Income Tax-4

INCOME TAX
What is tax?
 Tax is a compulsory contribution to state revenue, levied by the government on

worker’s income and business profits, or added to the cost of some goods,
services and transactions. It may be direct or indirect tax.
 Direct tax is tax, such as income tax, which is levied on the income or profits of
the person who pays it, rather than on goods or services.
 Indirect taxes levied on goods and services rather than on income or profits.
IMPORTANT
DEFINITIONS
Other sum of money
includes penalty, fines and
interest etc.
Deemed Assessee : Deemed assessee is an individual who is put
in a position to pay taxes for some other person by legal
authorities.
EX: 1) After the death of a person his legal representative will be
treated as an assessee for that income of the decreased on
which tax has not been paid by the decreased before his death.
2) A person representative a foreigner or a minor or a lunatic is
treated as an assessee for the income of such foreigner or minor
or lunatic.
Assessee in Default
Assessee in Default is a person who has failed to fulfill his
statutory obligations as per the income tax act such as not
paying taxes to the government or not filing his income tax
return.
For eg. An employer is supposed to deduct taxes from the salary of his
employee before disbursing the salary. He is, then, required to pay the
deducted taxes to the government by the specified due date. If the
employer fails to deposit the tax deducted, he will be considered as an
assessee- in-default.
Previous year and assessment year
HEADS OF INCOME (SEC.14)
Residential status
Residential
status for
individuals
Non
Resident
resident(NR)
Resident not
Resident
ordinarily
ordinarily
resident(RNO
resident(ROR)
R)
Basic condition
1) He stays in India for 182 days or more during the relevant previous year.
2) He stays in India for 60 days or more during the previous year and also for 365 days or
more during four years preceding the relevant previous years.
NOTE:
1) Period of Stay may not be continuous.
2) Date of departure and arrival both shall be considered for stay in India.
Additional condition
1) He is a resident in any 2/10 year preceding the relevant previous year and,
2) His total stay in India in the the last 7 years preceding the relevant previous year is 730
days or more.
Residential status in nutshell
STATUS BASIC CONDITION ADDITIONAL

( ANY ONE) CONDITION
Resident (R)

----
Ordinarily resident (ROR)

 
Not ordinarily
resident( RNOR)  
Non resident (NR)

----
Illustration 1
Mr.Ram Left for U.S.A along with his family, for the first time on 14-10-23. he returned to
India on 31st of May 2024. Determine his residential status for the assessment year 24-25.
SOLUTION
The total stay of Mr. Ram in the previous year is 197 days,
hence it satisfies the basic condition and other two
additional conditions, so Mr. ram is a resident and
ordinarily resident.
Illustration 2
Sri .Venkatesh who was born and brought up in India, went to U.K for further studies
on 1st Feb 2020 and came back to India on 1st October 2021. Ascertain his residential
status for the previous year 2021-22.

SOLUTION
Sri Venkatesh Satisfies the first basic condition, that is, he stays
for 182 days in the relevant previous year and also the two
additional conditions , So Sri Venkatesh is a resident and
ordinarily resident in India.
SOLUTION
Mr. J satisfies the first basic condition (stays more than 182
days in the relevant previous year) and first additional
condition but he is not able to satisfy the second additional
condition. Hence he is resident but not ordinarily
resident(RNOR)
SOLUTION
Mr. Arun satisfies the first basic condition (stays more than
182 days in the relevant previous year) but he is not able to
satisfy the both additional conditions. Hence he is resident but
not ordinarily resident(RNOR)
SOLUTION
Mr. Chandramouli satisfies the first basic condition (stays

more than 182 days in the relevant previous year) but he is not
able to satisfy the both additional conditions. Hence he is
resident but not ordinarily resident(RNOR).
SOLUTION
Mr. Subramani does not satisfy any of the basic conditions. Hence he is Non-resident.
SOLUTION
Mr. Gowtham does not satisfy any of the basic conditions (as he stays
only for 55 days in relevant previous year). Hence he is Non-resident.
Exemptions
The basic conditions relating to the role of residents are subject to following
exemptions:
In the above two
Indian citizen who goes abroad in the cases a individual
previous year for employment or as a need to satisfy only
member of crew of an Indian ship. one basic condition
(stay of 182 days
or more in relevant
Indian citizen or a person of Indian
P.Y) to become a
origin living outside Indian coming to resident.
visit India in the previous year.
Note
 A person is deemed to be of Indian origin if he, or either of his

parents or any of his grand parents, was born in India or
undivided India.
 Grandparents include both maternal and paternal
grandparents.
SOLUTION
Mr. Ravi stays in India for only 154 days in the previous year, so he does not
satisfy the FIRST BASIC CONDITION ( staying 182 days or more in the
relevant previous year )so Mr Ravi is Non-resident.
SOLUTION
Shri Kamal stays in India for only 133 days, so he does not satisfy the
basic condition. Hence Shri Kamal is Non-resident.
Residential status of a HUF
Illustration 3
Head office of XY, A Hindu undivided family, is situated in Hong Kong.

The family is managed by Y who is resident in India 1 year out of 10
years preceding the previous year 23-24. Determine the residential
status of the HUF for the assessment year 24-25 if affairs of the family
business are-
a) Wholly controlled from HongKong and
b) partly controlled from India.

SOLUTION
(a) If the affairs of the family’s business are wholly controlled from Hong
Kong :
The residential status of a HUF is ‘Non-resident’ for the assessment year

24-25 as the control and management of its affair has been wholly situated
outside India.
(b) If the affairs of the family’s business are partly controlled from India :
The residential status of HUF is ‘Resident but not ordinarily resident’ for the
assessment year 24-25 as the control and management of its affairs is partially
done from India and Karta is ‘Not ordinarily resident’ because he was resident for 1
out of 10 year preceding the previous year.
Residential status of a firm, aops
and boi
Residential status of a company
Residential status of a local
authorities and ajp
Scope of total income
Note:-Additional information (not relevant for exam)
Meaning of ‘accruing’ and ‘due’
 The building is on or in the immediate vicinity of agriculture land.
 it is occupied by the cultivator or receiver of rent or revenue.
 It is used as a dwelling house or a storehouse or other out-house.
 The land is assessed to a land revenue or it is situated in rural areas

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INCOME TAX

 Tax is a compulsory contribution to state revenue, levied by the government on

more during four years preceding the relevant previous years.

STATUS BASIC CONDITION ADDITIONAL

Ordinarily resident (ROR)

status for the previous year 2021-22.

Mr. Chandramouli satisfies the first basic condition (stays

 A person is deemed to be of Indian origin if he, or either of his

Head office of XY, A Hindu undivided family, is situated in Hong Kong.

a) Wholly controlled from HongKong and

b) partly controlled from India.

The residential status of a HUF is ‘Non-resident’ for the assessment year

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