SRM INSTITUTE OF SCIENCE AND TECHNOLOGY

DEPARTMENT OF COMMERCE
_

Subject: “TAX PROCEDURE LAW AND PRACTICE”

Prepared By P.Ganesh Assistant Professor

Department of Commerce
 INCOME TAX LAW & PRACTICE-I

UNIT- I: BASIC CONCEPTS

Income Tax Act 1961 & relevance of Finance Act – Definition of
important terms – Income, Person, Assessee, Assessment Year and
Previous Year – Broad features of Income
Residential status, Incidence of Tax & Basics of Charge:
Taxable entities – Classification of Residential Status of taxable
entities - Residential Status – Individual, firm, AOP, HUF and
Companies – Incidence of Tax.
EXEMPTED INCOMES: Classification of exempted incomes – Incomes
excluded from total income – Income forming part of total income
but exempted from Tax.
UNIT- II: INCOME FROM SALARIES
Different forms of salary – Provident Funds – Allowances –
Perquisites – Other items included in Salary – Qualifying amount for
deduction u/s 80(C).
UNIT- III: INCOME FROM HOUSE PROPERTY
Computation of Income from House Property – Let-out house – Self occupied
house – Deduction allowed from house property – Unrealized rent – Loss under the
head house property.
UNIT -IV: PROFITS AND GAINS OF BUSINESS AND PROFESSION
Introduction – Computation of profits and gains of business and profession –
Admissible deductions – Specific Disallowances – Depreciation – Loss under the
head business and profession.
UNIT- V: ADMINISTRATION OF INCOME TAX ACT
Income tax authorities – procedure for assessment – PAN (Permanent Account
Number) – Types of assessment.
PRESCRIBEDBOOKS:
Income Tax Theory, law and practice - T.S. Reddy & Dr. Y. Hari Prasad Reddy –
Margham publications.
Income Tax law and practice. – V.P.Gaur&D.B.Narang.
REFERENCE BOOKS:
1. Students Guide to Income tax – Dr.VinodK.SignHania&Dr.MonicaSighania –
Taxmann.
2. Income tax service tax & VAT – Dr.GirishAhuja&Dr.Ravi Gupta – Bharat law
house.
 Residential Status
Residential status of an assessee is important in
determining the scope of income on which
income tax has to be paid in India.

There are three different types of Residential

Status such as:-

 Resident and ordinarily resident (ROR).

 Resident but not ordinarily resident (RNOR)
 Non Resident (NR)
 Resident and Ordinarily Resident (ROR).
An individual or HUF assessee who is resident in India.
An assessee who satisfies one basic condition and two
additional conditions
I. Basic Condition:
1. An individual in India during the relevant previous year for a
period amounting in all to 182 days or more.
2. An individual in India for a period or periods amounting in all
to 365 days or more during the four preceding the relevant
previous year and he is in India for a period of 60 days or
more during the previous year.

II. Additional Condition:

1. He has been resident in India in at least 2 out of 10 years
preceding the relevant previous year.
2. He has been India for at least 730 days in all during the 7
preceding the previous year.
 Resident but Not Ordinarily Resident (RNOR).
An individual or HUF assessee who is resident in India.
An assessee who satisfies one basic condition and one or
none of the additional conditions
I. Basic Condition:
1. An individual in India during the relevant previous year for a
period amounting in all to 182 days or more.
2. An individual in India for a period or periods amounting in all to
365 days or more during the four preceding the relevant
previous year and he is in India for a period of 60 days or more
during the previous year.

II. Additional Condition:

1. He has been resident in India in at least 9 out of 10 years
preceding the relevant previous year.
2. He has been India for less than 730 days in all during the 7
preceding the previous year.
 Non Resident (NR)
An assessee satisfies None of the basic condition.
I.Basic Condition:
1. An individual in India during the relevant
previous year for a period amounting in all to
182 days or more.
2. An individual in India for a period or periods
amounting in all to 365 days or more during the
four preceding the relevant previous year and
he is in India for a period of 60 days or more
during the previous year.
Q1. Mr.Joseph, a foreigner, came to India from Poland for the first
time on 1st April 2013. He stayed here continuously for 3 years and
went to France on 1st April 2016. He, however, returned to India on
1st July 2016 and went to Poland on 1st December 2017. He again
come back to India on 25th January 2020 on a service in India. Find
residential status of an assessee.
Determination of Residential Status for the Previous year 2019-20
01-04-2013 to 31-03-2014 - 365 days
01-04-2014 to 31-03-2015 - 365 days
01-04-2015 to 31-03-2016 - 366 days
01-07-2016 to 31-03-2017
(31+31+30+31+30+31+31+28+31) - 274 days
01-04-2017 to 01-12-2017
(30+31+30+31+31+30+31+30+1) - 245 days
01-04-2018 to 31-03-2019 - NIL
25-01-2020 to 31-03-2020 - 67 days
 I. BASIC CONDITION
1. Mr.Joseph did not stay in India during the relevant previous year
amounting to all 182 days or more.
2. Mr.Joseph did stay in India for 67days in relevant previous year
2019-20 and Mr.Joseph did stay in India Preceding the 4 Previous
year.
2018-19 - NIL
2017-18 - 245 days
2016-17 - 274 days
2015-16 - 366 days
Total 885 days
Mr.Joseph stay in India for 67days in relevant previous year
2019-20 and also did stay in India for 885days in 4 Preceding the
relevant previous year and he has fulfilled the second condition
of section 6(1) hence he is become resident in India for the
previous year 2019-2020.
II. ADDITIONAL CONDITION

1. He has been resident in India in at least 2 out of 10

years preceding the relevant previous year.

1. He has been India for less than 730 days in all during
the 7 preceding the previous year.

Mr.Joseph shall be treated as ordinary resident of India as

he was resident of India for more than 2years out of10
years preceding the relevant previous year and also did
stay in India for more than 730days in 7 preceding the
relevant previous year.
Q2. Mr.Rohan, a Forginer, came to India for a first time on
June15,2014. During the financial year 2014-15,2015-16, 2016-17,
2018-19 an 2019-2020, he stays in India for
120days,115days,15days,191days ,124days and 80days
respectively. Determine his residential status for the Assessment
year 2020-2021.

Determination of Residential Status for the Assessment year 20-21

Is as under:
Previous year Days
2014-15 120
2015-16 115
2016-17 15
2017-18 191
2018-19 124
2019-20 80 (Current Previous year)
I. BASIC CONDITION
1. Mr.Rohan did not stay in India during the relevant previous year
amounting to all 182 days or more.
2. Mr.Rohan did stay in India for 80days in relevant previous year
2019-20 and he did stay in India for 365days or more Preceding
the 4 relevant Previous year.
Preceding the relevant P.Y Days
2018-19 - 124
2017-18 - 191
2016-17 - 15
2015-16 - 115
Total 445
Mr.Rohan stay in India for 80days in relevant previous year
2019-20 and also did stay in India for 445days in 4 Preceding
the relevant previous year and he has fulfilled the second
condition of section 6(1) hence he is become resident in India
for the previous year 2019-2020.
II. ADDITIONAL CONDITION

1. He has been resident in India in at least 2 out of 10

years preceding the relevant previous year.

1. He has been India for less than 730 days in all during the
7 preceding the previous year.

Mr.Rohan cannot be treated as an ordinary resident of

India as he was resident of India for more than 2years
out of10 years preceding the relevant previous year and
also did stayed only 565days ( i.e. Less than730days) in
7 preceding the relevant previous year.
Mr.Rohan shall be treated as Not ordinary resident in
India in the Asseement year 2020-21.
Q3. Mr.P.V.Rao, a senior scientist goes to Nigeria on a Job
approved by Central Government for a period of 3years on
15th Sep 2018. He has never been out of India before.
Determine the residential status of assessee for the previous
year 2019-2020.
Determination of Residential Status for the Previous year
2019-20 is as under:
Mr.P.V.Rao did not satisfy 2 Basic condition and he is treated
as Non-resident u/s 6(1) (b).
I.Basic Condition:
1. An individual in India during the relevant previous year for
a period amounting in all to 182 days or more.
2. An individual in India for a period or periods amounting in all to 365 days or
more during the four preceding the relevant previous year and he is in
India for a period of 60 days or more during the previous year.
Q4. Mr.Singh, an Indian citizen, went to USA on 10th Oct 2010 and
returned after 2year’s stay from there. Again on 10th Oct ,
2015 he went to Iran but returned on 10th May 2019. He made
another attempt to go abroad and finally succeeded to go to
Canada. He left Delhi for Canada on 10th Feb,2020. Find out the
residential status of an assessee during the Assessment Year
2020-21.
I.BASIC CONDITION
1. Mr.Singh did stay in India during the relevant previous year
amounting to all 182 days or more.

2. Mr.Rohan did stay in India for 277days ( more than 60days) in

relevant previous year 2019-20 and he did not stay in India for
365days or more during the Preceding the 4 relevant Previous
year. He has fulfilled the first condition of section 6(1) hence he
is become resident in India for the Assessment Year 2020-2021.
Preceding the relevant P.Y Days
2019-20 (1-5-2019-10-2-2020 - 277 (22+30+31+31+30+31+30+31+31+10)
2018-19 - ---
2017-18 - ---
2016-17 - ---
2015-16 - ---
2014-15 (1-4-2014 to 10-10-2014) - 193 (30+31+30+31+31+30+10)
2013-14 - 365
2012-13 (10-10-2012 to 31-3-2013) - 173 (22+30+31+31+28+31)
Total 731

Mr. Singh shall be treated as an ordinary resident of India as he

was resident of India for more than 2years out of10 years
preceding the relevant previous year and also did stayed only
731days ( i.e. More than 730days) in 7 preceding the relevant
previous year.
Mr. Singh shall be treated as Resident and ordinary resident in
India in the Assessment year 2020-21.
Q5. Mr.Rajendran,left or USA along with his family, for the first time,
on 14-10-2019. He returned to India on 31-5-2020. Determine his
residential status for the Assessment year 2020-2021.

Determination of Residential Status for the Assessment year 20-21

Is as under:
Previous year Days
2019-20 (1-4-2019 to 14-10-2019)
(30+31+30+31+31+30+14) 197days (current P.Y)
2018-19 365
2017-18 365
2016-17 365
2015-16 365
I. BASIC CONDITION
1. Mr. Rajendran did stay in India during the relevant previous year amounting to all
182 days or more.
2. Mr. Rajendran did stay in India for 197days ( more than 60days) in relevant
previous year 2019-20 and he did stay in India for 365days or more during the
Preceding the 4 relevant Previous year. He has fulfilled the both the basic
condition of section 6(1) hence he is become resident in India for the Assessment
year 2020-21.
II. ADDITIONAL CONDITION
1. Mr. Rajendran has been in India more than 2years out of 10 years preceding the
relevant previous year.
2. Mr. Rajendran has been in India more than 730 days in all during the 7 preceding
the previous year.

Mr. Rajendran shall be treated as an Resident and ordinary resident u/s 6(1) for
the Assessment Year 2020-21. He satisfied two basic condition and two
additional condition. So he treated as Resident and ordinary resident u/s 6(1)
Q6. Shri. Venkatesh, who was born and brought up in India, went to
U.K for the further on 1st Februrary2018and came back to India on
2nd October 2019.Ascertain his residential status for the Previous
year 2019-2020.
Determination of Residential Status for the Assessment year 20-21
Is as under:
Previous year Days
2019-20 (2-10-2019 to 31-03-2020)
(30+30+31+31+29+31) 182days (current P.Y)
2018-19 ---
2017-18 (1-4-2017 to 1-2-2018)
(30+31+30+31+31+30+31+30+31+31+1) 307days
2016-17 365days
2015-16 365days
I. BASIC CONDITION
1. Shri. Venkatesh did stay in India during the relevant previous year amounting to
all 182 days.
2. Mr. Rajendran did stay in India for 182days ( more than 60days) in relevant
previous year 2019-20 and he did stay in India for 365days or more during the
Preceding the 4 relevant Previous year. He has fulfilled the both the basic
condition of section 6(1) hence he is become resident in India for the Assessment
year 2020-21.
II. ADDITIONAL CONDITION
1. Shri. Venkatesh has been in India more than 2years out of 10 years preceding the
relevant previous year.
2. Mr. Rajendran has been in India more than 730 days in all during the 7 preceding
the previous year.

Shri. Venkatesh shall be treated as an Resident and ordinary resident u/s 6(1) for
the Assessment Year 2020-21. He satisfied two basic condition and two
additional condition. So he treated as Resident and ordinary resident u/s 6(1)
Q7. Mr.James, a Foreign national came to India for a first time on
June15,2014. During the financial year 2014-15,2015-16, 2016-17,
2018-19 an 2019-2020, he stays in India for
50days,183days,115days,25days ,190days and 58days respectively.
Determine his residential status for the Assessment year 2020-2021.
Determination of Residential Status for the Assessment year 20-21
Is as under:
Previous year Days
2019-20 58 (Current Previous year)
Conclusion:
Mr.James is “Non Resident” for the Assessment year 2020-21
because he fails to fulfil the satisfy both the basic condition for being
“Resident”
 Residential Status of HUF
Residential status of an assessee is an HUF based on Control and
Management of its affairs is situated (wholly or partially) in India.
Ordinary Resident Not-Ordinarily Resident Non - Resident

If Control and This status allowed If Control and

Management of only to HUF shall be Management of
such HUF was NOR if its Karta can such HUF was
wholly or partially fulfill any one of the wholly or partially
in India during the two additinal outside India during
relevant Previous Condition u/s 6(6) for the relevant
Year an individual. Previous Year
 Residential Status of Firm and AOP or BOI
Residential status of an assessee is an Firm and AOP or BOI based on Control
and Management of its affairs is situated (wholly or partially) in India.

Ordinary Resident Not-Ordinarily Non - Resident

Resident

If Control and A Firm, an If Control and

Management of such Association of Management of such a
a firm, an Association Person (AOP) firm, an Association of
of Persons (AOP) OR or Body of Persons (AOP) OR (BOI)
(BOI) was wholly or Individual was wholly or partially
partially in India (BOI) in India during the
during the relevant Can not claim relevant Previous Year
Previous Year this status.
 Residential Status of Company
Residential status of an assessee is an Company based on Control &
Management of its affairs is situated (wholly or partially) in India.

Ordinary Resident Not-Ordinarily Resident Non - Resident

A Company shall be said A Company cannot have A Company shall

to be resident in India, in this status. It is either be Non-resident if
any previous year, if Resident or Non-Resident it is not resident in
a) It is an Indian India during the
Company or relevant
b) Its place of effective accounting year
management, at any
time in that year, is in
India.
 SCOPE OF TOTAL INCOME
Particulars ROR RNOR NR
Income received in India Yes Yes Yes
Income deemed to be received in India Yes Yes Yes
Income accruing or arising in India Yes Yes Yes
Income deemed to accrue or arise in India Yes Yes Yes
Income received/ accrued outside India
from a business controlled in India Yes Yes No
Income received/ accrued outside India
from a business controlled outside India Yes No No
ROR – Resident and ordinary resident
RNOR- Resident but not ordinary resident
NR – Non Resident.
THANK YOU