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Unit 2: Residential Status and Taxation
Tanima Dutta, Lovely Professional University

Unit 2: Residential Status and Taxation Notes

CONTENTS

Objectives
Introduction
2.1 Residential Status (Section 6)
2.2 Residential Status of a Company
2.3 Incidence of Tax

2.4 Scope of Income
2.5 Deemed Receipt and Accrual of Income in India
2.5.1 Meaning of “Income Received or Deemed to be Received”
2.5.2 Meaning of Income ‘Accruing’ and ‘Arising’

2.5.3 Income Deemed to Accrue or Arise in India (Section 9)
2.6 Categories of Income which are Deemed to Accrue or Arise in India
2.7 Summary
2.8 Keywords
2.9 Review Questions

2.10 Further Readings

Objectives

After studying this unit, you will be able to:
State the meaning and scope of residential status of an individual

Discuss the provisions of analysing the residential status of an individual
Describe the residential status of a company and other legal entities existing in India
Explain incidence of tax and its importance
Elucidate the concept of deemed receipt and accrual of income in India
Trace the categories of income which are deemed to accrue or arise in India in detail

Introduction

Tax incidence on an assessee depends on his residential status. For instance, whether an income,
accrued to an individual outside India, is taxable in India depends upon the residential status
of the individual in India. Likewise, whether an income earned by a foreign national in India or
outside India taxable in India depends on the residential status of the individual, rather than on
his citizenship. Therefore, the determination of the residential status of a person is very signifi cant
in order to find out his tax liability.

The inclusion of a particular income in the Total Income of a person for income-tax in India is
based on his residential status. There are three residential statuses that we will study in detail this
unit namely the Residents also referred to as Resident & Ordinarily Residents, the Resident but
Not Ordinarily Residents and the Non-residents. There are several steps involved in determining

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