Question 1 (b)
Gross total income under each residential status (as set, 1961 Act, AY 2016-17)
6 marks
- Time to write
- About 12 minutes
From an older CBCS paper
Question
Question 1 (b) · 6 marksMr. Aman had the following incomes in the previous year 2015-16:
| Rs. | ||
|---|---|---|
| (i) | Income earned from agriculture in Bangladesh | 1,20,000 |
| (ii) | Salary for services rendered in Iraq, received in India (computed) | 1,80,000 |
| (iii) | Income earned from a business carried on in Kathmandu and controlled from Lucknow (one-third of it received in India) | 96,000 |
| (iv) | Dividend received from a domestic company | 16,000 |
| (v) | Interest from Bank Deposits there, earned and received in Australia | 26,000 |
| (vi) | Pension from a former employer in India, though received in Sri Lanka | 56,000 |
Compute the Gross Total Income of Mr. Aman if he is (a) a Resident and ordinarily resident, (b) a Resident but not ordinarily resident and (c) a Non-Resident in India.
Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2016-17 (previous year 2015-16), with the dates as printed. Marks printed: 6. The table's first two columns have no heading. Item (ii) carries the word "(computed)" as printed. The three requirements (a), (b) and (c) are the three cases of residential status to be computed. The question does not say how many days Mr. Aman stayed in India or that he is a citizen; the note only records this.
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 Basis of charge for each status (section 5) 1 mark 2 min
- 2 Treatment of items (i) to iii 2 marks 3 min
- 3 Treatment of items (iv) to (vi) 1½ marks 3 min
- 4 Gross total income in the three cases 1½ marks 2 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Try it first. About 12 minutes for 6 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 salary of item (ii) is taken as computed, as the question says.
- The farming in Bangladesh is not controlled from India, and its income is received outside India; the question states neither fact (the result if either is otherwise is given at the end).
- The two-thirds of the Kathmandu business income not received in India is received outside India.
- The pension of item (vi) is for his past service in India with that employer.
- Resident and ordinarily resident: income received or deemed received in India, income accruing or arising (or deemed to) in India, and income accruing or arising outside India (section 5(1)).
- Resident but not ordinarily resident: as above, except that income accruing or arising outside India is left out unless it is derived from a business controlled in India or a profession set up in India (section 5(1)(c), proviso).
- Non-resident: only income received or deemed received in India, and income accruing or arising (or deemed to) in India (section 5(2)).
| Item | Where it accrues and where it is received | Taxed for |
|---|---|---|
| (i) Agriculture in Bangladesh, ₹1,20,000 | Not agricultural income as section 2(1A) defines it (land situated in India), so section 10(1) does not exempt it; it accrues and is received outside India, from a business not controlled in India | Ordinarily resident only |
| (ii) Salary for services in Iraq, ₹1,80,000 | Earned outside India (section 9(1)(ii) treats salary as earned in India only for service rendered in India), but received in India (sections 5(1)(a) and 5(2)(a)) | All three |
| (iii) Kathmandu business, one-third received in India, ₹32,000 | Received in India | All three |
| (iii) Kathmandu business, two-thirds, ₹64,000 | Accrues and is received outside India, but the business is controlled from Lucknow (section 5(1)(c), proviso) | Both resident cases |
| (iv) Dividend from a domestic company, ₹16,000 | Exempt under section 10(34) (a dividend referred to in section 115-O) | None |
| (v) Interest earned and received in Australia, ₹26,000 | Accrues and is received outside India; not from a business controlled in India | Ordinarily resident only |
| (vi) Pension from a former employer in India, ₹56,000 | Pension is salary (section 17(1)(ii)); paid for service rendered in India, it is earned in India (section 9(1)(ii), Explanation), wherever it is received | All three |
The proviso to section 10(34) on dividends taxed under section 115BBDA was inserted with effect from 1 April 2017, so it does not apply to assessment year 2016-17.
Gross total income for assessment year 2016-17
| Particulars | Resident and ordinarily resident (Rs.) | Resident but not ordinarily resident (Rs.) | Non-resident (Rs.) |
|---|---|---|---|
| (i) Agricultural income from Bangladesh | 1,20,000 | — | — |
| (ii) Salary for services in Iraq, received in India | 1,80,000 | 1,80,000 | 1,80,000 |
| (iii) Kathmandu business: one-third received in India | 32,000 | 32,000 | 32,000 |
| (iii) Kathmandu business: two-thirds received outside India | 64,000 | 64,000 | — |
| (iv) Dividend from a domestic company (exempt) | — | — | — |
| (v) Interest earned and received in Australia | 26,000 | — | — |
| (vi) Pension from a former employer in India | 56,000 | 56,000 | 56,000 |
| Gross total income | 4,78,000 | 3,32,000 | 2,68,000 |
If the facts assumed are otherwise
If the Bangladesh income was received in India, it is taxed in all three cases: gross total income ₹4,78,000, ₹4,52,000 and ₹3,88,000. If it was received outside India but the farming is controlled from India, it is taxed in both resident cases: ₹4,78,000, ₹4,52,000 and ₹2,68,000.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Basis of charge for each status (section 5) | 1 |
| 2 | Treatment of items (i) to (iii) | 2 |
| 3 | Treatment of items (iv) to (vi) | 1.5 |
| 4 | Gross total income in the three cases | 1.5 |
| Total | 6 |
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