Residential Status of HUF

The residential status of an HUF depends on its place of control and management and the residential status of its Karta (the head of the HUF) during the previous year. Here are the key categories:

1. Resident HUF:
   • A resident HUF can be further sub-classified into the following statuses:
     • Resident and Ordinarily Resident (ROR): The Karta has been a resident in India for 2 or more years out of the 10 years preceding the previous year and has been in India for 730 days or more during the 7 years preceding the previous year.
     • Resident but Not-Ordinarily Resident (RNOR): If the above two conditions are not both satisfied, the HUF is deemed as RNOR.
   • A resident HUF is liable to pay tax in India on its global income.
2. Non-Resident HUF:
   • A non-resident HUF is liable to pay tax in India only on income that accrues, arises, or is deemed to accrue or arise in India and income received or deemed to be received in India.
   • If the HUF’s income is taxable both in India and outside India, it can claim foreign tax credit for such income.

Examples:

1. Rajesh HUF:
   • Rajesh HUF’s Karta has been a resident in India for 3 years out of the last 10 years.
   • During the previous year, Rajesh HUF’s Karta was in India for 800 days.
   • Residential Status: Rajesh HUF is an ROR because both conditions are satisfied.
   • Tax liability will be based on global income.
2. Meera HUF:
   • Meera HUF’s Karta has been a resident in India for 1 year out of the last 10 years.
   • During the previous year, Meera HUF’s Karta was in India for 600 days.
   • Residential Status: Meera HUF is an RNOR because not both conditions are met.
   • Tax liability will be based on Indian income and foreign income remitted to India.

Frequently Asked Questions (FAQs):

1. Q: When is an HUF considered a resident?
   • An HUF is considered a resident if its Karta satisfies the residency criteria (either ROR or RNOR).
2. Q: Can an HUF be considered a resident when the Karta resides outside India?
   • Yes, if the Karta meets the residency conditions, the HUF can be a resident even if the Karta resides outside India.
3. Q: How is an HUF defined under Hindu law?
   • An HUF consists of all persons lineally descended from a common ancestor, including their wives and unmarried daughters.

Remember that the residential status impacts the tax obligations of the HUF, so it’s essential to determine it correctly for each financial year

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