Control and management

An individual's residential status is counted in days. A Hindu Undivided Family has no days — it is not a person who travels. So the Act asks a different question: where are the decisions taken?

The workbook puts the rule in its strongest form. A HUF is resident in India in every case except where, during the year, the control and management of its affairs is situated wholly outside India. The word doing all the work is wholly.

Resident. Everything short of total absence makes the HUF resident. The workbook spells out the consequence: if the principal decision-makers of the HUF take even a single decision in India, the HUF will be considered a resident, because part of its control and management is then deemed to be situated in India.

Non-resident. A HUF is non-resident only if, during the previous year, the control and management of its affairs was situated wholly outside India.

Ordinarily resident or not — a second, separate test. A resident HUF is further categorised as Not Ordinarily Resident if any one of these is satisfied, and note that both are about the Manager (Karta), not about the family:

1. the Manager has been a non-resident in India for at least 9 out of the 10 preceding previous years; or
2. the Manager has been in India for 729 days or less during the 7 preceding previous years.

If neither condition is satisfied, the resident HUF is Resident and Ordinarily Resident.

So the structure is two-storey: control and management decides resident versus non-resident; the Karta's own history then decides ordinarily resident versus not. Scope of income then follows the same Table 7.1 grid as for individuals — worldwide income for an ROR HUF, Indian income only for an RNOR or non-resident HUF.

The Agarwal HUF holds a commercial property in Jaipur and a portfolio of Singapore-listed shares. The Karta has lived in Singapore since 2013 and all family meetings happen there.

Year 1. Every decision — the Jaipur tenancy renewal, the portfolio rebalancing, the distribution to coparceners — is taken in Singapore. Control and management is wholly outside India. The HUF is non-resident.

Year 2. The Karta visits Jaipur for a wedding and, over two days, signs off on a new tenant and instructs the broker to switch Rs 1 crore of the Singapore portfolio. That is enough. Part of the control and management was situated in India, so the HUF is resident for the whole year.

Is it ordinarily resident? The Karta has been non-resident for more than 9 of the last 10 years, so the HUF is RNOR — and RNOR is still not taxed on ordinary foreign income.

The RNOR shield held this year. Once the Karta moves back and crosses the 9-out-of-10 and 729-day thresholds, the HUF becomes ROR and that Rs 30,00,000 of Singapore dividend enters the Indian return — roughly Rs 9,36,000 of tax at 30% plus cess.

Chapter 7, section 7.4.3, is short and is examined almost verbatim: the "wholly outside India" phrasing, the "even a single decision in India" consequence, and the two Karta-based tests for Not Ordinarily Resident. Chapter 13 returns to HUFs for special tax cases. Expect a one-line fact pattern in which a Karta takes a single decision in India.

• "Wholly outside India" is the non-resident test. Partial control in India makes the HUF resident — a single decision suffices.
• The default is resident. A HUF is resident in every case except the wholly-outside one, so start from resident and look for the exception.
• The NOR tests look at the Manager, not the family. They are the 9-out-of-10 and 729-days-in-7 tests applied to the Karta personally.
• Do not apply the 182-day test to a HUF. Day counting belongs to individuals.
• There is no deemed-resident clause for a HUF — section 6(1A) applies to Indian citizens.
• Resident and non-resident is one question; ordinarily resident is a second. Answering only the first leaves the scope of income undetermined.