Costing and Taxation · Ch 4 — Residential Status and Incidence of Tax (Individual)
Incidence of Tax: Scope of Total Income by Residential Status
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Incidence of Tax: Scope of Total Income by Residential Status
Residential status is not an end in itself — its whole purpose is to fix the scope of total income: exactly which items of income get added into an individual's Total Income for the year. This is what the syllabus calls the incidence of tax.
The four kinds of income a person can receive
Any item of income an individual receives can be placed into one of these categories:
- Income received or deemed to be received in India during the previous year.
- Income accruing or arising, or deemed to accrue or arise, in India during the previous year.
- Income accruing or arising outside India during the previous year, from a business controlled from India (wholly or partly) or a profession set up in India.
- Income accruing or arising outside India during the previous year, from any OTHER source (i.e., not from a business controlled from India or a profession set up in India).
Incidence of tax for each residential status
| Type of income | ROR | RNOR | NR |
|---|---|---|---|
| 1. Received/deemed received in India | Taxable | Taxable | Taxable |
| 2. Accrues/arises (or deemed) in India | Taxable | Taxable | Taxable |
| 3. Accrues/arises outside India, from a business controlled from India or profession set up in India | Taxable | Taxable | Not Taxable |
| 4. Accrues/arises outside India, from any other foreign source | Taxable | Not Taxable | Not Taxable |
Note
Reading the table in one line per status
- A ROR is taxed on income from ALL FOUR rows — in effect, their entire global income.
- An RNOR is taxed on rows 1-3, but NOT row 4 — Indian income plus any foreign income from a business they control from India or a profession set up in India, but nothing else earned and retained abroad. …