Residential Status of a Company under the Income-tax Act

Income-tax Act

The provisions relating to the residential status of a company is prescribed under sub-section (3) of section 6 of the Income-tax Act, 1961.

Residential Status of a Company

Essentially, either of the following two conditions have to be satisfied by a company to be a resident in India in any previous year, which are:

1) It must be an Indian company.

The definition of an "Indian company" is given in section 2(26) of the Income-tax Act.

2) Its place of effective management, in that year, is in India.

Here, "place of effective management" means a place where key management & commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.

Non-Residential Status of a Company

All the companies in India who does not satisfy any one or both of the conditions mentioned aforesaid are considered having a non-residential status.

Ordinarily Resident / Not Ordinarily Resident Status

A company can either have a resident in India status or a non-resident status.

But it can never have the status as ordinarily resident or not ordinarily resident status, which is determined in the case of other persons i.e. assesses like individuals and HUFs.

Companies Act

There is no provisions or mention of the term 'residential status of a company' under any of the provisions of the Companies Act, 2013.