Residential status of an Indian citizen who leaves for a job abroad, and his taxable income (as set, 1961 Act, AY 2019-20)

Readings

1. Days in India in 2018-19. From 1 April 2018 to 27 September 2018 he was in India for 30 (April) + 31 (May) + 30 (June) + 31 (July) + 31 (August) + 27 (September) = 180 days, the day he left being counted as a day in India.
2. Earlier years. He left India for the first time in September 2018, so he had lived in India throughout the four years 2014-15 to 2017-18; his stay in those years was far above 365 days. As shown below, nothing turns on the exact figure.
3. The Dubai fees. The question does not say who paid them. They are read as paid by a person abroad for services used outside India; the result if an Indian resident paid them for use in India is given at the end.

Residential status for the previous year 2018-19

• Section 6(1)(a): an individual is resident if he is in India for 182 days or more in the year. Mr. Pankaj was in India for 180 days, so this condition fails.
• Section 6(1)(c): the other route is 60 days or more in the year with 365 days or more in the four years before. But for a citizen of India who leaves India in the year for employment outside India, Explanation 1(a) to section 6(1) replaces the 60 days by 182 days. Mr. Pankaj is an Indian citizen who left in 2018-19 to take up a job in Hong Kong, so he needs 182 days in the year under this route too. He has only 180, so it also fails, however long his earlier stay.

Neither condition is met, so Mr. Pankaj is a non-resident for the previous year 2018-19 (assessment year 2019-20). A non-resident is taxed only on income received or deemed to be received in India, and on income that accrues or arises, or is deemed to accrue or arise, in India (section 5(2)). Income that both accrues and is received outside India is outside his total income unless section 9 deems it to accrue or arise in India (section 5(2)(b)).

Treatment of each income

1. House property in India: income from property situated in India accrues in India; taxable in full.
2. Fees for services performed in India: the income arises in India, where the services were rendered; receipt in Hong Kong does not change that (section 5(2)(b)).
3. Fees for services performed in Dubai: neither received nor arising in India. Such fees are deemed to accrue in India only when payable by the Government, by a resident (unless used for a business or source outside India), or by a non-resident for a business or source in India (section 9(1)(vii)); on the reading above none applies. (Even then, the proviso to section 9(1)(vii) leaves out fees payable under an agreement made before 1 April 1976 and approved by the Central Government, or, by its Explanation 1, a later agreement made on proposals approved before that date.)
4. Singapore business controlled from Delhi: control from India brings foreign income into charge only for a resident who is not ordinarily resident (proviso to section 5(1)). For a non-resident only the ₹50,000 received in India is taxable (section 5(2)(a)).
5. Debenture interest: an Indian company is resident in India (section 6(3)(i)), and interest payable by a resident is deemed to accrue in India unless the borrowing is used for a business or source outside India (section 9(1)(v)(b)). Taxable even though received in Hong Kong.
6. Nepal rent: earned and received outside India; not taxable.

Taxable income

Of the ₹6,21,000 earned in the year, ₹2,64,000 is outside the charge because he is non-resident.

If the facts are read otherwise

• If 27 September 2018 is not counted as a day in India, the stay is 179 days: still below 182, so he remains non-resident and the taxable income stays ₹3,57,000.
• If the Dubai fees were payable by a resident of India for services used in his business in India, they would be deemed to accrue in India (section 9(1)(vii)(b)): taxable income ₹3,91,000.