Residential status and taxable income of a foreign national on a long visit (as set, 1961 Act, AY 2019-20)

Readings

1. Other visits. The question lists his visits before 2018-19 (from 10.04.2010 for 185 days and from 15.12.2017 for 100 days) and gives no others; he is taken to have had no other stay in India in the ten years before 2018-19.
2. Dates after the year. The stay runs to 12.07.2019 and the gift is dated 03.05.2019, both after 31 March 2019, as printed. Only the days up to 31 March 2019 count for 2018-19, and a gift received on 03.05.2019 belongs to the previous year 2019-20. The result if the gift is read as received in 2018-19 is given at the end.
3. Technical fees. The question does not say where the services were rendered; as shown below, the result is the same either way.

Days in India

For 2018-19: July 31 + August 31 + September 30 + October 31 + November 30 + December 31 + January 31 + February 28 + March 31 = 274 days. Both earlier visits fall wholly within their own previous years.

Residential status for the previous year 2018-19

• Resident or non-resident. He was in India for 274 days in 2018-19, more than 182, so he is resident (section 6(1)(a)). He is a foreign national and not of Indian origin, so Explanation 1(b) to section 6(1), which applies to citizens and persons of Indian origin on a visit, does not concern him; and the 182-day test is met in any case.
• Ordinarily resident or not. An individual is not ordinarily resident if he was a non-resident in nine of the ten previous years before that year, or was in India for 729 days or less in all during the seven previous years before it (section 6(6)(a)).
  • In the ten years 2008-09 to 2017-18 he was resident only in 2010-11 (185 days, section 6(1)(a)). In 2017-18 his 100 days pass the 60-day mark, but section 6(1)(c) also needs 365 days or more in the four preceding years, and he was not in India at all in the four years 2013-14 to 2016-17, so it is not met. He was non-resident in nine of the ten years.
  • In the seven years 2011-12 to 2017-18 he was in India for only 100 days.

Either condition alone is enough: Mr. Luongsang is resident but not ordinarily resident for the previous year 2018-19 (assessment year 2019-20).

A resident who is not ordinarily resident is taxed on income received or deemed received in India, income that accrues or arises or is deemed to accrue or arise in India, and income from outside India only where it comes from a business controlled in, or a profession set up in, India (section 5(1) and its proviso).

Treatment of each item

1. Debenture interest: interest paid by an Indian company on its debentures accrues in India and is received here; taxable (section 5(1)(a)).
2. Dividend: a dividend referred to in section 115-O, which a domestic company's dividend is, is exempt in the shareholder's hands (section 10(34)); the special charge of section 115BBDA applies only where such dividends exceed ₹10,00,000 in the year, and ₹58,000 does not.
3. Gift: a sum of money received without consideration from a person who is not a relative is taxed where the year's aggregate exceeds ₹50,000 (section 56(2)(x)(a)); a friend is not a relative. But it was received on 03.05.2019, so it is income of the previous year 2019-20, not of 2018-19.
4. Technical fees: fees for technical services payable by the Government are deemed to accrue in India (section 9(1)(vii)(a)); clause (a) sets no condition about where the services were rendered, so the result is the same either way. The proviso to section 9(1)(vii) would leave 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); the question gives no such agreement. Receipt in Hong Kong does not take them out of charge.
5. Capital gain on the Hong Kong house: it arose outside India and was received outside India. Bringing the money into India later, on 05.12.2018, is only a remittance, not a receipt of income in India. Not taxable for a person who is not ordinarily resident.

Taxable income

Of the ₹18,11,000 listed, ₹7,45,000 is outside his taxable income for 2018-19: the exempt dividend of ₹58,000, the gift of ₹1,87,000 that belongs to the next year and the foreign capital gain of ₹5,00,000.

If the facts are read otherwise

• If the gift is read as received in 2018-19, it exceeds ₹50,000 and is taxable in full (section 56(2)(x)(a)): taxable income ₹12,53,000.
• If other visits had made him resident in two or more of the ten years and in India for more than 729 days in the seven years, he would be ordinarily resident, and the Hong Kong capital gain would also be taxable: taxable income ₹15,66,000.