Definitions Residence and Tax Liability

Definitions
Residence and Tax Liability

Sec.2(31) "person" includes-
• (i) an individual,
• (ii) a Hindu undivided family,
• (iii) a company,
• (iv) a firm,
• (v) an association of persons or a body of individuals, whether incorporated or not,
• (vi) a local authority, and
• (vii) every artificial juridical person, not falling within any of the preceding sub-clauses;
• Explanation.- For the purposes of this clause, an association of persons or a body of individuals or
a local authority or an artificial juridical person shall be deemed to be a person, wherther or not
such person or body or authority or juridical person was formed or established or incorporated
with the object of deriving income, profits or gains;
Sec. 2(7) "assessee
• "assessee" means a person by whom any tax or any other sum of money is
payable under this Act, and includes-
• (a) every person in respect of whom any proceeding under this Act has been
taken for the assessment of his income or of the income of any other person in
respect of which he is assessable, or of the loss sustained by him or by such other
person, or of the amount of refund due to him or to such other person;
• (b) every person who is deemed to be an assessee under any provision of this
Act;
• (c) every person who is deemed to be an assessee in default under any provision
of this Act;
Sec. 2(9)"assessment year" means the period of twelve
months commencing on the1st day of April every year.
Sec. 3 Previous year- The year in which income is earned

is known as previous year and the next year in which this
income is taxable is known as assessment year.
A.Y 2020-21 P.Y 2019-20

1ST April,2019 – 31st March 2020
• Exceptions to the general rule-
(i) Income of non-resident from shipping business. 7.5% sec.172
(ii) Income of person leaving India. Sec 174
(iii)Income of an association of persons or a body of individuals or an artificial
juridical person formed for a particular event or purpose. Sec 174 A
(iv) Transfer of property to avoid tax. Sec 175
(v) On discontinuation of a business or a profession. Sec 176
Mr. X leaves India on 1st November 2019.

Sec. 2(1A) Agricultural Income
A- (i) Any rent or revenue derived from land (ii)
which is situated in India and (iii) is used for
agricultural purposes.
B- (i) Any income derived from such land by
agricultural operations or (ii) any process by
cultivator or receiver of rent in kind which
render the produce fit for the market or (iii)
the sale of such produce.
C- Any income from a farm house.
Farm house Income-
(i) The building is owned and occupied by the cultivator or receiver
of the rent or revenue of any such land;
(ii) It is situated on or in the immediate vicinity of the agricultural
land;
(iii) The building is by reason of his connection with the land, used as
dwelling house or a store-house or an out house by the cultivator
or receiver of rent in kind;
(iv) The land is either assessed to land revenue in India or is subject
to local tax.
OR
(a) The land is situated in non-urban area ;or
(b) The land is situated within municipality or cantonment board
jurisdiction, has a population of more than 10,000 but less than
1,00,000; or
(c) The land is beyond a notified distance (maximum 8 k.m)
from the local limits of any such municipality or cantonment board .
Partly Agriculture Income
• Profits of such sugar factories as produce sugar
from cane grown on their own farms: The average
market price of sugar cane during relevant previous year
shall be charged as an expenditure and no note will be
taken of the expenses of cultivating the sugarcane. The
income thus determined will be the business income.
• Income from growing and manufacturing of Tea- 60%
is deemed to be Agricultural income, 40% business
income.
• Income from growing and manufacturing of
centrifuged latex and cenex- 65% is deemed to be
Agricultural income, 35% business income.
• Income from growing and manufacturing of
Coffee.
(a) 75% of the income derived from the sale of
coffee grown and cured by the seller in India is
deemed to be agricultural income and
remaining 25% is business income.
(b) 60% of the income derived from the sale of
coffee grown, cured, roasted and grounded by
the seller in India with or without mixing of
chicory or other flavouring ingredients is
deemed to be agricultural income and
remaining 40% is business income.
Residential Status and its impact on Tax
Liability
Types of Residents
Resident
Non-resident
Ordinarily Resident Not Ordinarily

Resident
Individuals
Basic conditions: [sec. 6(1)]
(a) He is in India in the previous year for a period
of 182 days or more, or
(b) he has been in India for at least 365 days
during the four years preceding the previous
year and is in India for at least 60 days during
the previous year.
Exceptions to the rules of 60 days’ stay in India
(i) An individual who is a citizen of India and leaves
India in any previous year for the purpose of
employment or as a member of the crew of an
Indian ship must have stayed in India for at least
182 days during the previous year instead of 60
days;
(ii) If any citizen of India or a foreign national of Indian
origin, who is living outside India, comes on a visit
to India in the previous year, he must have stayed in
India for at least 182 days during the previous year
instead of 60 days.
Additional conditions : [sec. 6(6)(a)]
(i) He has been resident in India in at least two
out of the ten previous years preceding the
relevant year, and
(ii) he has been in India for at least 730 days in
all during the seven previous years preceding
the relevant previous year.
• Basic conditions: • Additional conditions
(a) He is in India in the (i) He has been resident in
previous year for a India in at least two out
period of 182 days or of the ten previous
more, or years preceding the
(b) he has been in India relevant previous year,
for at least 365 days and
during the four years (ii) he has been in India for
preceding the previous at least 730 days in all
year and is in India for during the seven
at least 60 days during previous years
the previous year. preceding the relevant
previous year.
• Individual
• Resident(Ordinarily resident) - Satisfy one of
the basic condition and both the additional
conditions.
• Not Ordinarily resident- Satisfy one of the
basic condition but does not satisfy both the
additional conditions.
• Non-resident- Satisfies non of the basic
conditions.
HUF [sec. 6(2)]
• Resident- If the control and management of its
affairs is situated wholly or partly in India during
the relevant previous year.
• Not ordinarily resident- If its Karta or manager
does not satisfy both the additional conditions.
• Non- resident - If the control and management
of its affairs is situated wholly outside India.
Firm or AOP
affairs is situated wholly or partly in India
during the relevant previous year
• Non- resident- If the control and management
Companies[sec.6(3)]
• Resident.
(i) It is an Indian company; or
(ii) During that year, the control and management of its
affairs is situated wholly in India.
W.e.f. A.Y. 2017-18 point (ii) will be as under
Its place of effective management, in that year, is in India.
Expln: POEM means a place where key management and
commercial decisions that are necessary for the
conduct the business of an entity as a whole are, in
substance made .
Every other person[sec. 6(4)]
affairs is situated wholly or partly in India
during the relevant previous year
• Non- resident- If the control and management
Incidence of tax on the basis of residence
(1) Incidence of tax in case of resident (ordinary)

The total income of any of a person who is a resident includes all income from
whatever source derived which:
(a) Is received or deemed to received in India in such year by or on behalf person,
whether accrued or arisen anywhere or,
(b) Accrues or arise or deemed to accrue or arise in India during such year, whether
received any where.
(c) Accrues or arises to him outside India during such year.
(2) Incidence of tax in case of not ordinarily resident.
The total income of any of a person who is a not ordinarily
resident includes all income from whatever source derived
which:
(a) Is received or deemed to received in India in such year by or
on behalf person, whether accrued or arisen anywhere or,
(b) Accrues or arise or deemed to accrue or arise in India
during such year, whether received any where.
(c) Accrues or arises to him outside India from a business
controlled in or profession set up in India.
(3) Incidence of tax in case of non resident.
The total income of any of a person who is a non resident
includes all income from whatever source derived which:
(a) Is received or deemed to received in India in such year by or
on behalf person, whether accrued or arisen anywhere or,
(b) Accrues or arise or deemed to accrue or arise in India
during such year, whether received any where.

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Definitions

Residence and Tax Liability

Sec. 3 Previous year- The year in which income is earned

A.Y 2020-21 P.Y 2019-20

Mr. X leaves India on 1st November 2019.

Ordinarily Resident Not Ordinarily

(1) Incidence of tax in case of resident (ordinary)

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