Question 1 OR (a)
Residential status of a citizen working in a tax-free country, in three cases
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 1 OR (a) · 12 marksMr. Ankit, an Indian citizen, carries on a profession in Singapore, where he has no liability to pay any income-tax. For the tax year 2026-27 his income is as below:
Interest from deposits in India Rs. 200000
Dividend from a UK company, received in India Rs. 300000
Lottery winnings in India Rs. 1200000
Professional income accrued in Singapore and received there Rs. 600000
Business income earned in Singapore, the business being controlled from India Rs. 400000
Determine his residential status, and his taxable income, if, in the tax year 2026-27, he has:
not visited India at all.
visited India for 200 days during 2026-27, and for 200 days in each preceding financial year since 2018-19.
visited India for 121 days, while in the four preceding years immediately the tax year 2026-27, Mr. Ankit had been in India for 300 days. (12)
Paper note: Set under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 3 years and every date in the question moves forward by the same 3 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed. "In the four preceding years immediately the previous year" is printed without "before"; read as the four years immediately before it.
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
- taxable incomeHead 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 2 min
- 1 Income other than from foreign sources 2 marks 3 min
- 2 Status in cases (a), (b) and (c), with reasons 6 marks 10 min
- 3 Taxable income in the three cases 4 marks 7 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Short on time? Step 2 carries 6 of the 12 marks: guard its minutes.
Try it first. About 24 minutes for 12 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.
Income other than from foreign sources (section 6(14))
Income from foreign sources is income that accrues outside India, except income from a business controlled in, or a profession set up in, India. Mr. Ankit's other income is:
| Particulars | Rs. |
|---|---|
| (i) Interest from deposits in India | 2,00,000 |
| (iii) Lottery winnings in India | 12,00,000 |
| (v) Business income in Singapore, the business being controlled from India | 4,00,000 |
| Income other than from foreign sources | 18,00,000 |
The UK dividend (received in India) and the Singapore professional income accrue outside India and are income from foreign sources. As ₹18,00,000 exceeds ₹15,00,000, the ₹15 lakh tests of section 6 apply to him.
He is not in India at all, so he is not resident under section 6(2). But section 6(7) deems a citizen of India resident if he is not liable to tax in any other country by reason of domicile or residence and his income other than from foreign sources exceeds ₹15 lakh: Singapore levies no tax on him and that income is ₹18,00,000. He is a deemed resident, and a deemed resident is not ordinarily resident (section 6(13)(c)).
Case (b): 200 days in India in the tax year and in every year since 2018-19
He is in India for 182 days or more, so he is resident (section 6(2)(a)). He has been resident in every one of the eight years before (200 days each), and in India for 200 × 7 = 1,400 days in the seven years before, more than 729. Neither test of section 6(13)(a) is met, so he is resident and ordinarily resident.
Case (c): 121 days in the tax year, 300 days in the four years before
- 121 days is less than 182, so section 6(2)(a) is not met.
- He is a citizen coming on a visit, so the 60-day test of section 6(2)(b) does not apply; with income other than from foreign sources above ₹15 lakh, it is replaced by 120 days (section 6(4)-(5)). He has 121 days, but the test also needs 365 days in the four years before, and he has only 300. He is not resident under section 6(2).
- Section 6(7) then applies as in case (a): he is a deemed resident and therefore not ordinarily resident.
Taxable income for tax year 2026-27
| Particulars | Case (a): not ordinarily resident | Case (b): ordinarily resident | Case (c): not ordinarily resident |
|---|---|---|---|
| (i) Interest from deposits in India | 2,00,000 | 2,00,000 | 2,00,000 |
| (ii) Dividend from a UK company, received in India | 3,00,000 | 3,00,000 | 3,00,000 |
| (iii) Lottery winnings in India | 12,00,000 | 12,00,000 | 12,00,000 |
| (iv) Professional income accrued and received in Singapore | — | 6,00,000 | — |
| (v) Business income in Singapore, controlled from India | 4,00,000 | 4,00,000 | 4,00,000 |
| Taxable income | 21,00,000 | 27,00,000 | 21,00,000 |
- A not ordinarily resident person is taxed on income received or accruing in India, and on foreign income only from a business controlled in, or a profession set up in, India (section 5(1)(c)): the UK dividend is taxed because it is received in India; the Singapore business income because the business is controlled from India; the Singapore professional income is not taxed, the profession being set up there.
- The lottery winnings of ₹12,00,000 are taxed at the flat rate of 30%, with no basic exemption or deduction against them (section 194).
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Income other than from foreign sources | 2 |
| 2 | Status in cases (a), (b) and (c), with reasons | 6 |
| 3 | Taxable income in the three cases | 4 |
| Total | 12 |
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