Basic Concepts of Taxation for CFP – 2

Calculation of Residential Status

Kinds of Residential Status:

• Resident in India
  • Resident and Ordinarily Resident
  • Resident but Not Ordinarily Resident 
• Non Resident in India

Calculation of Resident and Ordinarily Resident:

Basic condition 1	He is in India in the previous year for a period of 182 days or more
Basic condition 2	He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year

 

Additional condition  1	He has been resident in India in last 2 out of 10 PY  immediately preceding  the relevant PY
Additional condition  2	He has been in India for a period of 730 days or more during 7 years immediately preceding the relevant PY

 

An individual becomes resident and ordinarily resident in India if,

1. He satisfies at least one of the basic condition
2. Both the additional condition

An individual who satisfies at least one of the basic conditions but does not satisfy the two additional conditions, is treated as RBNOR in India.  An individual becomes RBNOR in any of the following circumstances:

Case 1	If he satisfies at least one of the basic conditions but none of the additional conditions
Case 2	If he satisfies at least one of the basic conditions and one of the two additional conditions

An individual is a Non-resident in India if he doesn’t satisfy any of the basic conditions

 Basis of Charge: 

 

Time and place of accrual/receipt of income	ROR	RBNOR	NR
Received or deemed to be received in India by him or on his behalf	Y	Y	Y
Accrues or arises or deemed to accrue or arise to him in India	Y	Y	Y
Accrues or arises outside India and received outside India from a business controlled or setup in India	Y	Y	N
Accrues or arises outside India and received outside India from a business controlled or setup outside India	Y	N	N

Basic Concepts of Taxation for CFP – 1

Assessment Year:

• Assessment year is the period of 12 months starting from April 1 of every year and ending on March 31 of the next year
• The period of assessment year is fixed by statute
• Income of the previous year of an assessee is taxed during the following assessment year at the rates prescribed for such assessment year by the relevant Finance Act

Previous Year:

• The year in which income is earned is known as previous year
• And the next year in which income is taxable is known as assessment year

Hence, current assessment year is 2012-13 for the previous year 2011-12.

Exceptions: where the previous year is assessment year

1. Persons Leaving India

Example:

Mr. Michael, a foreign citizen, is residing in India since 2004. While completing his assessment for the AY 2009-10 on February 14, 2010, the AO comes to know that Michael will leave India on April 12, 2010 with no intension of returning.

2. Bodies formed for short duration

3. Person likely to transfer property to avoid tax

4. Discontinued business

The ‘Person’ is defined in the Act as:

1. Individual
2. HUF
3. Company
4. Firm
5. Association of persons
6. Local authority
7. Every artificial judicial person, not falling within any of the preceding category

 Assessee is defined in the Act as

• A person by whom any tax or any other sum of money (interest, penalty) is payable under the Act
• Every person in respect of whom any proceeding under this act has been taken for assessment of the following
  • His income/loss
  • Income/loss of any other person in respect of which he is assessable
• Every person who is a deemed assessee