Residential status of a citizen who left for a job abroad and came back on a visit, and his total income (as set, 1961 Act, AY 2022-23)

Readings

1. Stay in 2021-22. Mr. Sumit was in India from 15th January, 2022 to 31st March, 2022: 76 days (17 + 28 + 31), taking him to stay on to the end of the year. On 31st March, 2021 he was still in 2020-21.
2. The visit. He has taken up employment in the USA, so his coming to India on 15th January, 2022 is read as a visit. The result if he came back to settle is at the end.
3. Earlier years. He left India for the first time on 31st March, 2021, so he lived in India throughout the years before.
4. Gift. The gift is printed as received on 30th June, 2022, after the previous year; it is taken as printed.

Residential status

• Section 6(1)(a): he is not in India for 182 days in 2021-22 (76 days).
• Section 6(1)(c): normally 60 days in the year plus 365 days in the four years before would make him resident. But for a citizen of India who, being outside India, comes on a visit to India, the 60 days become 182 days (Explanation 1(b) to section 6(1)). He is a citizen on a visit with 76 days, so the condition fails.
• He is therefore a non-resident for the previous year 2021-22 (the Finance Act, 2020, section 4 added, from assessment year 2021-22, a 120-day test and deemed residence under section 6(1A), each only where total income other than income from foreign sources exceeds ₹15,00,000; his such income is far below that, so they do not change the result).
• A non-resident is taxed only on income received or deemed received in India, or accruing or arising (or deemed to accrue or arise) in India (section 5(2)).

Treatment of each income

1. Business in London managed from Delhi, ₹1,25,000: the profit accrues outside India and is not received in India. Control from India matters only for a not ordinarily resident person (proviso to section 5(1)(c)); for a non-resident it is not taxable.
2. Salary from a former employer in India, received in London, ₹15,000: salary for service rendered in India is earned in India and deemed to accrue there (section 9(1)(ii)); taxable under the head Salaries, less the standard deduction, which is ₹50,000 or the salary if less (section 16(ia)): ₹15,000 − ₹15,000 = nil.
3. Interest on US Government bonds received in India, ₹20,000: received in India, so taxable (section 5(2)(a)).
4. Agricultural income from Nepal, ₹70,000: the land is outside India, so it is not agricultural income under section 2(1A) (which covers land in India) and is not exempt; but it accrues and is received outside India, so a non-resident is not taxed on it.
5. Gifts on 30th June, 2022: they fall in the previous year 2022-23, so they are not income of 2021-22. (Even in the year of receipt, the ₹1,00,000 from his mother, a relative, is outside section 56(2)(x), and ₹40,000 from a friend does not exceed ₹50,000.)

Computation of total income

The total income is below ₹2,50,000, so no tax is payable (Finance Act, 2022, First Schedule, Part I, Paragraph A).

Under section 115BAC. If Mr. Sumit opts for the new regime for assessment year 2022-23, his total income is computed without the standard deduction under section 16 (section 115BAC(2)(i), inserted by the Finance Act, 2020, section 53). The salary of ₹15,000 is then taxable and his total income is ₹35,000, still within the nil band up to ₹2,50,000 (section 115BAC(1), Table), so no tax is payable either way.

If the facts are read otherwise

• He came back for good on 15th January, 2022 (not a visit): the 60-day test of section 6(1)(c) applies; 76 days in the year and more than 365 days in the four years before make him resident, and, having lived in India until March 2021, ordinarily resident (section 6(6)(a)). He is then taxed on his world income (section 5(1)): business profit ₹1,25,000 + salary nil (after the standard deduction) + interest ₹20,000 + agricultural income from Nepal ₹70,000 = total income ₹2,15,000. Under section 115BAC the salary is taxed without the standard deduction, so the total income is ₹2,30,000.