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Residential Status Of HUF (Hindu Undivided Family) - under the 'Income Tax Act.'

 
Residential Status of HUF
 

1. Ordinary Resident [Section 6(2)]

HUF, is said to be resident in every case except where during that year the control and management of its affairs is situated wholly outside India. It means that if a HUF is controlled from India even partially it will be resident assessee.

The control and management of affairs refers to the controlling and directing power, the head and the brain. It means that decision making power for vital affairs is situated in India. The control and management means de-facto control and management and not merely the right to control or manage.

2. Not Ordinarily Resident [Section 6(6)(b)]

It is only HUF besides individual, which can claim the advantageous status of Not Ordinarily Resident. A HUF will be ‘Not Ordinarily Resident’ if :

  1.  its manager (Karta) has not been resident in India in nine out of ten previous years preceding the relevant accounting year; or
  2. the manager had not, during the seven previous years preceding the relevant previous year been present in India for a period or periods amounting in all to 730 days. [Section 6(6)(b)j.

These two tests have to be applied in case of manager (Karta) of such HUF. In case the Karta has been succeeded by some other man, for computing the presence in India, the length of presence in India of each succeeding Karta will be added.

While determining the residential status of a HUF it should be noted that residential status of co-parceners of a HUF is of immaterial consideration. What is important to note is that from where the business of HUF is being controlled.

Not ordinarily resident status of HUF is linked with the status of its Karta. So if Karta taken as an individual is not ordinarily resident then the status of his HUF shall also be not ordinarily resident.

3. Non-Resident [Section 2(30)]

HUF, shall be non-resident in India if the control and management of affairs is situated wholly outside India.

Ordinary Resident

Not Ordinarily Resident

Non-Resident

If control or management of such HUF was wholly or partially in India during relevant the previous year

This status is allowed only to HUF along with individuals. HUF shall be NOR if its Karta can fulfill any one of the two tests given u/s 6(6) for an individual

If control or management of such HUF was wholly outside India during relevant the previous year.

 

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