Taxability of income in India of a non resident

Dear friends,

 

An individual is Indian resident during an assessment year. He is assessed to Income Tax in his individual capacity. He is also Karta of HUF. In addition to he is trustee of various trust in India as well as beneficiary of certain trust in India.

 

During later assessment year due to his stay beyond specified period as prescribed under section 6 of the IT Act, 1961, he becomes nonresident in India and accordingly he is liable for income tax in India which is received or is deemed to be received in India or accrues or arise or is deemed to accrue or arise in India in his individual capacity.

 

However a question arises with respect to the taxability of the income of the HUF of which he is Karta and trust of which he is trustee or he is beneficiary in some other trust. Whether that shall still be taxable in India.

Replies (1)

Dear Rachit Sir,

Sec 6(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 management"  of its "affairs" is situated wholly  outside India

The words -

1) "control and management" - It has been defined as "head & brian" futhermore it should be "defacto "

"Head & brains" - Power to take decision

"Defacto" - Mere Power would not do, decisions must have been actually taken during the previous year.

 

2) "affairs" -It has been defined as having some connection with the Income or Income Tax as such.

 

3) "wholly" - Not even a single decision should be taken in India to qualify for non resident

 

Now if during the previous year even 1 of the decision having impact on the earning/tax  of the HUF/Trust was taken in India then it will be treated as "Resident"...

Remember if assesee claims that certain income is not taxable (becos of the benefit of Non resident) then the burden is on the assessee to prove that he was non resident......

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