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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Ananya Textiles Ltd is incorporated in Mauritius. During the tax year 2026-27 its board meets and takes all key strategic and commercial decisions in Surat, India. Which statement is correct about its residential status for that year?

The company is resident in India for 2026-27 because its place of effective management is in India, with key decisions taken in Surat. Foreign incorporation does not prevent residence, and no income threshold applies to company residence.

  1. ANon-resident, because it is incorporated outside India
  2. BResident in India, because its place of effective management is in IndiaCorrect
  3. CNot ordinarily resident, because it is a foreign company
  4. DResident only if its Indian income exceeds Rs. 1 crore

Explanation

A foreign-incorporated company is resident in India if its POEM during the year is in India. Key decisions are made in Surat, so POEM is India and the company is resident. Incorporation abroad alone does not make it non-resident, and there is no income threshold or 'not ordinarily resident' status for companies.

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