As per Section 5 of the Income
Tax Act 1961, incidence of tax on a taxpayer depends on his residential status
and also on the place and time of accrual or receipt of income.
In
order to understand the relationship between residential status and tax
liability, one must understand the meaning of “Indian income” and “Foreign
income”. An Indian income is one which satisfies any of the following
conditions:
a.
If income is received (or deemed to be
received) in India during the previous year and at the same time it accrues (or
arises or is deemed to accrue or arise) in India during the previous year, or
b.
if income is received (or deemed to be
received) in India during the previous year but it accrues (or arises) outside
India during the previous year, or
c.
if income is received outside India during the
previous year but it accrues (or arises or is deemed to accrue or arise) in
India during the previous year.
Similarly,
Foreign income is one which satisfies both the following conditions:
a.
Income is not received (or not deemed to be
received) in India; and
b.
income does not accrue or arise (or does not
deemed to accrue or arise) in India.
Indian
income is always taxable in India irrespective of the residential status of the
taxpayer.
Foreign
income of an individual and HUF from a business controlled or profession setup
in India will be taxable in the hands of resident and ordinarily resident and
resident but not ordinarily resident but not in the hands of a non-resident.
However, Foreign income from a business controlled or profession setup outside
India will be taxable only in the hands of resident and ordinarily resident and
not in the hands of a resident but not ordinarily resident or a non-resident
person.
Foreign
income of any other taxpayer (Company, Firm, AOP, BOI etc.) will be taxable if
the taxpayer is resident in India and will not be taxable in case the taxpayer
is non-resident in India.
Tax
incidence of different taxpayers is as follows—
|
Particulars
|
ROR
|
RNOR
|
NR
|
|
Income received in India
Income deemed to be received in India
Income accruing or arising in India
Income deemed to accrue or arise in India
Income received/ accrued outside India from a business in India
Income received/ accrued outside India from a business
controlled outside India
|
Yes
Yes
Yes
Yes
Yes
Yes
|
Yes
Yes
Yes
Yes
Yes
No
|
Yes
Yes
Yes
Yes
No
No
|