Residential Status of a Company – POEM [Section 6(3)]
## Residential Status of a Company [Section 6(3)]
### Indian Company
Always a Resident in India — regardless of where its control or management is located.
### Other (Foreign) Company
Resident in India in a P.Y. if its Place of Effective Management (POEM) is in India during that year.
Otherwise → Non-Resident.
### Meaning of POEM
POEM means the place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made.
### Quick Reference
Type
Test
Resident if…
Indian Co.
—
Always Resident
Foreign Co.
POEM
POEM is in India
Note: There is no ROR/RNOR distinction for companies.
Worked example
### Example 1
Example: XYZ Ltd. is incorporated in Singapore. All Board meetings and strategic decisions take place in Mumbai.
Solution: Foreign company. POEM is in India → Resident for the P.Y.
### Example 2
Example: ABC Pvt. Ltd. is incorporated in India but its entire management operates from Dubai.
Solution: Indian company → Always Resident, irrespective of location of POEM.
⚠️ Common exam mistakes
Treating an Indian company as Non-Resident because its management sits abroad — Indian companies are always Resident.
Confusing POEM with the place of incorporation or registered office.
Applying ROR/RNOR concept to a company.
Using day-to-day operations to determine POEM — POEM looks at strategic decision-making.
Bare-Act text Section 6(3) · Income-tax Act, 1961 · click to expand
A company is said to be a resident in India in any previous year, if— (i) it is an Indian company; or (ii) its place of effective management, in that year, is in India. Explanation.—For the purposes of this clause 'place of effective management' means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.