Income Tax

Chapter - 3
Residential Status and Incidence of Tax
OBJECTIVES
After going through this chapter you will be able to understand
• Residential Status of Assessees
• Residential Status of Individuals
• Conditions to determine Ordinarily Resident, Not Ordinarily Resident and
Non-Resident
• Residential Status of companies
• Incidence of Tax
• Computation of Gross Total Income of an individual based on Residental
Status
STRUCTURE
• Introduction
• Types of Residents
• Determination of Residential Status of Individuals
• Residential Status of Companies
• Incidence of Tax
38 : Income Tax
INTRODUCTION
Income tax is to be charged on the total income of the previous year of a
person at the rates fixed for the assessment year by the annual finance act. The
total income of a person is determined in accorance with the provision of the income
tax act; but the tax is charged according to the Finance Act which is passed by the
parliament every year.
RESIDENTIAL STATUS OF ASSESSEES
The scope of total income of an assessee is determined with reference to his
residence in India in the previous year. Residential Status of an assessee is determined
with reference to his residence in the previaous year. The incidence of tax has
nothing to do with the citizenship. An Indian may be non resident and a foreigner
may be a resident for income tax purposes. The residence of a person may change
from year to year but citizenship cannot be changed every year.
Types of Residents
On the basis of residence, the assesses are divided into three categories namely
1. Ordinarly resident.
2. Not ordinarly resident and
3. Non resident.
The determination of the residential status of a person is very important for the
purpose of levy of income tax, as income tax is levied based on residential status of
a tax payer. The residential status of a tax payer can be dividend into the following
categories.
Residential Status
|
| |
Resident Non Resident
| |
Ordinarly Not Ordinarly
Resident Resident
Determination of Residential Status of an Individual

The residential status of an individual is to be determined on the basis of period
of stay of the taxpayer in India and is computed separately for each year.
The residence of an individual is determined on the basis of the rules stated here
under
1. Ordinarily Resident [Section 6(1)]
An individual is said to be ordinarily resident in India in any previous year if he
satisfies any one of the following basic conditions:
a) He is in India for a period of 182 days or more during relevent previous year
or
b) He has been in India for a period of 365 days or more in four previous years
preceding the previous year and at least 60 days during the relevent previous year.
Residential Status and Incidence of Tax : 39
Besides, he also satisfies both the following additional conditions:

(i) He has been resident in India in at least two out of ten previous years
preceding the previous year
and
(ii) He has been in India for a period of 730 days or more in seven previous
years preceding the relevent previous year.
2. Not Ordinarily Resident [Section 6 (6)]
An individual is said to be not ordinarily resident in India in any previous year if
he satisfies any one of the following basic conditions:
or
preceding the previous year and at least 60 days during the relevent previous
year.
But he does not satisfy both the following additional conditions.
(i) He has been resident in India in at least two out of ten previous years
and
(ii) He has been in India for a period of 730 days or more in seven previous
years proceeding the previous year
3. Non-Resident [Section 2 (30)]
An individual is said to be a non resident in India in any previous year if he does
not satisfy any one of the following basic conditions:
or
preceding the previous year and at least 60 days during the relevent previous
year.
Exceptions to the above rule of 60 days stay in India.
In the following cases, the stay of 60 days is replaced by 182 days
1. An individual is a citizen of India and leaves India in any previous year for the
purpose of employment outside India
2. An Indian citizen or a foreign national of Indian origin who is living outside
India comes on a visit to India in the previous year.
Residential Status of a Company (Section 6(3))

1. Resident : A company is said to be a resident in India in any previous year, if:
a) It is an Indian company ;
or
b) The control and management of its affairs is situated wholly in India
during the previous year.
40 : Income Tax
2. Non – Residents :
If a company does not satisfy any of the following conditions, it is said to be
non resident company.
a) It is an Indian company;
or
b) The control and management of its affairs is situated wholly in India
during the previous year.
Illustration: 1
Sri Ramesh who was born and brought up in India, went for further studies to
U.S.A on 1st March, 2019 and came back to India on 1st October 2020 early in the
morning. What is his residential status for the assessment year 2021-22?
Solution:
For the assessment year 2021-22, the relevant previous year is 2020-21 i.e.
from 1st April 2020 to 31st March 2021.
During the previous year 2020-21, Sri. Ramesh is in India for a period of [31 + 30
+ 31 + 31 + 28 + 31] 182 days. Therefore, he satisfies the first basic condition (a)
he is in India for a period of 182 days or more during the previous year. Hence, he is
a resident.
Besides, he also satisfies both the following additional conditions
i) He has been resident in India in at least two out of the ten previous years
preceding the relevant previous year
and
ii) He has been in India for a period of at least 730 days in all during the seven
previous years preceding the relevant previous year.
Therefore, Sri. Ramesh is said to be “Ordinarily resident” for the Assessment
Year 2021-22.
Illustration: 2
Mr. Donold Trump a foreign national came to India for the first time on 1st
November 2019. During his stay in India upto 30th October 2020, he stayed at Delhi
upto 31st May 2020 and there after in Bangalore till his departure from India.
Determine his residential status for the assessment year 2021-22.
Solution:
For the Assessment year 2021-22 the relevant previous year is 2020-21 i.e.
During the previous year 2020-21, Mr. Donold Trump is in India for a period of [30
+ 31 + 30 + 31 + 31 + 30 + 30] 213 days. Therefore, he satisfies the first basic
condition (a) he is in India for a period of 182 days or more during the previous year.
Hence, he is a resident. But he does not satisfy both the following additional
conditions
(i) He has been resident in India in at least two out of the ten previous years
and
(ii) He has been in India for a period of at least 730 days in all during the seven
Therefore, Mr. Donald Trump is said to be “Not ordinarily resident” for the
Assessment year 2021-22.
Illustration: 3
Mr. John a Foreign National came to India for the first time on 15th June 2015.
During financial years 2015-16, 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21
he stayed in India for 120 days, 115 days, 15 days, 191 days, 124 days and 80 days
respectively.
Determine his residential status for the Assessment year 2021-22.
Solution:
During the previous year 2020-21, Mr. John is in India for a period of 80 days. He
has been in India for a period of [115 + 15 + 191 + 124] 445 days in four previous
years preceding the previous year. Therefore, he satisfies the second basic condition
(b) he has been in India for a period of 365 days or more during the four previous
years preceding the previous year and at least 60 days during the previous year.
Hence, Mr. John is said to be resident. But he does not satisfy both the following
additional conditions.
(i) He has been a resident in India in at least two out of the ten previous years
and
(ii) He has been in India for a period of at least 730 days in all during the seven
Therefore, Mr. John is said to be “Not ordinarily resident” for the Assessment
year 2021-22.
Illustration: 4
Mr. Wasim Akram a Pakistani criketer comes to India since 2007-08 every year to
play cricket and stays here for 100 days. State his residential status for the
Solution:
During the previous year 2020-21 Mr. Wasim Akram is in India for a period of 100
days. He has been in India for a period of 400 days in four previous years preceding
the previous year. Therefore, he satisfies the second basic condition (b) he has been
in India for a period of at least 365 days during the four previous years preceding the
previous year and is in India for at least 60 days during the previous year. Hence, he
is a resident. But he does not satisfies both the following additional conditions:
and
(ii) He has been in India for at least 730 days in all during the seven previous
years preceding the relevant previous year.
42 : Income Tax
Therefore, Mr. Wasim Akram is said to be “Not ordinarily resident” for the
Illustration: 5
Mr. Peter a foreigner came to India for the first time from U.K on 1st April 2008.
He stayed continuously for 4 years and went to Japan on 1st April 2014, he however
returns to India on 1st August 2014 and went to U.K on 20th January 2020. He came
back to India on 1st October 2020. What is his residential status for the Assessment
year 2021-22?
Solution:
During the previous year 2020-21, Mr. Peter is in India for a period of [31 + 30 +
31 + 31 + 28 + 31] 183 days. Therefore, he satisfies the first basic condition (a) he
is in India for a period of 182 days or more during the previous year. Hence, he is a
resident. Besides, he also satisfies both the following additional conditions:
and
years preceding the relevant previous year
Therefore, Mr. Peter is said to be “Ordinarily resident” for the Assessment
year 2021-22.
Illustration: 6
Mr. Madhu an Indian citizen left India on appointment by government of U.K for
the first time on 12th September 2018 to join his duty. During the financial year
2020-21 he comes to India on a visit and stayed here from 5th October 2020 to 10th
February 2021. State, the residential status of Mr. Madhu for the Assessment year
2021-22.
Solution:
For the Assessment year 2021-22 the relevant previous year is 2020-21. i.e.
During the previous year 2020-21 Mr. Madhu is in India for a period of [27 + 30 +
31 + 31 + 10] 129 days. Therefore, he does not satisfy any of the following basic
conditions –
(a) He is in India for a period of 182 days or more during the relavent previous
year
OR
(b) He has been in India for a period of 365 days or more in four previous years
preceding the previous year and at least 182 days during the previous year.
Hence Mr. Madhu is said to be “non resident” for the Assessment year
2021-22.
Note: For the second basic condition, the stay of 60 days is replaced by 182 days
because he comes under exceptional rule.
Illustration 7
Mr. Peter a German national is appointed in India as a scientific officer on 1st
April 2016. On 31st January 2018 he goes to Iran on Deputation for a period of 3
years but he leaves his wife and children in India. On 1st May 2018 he comes to India
and takes with him his family on 30th June 2019. He return to India and join his
original job on 2nd February 2021. Determine his residential status for the Assessment
year 2021-22.
Solution:
For the assessment year 2021-22 the relevant previous year is 2020-21 i.e. from
1st April 2020 to 31st March 2021.
During the previous year 2020-21 Mr. Peter is in India for a period of [27 + 31]
58 days. Therefore, he does not satisfy any of the following basic conditions.
(a) He is in India for a period of 182 days or more during the relavent previous
year.
OR
(b) He has been in India for a period of at least 365 days or more during the four
previous years preceding the previous year and at least 60 days during the
previous year.
Hence, Mr. Peter is said to be “Non-resident” for the assessment year
2021-22.
Illustration: 8
Mr. Richard a foreign national came to India for the first time from U.S.A on 30th
June 2013. He stayed here continuously for 3 years and left for Japan on 30th June
2016. He return to India on 1st April 2017 and remained here till 31st July 2017 when
he went back to U.S.A. He again came back to India on 30th January 2021 and
continued to stayed in India thereafter. Determine his residential status for the
assessment year 2021-22.
Solution:
During the previous year 2020-21 Mr. Richard is in India for a period of [2 + 28 +
31] 61 days. He has been in India for a period of
• 2015 – 16 = [30 + 31 + 30] = 91 days
• 2016 – 17 = [30 + 31 + 30 + 31] = 122 days
• 2017 – 18 = = Nil
• 2018 – 19 = = Nil
213 days
In four previous years preceding the previous year. Therefore, he does not
satisfy any of the following basic conditions
44 : Income Tax
(a) He is in India for a period of 182 days or more during the previous year
OR
(b) He has been in India for at least 365 days during the four years preceding
the previous year and at least 60 days during the previous year.
Hence, Mr. Richard is said to be “Non-resident” for the Assessment year
2021-22.
Illustration: 9
Mr. Prakash has gone to USA for training he left India on 3rd June 2020. He came
back to India on 5th April 2021. Determine his residential status for the Assessment
year 2021-22, assuming that he did not go out of India previously.
Solution:
During the previous year 2020-21, Mr. Prakash is in India for a period of [30 + 31
+ 3] 64 days. Therefore, he satisfies the second basic condition (b), he has been in
India for a period of at least 365 days or more during the four previous years
preceding the previous year and 60 days during the previous year. Hence,
he is a resident. Besides, he also satisfies both the following additional conditions –
and
years preceding the previous year.
Therefore, Mr. Prakash is said to be “Ordinarily Resident” for the Assessment
year 2021-22.
Illustration: 10
Mr. Priya Krishna an Indian citizen left India on 28th October 2016 for the first
time to U.K. for the purpose of employment. He visits India every year and stays
here from 15th April to 10th September since 2017-18. What will be his residential
status for the Assessment year 2021-22?
Solution:
During the previous year 2020-21 Mr. Priya Krishna is in India for a period of [16
+ 31 + 30 + 31 + 31 + 10] 149 days. Therefore, he does not satisfy any of the
following basic conditions:
(a) He is in India for a period of 182 days or more during the previous year
OR
(b) He has been in India for at least 365 days during the four previous years
Therefore, Mr. Priya Krishna is said to be “Non-resident” for the Assessment

year 2021-22.
Note: For the second basic condition, the stay of 60 days is replaced by 182 days
because he comes under exceptional rule.
Illustration: 11
Mrs. Mangala, a citizen of India went to England on 2nd October 2014 for higher
studies for a period of two years. After she came back she was employed in a
multinational company in India. The company sent her for 6 months training to
Germany on 1st March 2017. She was transferred to the company’s head office in
Newyork on 15th August 2018. However, she left India on 2nd Octorber 2018 and
reported for duty on 5th October 2018. She visited India during the months of
November and December 2019. The company transferred her back to her original
post in India and she returned to India on 26th January 2021. Determine her
residential status for the Assessment year 2021-22.
Solution:
During the previous year 2020-21, Mrs. Mangala is in India for a period of [6 +
29 +31] 66 days. She has been in India for a period of
• 2016 – 17 = [30 + 30 + 31 + 31 + 28] = 150
• 2017 – 18 = [30 + 31 + 30 + 31 + 31 + 28 + 31] = 212
• 2018 – 19 = [30 + 31 + 30 + 31 + 31 + 30 + 2] = 185
• 2019 – 20 = [30 + 31] = 61
608 days
During the four previous years preceding the previous year. Therefore, she
satisfies the second basic condition (b), she has been in India for at least 365 days
during the four pervious years preceding the previous year and is in India for at least
60 days during the previous year. Hence, she is a resident. Besides, she also satisfies
both the following additional conditions –
(i) She has been a resident in India at least two out of the ten previous years
and
(ii) She has been in India for at least 730 days in all during the seven previous
Therefore, Mrs. Mangala is said to be “Ordinarily resident” for the Assessment
year 2021-22.
Illustration: 12
Mr. Rama went to England for higher studies on 5th August 2020 and came back
to India on 25th February 2021. He had never been out of India before what is his
residential status for the Assessment year 2021-22?
46 : Income Tax
Solution:
During the previous year 2020-21. Mr. Rama is in India for a period of
[30+31+30+31+5+5+31] 163 days. He has been in India for a period of
[365+365+366+365] 1461 days during the four previous years preceding the previous
year. Therefore, he satisfies the second basic condition -
(b) He has been in India for at least 365 days during the four year preceding the
previous year and is in India for at least 60 days during the previous year. Hence, he
is a resident. Besides, he also satisfies both the following additional conditions -
and
Therefore, Mr. Rama is said to be “Ordinarily resident” for the Assessment
year 2021-22.
Illustration: 13
Mr. Krishna was born in Lahore in 1946. He has been staying in USA since 1972.
He came to India on 3rd October 2020 and returned on 4th April 2021. Determine his
residential status for the assessment year 2021-22.
Solution:
During the previous year 2020-21. Mr. Krishna is in India for a period of
[29+30+31+31+29+31] 181 days. Therefore, he does not satisfy any of the following
basic conditions -
(i) He is in India for a period of 182 days or more during the relavent previous year
or
(ii) He has been in India for a period at least 365 days in four previous years
Therefore, Mr. Krishna is said to be “non-resident” for the Assessment year
2021-22.
Note: Stay in India 182 days instead of 60 days because he is an Indian Citizen
staying outside India, visits India occassionally. A person born in Pakistan before
independance is an Indian Citizen.
INCIDENCE OF TAX
The relationship between residential status and incidence of tax:
Incidence of tax on a tax payer depends on his residential status and also on
place and time of accrual or receipt of income.
Incidence of tax in case of ordinarily resident: (Sec 5[1]) The total income
of any previous year of a person who is a resident but ordinarily resident, in India
includes —
a) Income received in India demeed to be received in India whether accrued in
India or outside India during the previous year.
b) Income accrued or demeed to be accrued in India whether received in India
or outside India during the previous year.
c) Income accrued and received outside India during the previous year.
Incidence of tax in case of not ordinarily resident: The total income of
resident but not ordinarily resident in India in the previous year includes—
a) Income received in India or demeed to be received in India whether accrued
in India or outside India during the previous year.
b) Income accrued in India or demeed to be accrued in India whether received
in India or outside India during the previous year.
c) Income accrued and received outside India from a business or profession
controlled from India during the previous year.
Incidence of tax In case of non-resident: The total income of non resident in
the previous year includes-
a) Income received in India whether accrued in India or outside India during the
previous year.
b) Income accrued in India whether received in India or outside India during the
previous year.
Incidence of Tax or Scope of Total Income
The following table highlights the tax incidence in brief:
Not
Incomes Resident Ordinarily Non
Resident Resident
1. Income received in India or deemed to be Taxable Taxable Taxable
received in India during the previous year
whether earned in India or outside India.
2. Income accrued in India or deemed to be Taxable Taxable Taxable
accrued in India during the previous year
whether received in India or outside India.
3. Income accured and received outside India Taxable Taxable Not
during the previous year from a business or Taxable
profession controlled from India.
4. Income accured and received outside India Taxable Not Not
during the previous year from any other source Taxable Taxable
5. Past untaxed foreign income brought into Not Not Not
India during previous year. Taxable Taxable Taxable
Gross Total Income xxx xxx xxx
48 : Income Tax
Note: The following incomes are exempted from tax and hence, they are not to be
included while computing Gross Total Income.
(1) Agricultural Income in India
(2) Sum received by a member HUF
(3) Share of Income of a partner from the firm
(4) Allowances and perquisites paid by the Government for employees posted outside
India
(5) Income from transfer of units of UTI
(6) Dividend from Indian companies or domestic companies
(7) Certain Interest Incomes Notified under Sect 10(15) – interest on SB Account in
any bank or interest on Post Office SB Account (upto of ` 10,000).
(8) Interest on Post Office NSC.
(9) Income from units of UTI and other mutual funds.
(10) Any amount received from UNO
(11) Any amount received from any person other than a relative an amount not
exceeding ` 50,000.
Illustration: 14
Following are the particulars of Mr. George relevant to the previous year
2020-21, compute his total income based on different residential status.
1) Income from agriculture in Indonesia, one half of the income is received in
Bangalore and the balance is received in Pakistan, ` 30,000.
2) Income from agriculture in Punjab, the whole amount is received in London
and used for children education there ` 25,000.
3) Profit from a business in Chennai, the business is controlled and managed
from Colombo, 50% of the profits are received in Colombo ` 50,000
4) Profit from a business in Paris, the business is managed from Mumbai, one
half of the profit is received in Bangalore and the balance is remitted to India
` 60,000.
5) Dividend from Microsoft Corporation Limited (domestic company) ` 20,000
6) Share of profit from a partnership firm in Mumbai ` 22,000
7) Interest on fixed deposits in State Bank of India ` 10,000
8) Interest on Savings Bank account in post office ` 12,000.
Solution:
Computation of Total Income of Mr. George for the
Assessment Year 2021-22
Particulars Resident Not Non

Ordinarily Resident
Resident
1. Income from agriculture in Indonesia one
half of the income received in Bangalore 30,000 15,000 15,000
2. Income from Agriculture in Punjab received
in London Exempt Exempt Exempt
3. Profit from business in Chennai controlled
from Colombo 50,000 50,000 50,000
4. Profit from business in Paris, the business is
managed from Mumbai half of which is
received in Bangalore 60,000 60,000 30,000
5. Dividend from micro soft company limited Exempt Exempt Exempt
6. Share of profit from a firm in Mumbai Exempt Exempt Exempt
7. Interest on fixed deposit in SBI 10,000 10,000 10,000
8. Interest on Saving Bank account in post office
(12,000 – 10,000) 2,000 2,000 2,000
Total Income 1,52,000 1,37,000 1,07,000

Note: (In Section 80TTA of Income Tax act interest upto ` 10,000 earned from all
savings bank account Including Post Office S.B. is Exempt from tax).
Illustration: 15
Sri Suresh has the following incomes for the financial year 2020-21
a) Income from house property situated in U.K 10,000
b) Income from salary received in India for services rendered in USA 58,000
c) Profits from Business in Pakistan controlled from India 1,10,000
d) Profit from Delhi business 1,20,000
e) Agricultural income in India 12,000
f) Income earned in Australia and received there but brought to India 80,000
Compute the income of Sri. Suresh for the Assessment year 2021-22 if he is
1) Resident
2) Not ordinarly Resident and
3) Non Resident
50 : Income Tax
Solution:
Computation of Total Income of Sri. Suresh for the Assessment Year 2021-22

Ordinarily Resident
Resident
a. Income from house property situated in U.K 10,000 — —
b. Income from salary received in India for
services rendered in USA 58,000 58,000 58,000
c. Profits from Business in Pakistan controlled
from India 1,10,000 1,10,000 —
d. Profit from Delhi business 1,20,000 1,20,000 1,20,000
e. Agricultural income in India Exempt Exempt Exempt
f. Income earned in Australia and received
there but brought to India 80,000 — —
Total Income 3,78,000 2,88,000 1,78,000

Illustration: 16
Rekha furnishes the following details of her income for the previous year
2020-21.
a) Income accrued in America but received in India ` 19,000
b) Interest on UK government securities 1/3 of which received in India
` 15,000
c) Salary received in India for services rendered in Germany ` 28,000
d) Income from agriculturel in Bangladesh received and spent there ` 16,000
e) Income from profession in china received there. The profession was setup in
India ` 12,000
f) Income accrued in India but received in china ` 14,000
g) Income earned outside India in preceeding years but remitted to India during
previous year ` 36,000
h) Gift in foreign currency from a relative received in India during previous year
` 10,000
Compute the total income of Rekha for the Assessment year 2021-22 if she is:
1) Resident
2) Not ordinarily resident and
3) Non Resident (BU, B.Com, April 2005)
Solution:
Computation of Total Income of Rekha for the Assessment Year 2021-22

Ordinarily Resident
Resident
a. Income accrued in America but received in India 19,000 19,000 19,000
b. Interest on UK government securities 1/3 of
which received in India 15,000 5,000 5,000
c. Salary received in India for services rendered
in Germany 28,000 28,000 28,000
d. Income from agriculturel in Bangladesh received
and spent there 16,000 — —
e. Income from profession in china received there.
The profession was setup in India 12,000 12,000 —
f. Income accrued in India but received in china 14,000 14,000 14,000
g. Income earned outside India in preceeding
years but remitted to India during previous year — — —
h. Gift in foreign currency from a relative received
in India during previous year Exempt Exempt Exempt
Total Income 1,04,000 78,000 66,000

Illustration: 17
Mr. Darshan earns the following incomes during the financial year 2020-21
1) Profits earned from business in Paris which is controlled from India, half of
the profits being received in India ` 1,60,000
2) Pension from former employer in India, received in USA ` 32,000
3) Income from agriculture in Pakistan and brought to India ` 40,000
4) Income from property in UK and received there ` 32,000
5) Past untaxed foreign income brought into India during the previous year
` 40,000.
6) Gift in foreign currency from a relative received in India ` 80,000.
Determine the gross total income of Mr. Darshan for the Assessment year
2021-22 if he is:
a) Resident
b) Not Ordinarily resident and
c) Non resident (BU, B.Com, April 2004)
52 : Income Tax
Solution:
Computation of Gross Total Income of Mr. Dharshan for the Assessment Year
2021-22

Ordinarily Resident
Resident
1. Profits earned from business in Paris which is
controlled from India, half of the profits
being received in India 1,60,000 1,60,000 80,000
2. Pension from former employer in India,
received in USA 32,000 32,000 32,000
3. Income from agriculture in Pakistan
brought to India 40,000 — —
4. Income from property in UK and received there 32,000 — —
5. Past untaxed foreign income brought into
India during the previous year — — —
6. Gift in foreign currency from a relative
received in India — — —
Gross Total Income 2,64,000 1,92,000 1,12,000

Illustration: 18
Following is the income of Mr. Nishcal for the financial year 2020-21
1) Interest on SB deposit in SBM, Delhi ` 11,200
2) Income from agriculture in Africa invested in Nepal ` 10,000
3) Dividends received in UK from an American company out of which ` 2,000
was remitted to India ` 10,000
4) Salary drawn for 3 months for working in Indian embassies office in Australia
and salary received there ` 72,000
5) Income from house property situated in Pakistan ` 15,000
6) Pension received in Belgium for services rendered in India with a limited
company ` 20,000
You are required to compute his gross total income for the Assessment Year
2021-22 if he is:
a) Resident
b) Not ordinarily resident and
c) Non resident (BU, B.Com., Nov 2003)
Solution
Computation of Gross Total Income of Mr Nischal for the Assessment year
2021-22

Ordinarily Resident
Resident
i. Interest on SB deposit in SBI, Delhi
(11,200 – 10,000) 1,200 1,200 1,200
ii. Income from agriculture in Africa invested in Nepal 10,000 — —
iii. Dividends received in UK from an American company 10,000 — —
iv. Salary drawn for 3 months for working in Indian
embassy office in Australia and salary received there 72,000 72,000 72,000
v. Income from house property situated in Pakistan 15,000 — —
vi. Pension received in Belgium for services
rendered in India with a limited company 20,000 20,000 20,000
Gross total income 1,28,200 93,200 93,200

savings bank account Including Post Office is Exempt from tax).
Illustration: 19
From the following particulars of Mr. Nagaraj compute his Gross total income for
the assessment year 2021-22, if he is:
1) Resident
2) Not ordinarily Resident and
3) Non Resident
a) Income from business in Raichur ` 50,000
b) Profit from business in UK controlled from India ` 60,000
c) Income from house property in Japan not received in India ` 30,000
d) Income from business in India but received in Pakistan ` 50,000
e) Salary received in India for service rendered in USA ` 70,000
f) Interest on deposit with State Bank of India, in Bangalore ` 10,000
g) Profit from business in Ceylon controlled from India, 1/3
profit received in India ` 30,000
h) Salary received in India for service rendered in Kuwait ` 35,000
i) Past untaxed foreign income brought into India ` 80,000
j) Dividend received from domestic company ` 5,000
k) Interest on post office savings bank account ` 5,000
l) Agricultural income earned in Nepal ` 25,000
(BU, BBM, 2008)
54 : Income Tax
Solution
Computation of Gross Total Income of Mr. Nagaraj for the Assessment Year
2021-22

Ordinarily Resident
Resident
a. Income from business in Raichur 50,000 50,000 50,000
b. Profit from business in UK controlled from India 60,000 60,000 —
c. Income from house property in Japan not
received in India 30,000 — —
d. Income from business in India but received in
Pakistan 50,000 50,000 50,000
e. Salary received in India for service rendered in
USA 70,000 70,000 70,000
f. Interest on deposit with SBI in Bangalore 10,000 10,000 10,000
g. Profit from business in Ceylon but controlled
from India, (1/3) profit received in India 30,000 30,000 10,000
h. Salary received in India for service rendered in
Kuwait 35,000 35,000 35,000
i. Past untaxed foreign income brought into India
during the previous year — — —
j. Dividend received from domestic company Exempt Exempt Exempt
k. Interest on post office savings bank account Exempt Exempt Exempt
l. Agricultural income earned in Nepal 25,000 — —

savings bank account Including Post Office is Exempt from tax).
Illustration: 20
The following are the income of Sri. Anand for the previous year 2020-21
a) Salary received in Tokyo (Japan) from an Indian company ` 3,95,000
b) Income from house property in Bangalore ` 75,600
c) Income from agriculture in Srinagar (J&K) ` 1,35,000
d) Interest earned on US government securities received in Mumbai ` 56,000
e) Profit earned from a business established in China and deposited in a bank
there is ` 1,95,000 out of which a sum of ` 95,000 is received in New Delhi.
The head office of the business establishment is situated in Mangalore.
f) Income from agriculture in Nepal deposited in a bank there is ` 1,25,000 out
of which ` 17,000 is remitted to India
g) Share of income from HUF is ` 70,000. From the above particulars compute
the taxable income of Sri. Anand for the assessment year 2021-22 if he is
1) Resident
2) Not ordinarly resident and
3) Non resident (BU B.Com April 01)
Solution
Computation of Taxable Income of Sri. Anand for the Assessment Year
2021-22

Ordinarily Resident
Resident
1. Salary received in Tokyo (Japan) from an
Indian company 3,95,000 3,95,000 3,95,000
2. Income from house property in Bangalore 75,600 75,600 75,600
3. Income from agriculture in Srinagar (J&k) Exempt Exempt Exempt
4. Interest earned on US government securities
received in Mumbai 56,000 56,000 56,000
5. Profit earned from a business established in
China received in New Delhi 1,95,000 1,95,000 95,000
6. Income from agriculture in Nepal deposited
in a bank there 1,25,000 — —
7. Share of income from HUF Exempt Exempt Exempt
Taxable income 8,46,600 7,21,600 6,21,600

Illustration: 21
The following are the particulars of income of Mr.X for the previous year 2020-21
a) Rent from property, in Delhi received in USA ` 80,000
b) Income from a business in USA controlled from Delhi ` 1,20,000
c) Income from a business in Bangalore controlled from USA ` 1,80,000
d) Rent from a property in USA received there but subsequently remitted to
India ` 60,000
e) Interest from deposits with an Indian company received in USA ` 20,000
f) Profit for the year 2018-19 of a business in USA remitted to India during
2020-21 (not taxed earlier) ` 75,000.
g) Gift received from his parents ` 45,000
Compute his income for the Assessment Year 2021-22 if he is:
1) Resident ordinarily resident in India
2) Resident but not ordinarily resident in India
3) Non resident in India (BU, BBM, May 2006)
56 : Income Tax
Solution:
Computation of Income of X for the Assessment Year 2021-22

Ordinarily Resident
Resident
1. Rent from property in Delhi received in USA 80,000 80,000 80,000
2. Income from a business in USA controlled
from Delhi 1,20,000 1,20,000 —
3. Income from a business in Bangalore
controlled from USA 1,80,000 1,80,000 1,80,000
4. Rent from a property in USA received there
but subsequently remitted to India 60,000 — —
5. Interest on deposits with an Indian
company received in USA 20,000 20,000 20,000
6. Past Profit for the year 2018-19 of a busi-
ness in USA remitted to India during 2020-21 — — —
7. Gift received from his parents — — —
Total income 4,60,000 4,00,000 2,80,000

Illustration: 22
Following are the particulars provided by Mr. Joseph relevant to the previous
year 2020-21, compute his Gross total income based on different residential status.
a) Royalty received outside India from the government of India ` 17,000
b) Technical fee received from A Ltd, an Indian company in Germany for advice
given by him is respect of a project situated in Iran ` 1,17,000
c) Income from a business situated in Sri Lanka (goods are sold in Sri Lanka,
sale consideration is received in Sri Lanka but business is controlled and
managed in India) ` 2,17,000
d) Income earned from a business in Uganda the business is controlled from
Delhi (` 15,000 is received in India) ` 65,000.
e) Pension (commuted) from the government of India for the service rendered in
Rangoon and received in Rangoon ` 18,000.
f) Profits from a business in Goa, the business is wholly controlled and managed
from Portugal and the whole profits are received in France ` 75,000
g) Cash gifts received in India from a relative in USA ` 1,00,000
h) Income from agriculture in Indonesia 50% of the income is received in India
and the balance is received and used for son’s education is London ` 50,000.
(BU, BBM, April 2005)
Solution
Computation of Gross Total Income of Mr. Joseph for the Assessment year
2021-22

Ordinarily Resident
Resident
a. Royalty received outside India from the
Government of India 17,000 17,000 17,000
b. Technical fee received from A Ltd.
in Germany for technical service rendered
in Iran 1,17,000 — —
c. Income from a business situated in Sri Lanka
(goods are sold in Sri Lanka, sale consideration
is received in Sri Lanka but business is
controlled and managed in India) 2,17,000 2,17,000 —
d. Income earned from a business in Uganda the
business is controlled from Delhi
(` 15,000 is received in India) 65,000 65,000 15,000
e. Pension from Govt. of India for services
rendered in Rangoon received there 18,000 18,000 18,000
f. Profit from business in Goa but received
in France 75,000 75,000 75,000
g. Cash gifts received in India from a relative
in USA — — —
h. Income from agriculture in Indonesia, 50% of
the income is received in India and the
balance is received and used for Sons
education is London 50,000 25,000 25,000

Illustration: 23
Following are the particulars of incomes of Mr. Naresh for the previous year
2020-21
1) Profit from business in England, Received in India ` 12,000.
2) Income from house property in Pakistan received there and brought to India
` 20,000.
3) Profit from business in Iran received in India ` 5,000.
4) Income from house property in Bangladesh deposited in a bank there ` 4,000.
5) Profit from business in Indonesia deposited in bank there this business is
controlled from India `15,000.
58 : Income Tax
6) Profit from software business in Bangalore controlled from USA ` 15,000.

7) Income accrued in Chennai but received in Singapore ` 16,000.
8) Past untaxed foreign income brought to India during the previous year `
20,000.
9) Income from agriculture in Punjab received in Mumbai ` 25,000.
10) Profit from sale of building in India received in Sri Lanka ` 15,000.
Compute gross total income of Mr. Naresh for the Assessment year 2020-21 if he is:
1) A resident
2) Not ordinarily resident and
3) Non resident
Solution
Computation of Gross Total Income of Mr. Naresh for the Assessment Year
2021-22

Ordinarily Resident
Resident
1. Profit from business in England received in India 12,000 12,000 12,000
2. Income from house property in Pakistan
received there and brought to India 20,000 — —
3. Profit from business in Iran received in India 5,000 5,000 5,000
4. Income from house property in Bangladesh
deposited in a bank there 4,000 — —
5. Profit from business in Indonesia deposited
in a bank there but this business is controlled
from India 15,000 15,000 —
6. Profit from software business in Bangalore
controlled from USA 15,000 15,000 15,000
7. Income accrued in Chennai but received in
Singapore 16,000 16,000 16,000
8. Past untaxed foreign income brought to India
9. Income from agriculture in Punjab received in
Mumbai Exempt Exempt Exempt
10. Profit from sale of building in India received in
Sri Lanka 15,000 15,000 15,000
Gross Total Income 1,02,000 78,000 63,000

Illustration: 24
Mr. Akshay furnishes the following particulars of income for that Previous Year
2020-21. Determine his taxable income for the Assessment Year. 2021-22. If his
residential status is
a) Ordinary resident
b) Not Ordinary resident
c) Non-Resident
i) Income from business in Hubli ` 1,00,000.
ii) Profit in business in UK, controlled from India ` 60,000
iii) Income from House Property in Japan, received their ` 50,000
iv) Income from Business in India, received in Pakistan ` 30,000
v) Salary received in India for services rendered in USA ` 70,000
vi) Interest on deposits with SBI in Mysore ` 20,000
vii) Profit from business in Singapore, controlled from India (1/3 received in
India) ` 30,000
viii) Past untaxed foreign income brought into India ` 8,000
ix) Dividend received from a Domestic company ` 5,000
x) Agricultural income earned in Nepal ` 25,000
xi) Commission received in India for service given in Japan ` 10,000
xii) Income from profession in India but received in France ` 10,000.
Solution
Computation of Taxable Income of Mr. Akshay for the Assessment Year
2021-22

Ordinarily Resident
Resident
i) Income from business in Hubli 1,00,000 1,00,000 1,00,000
ii) Profit in business in UK, controlled from India 60,000 60,000 —
iii) Income from House Property in Japan,
received their 50,000 — —
iv) Income from Business in India, received in
Pakistan 30,000 30,000 30,000
v) Salary received in India for services rendered
in USA 70,000 70,000 70,000
vi) Interest on deposits with SBI in Mysore 20,000 20,000 20,000
vii) Profit from business in Singapore, controlled
from India (1/3 received in India) 30,000 30,000 10,000
viii) Past untaxed foreign income brought into India — — —
ix) Dividend received from a Domestic company Exempt Exempt Exempt
60 : Income Tax
x) Agricultural income earned in Nepal. 25,000 — —

xi) Commission received in India for service
given in Japan 10,000 10,000 10,000
xii) Income from profession in India but received
in France 10,000 10,000 10,000
Gross Total Taxable Income 4,05,000 3,30,000 2,50,000
Illustration: 25
Following are the Incomes of Mr. Vishnu for the previous year 2020-21.
a) Received ` 20,000 in India, which accrued in England.
b) Income earned in India but, received in England ` 10,000
c) Income earned and received in Africa, but brought to India ` 5,000
d) Income earned and received in Japan from a business which was controlled
and managed in Japan ` 10,000
e) ` 16,000 was untaxed foreign income of some earlier year which was brought
to India in the previous year.
f) Interest on Fixed deposits in SBI, Bengaluru ` 12,000
g) Income from Agriculture in Africa ` 10,000
h) Dividends received in UK from an American company ` 10,000
i) Salary income for three months for working in Indian Embassy's Office in
Australia and salary received there ` 72,000
j) Income from House Property in Mumbai ` 1,00,000
k) Interest received in Post Office SB Account ` 1,000
l) Pension income from Belgium for services rendered in India with Limited
Company ` 20,000
m) Gift from a relative ` 80,000.
Compute Gross Total Income, if Mr. Vishnu is Ordinarily resident, Not Ordinarily
resident and Non-Resident.
Solution:
Computation of Taxable Income of Mr. Vishnu for the Assessment Year
2021-22
Particulars Ordinary Not Non

Resident Ordinarily Resident
Resident
a) Income received in India, Which accrued
in England. 20,000 20,000 20,000
b) Income earned in India but, received
in England 10,000 10,000 10,000
c) Income earned and received in Africa,
but brought to India 5,000 — —
d) Income earned and received in Japan from
a business which was controlled and
managed in Japan 10,000 — —
e) Untaxed foreign income of some
earlier year which was brought to India
in the Previous year. — — —
f) Interest on Fixed deposits in SBI, Bengaluru 12,000 12,000 12,000
g) Income from Agriculture in Africa 10,000 — —
h) Dividends received in UK from an
American company 10,000 — —
i) Salary income for three months for working
in Indian Embassy’s Office in Australia and
salary received there 72,000 72,000 72,000
j) Income from House Property in Mumbai 1,00,000 1,00,000 1,00,000
k) Interest received in Post Office SB Account
(In Section 80TTA of Income Tax act
interest upto ` 10,000 earned from all
savings bank account Including Post Office
is Exempt from tax) — — —
l) Pension income from Belgium for services
rendered in India with Limited Company 20,000 20,000 20,000
m) Gift from a relative. — — —
Total Taxable Income 2,69,000 2,34,000 2,34,000
Illustration: 26
Mr. Nischay furnishes the following particulars of income for that previous year
2020-21.
a) Profit from Business in Chennai ` 50,000
b) Income from Agriculture in Sri lanka ` 1,90,000
c) Income from Property in Mexico received their ` 2,00,000
d) Interest on Singapore Development Bonds ` 1,50,000 (1/3 rd received in
India)
62 : Income Tax
e) Income from Business in Kuwait controlled from Mumbai ` 85,000 (` 35,000

received in India)
f) Dividend from Domestic Company ` 10,000
g) Profit on Sale of Building in Bangalore, received in Nepal ` 50,000
h) Income from Agriculture in Punjab ` 1,00,000
i) Profit on sale of Plant at London ` 50,000 (50% received in India)
j) Rent from House Property in Nepal Received their ` 20,000
k) Profit from Business in Mysore received in Mandya ` 25,000
l) Dividends from UK based company received in UK ` 27,000
Compute his Gross Total Income for the Assessment Year 2021-22 if he is,
i) Ordinary resident
ii) Not Ordinary resident
iii) Non-Resident
Solution:
Computation of Taxable Income of Mr. Nischay for the Assessment Year
2021-22

Resident
a) Profit from Business in Chennai. 50,000 50,000 50,000
b) Income from Agriculture in Sri lanka 1,90,000 — —
c) Income from Property in Mexico
received their 2,00,000 — —
d) Interest on Singapore Development
Bonds (1/3 rd received in India) 1,50,000 50,000 50,000
e) Income from Business in Kuwait
controlled from Mumbai
(` 35,000 received in India) 85,000 85,000 35,000
f) Dividend from Domestic Company Exempt Exempt Exempt
g) Profit on Sale of Building in Bangalore,
received in Nepal 50,000 50,000 50,000
h) Income from Agriculture in Punjab Exempt Exempt Exempt
i) Profit on sale of Plant at London
(50% received in India) 50,000 25,000 25,000
j) Rent from House Property in Nepal
Received their 20,000 — —
k) Profit from Business in Mysore
received in Mandya 25,000 25,000 25,000
l) Dividends from UK based company
received in UK 27,000 — —
Illustration: 27
From the following particulars of Mr. Manu. Compute his Gross Total Income for
the Assessment Year 2021-22. If he is,
i) Resident
ii) Not Ordinarily Resident
iii) Non Resident
a) Profit from Business in Chennai, business managed from Sri Lanka ` 25,000.
b) Income from House property in Mysore ` 1,00,000
c) Income from salary in Japan ` 1,60,000
d) Income from Business in Kuwait, business being controlled from Mumbai
(` 25,000 received in India) ` 65,000
e) Income from Agriculture in Punjab received in Mumbai ` 30,000
f) Income from Agriculture in Bangladesh remitted to India ` 10,000
g) Profit on Sale of Building in India ` 2,50,000
h) Profit from business in Indonesia, this business controlled from Delhi `
40,000
i) Share of Income from Indian Partnership firm ` 5,000
j) Interest on Savings Bank Deposits in State Bank of India ` 1,000
k) Dividends from foreign company received in England ` 10,000
l) Income on German Development bonds (1/3 received in India) ` 51,000
Solution:
Computation of Taxable Income of Mr. Manu for the Assessment
Year 2021-22

Resident
a) Profit from Business in Chennai, business
managed from Sri Lanka. 25,000 25,000 25,000
b) Income from House property in Mysore 1,00,000 1,00,000 1,00,000
c) Income from salary in Japan 1,60,000 — —
d) Income from Business in Kuwait, business
being controlled from Mumbai
(` 25,000 received in India) 65,000 65,000 25,000
e) Income from Agriculture in Punjab received
in Mumbai Exempt Exempt Exempt
f) Income from Agriculture in Bangladesh
remitted to India 10,000 — —
g) Profit on Sale of Building in India 2,50,000 2,50,000 2,50,000
h) Profit from business in Indonesia, this
business controlled from Delhi 40,000 40,000 —
64 : Income Tax
i) Share of Income from Indian Partnership firm Exempt Exempt Exempt

j) Interest on Savings Bank Deposits in
State Bank of India
interest upto ` 10,000 earned from all savings
bank account Including Post Office is
Exempt from tax) 10,000 — —
k) Dividends from foreign company received
in England 51,000 17,000 17,000
l) Income on German Development bonds
(1/3 received in India)
Illustration: 28
Mr. Ganesh an Indian Citizen provides the following particulars of his income.
Compute his Gross Total Income for the Assessment Year 2021-22, if he is
a) Resident
b) Not Ordinarily Resident
c) Non Resident
i) Income from Agricultural Land situated at Mangalore ` 20,000
ii) Interest received from a company in USA, remitted to India ` 15,000
iii) Commission received in India for services rendered in Sri Lanka ` 60,000
iv) Profit from business in Australia controlled from India (1/4 received in India)
` 40,000
v) Interest from Post Office Savings Bank Account ` 5,000
vi) Profit from business in Bangalore ` 10,000
vii) Income earned in Sydney but received in USA ` 25,000
viii) Share of Income from Partnership business ` 15,000
ix) Dividend received from a Foreign company received in China ` 5,000
x) Profit from business in Mysore controlled from Sri Lanka (Half received in Sri
Lanka) ` 50,000
xi) Agricultural income from agricultural land situated in Bangladesh ` 20,000
xii) Past Untaxed foreign income brought to India ` 1,00,000
Solution:
Computation of Taxable Income of Mr. Ganesh
for the Assessment Year 2021-22

Resident
i) Income from Agricultural Land situated
at Mangalore Exempt Exempt Exempt
ii) Interest received from a company in USA,
remitted to India 15,000 — —
iii) Commission received in India for services
rendered in Sri Lanka 60,000 60,000 60,000
iv) Profit from business in Australia controlled
from India (1/4 received in India) 40,000 40,000 10,000
v) Interest from Post Office Savings
Bank Account
interest upto ` 10,000 earned from all
savings bank account Including Post Office
is Exempt from tax) 10,000 10,000 10,000
vi) Profit from business in Bangalore 25,000 — —
vii) Income earned in Sydney but
received in USA Exempt Exempt Exempt
viii) Share of Income from Partnership business Exempt Exempt Exempt
ix) Dividend received from a Foreign company
received in China 5,000 — —
x) Profit from business in Mysore controlled
from Sri Lanka (Half received in Sri Lanka) 50,000 50,000 50,000
xi) Agricultural income from agricultural land
situated in Bangladesh 20,000 — —
xii) Past Untaxed foreign income brought to India — — —
Illustration: 29
From the following particulars of Mr. Naveen compute his Gross Total Income for
the Assessment Year 2021-22 if he is
i) Ordinarily Resident
ii) Not Ordinarily Resident
iii) Non Resident
a) Profit from business in England received in India ` 24,000
b) Income from House Property in Pakistan received there ` 20,000
66 : Income Tax
c) Profit from Business in Iran received in India ` 10,000

d) Income from House property in Bangladesh deposited in a bank there
` 10,000
e) Profit from business in Indonesia deposited in bank there, this business is
controlled from India ` 30,000
f) Profit from software business in Bangalore controlled from USA ` 30,000
g) Income from Agriculture in Punjab ` 20,000
h) Profit from sale of Building in India received in Sri Lanka ` 25,000
i) Income Accrued in Chennai but received in Singapore ` 32,000
j) Dividend received from a domestic company ` 10,000
k) Past untaxed foreign income brought to India during the previous year
` 35,000
l) Allowances received from UNO ` 25,000
Solution:
Computation of Taxable Income of Mr. Naveen
for the Assessment Year 2021-22

Resident
a) Profit from business in England received
in India 24,000 24,000 24,000
b) Income from House Property in Pakistan
received their 20,000 — —
c) Profit from Business in Iran received in India 10,000 10,000 10,000
d) Income from House property in Bangladesh
deposited in a bank there 10,000 — —
e) Profit from business in Indonesia deposited in
bank there, this business is controlled
from India 30,000 30,000 —
f) Profit from software business in Bangalore
controlled from USA 30,000 30,000 30,000
g) Income from Agriculture in Punjab Exempt Exempt Exempt
h) Profit from sale of Building in India received
in Sri Lanka 25,000 25,000 25,000
i) Income Accrued in Chennai but received
in Singapore 32,000 32,000 32,000
j) Dividend received from a domestic company Exempt Exempt Exempt
k) Past untaxed foreign income brought to India
l) Allowances received from UNO Exempt Exempt Exempt

Income Tax

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Chapter - 3

Residential Status and Incidence of Tax

Determination of Residential Status of an Individual

Besides, he also satisfies both the following additional conditions:

Residential Status of a Company (Section 6(3))

Therefore, Mr. Priya Krishna is said to be “Non-resident” for the Assessment

Particulars Resident Not Non

Total Income 1,52,000 1,37,000 1,07,000

Particulars Resident Not Non

Total Income 3,78,000 2,88,000 1,78,000

Particulars Resident Not Non

Total Income 1,04,000 78,000 66,000

Particulars Resident Not Non

Gross Total Income 2,64,000 1,92,000 1,12,000

Particulars Resident Not Non

Gross total income 1,28,200 93,200 93,200

Particulars Resident Not Non

Gross Total Income 3,60,000 3,05,000 2,25,000

Particulars Resident Not Non

Taxable income 8,46,600 7,21,600 6,21,600

Particulars Resident Not Non

Total income 4,60,000 4,00,000 2,80,000

Particulars Resident Not Non

Gross Total Income 5,59,000 4,17,000 1,50,000

6) Profit from software business in Bangalore controlled from USA ` 15,000.

Particulars Resident Not Non

Gross Total Income 1,02,000 78,000 63,000

Particulars Resident Not Non

x) Agricultural income earned in Nepal. 25,000 — —

Particulars Ordinary Not Non

e) Income from Business in Kuwait controlled from Mumbai ` 85,000 (` 35,000

Particulars Ordinary Not Non

Particulars Ordinary Not Non

i) Share of Income from Indian Partnership firm Exempt Exempt Exempt

Particulars Ordinary Not Non

c) Profit from Business in Iran received in India ` 10,000

Particulars Ordinary Not Non

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