Residential Status

Important Notes
Scope of Income Sec. 5
1. ROR:- Global (All) income of is taxable except:
i. Past untaxed profit
ii. Agricultural Income from Land in India
iii. Dividend from Indian co.
iv. Gifts from relatives
v. other incomes which are exempt.
2. RNOR and NR:-
For both Income earned or received in India are taxable. The only difference is:-
For NR any type of income earned outside India is not taxable in India. But for RNOR income of
outside India shall be taxable if it is from business which is controlled from India.
Income deemed to be earned in India- Section 9
1. If income is first received in India then only it shall be taxable. If first received outside India and then
remitted to India, then not treated as received in India.
2. If business located in India and controlled from outside India then also taxable.
E.g. Profit from a branch in Chennai controlled from USA is taxable.
3. Salary for services rendered in India but received outside India then taxable as per sec.9 like pension
from a former employer.
4. If the Indian govt. employee received salary/ remuneration from Indian govt. for the services
rendered outside India then it is taxable. e.g. Indian Embassy’s outside India(u/s 9)
5. If rent received from a house property then also allowed 30% standard deduction.
6. Interest from deposits with an Indian Co. received outside India, then it is assumed that deposits
used in India. Hence it shall be taxable in all cases.
7. In case of interest/ royalty/fees just check that where amount borrowed/patent etc./services are
used.
E.g. Architect sitting in UK made design of Taj Hotel in Mumbai shall be taxable.
8. Exports, News and films in India are not taxable only for non-residents.
Income from shooting of a cinematograph film in India is taxable done a citizen of India.
Residential status Section 6
9. As soon as you find Indian citizen/POI dont check 2nd basic condition. Decide properly whether
POI/ Indian citizen or not. If Relatives born in Undivided India, then it does not make the assessee
person of Indian origin, for that parents & grandparents birth place before 1947 is relevant.
10. If the person initially an Indian citizen but after cancelled his Indian citizenship then any of the two
basic conditions can be checked.
11. For the additional conditions, if both are satisfied then only the assesses will be ROR.
12. For other than Individual/HUF don’t check additional conditions. If resident then global income as
of ROR shall be taxable.
13. Only different treatment for foreign company(entire control in India to be treated as Resident). HUF,
firm, club etc. even if partly controlled from India, shall become resident.
14. Profits received from a partnership firm is exempt in the hands of partners but if the firm is situated
outside India and share of income from such firm is deemed to accrue or arise in India, then such
share of income shall be taxable in the respective partner’s hand.