CHAPTER 2 - Residential status and scope of

income
10/11/2022

sections covered in the chapter

Section 5 - scope of income
Section 6 (1) - residential status (R or NR)
Section 6 (6) - ordinary or not ordinary resident

section 6(1) - determination of residential status

needs to satisfy any 1 of the 2 conditions
Section 6(1)(a) - stays for 182 days or more
section 6(1)(b) - stays 60 days or more + a total of 365 days in the 4 preceding previous
years
section 6(1)(b) does not apply to all. It applies only to foreign citizens who don't satisfy the
conditions of section 6(1)(a).
section 6(1)(a) is applicable to all irrespective of citizenship
exceptions -
there are hence 3 types of residential status -
1. resident and ordinarily resident
2. resident but not ordinarily resident
3. non resident

14/11/2022
Problems on residential status U/S 6 (1) and U/S 6 (6)

Q1 - PG 49

SOLUTION
Name of Assessee - Mr. Ajay
Assessment year - 2023-24
Previous year - 2022-23
Legal status - Individual
Residential status -

Mr Ajay has to satisfy one of the following 2 conditions u/s 6 (1) to be termed as a resident -
a. His stay in India should be 182 days or more in the previous year
(or)
b. His stay in India should be 60 days or more in the previous year and 365 days or more in the
preceding 4 years of the previous year

Months Days

April 2022 30

May 2022 31
 June 2022 30

July 2022 15

January 2023 12

February 2023 28

March 2023 31

Total 177

Conclusion - Mr Ajay does not satisfy condition A U/S 6 (1) since his total number of days of stay
in India is less than 182 days and condition b cannot be applied since he left India as a crew
member on a ship.
Therefore Mr Ajay is a NON RESIDENT
17/11/2022

Q2 - PG 49

SOLUTION -
(a)
Name of the assessee - Chris Gayle
Assessment year - 2023-24
Previous year - 2022-23
Legal status - Individual

Residential status -
Mr Chris Gayle has to satisfy one of the following 2 conditions U/S 6 (1) to be termed as a
resident of India -
a. His stay in India should be 182 days or more in the previous year (P.Y)
or
b. His stay in India should be 60 days or more in the P.Y and 365 days pr more in the preceding 4
years of the P.Y

Years No of Days
 2019-20 102

2020-21 102

2021-22 102

TOTAL 408 Days

Conclusion ------ (i)

Mr Chris Gayle does not satisfy condition A U/S (1) since his stay in India in the P.Y was less than
182 days
but
He satisfies condition B since his stay in India in the P.Y was 102 days and 408 days in the 4 years
preceding the P.Y
Therefore, he is a RESIDENT of India

Mr Chris Gayle has to satisfy both the following conditions U/S 6 (6) to be termed as Resident and
Ordinary Resident
a. He should be a resident for at least 2 years in the preceding 10 years of the P.Y
and
b. his stay in India should be 730 days in the preceding 7 years of the previous year

YEARS DAYS R/NR

2012-13 102 NR

2013-14 102 NR

2014-15 102 NR

2015-16 102 NR

2016-1Y 102 R

2017-18 102 R

2018-19 102 R

2019-20 102 R

2020-21 102 R

2021-22 102 R

TOTAL 1020
Conclusion -----(ii)
Mr Chris Gayle satisfies Condition A U/S 6 (6) since he has been a resident for 6 years in the
preceding 10 years of the PY
but
He does not satisfy Condition B U/S 6(6) since his stay in India is 714 days in the preceding 7 years
of the previous year
Therefore,
Mr Chris Gayle is a RESIDENT BUT NOT ORDINARILY RESIDENT

scope of income
Step 1: categorise the type of income
income is categorised into 2 parts -
1. Indian income - earned, received or deemed to be received in India
example 1 - You as well as your employer lives in India
example 2 - The employer is in India - tax deducted at source
example 3 - ONGC employee working in the gulf
2. foreign income - earned, received or deemed to be received in India
step 2: if foreign income, categorise business set up location
1. business set up in India -
2. outside India

tax incidence

computation of scope of income

Q1 - PG 40

SOLUTION

Sr
Particulars R & OR R & NOR NR
No

Business income received in

1 10000 10000 10000
india

business income earned in

2 20000 20000 20000
india

Salary income from business

3 15000 15000 -
set up in India

interest on german
24000 (2/5th)
4 development bond (2/5th rcvd 24000 24000
36000 (3/5th)
in india)

Income from nepal later

5 181000 - -
remitted to india

income from jakarta received

6 86000
outside india

income earned from uae which

7 is controlled in delhi 65000 65000 15000
₹15000 received in india
 past untaxed profit of 15-16
8 - - -
brought to india in the PY

21/11/2022

profit from a business in

9 madras and controlled from 27000 27000 27000
outside india

profit of sale of building in

10 1480000 1480000 1480000
india received in sri lanka

pension of a former employee

11 36000 36000 36000
of india received in ussr

TOTAL (SCOPE OF INCOME) 19,80,000 16,77,000 16,27,000

Q1 - PG 50

SOLUTION -
Name of assessee - Mr Shashank
Assessment year - 2023-24
Previous year - 2022-23
Legal status - individual

Calculating the scope of income -

 Sr
Particulars R & OR R but NOR NR
No

Short term capital gains on sale

a of shares of an Indian company 20000 20000 20000
received in Germany

Dividend from an Australian

b 12000
company received in Australia

Rent from property in London

deposited in a bank in London
c later remitted to India 90000
(assumed to be earned and
remitted in the PY only)

Dividend from RIL Ltd an Indian

d 7500 7500 7500
company

Agricultural income from lands

e 20000 20000 20000
in Tamil Nadu

TOTAL (SCOPE OF INCOME) 149500 47500 47500

Q1 - Test yourself - pg 38

Name of Assessee - Mr X
Assessment year - 2023-24
Previous year - 2022-23
legal status -Individual

residential status-
Mr X has to satisfy one out of the two conditions U/S 6 (1) to be termed as a resident of India -
a. His stay in India should be 182 days or more in the previous year (P.Y)
or
b. His stay in India should be 60 days or more in the P.Y and 365 days pr more in the preceding 4
years of the P.Y

Months Days

August 27
 September 30

October 31

November 25

TOTAL 113 days

YEARS DAYS

2021-22 -

2020-21 -

30 + 31 + 30 + 31 + 31
2019-20 + 30 + 31 + 31 + 25 =
269 Days

8 + 31 + 30 + 31 + 30
2018-19 + 31 + 31 + 28 + 31 =
251 Days

TOTAL 520 Days

Conclusion ----- (i)

Mr X fails to satisfy condition a
but
Mr X satisfies condition b as his stay in India in the PY is 113 days and 520 days in preceding 4
years of the PY
Hence, Mr X is A RESIDENT

Mr X has to satisfy the following two conditions U/S 6 (6) to be termed as a resident and
ordinarily resident -
a. he should be a resident for 2 years or more in the preceding 10 years of the previous year
and
b. his stay in India should be 730 days or more in the preceding 7 years of the previous year

Conclusion ----- (ii)

As seen from part 1 of the question, Mr X satisfies condition a U/S 6(6) since he was a resident of
india in FY 2019-20 and 2018-19
However, Mr X does not satisfy condition b U/S 6 (6) as his stay in India is 520 days in the
preceding 7 years of the PY
Hence, Mr X is a RESIDENT BUT NOT ORDINARILY RESIDENT

Q2 - Test yourself - pg 38

Name of Assessee - Mr Balm

Assessment year - 2023-24
Previous year - 2022-23
Legal status - Individual

Residential status -
Mr Balm needs to satisfy one of the following two conditions U/S 6 (1) to be termed as a resident
of India -
a. His stay in India should be 182 days or more in the PY
or
b. His stay in India should be 60 days or more in the PY and 365 days or more in the preceding 4
years of the previous year

MONTHS DAYS

January 31

February 28

March 31

TOTAL 90

YEAR DAYS

2018-19 365 DAYS

30 + 31 +30 + 1 = 92
2019-20
DAYS

2020 - 21 365 DAYS

30 + 31 + 30 + 31 + 1
2021-22
=123 DAYS
 TOTAL 945 DAYS

Conclusion ---- (i)

Mr Balm fails to satisfy condition a U/S 6 (1) as his stay in india is less than 128 days
but
Mr Balm satisfies condition B as his stay in India exceeds 60 days in the previous year and 365
days in the preceding 4 year
Hence, Mr Balm is a RESIDENT

Mr Balm must satisfy the following two conditions U/S 6 (6) to be termed as a resident and
ordinarily resident -
a. he should be a resident for 2 years or more in the preceding 10 years of the previous year
and
b. his stay in India should be 730 days or more in the preceding 7 years of the previous year

Conclusion ---- (ii)

Mr Balm satisfies both condition A and B U/S 6 (6) since he had been a resident for more than 2
years in the preceding 10 yyears of the previous year and his stay in india was more than 730 days
in the preceding 7 years of the previous year
Hence, Mr Balm is a RESIDENT AND ORDINARILY RESIDENT
also,
In the FY 2022-23 mr balm earned (₹800000*9 months) ₹7200000 and since his residential status
is R & OR while his income is foreign income with a business set up and control abroad he would
be taxed in india.

Q3 - Test yourself - pg 38

Name of the Assessee - Mr Brown

Assessment year - 2023-24
Previous year - 2022-23
Legal status - Individual

Residential status -
Mr Brown must satisfy one of the following 2 conditions U/S 6 (1) to be termed as a resident of
india -
a. His stay in india should be of 182 days or more in the py
or
b. His stay in India should exceed 60 days or more in the PY and 365 days or more in the
preceding 4 years of the previous year
 YEAR DAYS R / NR

2018 - 19 120 days NR

2019-20 110 days NR

2020-21 100 days NR

2021-22 85 days NR

2022-23 62 days R

Conclusion ---- (i)

Mr Brown does not satisfy condition A
However, Mr Brown satisfies condition B as his stay in India exceeds 60 days in the PY and 365
days in the preceding 4 years of the PY
Hence, Mr Brown is a RESIDENT

Mr Brown must satisfy both the following conditions U/S 6 (6) to ber termed as a resident and
ordinarily resident -
a. He should have been a resident at least twice in the preceding 10 years of the previous year
and
b. His stay in India should exceed 730 days in the preceding 7 years of the previous year

Conclusion ---- (ii)

Mr Brown does not satisfy either of the conditions
Hence Mr Brown is a RESIDENT BUT NOT ORDINARILY RESIDENT