Section 6 of Income-Tax Act, 1961

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HomeBrud.gifIndian LawBrud.gifActsBrud.gifIncome-Tax Act, 1961Brud.gifSection 6 of Income-Tax Act, 1961

Section 6 of Income-Tax Act, 1961 clarifies various doubts that arise in regard to the residential status.

  • According to Tax Law, 'residence' does not merely mean the place where the person is residing but also his animus (ambition) and his conduct must prove his intention.
  • The residence status is determined based on his residence period in India or his previous year and not according to the assessment year.
  • The terms citizen, nationality and domicile are different to residential status in the charging section

Contents

Types of Taxable Entities

  • Individual
  • Hindu Undivided Family (HUF)
  • Firm, Association of Persons or body of individuals
  • Company
  • Every other person

Types of Residential Status

  • Resident and ordinarily resident
  • Resident and not ordinarily resident
  • Not resident

Resident and ordinarily resident

  • An individual is said to be resident of India if
    • He is in India in the previous year for a period of 182 days or more (60 days in the person is a member of the crew of an Indian ship)
    • He is in India for a period of 365 days or more within 4 years preceding the assessment year AND periods amounting to all to 60 days or more in that year
  • The exception is given to member of the crew of an Indian ship because they work for moths together on duty on the seas

Resident and not ordinarily resident

Not resident

Resident and Non-Resident treatment for various entities

  • A Hindu Undivided Family, firm or other association of persons is said to be resident in India if the control and management of its affairs is in India, either partly, or wholly. It will be a non-resident only when its affairs are wholly outside India. It is a non-resident if its manager is out side India for 9 out of 10 years or has not during the 7 previous years been in India for a period of, or periods amounting in all to, 729 days or less.
  • A company is said to be resident if its affairs are managed partly or wholly in India and non-resident only if all its affairs are managed outside India. Hence, every company registered in India is a resident.
    • Control and management of a company can be decided on the factor of where the director's meetings are held, but not on the share-holder's meeting place.
    • Residency status of the company can change depending on from where its operations are held in the previous year.
    • In case of 'every other person', the person is resident in India if a previous year relevant to an assessment year in respect of any source of income. He is deemed to be resident of India in the previous year relevant to the assessment year in respect of his other sources of income.
  • The burden of proof about the status of resident or non-resident lies on the assessee only.

From the Bare Act

For the purposes of this Act,—

(1) An individual is said to be resident in India in any previous year, if he—

(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or

(b) [* * *]

(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

Explanation

—In the case of an individual,—

(a) being a citizen of India, who leaves India in any previous year [as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted ;

(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and 58[eighty-two] days” had been substituted.]

(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.

(3) A company is said to be resident in India in any previous year, if—

(i) it is an Indian company ; or

(ii) during that year, the control and management of its affairs is situated wholly in India.

(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

(5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.

[(6) A person is said to be “not ordinarily resident” in India in any previous year if such person is—

(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or

(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.]

Related Sections

Related Topics

Sections of the Indian Income Tax Act, 1961


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