Taxation · Residential Status and Scope of Total Income

Residential Status of HUF, Firms, Companies and Other Persons

Updated 4 October 2026 · Fact-checked

Residential status of non-individuals is decided by where control and management sits. A HUF, firm, AOP or other person is resident if control and management is wholly or partly in India in the tax year. A company is resident if it is an Indian company or its place of effective management is in India.

Understand Residential Status of HUF, Firms, Companies and Other Persons

Residential status decides which income of a person India can tax. For an individual you count days of stay. A HUF, firm or company cannot stay anywhere, so the law uses a different test: where is the brain of the entity?

For a HUF, firm, association of persons (AOP), body of individuals (BOI) and every other person except a company, the test is control and management of affairs. If control and management is wholly or partly in India during the tax year, the person is resident. If it is wholly outside India, the person is non-resident. Partial control in India is enough, so even a small part of decision-making in India makes the entity resident.

A HUF has one more step. After a HUF is resident, you ask whether it is resident and ordinarily resident (ROR) or resident but not ordinarily resident (RNOR). This depends on the manager (karta) of the HUF. The HUF is ROR only if the karta satisfies both additional conditions: he was resident in India in at least 2 of the 10 tax years before the relevant tax year, and he stayed in India for at least 730 days in the 7 tax years before the relevant tax year. The karta's residence in those earlier years is judged by the day-count tests for individuals. If either condition fails, the HUF is RNOR. Firms, AOPs and other persons have no RNOR category. They are either resident or non-resident.

A company is resident in India in a tax year if (a) it is an Indian company, or (b) its place of effective management (POEM) in that year is in India. POEM means the place where key management and commercial decisions needed to run the business as a whole are, in substance, made. A company incorporated outside India is therefore resident if its real decision-making sits in India. An Indian company is always resident, even if all its directors sit abroad. A company is only resident or non-resident, never RNOR.

Residence is tested afresh for every tax year, so the same entity can be resident in one year and non-resident in the next.

Key rules to remember

HUF, firm, AOP, BOI and other persons (not company): Resident if control and management is wholly or partly in India; Non-resident if wholly outside India; Tested for the relevant tax year. Partial control in India is enough for residence. The 182-day and 60-day tests are not used for these persons.
HUF: ROR test (applied to the karta/manager): ROR if karta was resident in at least 2 of the 10 preceding tax years AND stayed in India for at least 730 days in the 7 preceding tax years; Both conditions must be met. The karta's residence in the earlier years is judged by the individual day-count tests. If either condition fails, the resident HUF is RNOR. A non-resident HUF has no ROR/RNOR status.
Company: Resident if Indian company OR place of effective management (POEM) is in India in the tax year; Otherwise non-resident. No RNOR category for a company.
Place of effective management: Place where key management and commercial decisions for the business as a whole are, in substance, made; Substance matters over form. Where the board meets on paper is not decisive on its own.

How to solve Residential Status of HUF, Firms, Companies and Other Persons questions

Use this order for any question on residence of a non-individual. First identify the type of person, because the test differs.

1Identify the person: HUF, firm, AOP/BOI, other artificial person, or company.
2If it is a company, check whether it is an Indian company. If yes, it is resident. Stop.
3If it is a foreign company, find where key management and commercial decisions are actually made. If that place is in India, it is resident through POEM. Otherwise it is non-resident.
4If it is a HUF, firm, AOP or other person, find where control and management lies in the tax year. Any part in India makes it resident. Wholly outside India makes it non-resident.
5If it is a resident HUF, test the karta: resident in at least 2 of the 10 preceding tax years, and at least 730 days in India in the 7 preceding tax years. Both met means ROR, else RNOR.
6Use only facts of the relevant tax year for control and management or POEM. Do not use ownership, nationality of partners or place of business alone.
7State the conclusion in one line, and add the tax consequence if asked (for example, which income is taxable in India).

Quickest way: Entity-type shortcut for MCQs and written answers

When to use it: Use when you have under two minutes for an MCQ or need a short, mark-earning written answer.

Company: Indian company means resident, no further check. Foreign company means look only at POEM.
Non-company: ask 'is any part of control and management in India?' Yes means resident.
HUF: only after residence is established, check the karta's 2 of 10 years and 730 days of 7 years.
MCQ elimination: reject any option that says a company or firm is RNOR. Reject options that make a foreign-incorporated company non-resident when its key decisions are made in India.
Written format: write the rule, then the facts, then the conclusion. For example: Rule: control and management partly in India makes a firm resident. Facts: two partners manage from Delhi. Conclusion: the firm is resident.

Common mistakes in Residential Status of HUF, Firms, Companies and Other Persons

Applying the 182-day or 60-day stay test to a firm, HUF or company.
Students carry over the individual's tests to every person.
Fix: Day-count tests apply to individuals. For a HUF, they come in only indirectly, because the karta's residence history (the 2 of 10 years condition) is judged by those individual tests, along with the 730-day condition for the karta. Use control and management for non-companies and Indian company/POEM for companies.
Saying a firm is non-resident because most partners live abroad.
Students look at where partners reside instead of where affairs are controlled.
Fix: If even part of control and management is in India, the firm is resident. Non-resident needs control wholly outside India.
Declaring a company RNOR.
Students extend the individual and HUF categories to all persons.
Fix: A company is only resident or non-resident. RNOR exists only for individuals and HUFs.
Treating a foreign-incorporated company as non-resident without checking POEM.
Students rely on the place of incorporation.
Fix: Incorporation abroad does not decide it. If key management and commercial decisions are made in India, it is resident.
Testing the HUF's ROR status using the HUF's own years, or the karta's one-year stay.
Students forget the test is applied to the manager (karta) over the 10-year and 7-year windows.
Fix: Take the karta's history: at least 2 of the 10 preceding tax years as resident and at least 730 days in India across the 7 preceding tax years. Both must be met.
Marking a non-resident HUF as RNOR or ROR.
Students apply the karta test before settling residence.
Fix: First decide resident or non-resident from control and management. The karta test applies only if the HUF is resident.

Worked examples

Example 1

Control and management of a HUF is partly in India in tax year 2026-27. Case A: the karta was resident in India in 3 of the 10 preceding tax years and stayed in India for 800 days in the 7 preceding tax years. Case B: the karta was resident in 2 of the 10 preceding tax years and stayed in India for 700 days in the 7 preceding tax years. Determine the residential status of the HUF in each case.

Show the solution

Step 1: Control and management is partly in India, so the HUF is resident in India for tax year 2026-27 in both cases.
Step 2: Case A. Test 1: resident in 3 years, which is at least 2 of 10. Met. Test 2: 800 days, which is at least 730. Met.
Step 3: Both conditions are met in Case A, so the HUF is resident and ordinarily resident (ROR).
Step 4: Case B. Test 1: resident in 2 years, which is at least 2. Met. Test 2: 700 days, which is less than 730. Not met.
Step 5: One condition fails in Case B, so the HUF is resident but not ordinarily resident (RNOR).

Answer: Case A: Resident and ordinarily resident. Case B: Resident but not ordinarily resident.

Example 2

For tax year 2026-27, decide the residential status of: (a) Alpha Ltd, an Indian company whose directors all meet and decide in London; (b) Beta Inc, incorporated abroad, whose key commercial decisions are made by its board in Mumbai; (c) Gamma Inc, incorporated abroad, with key decisions made abroad and only a liaison office in India; (d) a partnership firm with three partners where two partners run the business from Delhi and one lives abroad.

Show the solution

Step 1: Alpha Ltd is an Indian company. An Indian company is resident whatever the place of control, so it is resident.
Step 2: Beta Inc is a foreign company. Test POEM: key management and commercial decisions are made in Mumbai, so POEM is in India. It is resident.
Step 3: Gamma Inc is a foreign company. Key decisions are made abroad and a liaison office does not make key decisions. POEM is outside India, so it is non-resident.
Step 4: The firm is not a company, so use control and management. Two partners manage from Delhi, so at least part of control is in India. The firm is resident.
Step 5: Note that none of these entities has an RNOR status.

Answer: (a) Resident. (b) Resident, through POEM. (c) Non-resident. (d) Resident.

Exam tips

Always start your answer by naming the entity type. The test changes with the type, and examiners award marks for choosing the right test.
For company questions, scan the facts for 'Indian company' first. It settles the question immediately.
In HUF questions, check that the HUF is resident before testing the karta. Many students lose marks by skipping this.
Write boundary values carefully: at least 2 of 10 years and at least 730 days. 730 days exactly meets the test.
Use facts only for the relevant tax year when testing control and management or POEM, and state the tax year in your conclusion.

Practice questions from Residential Status and Scope of Total Income

Residential Status of HUF, Firms, Companies and Other Persons in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Residential Status of HUF, Firms, Companies and Other Persons: frequently asked questions

How is the residential status of a company decided?

A company is resident in India in a tax year if it is an Indian company or its place of effective management is in India in that year. Otherwise it is non-resident. A company is never RNOR.

What is place of effective management?

It is the place where key management and commercial decisions needed to run the business as a whole are, in substance, made. Look at where the real decisions are taken, not just where the company is registered or where meetings are formally held.

When is a firm or AOP resident in India?

A firm, AOP or BOI is resident if control and management of its affairs is wholly or partly in India in the tax year. It is non-resident only if control and management is wholly outside India. It has no RNOR status.

How do I decide if a HUF is ROR or RNOR?

First check that the HUF is resident through control and management. Then test the karta: resident in at least 2 of the 10 preceding tax years and at least 730 days in India in the 7 preceding tax years. If both are met, the HUF is ROR. If either fails, it is RNOR.