Residential status and Scope of total income.

Income tax is levied on the total income of a person.

A person may have earned income in India as well as from foreign
source, i.e. from outside India, during the previous year. Which all
incomes are to be taken for computing the total income, is
depending up on the residential status of an individual in India
during the Previous Year.
Residential status has nothing to do with the citizenship of an
individual. An Indian citizen may be a non-resident during a
particular previous year and similarly a foreigner may be Resident
individual for Income tax purpose.
Residential status of Individuals

An individual may be an ordinarily resident or not

ordinarily resident or even a non resident during
the previous year depending up on satisfying
various conditions laid down as per the income
tax rules.
1) Ordinarily Resident

An individual is said to be an Ordinarily

Resident in India during the previous year, if
he satisfies any one of the Basic conditions u/s
6 (1), and both the additional conditions u/s 6
(6).
2) Not ordinarily Resident

An individual is said to be a Not ordinarily

Resident in India during the previous year, if
he satisfies any one of the Basic Conditions
u/s 6(1) and also satisfies one or none of the
additional conditions u/s 6(6.
3) Non Resident

An individual who does not satisfy any of the

Basic conditions u/s 6(1) is said to be a non
resident.
Basic conditions u/s section 6 (1)

1)He was in India during the previous year for

a period of 182 days or more,
2) He was in India during the previous year for
a period of 60 days or more and 365 days
or more during the 4 years immediately
preceding the previous year.
Note:
1) For finding out the number of days stay in
India, both days of arrival and departure
should be included.
2) 182 days, 60 days, 365 days, not necessarily
be in one stretch and also need not be in a
particular place alone.
Exceptions
The 2nd Basic condition has got two exceptions.
1) An Indian citizen who leaves India during the previous year for
the purpose of employment outside India or as a member of the
crew of an Indian ship,
then the 2nd basic condition is not applicable, they should satisfy
the 1st basic condition.
2) An Indian citizen or a person of Indian origin who comes on a
visit to India during the previous year,
then the 2nd basic condition is not applicable, they should satisfy
the 1st Basic condition.
Person of Indian Origin

A person is deemed to be an Indian origin if

he, or either of his parents or any of his grant
parents, was born in undivided India.
Additional conditions u/s 6(6)
1) He has been a resident in India for at least 2
years out of 10 previous years, preceding the
relevant previous year, by satisfying any one of
the basic condition u/s 6(1) in all these 10
years.
2) He has been in India for a period of 730 days
or more during 7 years immediately preceding
the relevant previous year.
Mr. John, who was working with Infosy’s Ltd, resigned and left
for England to join with a software company on 25th
September 2020. He has not visited India till 31/03/2021.
Find out his residential status for the assessment year 21-22.
Solution:
Mr. John, left for England for employment purpose during the
previous year and therefore he can claim the 1st exception.
Assessment year=2021 – 2022
Previous year = 2020 – 2021 = 178 days
1/4/20 to 25th Sept 2020.
During the previous year 20-21, Mr. John was
in India only for 178 days i.e. from 1/4/20 to
25th September 20, and as such he has not
satisfied the Basic condition i.e. should be in
India for 182 days or more during the previous
year.
Since Mr. John has not satisfied the Basic
condition u/s 6(1), he is a Non-Resident for the
Assessment year 21-22.
Illustration 2

Mr. Arvind, an Indian citizen is working in USA since 1/4/2016.

He came to India on a visit on 15th July 2020 and went back on
December 15th 2020. Earlier previous years his visit to India was
as follows:
2017 – 2018- 96 days, 2018 – 2019 – nil, 2019- 2020 – 125 days.
Find out his residential status during the year 2020- 2021.
Solution
Mr. Arvind , an Indian citizen, living outside India, comes to India on a visit
during the P Y and therefore he can claim the 2nd exception.
A . Y = 2021- 2022
P . Y = 2020- 2021 = 153 days
1/4/2019 to 31/3/2020
During the P . Y 20-21,Mr. Arvind was in India only for 153 days i.e. from
15th July 20 to 15th December 20, and therefore, has not satisfied the Basic
condition i.e. Should be in India for 182 days or more.
Since Mr. Arvind has not satisfied the Basic condition u/s 6(1), he is a non-
resident during the A.Y. 21-22.
Illustration 3
Mr. Keshav was in Australia for the last 15 years, working
with a Bank. He resigned and shifted to Bangalore
permanently on 15th December 2020. His visits to India
during the preceding previous years were as follows:
2019- 2020- nil, 18- 19 – 90 days, 17-18 – 130 days, 16-17 –
150 days, 15-16 – nil, 14-15- 110 days, 13-14- 200 days, 12-
13 – 190 days,
Find out Mr. Keshav’s residential status for the Assessment
year 2021 – 2022.
During the P Y Mr. Keshav has returned to India permanently, and not on a visit, therefore he cannot
claim the exception with respect to the basic condition. So, a stay of 182 days during the P Y is not
required, but 60 + 365 days stay will be enough to satisfy the Basic condition.
A.Y. = 2021 – 2022
P.Y. = 2020 – 20201= 109 days
1/4/20 to 31/3/21
19- 20 = Nil
18- 19 = 90 days
17 – 18 = 130 days
16- 17 = 150 days
15- 16 = Nil
14- 15 = 150 days
13- 14 = 215 days- R
12- 13= 190 days – R
During the P Y 20- 21,Mr. Keshav was in India for 109 days, i.e. from 15th December 2020 to 31/3/ 21 and
for 370 days in 4 years preceding the P Y 20-21. Therefore he has satisfied the 2 nd basic condition U/S
6(1).
In 7 years preceding the P Y 20-21, he was in India
for 735 days and was a resident for 2 years i.e. 13-14
and 12-13, of 10 years preceding the P Y 20-21 and
therefore has satisfied both the additional condition
u/s 6(6).
Since Mr. Keshav has satisfied one of the Basic
conditions u/s 6(1) and both the additional
conditions 6(6), he is an ordinarily resident for the
assessment year 21-22.
Illustration 4
Mr. X, a foreign national, comes to India for
the first time on April 16, 2018. During his
stay in India up to October 5, 2020, he stayed
in Delhi up to 10th April 2020 and thereafter
remains in Chennai till his departure from
India. Determine his residential status for the
A.Y. 2021- 2022.
Solutions:
A.Y. 2021- 2022
P.Y. 2020- 2021 = 188 days
1/4/20 – 31/3/21
19 - 20 = 365 days – R
18- 19 = 350 days- R
17- 18 = Nil
During the p.y. 20-21, he was in India for 188 days and therefore satisfied the 1 st
basic condition u/s 6(1).
He was a resident for 2 years in 10 years preceding 20-21 and was in India only for
715 days in 7 years preceding 20-21 and therefore he has satisfied only one
additional condition u/s 6(6).
Since Mr X has satisfied one of the basic conditions U/S 6(1) and one of the
additional conditions u/s 6(6), he is a not ordinarily Resident for the A.Y. 21-22.
Illustration 5
Mr.David, a foreign national (not being a person of Indian origin) leaves India for
the first time in the last 20 years on November 20, 2018. During the calendar year
2019 he comes to India on September 1 for a period of 30 days. During the
calendar year 2020, he does not visit India at all but comes to India on January 16,
2021. Determine his residential status for the Assessment year 21-22.
A.Y. = 2021- 2022
P.Y. = 2020- 2021 = 75 days
1/4/20 to 31/3/2021
19 – 20 = 30 days- NR
18 – 19 = 233 days – R
17 – 18 = 365 days – R
16 – 17 = 365 days – R
15 – 16 = 365 days - R
During the P Y Mr. David was in India for 75 days i.e.
from16th January 2021 to 31st March 2021 and was in
India for more than 365 days in 4 years preceding 20-21
and therefore has satisfied the 2nd basic condition u/s 6(1).
In 10 years preceding 20 – 21, he was a resident for 9 years
and in 7 years preceding 20-21, he was in India for more
than 730 days and therefore has satisfied both the
additional conditions u/s 6(6).
Since Mr.David has satisfied one of the basic conditions and
both the additional conditions, he is an ordinarily resident
for the A.Y. 21 – 22.
Question No. 1
Mr. Sen an Indian citizen, working in USA,
came to India on 10th May 2017, after a gap of
10 years. He stays in India up to 5th January
2021 and left for USA. Determine his
residential status for the assessment year 21-
22.
Ans: Not ordinarily resident.
Question No. 2
Mr. Roshan, a foreign national came to India for
the first time on June 15th 2016. During the
financial years 16-17, 17-18, 18-19, 19-20 and
20-21, he stayed in India for 15 days, 191 days,
124 days, 110 days and 90 days. Determine his
residential status for the assessment year 21-
22.
Ans: Not ordinarily Resident.
Question No. 3
Mr. Gerard, a German citizen used to visit
India every year for 100 days for business
purpose from the financial year 13-14.
Determine his residential status for the A.Y. 21-
22.
Ans: Not ordinarily resident.
Question No. 4
Mr.Dinesh, an Indian citizen took an
employment with a U.K. based company in
Dubai, leaves India for the first time on
September 26, 2019. During the year 20-21, he
came to India on a visit for 176 days.
Determine his residential status for the A.Y. 20-
21.
Ans: Non-Resident.
Question No. 5
Mr.Lakshman, was born in Chennai and at the
age of 22 he had migrated to Canada in June
2016. During the financial year 20-21, he came
to India for 150 days. During the earlier 4 years
he had visited India for 510 days altogether.
Determine his residential status for the A.Y. 21-
22.
Ans: Non-Resident.
Scope of total income

The total income of a person is determined

on the basis of his/her residential status in
India during the previous year.
Scope of Total Income of an ordinarily Resident.

The total income of an ordinarily resident include:

1) Income earned in India, whether received in India or outside
India
2) Income received in India, whether earned in India or outside
India
3) Income earned and received outside India from a business
controlled or profession set up in India
4) Income earned and received outside India from any other
source (except income under point No. 3
Scope of total income of Not ordinarily Resident.

1) Income earned in India, whether received in

India or outside India
2) Income received in India, whether earned in
India or outside India
3) Income earned and received outside India from
a business controlled or profession set up in
India.
Scope of total income of Non-Resident

1) Income earned in India, whether received in

India or outside India
2) Income received in India, whether earned in
India or outside India.
Particulars OR NOR NR
Income earned in India, Taxable Taxable Taxable
whether received in India or
outside India

Income received in India, Taxable Taxable Taxable

whether earned in India or
outside India
Income earned and received Taxable Taxable Not Taxable
outside India from a business
controlled or profession set up
in India

Income earned and received Taxable Not Taxable Not Taxable

outside India from any other
source (other than point No. 3)

Income earned and received Not Taxable Not Taxable Not Taxable
outside India in the years
preceding the previous year
and is remitted to India during
the previous year .
Receipts Vs Remittance
The term “receipt” of income refers to
where the income is received first.
Remittance means, the recipient has received
the amount and then remitted or transmitted
to other place.
The place/country where the amount is
received or is made under the control of the
recipient, is the place of receipt.
Eg:
a) Salary of a person credited to his Bank in Bangalore.
Earned and received in India
b) Salary of a person working in Dubai, is credited to his
Bank account in Dubai- received in Dubai
c) Salary of a person working in Dubai, the employer
has credited the amount to the employees Bank
account in Mumbai – received in India
d) Salary of a person working in Dubai, credited to his
bank account in Dubai, but later he has transferred to
his Bank account in Bangalore – Received in Dubai.
Exempted Incomes
Following incomes are exempted from tax and therefore need not be
considered while computing the total income.
1) Agricultural income in India
2) Share of income from a partnership firm
3) Share of income from an HUF
4) Gift –i) from relatives fully exempted
ii) Non-relatives, aggregate amount up to Rs.
50,000 is exempted in a year. If exceeds Rs.50000, the
whole amount is taxable.
5) Dividend from Indian companies up to Rs. 10 lakh. The amount
exceeding Rs. 10 lakh is taxable at 10% + sc if applicable + cess
6) Interest on post office savings bank account up to Rs. 3500 in the case
of individual account and up to Rs.7000/- in case of joint account.
Illustration 1
Following are the income of Mr. Jagadeesh for
the previous year 20-21. Compute his gross
total income for the A.Y. 21-22 if he is;
i)An ordinarily resident,
ii) Not ordinarily resident,
iii) Non- Resident.
1) Profit from business in England, received in India
Rs.1,50,000.
2) Profit from business in England Rs.2,00,000 received
there, the business is controlled from India.
3) Profit from a business in England received there
Rs.2,00,000.
4) Share of profit from a partnership firm in India Rs.60,000.
5) Income from House property in India received in England
Rs.1,80,000.
6) Dividend from an Indian company Rs.30,000.
 Solution
Computation of Gross Total Income of Mr. Jagadesh for the
A.Y. 20-21
Particulars Ordinarily Not ordinarily Non Resident
resident resident
Profit from Business in England 1,50,000 1,50,000 1,50,000
received in India
Profit from business in England 2,00,000 2,00,000 -
received there, business is
controlled from India

Profit from business in England 2,00,000 - -

received there
Share of profit from partnership - - -
firm ( exempted income)

Income from HP in India, received 1,80,000 1,80,000 1,80,000

in England
Dividend from Indian companies Exempted Exempted Exempted

Gross Total Income 7,30,000 5,30,000 3,30,000

Illustration 2
Mr.Arvind furnishes the following particulars of income earned during the
P Y 20 – 21.
1) Interest on German Development Bond Rs.51,000 (1/3 received in India).
2) Income from Agriculture in India Rs,2,00,000.
3) Income from agriculture in Australia Rs.5,00,000, received there.
4) Income from Business in Dubai Rs.6,00,000 (Business is controlled from India ,1/3 is
received in India).
5) Dividend from Indian company Rs.40,000.
6) Rent of let out building in Sri Lanka Rs.3,60,000, the amount is directly credited to his
account in Mumbai.
7) Income from business in England received there, but later on remitted to India
Rs.3,00,000.

Compute his Gross Total Income for the A.Y. 21-22, if he is;
1) An Ordinarily resident,
2) Not ordinarily resident,
3) Non resident.
 Solution
Sl. No Particulars OR NOR NR
Amt.in Rs Amt. in Rs. Amt.inRs.

1. Interest on German Development Bond =Rs. 17000 17000 17000

51,000 (1/3rd received in India, 2/3 in Germany
34000

2. Income from agriculture in India Exempted Exempted Exempted

3. Income from agriculture in Australia received 5,00,000 - -

here

4. Income from business in Dubai- business is 2,00,000 2,00,000 2,00,000

controlled from India
1/3 is received in India, 60,000 x 1/3 4,00,000 4,00,000 -
2/3 earned and received there

5. Dividend from Indian Co Exempted Exempted Exempted

6. Rent in Sri Lanka (received in India) 3,60,000 3,60,000 3,60,000

Illustration 3
Mr. Anil was working in Bangalore with a private company and left for
Australia to take on employment there. He left on 15th September 2019.
His income details for the p.y. 2019-20 is as follows:

1.Salary in India for 5 months Rs.6,00,000 (computed

2.Income from let out building (computed) Rs.1,80,000
3.Interest on Bank deposit Rs.15,000
4.Dividend from Reliance Ltd Rs.6,000
5.Agricultural income in Tumkur Rs.60,000
6.Salary in Australia Rs.2,40,0000
7.Interest on Bank deposit in Australia Rs.1,40,000
8.Dividend from an Australian Co, Rs.1,40,000 directly credited to his bank
in Bangalore.
Compute his Gross Total Income for the A.Y. 20-21.
Solution:
Mr. Anil left India during p.y. for employment
purpose, therefore, he can claim the 1st exemption
relating to the 2nd basic condition i.e. to satisfy the
basic condition, he should be in India for 182 days
or more during the p.y.
During the p.y. He was in India only for 168 days
and therefore has not satisfied the basic condition
u/s 6(1) and therefore he is a Non-Resident for the
A.Y. 20-21.
Computation Gross Total Income of Mr. Anil (Non-Resident for the A.Y. 20-21.

SL. No Particulars Amt. In Rs.

1. Income from salary in India (computed_ 6,00,000
2. Income from house property in India 1,80,000
3. Interest on Bank deposit in India 15,000

4. Dividend from Reliance Ltd Exempted

5. Agricultural income in Tumkur (Karnataka) Exempted
6. Salary in Australia -
7. Interest on bank deposit in Australia -
8. Dividend from an Australian Co. (received in India) 40,000
Gross Total Income 8,35,000
Question No. 1
Mr.X is employed in India and gets Rs.6,00,000 as salary (computed). His income from
other source included:
1. Dividend received in England from a foreign company Rs.10,000
2. Profit from a business in Sri Lanka Rs.2,00,000, which is controlled from India
3. Dividend received from an Indian company Rs.40,000
4. Interest on Bank deposit in India 60,000
Find out his Gross Total Income the A.Y. 20-21 if he is;
1) ordinarily resident
2) Not ordinarily resident
3) Non-resident
Answer:
Ordinarily resident - Rs.8,70,000
Not ordinary resident- Rs.8,60,000
Non-Resident - Rs. 6,60,000.
Question No.2

X, a foreign national, furnishes the following particulars of his income relevant for the previous year 2019-20.
1) Profit on sale of plant at London (one-half is received in India)- Rs.1,46,000
2) Profit on sale of plant at Delhi (one-half is received in London)- Rs.1,02,000
3) Salary (after standard deduction) from an Indian company in London (one-half is paid for rendering service in India)-
Rs.60,000
4) Interest on UK Development Bonds (entire amount is received in London)- Rs.40,000
5) Income from property in London received there- Rs.30,000
6) Income from agriculture in London received there, half of which is used for meeting hostel expenses of X’s son in
England and remaining amount is later on remitted to India – Rs. 25,000
7) Dividend received in London on May 6, 2019 from a company registered in India but mainly operating in UK-
Rs.17,000
8) Profit from a business in Delhi managed in India – Rs,49,000
9) Rental income from a property in Nepal deposited by the tenant in a foreign branch of an Indian bank operating
there – Rs.12,000
10)Gift in foreign currency received on September 20, 2019 from a friend (one-third of which is received in India and
remaining amount is received outside India and utilised for meeting education expenses of X’s son in USA
Rs.3,70,000
11)Determine Gross Total Income of X for the assessment year 2020-21; if he is;
a) An Ordinarily Resident,
b) Not ordinarily Resident,
c) Non Resident.

Answer. Ordinarily resident – Rs.649000. Not Ordinarily Resident – Rs.439000. Non resident - Rs.439000.