# Residential Status of Non-Individual Assessees

For entities other than individuals, residence usually turns on where control and management lies (or, for companies, on POEM).

## 1. Hindu Undivided Family (HUF)

Resident if control and management of its affairs is situated wholly or partly in India.
Non-resident only if control and management is wholly outside India.
An HUF (like an individual) can be ROR or RNOR, tested on the Karta using the additional conditions.
The HUF and its Karta may have different statuses — e.g., the HUF may be ROR while the Karta is Non-Resident in the same year.

Meaning of "Control and Management":

1. Refers to central control and management, not day-to-day operations.

2. Means de facto control, not merely the right to control.

3. Business may be conducted outside India yet control may still be in India.

4. Place of control may differ from the usual place of business / registered office.

5. Implies functioning of the controlling/directing power at a place with some degree of permanence.

## 2. Firms, AOPs and BOIs

Resident if control and management is situated wholly or partly in India.
Non-resident if control and management is wholly outside India.
💡 The residential status of the partners / members is immaterial in determining the status of the firm/AOP/BOI.

## 3. Companies

A company is resident if it is an Indian company, or if its POEM is in India during the year.
POEM (Place of Effective Management): the place where key management and commercial decisions that are necessary for the conduct of the business as a whole are substantively made.

## 4. Local Authorities and Artificial Juridical Persons (AJP)

Resident if control and management is situated wholly or partly in India.
Non-resident if control and management is wholly outside India.

Worked example

### Example 1

Example — Partly in India makes HUF resident: An HUF's affairs are controlled partly from Delhi and partly from London. Since control is at least partly in India, the HUF is a Resident.

### Example 2

Example — HUF ROR but Karta NR: An HUF is controlled from India (Resident, and ROR on the Karta's history), but the Karta personally spent the year abroad and is a Non-Resident. The two statuses coexist.

### Example 3

Example — Company POEM: A company incorporated abroad has its board's key commercial decisions substantively taken in Mumbai. Its POEM is in India, so it is a Resident company.

⚠️ Common exam mistakes

Requiring control to be WHOLLY in India for a firm/HUF/AOP to be resident — even PARTLY in India suffices; non-resident needs control WHOLLY outside India.
Using partners'/members' residential status to decide a firm's/AOP's status — it is irrelevant.
Confusing 'control and management' with day-to-day operations; it means central, de facto control.
Assuming the HUF and its Karta must share the same residential status.
Treating POEM as the registered office; POEM is where key management/commercial decisions are substantively made.

Bare-Act text Section 6(2), 6(3), 6(4) · Income-tax Act, 1961 · click to expand

Section 6(2): A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India. Section 6(3): 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. Section 6(4): Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Residential Status of HUF, Firms, AOPs, BOIs, Companies, Local Authorities and AJPs

Worked example

⚠️ Common exam mistakes