Question 1 (a)
Residential status of a frequent traveller and her taxable income
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 1 (a) · 12 marksMs. Arpita Gupta, an Indian citizen, has worked since 2013 as Deputy General Manager in Union Bank of India. In connection with her banking profession she regularly visits foreign countries. In the tax year 2026-27 she remained out of India for 182 days, and during the seven immediately preceding previous years. Her stay in India was as shown below:
| Year | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 | 2024-25 | 2025-26 |
|---|---|---|---|---|---|---|---|
| Days of stay in India | 80 | 170 | 165 | 84 | 78 | 50 | 120 |
For tax year 2026-27, she reported this income:
| 1) Income from her job with the bank in India | Rs. 2050000 |
|---|---|
| 2) Dividend from Adani Power Ltd. (an Indian Co.) | Rs. 230000 |
| 3) Capital gains on the sale of shares of a foreign company, received in Australia. | Rs. 185000 |
| 4) Cash gift from a friend on her wedding, received in India | Rs. 180000 |
| 5) Rental income from a property in Canada, half of the rent received in India | Rs. 158000 |
| 6) Profits from a business controlled from India but carried on at Sri Lanka | Rs. 200000 |
For the tax year 2026-27, determine her residential status and taxable income.
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. No marks are printed for this part; 12 inferred (each question is 12 + 6). "During the seven immediately preceding previous years" stands as printed; the table that follows gives her stay in India in those years.
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 Days in India and the basic condition 2 marks 3 min
- 2 Tests for not ordinarily resident, with working 3 marks 5 min
- 3 Residential status and scope of total income 1 mark 2 min
- 4 Treatment of each item and taxable income 6 marks 10 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Short on time? Step 4 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.
- The income from her job is the income chargeable under Salaries, as given; no regime choice or deduction is involved, as only the taxable income is asked.
- The rental income from Canada is the rent received, which is the annual value; no municipal tax is paid.
- Her foreign visits are part of her Indian job, so she does not leave India for the purposes of employment outside India; the 60-day test therefore applies to her (section 6(3)(b)).
Step 1: is she resident? (section 6(2))
The tax year 2026-27 has 365 days. She was outside India for 182 days, so she was in India for 365 − 182 = 183 days, which is 182 days or more. She is resident under section 6(2)(a).
Step 2: is she ordinarily resident? (section 6(13)(a))
She is not ordinarily resident if either test is met:
| Test | Her position | Met? |
|---|---|---|
| (i) Non-resident in nine of the ten years before 2026-27 | In 2025-26 she was in India 120 days, and 165 + 84 + 78 + 50 = 377 days in the four years before; in 2023-24, 78 days, and 80 + 170 + 165 + 84 = 499 days in the four years before; in 2022-23, 84 days, and at least 80 + 170 + 165 = 415 days before. She was resident (60 days and 365 days, section 6(2)(b)) in at least these three years | No |
| (ii) In India 729 days or less in the seven years before 2026-27 | 80 + 170 + 165 + 84 + 78 + 50 + 120 = 747 days | No |
Neither test is met, so she is ordinarily resident.
Ms. Arpita Gupta is resident and ordinarily resident in India for the tax year 2026-27. Her income from every source, in India or outside, is included in her total income (section 5(1)).
Computation of taxable income for tax year 2026-27
| Particulars | Rs. |
|---|---|
| Salaries: income from her job with the bank in India | 20,50,000 |
| Income from house property in Canada: rent ₹1,58,000 less 30% standard deduction (₹47,400) (section 22(1)(a)) | 1,10,600 |
| Profits of the business in Sri Lanka, controlled from India | 2,00,000 |
| Capital gains on shares of a foreign company, received in Australia | 1,85,000 |
| Income from other sources: dividend from Adani Power Ltd. | 2,30,000 |
| Cash gift from a friend on her wedding: not income (section 92(3)(b)) | Nil |
| Gross total income = taxable income | 27,75,600 |
- As she is ordinarily resident, the foreign income (Canadian rent, Sri Lankan business profit and the Australian capital gain) is taxable wherever it is received; whether half the rent came to India does not matter.
- Had she been not ordinarily resident, the Canadian rent received outside India and the Australian capital gain would have been excluded, but the Sri Lankan business profit would still be taxed, because the business is controlled from India (section 5(1)(c)).
- A gift received on the occasion of marriage is not income, whoever gives it.
- Dividends from an Indian company are taxed in the shareholder's hands as income from other sources.
The other reading. If ₹20,50,000 were read as her gross salary rather than the income under Salaries, the standard deduction of ₹75,000 under the default regime (section 19(1), Table: Sl. No. 2) would come off it, giving salary income of ₹19,75,000 and a taxable income of ₹27,00,600. Her residential status is the same either way.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Days in India and the basic condition | 2 |
| 2 | Tests for not ordinarily resident, with working | 3 |
| 3 | Residential status and scope of total income | 1 |
| 4 | Treatment of each item and taxable income | 6 |
| Total | 12 |
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