Question 1 (b)
Residential status of an individual back on a visit, and his total income (as set, 1961 Act, AY 2022-23)
5 marks
- Time to write
- About 10 minutes
From an older CBCS paper
Question
Question 1 (b) · 5 marksAttempt any three questions from the 6 questions given below:
- X first left India on 18th August, 2020. In the Previous Year 2020-21, he arrives in India on 2nd October, 2021 for 196 days. Find his Residential Status and compute his Total Income in respect of the Assessment Year 2022-23 from the information that follows:
| Income | Rs. | |
|---|---|---|
| 1. | Interest from the Government of India, which is received in London | 5,00,000 |
| 2. | Royalty from an Indian Resident for a project of an Indian company that is situated in London | 6,00,000 |
| 3. | Dividends paid by an Indian Company | 50,000 |
| 4. | Gifts from friends given in foreign currency, which are received in London | 24,000 |
| 5. | Income that was earned and received in London in 2019-20, and remitted to India in 2021-22 | 6,00,000 |
| 6. | Interest that is earned in India but received in London | 60,000 |
Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2022-23 (previous year 2021-22), with the dates as printed. Q1 is "any three of six" (15 marks); this slot is item (2). As printed, the second sentence names the Previous Year 2020-21, although the visit on 2nd October, 2021 falls in the previous year 2021-22 (the previous year of the assessment year 2022-23); it stands as printed and the answer states how it reads this. The question gives no stay in India other than the 196 days, and no earlier history beyond the date he first left India.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- any threeThe paper asks for any 3, and this is one of them. Only 3 are marked: a fourth earns nothing.
- computeHead by head: each income under its head, exempt items marked exempt, then the deductions and the tax.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Residential status: basic and additional conditions 2 marks 3 min
- 2 Treatment of the six items 2 marks 3 min
- 3 Total income 1 mark 2 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Try it first. About 10 minutes for 5 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
- Which year. The question asks for the assessment year 2022-23, whose previous year is 2021-22, and the visit starts on 2nd October, 2021, inside 2021-22. The printed Previous Year 2020-21 is read as 2021-22, and the 196 days as his stay in India in that previous year, as the question states it.
- Earlier years. X first left India on 18th August, 2020, so he is taken to have lived in India throughout the years before that date.
- Dividends. From the assessment year 2021-22 a dividend from an Indian company is taxable in the shareholder's hands (Finance Act, 2020, section 7 (clause (e), a further proviso to section 10(34): no exemption for a dividend received on or after 1 April 2020 other than one on which tax under section 115-O has been paid) and section 59 (section 115-O confined to dividends declared, distributed or paid on or before 31 March 2020)).
- Basic condition. An individual is resident if he is in India for 182 days or more in the previous year (section 6(1)(a)). X is in India for 196 days in 2021-22, so he is resident. (He meets the test whether or not he is an Indian citizen on a visit, because the 182-day test of section 6(1)(a) is not changed by Explanation 1 to section 6(1), which alters only the 60-day test of section 6(1)(c).)
- Ordinarily resident. A resident is not ordinarily resident only if he was a non-resident in nine of the ten preceding previous years, or was in India for 729 days or less in the seven preceding previous years (section 6(6)(a)). X lived in India until August 2020, so neither applies: he is resident and ordinarily resident.
- A resident and ordinarily resident person is taxed on his income from all sources, in India and outside (section 5(1)). From assessment year 2021-22 the Finance Act, 2020, section 4 added a 120-day test for a visiting citizen or person of Indian origin, deemed residence under section 6(1A), and section 6(6)(c) and (d), each only where total income other than income from foreign sources (income that arises abroad, other than income from a business controlled from India or a profession set up here) exceeds ₹15,00,000. X's such income is ₹6,10,000 (his total income less the royalty for the London project, which accrues outside India); ₹6,10,000 is below ₹15,00,000, so they do not change his status.
| Particulars | ₹ |
|---|---|
| Interest from the Government of India, received in London: taxable for an ordinarily resident person wherever received | 5,00,000 |
| Royalty from an Indian resident for a project situated in London: income from outside India, taxable for an ordinarily resident person | 6,00,000 |
| Dividends from an Indian company | 50,000 |
| Gifts from friends in foreign currency: the year's aggregate of ₹24,000 does not exceed ₹50,000 (section 56(2)(x)) | Nil |
| Income of 2019-20 earned and received in London, remitted in 2021-22: not income of this year (a remittance of past income) | Nil |
| Interest earned in India, received in London | 60,000 |
| Gross total income = total income, assessment year 2022-23 | 12,10,000 |
No deductions under Chapter VI-A are claimed in the question.
If the facts are read otherwise
- Days counted from the date. Counting from 2nd October, 2021 to 31st March, 2022 gives 181 days, not 196. Then X is not resident under section 6(1)(a). If he is an Indian citizen (or a person of Indian origin) who comes on a visit, the 60 days of section 6(1)(c) become 182 days (Explanation 1(b) to section 6(1)) and he is a non-resident, taxed only on income that accrues or is received in India (section 5(2)): Government of India interest ₹5,00,000 (section 9(1)(v)(a)), dividends ₹50,000 and interest earned in India ₹60,000; the royalty is paid for a project outside India and is not deemed to accrue in India (section 9(1)(vi)(b)). Total income ₹6,10,000.
- If on that count he is not a citizen or person of Indian origin, he is resident under section 6(1)(c) (181 days in the year and more than 365 days in the four years before it) and ordinarily resident, and total income stays ₹12,10,000.
Where the 5 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Residential status: basic and additional conditions | 2 |
| 2 | Treatment of the six items | 2 |
| 3 | Total income | 1 |
| Total | 5 |
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