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TEST FOR RESIDENCY

Discuss TEST FOR RESIDENCY within the Direct and Indirect Taxes ( D I Tax ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; Residency rules have an important role to play in tax treaties as they clarify the right to tax and assist ...

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TEST FOR RESIDENCY
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Sunanda K. Chavan
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TEST FOR RESIDENCY - October 4th, 2010

Residency rules have an important role to play in tax treaties as they clarify the right to tax and assist in the avoidance of double taxation. All countries have residence tests for both natural persons (individuals) and legal persons (companies).

The residency test for individuals is usually based on either physical presence in the country (legal form, such as citizenship) or facts and circumstances that prove residence in a country (economic substance, such as the country where the person has a fiscal presence) or a combination of the two.

In many cases, this may be satisfied simply by being present in a country for a prescribed period of time.

The tax residence of companies (that is, where companies are established or carry on business) is usually based on either place of incorporation (legal seat), location of management (real seat) or a combination of the two.

Under the Code, the residential status of an individual in a financial year will continue to be determined on the basis of his stay in India during the financial year and the earlier years. He would be a resident in India if,-

(a) he is in India for 182 days or more during the financial year; or

(b) he is in India for 365 days or more during the four years immediately

preceding the financial year and for 60 days or more in the financial year.
4.10 The residency of an individual will be determined only on the basis of the test specified in sub para

(a) of para 4.9 in the case of,-


(a) an Indian citizen who leaves India during the financial year for the purpose of employment outside India with an employer;

(b) an Indian citizen who leaves India as a member of a crew of an Indian ship; and

(c) an Indian citizen or a person of Indian origin, who comes to India on a visit during the financial year.

An individual will be treated as a person of Indian origin if either he or either of his parents or any of his grand-parents was born in undivided India.

An Indian company will always be treated as resident in India. However, a foreign company can either be resident or non-resident in India.

It will be treated as resident in India if, at any time in the financial year, the control and management of its affairs is situated wholly or partly in India (it need not be wholly situated in India, as at present).


A Hindu Undivided Family (HUF), partnership firm, an association of persons or any other person will be resident in India if the control and management of their affairs are wholly or partly situated within India at any time in the relevant financial year.


A person will be a non-resident in India if he is not a resident in India.
Under the Code, the concept of "resident but not ordinarily resident" for an individual and a Hindu undivided family will be replaced by providing exemption to the income of an individual sourced outside India and not derived from a business controlled or a profession set up in India.


This exemption will be available to the individual in the financial year in which such individual becomes a resident and in the immediately succeeding financial year, if such individual was a non-resident for nine years immediately preceding the financial year in which he becomes a resident.
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Jitendra Mazee
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Re: TEST FOR RESIDENCY - March 31st, 2016

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Originally Posted by sunandaC View Post
Residency rules have an important role to play in tax treaties as they clarify the right to tax and assist in the avoidance of double taxation. All countries have residence tests for both natural persons (individuals) and legal persons (companies).

The residency test for individuals is usually based on either physical presence in the country (legal form, such as citizenship) or facts and circumstances that prove residence in a country (economic substance, such as the country where the person has a fiscal presence) or a combination of the two.

In many cases, this may be satisfied simply by being present in a country for a prescribed period of time.

The tax residence of companies (that is, where companies are established or carry on business) is usually based on either place of incorporation (legal seat), location of management (real seat) or a combination of the two.

Under the Code, the residential status of an individual in a financial year will continue to be determined on the basis of his stay in India during the financial year and the earlier years. He would be a resident in India if,-

(a) he is in India for 182 days or more during the financial year; or

(b) he is in India for 365 days or more during the four years immediately

preceding the financial year and for 60 days or more in the financial year.
4.10 The residency of an individual will be determined only on the basis of the test specified in sub para

(a) of para 4.9 in the case of,-


(a) an Indian citizen who leaves India during the financial year for the purpose of employment outside India with an employer;

(b) an Indian citizen who leaves India as a member of a crew of an Indian ship; and

(c) an Indian citizen or a person of Indian origin, who comes to India on a visit during the financial year.

An individual will be treated as a person of Indian origin if either he or either of his parents or any of his grand-parents was born in undivided India.

An Indian company will always be treated as resident in India. However, a foreign company can either be resident or non-resident in India.

It will be treated as resident in India if, at any time in the financial year, the control and management of its affairs is situated wholly or partly in India (it need not be wholly situated in India, as at present).


A Hindu Undivided Family (HUF), partnership firm, an association of persons or any other person will be resident in India if the control and management of their affairs are wholly or partly situated within India at any time in the relevant financial year.


A person will be a non-resident in India if he is not a resident in India.
Under the Code, the concept of "resident but not ordinarily resident" for an individual and a Hindu undivided family will be replaced by providing exemption to the income of an individual sourced outside India and not derived from a business controlled or a profession set up in India.


This exemption will be available to the individual in the financial year in which such individual becomes a resident and in the immediately succeeding financial year, if such individual was a non-resident for nine years immediately preceding the financial year in which he becomes a resident.
Hey sunanda, thanks for sharing such a nice information and explaining about the residence rule for the income tax. Well, i have also got a document where you would find the more detailed information which would help many people.
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