Chapter 2 Scope of Total Income & Residential Status [Sections 5 to 9B] 2.1 Scope of Total Income/Incidence of tax [Section 5] Toral income of an assessee cannot be computed unless we know his residential status in India during the previous year. According to the residential status, the her be (0 Resident in India: ot (i) Non-resident in India However, individual and HUF cannot be simply called resident in India, If individual is a resident in India he will be either: (a) Resident and Ordinarily resident in India: or (A) Resident but not Ordinarily resident in India As per section 6(1A), an individual can be deemed to be resident in India if certain conditions are satisfied However, such individual shall be resident but not ordinarily resident in India, Other categories of persons shall either be resident in India or non-resident in India, There is no further classification into ordinarily resident or not ordinarily resident in their case 2.2 Basic rules for determining residential status of an assessee The following basic rules must be kept in mind while determining the residential status 4 Residential status is determined for each category of persons separately e.g. there are separate set of rules for determining the residential status of an individual and separate rules for companies, ete 4 Residential status is always determined for the previous year because we have to determine the total income of the previous year only 4 Residential status of a person is to be determined for every previous year because it may change from year to year. For example A. who is resident of India in the previous year 2021-22, may become @ non-resident in previous year 2022-23, % Ifa person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other source of income. [Section 6(5)] + Apperson may be a resident of more than one country for any previous year. If Y is a resident in India for previous year 2021-22, it does not mean that he cannot be a resident of any other country for that previous year. %& Citizenship of a country and residential status of that country are separate concepts. A person may be an Indian national/citizen, but may not be a resident in India. On the other hand, a person may be a foreign nationalicitizen, but may be a resident in India. ‘It is the duty of the assessee to place all material facts before the assessing officer to enable him to determine his correct residential status 2.3 Rules for determining the residential status of an individual [Sections 6(1) & 6(1A)] An individual may either be (a) Resident in India; or (b) Deemed to be resident in India; or (c) Non-resident in India. An individual cannot simply be called a resident or deemed to be resident in India. Ifhe isa resident in India, we have to further determine whether he is (a) resident and ordinarily resident in India; or (6) resident but not ordinarily resident in India. Whereas, ifan individual is deemed to be resident in India as pr seston 6(1), he shall be not ordinarily resident in india» Income Tax . Simplified Approach to In Che - dual | + : | Deemed to be resident Non-resident + | ‘Such individual shall be “hot ordinarily resident™ Resident + aaa ‘onlin Resident Not Ordinarily Resident ction 6(1)1 isties any one of the days or more in the relevant previous year; or 4.44 When an individual iy sido be resident in Indi ‘An individual ts said 10, be resident in India tf he sat a (1) He isin India for a period or periods aos inal : ie 3) He ten Inia fr 60 days or more during the relevant previous year 2 2 four vious yeas smmedately preceding the leva Mevows J83P " : rns to the above rule Explanation As per the Explanation, tere ss sus ve ee ua, wo isa cizen of India and who leaves India in amy previons year for the puro Oar ka te pre of 0 yn contion No, 2. supra shall e ebsites TS3 days aren ee der etl eat least 182 days during the relevant previous year Shall not be a esident of India unless his stay nnd ree Searing citizen of India and who leaves India in any previ he leaves India, Similarly in ease of an indi ual who ts a eitizen ho eaves In Pe assrmember ofthe crew ofan indian hp he period 0 dys wl sabia Hy 182 days . citizen of India, or a person of Indian origin within the mean, (>) In the case of an individual being a citizen of India, oF 2 person mo Coe ota tte) ao, bang otis Ind, cones ona sist naan} EMO ear {Othe peri of 60 dys the condition No. 2 supra, n elation to that year stall Be substituted by 182 dys og rraeejo ss ving total income, oter than the income fom foreign sources, nor exceeding €15.0) i Guing the previous yea 11) the period of 60 days the c ’ 2 Adidua fs having total income, other than the income from foreien sources, exceeding 215,00.000 duns following two conditions vows year and has been in India for 365 ds ofp are two except condition No. 2 supra, in relation to that year shall be substituted by 120 days. ifs the previous year However as per section 6(6) discussed below, in case of the citizen or person of Indian origin having toa incon, other than the income from foreign sources, exceeding €15,00,000 during the previous year. he comes to India fr a visit for 120 day but less tha 182 days inthe previous year. he shall be deemed to be not ordinarily reside India In ober words, a citizen of India or person of Indian origin, who had bs preceding previous years and who undertakes a visit to India in any previous sear. and {@) whose total income other than income from foreign sources doesnot exceed &15.00,000 shall not bea reside in India if he stays in India upto 181 days in the relevant previous yer. or (6) whose total income other than income from foreign sources exceeds £15, 0.000 shall not be a resident in India| | en in India for 368 days or more thes ie stays in India upto 119 days inthe relevant previous year. ‘The moment he stays in India for 182 days or 120 days, asthe case may be, he shell be treated as resident in India Explanation 2: For the purposes of this clause, in the case of an individual, being « citizen of India and a member ofthe crew of a foreign bound ship leaving India. the period or periods of stay in India shall in respect of such voyage, 6 determined in the manner and subject to such conditions as may be prescribes For computing the period or periods of stay in India, in respect of an eligible vosave. the entered into the Continuous Discharge Certificate in respect of joining the ship by the saud indisidual tor the and ending on the date entered into the Continuous Discharge Certificate in respect t ship in respect of such voyage shall be excluded. (For details see rule 26) [1 Meaning of income from foreign sources [Explanation] _ | For the purpose of section 6, the expression “income from foreign sources” means income whict accrues or anses outside India tod beginning on the date gible voy vidual trom the (except income derived from a business controlled in ora profession setup in lia) an sich i not deemed to accrue oF Anse 8 (exe M up in In is not deemed to accrue oF arse {Explanation w Seton 11504] . “ee | 3. Due to excetons given above mss ofan india wove ft o : 8 dual whose toal income other than sone from foreign sources does 2 exceed 215.0.00, the second condition although no delete bu shall hecome redunan in cae of sitcom of India unt the St exception and in case of eten of India and person of Indian ongn under the second exception | ‘year only first condition shall be applial The above con tions, with exceptions for that previous ay be called as category A’ conditionsRe” Chap. 2 P. Seope of Total Income & Residential Status gw) Important explanations % Relevant previous year means the * In comput tobe Previous year for which the residential status is being determined the period of stay in India, is not h lay 19 India. Ws not necessary that the stay should be for a continuous period. What is Sen isthe total mumber of days stay wn India ciring the relevant previous year : Wis also not necessary thatthe ikisalio neces iat sy een ‘one place. ¢ g_, he may stay at Bombay for 90 days and then go nn the same previous year. he may stay at Delhi for 120 days during the same previous yeat Hs ttl say iw Be 210 fr that previ ea nT ys mimetic ce sows ya % In computing the period of 182 © treated sa tn echt US? days the day the individual enters Indi an the day he leaves India should both be % Place and purpose of stay in India 1s immaterial P presence in India, Meaning of employment: The term employment isnot defined in the Income-tax Act i SAN set soas to ean profits in many ways, Thus he can set up an independent practice abroad or vith hie emplovirent an nag ness etvities to a foreign country. A person merely undertaking tours abroad in connection ployment in India would not be eligible forthe relaxation provided under exception | 2.3b Citizen of India shall be deemed to be resident in India in certain cases [Section 6(1A)] Notwithstanding anything contained in section 6(1), an indivi ny ividual s semed to be resident in India im the previous yar ihe satisfies all the following contons Mata sal Be deed 1 be resent in In (i) heis citizen of India, 'esence in territorial waters of India would also be regarded as Gi) he has total income, other than the income from foreign sources, exceeding 215 lakh during the previous year, (Gil) he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature Explanation—For the removal of doubts, itis hereby declared that the above section 6(1A) shall not apply in | ‘case of an individual who is said to be resident in India in the previous year under section 6(1). In other words, where an individual, is a citizen of India, having total income, other than the income from foreign sources, exceeding 215 lakh during the previous year and he is not liable to pay tax in a foreign country due to his— (a) domicile, or (b) residence. or (c) criteria of similar nature Conditions of section 6(1) with explanation mentioned above shall not be applicable and he shall be deemed to be resident in India in all cases i.e. although he does not stay in India for even one day However, an Explanation has been inserted under section 6(1A) to clarify that section 6(1A) shall not apply in case of an individual who is said to be resident in India in the previous year under section 6(1) read with Explanation | under the said section. Therefore, if an individual satisfies any of the two conditions read with Explanation mentioned in section 6(1) above, section 6(1A) shall not apply in his case. Further, as per Section 6(6) discussed in para 2.3c below, citizen of India who is deemed to be resident in India under section 6(1A) shall be treated as not ordinarily resident in India. 1. Meaning of income from foreign sources [Explanation] ] For the purpose of section 6, the expression “income from foreign sources” means income which accrues or arises | outside India (except income derived from a business controlled in or a profession set up in India) and which is not deemed to acerue or arise in India 2. Meaning of term “liable to tax”|Section 2(29A)], | “able to tax”, in relation to & person and with reference to & country, means that there is an income-tax lability on | such person under the law of that country for the time being in force and shall include a person who has | subsequently been exempted from such lability under the law of that country | Thus if an individual is liable to tax under the law of a foreign country, section 61) relating to deemed to be | resident in India shall not be applicable. On the other hand, if he is not liable to tax in a foreign country, section 6(1A) relating to deemed to be resident in India shall become applicable provided the conditions mentioned in section 6(1A) are satisfied. However, in this ease, he shall be not ordinarily resident in India as per section 6( 2.3e When an individual is said to be resident but not ordinarily resident in India? [Section 6(6)], Section 6(6) states that an individual shall be nor ordinarily resident in India if he satisfies any one of the following conditions: (1) he has been a non-resident in India in 9 out of 10 previous years immediately preceding the relevant previous year, for he has been in India for a period of 729 days or less in 7 previous years immediately preceding the relevant previous year.Simp ii PE nN e. other than the ine Com (2) He is ition oe Gt He eM or pets amounting mall 10120 days on 61, oF mor sources, exceeds pee oe {See the amendment hers fess than 182 days: oF 7 (a) He sa citizen of India whom deere individual ssa 6 Be resident 2 Deriving fom the above Mara 2, aan Inia if the following comsitions ave 8 han THe hs boom resi a ia for a Fel © This means the a resident for at nendment above} out of I 1 previous years immediately preceding the relevant preg | Jons, with exceptionsiconcession (given aby fly preceding the relevant previous year, ang nrisfied any one of the condi v0) fe | ars immediat | seven previous years immediately preceding the re ? aa eva athe must have st ‘ rast 2 out of 10 previous Ye 730 days or more, during > He has been in India for SA pr ets TAY Sal ew onal SKS in da 5 ag “an individual who is deemed 0 66x 2 Aci a person of Indian origin, having tt ath during evpcriod oF periods amounting inal 0 120 days oro SSSarty reside in nda as per section (ONC) 2 , When an individual resident in India [Section 2(30)] 2.3e When an individual is said to be non-! - pane snndual ix said to be a non-resident, if he is not a resident in India e, mone of the conditions (ay exception concession) mentioned in para 2.3a is satisfied. “The conditions for determining the residential status may be summarised as under: | (A). Conditions for determining whether an individual is resident or not (Conditions of Category 8) _ 1 income, other than the income from foreign sources, exceeding tis han | to Section 6(1) [See the amendment above). who he, | rebut less than 182 days shall be resident but my | 7 2 3 L_ 4 | "For ndividuals not |For an Indian Citizen who |For an Indian citizen or a) For an Indian citzen or 3 cer red under columns \leaves India during the person, of Indian origin person, of Indian orign sh 2,3 and4 |relevant previous year for|who being outside India,| being outside India, comes | | the purpose of employment | comes to visit India during visit India during the ‘or as a member of the crew| the relevant previous year'| relevant previous year and ‘ofan Indian Ship. and his otal income other| his total income other than than the income fromthe income from foreign [foreign source does not| source exceeds 815 Laths exceed 115 Lakhs. (a) Must be in India for | Must be in India for at least | Must be in India for at least | Must be in India for at leas | at least 182 days | 182 days during the relevant 182 days during the 182 days during the relesan during te relevant | previous year. relevant previous year. previous year previous year. . OF | (6) Must bein India for |The condition No. 2 of Col.| This condition No. 2 of Must be in India for 2038 atleast 60 days No. 1 will be of no|Col. 1 will be of no/or more and less than uring the relevant | significance because in view |significance because in days during the ch! previous year and [ofthe exception, the period |view of the exception. the previous year and 365 3s days during 4 of stay in India has been | period of stay in India has during 4 previous Immediately raised to 182 days. | been raised to 182 days. immediately preveding preceding the relevant previous year relevant previous year, (B) Conditions to be satisfied for being an ordin: Should be resident in India for at least 2 out of 10 previous years precedi previonsyear ot Preeeding, the relevant | preceding the relevant previous year | L eeyD n Chap. 2 Scope of Total Income & Residential Stains IW any oF both of the above conxttions of para 1 are not satisfied, he shall be salto be ardinaily resident am © en to be satisfied for being resident but not ordinarily resident in India (Conditions of Category ©) (1) He fas been a non-resident India in 9 out of 10 preety immediately preceding the relevant previ zea oe has en in tia fo pei of 729 dvs a fxs in 7 previous years immeliey preci the (2) Heisa en of India, oF a person of Ind ‘on of Indian origin, having total income, other than the income from foretge uurees ences £18 lal crn the previous ear, a referred to in else (b) of Fspanation 1 w Seton {See the amendment above]. who has been in India fora period ot periods amounting in all 120 days or tr testa 8 deo en een a arenes amg mal 2 ay 2) He tsa citizen of Inia who (3) Me's a citizen of India who is deemed to be resident in India under Section 6(1) [See amendment above] ‘Rendon m ria as per Sex 641) | read with Clause (a) and (h) of Exp under See 6(1) ‘Nom resident in nia, (0) one of the eon ‘wth explanation esate, nd (08) hes not deemed tbe resident Ind «Ay Deemed tobe Resient in Indias per See (1A) rsinary Reet nd fhe [Not Ordinarily Resident in Ini if a fe inowine conations (He hasbeen non-resident in 9 out ofthe 10 Te has been resides mare than cn previous yrs ut of ten previo years mediately proces th levant revs years mediate | ae roczding the relevant previous | Hehas ding the 7 previo years presen that year and ear been in India fran ovr period of 729 ays | preceding that year been in Indi “ (iy He isa etizen of india, oF a person of Indian for an overall penod of 730 days | erm ex, Soil ns rh ene fiom foreign sources, exccoding Rs. 15 lakh during the previous year and who has been in India for a | ped or periods amounting al © 120 dy oF | more tes than 182 days Ilustration 2.1: A citizen of USA has been staying in India since 1991. He leaves India on 16.7.2021 on a visit to USA and returns on 4.1.2022. Determine his residential status for the previous year 2021-22, Solution Step 1: Find out if he is a resident Yor this, examine if he satisfies first condition (stay in Indi for at least 182 days) His stay in India during the previous year 14.2021 10 313.2022 is as under _ 1 BO ays ctober, 202 [ /May, 2021 eae ea November, 2021 | * — Giune.20210 Ray December, 2021 7 | Tuly,2020 SO ’ 16 days January, 2022 _28 days | [August,2020 _ = February, 2022 dys September, 2021 a _ I March, 2022 dys |come Ta & Simphied Approach to tne 1 4 m4 “Ths his total stay in In revious 4 days Ache in hee era sag. he satisfies the Fist condition and is, there sis tot ty ida gets ens h ‘ae is an Arai fae than 182 “ee the secon andiion as already st tion as the first " anc the secon conn a8 sate hour of Feaving and arrival is relevant Tae ni ont [es Sateen | ‘Step 2 Fr oui sora #9 always Pec sy Here number of hours are otherwise | it was a marginal case of 182 days, 3 | Dee 1 previous year) Resident for at Tea : ‘ ., therefore, sat ‘ 2011-12 to 2020 21 isthe it cond wt? (a) Examine Tn previous years pF ton for ene a esdent 142 gy, During these years he has stayin India during the relevant Ne (2) Now examine the second & Seven years prior to previous year mars tHe Teast 730 days 1 1020-21 and 2021-2. dia for 150 days, 100 days, 120 day pres 202 oo92 she stayed in India for 150 days, 100 day Ai een Tag] 18. 201819, 2019-20, 2020-21 and 202 y essment year 2022-23 ry Od dons rexpectvels. Determine hee sient tats 0" the asses ny en ‘Ans. Resident but not ordinarily resident in India. [See Pen 281 Pao Netration 2.2: Indian citizen and businessman Shri Ra} Gopal, who resides in ar cmtoreca purposes on 1S 8.2021 and came back to India on 10.11 2022, He has never Hpeen out of India in the past at 2022-23. ermine sient stats of Shri Raj Gopal forthe assessment 37 20 (6) Will your answer be different ibe had gone on leisure iP | Solution a) The previous year forthe assessment year 2022-23 is prior to the relevant previous year) during 7 previous years contin (790 day period 14.2014 10 31 ‘ | aire period, tis condition is also Sa 2021-22. During this period he was in India for 137 days (30 +3] < ae ae arr Tr 182 days, he does not satisfy the first condition of eategury A. The Sead Reyes mn tna i pa anloyanent outside Indi and is therefore, covered under exception No, | ‘where 60 days will be substituted by 182 days “Trercfore he isa non-resident. Conditions of eategory B need not te examined (&) In ths case although he dos not satisfy the fist condition of category A» he saisfeh the second condition as he was | aa ea har 60 days in the velevant previous year and was aso here for more than 365 days during four prealg previous years. He i therefore, resident in India. The exception will not be anpliabfe 1 him because he did not lene pas for ane purpose of employment. He satisfies both the conditions of category B because he has always been in nk before 15.8.2021. “The status ofthe asessee forthe previous year 2021-22 will inthis case be resident and ordinarily resident in India Ilustration 23: R, a German national, comes to India for the first time during 2017-18. During the previous years 201748, 201819; 2019-20 and 2020-21 he was in India for 156 days, 72 days, 183 days and 161 days respectively. Further dunng te previous year 2021-22, he is in India for 84 days Determine the residential status of R for the assessment year 2022-23, Solution: The residential status in this question is to be determined for the previous year 2021-22 which 3s relevant ® assessment year 2022-23 ‘Stay in India during previous year 2021-22 — 84 days. Stay in the four preceding previous years. 156 + 72 + 183 + 161 = 572 days He satisfies the 2nd basic condition, hence he is resident in India To determine whether he is ordinarily resident in India he should satisfy both the additional conditions: Condition No. | resident in atleast 2 previous years out of the 10 previous years immediately preceding previous year 20217 Previous year 2020-21: Stay in India 161 days. ‘ “n - Stay in 4 preceding previous years Previous Years 2019-20 2018-19 - —SS. ne Scope of Total Income & Resident Sas 7 2 — 156 foie so val 41 | Tal e second condition Hence, he is resident forthe previous year 2020-21 as he satisfies Previows year 2019-20 Stay mn India 183 days, He is resent in Indi for previous year 2019-20 ashe satisfies the First condition, There is no need to see the 2nd condition, Since, he has become resident in 2 previous years immediately preceding the previous year 2021-22, there is no need to see his residential status for prior previous years, “Thus, he satisfies the first additional condition, Additional condition No. 2, He shouldbe in India for atleast 730 days in 7 preceding previous years immediately preceding the previous year 2021-22, His stayin India in past 7 years is as under: Previous Vears } - — [hois.16 [owas | Toval He does not satisfy the second additional condition. Hence, he is resident but not ordinarily resident in India Ilustration 2.4: Rickey Ponting, an Australian cricketer has been coming to India for 100 days every year since 2008-09: (a) Determine his residential status forthe assessment year 2022-23, (6) Will your answer be different if he has been coming to India for 110 days instead of 100 days every year? Solution (a) Rickey Ponting satisfies the second condition of category A because he is in India for more than 60 days during the relevant previous year and for 400 days during four years preceding the relevant previous year. Therefore, he is a resident. Further, in this case, although he satisfies the first condition of category B of being resident for at least 2 out of 10 preceding previous years but he does not satisfy the second condition of category B as during 7 years preceding the previous year, he is in India for only 700 days. He shall, therefore, be a resident but not ordinarily resident in India, (8) Yes. He will in this case, be resident and ordinarily resident in India. He satisfies both conditions of category 'B' as he was in India for 770 days in the last seven years and he was resident for at least 2 previous year out of 10 previous years immediately preceding the relevant previous year. IMlustration 2.5: X came to India from America for the frst time on 10.10.2021. He retums to his home country after staying in India upto 5.7.2022. Will he be a resident in India for the assessment year 2022-23? Solution: In this ease although X has been in India for a continuous period of 271 days but it falls in two previous years ie. previous year 2021-22 and previous year 2022-23. During the previous year 2021-22, his stay in India was only 173 days (22 + 30+ 31+ 31 +28 +31) (ce. 10.10.2021 to 31.3.2022). Therefore, he will be a non-resident in India in previous year 2021-22 as he does ‘not satisfy the first condition of 182 days stay in India during the previous year. Further, the second condition is also not satisfied as, although, he was in India for more than 60 days in the relevant previous year, he was not here for 365 days or more in 4 preceding previous years as he came to India for the first time on 10.10.2021. He would also be non-resident in previous year 2022-23, for the same reasons, if he does not come to India thereafter asthe period of stay in India will be 97 days only (ie. 14.2022 to 6.7.2022) The second condition is also not satisfied asin the preceding 4 years he was here only for 174 days. Mlustration 2.6: X came to India from America forthe frst time on 3.10.2020. He returned to his home country after staying in India upto 28.9,2021. Will he be a resident in India forthe assessment years 2021-22 and 2022-23? Solution Assessment year 2021-22: During the previous year 2020-21, he is in India from 3.10.2020 to 31.3.2021 ie. for 181 days, Prior tothe previous year he as never been in nda, He does ot satis any ofthe coniton of category A andi therefore, a non- resident. Assessment year 2022-23: During the previous year 2021-22, he is in India from 14.2021 to 28.9.2021 te. for 181 days. He «does not satisfy the first condition. During 4 previous years immediately preceding the previous year 2021-22 he isin India for only 181 days, He does not satisfy the second condition also. He is, therefore, a non-resident.tw Income Tar Simplified Approee - : wo 28 9.2021 is 362 days ata stretch, stil he is @ noncr m 310.2020 ately and, therefore, he can enjoy the Benefit of being ne than 182 days provided it falls in two different previous years, India for the first time on 21.92021 for employ ° 2% Tt may be observed that his total stay in India fron fave fo determine the stay in Tndia for each previous year senarn resident even though his slay may be much in The secre condion 1s not appeal Bisse, as he 219.2021) an therefore, doesnot ail te fit cond 2? for employe Inia al Jeaves India 2021 sient In eae ss. In this case also, second condition is not pe Sint er ew Theft he wl be No- Reet nnd ve or prev oy shore in 1946, He has been staying in England since 1972, He came to visi tn ae SN ant Dae ssidential status for assessment year 2022-23, In 2.10.2021 and retums on 313.2022, Determine his e i lays (30 +304 31+ 31 428+ 31 Ge 319, Solution, During the previous year 2021-22, 'G! stays in Indi for 181 days ( i person of Indian ongin (He was bom in undivided India) and visits India during the previous year. Hei, therefore, a Non Rest station 2.9 was bor in England in 196. His father was bom in Amerie in 1936, GS grandfather was or ay #106, WG fea Reena ie wists India for 10 dy rings Prevows YON 90H ton: No. G was born in Lal ice. im undivided India and th Solution: No. G isa person of Indian origin as his grandfather was bom in Lahore in i alll the second condition isnot applicable in hs case and the first condition is not satisfied as he visits India for less than 182 days, Mlustration 2.10: A’, a citizen of india left India on 6.6.2008 for employment abroad. He did not come to India upto year 2018-19. During 2019-20 and 2020-21, he visited Inia for 145 days and 195 days respectively. Inthe previous year 2039) ine came to India on 7.4.2021 and left on 30.11.2021. Determine his residential status for assessment year 2022-23. Solution: Category 'A' conditions. Previous yer 2021-22: Stay in India is for 238 days (24 + 31 + 30 +31 +31 + 30 +31 + 30) (ce. 74.2021 to 30.11.2021) fy is, therefore, Resident in Inia - _ Category 'B" condi Previous year No. of days’ stay ___ Resident/Non-resident /2020.21 | 19s I Resident 2019-20 us [Nonresident "As he is a citizen of India a 1s India during the previous years 2020-21 and 2019-20, second condition will tle applicable in his case forthe previous year 2019-20, Prior to that he did not visit India after he left on 6.6.2008, AAs he is resident only for one previous year, out of 10 preceding previous years (ie. previous years 2011-12 to 2020-2} te does not satisfy the first condition of category (B) ie. being resident in at least 2 out of 10 previous years immediately preceding te relevant previous year. There is no need to see the second condition of Category (B) asthe first condition itself is not satisfied Hes, therefore, “not ordinarily resident in India Illustration 2.11: R, a citizen of India, has been carrying on a profession in Dubai (UAE), where he is not liable to psy a income tax. His taxable Indian income for the previous year 2021-22 is 212,00,000 and he has also eamed %5,00,00 fe exercising the profession in Dubai. The profession is set up in India. Besides, the professional income, he has earned 210,00,000i8 Dubai. Determine his residential status, if during the previous year 2 (a) visited India for 110 days (b) not visited India (€)_ visited India for 190 days (@) visited India for 122 days and in the four preceding previous years immediately the previous year 202 for 300 days . ° (©) visited India for 122 days and inthe four preceding previous years immediately the previous year 2021 for 400 days he has: (@) Ris not liable to pay tax in Dubai. Since he isa citizen of India and his total income other than income from f source exceeds 215,00,000 (312,00,000 + 5,00,000 being income from profession which is set up in India), be sil deemed to be resident in India as per section 6(1A) (inserted by the Finance Act, 2020). However, 38 Pet section 6(6), he shall be resident but not ordinarily resident in India and shall be liable to pay tax in India on 217% Further, it may be noted that section 6(1) is not attracted in his case.Scope of Total Income & Residential Status 27 () The answer will remain the same as numberof days stayin India i not relevant, the individual is deemed to be resident in India as por section 6(1A) (6) He will Become resi per section 6(1) ashe was in India for more than 182 days. As per Explanation wo section (1A), if the individual is covered under section 6(1), then section 6(1A) 1s not applicable. However, in the absence ofthe information available ofthe past previous years, 1! cannot be determined whether he shall he reident and diary resident i nda or resent but not enmity resident in Td (a) He shall be docmeto be resident as por section 6(1A), Section 6(1) 8 nt applicable as although he visited India for more than 120 ays But he ds not sats the conditions of 468 days inthe preceding four years. As per amended section (46). he shall Be te resident but not ontinarily resident in India and shall be file to pay tax in India on 217,00,000. He shall be resident as per section 6(1), as he visited Inia for more than 120 days and he also satisfies the conditions of stay of 468 days oF more in the four preceding previous years, However, in the absence of the information available of the past previous years, it cannot be determined whether he shall he resident and ordinarily resident in India or resident but not ordinarily resident im India Mlustration 2.12: Take the above illustration No, 2.11 and assume his Indian income was %9,00,000 instead of @12,00,000. Solution Since the total income, other than the income from foreign source, of R who isa citizen of India does not exceed 215,00,000, section be appli @ ) © @ © Mus {6(1A) relating to deemed to be resident in India shall not be applicable. In his case section 6(1) read with section 6(6) shall able Since, R a citizen of India is outside India and comes for a visit to India for 110 days during the previous year, he shall be non-resident in India and shall be liable to pay tax on the total income of 812,00,000. Since, R has not visited India during the previous year, he shall be non-resident in India and shall be liable to pay tax on the total income of @12,00,000. Since, R has visited India during the previous year for 190 days, he shall be treated as resident in India. However, in the absence of the information available of the past previous years, it cannot be determined whether he shall be resident and ‘ordinarily resident in India or resident but not ordinarily resident in India, He shall be non-resident in India as per section 6(1), as although he visited India for more than 120 days but he does not satisfy the conditions of 365 days in the preceding four years. Section 6(1AA) is not applicable in his case as his income from foreign source is less than 21 5,00,000, He shall be non-resident as per section 6(1), as he visited India for ess than 182 days. Further, the second basic condition is not applicable in his case as the stay in India in the relevant previous year is less than 182 days. stration 2.13: R, a citizen of Indi, is carrying on profession in Singapore which is set up in India. He visited India during the previous year 2021-22 for 145 days. @ ( Determine his residential status if he has eamed the following income during the previous year 2021-22. (i) Taxable Indian income — 3%8,00,000 (ii) Income from profession in Singapore — 210,00,000 ii) Other income eamed in Singapore — &9,00,000 Ris liable to pay income-tax in Singapore. (©) What will be your answer ifR visited India for 115 days Solution (@) Total income of R other than income from foreign source is %18,00,000 (38,00,000 + 10,00,000 from a profession which is ) set up in India), therefore R shall become resident in India as he has visited in India during the previous year for more than 119 days but less than 182 days. However, R shall be deemed to be resident but not ordinarily resident in India as per section 6(6) and shall be liable to pay tax in India on 218,00,000, Foreign income of 89,00,000 shall not be included in his total income. R shall be non-resident in India as his stay in India is less than 120 days during the previous year. He is liable to pay tax ‘only on the Indian income of 88,00,000, Section 6(1A) is not attracted in his case as he is liable to pay tax in Singapore. Problem 2: During the previous year 2021-22, X, a foreign citizen, stayed in India for just 69 days, Determine his residential status for 0 i) to) the assessment year 2022-23 on the basis ofthe following information: During 2020-21, he was not present in India but during 2019-20 he came to India for 276 days During 2018-19, X was present in India for 90 days. During 2015-16 and 2014-15, X was in India for 359 and 348 days respectively. (iv) Earlier to 2014-15 he had been regularly coming to India for 100 days every year. Ans.: Resident and ordinarily resident in India [See problem 2.14 of Practical ApproachSimplified Approach to Income Tax 28 ayer of Arjun Overseas Limited, an Indian Com sro dn isa eon anagerof Aun very A Problem Mr Kohl ce Th Ar cart promo, He spent he fv MESSY USS.A. for the last fi 1,5.2017 He has been regularly Bomne | No. of days spent in USA [ Previous year ended | 419 days ~ AL 32018 149 days a 32019 ] 2 271 days 3142020 312 days Hl 3 al | 295 days sent year 2022-23 assuming that prior 18.2017 he had never travelled abroag ‘ne Resfent and onary reset Ida [See po sm 2.8 of Practical Approach] 2.4 Residential Status of Hindu Undivided Family (HUF) [Section 6(2)) 2.da When is HUF said to be a resident in India? A HUF is said to be resident in India im any pr management of its affairs is situated wholly outside India. 2.4 When is HUF said to be a Non-Resident? A HUF is said to be non-resident in India if during the previous situated wholly outside India. ; " ‘i ae til be non-resident in Indi part ofthe control and management ofits affais is situated in Indy J Control and management refers to the decisions taken regarding affairs of the HUF. The control and —— the place where decisions eparding the affairs ofthe HUF are taken. _ Once the HUF isa resident in Indi, it sto be further determined whether it's (a). resident and ordinarily resident in India; or (6) resident but not ordinarily resident in India, ‘2.4e When is HUF said to be a resident and ordinarily resident in India? The HUE shall be sai to be resident and ordinarily resident in India ifthe karta of the HUF satisfies both the fllowig conditions (a) He (Karta) must be resident in atleast 2 out of 10 previous years immediately prec ‘eding the relevant previous year, and ‘Determine his residential status for arin every case except where during that year the conto ng fous ye year, the control and management of it afin i (6) He must bein India for atleast 730 days during 7 previous years immediately preceding the relevant previous yea, 24d When is HUF said to be resident but not ordinarily resident in India? [Section 6(6)(6)] 'A-HUF, which is resident in India, is said to be resident but not ordinarily resident in India during the relevant previow year, ifthe manager (Karta) ofthe HUF does not satisfy any one, or both, of the conditions mentioned in clauses (a) an above. For determining whether HUF is a Resident or not, the residential status of its ‘Karta’ for the relevant previous year isa no relevance, But for determining whether HUF is ordinarily Resident in India or not, Karta’s status for the pr years becomes relevant. Excepting individual and HUF, all other persons are classified either as resident or non-resident. They are not further classified as ordinarily resident or as not ordinarily resident, 2.5 Residential Status of Firm, Association of Persons (AOP), Body of Individuals (BOI) and other persons (except companies) [Sections 6(2) and 6(4)] ‘These entities may either be resident or non-resident in India for any previous year. 2.5a When is a Firm, AOP, BOI, ete. said to be resident in India? ‘A firm, AOP, etc. is said to be resident in India in any previous year in all eases exeept where during that year control and management ofits affairs is situated wholly outside India. In the case of a firm, the control and management is in the hands of the partners and therefore, if the partners ‘meet in India regarding the affairs of the firm, then the firm is said to be resident in India. 2.Sb When is a Firm, AOP, BOL, etc. said to be Non-Resident in India? Ifthe control and management ofthe alfirs of these entities is wholly out of India during the relevant previous yet they are said to be non-resident. In other words, to be Non-Resident, no part of the control and management should be in India.=> ee Oe Chap. 2 P. Scope of Total Income & Residential Stars a Lape prey ms rceideetal sai oft firm oF « HUF, the revidenial status of the partner ofthe firm or the | members aad atmateral except in caves where the residence ofthe parmers ofthe members ofthe fait | affet its conto and management } 2.6 Residential Status of a Company [Section 6(3)] 2.6a When is @ company said to be resident in India? A company is sand to be reside (i) itis an Indian company: or n Inia in any previous year i (is place oF effective management, im that year, isin India 2.6 When is a company said to be Non-resident in India? A Company will be a non-resident (a) itisnot ny previous year if n Indian company and (b)_ its place of effective management, in that year. isnot in India sap S ae of ecve ‘management". "Place of effective management" (POEM) means a place where Key | ‘manas “ommercial decisions that are necessary for the conduct i ity Ne or ry of the business of an entity as a whole are, in Scope of Total Income according to residential status 2.6¢ In the case of Resident in India (resident and ordinarily resident in case of individual or HUF) [Section 5(1)] The following incomes from whatever source derived form part of Total Income in case of resident in India/ordinarily resident in India: i) any income which received or is | (b) any income which accrues or arises | (c) any income which accrues or | deemed to be received in India inthe | or is deemed to acerue or arise in India| arises outside India during the relevant relevant previous year by or on behalf | during the relevant previous year; previous year. | of such person; 2.6d In the case of a Resident but not Ordinarily Resident in India (In the case of individuals and HUF only) (including an individual who is deemed to be resident in India) [Section 5(1) and its proviso] The following incomes from whatever source derived form part of Total Income in the case of resident but not ordinarily resident in India (including an individual who is deemed to be resident in India) [@ any income which is received or is | (b) any income which accrues or arises | (e) any income which accrues or deemed to be received in India in the | or is deemed to accrue or arise to him | arises to him outside India during the relevant previous year by or on behalf | during the relevant previous year; relevant previous year if itis derived of such person; from a business controlled in or a | profession set up in India. 2.6¢ In the case of Non-Resident [Se The following incomes from whatever source derived form part of Total Income in the case of Non-Residents in India: [(@ any income which is received or is deemed to be | (b) any income which acerues or arises or is deemed 10 | received in India during the relevant previous year by or on | accrue or arise to him in India during the relevant previous | behalf of such person; year. . | described in items (a) and (b) in all the three cases above are to be included in total Thus it may be noted that incom income of all the three categories of the assessees in the same manner. The income deseribed in item (c) ie. income which accrue or arise outside India is: (i) not includible in the total income at all in case the assessee is non-resident in India, (ii) includible inthe total income in the case of resident but not ordinarily resident in India (including an individual who is deemed to be resident in India) only when itis derived from a business controlled in or profession set up in India .e who is resident and ordinarily resident in India, 1 in case of non-resident in India ifthe assessee ‘Therefore, the incidence of tax is likely to be more in case of an a alittle less in case of a resident but not ordinarily resident in India and the les has various incomes both inside and outside India. IMPORTANT NOTES 4 Global income is taxable in case of a resident in India, but where an assessee has paid tax in the foreign country on the income which accrues or arises outside India, he shall get a relief of tax paid by him in the foreign country while computing his tax payable on such income in India, This is known as double taxation relief2 Simplified Approach to Income Tax a ‘Where income is deemed to acerve or arise in In sander clause (h(a) 6) above, such income shall be incadgy “ total income of the non-resident, whether or not the non-resident: } yection in India; of fy (2) has n residence or place of business or business com [._(®) has rendered services in India, [Explanation to section 9] ent an India earned the Follow GOMES by yay op hands of R Ltd. in India re he used for a project in Inia be used in India. rmany to be used in China be used in India for carryin Bon a Problem 4: R Lid. a German company, which is non-res technical services. Advise about the taxability of such income i the (2) Govemment of India paid £20,00,000 under an agreement (0 (8) S Ltd. an Indian company. paid 830,00,000 forthe know-how fo De Nt (e)_ Lid an Indian company, pad %40,0,000 fr know-how aequred in Ger (_ZLtd.a non-resident company paid %24,00,000 for acquiring 2 know-how £0 ‘manufacturing business Ans.: (a) Taxable, (4) Taxable, (c) Not taxable ( ing incidence of tax ab problem 2.42 of Practical Approach] summarised in the following tabje: OL Whether - (d) Taxable. [See may be 2.9 The provisions regarding | Particulars of Income Resident and | Not-ordinarily | jg. | \Nordinarily | Resident p | resident | clea income received or deemed to be F received in India whether eared in| Yes - India or elsewhere nm orarise in India| ye Yes jich accrues or arises or is deemed to accrue revious year, whether received in India or elsewhere. ived outside India) yg ‘Income whi during the pr Tncome which accrues or arises outside India and recei from a business controlled from India. Tncome which accrues or arises outside India and received outside India — a in the previous year from any other source. Income which accrues or arises outside India and received outside ‘preceding the previous year and remitted to India during == India No No aL | |" during the years | the previous year. Highlights of provisions of incidence of tax ‘An analysis of the above provisions would highlight the following: (a) Any income which is either received in India or deemed to be received in India is taxable in India, irrespective oft residential status, (b) Any income whic! residential status. (c) Fora Resident in India (for individual & HUF, resident and ordinarily resident in India) all global income, wheres earned/received is taxable in India, (a) Fora non-resident, an income is taxable only i ts either earned in India or itis received in India. (©). For not ordinarily resident, income eared and received outside India will be taxable, only when itis from a busines ‘or profession controlled or set up in India. Inustration 2.14: The following are the particulars of income of R forthe previous year 2021-22: tis either earned in India or is deemed to be earned in India is taxable in India, irespective oft (a) _| Rent from a property in Delhi received in USA (6)_| Income fom a business in USA controlled from Dethi ; _ (6) _| Income from a business in Bangalore controlled from USA (a _| Rent froma property in USA received there but subsequently remitted to India (e) | Anterest from deposits with an Indian company received in USA - (A) | Profits for the year 2020-21 of a busi Profs re ness in USA remitted to India during the previous year 2021-22 (e) _| Gifts received from his parents (ie. relative).Chap. 2 Scope of Total Income & Residential Status a Compute his come for the assessment year 2022-29 i he ve (Resident an ordinarily resident in India, (id) Not ordinary reson India ii) Non-resident in nin Solution Particulars Resident and | Not Ordinarily | Non ordinarily Residem | Resident = resident (0) Income earned /dcemed to accrue/arise in India | Rent from property in Dethi 80,000 0,000) 80,000 I | tocome from business in Bangalore 1,0,000 180,000 | _1,80,000 Interest from Indian company | 20,000 20,000 20,000 2)__ Income earned and received outside _ India, from a business controlled 1 from India Income from business m U.S.A 1.20.00 Income earned and received outside a other than (2) = Rent from property in US.A. 60,000 = 4,60,000 4,00,000 280,000 m Pio -21 are not income ofthe previous year 2021-22 and hence cannot be included inthe income for assessment 2. Gifts received are capital receipts and are not regarded as income, Particulars (@) Interest from an Indian comy |@)_[Pension from former employer in India received in USA. (©)__Profits eared from a business in Paris which is controlled in India, half of the profits being received in India. |(@)_ Income from agriculture in Bhutan and remitted to India, “(@) Income from property in England received there 7 (Past foreign income brought tol (g) _ Gift of money received by X, outside India on 5.8.2021 from Y, a resident ‘Compute his income forthe assessment year 2022-23 ifX is (Resident and ordinarily resident in India (ii) Non-resident in India. Solution _ = _ Paras ot le | ; ; Z 7 aeeae| z (1) [Income deemed to acerue/arise in India - _ | | Tinterest from Indian Company .20,000/ ——_+1,20,000) Pension from employer in India _—__1,80,000 1,80,000 20,000 120,000) @)_|Income received in India - _ - 50% of profits of business in Pars. - | 100,000] 1,00,000 |xd Approach to Income Tat Simpl : i Tamcome earned and receive 0 ide Uni from business coneralted from | Fncome from Agneulture yn Blvatan | 1asane : fame rm Porto land a included because it in | veya year 2071-22 Anil Kurar ha he following income - | —_——— | Particulars Oe | mice rendoedinfone Kong om Salary income rocenved in India for st Income fom profession but received in Germany. ee oo * property ncome i Uganda (out of which $2+ 100 was Fe remitted 0 India). la |i Profs eared om business in Bangor, ee ‘Agneaitural meome im Kenya _ yess caried on at N amar forthe asessment year 2022-23 3 if he cr i) “230,6) © © is () resident and ordinarily ree, Gi Nepal ut controlled fom nn Compute the income of Anil Ki ordinarily resident, and (ii) Non-resident in India. “ewven Computation of Taxable Income of Anil Kumar fr the assessment YEA 2 1223 | - R&OR) NOR — | | w _® “Gd [Income received in India wherever it accrues LC | I Salary received in India for services rendered in Hong Kone 3.90000] 3:90.00 390.001 (2) | Income acerued in India wherever received _ al | T( Profit eamed from business in Bangalore. 150,000} _1,50,000 1,50,000) ip Income from profession in India but received in Germany” 360,000 360,000, 3,00) {@) | Income accrued and received outside Indin | [| (@ Property income in Uganda 5,00,000 | “Gi) Agricultural income in Kenya ~1,60,000 2 (ii) Profits of a business carted on in Nepal but controlled from India, “) 220,000) 2,20,000 = Total Income ~[77.80.000] 11.20,000] 9.00.00 | | ‘THEORETICAL QUESTIONS J. The residential status is determined for each category of persons separately. Discuss in detail how would you determine the residential status for each category. . 2. How would you determine the residential status of a company? Can a company be not ordinarily resident in India? 3. When is an individual said to be resident but not ordinarily resident in India? What is the scope of Total Income it his case? 14. How does the tax liability of a not ordinarily resident person differ from that of a resident and ordinarily resieat person under the Income-tax Act? Explain. 5. The incidence of income-tax depends upon the residential status of an assessee. Discuss fully 6. Write short notes on the following: : (a) Income received in India, (b) Income deemed to be received in India. (0) Income accrues and arises in India i:Chap. 2 Scope of Total Income & Residential Status 38 (4) Income deemed to averve and arise in Ind 4. For the assessment year 2022-21 X an Indian citizen having business intrest in India and Hong Kong, is resident but not ord iit in India, How woukl you find out the tax incidence in his case? Does it make any difference if he 8. "Income-tax is charged on income of previous year." Do you fully agree with this statement? If not, what are 1's [B.Com Dethi, 2013) 10, “Income of previous year is chargeable to tax in the immediately following assessment year. Is there any exception to this rule? Discuss 12. Mr. Ran Indian Citizen, left India on 22.9.2021 for the frst ime to work as an officer for a company im Germany, Determine the residential status of Mr. R for the assessment year 2022-23 under the Income Tax Act, 1961 : [B.Com (Hons) Delhi, 2016) 13. Explain the provisions to determine residential status of an Individual and a Hindu undivided family. [B.Com Delhi, 2018) 14. How is the residential status of an individual determined for the assessment year 2022-23? Also, explain both the categories of determining the residential status of an individual where he/she will be treated as Resident but not ordinarily resident. {B.Com Delhi, 2021) 15. Explain the provisions applicable for determining the residential status of an individualand Hindu Undivided Family (HUF) under the Income Tax Act, 1961 for AY 2022-23 [B.Com (Hons) Delhi, 2016, 2022). OBJECTIVE QUESTIONS (For Answers see at the end of the Chapter) WRITE TRUE OR FALSE. 1. Once a person is a resident in a previous year, he shall be deemed to be resident for subsequent previous year also 2 Once a person is resident for a particular source of income in a particular previous year, he shall be deemed to be resident for all other sources of income in the same previous year 3. Aresident in India cannot become resident in any other country for the same assessment year 4, No person other than individual or HUF can be "resident but not ordinarily resident in India" 5. An Indian company is always resident in India. 6. A foreign company in always non-resident in India 7. Salary payable by a company to an Indian citizen for services rendered ‘outside India is an income which is deemed to acerue or arise in India. 8. Salary payable by the Government to an Indian citizen who is non-resident in India for service rendered outside India isnot taxable in India . 9. Once a person is a not ordinary resident in a previous year, he shall be deemed to be not ordinary resident for subsequent previous year als, 10. Any person can be "not ordinarily resident in India” 11. R Ltd., is registered in Germany. The place of its effective management in the previous year is situated in India. R Ltd. shall be non-resident in India. FILL IN THE BLANKS: 12. In case of an Indian citizen who India during the previous year outside India the period of 60 days shall be substituted by ___days. 13. An individual shall be deemed to be of origin if he or any of his or ___ were born in India. 14, HUF is said to be in India if the and management of its ___ is situated or__ in India. 15, Foreign company is in India if the place of its situated in India during the year. 16. Salary payable by the to an Indian citizen for services rendered ___India shall be an income which is deemedto ___or_in India. 17. Income which accrue or arise outside India from a business controlled from India is taxable in case of _. 18, R a person of Indian origin visited India on 5.10.2021 and plans to stay here for 300 days. His total income (excluding from foreign sources) is 16,00,000. During 4 years prior to previous year 2021-22, he was in India for £840 days. Earlier to that he was never in India. For assessment year 2022-23, R shall be:——————— Chap. 2 seq an an company fr expr ot tay nen Ini for Simplified Approach 19 Income Tas for booking orders 0 He had heen resident and sar 2021-22 he leaves India for Germany for the past 3 years. Earlier £0 that he 36 so inf Iain fr 1) 8-00 14820 Peek ta tin om 6.72022 SR al be san sip 35 Mena ech H22 PR shal be rel management 1S situated outside India, R Ltd. shall be 19, Racitize [goods to US. He came 10 vears, For assessment Yet eat om an I returned! om 14 the Me pean no-rewdent 20. R,acitizen a trata is empleo 28.0.2021 for hoidays anal : Ianently am India, For assessment Yea vompany whose place of efTectve was perm DOR LM, 969 foreign ESTIONS be determined for MULTIPLE CHOICE Ot 22, Residential si (A) previous year [R) _assessment year (©) accounting year () both previous year and a which accrue or arise outsi assessment year cde India but are received directly into India are taxable 23 Incomes (A) resident only ‘ay both ordinary resident and not ordinarily resident (©) non-resident (D) all the assessees 24. Income deemed to accrue or arise in India is taxable in ease of: (A) _ resident only ; {B) _ both ordinarily resident and not ordinarily resident (C) non-resident (D) all the assesses 25. Total income of a person is determines (A) _ residential status in India (B) citizenship in India (©) none of the above (D) _ both of the above 26. _R was born on Sth April, 19 parents were born in divided! (A) citizen of India (B) person of India origin (©) 2 foreign national (D) none of the above .d on the basis of his: 191 in India & he later on took the citizenship of undivided India. R in this case shall be: PRACTICAL QUESTIONS 1.X, a German national, came to India for the first time on 1.7.2015. During the period from 1.7.2015 to 31 stayed in India as follows—from 1.7.2015 to 31.10.2015; from 1.5.2016 to 31.10.2016; from 1.11.2017 to 31. from 1.7,2020 to 31.8.2021. During the previous year ended on 31.3.2022, X's income consisted of: (a) business in India: 40,000; (6) interest from an Indian company: %2,000; (c) dividends from non-Indian companies received in Germany bit remitted to India: %5,000; (a) business in Germany (controlled from India): & ULS.A. Neither his parents nor his grand 000; (2) income from house property i Germany: 28,000. Determine, giving full reasons, the gross total income of X for the assessment year 2022-23 afte ascertaining his residential status for the purpose of income-tax. ‘Ans. Non resident, 242,000, [See problem No. 2.| of Practical Approach} 2. X isa citizen of Bangladesh. His grandmother was born in a village near Dhaka in 1940. He came to India for the fit time since 1981 on 2.10.2021 for a visit of 190 days. Find out the residential status of X for the assessment year 2022-23 on the assumption that wife of X is a resident but "a4 ordinarily resident in India” for the same year. ‘Ans. Non-resident. [See problem No. 2.2 of Practical Approach] 3. During the previous year 2021-22, X, a foreign citizen, stayed in India for just 69 days, Determine his resieti | status for the assessment year 2022-23 on the basis of the following information:os 2 Chap. Scope of Total Income & Residential Status 37 (i) During 2018-19. X was present in India for 365 «lays (i) During 2015-16 and 2014-18, X was in Japan for 358 and 349 days respectively and for the balance period in India (iif) Mrs X ty resident'in India for the assessment year 2022-23. Ane Notontnanly resident [See problem No, 2.3 of Practical Approach] 4 ' bee bom 2 1977 in India. His parents were also born in India in 1948. His grand parents were, however, born in England, U7 wa teviing India till 16,3.2019. Thereafter, he migrated to England and took the citizenship of that country on 153.2021. He visits India during the previous year 2021-22 for 90 days. Determine the residential status of 'U' for assessment yeat 2022-23 : ¥ Ans. Resident and ordinarily resident [See problem No, 2.4 of Practical Approach] Mn aris citizen Let nda for the first time on 24.92020 for employment in USA. During the previous year 2021- he comes 1 India on S.6.2021 for 165 days Determine the residential status of M! for the assessment ye 2021-22 and 2022-23. His total income excluding the income from foreign source during the previous year 2021-22 is 29,00,000 Ans. (a) Non-resident in India, (b) Non-resident in India as although M has come to India for more than 120 days but his total income is less than 215,00,000 and thus can come to India upto 181 days. [See problem No. 2.5 of Practical Approach] 6. ALLtd. is an Indian Co. It carries on business in New Delhi and London. The place of effective management of A Limited is situated outside India. 80% of the total income of the company is from the business in London. What is the residential status of A Ltd.? ‘Ans. Resident [See problem No. 2.9 of Practical Approach] 7. From the following incomes eared by Mr. Rajesh during the financial year 2021-22, determine his total income for the assessment year 2022-23 if he is (I) resident and ordinarily resident; (2) not ordinarily resident; (3) non-resident. Particulars T z 1,60,000 (a) _| Profits from a business in Bombay managed from London. pos ede a | Ge Interest on UK. Government Bonds alf of which is received in India. 74000 1 G@__Ineome from property situated in Pakistan received there. | 000 [Ge [Past foreign untaxed income brought wo India during the previous year. 7,000| ()_ Income from agricultural land in Nepal received there and then brought to India. _ | 30,000 (g) __ Income from profession in Kenya which was set up in India, received there. [12.000 "Ans. (a) &2,41,000, (b) 21,89,000, (c) &1,77,000 [See problem No. 2.15 of Practical Approach] - 8."A' ears the following income during te financial year 2021-22: Particulars i - z “G@) Interest paid by an Indian company but received in London 2,00,000| (6) [Pension from former employer in India received in USA 3.00 (©) | Profits eared from business in Paris which is controlled in India half ofthe profit being received in India| 40,000 {(@) _| Income from agriculture in Bhutan and remitted to India _ 10,000) {e) [Income from property in England and received there - $000 () [Past foreign untaxed income brought to India 20,000) Determine the total income of ‘A’ for the assessment year 2022-23 if he is (#) Resident and ordinarily resident, (1) Not ordinarily resident, and (ii) Non-resident in India. ‘Ans. (a) 82,66,000, (b) 22,48,000, (c) 22,28,000. [See problem No. 2.16 of Practical Approach] 9. Discuss, giving reasons whether the following transactions will give rise to incomes which will be deemed to accrue or arise in India (a) R,anon-resident, holds 5,000 equity shares in WG Ltd. an Indian Company, The share certificates are lying with Ry in UK where he normally resides. R sold these shares to M by handing over to M in UK the duly executed share transfer form and the relevant share certificates. The purchase consideration is received in UK in sterling currency. (6) A foreign company having no Indian ctizenesident of India as shareholder, has shot a TV film entirely on Indian Tocatione. The fils isto be telecast exclusively inthe foreign countries, but it has also agreed with Government of India, to give the right of telecast in India, free of charge. ‘Ans. (a) Deemed to accrue ot arise in Indi, (b) It will not be taxable in India, (See problem No, 2.17 of Practical Approach]sh to Income Tax ' Chap.» 38 Simplified Approae 10, From the following particulars compute the taxable income of R when his residential status is (i) residen, ordinarily resident andl (i) non-res (i [Particulars of income | vex an tan company eee Lon Taoterest for eben “neestima co dep f “restomt K Devs onal 50% of inte Tantish Co. received mn London roof profi vy whichis controled rom Delhi. & » London _ on, brought India London but the same ‘money was used in o [a wn nia but received in Germany rest received in India “Diwndend from ‘Profits on sate of plant at Germany SO” | come cared from busines Germany sn Dethi ut managed ently ft wo fits are received in India 40,0 is received in India in London deposited in a Indian Bank at i Londo in India ope received in London on money Fen 10.8 resident i » non-resident ink Inia to be used for business in India (Gift of ‘money received by byR y Routside India on 6 roblem No, 2.18 of Practical | Approach] iw Lew ‘Ams. (a) 85,07,000. (b) &3,67,000. [See pr "ANSWERS TO OBJECTIVE QUESTIONS 21. | non-resident fa. n fF | | 12, | Leaves; for employment; 182 2. [A 13, | Indian; parents; grandparents; undivided 23. |D 14. _ | Resident; control; affairs; wholly; partly 24. | D 15. | Resident, effective management; previous 25. | A 26. | C 16. Government; outside; accrue; arise 17. Both resident and not ordinarily resident 18, _ | Resident and not ordinarily resident 19, _| Resident and ordinarily resident 20.__| Resident and ordinarily resident welolm|ala] ae |r es Nese oe tee | tel