Residential Status of Firm/ AOP/ BOI

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Residential Status of Firm/ AOP/ BOI

After studying “Residential Status of HUF”, now we will see the residential status of the Firm/ Association of Persons (AOP)/ Body of Individuals (BOI). So let’s start…


When Firm/ AOP/ BOI becomes Resident?

Residential Status of Firm/ AOP/ BOI

A Firm/ AOP/ BOI would be resident in India if the control and management of its affairs are situated wholly,

OR

Partly in India

When Firm/ AOP/ BOI becomes Non-Resident?

Control and management of its affairs – wholly outside India.


HOW TO DETERMINE THE RESIDENTIAL STATUS OF A PERSON OTHER THAN AN INDIVIDUAL, HUF AND COMPANY?

​Every person other than an individual, HUF and company is said to be resident in India during the year, if the control and management of its affairs for that year is located wholly or partly in India.

HOW TO DETERMINE THE RESIDENTIAL STATUS OF A HUF FOR THE PURPOSE OF THE INCOME-TAX LAW?

Step 1: Determining whether resident or non-resident

For the purpose of Income-tax Law, a HUF will be treated as resident in India, if the control and management of the affairs of the HUF is located (partly or wholly) in India.

Step 2: Determining whether resident and ordinarily resident or resident but not ordinarily resident

A resident HUF will be treated as resident and ordinarily resident in India during the year if its manager (i.e. karta or manager) satisfies both the following conditions :(1) He is resident in India for at least 2 years out of 10 years immediately preceding the relevant year.(2) His stay in India is for 730 days or more during 7 years immediately preceding the relevant year.A resident HUF whose manager (i.e. karta or manager) does not satisfy any of the aforesaid conditions or satisfies only one of the aforesaid conditions will be treated as resident but not ordinarily resident.In short, following test will determine the residential status of a HUF :

If the control and management of the affairs of the HUF is located (partly or wholly) in India and the manager (i.e. karta or manager) satisfies both the conditions specified at step 2, then the HUF will become resident and ordinarily resident in India.

If the control and management of the affairs of the HUF is located (partly or wholly) in India and the manager (i.e. karta or manager) satisfies none or only one condition specified at step 2, then the HUF will become resident but not ordinarily resident in India.

If the control and management of the affairs of the HUF is located wholly outside India, then the HUF will become non-resident. 

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