1 Basic and Tax Calculation

“VLEARN RECAP”
Income Tax Income-tax is the most significant direct tax. Entry 82 of the Union List
i.e., List I of Seventh Schedule to Article 246 of the Constitution of
India has given the power to Parliament to make laws on taxes on
income other than agricultural income.
Income-tax is a TAX levied on the TOTAL INCOME of the
PREVIOUS YEAR of every PERSON.
Components of  Income-tax Act, 1961 – governs the levy of income-tax in India.
Income Tax  Income-tax Rules, 1962 – formulated for proper administration of
the Act.
 Annual Finance Act – Amendments in the Income-tax Act, 1961
are effected every year through the Annual Finance Act.
 Circulars – issued by CBDT to clarify the meaning and scope of
certain provisions of the Act.
 Notifications – issued to give effect to the provisions of the Act/
make or amend Rules.
 Court decisions – interprets the various provisions of income-tax
law.
Person  An Individual
 A Hindu Undivided Firm (HUF) ( Dayabhaga or Mitakshra)
 A Firm including LLP ( Except for Sec 44AD/ 44ADA)
 A Company (Domestic & Foreign)
 Association of person/Body of individual (AOP/BOI)
 A local Authority
 Artificial juridical person
Concept of Previous year is the financial year immediately preceding the
Previous year assessment year i.e., it is the financial year ending on 31st March,
(P.Y.) and in which the income has accrued/received.
Assessment Year In case of a newly set-up business, the previous year would be the
(A.Y.): period beginning with the date of setting up of the business or
profession or, as the case may be, the date on which the source of
income newly came into existence, and ending on 31st March.
 Assessment year (A.Y.): Assessment year means the period
of twelve months commencing on the 1st April every year.
Exceptions to Exceptions to the rule that income is charged to income-tax in
Above Case the Assessment Year following the previous year:
The income of an assessee for a previous year is charged to income-
tax in the assessment year following the previous year. However, in
the following cases, this rule does not apply and the income is taxed
in the previous year in which it is earned.
(i) Shipping business of non-resident [Section 172]
(ii) Persons leaving India [Section 174]
(iii) AOP/BOI/Artificial Juridical Person formed for a particular
event or purpose [Section 174A]
(iv) Persons likely to transfer property to avoid tax [Section 175]
Discontinued business [Section 176]
Tax Liability Tax has to be computed by applying the rates of tax

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 mentioned in the Annual Finance Act and the rate specified
under the Income- tax Act, 1961, as the case may be.

Individual (not The Tax rates are as under:-

opting for the Total Income (in Rs.) Rates
provisions of of Tax
section 115BAC) (i) Upto ₹ 2,50,000 (below 60 years) Nil
(ii) Upto ₹ 3,00,000 (60 years or above but less than
80 years and resident in India)
(iii) Upto ₹ 5,00,000 (above 80 years and resident in
India
₹ 2,50,001/ ₹ 3,00,001, as the case may be, to ₹ 5,00,000 5%
[in cases (i) and
(ii) above, respectively]
₹ 5,00,001 to ₹ 10,00,000 20%
Above ₹ 10,00,000 30%
HUF/AOP/BOI/AJP AS APPLICABLE TO INDIVIDUAL BELOW 60 YEARS
Firm/LLP/Local 30%
Authority
Co-operative
Society (not Total Income In (₹) Rates
opting for the of Tax
provisions of Upto ₹ 10,000 10%
Section 115 BAD)
₹ 10,001 to ₹ 20,000 20%
Above ₹ 20,000 30%

Company (not
opting for the Domestic Company Foreign
provisions of Company
section Total turnover or gross Other
115BAA/115BAB) receipts in the P.Y. 2019 20 ≤ domestic
₹ 400 crore companies
25% 30% 40%

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Surcharge
Individual/ HUF/ AOP/ BOI/ Artificial juridical person
(i) Where the total income (including 10%
dividend income and capital gains
chargeable to tax u/s 111A, 112A, & 112) > ₹
50 lakh but is ≤ ₹ 1 crore
(ii) Where the total income (including 15%
dividend income and capital gains
chargeable to tax u/s s 111A, 112A, & 112)>
₹ 1 crore but is ≤ ₹ 2 crore
(iii)  Where the total income (excluding 25%
dividend income and capital gains
chargeable to tax u/s s 111A, 112A, &
112)> ₹ 2 crore but is ≤ ₹ 5 crore Not
 Rate of surcharge on the income-tax exceeding
payable on the portion of dividend 15%
income and capital gains chargeable
to tax u/s s 111A, 112A, & 112
(iv)  Where the total income (excluding 37%
dividend income and capital gains
chargeable to tax u/s s 111A, 112A, &
112)> ₹ 5 crore Not
 Rate of surcharge on the income-tax exceeding
payable on the portion of dividend 15%
income and capital gains chargeable
to tax u/s s 111A, 112A, & 112
(v) Where the total income (including 15%
dividend income and capital gains
chargeable to tax u/s s 111A, 112A, & 112) >
₹ 2 crore in cases not covered in (iii) and
(iv) above
An AOP consisting of only companies as members
(a) In case of an AOP consisting of only companies as members,
whose total income > ` 50 lakhs but is ≤ `1 crore Where the total
income exceeds ` 50 lakhs but does not exceed ` 1 crore,
surcharge is payable at the rate of 10%
(b) In case of an AOP consisting of only companies as members,
whose total income > ` 1 crore Where the total income exceeds `
1 crore, surcharge is payable at the rate of 15% (FA.22)
# In case of AOP (consisting of only companies as its member),
the maximum of rate of surcharge is 15% for AY 2023 & 24 (FA
22)

Firm/Limited Liability Partnership/Local Authorities/Co-operative societies (other

than a co-operative society opting for section 115BAD)
Where the total income > ₹ 1 crore 12%
Domestic company (other than a domestic company opting for section 115BAA or
section 115BAB)
Total income > ₹ 1 crore but is ≤ ₹ 10 crore 7%
Total income is > ₹ 10 crore 12%
Foreign company
Total income > ₹ 1 crore but is ≤ ₹ 10 crore 2%

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Total income is > ₹ 10 crore 5%
Rebate under section 87A: Rebate of up to ₹ 12,500 for resident individuals having
total income of up to ₹ 5 lakh. “Health and Education cess” on Income-tax: 4% of
income-tax and surcharge, if applicable

Question 1:
Mr. Raj has a total income of ₹13,00,000 for P.Y. 2022-23, comprising of income
from house property and interest on fixed deposit. Compute his tax liability for
A.Y. 2023-24 assuming his age is -
(a) 37years
(b) 65years
(c) 83years
Assume that Mr. Raj has not opted for the provisions of section 115BAC.

Solution:
a) Computation of tax liability of Mr. Raj (age 37years)
Tax liability:
First ₹ 2,50,000 Nil
Next ₹ 2,50,001 – ₹ 5,00,000 @5% of ₹2,50,000 12,500
Next ₹ 5,00,001 – ₹ 10,00,000 @20% of ₹5,00,000 1,00,000
Balance = ₹13,00,000 (-) ₹ 10,00,000 @30% of ₹ 3,00,000 90,000

2,02,500
Add: Health and Education cess@4% 8,100
2,10,600

b) Computation of tax liability of Mr. Raj (age 65years)

First ₹ 3,00,000 Nil -
Next ₹ 3,00,001–₹ 5,00,000 @ 5% of ₹ 2,00,000 10,000
Next ₹ 5,00,001–₹10,00,000 @ 20% of ₹ 5,00,000 1,00,000
Balance i.e., ₹13,00,000 minus₹ 10,00,000 @ 30% of ₹ 3,00,000 90,000

2,00,000
Add: Health and Education cess@4% 8,000
2,08,000
c) Computation of tax liability of Mr. Raj (age 83years)
First ₹5,00,000 Nil -
Next ₹5,00,001 – ₹10,00,000 @ 20% of ₹5,00,000 1,00,000
Balance i.e., ₹13,00,000 minus₹ 10,00,000 @ 30% of ₹3,00,000 90,000
1,90,000
Add: Health and Education cess@4% 7,600
1,97,600

Question 2:
Compute the tax liability of Mr. Raja (aged 42 years), having total income of ₹51.5
lakhs for the Assessment Year 2023-24. Assume that his total income comprises of

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salary income, income from house property and interest from saving bank
account. Also, assume that Mr. Raja has not opted for the provisions of
section115BAC.

Solution:
Computation of tax liability of Mr. Raja for the A.Y. 2023-24
Particulars ₹
(A) Tax payable including surcharge on total income of
51,50,000
₹2,50,000 – ₹ 5,00,000 @5% 12,500
₹ 5,00,000 – ₹ 10,00,000 @20% 1,00,000
₹ 10,00,000 – ₹ 51,50,000 @30% 12,45,000
Total 13,57,500
Add: Surcharge @10% 1,35,750 14,93,250
(B) Tax Payable on total income of ₹50 13,12,500
lakhs
(₹12,500 plus ₹1,00,000 plus
₹12,00,000)
(C) Total Income less ₹50 lakhs 1,50,000
(D) Tax payable on total income of ₹50 14,62,500
lakhs plus the excess of total income
over ₹50 lakhs (B+C)
(E) Tax payable: Lower of (A) and (D) 14,62,500
Add: Health and education cess @4% 58,500
Tax Liability 15,21,000
(F) Marginal Relief (A – D) 30,750

Question 3:
Compute the tax liability of Mr. Akash (aged 55 years), having total income of ₹
1,02,00,000 for the Assessment Year 2023-24. Assume that his total income comprises
of salary income, income from house property and interest from fixed deposit
account. Also, assume that Mr. Akash has not opted for the provisions of section
115BAC.

Solution:
Computation of tax liability of Mr. Akash for the AY 2023-24
Particulars ₹ ₹
A) Tax payable including surcharge on total income of
₹1,02,00,000 12,500
₹2,50,000 – ₹5,00,000 1,00,000
₹5,00,000 – ₹10,00,000 @20% 27,60,000
₹10,00,000 – ₹1,02,00,000 @30%
Total 28,72,500
Add: Surcharge @ 15% 4,30,875 33,03,375
B) Tax payable on total income of 1 crore 28,12,500
(₹12,500 + ₹1,00,000 + ₹27,00,000)
Add: Surcharge @ 10% 2,81,250
30,93,750
C) Total income (-) ₹1 crore 2,00,000
D) Tax payable on total income of ₹1 crore (+) excess of 32,93,750
total income over ₹1 crore (B+C)
E) Tax payable: Lower of (A) and (D) 32,93,750

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 Add: Health and education cess @ 4% 1,31,750
Tax liability 34,25,500
F) Marginal relief (A-D) 9625

Question 4:
Compute the tax liability of Mr. Deepak (aged 57 years), having total income of
₹2,02,00,000 for the Assessment Year 2023-24. Assume that his total income
comprises of salary income, income from house property and interest from fixed
deposit account. Also, assume that Mr. Deepak has not opted for the provisions of
section 115BAC.

Solution:
Computation of tax liability of Mr. Deepak for the A.Y. 2023-24
Particulars ₹ ₹
(A) Tax payable including surcharge on total
income of ₹2,02,00,000
₹ 2,50,000 – ₹ 5,00,000 @5% 12,500
₹ 5,00,000 – ₹ 10,00,000 @20% 1,00,000
₹ 10,00,000 – ₹ 2,02,00,000 @30% 57,60,000
Total 58,72,500
Add: Surcharge @25% 14,68,125 73,40,625
(B) Tax Payable on total income of ₹2 crore
(₹12,500 plus ₹1,00,000 plus₹57,00,000) 58,12,500
Add: Surcharge @15% 8,71,875
66,84,375
(C) Total Income less ₹2 crore 2,00,000
(D) Tax payable on total income of ₹2 crore 68,84,375
plus the excess of total income over ₹2
crore(B+C)
(E) Tax payable: Lower of (A) and (D) 68,84,375
Add: Health and education cess @4% 2,75,375
Tax Liability 71,59,750
(F) Marginal Relief (A – D) 4,56,250

Question 5:
Compute the tax liability of Mr. Rajesh (aged 57 years), having total income of
₹5,02,00,000 for the Assessment Year 2023-24. Assume that his total income
comprises of salary income, income from house property and interest on fixed
deposit account. Assume that Mr. Rajesh has not opted for the provisions of
section 115BAC.

Solution:
Computation of tax liability of Mr. Rajesh for the A.Y. 2023-24
Particulars ₹ ₹
(A) Tax payable including surcharge on total
income of
₹ 2,50,000 – ₹ 5,00,000 @5% 12,500
₹ 5,00,000 – ₹ 10,00,000 @20% 1,00,000
₹ 10,00,000 – ₹ 5,02,00,000 @30% 1,47,60,000
Total 1,48,72,500

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 Add: Surcharge @37% 55,02,825 2,03,75,325
(B) Tax Payable on total income of ₹5 crore
(₹12,500 +₹1,00,000+ ₹1,47,00,000) 1,48,12,500
Add: Surcharge @25% 37,03,125
1,85,15,625
(C) Total Income (+) ₹2 crore 2,00,000
(D) Tax payable on total income of ₹ 5 crore plus 1,87,15,625
the excess of total income over ₹5 crore(B+C)
(E) Tax payable: Lower of (A) and (D) 1,87,15,625
Add: Health and education cess @4% 7,48,625
Tax liability 1,94,64,250
(F) Marginal relief (A-D) 16,59,700

Question 6:
Compute the marginal relief available to X Ltd., a domestic company, assuming
that the total income of X Ltd. is ₹ 1, 01,00,000 for A.Y.2023-24 and the total
income does not include any income in the nature of capital gains. Assume that
the company has not exercised option under section 115BAA or 115BAB.
[Note - The gross receipts of X Ltd. for the P.Y.2019-20 is ₹402 crore]

Solution:
The tax payable on total income of ₹1,01,00,000 of X Ltd. computed @32.1% (including
surcharge @7%) is ₹32,42,100. However, the tax cannot exceed ₹31,00,000 (i.e.,the tax of
₹ 30,00,000 payable on total income of ₹ 1crore plus ₹1,00,000, being the amount of total
income exceeding ₹1 crore). Therefore, the tax payable on ₹1,01,00,000 would be
₹31,00,000.The marginal relief is₹1,42,100 (i.e., ₹32,42,100 - ₹31,00,000).
( HEC @ 4%)

Question 7:
Compute the marginal relief available to Y Ltd., a domestic company, assuming
that the total income of Y Ltd. for A.Y.2023-24 is ₹10,01,00,000 and the total
income does not include any income in the nature of capital gains. Assume that
the company has not exercised option under section 115BAA or 115BAB.
[Note - The gross receipts of Y Ltd. for the P.Y.2019-20 is ₹410 crore]

Solution:
The tax payable on total income of ₹10,01,00,000 of Y Ltd. computed@ 33.6% (including
surcharge @ 12%) is ₹ 3,36,33,600. However, the tax cannot exceed ₹ 3,22,00,000 [i.e., the tax
of ₹3,21,00,000 (32.1% of ₹10 crore) payable on total income of ₹10 crore plus ₹1,00,000,
being the amount of total income exceeding₹10 crore]. Therefore, the tax payable on
₹10,01,00,000 would be ₹3,22,00,000. The marginal relief is ₹14,33,600 (i.e.,₹3,36,33,600-
₹3,22,00,000).
( HEC @ 4%)

Question 8:
Mr. Sanjay aged 30 years, has a total income of ₹4,50,000, comprising his salary
income and interest on bank fixed deposit. Compute his tax liability for A.Y.2023-
24.

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Solution:
Computation of tax liability of Mr. Sanjay for A.Y.2023-24
Particulars ₹
Tax on total income of ₹4,50,000
@5% of ₹2,00,000 (₹4,50,000 – ₹2,50,000) 10,000
Less: Rebate u/s87A(Lower of tax payable or ₹12,500) 10,000
Tax liability Nil

Question 9: Who is an “Assessee”?

Solution:
As per section 2(7), assessee means a person by whom any tax or any other sum of money is
payable under the Income-tax Act, 1961.
In addition, the term includes –
1. Every person in respect of whom any proceeding under the Act has been taken for the
assessment of –
 his income; or
 the income of any other person in respect of which he is assessable; or
 the loss sustained by him or by such other person; or
 the amount of refund due to him or to such other person.
2. Every person who is deemed to be an assessee under any provision of the Act;
3. Every person who is deemed to be an assessee in default under any provision of the
Act.

Question 10:
Mr. Agarwal aged 40 years and a resident in India, has a total income o f ₹
4,50,00,000, comprising long term capital gain taxable under section 112A of ₹
55,00,000, short term capital gain taxable under section 111A of ₹65,00,000 and
other income of ₹3,30,00,000. Compute his tax liability for A.Y.2023-24. Assume that
Mr. Kashyap has not opted for the provisions of section 115BAC.

Solution:

Particulars ₹
Tax on total income of ₹4,50,00,000
Tax on 54L @10% 5,40,000
Tax on 65L @15% 9,75,000
Tax on other Income of 3,30,00,000 97,12,500
Total Income 1,12,27,500
surcharge @15% on (15,15,000) 2,27,250
surcharge @25% on 97,12,500 24,28,125
Total 1,38,82,875
HEC@4% 5,55,315
Total tax Payable 1,44,38,190

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 2 Residential Status

“VLEARN RECAP”
Section 6 [Residence in India]
A) INDIVIDUAL The residential status of an individual is determined on
Sec.6 the basis of the period of his stay in India.
Basic conditions:
1.He must be present in India for a period of 182
days or more during the previous year
2.(He must be present in India for a period of 60
days or more during the previous year and 365
days or more during the 4 years immediately
preceding the previous year.

Cases where condition (ii) is not applicable:

1) Where an Indian citizen who leaves India during
the previous year for the purpose of employment
outside India or as a member of the crew of an
Indian ship;
2) Where an Indian citizen or a person of Indian origin
who, being outside India, comes on a visit to India
during the previous year [whose total income
(excluding income from foreign sources) does not
exceed ₹ 15 lakhs].
Additional condition:
1) He is a resident in at least 2 out of 10 previous years
preceding the relevant previous year;
2) His stay in India in the last 7 years preceding the
relevant previous year is 730 days or more.
Resident and Resident but not Non-resident [NR]
ordinarily ordinarily
resident resident [RNOR]
[ROR]
Must satisfy Must satisfy at Must not satisfy either
at least one of least one of the of the basic conditions
the basic basic conditions [neither (i) nor (ii)]
conditions [(i) or (ii)] and
[(i) or (ii)] one or none of
and both the the additional
additional conditions [(1) or
conditions (2) or neither]
[(1)& (2)]
B) An Indian citizen or a person of Indian origin who, being
outside India, comes on a visit to India during the
previous year (having total income, other than the
income from foreign sources), exceeding ₹ 15 lakhs during
the previous year would be resident if his period of stay is
 182 days or more during the previous year [First
condition]; or

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  120 days or more during the previous year and 365
days or more during the 4 years immediately
preceding the previous year [Second condition].
Such individual would, however, be resident but not
ordinarily resident if he satisfies only the second
condition mentioned above but not the first condition
(i.e., the period of his stay in India during the relevant
previous year is ≥120 days but < 182 days).
If he satisfies the first condition, he would be-
•Resident and ordinarily resident (ROR), if he satisfies
both the additional conditions [(1) & (2)] and
•Resident but not ordinarily resident (RNOR) if he
satisfies one or none of the additional conditions [(1) or
(2) or neither].
Note – “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 accrue or arise in
India.
Deemed Resident Deemed resident in India [Section 6(1A)] - An individual,
Sec. 6(1A) being an Indian citizen, having total income, other than
the income from foreign sources, exceeding ₹ 15 lakhs
during the previous year would be deemed to be resident
but not ordinarily resident in India in that previous year,
if 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.
This provision would not apply in case of an individual
who is said to be resident in India in the previous year
under section 6(1).
Sec. 6(ii) HUF [ROR/RNOR/non-resident]
A HUF would be resident in India if the control and
management of its affairs is situated wholly or partly in
India. If the control and management of the affairs is
situated wholly outside India, it would become a non-
resident.
If the HUF is resident, then the satisfaction or otherwise
of additional conditions by Karta would determine
whether the HUF is ROR or RNOR.
If Karta satisfies both the additional conditions [(1) & (2)]
in (I) above, then, the HUF would be ROR. Otherwise, the
HUF would be RNOR.
Sec. 6(III) Firms , AoPs and BoIs [Resident/Non-resident]
(i) A firm, AoP or BoI would be resident in India, if the
control and management of its affairs is situated wholly
or partly in India.
(ii) If the control and management of the affairs is
situated wholly outside India, they would become a non-
resident.

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 Sec. 6(iv) Companies [Resident/Non-resident]
(i) A company would be resident in India in any previous
year, if it is an Indian company or its place of effective
management (POEM) in that year, is in India.
(ii) If the company is not an Indian Company and its
POEM is also not in India in that year, it would become a
non-resident for that year.
Section 5 [Scope of Total Income]
Resident and Ordinarily Resident but not Non-Resident
Resident Ordinarily Resident
Income received/deemed to Income which is Income received/ deemed
be received/accrued or received/ deemed to to be received/accrued
arisen/deemed to accrue or be received/ accrued or
arise in or outside India or arisen/ deemed to arisen/ deemed to accrue
In short, the global income accrue or arise in or arise in India.
is taxable. India;
AND
Income which accrues
or arises outside India
being derived from a
business controlled in
or profession set up in
India.

Question 1:
Mr. Anand is an Indian citizen & a member of the crew of a
Singapore bound Indian Ship engaged in carriage of passengers in
International traffic departing from Chennai port on 6th June 2022.
From the following details for the PY 22-23, determine the residential
status of Mr. Anand for AY 23-24, assuming that his stay in India in
the last 4 Previous Years (Preceeding PY 22-23) is 400 days
Particulars Date
Date entered into the Continuous Discharge 6 June 2022
th

Certificate in respect of joining the ship by Mr.

Anand
Date entered into the continuous Discharge 9th December
Certificate in respect of signing off the ship by Mr. 2022
Anand.

Solution:
In this case, since Mr. Anand is an Indian Citizen & leaving India during PY
22-23 as a crew member of the Indian Ship, he would be resident in India if
he stayed in India for 182 days or more. The voyage is undertaken by Indian
Ship engaged in the carriage of passengers in international traffic,
originating from a port in India (i.e Chennai Port) & having its destination at
a port outside India (i.e Singapore Port). Hence, the voyage is an eligible
voyage for the purpose of Sec 6(1). Therefore, the period beginning from 06th
June 2022 & ending on 9th December, 2022 being the date entered into the
Continuous Discharge Certificate in respect of joining the ship & signing off

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 from the ship by Mr. Anand, an Indian Citizen who is a member of the crew
of the ship, has to be excluded for computing the period of stay in India.
Accordingly, 187 days (25+31+31+30+31+30+9) have to be excluded from the
period of stay in India. Consequently, Mr Anand’s period of stay in India
during the PY 22-23 would be 178 days (365 days – 187 days). Since his
period of stay in India during the PY 22-23 is less than 182 days, he is a non-
resident for AY 23-24.

Question 2:
J, a citizen of India, employed in the Indian Embassy at Tokyo,
Japan. He received salary and allowances at Tokyo from the
Government of India for the year ended 31.3.2023 for services
rendered by him in Tokyo. Besides, he was allowed perquisites by
the Government. He is a non- resident for the assessment year 2023-
24. Examine the taxability of salary, allowances and perquisites in
the hands of J for the assessment year 2023-24.

Solution:
As per section 9(1)(iii), salaries payable by the Government to a citizen of
India for services rendered outside India shall be deemed to accrue or arise in
India. As such, salary received by J is chargeable to tax, even though he was
a non-resident for A.Y. 2023-24.
As per section 10(7), all allowances or perquisites paid or allowed as such
outside India by the Government to a citizen of India for rendering services
outside India is exempt from tax. Therefore, the allowances and perquisites
received by J are exempt as per section 10(7).

Question 3:
Examine with reasons whether the following transactions attract
income-tax in India, in the hands of recipients under section 9 of
Income-tax Act, 1961:
1. A non-resident German company, which did not have a
permanent establishment in India, entered into an agreement for
execution of electrical work in India. Separate payments were
made towards drawings & designs, which were described as
"Engineering Fee". The assessee contended that such business
profits should be taxable in Germany as there is no business
connection within the meaning of section 9(1)(i) of the Income-tax
Act, 1961.
2. A firm of solicitors in Mumbai engaged a barrister in UK for
arguing a case before Supreme Court of India. A payment of 5000
pounds was made as per terms of professional engagement.
3. Amount paid by Government of India for use of a patent
developed by Mr. A, who is a non- resident.
4. Sai Engineering, a non-resident foreign company entered into a
collaboration agreement on 25/6/2022, with an Indian Company
and was in receipt of interest on 8% debentures for Rs.20 lakhs,
issued by Indian Company, in consideration of providing
technical know-how utilised in its business in Mumbai during

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 previous year 2022-23.

Solution:
(i) Fees for technical services is taxable under section 9(1)(vii). In this
case, the separate payments made towards drawings and designs
(described as “engineering fee”) are in the nature of fee for technical
services and, therefore, it is taxable in India by virtue of section
9(1)(vii), since the services are utilized for execution of electrical
work in India.
As per Explanation below section 9(2), where income is deemed to
accrue or arise in India under section 9(1)(vii), such income shall be
included in the total income of the non-resident German company,
regardless of whether it has a residence or place of business or
business connection in India.
(ii) As per section 9(1)(i), all income accruing or arising, whether
directly or indirectly, through or from any business connection in
India is deemed to accrue or arise in India.
In this case, there was a professional connection between the firm of
solicitors in Mumbai and the barrister in UK. The expression
“business” includes not only trade and manufacture; it includes,
within its scope, “profession” as well. Therefore, the existence of
professional connection amounts to existence of “business
connection” under section 9(1)(i). Hence, the amount of 5,000
pounds paid to the barrister in UK as per the terms of the
professional engagement constitutes income which is deemed to
accrue or arise in India under section 9(1)(i). Hence, it is taxable in
India.
(iii) As per section 9(1)(vi), income by way of royalty payable by the
Government of India is deemed to accrue or arise in India. “Royalty”
means consideration for, inter alia, use of patent. Therefore, the
amount paid by Government of India for use of patent developed by
Mr. A, a non-resident, is deemed to accrue or arise in India. Hence,
it is taxable in India in the hands of Mr. A.
(iv) ₹20 lakhs, being the value of debentures issued by an Indian
company in consideration of providing technical know-how for use
in its business in India, is in the nature of fee for technical services,
deemed to accrue or arise in India to Sai Engineering, a non-
resident foreign company, under section 9(1)(vii). Hence, it is
taxable in India.
Further, as per section 9(1)(v), income by way of interest payable by
a person who is a resident of India is deemed to accrue or arise in
India. Therefore, interest income from debentures of an Indian
company is deemed to accrue or arise in India in the hands of Sai
Engineering by virtue of section 9(1)(v). Hence, it is taxable in
India.

Question 4:
The business of an HUF is transferred from Australia & all the policy

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 decisions are taken there. Mr E, the Karta of the HUF, who was born
in Kolkata, visits India during the PY after 15 years. He comes to
India on 01.04.2022 & leaves for Australia on 01.12.2022. Determine
the residential status of Mr. E & HUF for the AY.

Solution:
During the PY, Mr E has stayed in India for 245 days (i.e.
30+31+30+31+31+30+31+30+1 days). Therefore, he is a resident. However,
since he has come to India after 15 years, he does not satisfy the condition for
being ordinarily resident. Therefore, the residential status of Mr. E for the PY
22-23 is resident but not ordinarily resident. Since the business of the HUF is
transacted from Australia & policy decisions are taken there, it is assumed
that the control & management is in Australia i.e the control & management
is in Australia i.e the control & management is wholly outside India.
Therefore, the HUF is a non-resident for the PY 22-23.

Question 5:
Mr. X earns the following income during the previous year ended
31st March, 2023. Determine the income liable to tax for the
assessment year 2023-24 if Mr. X is
(a) resident and ordinarily resident in India,
(b) resident and not ordinarily resident in India, and (c) non-resident
in India during the previous year ended 31st March, 2023.
1. Profits on sale of a building in India but received in Holland –
Rs. 20,000
2. Pension from former employer in India received in Holland –
Rs. 14,000
3. Interest on U.K. Development Bonds (1/4 being received in
India) – Rs. 20,000
4. Income from property in Australia and received in U.S.A. – Rs.
15,000
5. Income earned from a business in Abyssinia which is
controlled from Zambia (Rs. 30,000 received in India) – Rs.
70,000
6. Dividend on shares of an Indian company but received in
Holland – Rs. 10,000
7. Profits not taxed previously brought into India – Rs. 40,000
8. Profits from a business in Nagpur which is controlled from
Holland – Rs. 27,000.

Solution:
Particulars ROR RNOR NR
Profits on sale of a building in India 20,000 20,000 20,000
but received in Holland (accrued in
India received outside India)
Pension from former employer in 14,000 14,000 14,000
India received in Holland (accrued in
India, received out of India)
Interest on U.K. Development Bonds 5,000 5,000 5,000

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 (Accrued out of India, 1/4th received
in India)
Interest on U.K. Development Bonds 15,000 NIL NIL
(Accrued out of India, 3/4th received
out of India)
Income from property in Australia 15,000 NIL NIL
and received in U.S.A. (Accrued and
received out of India)
Income earned from a business in 70,000 30,000 30,000
Abyssinia which is controlled from
Zambia (Business controlled outside
India)
Dividend on shares of an Indian 10,000 10,000 10,000
company but received in Holland
(Accrued in India)
Profits not taxed previously brought Nil Nil Nil
into India (Not an income so not
taxable)
Profits from a business in Nagpur 27000 27000 27000
which is controlled from Holland
(Accrued in India)
Total 176000 106000 106000

Question 6:
A had the following income during the previous year ended 31st
March, 2023:
1. Salary Received in India for three Months - Rs. 9,000
2. Income from house property in India - Rs. 13,470
3. Interest on Saving Bank Deposit in State Bank of India - Rs.
1,000
4. Amount brought into India out of the past untaxed profits
earned in Germany - Rs. 20,000
5. Income from agriculture in Indonesia being invested there - Rs.
12,350
6. Income from business in Bangladesh, being controlled from
India - Rs. 10,150
7. Dividends received in Belgium from French companies, out of
which Rs. 2,500 were remitted to India- Rs. 23,000
You are required to compute his total income for the assessment
year 2023-24 if he is : (i) a resident; (ii) a not ordinarily resident, and
(iii) a Non-resident.

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 Solution:
Particulars ROR RNOR NR
Salary Received in India for three 9,000 9,000 9,000
Months (Indian received in India)
Income from house property in India 13,470 13,470 13,470
(Income accrue or arise in India)
Interest on Saving Bank Deposit in 1,000 1,000 1,000
State Bank of India (Income accrue or
arise in India)
Amount brought into India out of the Nil Nil Nil
past untaxed profits earned in
Germany (not an income, hence not
taxable)
Income from agriculture in Indonesia 12350 Nil Nil
being invested there (Income accrue
or arise in outside India)
Income from business in Bangladesh, 10,150 10,150 Nil
being controlled from India (it is
supposed that the money is not
received in India) (Income accrued
outside India from a business
controlled from India)

Dividends received in Belgium from 23,000 Nil Nil

French companies (Income accrue
outside India remittance is irrelevant)
Total 68970 33620 23470

IMPORTANT
Question 7:
Mr. Guddu Pandit is an Indian citizen staying in Canada from past
10 years. He comes to visit in India during the PY on 16th June 2022 &
earned the income from India amounting to ₹19,20,000 after all
deductions. What will be his Residential Status for the AY 23-24.

Solution:
As per Sec 6(1), an Indian Citizen who comes to visit in India or a person of
Indian origin who visit India & earn more than 15lakhs would be treated as
resident if any of the following conditions are satisfied:
1) They stay in India for 182 days in PY or
2) Stay in India for 120 days or more in PY & 365 days or more in 4
Previous Preceding years
Since, Mr. Guddu Pandit stays for more than 182 days in PY, he would be
regarded as Resident. Further, he will be treated as ROR if he satisfies both
the conditions of Sec 6(6), otherwise he will be treated as RNOR.

Question 8:
Mr. Munna Bhaiya is an Indian citizen staying in Canada but not
liable to tax either in Canada or any other country. He visited India

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 on 04th July 2022. His earning from India amounts to ₹35,15,000 after
all deductions. What will be his Residential Status for the AY 23-24

Solution:
As per Sec 6(1A), An Individual who is an Indian Citizen, having total income
exceeding 15lakhs other than from Foreign Sources, shall deemed to be
resident in India if he is not liable to tax in any other country by reason of his
Domicile or residence or any other criteria of similar nature. Further as per
Sec 6(6), he will be treated as RNOR.
Hence, Munna Bhaiya will be treated as RNOR in India.

Question 9:
Mr. David, an Indian citizen aged 40 years, a Government employee
serving in the Ministry of External Affairs, left India for the first time
on 31.03.2023 due to his transfer to High Commission of Canada. He did
not visit India any time during the previous year 2022-23. He has
received the following income for the Financial Year 2022-23:
Sr.no Particulars ₹
(i) Salary (Computed) 5,00,000
(ii) Foreign Allowance 4,00,000
(iii) Interest on fixed deposit from bank in India 1,00,000
(iv) Income from agriculture in Nepal 2,00,000
(v) Income from house property in Nepal 2,50,000
Compute his Gross Total Income for Assessment year 2023-24.

Solution:
As per section 6(1), Mr. David is a non-resident for the A.Y. 2023-24, since he
was not present in India at any time during the previous year 2022-23 .As per
section 5(2), a non-resident is chargeable to tax in India only in respect of
following incomes:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India.
In view of the above provisions, income from agriculture in Nepal and income
from house property in Nepal would not be chargeable to tax in the hands of
David, assuming that the same were received in Nepal. Income from
‘Salaries’ payable by the Government to a citizen of India for services
rendered outside India is deemed to accrue or arise in India as per section
9(1)(iii). Hence, such income is taxable in the hands of Mr. David, even
though he is a non-resident.
However, allowances or perquisites paid or allowed as such outside India by
the Government to a citizen of India for rendering service outside India is
exempt under section 10(7). Hence, foreign allowance of ₹4,00,000 is exempt
under section 10(7) in the hands of Mr. David.

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 Gross Total Income of Mr. David for A.Y. 2023-24
Particulars ₹
Salaries (computed) 5,00,000
Income from other sources (Interest on fixed deposit in India) 1,00,000

Gross Total Income 6,00,000

Question 10:
X Is an Indian Citizen (or he is a person of Indian origin). He wants
to know his residential status in India for the previous year 2022-23
in the following different possible situations-
a. If he visits India during the PY.2022-23 for less than 120 days;
or
b. If he visits India during the PY.2022-23 for 150 Days; or
c. If he visits India during the PY.2022-23 for 180 Days or more.

Solution:
The table given below highlights the impact of amendment made by the
Finance Act, 2020 in the case of an Indian citizen or person of Indian origin
who visits India during the relevant PY.

How many days an Indian citizen /a person of Indian origin visits

India during the relevant PY.
Less than 120 120 days or more but not 182 days or more
Days more than 181 days
NON-RESIDENT  If he satisfies both of the  If he satisfies both of
IN INDIA following conditions, he the following
will be resident but not conditions, he will be
ordinarily resident – resident and
(i) During preceding 4 years, ordinarily resident
he was in India for 365 (i) He has been resident
Days or more; and in India in at least 2
(ii) His taxable income (other out or 10 PY.
than the income from Immediately
foreign sources) exceeds Preceding the
Rs.15,00,000 During the relevant PY; and
relevant PY. (ii) He has been in India
for a period of 730
days or more during
7 years immediately
preceding the
relevant previous
year.

 If he satisfies one or none  If he satisfies one or

of the above two conditions, none of the above two
he will be Non-resident of conditions, he will be

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 India. resident but not
ordinarily resident.

Question 11:
Mr. Dhruv, a person of Indian origin and citizen of Country X, got
married to Ms. Deepa, an Indian citizen residing in Country X, on 4th
February, 2022 and came to India for the first time on 20-02-2022. He
left for Country X on 12th August, 2022. He returned to India again on
20-01-2023. with his wife to spend some time with his parents-in law
for 30 days and thereafter returned to Country X on 18.02.2023.
He received the following gifts from his relatives and friends of her
wife during 01-04-2022 to 31-03-2023 in India:
- From parents of wife ₹ 1,01,000
- From married sister of wife ₹ 11,000
- From very close friends of his wife ₹ 2,82,000
(a) Determine his residential status and compute the total income
chargeable to tax along with the amount of tax payable on such
income for the Assessment year 2023-24.
(b) Will your answer change if he has received ₹ 16,00,000 instead of ₹
2,82,000 from very close friends of his wife during the previous year
2022-23 and he stayed in India for 400 days during the 4 years
preceding the previous year 2022-23?

Solution:
(a) Determination of residential status and computation of total income and
tax payable of Mr. Dhruv
Under section 6(1), an individual, being a person of Indian origin and who
comes on a visit to India during the previous year and his total income other
than the income from foreign source exceeds ₹ 15,00,000, is said to be
resident in India, if he stayed in India for a total period of 120 days or more
during that previous year and for 365 days or more during the 4 years
immediately preceding the relevant previous year.
However, in case, the total income other than the income from foreign source
does not exceed ₹ 15,00,000, the said individual is said to be resident in India,
only if he stayed in India for a total period of 182 days or more during that
previous year.
Since in the present case, total income other than from foreign source, of Mr.
Dhruv, a person of Indian origin does not exceed ₹ 15,00,000, he would be
said to be resident in India, only if he stayed in India for 182 days or more
during the previous year 2022-23 relevant to A.Y. 2023-24.
His stay in India during the previous year 2022-23 is as under:
P.Y. 2022-23
01.04.2022 to 12.08.2022 - 134 days
20.01.2023 to 18.02.2023 - 30 days
Total 164 days
Since Mr. Dhruv has stayed in India during the previous year for less than
182 days, he is said to be non-resident. Accordingly, his total income and tax
payable would be computed in the following manner:

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 Computation of total income and tax payable of Mr. Dhruv for the A.Y. 2023-
24
Particulars ₹
Income from other sources
Cash gifts received from non-relatives is chargeable to tax as per section
56(2)(x) if the aggregate value of such gifts exceeds ₹ 50,000.
₹ 1,01,000 received from parents of wife would be exempt, since parents Nil
of wife fall within the definition of ‘relatives’ and gifts from a relative
are not chargeable to tax.
₹ 11,000 received from married sister-in-law is exempt, since sister of Nil
wife falls within the definition of relative and gifts from a relative are
not chargeable to tax.
Gift received from close friends of his wife of ₹ 2,82,000 is taxable under 2,82,000
section 56(2)(x) since the said sum exceeds ₹ 50,000.

Total Income 2,82,000

Tax on total income of ₹ 2,82,000 [5% of ₹ 32,000 in excess of ₹ 2,50,000, 1,600
being the basic exemption limit]
Add: Health and Education cess@4% 64
Total tax payable 1,664
Total tax payable (rounded off) 1,660

B) Determination of residential status and computation of total income and

tax payable of Mr. Dhruv (if he has received cash gifts from non-relative for ₹
16,00,000):
Where an individual, being a person of Indian origin comes on visit to India
and he is having total income other than income from foreign sources
exceeding ₹ 15 lakhs during the previous year, such individual is said to be
resident in India, if he stays in India during the previous year for 120 days or
more and for 365 days or more during the 4 years immediately preceding the
relevant previous year. As per section 6(6),
such individual whose stay in India is for 120 days or more but less than 182
days in the P.Y. 2022-23 would be resident but not ordinarily resident
irrespective of his residential status or no. of days of stay in India in the
immediately preceding PYs.
Mr. Dhruv, is a person of India origin who has come on a visit to India during
the previous year. Since his total income other than income from foreign
sources exceeds
₹ 15,00,000; and his stay in India is for 164 days during the P.Y. 2022-23 and
for 400 days during the 4 years immediately preceding the P.Y. 2022-23, he is
resident but not ordinarily resident in India for the P.Y. 2022-23.
In such case, his total income and tax payable would be computed in the
following manner:

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 Computation of total income and tax payable of Mr. Dhruv for the A.Y. 2023-
24
Particulars ₹
Income from other sources
Cash gifts received from non-relatives is chargeable to tax as per
section 56(2)(x) if the aggregate value of such gifts exceeds ₹ 50,000.
₹ 1,01,000 received from parents of wife would be exempt, since Nil
parents of wife fall within the definition of ‘relatives’ and gifts from
a relative are not chargeable to tax.
₹ 11,000 received from married sister-in-law is exempt, since sister Nil
of wife falls within the definition of relative and gifts from a relative
are not chargeable to tax.
- Gift received from close friends of his wife of ₹ 16,00,000 is taxable
under section 56(2)(x) since the amount of cash gifts exceeds ₹ 16,00,000
50,000.
Total Income 16,00,000
Tax on total income of ₹ 16,00,000 2,17,500
Upto ₹ 2,50,000 Nil
₹ 2,50,001 – ₹ 5,00,000 [₹ 2,50,000 @ 5%] 12,500
₹ 5,00,001 – ₹ 7,50,000 [₹ 2,50,000 @ 10%] 25,000
₹ 7,50,001 – ₹ 10,00,000 [₹ 2,50,000 @ 15%] 37,500
₹ 10,00,001 – ₹ 12,50,000 [₹ 2,50,000 @ 20%] 50,000
₹ 12,50,001 – ₹ 15,00,000 [₹ 2,50,000 @ 2 5%] 62,500
₹ 15,00,001 – ₹ 16,00,000 [₹ 1,00,000 @ 30%] 30,000
Add: Health and Education cess@4% 8,700
Total tax payable 2,26,200
Note – Since his tax payable as per normal provisions is ₹ 3,04,200 [₹
2,92,500 (₹ 1,12,500 plus 30% on ₹ 6,00,000 income exceeding ₹
10,00,000) plus ₹ 11,700, being health and education cess @4%], which
is higher than the tax payable computed as per concessional tax
rates available under section 115BAC, it is beneficial for him to opt
for section 115BAC.

Question 12:
Mr. Dhanush, an Indian citizen aged 35 years, worked in ABC Ltd. in
Mumbai. He got a job offer from XYZ Inc., USA on 01.06.2021. He left
India for the first time on 31.07.2021 and joined XYZ Inc. on 08.08.2021.
During the P.Y. 2022-23, Mr. Dhanush visited India from 25.05.2022 to
22.09.2022. He has received the following income for the previous year
2022-23

Particulars ₹
Salary from XYZ Inc., USA received in USA 7,00,000
Dividend from Indian companies 5,50,000
Agricultural income from land situated in Punjab 55,000

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 Rent received/receivable from house property in Lucknow 4,00,000
Profits from a profession in USA, which was set up in 6,00,000
India, received there
Determine the residential status of Mr. Dhanush and compute his
total income for the A.Y. 2023-24

Solution:
As per section 6(1), an Indian citizen or a person of Indian origin who, being
outside India, comes on a visit to India would be resident in India if he or
she stays in India for a period of 182 days or more during the relevant
previous year in case such person has total income, other than the income
from foreign sources, not exceeding ` 15 lakhs. However, if such person has
total income, other than the income from foreign sources, exceeding ` 15
lakhs, he would also be a resident if he has been in India for at least 120
days during the relevant previous year and has been in India during the 4
years immediately preceding the previous year for a total period of 365
days or more. In such a case, he would be resident but not ordinarily
resident in India.
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 accrue or arise in India.
In this case, total income, other than the income from foreign sources, of Mr.
Dhanush for P.Y. 2022-23 would be

Particulars Amount
(₹)
Salary from XYZ Inc., USA received in USA (Not included in -
total income, since it is income from foreign source)
Dividend from Indian companies (Included in total income, 5,50,000
since deemed to accrue or arise in India)
Agricultural income from land situated in Punjab [Exempt u/s -
10(1)]
Rent received/receivable from house property in 4,00,000
Lucknow (Included in total income, since deemed to
accrue or arise in India)
Less: 30% of ` 4 lakhs 1,20,000 2,80,000
Profits from a profession in USA, which was set up in India, 6,00,000
received there
Total income, other than the income from foreign 14,30,000
sources

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WWW.VLEARNCLASSES.COM | CA VIJAY SARDA | 8956651954 2.15 Residential Status