Meaning of residential status - Residential Status and Scope of Total Income, Income Tax Laws Video Lecture | Income Tax Laws - B Com

Hi there ! This is Student Guide Live & we
will be discussing the basics of residential
status in this video. Before you go ahead,
note that the concept of residential status
is very important in determining the income
taxable in the hands of assessee. All other
things remaining constant, taxability of an
income may change in the hands of different
assessees due to different residential status.
For better understanding we can take example
of railway fare. Distance traveled and services
availed by the passenger determines the amount
of railway fare payable by him. Therefore,
two adults of same age travelling by the same
train at the same time, boarding the train
at same station may end up in paying different
fare if they travel different distance or
avail different services. Similarly, due to
different residential status the amount of
taxable income may change in the hands of
different assessees. In this video we will
not be discussing the conditions of section
6, instead we will focus on the result of
section 6.
Section 6 deals with the concept of residential
status of an assessee.
Section 6 creates four possible states of
residential status called as
One – Resident assessee
Two - Resident and Ordinarily Resident assessee
Three - Resident but not ordinarily resident
assessee
And Four - Non resident assessee However,
every assessee must be a person first and
a person can be individual or artificial person,
i.e. an assessee can be either an individual
or HUF or Firm or Company or AOP / BOI or
a Local Authority or other artificial person.
Therefore, after stating the four possible
states of residential status of an assessee,
the conditions given by Section 6 are not
for assessee but for person. In other words,
the entire discussion of residential status
revolves around different types of person
who are assessee
Check the different entities on the screen.
Some of them are person and some are not.
Those who are not a person can not be assessee,
hence the concept of residential status explained
by Section 6 is not applicable to them.
After separating all the entities as person
or non person, let us divide all the person
in seven categories.
As discussed earlier, each category of person
can be either,
Resident or
Resident & Ordinarily Resident or
Resident but not ordinarily resident or
Non resident
Upon analysis of Section 6 & its subsections,
we can conclude that
Both the Individual & HUF can be either
Resident & Ordinarily Resident or
Resident but not ordinarily Resident or
Non Resident
Whereas Firm, Company, AOP / BOI, Local Authority
& Artificial / juridical person can be either
Resident
Non Resident
Further, the scope of total income as explained
by Section 5, prescribes same rules for
Resident as well as
Resident & Ordinarily Resident
Therefore, despite of 4 possible states of
residential status of an assesse, for all
practical purposes they are treated as 3 possible
states.
Now, that you have understood what can be
the residential status of each category of
person, you can study the conditions given
by Section 6 to attain any one of theses states.
Remember, that fulfilling the conditions of
Sec 6 will make the person R or ROR or RNOR,
and non fulfilling all these conditions will
automatically result in NR or Non Resident
Status.