INCOME FROM SALARIES

MEANING:
An income is treated as salary if the relationship between the payer
& the receiver is of MASTER & SERVANT [Employer & Employee].
In this chapter, we have to learn how to prepare a statement of
Income from Salaries.
Statement of Income from Salaries
Particulars ₹
* Basic Salary (Note 1) XX
* Allowances (Note 2) XX
* Provident Fund (Note 3) XX
* Gratuity (Note 4) XX
* Pension (Note 5) XX
* Leave Salary (Note 6) XX
* Voluntary Retirement Compensation (Note 7) XX
* Retrenchment Compensation (Note 8) XX
* Advance Salary, Arrears of Salary & Bonus (Note 9) XX
* Perquisites (Note 10) XX
GROSS SALARY XXX
Less: Deductions u/s 16:
 Standard deduction [Max.50,000] - XX
 Entertainment Allowance - XX
 Profession Tax - XX
TAXABLE INCOME FROM SALARIES XXX

Note 1: BASIC SALARY

Basic salary is fully taxable. If net basic salary is given in the
question then convert it in to GROSS by adding back the items
which are deducted from employee’s basic salary like
PF contribution, Profession tax etc.

Note 2: ALLOWANCES
Allowances are fixed amount received on monthly basis for a
particular expense. All the allowances are fully taxable except
following:
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 EXEMPT ALLOWANCES:
Type of Allowance Amt. of Exemption
Tribal Area Allowance Max.. 200 p.m.
Transport allowance Max. 3,200 p.m.
[i.e. Commutation Allowance for journey between
office & residence for physically handicapped employees]
Children Education AllowanceMax. 100 p.m. per child for
max. 2 children
Children Hostel Allowance Max. 300 p.m. per child for
max. 2 children
House Rent Allowance (HRA) 1) *50% / 40% of Salary
[Exempt only if employee is 2) Actual amount received
actually paying rent] 3) Rent paid – 10% of Salary
Whichever is less

* 50% , If rent is paid in Mumbai, Delhi, Chennai, Kolkata.

40% , If rent is paid in Other places
Salary = Basic + DA (in terms) + Turnover Commission

Underground Allowance Max. 800 p.m.

Allowances to employees of 70% of Amt. Received
Transport undertakings 10,000 p.m.
Travelling on “tour” or
Amt Exempt = Amt Spent
“transfer” allowance
Conveyance Allowance
Amt Exempt = Amt Spent
{for local travelling}
Uniform Allowance Amt Exempt = Amt Spent
Daily Allowance
Amt Exempt = Amt Spent
{for day to day exps on tour}
Helper Allowance
Amt Exempt = Amt Spent
{for office assistant}
Research Allowance Amt Exempt = Amt Spent
Note: Few more allowances are exempt but not so important

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 ENTERTAINMENT ALLOWANCE:
GOVT. EMPLOYEES OTHER EMPLOYEES
First Include
Then Deduction
Only Include
1) 1/5  Basic Salary No Deduction
2) Actual Amt Received
3) ₹ 5,000
Whichever is less

Note 3: PROVIDENT FUND

STATUTORY PROVIDENT FUND [SPF]

Employer Cont.
Fully Exempt
Employee Cont. Interest
Ignore* Fully Exempt

SPF
Lumpsum Amt.

Employee
Fully Exempt u/s 10(11)

* Because employee’s contribution is not an additional benefit; it’s

part of basic salary

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RECOGNISED PROVIDENT FUND [RPF]

Employer Cont.
Exempt up to
Employee Cont. 12% of Salary* Interest
Ignore Exempt up to
9.5%

RPF
Lumpsum Amt.

Employee
Fully Exempt u/s 10(12)

* Salary = Basic Salary + DA (in terms) + Turnover Commission

Lumpsum amount received from RPF is fully exempt only if the

employee has rendered service for at least 5 years.
If the employee retires before 5 years then the exemption in
respect of employer’s contribution and interest (in past)
shall be withdrawn.
However, in following cases, exemption will not be withdrawn
even if the service is less than 5 years.
Case i) The employee has retired due to uncontrollable
reasons. [E.g. Death etc.]
Case ii) Employer’s business is discontinued.
Case iii) The employee has retired and joined a new employer
with an instruction that his balance in RPF should be
transferred to the new employer.

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UNRECOGNISED PROVIDENT FUND [UPF]

Employer Cont.
Fully Exempt
Employee Cont. Interest
Ignore Fully Exempt

UPF
Lumpsum Amt.
[on retirement]
Employee

Employee’s Interest on Employer’s Interest on

contribution Employee’s Cont. contribution Employer’s Cont.
Ignore Taxable [IFOS] Taxable [IFS] Taxable [IFS]

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Note 4: GRATUITY

Gratuity received by Government employees is fully exempt but

Gratuity received by Private sector employees is partly exempt as
follows:
GRATUITY
[Exempt u/s 10(10)]

POGA Employees Other Employees

1) 15/26  Salary p.m.  No. of yrs* 1) ½  Salary p.m.  No. of yrs*
2) Actual Amt. recd. 2) Actual Amt. recd.
3) Max. ₹ 20,00,000 3) Max. ₹ 20,00,000
Whichever is less Whichever is less

Latest Basic p.m. Avg. Basic p.m.

(+) Latest DA p.m. (Both) (+) Avg. DA (in terms) p.m.
(+) Avg. TC p.m.
(Avg. of preceding 10 mnths)

*No. of years of service *No. of years of service

Fraction should be rounded off Fraction should be ignored.
if it is more than 6 months. E.g. 24 yrs., 9m = 24 yrs.
E.g. 24 yrs., 9m = 25 yrs.

POGA Employees means employee covered by

Payment Of Gratuity Act, 1972

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Note 5: PENSION

Pension is a monthly amount received after retirement. On

retirement, the employee has the option to convert his monthly
pension in to a lumpsum amount. Such lumpsum amount is known
as commuted pension.
PENSION

Uncommuted Commuted
Monthly basis Lumpsum Amt.

Fully taxable for Exempt u/s 10(10A)

all employees

Govt. employees Other employees

Fully exempt Exempt upto

50% / 33.333333…%

If Gratuity is If Gratuity is
Not Received Received

Note 6: LEAVE SALARY

Leave salary means encashment of “unused leave” (Leave Saved).

E.g. If employer allows 40 days leave every year and if employee
has taken only 10 days leave in a particular year then the unused
leave of 30 days can be:
1) Encashed immediately
or 2) Carried forward to subsequent years and encashed at the
time of retirement

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LEAVE SALARY

Encashed during the service Encashed on retirement

Fully taxable Exempt u/s 10(10AA)
for all employees

Govt. employees Other employees

Fully exempt Exempt upto

1) Leave credit  Avg. salary p.m.
2) 10 mths  Avg. salary p.m.
3) Actual amt. recd.
4) ₹ 25,00,000
Whichever is less

 Leave credit =
Leave allowed as per Govt. Rules XXX
(Max. 30 days  No. of yrs. Service ignoring fraction)
Less: Leave taken - XX
Leave credit XXX

 Average salary p.m. =

Avg. Basic p.m. + Avg. D.A. (in terms) p.m. + Avg. TC p.m.
[Average of last 10 months up to the date of retirement]

Note: In case of gratuity, month of retirement should be ignored

while selecting10 months.

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Note 7: VOLUNTARY RETIREMENT COMPENSATION

It is exempt u/s 10(10C) if the voluntary retirement scheme is as

per the guidelines prescribed in Rule 2BA.

 Amount of Exemption:
1) Salary* p.m.  3 months  No. of years of service completed
2) Salary* p.m.  1 month  No. of months of service remaining
3) Actual amount received
4) ₹ 5,00,000
Whichever is less
* Salary p.m. = Latest [Basic p.m. + DA (in terms) p.m. + TC p.m.]

Note 8: RETRENCHMENT COMPENSATION

It is exempt u/s 10(10B)

 Amount of Exemption:
1) Amount calculated as per Industrial Disputes Act (Given)
2) Actual amount received
3) ₹ 5,00,000
Whichever is less

Note 9: ARREARS/ADVANCE SALARY/BONUS

Arrears of Salary
Arrears received after settlement of dispute is fully taxable.
Advance Salary
It is taxable.
Note: If the word advance is given without the word salary then it
is a Loan/Liability (Ignore it)
Bonus
It is taxable on ‘Receipt basis’.

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Note 10: PERQUISITES

Perquisites are additional benefits over and above the monthly

salary. Here, the employer provides money or facility for personal
expenses of employee.
If employer provides money then it is monetary perquisite and if
employer provides facility, then it is non-monetary perquisites.

Allowance Perquisites
Allowances are fixed amount Perquisites are provided over and
part of monthly salary above the monthly salary
received on monthly basis [when the expenses are actually
[whether the expense is incurred]
incurred or not]
Example: Example:
Medical Allowance. Medical bills paid/reimbursed by
employer (monetary)
Free medical facility (non-monetary)

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TAX TREATMENT OF PERQUISITES

1) MEDICAL FACILITIES:

MEDICAL FACILITIES

In India Outside India

Treatment in Otherwise Benefit of Benefit of Benefit of

Govt. TREATMENT STAY TRAVEL
Hospital Fully Exempt Exempt Fully
Recognised Taxable to the to the Exempt
Hospital extent extent If the Gross
Employer’s permitted permitted Total
Own Hospital by RBI. by RBI Income of
Fully Exempt employees
is upto
` 2,00,000

Note A: Benefit of Stay and Travel is exempt only for the patient
and one attendant.

Note B: Medical facilities (inside or outside India) is exempt only if

the patient is:
 Employee
 Spouse
 Children
 Dependent (Parent/Brothers/Sister)

Note C: Mediclaim Insurance premium paid or reimbursed by

employer is fully exempt.

Note D: If medical bills are reimbursed by employer for treatment

of illness related to COVID-19 then it is fully exempt (even
if the treatment is not in GRE hospital)
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2) LEAVE TRAVEL CONCESSION:

Leave travel concession is exempt u/s 10(5) read with Rule 2B.
 Amount of Exemption
JOURNEY

By AIR By Other Mode

Amt. Exempt
1. Economy Railway Not Available
Class Fare Facility
2. Amt. spent Available
Amt. Exempt RPT Available Not Available
1. First Amt.Exempt 1. First Class
Class 1. First AC Rail
AC Rail Class Fare
Fair Deluxe (Similar
2. Amt. Fare journey)
spent 2. Amt. 2. Amt.
Spent Spent

RPT – Recognised Public Transport

Note: Exemption for leave travel is allowed only for the journey of:
 Employee
 Spouse
 Children**
 Dependent (Parents/Brother/Sister)

**Maximum 2 children, if the children are born on or after

1 October, 1998 (no limit on children born before 1.10.1998)

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3) FREE LUNCH:
Exempt up to ₹ 50 per meal if it is in office or through paid
vouchers. Free refreshments is fully exempt.

4) INTEREST BENEFIT:
Interest Benefit

Loan up to ₹ 20,000 Loan > ₹ 20,000

Interest benefit is Interest benefit is
Fully Exempt Fully Taxable

[Taxable Amt. = Loan Amt.  (SBI Rate – Actual Rate)]

Interest benefit on loan taken from employer for treatment of

specified disease is fully exempt.

5) GIFT FROM EMPLOYER:

Gift in kind or Gift voucher is exempt upto ₹ 5,000)
Cash gift is fully taxable.

6) EDUCATION FACILITY:

Education Facility

Employee Children Other Family Member

Fully Exempt Exempt upto Fully Taxable
₹ 1000 p.m.p.c.
(If in Employer’s Own
Institute or Other Institutes
where employer has tie-up)
No limit on no. of children

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7) HOUSE (ACCOMODATION):

HOUSE

Govt Employees Other Employees

If E’er Own House If Rented House

Taxable Value = Taxable Value = Taxable Value =
Rent as per 5%/7.5%/10% 10% of Salary*
Govt. rules of Salary* Rent paid by E’er
Whichever is less
(+) (+) (+)
Value of Furniture Value of Furniture Value of Furniture
Dep.@ 10% p.a. Dep.@ 10% p.a. Dep.@ 10% p.a.
on cost on cost on cost
[if own furniture] [if own furniture] [if own furniture]
or or or
Hire charges Hire charges Hire charges
paid by E’er paid by E’er paid by E’er
[if hired] [if hired] [if hired]
(-) (-) (-)
Rent charged by Rent charged by Rent charged by
Employer Employer Employer

Population %
Upto 15,00,000 5%
More than 15,00,000 up to 40,00,000 7.5%
More than 40,00,000 10%

*Salary for the purpose of above calculation includes BDA BCM

B – Basic Salary
D – Dearness Allowance (In terms)
A – Other Taxable Allowances
B – Bonus
C – Commission
M – Other Monetary Incomes (excluding perquisites)

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Important points on BDA BCM
1) Only current year’s salary should be considered. Ignore past
and future i.e. ignore arrears of salary, advance salary and
past bonus.
2) BDA BCM should be calculated for the period during which
house is occupied by the employee.
3) If the employee is employed with more than one employer,
then while calculating BDA BCM, salary from all the
employers should be considered.
4) Provident Fund contribution and interest should not be
considered in BDA BCM.

 Hotel accommodation:
If an employee (whether Government or Non-Govt.) is
provided an accommodation in Hotel, then the taxable value
1) 24% of BDA BCM
2) Rent paid by Employer to Hotel
whichever is less
Less: Rent charged by Employer.

 Important note:
If employee is transferred to some other place and he is provided
an accommodation in Hotel at other place, then the stay in
Hotel up to 15 days is exempt.

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8) USE OF MOVABLE ASSETS:

USE OF MOVABLE ASSETS

Computer/Laptop Car Other Assets

Fully Exempt See Below Taxable Amt.
=
Dep.@ 10% p.a. on cost
[if Asset owned by E’er]
or
Hire charges paid by E’er
[if Asset hired by Employer]

CAR FACILITY

Fully Office to Fully Partly Office

Office use Residence Private use Partly Private
No benefit Fully Ex.. Taxable Taxable
No Tax (Note ‘a’) (Note ‘b’)

Note ‘a’: CAR FOR FULLY PRIVATE USE:

Depn @ 10% p.a. on cost/Hire charges paid by E’er XXX

Add: Running & Maintenance Exps (If paid by E’er) XXX
Add: Drivers Salary (If paid by Employer) XXX
Taxable Amount XXX

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Note ‘b’: CAR FOR PARTLY OFFICE PARTLY PVT. USE:

CAR – PARTLY OFFICE PARTLY PRIVATE

Car owned by Employee Car owned by Employer

Expenses Expenses

Paid by E’ee Paid by E’er Paid by E’ee Paid by E’er

Ignore Taxable Amt. Taxable Amt. Taxable Amt.
(No Benefit) = = =
Total Amt. Recd. Rs. 600* pm Rs. 1,800* pm
from Employer [If Car upto [If Car upto
(-) Fixed Amt. 1600cc] 1600cc]
For Office use or or
(1800/2400pm*) Rs. 900* pm Rs. 2,400* pm
[If Car > [If Car >
1600cc] 1600cc]

*All the amounts should be increased by ₹ 900 p.m. if Driver is

provided by Employer or his salary is paid by Employer.

9) TRANSFER OF MOVABLE ASSETS:

TRANSFER OF MOVABLE ASSETS

Computer/Laptop Car Other Assets

Taxable Amt. Taxable Amt. Taxable Amt.
= = =
WDV - SP WDV – SP WDV – SP

Cost Cost Cost

(-) Dep. @ 50% (-) Dep. @ 20% (-) Dep. @ 10%
(WDV Method) (WDV Method) (SLM Method)
Depn should be calculated for completed years starting from the date
of purchase by employer up to the date of transfer to employee
[Part of the year should be ignored]
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10) EMPLOYEES STOCK OPTION SCHEME [ESOPS]:
Taxable Amt. =
FMV on the date of exercising the option – Issue Price.

Mobile bills paid/reimbursed by employer is fully exempt

Scholarship for employee’s children is fully exempt u/s 10(16)

Perquisites other than those discussed above are fully taxable

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 INCOME FROM HOUSE PROPERTY

HP
LOP SOP

Taxable SOP (R)s SOP (B)

Two Remaining Ignore

SOP(R)s SOP(R)s = DLOP

Exempt Taxable
LOP – Let out property
SOP (B) – Self Occupied Property for Business
SOP (R) –Self Occupied Property for Residence
DLOP – Deemed to be let out property

Statement of Income from House Property

Particulars LOP DLOP SOP (R)
Gross Annual Value XX XX NIL
Less: Municipal Taxes (XX) (XX) NIL
Net Annual Value XX XX NIL
Less: Deduction u/s 24
 Standard dedn [30% of NAV] (XX) (XX) NIL Limit
 Interest on Loan (XX) (XX) (XX)
XX XX (XX)

Taxable IFHP XXX

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GROSS ANNUAL VALUE

Municipal Value XX
Fair Rent XX
whichever is higher XX
Standard Rent XX
Expected Rent XX
Actual Rent Received XX
GAV (whichever is higher) XX

Municipal Value means rent as per the records of Local Authority.

Fair Rent means rent of similar houses in the same locality.
Standard Rent means maximum rent which can be legally
recovered as per “Rent Control Act”.
Expected Rent is computed for the entire 12 months. However,
if the property is newly acquired during the PY say on 1st June,
2023 then it should be computed for 10 months only i.e.
ownership period.
Actual Rent should be taken for the period actually let-out
(whether received or outstanding)

GAV of LOP which is VACANT for some part of the year

If Actual Rent Received + Vacancy Rent  Expected Rent
then GAV = Actual Rent Received
If Actual Rent Received + Vacancy Rent < Expected Rent
then GAV = Expected Rent

MUNICIPAL TAXES
(a) Any tax paid to Municipality i.e. Local Authority is Municipal
Tax like Water Tax, Local Tax, Property Tax, Corporation Tax,
Sewerage Tax, etc.
(b) Deduction is allowed on payment basis
(c) Deduction is allowed only, if it is paid by the owner.
(d) If it is given in % form then it apply % on Municipal Value.
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INTEREST ON LOAN
(a) Deduction is allowed on accrual basis.
(b) Loan may be taken for any purpose of house whether
purchase, construction, repairs, renovation etc..
(c) Dedn is allowed whether loan is taken from Banks/Others
[But u/s 80C, deduction for principal repayment is allowed
only if loan taken from Banks/Financial Institution]
 Housing Loan
Deduction u/s 24 Deduction u/s 80C
Interest Principal
Loan taken from Any One Loan taken from Banks/FI’s
Loan for any purpose Loan for Purchase/Const.
(d) Amount of deduction:
Interest on Loan

LOP/DLOP SOP (R)

Combined for
both the SOP(R)s
No Limit Limit

Loan taken for Loan taken for

Purchase/Construction Repairs etc...
Loan taken before 1.4.99 Max. ₹ 30,000
Max. ₹ 30,000
Loan taken on or after 1.4.99
Max. ₹ 2,00,000*
* If purchase/construction is completed within 5 years
from the end of the year in which loan is taken and the
assessee furnishes a certificate from the lender specifying
the amount of interest payable.
(e) Pre-Construction Interest:
It means interest paid before the year in which
construction/acquisition is completed. It is allowed as
deduction in 5 equal instalments, starting from the year in
which construction/acquisition is completed.

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(f) If loan is taken by mortgaging House 1 & it is used for
purpose of House 2 then deduction is allowed in House 2.

UNREALISED RENT
(a) It means rent which could not be recovered (Bad Debts).
(b) It should be deducted from Actual Rent.
(c) Recovery of unrealised rent should be added at the end of
the statement. Taxable Amt. =
Unrealised Rent Recovered – 30% Standard Deduction
Note: Any expense on recovery shall not be allowed.

ARREARS OF RENT
If the rent of the property is retrospectively increased or due to any
other reason, the owner receives rent for past years (which was
not taxed earlier) then it should be added at the end of the
statement.
 Taxable Amount = Arrears Received – 30% Standard Dedn
Note:
Recovery of unrealized rent and arrears of rent shall be taxable
even if the assessee is no more the owner of such house property.

PARTLY LET OUT PROPERTY

It means some area of the house is let out & the remaining area is
self-occupied. In such case, prepare 2 columns assuming there are
2 houses [LOP & SOP (R)].
Divide all the amounts in the given ratio.
Don’t divide actual rent because it is already for let out portion.
Interest on loan for let out area – Deduct full amount
Interest on loan for self-occupied area – Deduct as per limit

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CO-OWNERSHIP
In such case, prepare the statement as usual & at the end divide
the final answer between the owners (in the given ratio)
If such house is SOP (R), then the limit for interest deduction will be
maximum ₹ 30,000/2,00,000 per owner.

OTHER POINTS
(a) No standard deduction, if NAV is Negative.
(b) Penalty in respect of M. Tax & Int. on Loan is not allowed.
(c) A house is treated as SOP (R) only if it is self-occupied for full
12 months [it may be vacant for some period but should not
be let-out at all]. If the house is let out for some months &
self-occupied for remaining months then it is treated as LOP.
(d) Expenses of the house property:
 Municipal Taxes – Allowed
 Interest on loan – Allowed
 Other Expenses – Not Allowed

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 INCOME FROM OTHER SOURCES

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STATEMENT OF INCOME FROM OTHER SOURCES
D Dividend income XXX
W Winnings from lottery, races, gameshows etc. XXX
R3 Rent Income
1. Rent from Other Assets (other than HP) XXX
2. Rent from Sub-letting of house property XXX
3. Composite rent of (Bldg. + Other Assets) XXX
A Agricultural Income
 In India [Exempt u/s 10(1)] ----
 In Foreign [Taxable] XXX
M1 Receipts as MP/MLA
 Salary [Taxable] XXX
 Daily allowance [Exempt u/s 10(17)] ----
M2 Income of minor children XXX
Exempt up to Rs.1500 per minor child u/s 10(32)
U Income from ‘units’ of UTI/Mutual fund XXX
F Family pension received after the death of employee XXX
[Fully exempt u/s 10(19) if received after the death of
Army employee]
A Award
 From Government [Exempt u/s 10(17A)] ----
 From Others [Taxable] XXX
K Amount receipt from Keyman Insurance Policy XXX
Note: Amt. received from Life Insurance Policy is
Exempt u/s 10(10D)
I Interest Incomes (Note 1)
 GP2S [Exempt 10(15), (11), (11A)] -----
 Remaining Interest Incomes [Taxable] XXX
R Royalty Income XXX
G Gifts from friends, relatives etc.. XXX
(Discussed in separate topic)
Etc……..
Taxable IFOS XXX

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Note 1:
INTEREST INCOMES

GP2S Remaining Interest Income

Exempt Taxable

G – Gold Bonds issued under Gold Deposit Scheme, 1999

& Gold Monetization Scheme, 2015 [Exempt u/s 10(15)]
P – Post Office Savings Bank Account (POSBA)
[Exempt u/s 10(15) upto ₹ 3,500 – In case of joint a/c,
exempt upto ₹ 7,000]
P – Public Provident Fund A/c (PPF) [Exempt u/s 10(11)]
S – Sukanya Samriddhi Account Scheme [Ex.. u/s 10(11A)]

Note 2: DEDUCTIONS u/s 57:

Deduction is for EXPENSES.
Expenses given in the question should be treated as follows:
Income Deduction u/s 57
Taxable Incomes DEDUCT all expenses.
Exempt Incomes IGNORE all expenses.
Winnings IGNORE all expenses.
Dividend and Income from DEDUCT only one expense i.e.
units of UTI/Mutual fund interest on borrowings [max.
20% of Dividend/units’ income]
Family Pension STANDARD Deduction
1/3 × Actual amt. received
₹ 15,000
Interest on compensation STANDARD Deduction
on account of compulsory 50% of Amount received
acquisition

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 RESIDENTIAL STATUS
 Why to decide?
It is necessary to decide because:
- If a person is a ROR [Resident and Ordinarily Resident] then
he has to pay tax on World income.
- If a person is NOR [Not Ordinarily Resident] then he has to
pay tax on all Indian incomes + Only One foreign income
i.e. foreign business income controlled from India.
- If a person is NR [Non-Resident] then he has to pay tax only
on Indian incomes.

 How to decide?
INDIVIDUAL

Basic Conditions – NOTE 1

Satisfied Not Satisfied

Otherwise
Indian citizen with
Indian income > 15 lakhs
and not liable to pay tax
in any foreign country

RESIDENT DEEMED RESIDENT– NOTE 2

Additional Conditions – NOTE 3

Satisfied Not Satisfied

ROR NOR Always NOR NON-RESIDENT

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 CA SHIRISH VYAS/ CA INTER / DIRECT TAX / RESIDENTIAL STATUS

NOTE 1: BASIC CONDITIONS:

Stay in India for 182 days or more in current P.Y.
or
Stay in India for 60/120 days or more in current P.Y. and
Stay in India for 365 days or more in preceding 4 PYs.

Use of above basic conditions depends upon the

type of individual as follows:

INDIVIDUALS

Normal Indian citizen or Indian citizen or Indian citizen

individuals Indian origin* Indian origin* leaving India
[settled abroad], [settled abroad], during P.Y.
who comes to who comes to for employment
India during P.Y. India during P.Y. outside India or as
for visit for visit a member of crew
[having [having of Indian ship
Indian income Indian income
> 15 lakhs] upto 15 lakhs]

Resident if Resident if Resident Resident

any one basic any one basic only if 1st basic only if 1st basic
condition is condition is condition is condition is
satisfied i.e. satisfied i.e. satisfied i.e. satisfied i.e.
182 days 182 days 182 days 182 days
or or
60 + 365 days 120 + 365 days

*An individual is said to be a person of Indian origin if he himself

or his parents or his grandparents were born in undivided India.

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 CA SHIRISH VYAS/ CA INTER / DIRECT TAX / RESIDENTIAL STATUS

NOTE 2: DEEMED RESIDENT:

Normally, residential status is decided based on number of days an

individual stays in India [as discussed in basic conditions].
However, if following conditions are satisfied then an individual is
deemed as resident of India [irrespective of his stay in India]:
i) Such Individual is an Indian Citizen;
ii) His Indian* income is more than 15 lakhs and
iii) He is not liable to tax in any foreign country by reason
of his domicile, residence or any other similar criterion.
* Indian income = Income from sources in India + Income from
foreign business controlled from India.

NOTE 3: ADDITIONAL CONDITIONS:

Resident in India for 2 yrs. or more out of preceding 10 PYs

and
Stay in India for 730 days or more in preceding 7 PYs

If an individual satisfies both the above additional conditions

then he is ordinarily resident in India.

However, in case of an Indian citizen or Indian origin [settled

abroad], who comes to India during P.Y. for visit [having Indian
income > 15 lakhs], he will be always be treated as NOR
if he has become resident by satisfying condition of
120 days + 365 days.

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 CA SHIRISH VYAS/ CA INTER / DIRECT TAX / RESIDENTIAL STATUS

HUF

Control & Mngt. in India [partly/fully] Otherwise

Resident Non-Resident

If Karta satisfies both the Additional conditions Otherwise

Ordinarily Resident NOR

PARTNERSHIP FIRMS/AOP

Control & Mngt. in India [partly/fully] Otherwise

Resident Non-Resident

COMPANIES

Indian Company Foreign Company

Resident

If POEM in India If POEM outside India

Resident Non-Resident

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