Q -1 Mr.

Sameer, a citizen of USA has been coming to India every year for 100 days since 2014 -15.
During the financial year 2018 -19, he earned the following income :

Particulars ₹
a) Profits from business in Australia 3,00,000
b) Agricultural income from Nepal 60,000
c) Profit from business in UK controlled from India (40% is received in lndia) 2,00,000
d) Interest on UK Government Bonds 1,00,000
e) Profit on sale of property situated in India 2,60,000
f) Pension income received in UK for services rendered in India 1,00,000
g) Dividend received from a company registered in UK 50,000
h) Profit from sale of property located in Uganda received in UK 2,50,000

How can he plan his visit in India so that his tax liability is reduced for Assessment Year 2019-20. Also
determine his taxable income.

Solution : Determination of residential status of Mr. Sameer in the assessment year 2019-20: A
person is taxable in India based on his residential status.

Period of stay during previous year 2018-19 100 days

Calculation of period of stay during 4 preceding previous years (100 x 4 = 400 days)

Year. Days

2017-18. 100

2016-17. 100

2015-16. 100

2014-15. 100

As it was told he came to India first time in 2014-15 He won't qualify one of the additional conditions
of staying more than 730 days in last 7 years. So, Mr. Sameer has been in India for a period more
than 60 days during previous year 2022-23 and for a period of more than 365 days during the 4
immediately preceding previous years. Therefore, since he satisfies one of the basic conditions under
section 6(1), he is a resident for the assessment year 2019-20.

He is a resident but not ordinarily resident during the previous year 2018-19 relevant to the
assessment year 2019-20.

To be a resident in India a person has to satisfy one of the basic conditions and both of the additional
conditions under sec -6(1) and sec -6(6) respectively.
Calculation of taxable income for Assessment year 2019-20:

Particulars ₹

a) Profits from business in Australia Not Taxable

b) Agricultural income from Nepal Not Taxable

c) Profit from business in UK controlled from India (40% is received in lndia) 2,00,000

d) Interest on UK Government Bonds Not Taxable

e) Profit on sale of property situated in India 2,60,000

f) Pension income received in UK for services rendered in India 1,00,000

g) Dividend received from a company registered in UK Not Taxable

h) Profit from sale of property located in Uganda received in UK Not Taxable

Total Taxable Income 5,60,000

For a resident but not ordinary resident following incomes are taxable.

a. Income received or deemed to be received in India during the previous year

b. Income accruing or arising or deeming to accrue or arise in India during the previous year

c. Income accruing or arising outside India during the previous year but only if such income is
derived from a business controlled in or profession set up in India

Mr. Sameer can reduce his tax liability by coming to India 2019 after February 01, by which in 2018-
19 his total number of days of stay will be less than 60 days even though his stay exceeds 365 days in
preceding previous 4 years.

By which he will not satisfy both the conditions in section 6(1) of income tax which will make him
non-resident. Non. residents are not required to pay tax on income accruing or arising outside India
during the previous year. So, he is not required to pay tax on income earned on Profit from business
in UK Control from India which saves him 2,00,000. His total income that is taxable will be 3,60,000

Therefore, his current taxable income is Rs. 5,60,000. If he plans his visit his taxable income will be
Rs. 3,60,000.

Q – 2 Mr. Chaddha (55 years old) owns two self-occupied flats in Delhi. Flat I has a Municipal
Valuation Rs. 6,00,000, Fair Rent is Rs. 6,80,000, Standard Rent is Rs. 6,65,000; Municipal Taxes paid
during the year Rs.5,000; Mr. Chaddha has paid interest of Rs.50,000 during the year for renovation
of flat I.

His other flat (Flat II) has a Municipal Valuation Rs. 8,00,000; Fair Rent is Rs. 9,00,000; Standard Rent
is Rs. 12,00,000; Municipal Taxes outstanding Rs. 24,000; Interest on Borrowed Capital paid by Mr.
Chaddha during 2018-19 Rs. 8,50,000; past unrealized rent (pertaining to previous year 2015-16) Rs.
30,000 is recovered during the year 2018-19.
His income under the head other sources during PY 2018-19 is Rs.6,00,000. Mr. Chaddha seeks your
advice on choice of self-occupied house and his taxable income & tax liability.

Solution : In order to determine Mr. Chaddha's taxable income and tax liability from his self-
occupied flats, we will need to consider the provisions of the Indian Income Tax Act.

According to the Act, the value of a self-occupied house is deemed to be the higher of the following:

 The municipal valuation of the house

 The fair rent of the house

 The standard rent of the house

In the case of Flat I, the municipal valuation is Rs. 6,00,000, the fair rent is Rs. 6,80,000, and the
standard rent is Rs. 6,65,000. Therefore, the deemed value of Flat I is Rs. 6,80,000, which is the
highest of the three amounts.

In the case of Flat II, the municipal valuation is Rs. 8,00,000, the fair rent is Rs. 9,00,000, and the
standard rent is Rs. 12,00,000. Therefore, the deemed value of Flat II is Rs. 12,00,000, which is the
highest of the three amounts.

The deemed value of a self-occupied house is considered as "notional rent" for tax purposes, and it
is taxable as "income from house property" under the Act. In Mr. Chaddha's case, the total notional
rent from both flats would be Rs. 6,80,000 + Rs. 12,00,000 = Rs. 18,80,000.

However, Mr. Chaddha is entitled to claim certain deductions in order to arrive at his taxable income
from house property. These deductions include:

 Municipal taxes paid: Mr. Chaddha can claim a deduction for the municipal taxes paid on Flat
I, which is Rs. 5,000.

 Interest on borrowed capital: Mr. Chaddha can claim a deduction for the interest paid on
borrowed capital for the renovation of Flat I, which is Rs. 50,000. He can also claim a
deduction for the interest paid on borrowed capital for Flat II, which is Rs. 8,50,000.

 Past unrealized rent: Mr. Chaddha can claim a deduction for the past unrealized rent
recovered for Flat II, which is Rs. 30,000.

Therefore, Mr. Chaddha's total deductions would be Rs. 5,000 + Rs. 50,000 + Rs. 8,50,000 + Rs.
30,000 = Rs. 9,35,000.

The taxable income from house property for Mr. Chaddha would be calculated as follows:

Taxable income from house property = Notional rent - Deductions = Rs. 18,80,000 - Rs. 9,35,000 = Rs.
9,45,000

Mr. Chaddha's taxable income from other sources during the previous year (PY) 2018-19 was Rs.
6,00,000. Therefore, his total taxable income for the year would be Rs. 9,45,000 + Rs. 6,00,000 = Rs.
15,45,000.

Based on the tax slab rates applicable for the financial year 2018-19, Mr. Chaddha's tax liability
would be calculated as follows:

 Up to Rs. 2,50,000: Nil

  Rs. 2,50,001 to Rs. 5,00,000: 5% of the amount exceeding Rs. 2,50,000

 Rs. 5,00,001 to Rs. 10,00,000: Rs. 12,500 + 20% of the amount exceeding Rs. 5,00,000

Q – 3 Ms. Pallavi (32 years old) is employed as a manager of a company in Delhi and submits the
following particulars of her income.

Salary Rs.30,000 p.m, Dearness Allowance Rs.5,000 p,m. (forms a part of all retirement benefits). Her
employer contributes Rs. 50,000 per annum towards the National Pension scheme (NPS) and she
herself contributes Rs. 92,000 p.a. Her income from other sources is Rs.5,00,000. She invested
Rs.24,000 in National Savings Certificates (IX Issue) and Rs.65,000 in public Provident Fund with SBI
and Rs.4,000 towards Life Insurance Premium on her own life. She has invested Rs.30,000 in an
annuity plan of LIC eligible for deduction under 80CCC. Compute the net taxable income of Ms.
pallavi for the assessment year 2019-20 and advise Ms. Pallavi whether she and her employer should
reduce their contribution to the NPS.

Solution : To calculate the net taxable income of Ms. Pallavi, we will need to first calculate her total
income from all sources, which includes her salary, income from other sources, and any interest
income earned on her investments. Then, we will subtract any deductions that she is eligible for
under the Income Tax Act, such as the investments that she made in the National Savings
Certificates, Public Provident Fund, and annuity plan of LIC.

Here is the calculation of Ms. Pallavi's net taxable income:

Total income from salary: 30,000 * 12 = 360,000

Total income from other sources: 500,000

Total income: 360,000 + 500,000 = 860,000

Deductions:

Investment in National Savings Certificates: 24,000

Investment in Public Provident Fund: 65,000

Investment in annuity plan of LIC: 30,000

Total deductions: 24,000 + 65,000 + 30,000 = 119,000

Net taxable income: 860,000 - 119,000 = 741,000

Ms. Pallavi's net taxable income is 741,000.

As for whether Ms. Pallavi and her employer should reduce their contribution to the National
Pension Scheme (NPS), it would depend on their financial goals and their ability to save for
retirement. Contributions to the NPS are tax-deductible up to a certain limit, so reducing the
contribution may not be the best decision if they are trying to maximize their tax savings. However,
if they are already contributing the maximum amount that is allowed for tax deductions and are
unable to save more for retirement, then they may want to consider reducing their contribution. It
would be best for Ms. Pallavi to consult a financial advisor or a tax professional to determine the
best course of action for her specific circumstances.
Q – 4 Mr. Madhukar is planning to sell land owned by him situated in an urban arca that is being
used by his parents for agriculture. He has received a concrete offer of Rs.50,80,000 on 01.03.2019
whereas the stamp duty valuation is Rs, 60,00,000. He will need to pay brokerage @2%. He acquired
this land on 01.03.2006 for Rs. 3,50,000. He owns only one residential house property. Advise him
about investment options to save capital gains tax on the assumption that he wants to invest Rs. 30
lakhs in a residential house. (CII 2005-06: 117 & 2018-19: 280).

Solution : Given Information, Cost of Acquisition = 350000

Date of Acquisition = 1/3/2006

Sale Consideration = 50,80,000

Stamp Duty Valuation = 60,00,000

Brokerage = 2% on Sale Consideration

Next Investment Option = 30 Lacs in residential House

Calculation of Long Term Capital Gain Tax

Particular Amount

Sale Consideration 5,080,000

Less: Brokerage

Brokerage @2%

5080000*2% 101,600

Net Sale Consideration 4,978,400

Indexed Cost of Acquisition

350000*280/117 837,607

Long Term Capital Gain 4,140,793

Less: Exemption

Further Investment in Residential

3,000,000
Property

Net Long Term Capital Gain 1,140,793

Tax on Long Term Capital Gain @ 20% 228,158.63

Condition to claim exemption on Capital gain shall be further purchase of house property before
filing of Income Tax.