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

Under the Income-tax Act, 2025 (applicable from the June 2027 session), which of the following is a condition that makes an Indian company resident in India for a tax year, under the standard rule taught for companies?

A company is resident in India for a tax year if it is an Indian company or if its place of effective management during that year is in India. Shareholder nationality, branches or income sources do not decide corporate residence.

  1. AIt is incorporated outside India but has a branch in India
  2. BIt is an Indian company, or its place of effective management in that year is in IndiaCorrect
  3. CMajority of its shareholders are Indian citizens
  4. DIt earns more than half of its income from Indian sources

Explanation

A company is resident in India if it is an Indian company or if its place of effective management (POEM) in the tax year is in India. Incorporation abroad with an Indian branch, shareholder nationality, or income share does not by itself decide residence, so the other options are wrong.

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