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CMA Intermediate · Direct and Indirect Taxation · Basic Concepts, Basis of Charge and Capital and Revenue Receipts

Ms. Kavita Rao is resident in India in the current tax year. She was resident in 3 of the 10 tax years preceding the current year and stayed in India for 600 days in total during the 7 preceding tax years. What is her status?

Ms. Rao is resident but not ordinarily resident. To be ordinarily resident a resident must satisfy both tests: resident in at least 2 of the 10 preceding years and stay of at least 730 days in the 7 preceding years. She meets the first but her 600 days fail the second.

  1. AResident and ordinarily resident, because she was resident in at least 2 of the 10 preceding years
  2. BResident but not ordinarily resident, because her stay in the 7 preceding years is below 730 daysCorrect
  3. CNon-resident, because her stay in the 7 preceding years is below 730 days
  4. DResident but not ordinarily resident, because she was resident in fewer than 9 of the 10 preceding years

Explanation

A resident is ordinarily resident only if she was resident in at least 2 of the 10 preceding years and stayed 730 days or more in the 7 preceding years. The first condition is met (3 ≥ 2), but the second fails (600 < 730). Hence she is resident but not ordinarily resident.

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