Residential Status – Section 6 of Income Tax Act

Residence in India.

546. 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) 55[* * *]

(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.

56[Explanation.—In the case of an individual,—

(a) being a citizen of India, who leaves India in any previous year 57[as a member of the crew of an 58Indian 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 59[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 management60 of its affairs60 is situated wholly60 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 management60 of its affairs60 is situated wholly60 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.

61[(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.]

Resident but not ordinarily resident

To determine category – resident or non-resident or Residents but not ordinary, you may apply the following tests:

Resident

A Resident is one who falls into either of these two categories:
Is in India for 182 days in the year or more, OR
In the preceding four years was in India for 365 days or more, and in the current tax year is in India for a total of 60 days or more
This applies to citizens of any nationality. However the period of 60 days in the second clause above will be extended to 182 days for those who fall into one of these two categories:
an Indian citizen who left India in any year for employment outside India, OR
an Indian citizen or a foreign citizen of Indian origin (NRI), who is outside India, comes on a visit to India
Non-Resident
A tax assessee is non-resident if he or she is not a Resident as-per the section above.

Resident but Not Ordinarily Resident
A Resident is “not Ordinarily Resident” if one fulfils either of these two conditions:
Has been a Non-Resident in India for 9 out of 10 preceding years, OR
During the 7 preceding years been in India for a total of 729 days or less

Foreign Income Taxed On Residential Status

Under the Income-Tax Act, 1961, the taxability of an individual is dependent on his residential status, which is determined on the basis of his physical presence (number of days) in India during the relevant financial year.

A resident individual is subject to tax on his global income in India subject to the foreign tax credit on taxes paid outside India. As such, income from foreign investments would generally be liable to tax in India. In case of non-residents, such an income is not liable to tax as long as it is not directly received in India.

Tax assessees may be resident or non-resident. Residents are further subdivided into two sub-categories – (a) resident and ordinarily resident, and (b) resident but not ordinarily resident. To determine which category you fall into, apply the following tests to the tax year from April 1 to March 31.

Resident

A Resident is one who falls into either of these two categories:
Is in India for 182 days in the year or more, OR
In the preceding four years was in India for 365 days or more, and in the current tax year is in India for a total of 60 days or more
This applies to citizens of any nationality. However the period of 60 days in the second clause above will be extended to 182 days for those who fall into one of these two categories:

an Indian citizen who left India in any year for employment outside India, OR
an Indian citizen or a foreign citizen of Indian origin (NRI), who is outside India, comes on a visit to India

Non-Resident

A tax assessee is non-resident if he or she is not a Resident as-per the section above.

Resident but Not Ordinarily Resident

A Resident is “not Ordinarily Resident” if he or she fulfils either of these two conditions:

Has been a Non-Resident in India for 9 out of 10 preceding years, OR
During the 7 preceding years been in India for a total of 729 days or less

New rules require disclosure of foreign assets

With increased global mobility, India has a large number of foreign nationals / Persons of Indian origin working in India. India has a large foreign student community as well. Given that these individuals/their accompanying spouses could have assets overseas, a reporting requirement will be triggered where these individuals are considered “resident in India”.

Accordingly, a foreign national / his or her spouse / a student having overseas bank account or investments would be covered under this reporting requirement if their presence in India exceeds 182 days even in the first year of arrival to India.

The Central Board of Direct Taxes (CBDT) recently notified the new tax return forms for the tax year 2011-12 or assessment year 2012-13, mandating disclosure of foreign assets. In the tax return forms called ITR 2/3, a new section called ‘FA’ (Foreign Assets) has been introduced to disclose foreign assets.

As per the notification, individuals having taxable income exceeding Rs.1 million (nearly $20,000) and domestic and expatriate resident individuals with assets located overseas have to file their returns through the electronic mode.

Resident individuals are required to file tax returns in India irrespective of whether they have income chargeable to tax in India or not.

As per the Finance Bill 2012, resident individuals having assets, including financial interest in any entity located outside India are required to furnish tax returns electronically from financial year 2011-12 onwards giving complete details of such assets.

In other words, income is not the only criteria to file an income tax return in India now. Those resident individuals who have assets outside the country are compulsorily required to file income tax return, irrespective of whether they have any income generated in India or not.

Totalization Agreement with Japan

Employees sent from Japan to India as well as those sent from India to Japan are currently obliged to affiliate to the social security systems of both countries thus causing duplicable payments of social security contribution which impose a huge economic burden on both individuals and corporations. It is expected that the conclusion of an agreement between Japan and India on social security will solve these problems through reducing the burden imposed on the employees and corporations, and further promote human and economic exchanges between the two countries.

Japan and India signed the Comprehensive Economic Partnership Agreement (CEPA) on 16th February 2011 in Tokyo. After the completion of the respective necessary legal procedures, the Agreement entered into force on 1st August 2011.

Under CEPA, Japan and India also agreed to enter into negotiations on a Social Security Agreement in order to complete the consultations and negotiations within 36 months after the commencement of the consultations, which took place in January 2011. The first round of negotiations was held last week between 25 -29 July in Tokyo which contributed significantly towards the conclusion of the negotiation.

The first meeting of the Joint Committee established under the Agreement was held on 1st August 2011 in Delhi. At this meeting, co-chaired by Ambassador Akitaka Saiki (Japanese side) and Dr. Rahul Khullar, Commerce Secretary (Indian side), the Joint Committee made the decisions necessary for the implementation of the Agreement, such as the Operational Procedures. It is expected that this Agreement will promote the liberalization and facilitation of trade as well as investment between the two countries and will further strengthen their economic ties in wide-ranging fields.

India, Japan reach agreement on social security contributions

India, Japan reach agreement on social security contributions
India and Japan have reached an agreement to streamline social security contributions aiming to further promote human and economic exchanges between the two countries.

The governments of Japan and India have reached a substantial agreement on social security, as a result of its Fourth Round of inter-governmental negotiations which was been held from 28 May in Tokyo, a Japanese Embassy statement said here.

As per the present agreement, Japanese and Indian employees are required pay the social security contribution in both the countries, imposing a huge economic burden on individuals and their corporations.

“It is expected that after its conclusion, the agreement will solve these problems through reducing the burden imposed on the employees and corporations, and further promote human and economic exchanges between the two countries,” the statement said.

Fixed Assets Audit

At Amit Arun & Assiciates we undertake Fixed Assets Audit & Verification Services

Delhi, Gurgaon, Manesar, Noida, Greater Noida, Faridabad, Baddi, Himachal Pradesh, Jaipur, Alwar, Nagpur, Punjab, Pune and Mumbai.

To Conduct Physical verification of Assets at multiple locations
Identification & tagging of all assets
Reconciliation of results with Assets Register & book record
Uploading in database
Discrepancy resolution
IFRS & CARO compliance

For any inquiries or questions regarding Fixed Assets Management or Verification Contact us at info@amitarun.com or dial 9810414035

Or visit our website – www.amitarun.com

Identification of a fixed asset

Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. Even in the case of service entities such as hotels, banks, financial institutions, insurers, mobile / telephone service providers etc. it has become imperative to invest heavily in furnishing, equipment, and technology to attract, and retain customers. It is important for a business entity to have a list of its fixed assets. A fixed asset register is that list of assets.

Identification of a fixed asset

In a large corporation, the task of identifying and locating a specific fixed asset can be difficult unless numbering is scientific, systematic, and up-to-date. A common problem in most companies is the improper maintenance of the FAR. Physical verification of fixed assets becomes a futile exercise unless the FAR is properly maintained.

It would be advisable to use a scientific numbering technique to identify fixed assets. The process of numbering fixed assets is called tagging.The purpose of Tagging assets is Tracking movement of assets from one place to another place. An identification number (combination of alphabets, and numbers) is written on the asset. Engraving the identification number on the asset is advisable in the case of plant and machinery where there is heavy wear and tear.

A tag verifies the existence of assets and their location, aids in maintenance, provides a common ground for communication between the Accounts Department and the end-users and recording the net book value of asset in case of sale / scrapping.

It is not necessary to tag all fixed assets. Land, buildings and vehicles all have independent systems of tracking in registration papers and survey numbers.

Fixed Assets Verification Services

At Amit Arun & Assiciates we provide following Fixed Assets Verification Services

Delhi, Gurgaon, Manesar, Noida, Greater Noida, Faridabad, Baddi, Himachal Pradesh, Jaipur, Alwar, Nagpur, Punjab, Pune and Mumbai.

To Conduct Physical verification of Assets at multiple locations

Identifyication & tagging of all assets

Reconciliation of results with Assets Register & book record

Uploading in database

Discrepancy resolution

IFRS & CARO compliance