxation officer by the Government of Nigeria, leaves India, for the first time , on September 26,2014 for joining his duties in Nigeria. Determine his residential status for A.Y. 2015-16.

Ans- Stay in P.Y. 2014-15 -179 days Stay in Preceding four years- more than 365 days Even though Mr. X is satisfying the second basic condition of completing a stay of minimum 60 days in previous year 2014-15 and at least 365 days in four years immediately preceding the relevant previous year, Mr. X will be a Non-Resident in India for the A.Y. 2015-16 since he is an Indian citizen leaving India for the purpose of employment and will be treated as a Resident in India only if he has been in India in that year for atleast 182 days.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

In the last question, if Mr. X comes to India in the previous year 2015-16 for 176 days . Determine his residential status for the A.Y. 2016-17.

Ans- Stay in P.Y. 2015-16- 176 days Stay in preceding four years- more than 365 daysAgain, even though he satisfies the second basic condition, he will be treated as a Non-Resident for the A.Y. 2016-17 since he is falling in another exception for the A.Y. 2016-17 i.e. he is an Indian citizen who comes on a visit to India during the P.Y. 2015-16 and will be treated as a Resident only if he has been in India in that year for at least 182 days .

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

ADDITIONAL CONDITIONS TO BE SATISFIED TO BE A ROR

• He must be a RESIDENT in India for at least 2 out of 10 years immediately preceding the relevant previous year.

• He must stay in India for at least 730 days in seven years immediately preceding the relevant year.

AND

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

If any one or both the additional conditions are not satisfied, the resident individual becomes Resident But Not Ordinarily Resident (RBNOR)

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Now give this a shot..!

Mr. X and Mrs. X are Indian citizens. They come to India on October 15, 2014 for a visit of 170 days. In the earlier previous years, they were in India as follows:

Find out their residential status for the Assessment Year 2014-15

X Mrs. X2013-20142012-20132011-20122010-20112009-20102008-20092007-20082006-20072005-20062004-2005

365 days20 days15 days120 days5 days8 days15 days18 days140 days10 days

240 days340 daysNIL118 days350 days190 days160 days332 days192 days221 days

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

Ans- Since Mr. X and Mrs. X are Indian citizens and they both are coming to India on a visit of 170 days in the previous year, they will be termed as Resident of India only if they satisfy a stay of at least 182 days in this year (one of the exceptions to basic conditions). Therefore, Mr. X and Mrs. X are Non Residents for the A.Y. 2015-16.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

INCIDENCE OF TAXROR RBNOR NR

•Income received in India weather accrued/arise in India or not

•Income accrued/ arise in India weather received in India or not

•Income deemed to be received in India

•Income deemed to accrue/ arise in india

•Income accrued/arise/received outside India but from a business/ profession which is carried on from inside India

•Income arrued/arise/received outside India from a source which is outside India.

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TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

INCOME DEEMED TO ACCRUE/ARISE IN INDIA (Sec-9)

In total, there are 7 incomes which are deemed to accrue/arise in India:

• Income from Business Connection• Income from any property, asset or source of income in

India• Income through transfer of capital asset situated in India• Income under the head ‘salaries’• Salary payable abroad by the Government to a citizen of

India.• Dividend paid by an Indian company• Income by way of Interest, royalty and technical fees

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

INCOME FROM BUSINESS CONNECTION (Sec-9 (1)(i))

WHAT IS BUSINESS CONNECTION?1. When a Non-Resident maintains a branch office in India

for sale or purchase of goods2. When a Non-resident appoints an agent in India for

regular purchase of raw material, or for sale of non-resident’s goods or other business purposes.

3. When a NR erects a factory in India where raw- material purchased locally is turned into exportable goods.

4. When a NR parent company forms a local subsidiary company to sell its own products.

5. When a NR company has a financial association with a Resident company in India.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

POINTS TO REMEMBER• Sec-9(1) (i) is applicable only for a NON-

RESIDENT who has a business connection in India

• Any income earned by the Non-Resident outside India but because of this business connection in India, will be deemed to be accrued/arise in India.

• The above mentioned definition is inclusive rather than exhaustive. A NR could have more than these business connections in India in other forms.

TRINITY INSTITUTE OF PROFESSIONAL STUDIESSector – 9, Dwarka Institutional Area, New Delhi-75

THANK YOU