Question 1 OR (b)
Deemed residence of an Indian citizen living abroad, and its effect on taxable income
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 1 OR (b) · 12 marksMs Varsha, an Indian citizen, is settled in Singapore since year 1/04/2010 and has not visited India since then. Her income during the tax year 2026-27 is given below:
| S.N | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Income accrued in Singapore and received there. | 1500000 |
| 2 | Rent from a house property in Indore, the amount received in Kotak Mahindra Bank, Indore branch | 1400000 |
| 3 | Singapore income from a profession that is set up in India | 1200000 |
| 4 | Dividend (TATA Ltd., an Indian company) | 300000 |
Singapore does not tax the above incomes.
For the tax year 2026-27, determine the residential status of Ms Varsha and her taxable income.
What would your answer be if the income arising in Singapore from a profession set up In India were Rs. 2 lakhs instead Rs. 12 lakhs?
Would your answer change if Ms Varsha were a British citizen instead of Indian citizen? (12)
Paper note: Set under the Income-tax Act, 1961 for assessment year 2025-26 (previous year 2024-25); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 2 years and every date in the question moves forward by the same 2 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed. "Since year" and "instead Rs. 12 lakhs" are as printed.
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
- What…?Would…?Two asks in one question: answer both.
- 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 and the deemed-residence test 4 marks 7 min
- 2 (i) Status (deemed resident, not ordinarily resident) and taxable income 3 marks 5 min
- 3 (ii) Status and taxable income with 3 marks 5 min
- 4 (iii) Effect of British citizenship 2 marks 3 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
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.
- Ms Varsha has not been in India at all in tax year 2026-27 or for many years before it, so she fails both tests of section 6(2) on her own stay.
- The question says only that Singapore does not tax these incomes; whether she is liable to tax there by reason of domicile, residence or a similar criterion (section 6(7)(b)) decides part (i). The main answer reads her as not liable; the result if she is liable is given with it.
- The ₹12,00,000 from the profession is its computed income. The Indore rent is the annual value (no municipal taxes are given), so the house property income is the rent less 30% (sections 21 and 22(1)(a)).
Indian income for the fifteen-lakh test
Section 6(7) deems an individual resident if (a) she is a citizen of India, (b) she is not liable to tax in any other country by reason of domicile or residence, and (c) her total income other than income from foreign sources exceeds ₹15,00,000. Under section 6(14), income from foreign sources is income accruing outside India, except income from a business controlled in, or a profession set up in, India. So the Singapore income from the profession set up in India counts towards the ₹15,00,000; the other Singapore income does not.
| Income | Source | Rs. |
|---|---|---|
| Rent from the Indore house, 14,00,000, less 30% (4,20,000) | India | 9,80,000 |
| Dividend from TATA Ltd. (section 92(2)(a)) | India | 3,00,000 |
| Singapore income from a profession set up in India | Not a foreign source (section 6(14)) | 12,00,000 |
| Total income other than income from foreign sources | 24,80,000 | |
| Income accrued and received in Singapore | Foreign source | 15,00,000 (left out) |
(i) Residential status and taxable income
The income other than from foreign sources is ₹24,80,000, above ₹15,00,000, and she is an Indian citizen not liable to tax elsewhere, so she is deemed resident under section 6(7). A citizen deemed resident under section 6(7) is not ordinarily resident (section 6(13)(c)).
As a not ordinarily resident person she is taxed on income received or accruing in India; her foreign income is taxed only where it is earned from a profession set up in India or a business controlled from India (section 5(1)(c)):
| Particulars | Rs. |
|---|---|
| Income from house property (Indore) | 9,80,000 |
| Profits and gains of profession (set up in India; section 5(1)(c)) | 12,00,000 |
| Income from other sources: dividend | 3,00,000 |
| Income accrued and received in Singapore (foreign, not from a business or profession in India) | — |
| Total income | 24,80,000 |
If she is liable to tax in Singapore by reason of domicile or residence, section 6(7) does not apply: she is non-resident, taxed only on income received or accruing in India (section 5(2)), and her total income is ₹12,80,000 (Indore house ₹9,80,000 + dividend ₹3,00,000), as in (ii).
(ii) Professional income of ₹2,00,000
Her income other than from foreign sources would be ₹9,80,000 + ₹3,00,000 + ₹2,00,000 = ₹14,80,000, which does not exceed ₹15,00,000. Section 6(7) does not apply, and she is non-resident. A non-resident is taxed only on income received or accruing in India (section 5(2)); income from a profession set up in India but earned in Singapore accrues outside India and is not taxable to her.
| Particulars | Rs. |
|---|---|
| Income from house property (Indore) | 9,80,000 |
| Income from other sources: dividend | 3,00,000 |
| Singapore income (both items) | — |
| Total income | 12,80,000 |
Section 6(7) applies only to a citizen of India. As a British citizen with no stay in India she would be non-resident whatever her Indian income, and in both (i) and (ii) her total income would be the Indian rent and dividend only: ₹12,80,000. The answer to (i) therefore changes (₹24,80,000 becomes ₹12,80,000); the answer to (ii) does not.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Income other than from foreign sources and the deemed-residence test | 4 |
| 2 | (i) Status (deemed resident, not ordinarily resident) and taxable income | 3 |
| 3 | (ii) Status and taxable income with ₹2,00,000 | 3 |
| 4 | (iii) Effect of British citizenship | 2 |
| Total | 12 |
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