Amendment to the conditions for determining residency status in respect of Companies

[Admin TMI]

Question - What are the proposed amendment in section 6 of income tax act, 1961 in Finance Bill 2015 ?

AI Summary

Proposed Amendment to Section 6: Introducing 'Place of Effective Management' for Determining Company Residency from April 2016. The discussion addresses proposed amendments to Section 6 of the Income Tax Act, 1961, as outlined in the Finance Bill 2015, concerning the residency status of companies. The existing law defines a company as resident if it is Indian or its management is wholly in India. However, this allows companies to avoid residency by holding meetings abroad, leading to the creation of shell companies. The amendment introduces the concept of 'Place of Effective Management' (POEM), aligning with international standards and tax treaties, to determine residency based on where key management decisions occur. These changes will be effective from April 1, 2016.