Question 1 (b)
Residential status and gross total income of a surgeon (as set, 1961 Act, AY 2017-18)
7 marks
- Time to write
- About 14 minutes
From an older CBCS paper
Question
Question 1 (b) · 7 marksRohit Verma is an Indian citizen and a well-known medical surgeon. In 1996 he received his professional degree from the All India Institute of Medical Sciences (AIIMS) Delhi, and in 1999 he set up his nursing home in Delhi. Apart from practising in India, he visits foreign countries regularly on account of his medical profession. In the previous year 2016-17 he stayed outside India for 180 days, while in the seven previous years immediately preceding it he was in India for 700 days in all. For previous year 2016-17 his income is reported as follows:
| Income from the Medical Profession in India | Rs. 12,00,000 |
|---|---|
| Income from the Medical Profession in Dubai | Rs. 8,00,000 |
| Dividend Income from an Indian Company | Rs. 13,00,000 |
| Capital Gains from the sale of House Property in Dubai, which were remitted to India | Rs. 6,00,000 |
| Interest on a Savings Account with a post office in India | Rs. 13,000 |
For the Assessment Year 2017-18, compute the gross total income of Rohit.
Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2017-18 (previous year 2016-17), with the dates as printed. The question gives the stay in India for 2016-17 (180 days out of India) and 700 days in all for the seven immediately preceding previous years; the stay in the four previous years immediately preceding 2016-17 is not given, and neither is where the professional income from Dubai was received or whether the profession there is controlled from India. This note only records what the question leaves out.
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
- 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: resident, not ordinarily resident (section 6) 2 marks 3 min
- 2 Treatment of the professional incomes 1½ marks 3 min
- 3 Dividend (sections 10(34), 115BBDA) and interest 2 marks 3 min
- 4 Capital gain and gross total income 1½ marks 3 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Try it first. About 14 minutes for 7 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.
- The Dubai professional income comes from his medical profession, which was set up in India (his nursing home in Delhi since 1999); the question does not say where that income was received (the result if the Dubai work is a separate profession set up abroad is given at the end).
- The Dubai capital gain arose and was received outside India and only later remitted to India.
- The post office savings account is an individual account (CBDT Notification No. 32/2011 of 3 June 2011 (S.O. 1296(E)), gives the limit for an individual account).
- Resident: previous year 2016-17 has 365 days; he was outside India for 180 of them, so in India for 365 − 180 = 185 days. That is 182 days or more, so he is resident (section 6(1)(a)). His stay in the four earlier years is not needed.
- Not ordinarily resident: in the seven previous years before 2016-17 he was in India for 700 days in all, which is 729 days or less, so he is not ordinarily resident (section 6(6)(a)).
He is therefore resident but not ordinarily resident for assessment year 2017-18. Such a person is taxed on income received or deemed received in India and income accruing or arising in India, and on income accruing outside India only if it is derived from a business controlled in India or a profession set up in India (section 5(1), proviso).
| Item | Treatment | Rs. |
|---|---|---|
| Medical profession in India | Accrues in India (section 5(1)(b)) | 12,00,000 |
| Medical profession in Dubai | Accrues outside India, but derived from his profession set up in India (section 5(1)(c), proviso) | 8,00,000 |
| Dividend from an Indian company, ₹13,00,000 | Exempt up to ₹10,00,000 (section 10(34), dividends referred to in section 115-O); the excess over ₹10,00,000 is taxable, as he is a resident individual (proviso to section 10(34); section 115BBDA(1), in force from 1 April 2017) | 3,00,000 |
| Capital gain on the Dubai house, later remitted | Accrues and is received outside India; remitting it later is not receipt in India; not from a business or profession | — |
| Post office savings interest, ₹13,000 | Exempt up to ₹3,500 (section 10(15)(i)) (CBDT Notification No. 32/2011: ₹3,500 for an individual account, ₹7,000 for a joint account); the balance is taxable | 9,500 |
Gross total income for assessment year 2017-18
| Particulars | Rs. |
|---|---|
| Profits and gains of profession: in India | 12,00,000 |
| Profits and gains of profession: Dubai | 8,00,000 |
| Income from other sources: dividend above ₹10,00,000 | 3,00,000 |
| Income from other sources: post office savings interest (₹13,000 − ₹3,500) | 9,500 |
| Gross total income | 23,09,500 |
The dividend of ₹3,00,000 is taxed at 10% under section 115BBDA, with no deduction or expense against it (section 115BBDA(2)). The savings interest may later qualify for the deduction under section 80TTA, which is given from gross total income and so does not change the figure asked for.
If the facts assumed are otherwise
If the Dubai work is a separate profession set up outside India and its income was received outside India, the ₹8,00,000 is not taxed for a not ordinarily resident person: gross total income ₹15,09,500. If the Dubai income was received in India, it is taxed in any case and the total stays ₹23,09,500.
Where the 7 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Residential status: resident, not ordinarily resident (section 6) | 2 |
| 2 | Treatment of the professional incomes | 1.5 |
| 3 | Dividend (sections 10(34), 115BBDA) and interest | 2 |
| 4 | Capital gain and gross total income | 1.5 |
| Total | 7 |
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