INCOME TAX

CHAPTER – 2
RESIDENTIAL STATUS
Illustration 1:
Determination of Residential status: Mr. X, an Indian citizen, is employed in XYZ Ltd. He was
sent on deputation in US on 15-07-2023.
Determine his residential status for assessment year 2024-25.
Solution 1:
In the given case,- Mr. X was sent on deputation to US during the previous year 2023-24 i.e. he
is leaving India for employment outside India. It is irrelevant that he is employed in India
before leaving India for employment outside India. For him basic condition number 2 is not
applicable. His total stay in India during the previous year
= 30 + 31 + 30 + 15 = 106 days.
Since Mr. X does not satisfy the first basic condition applicable to him, therefore he is a non-
resident for the Assessment Year 2024-25

Illustration 2:
Determination of residential status: In the year 2023-24, a sailor has remained on a ship for a
private company owning ocean-going ships as follows:
► Outside the territorial waters of India for 183 days;
► Inside the territorial waters of India for 183 days;
Is he considered to be a resident for the assessment year 2024-25?

Solution 2:
An individual is an Indian resident if he is in India for period of 182 days or more during the
previous year. India includes territorial waters of India. Since the sailor remained inside the
territorial waters of India for 183 days, he is regarded as resident in India for the assessment
year 2024-25.

Illustration 3:
Determination of residential status: Mr. Ram an Indian citizen left India on 22-9-2023 for the
first time to work as an officer of a company in Germany. Determine the residential status of Ram
for the assessment year 2024-25 and explain the conditions to be fulfilled for the same under
the Income-tax Act, 1961.
Solution3:
Mr. Ram is an Indian Citizen who left India during the previous year for employment outside
India. For him basic condition no. 2 is not applicable. Hence, for being resident in India, he
should be in India for 182 days or more during the previous year. In this case, Mr. Ram was in
India only for 175 days during the previous year (01-04-2023 to 22-9-2023 = 30 + 31 + 30 + 31 +
31 + 22 = 175 days). Since he does not satisfy the minimum criteria of residence of 182 days
during the previous year, hence, he is a non-resident for assessment year 2024-25.

Illustration 4:
Determination of residential status: Teji, a citizen of India, is an export manager of Arjun
Overseas Ltd., an Indian company since 1" May, 2019. He has been regularly visiting USA for
export promotion. He spent the following days in USA during the last 5 years:
Previous Year Ended Number of days spent in USA

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31-03-2020 (Leap year) 320 days
31-03-2021 150 days
31-03-2022 270 days
31-03-2023 310 days
31-03-2024 295 days
Determine his residential status for assessment year 2024-25 assuming that prior to 1st May,
2019 he had never travelled abroad.

Solution 4:
During the previous year 2023-24, Teji was in India for 71 days (366 days - 295 days in USA)
and during the immediately preceding previous year, he was in India for 411 days as shown
below-
Year 2019-20 (leap year) 2020-21 2021-22 2022-23 Total
No. of days spent in USA 320 150 270 310 1050
No. of days stayed in India 46 216 95 55 412
Thus, he satisfies one basic condition and thus, he is a resident in India for the previous year
2023-24. He does not satisfy any of the additional conditions, hence Mr. Teji is a resident & not
ordinarily resident.

Illustration 5:
Determination of residential status: A, a British national, comes to India for first time during
2019-20. During financial years 2019-20, 2020-21, 2021-22, 2022-23 and 2023-24, he was in India
for 65 days, 60 days, 80 days, 160 days and 70 days respectively. Determine his residential status
for assessment year 2024-25.

Solution 5:
During the previous year 2023-24, a was in India for 70 days and during 4 years immediately
preceding the previous year, he was in India for 365 days as shown below-

Year 2019-20 2020-21 2021-22 2022-23 Total

No. of days stayed in India 65 60 80 160 365
Thus, he satisfies the second basic condition and is, therefore, resident in India for the previous
year 2023-24. Further, he satisfies additional conditions as follows-
(a) He was non-resident in India in all of the last 10 preceding years;
(b) He resided in India only for 365 days during the 7 preceding previous year.
Accordingly, he is 'Not Ordinarily Resident in India' for the previous year 2023-24.

Illustration 6:
Determination of residential status: MRS. Karuna Kapoor, is a Hollywood actress. Her passport
reveals the following information about her stay in India.
2023-24 From April 3rd to July 11th
2022-23 From June 22nd to July 11th
2021-22 From February 10 th to March 26th
2020-21 From September 7th to March 26th
2019-20 From April 3 rd to September 30th
2018-19 From April 3 rd to July 11th
2017-18 From April 3rd to July 11th
2016-17 From April 3 rd to July 11th
2015-16 From April 3 rd to July 11th
Find out her residential status for the assessment year 2024-25.

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Solution 6:
An individual is said to be a Resident in India in any previous year if he satisfies one or both of
the basic conditions as given under section 6(1).
(i) Basic conditions:
► He must be in India for a period of 182 days or more during the previous year; or
► He must be in India for a period of 60 days or more during the previous year and
365 days or more during the four years preceding the previous year.
(ii) If he does not satisfy either of these conditions, he would be a non-resident.
During the previous year 2023-24, MRS. Karuna Kapoor was in India for 100 days (April: 28 + May:
31 + June: 30 + July: 11) and during the immediately preceding 4 previous years, she was in
India for 404 days as shown below-
Year 2019-20 2020-21 2021-22 2022-23 Total
(Leap Year)
No. of days stayed in India 137 202 45 20 404
Thus, she satisfies one basic condition and thus, she is a resident in India for the previous year
2023-24.
As per Section 6(6), a person will be "Not ordinarily Resident" in India in any previous year, if
such person:
(i) has been a non-resident in 9 out of 10 previous years preceding the relevant previous
year; or
(ii) has during the 7 previous years immediately preceding the relevant previous year been
in India for 729 days or less.
(iii) a citizen of India, or a person of Indian origin, having total income, other than the
income from foreign sources, exceeding ₹15 lakh during the previous year, and he
comes to India for the purpose of visit to India during the relevant previous year and
he has been in India for a period or periods amounting in all to 120 days or more but
less than 182 days; or
(iv) a citizen of India who is deemed to be resident in India under section 6(1A).

Year 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Total

No. of days stayed in India 100 100 100 137 202 45 20 704
She also satisfies the second additional condition, hence she is resident but not ordinarily
resident.

Illustration 7:
Determination of residential status: Ms. Bindu, a non-resident, residing in New York since 1991,
back to India on 19-02-2022 for permanent settlement in India. Explain her residential status
of Ms. Bindu for the Asessment Year 2024-25 in accordance with the various provision of Indian
Income-Tax Act.
Solution 7:
Ms. Bindu is a resident in assessment year 2024-25 since she has stayed in India for a period of 365
days (more than 182 days) during the Previous Year 2023-24, respectively.
As per section 6(6), a person will be "Not ordinarily Resident" in India in any previous year, if
such person:
(i) has been a non-resident in 9 out of 10 previous years preceding the relevant previous
year; or
(ii) has during the 7 previous years immediately preceding the relevant previous year been
in India for 729 days or less.
(iii) a citizen of India, or a person of Indian origin, having total income, other than the

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income from foreign sources, exceeding ₹15 lakh during the previous year, and he
comes to India for the purpose of visit to India during the relevant previous year and he
has been in India for a period or periods amounting in all to 120 days or more but less
than 182 days; or
(iv) a citizen of India who is deemed to be resident in India under section 6(1A).
If he does not satisfy any of these conditions, he would be a resident and ordinarily resident.
In the instant case, applying the above provision, the status of Ms. Bindu for the previous year
2023-24 (A.Y. 2024-25) would be Resident but not ordinarily resident since she was non-
resident in 9 out of 10 previous years immediately preceding the previous year and also had
stayed for less than 729 days in 7 previous years immediately preceding the previous year.

Illustration 8:
Determination of residential status of crew member of ship: Mr. Rohan is an Indian citizen and
a member of the crew of a London bound Indian ship engaged in carriage of passengers in
international traffic departing from Mumbai portion 10 th August, 2023. From the following
details for the P.Y. 2023-24, determine the residential status of Mr. Rohan for A.Y. 2024-25,
assuming that his stay in India in the last 4 previous years (preceding P.Y. 2023-24) is 380
days and last seven previous years (preceding P.Y. 2023-24) is 780 days.

Particulars Date
Date entered into the Continuous Discharge Certificate in respect of 10th August, 2023
joining the ship by Mr. Rohan
Date entered into the Continuous Discharge Certificate in respect of 13th February, 2024
signing off the ship by Mr. Rohan

Solution 8:
As per Section 6, where an Indian citizen leaves India as a member of crew of an Indian ship
or for the purpose of employment outside India, he will be resident only if he stayed for 182
days during the previous year. In this case, the voyage is undertaken by an Indian ship engaged in
the carriage of passengers in international traffic, originating from a port in India (i.e., the
Mumbai port) and having its destination at a port outside India (i.e., the London port) is an
eligible voyage and therefore the period beginning on the date entered into the Continuous
Discharge Certificate in respect of joining the ship by the said individual for the eligible voyage and
ending on the date entered into the Continuous Discharge Certificate in respect of signing off by
that individual from the ship in respect of such voyage shall not be counted for stay in India.
Therefore, the period beginning from 10th August, 2023 and ending on 13th February, 2024,
being the dates entered into the Continuous Discharge Certificate in respect of joining the ship
and signing off from the ship by Mr. Rohan, has to be excluded for computing the period of his
stay in India. Accordingly, 188 days [22 (August) + 30 (September) + 31 (October)+ 30
(November)+ 31 (December)+ 31 January) + 13 (February)] have to be excluded from the
period of his stay in India.
Consequently, Mr. Rohan's period of stay in India during the P.Y. 2023-24 would be 178 days [i.e.,
366 days -188 days]. Since his period of stay in India during the P.Y. 2023-24 is less than 182
days, he is a non-resident for A.Y. 2024-25
Note: Since the residential status of Mr. Rohan is "non-resident" for A.Y. 2024-25 consequent to
his number of days of stay in P.Y. 2023-24 being less than 182 days, his period of stay in the
earlier previous years become irrelevant.

Illustration 9:
Determination of residential status: MRS. X, is an Indian citizen. Currently she is in employment

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with an overseas company located in Dubai. Her passport reveals the following information about her
stay in India.
2023-24 From April 3rd to May 11th
2022-23 From June 22 nd to July 11th
2021-22 From February 10th to March 26th
2020-21 From September 7 th to March 26th
2019-20 From May 17 th to September 30th
2018-19 From April 3rd to July 11th
2017-18 From April 3 rd to July 11th
2016-17 From April 3rd to July 11th
2015-16 From April 3rd to July 11th

Find out her residential status for the assessment year 2024-25 if MRS. X is not taxable in Dubai
or any other country or territory by reason of her domicile or residence. Income of MRS. X in
India for previous year 2023-24 (other than income· from foreign sources) is ₹ 20,00,000.
Solution 9:
An individual is said to be a Resident in India in any previous year if he satisfies one or both of
the basic conditions as given under section 6(1).
(i) Basic conditions:
► He must be in India for a period of 182 days or more during the previous year; or
► He must be in India for a period of 60 days or more during the previous year and
365 days or more during the four years preceding the previous year.
(ii) If he does not satisfy either of these conditions, he would be a non-resident unless his
case falls u/ s 6(1A).
According to section 6(1A) of the Act, an individual shall be deemed to be resident in India if he
fulfills the following conditions:
(1) He must be citizen of India.
(2) His total income, other than the income from foreign sources, must exceed ₹15 lakh
during the previous year; and
(3) He is not liable to tax in any other country or territory by reason of his domicile or
residence or any other criteria of similar nature.
If these conditions are satisfied he is deemed to be Not Ordinarily resident in India as per Section
6(6)(d).
During the previous year 2023-24, MRS. X was in India for 39 days (April: 28 + May: 11) Thus, she
does not satisfy any of the basic condition as per Section 6(1) of the Act. However, she satisfies
the conditions of Section 6(1A) read with Section 6(6)(d), hence she is resident but not
ordinarily resident in India.
Illustration 10:
Determination of Residential status: MRS. Shruti is an Indian citizen, is currently in
employment with an overseas company located in UAE. During the previous year 2023-24, she
comes to India for 157 days. She is in India for 200 days, 100 days, 76 days and 45 days in the
financial years 2019-20, 2020-21, 2021-22 and 2022-23, respectively. Her annual income for
the previous year 2023-24 is as follows:
Particulars Amount (₹)
Income from salary earned and received in UAE 2,00,000
Income earned and received from a house property situated in UAE 5,00,000
Income deemed to be accrued and arise in India 5,00,000

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Income from retail business (accrued and received outside India, controlled 10,00,000
from India)
Income accrued and arise in India 3,00,000
Life insurance premium paid by cheque in India 1,50,000
Determine the residential status of MRS. Shruti for the assessment year 2024-25. (Support your
answer with computation).
Solution10:
Mrs. Shruti is an Indian citizen in employment in UAE. She comes on a visit to India during the
P.Y. 2023-24 for 157 days.
Her stay in India in the four immediately preceding previous years is as follows:
P.Y. No. of days
P.Y. 2019-20 200
P.Y. 2020-21 100
P.Y. 2021-22 76
P.Y. 2022-23 45
Total 421

Computation of Total Income of MRS. Shruti (excluding income from foreign sources)
(amount in ₹)
Income from salary earned and received in UAE (income from a foreign source, -
hence, to be excluded)
Income earned and received from a house property situated in UAE (income from a -
foreign source, hence, to be excluded)
Income deemed to accrue or arise in India 5,00,000
Income from retail business (to be included since the business is controlled from 10,00,000
India, even though such income accrues and is received outside India)
Income accrued and arising in India 3,00,000
18,00,000
Less: Deduction u/s 80C (LIC premium paid by cheque in India) – Assuming other 1,50,000
conditions are fulfilled
Total income (excluding income from foreign sources) 16,50,000
Mrs. Shruti, an Indian citizen visiting India in the P.Y. 2023-24, would be a resident in India for A.Y.
2024-25, if she satisfies either of the following conditions –
(i) She is in India for 182 days or more during the P.Y. 2023-24; or
(ii) She is in India for a period of 120 days or more during the P.Y. 2023-24 and her stay in India
in the four immediately preceding previous years is 365 days or more. [This condition will
apply to her since she comes on a visit to India during the previous year 2023-24 and her
total income (excluding income from foreign sources) is ₹16.50 lakhs. Which exceeds the
threshold of ₹15 lakhs]
This first condition is not satisfied since she is in India only for 157 days during the P.Y. 2023-24.
The second condition is satisfied, since she has stayed in India for 157 days during the P.Y. 2023-
24 and 421 days in the four immediately preceding previous years. Since she has become resident
in India for A.Y. 2024-25 by satisfying this condition, by default, she would be treated as resident
but not ordinarily resident.
Conclusion: Mrs. Shruti’s residential status for A.Y. 2024-25 is resident but not ordinarily
resident.

Note: The provisions of section 6(1A) deeming an Indian citizen to be a resident but not

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ordinarily resident, irrespective of the period of her stay in India in the relevant previous year, if
she is not liable to tax in any other country would not apply to Shruti, since she is a resident as per
the provisions of section 6(1).

Illustration 11:
Determination of Residential status: Mr. Jai Chand (an Indian citizen) left India for
employment in country X on 5th June, 2015. He regularly visited India and stayed for 60 days
in every previous year since then. However, in the financial year 2023-24, he did not come to
India at all. He owns a commercial building in Delhi which is let out. He has also set a retail store
in India which is controlled by his brother from India. He provides the following information to
you regarding his income for the financial year 2023-24:
Income from commercial building in Delhi - ₹ 12,00,000 (computed as per the provisions of the
Act).
Income from the retail store - t4,50,000 (computed as per the provisions of the Act)
Country X does not tax any individual on their income as there is no personal income-tax regime
there.
Determine the residential status of Mr. Jai Chand for the Assessment year 2024-25.
Will your answer he is a citizen of Country X?

Solution 11:
Determination of residential status of Mr. Jai Chand for A.Y. 2024-25:
Since Mr. Jai Chand, an Indian citizen employed in Country X, did not come to India at all during
the P.Y. 2023-24, he would not be a resident for A.Y. 2024-25 as per section 6(1).
However, since he is an Indian citizen
► having total income (excluding income from foreign sources) of ₹ 16,50,000 [₹ 12,00,000,
being income from commercial building in India + ₹ 4,50,000, being Income from retail
store in India], which exceeds the threshold of ₹ 15 lakhs during the previous year; and
► not liable to tax in Country X,
he would be deemed resident in India for the P.Y. 2023-24.
A deemed resident is always a resident but not ordinarily resident in India (RNOR).
Yes, in case Mr. Jai Chand is a citizen of Country X, he would be non-resident in India for the P.Y.
2023-24, since the provisions of deemed resident are applicable citizen.

Illustration 12:
Determination of Residential status: Mr. X, Karta of HUF, claims that the HUF is non-resident
as the business of HUF is transacted from UK and all the policy decisions are taken there.

Solution 12:
True since the business of the HUF is transacted from UK and policy decisions are taken there,
therefore, the 'Control and Management' of its affairs is wholly situated outside India.

Illustration 13:
Determination of Residential status: XYZ Inc is incorporated in Cayman Island. Its key
commercial decisions are taken in Board meetings held in Mumbai during financial year 2023-
24. Determine the residential status for assessment year 2024-25.

Solution 13:
As per section 6(3), A company is said to be resident in India in any previous year, if its place of
effective management, in that year, is in India. In this case though the company is incorporated

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outside India, it will be regarded as resident in India as its place of effective management
during the relevant financial year is in India since its key management and commercial
decisions are taken in its board meetings held in Mumbai.

Illustration 14:
Determination of Residential status: Lotus Inc., a US company headquartered at New York,
not having a permanent establishment in India, has set up a liaison office in Delhi in April, 2023
in compliance with RBI guidelines to look after its day to day business operations in India,
spread awareness about the company's products and explore further opportunities. The
liaison office takes decisions relating to day to day routine operations and performs support
functions that are preparatory and auxiliary in nature. The significant management and
commercial d decisions are, however, in substance made by the Board of Directors at New
York. Determine the residential status of Lotus Inc. for A.Y. 2024-25.

Solution 14:
In the case of Lotus Inc., its place of effective management for P.Y. 2023-24 is not in India, since the
significant management and commercial decisions are, in substance, made by the Board of
Directors outside India in New York.
Lotus Inc. has only a liaison office in India through which it looks after its routine day to day
business operations in India. The place where decisions relating to day to day routine
operations are taken and support functions that are preparatory or auxiliary in nature are
performed are not relevant in determining the place of effective management.
Hence, Lotus Inc., being a foreign company is a non-resident for A.Y. 2024-25, since its place of
effective management is outside India in the P.Y. 2023-24.

Illustration 15 Taxability of interest income: Mr. A, a citizen of India, left for USA for the
purposed of employment on 01-05-2023. He has not visited India thereafter. Mr. A borrows
money from his friend Mr. B, who left India one week before Mr. A’s departure, to the extent of
₹10 lakhs and buys shares in X ltd., an Indian company. Discuss the taxability of the interest
charged @ 10% in B’s hands where the same has been received in New York.

Solution 15:
In this case –
(a) Mr. A and Mr. B are non-resident in India during the previous year 2023-24;
(b) The purpose of borrowal by Mr. A is not carrying of any business of profession in India’
but for the purpose of investment in India i.e. earning any source of income in India.
Hence, the provisions of section 9(1)(v) relating to deeming fiction of accrual s not applicable
in tis case. Accordingly the interest does not accrue or arise in India and is, therefore, nor
taxable in India.

Illustration 16:
Taxability of fees for technical services: Miss Vivitha paid a sum of 5000 USD to Mr. Kulasekhara,
a management consultant practising in Colombo, specializing in project financing. The payment was
made in Colombo. Mr. Kulasekhara is a non-resident The consultancy related to a project in India
with possible Ceylonese collaboration; Is this payment chargeable to tax in India in the hands of
Mr. Kulasekhara, since the services were used in India?

Solution 16:

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A non-resident is chargeable to tax in respect of income received outside India only if such
income accrues or arises or is deemed to accrue or arise to him in India. The income deemed to
accrue or arise in India under section 9 comprises, inter alia, income by way of fees for technical
services, which includes any consideration for rendering of any managerial, technical or
consultancy services. Therefore, payment to a management consultant relating to project
financing is covered within the scope of "fees for technical services".
According to explanation to section 9, income by way of, fees for technical services, from
services utilized in India would be deemed to accrue or arise in India in case of a non-resident
and be included in his total income, whether or not such services were rendered in India.
In the instant case, since the services were utilized in India, the payment received by Mr.
Kulasekhara, a non-resident, in Colombo is chargeable to tax in his hands in India, as it is
deemed to accrue or arise in India.

Illustration 17:
Residential Status and its effect on tax incidence: Mr. Soham, an Indian Citizen left India on 20-
04-2019 for the first time to setup a software firm n Singapore. On 10-04-2023, he entered into
an agreement with LK Limited, an Indian Company for the transfer of technical documents and
designs to setup an automobile factory in Faridabad. He reached India along with his team to
render the requisite serviced on 15-05-2023 and was able to complete his assignment on 20-
08-2023. He left for Singapore on 21-08-2023. He charged ₹50 lakhs for his serviced from LK
Limited. Determine the residential status of Mr. Soham for the Assessment Year 2024-25 and
explain as to the taxablility of the fees charged from LK limited as per the Income tax Act, 1961.

Solution 17:
As per Section 6 an Indian citizen or a person of Indian origin, who being outside India, comes
on a visit to India shall be resident in India if he is in India for a period of 182 days or more
during the previous year or he comes on a visit to India in the previous year for a period of
more than 120 days and was in India for a period of 365 days or more during 4 years preceding
the previous year and having total income, other than the income from foreign sources,
exceeding 15lakh rupees during the previous year.
In this case Mr. Soham came to India on 15-05-2023 and left for Singapore on 21-08-2023,
hence he was in India for a period of 99 days during previous year 2023-24. Hence, he is non-
resident in India.
According to Section 9(1)(vi), Income by way of royalty shall be deemed to accrue or arise in India
in hands of recipient (Mr. Soham) if it is payable by a person who is resident (LK Limited), except
where the royalty are payable in respect of services utilised in a business or profession carried on
by such person outside India or for the purposes of making or earning any income from any source
outside India. Hence, the income of 50,00,000 shall be deemed to accrue in India. The income of a
non-resident shall be deemed to accrue or arise in India under section 9(1)(vi) and shall be
included in the total income of the non-resident, whether or not-
(i) the non-resident has a residence or place of business or business connection in India; or
(ii) the non-resident has rendered services in India.
Hence, sum of ₹ 50,00,000 will be taxable in hands of Mr. Soham.

Illustration 18:
Scope of total Income: Following incomes are derived by Mr. Krishna Kumar during the
year ended 31-03-2024:
Particulars Amount (₹)
Pension received from the US Government 3,20,000
Agricultural income from lands in Malaysia 2,70,000

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Rent received from let out property in Colombo, Sri Lanka 4,20,000
Discuss the taxability of the above items where the assessee is (i) Non-resident.

Solution 18:
Computation of Gross total income (amount in ₹):
Particulars Resident Non-Resident
Pension received from the US Government (Net of standard 2,70,000 -
deduction of ₹50,000)
Income from agriculture land situated in Malaysia 2,70,000 -
Rent received from let out property in Colombo, Sri Lanka 2,94,000 -
(WN)
Gross Total Income 8,34,000 Nil
It has been assumed that the above incomes has been received outside India. If the same is received
in India, then the said amounts will also be taxable even if Krishna Kumar is non-resident.
Working Note: It has been assumed that the rental income is the gross annual value of the
property. Therefore, deduction @30% under section 24, has been provided and the net income so
computed is taken into account for determining the total income of a resident and ordinarily
resident.
Rent received (assumed as gross annual value) 4,20,000
Less: Deduction under section 24 (30% of ₹4,20,000) 1,26,000
2,94,000

Illustration 19:
Scope of total Income: Explain with reasons whether the following transactions attract income-
tax in India in the hands of recipients?
(i) Salary (Computed) paid to Mr. David, a citizen of India ₹ 15,00,000 by the Central Government
for the services rendered in Canada.
(ii) Legal charges off 7,50,000 paid to Mr. Johnson, a lawyer of London, who visited India to
represent a case at the Supreme Court.
(iii) Royalty paid to Rajeev, a non-resident by Mr. Kukesh, a resident for a business carried on in Sri
Lanka.
(iv) Interest received off 1,00,000, on money borrowed from France, by Ms. Dyana, a non-
resident for the business at Bangalore.

Solution 19:
Taxable / Amount liable Reason
Not Taxable to tax (₹)
(i) Taxable 15,00,000 As per Section 9(1)(iii), salaries payable by the
Government to a citizen of India for service rendered
outside India shall be deemed to accrue or arise in India.
Therefore, salary paid by Central Government to Mr.
David for services rendered outside India would be
deemed to accrue or arise in India since he is a citizen of
India.
(ii) Taxable 7,50,000 Legal charges paid to Mr. Johnson, a lawyer of London,
who visited India to represent a case at the Supreme
Court, since it accrues or arises in India.
(iii) Not Taxable - Royalty paid by a resident to a non-resident in respect
of a business carried outside India would not be taxable

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in the hands of the non-resident provided the same is
not received in India. This has been provided as a
exception to deemed accrual mentioned in Section
9(1)(vi)(b).
(iv) Taxable 1,00,000 As per section 9(1)(v)(c), interest payable by a non-
resident on moneys borrowed and used for the
purposed of business carried on by such person in India
shall be deemed to accrue or arise in India in the hands
of the receipt.

Illustration 20:
Computation of total income: Determine the taxability of income of us based company Heli Ltd. In
India on entering following transactions during the financial year 2023-24:
(i) ₹5 lacs received from an Indian domestic company for providing technical know how in
India.
(ii) ₹ 6 lacs from an Indian firm for conducting the feasibility study for the new project in
Finland.
(iii) ₹ 4 lacs from a non-resident for use of patent for a business in India.
(iv) ₹ 8 lacs from a non-resident Indian for use of know how for a business in Singapore.
(v) ₹ 10 lacs for supply of manuals and designs for the business to be established in Singapore.
Explain the rate of tax applicable on taxable income for US based company, Heli Ltd., in India.

Solution 20:
A non-resident is chargeable to tax in India in respect of following incomes:
(i) Income received or deemed to be received in India.
(ii) Income accruing or arising or deemed to accrue or arise in India.
In view of the above provisions, taxability of income is determined in following manner:

S.No. Particulars ₹
(i) Amount received form an Indian domestic company for providing 5,00,000
technical know how in India is from business Connection in India,
therefore taxable in India.
(ii) Conducting the feasibility study for the new project in Finland for the Nil
Indian firm is not taxable in India as done for the business outside India.
The income from business set up in India is taxable in India. Therefore,
(iii) money received from a non-resident for use of patent for a business in 4,00,000
India is taxable in India.
Money received from a non-resident India for use of know-how for a
(iv) business in Singapore is for the business outside India, therefore non- Nil
taxable in India.
Payment made for supply of manuals and designs for the business to be
(v) established in Singapore is not taxable in India. Nil
Total Income taxable in India 9,00,000

Tax rate applicable to Heli Ltd.: In respect of foreign companies, certain specified income such as
Royalty and fees for technical service is taxable @ 10% + Surcharge +Health and education cess.
The rates are also depends on Double Taxation Avoidance Agreement, if any, entered into between
India and the respective country of the foreign company, whichever is more beneficial to the
assessee. The basic normal rate applicable for the US based company who is a foreign company is
40%. In case the taxable income is more than ₹1 crore but upto ₹ 10 crores in the previous year, the

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surcharge @ 2% is applicable. If total income exceeds ₹10crores surcharge of 5% is applicable. The
Health and education cess is payable @ 4%. The effective rate of tax in case of foreign companies in
India is 42.432%/ 43.68% respectively.

Illustration 21:
Computation of total income: From the following particulars of Income furnished by Mr. Anirudh
pertaining to the year ended 31-03-2024, compute the total income for the assessment year 2024-
25, if he is:
(i) Resident and ordinary resident;
(ii) Resident but not ordinarily resident;
(iii) Non-resident:

Particulars Amount
(a) Profit on sale of shares in Indian Company received in Germany 15,000
(b) Dividend from a Japanese Company received in Japan 10,000
(c) Rent from property in London deposited in a bank in London, later on 75,000
remitted to India through approved banking channels
(d) Dividend from RP Ltd., an Indian Company 6,000
(e) Agricultural income form lands in Gujarat 25,000

Solution 21:
The total income, in each case, is computed herein below (amount in ₹)-
Particulars Resident & Resident but Non-
ordinarily not ordinarily resident
resident resident
Profit on sale of shares in Indian company received 15,000 15,000 15,000
in Germany
Dividend from Japanese company, received in Japan 10,000 - -
Rent from property in London deposited in a bank
in London [WN-1] 52,500 - -
Dividend from RP Ltd. An Indian company [WN-2] 6,000 6,000 6,000
Agricultural income from lands in Gujarat [WN-3] - - -
Total Income 83,500 21,000 21,000

Working Notes:
(1) It has been assumed that the rental income is the gross annual value of the property.
Therefore, deduction @ 30% under section 24, has been provided and the net income so
computed is taken into account for determining the total income of a resident and
ordinarily resident.
Particulars ₹
Rent received (assumed as gross annual value) 75,000
Less: Deduction under section 24(30% of 75,000) 22,500
Income from House Property 52,500
(2) Dividend from Indian company is taxable in hands of shareholder.
(3) Agricultural income is exempt under section 10(1).

Illustration 22:
Computation of total income: MRS. Geetha and MRS. Leena are sisters and they earned the

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following income during the Financial Year 2023-24. MRS. Geetha is settled in Malaysia since 1988
and visits India for a month every year. MRS. Leena is settled in Indore since her marriage in 1996.
Compute the total income of MRS. Geetha and MRS. Leena for the assessment year 2024-25:
Particulars MRS. Geetha MRS. Leena
1 Income from Profession in Malaysia, (set up in India) 15,000 -
received there
2 Profit from business in Delhi, but managed directly from 40,000 -
Malaysia
3 Rent (computed) from property in Malaysia deposited in 1,20,000 -
a Bank at Malaysia, later on remitted to India through
approved banking channels.
4 Dividend from PQR Ltd., an Indian Company 5,000 9,000
5 Dividend from a Malaysian company received in Malaysia 15,000 8,000
6 Cash gift received from a friend on Mrs. Leena’s 50th - 51,000
birthday
7 Agricultural income from land in Maharashtra 7,500 4,000
8 Past foreign untaxed income brought to India 5,000 -
9 Fees for technical services rendered in India received in 25,000 -
Malaysia
10 Income from a business in Pune (Mrs. Geetha receives 12,000 15,000
50% of the income in India)
11 Interest on debentures in an Indian company (Mrs. 18,500 14,000
Geetha received the same in Malaysia)
12 Short-term capital gain on sale of shares of an Indian 15,000 25,500
company
13 Interest on savings account with SBI 12,000 8,000
14 Life Insurance premium paid to LIC - 30,000

Solution 22:
Computation of total income of MRS. Geetha and MRS. Leena (amount in ₹)
Particulars MRS. Geetha MRS. Leena
1 Income from Profession in Malaysia, (set up in India) 15,000 -
received there
2 Profit from business in Delhi, but managed directly from 40,000 -
Malaysia
3 Rent (computed) from property in Malaysia deposited in 1,20,000 -
a Bank at Malaysia, later on remitted to India through
approved banking channels.
4 Dividend from PQR Ltd., an Indian Company 5,000 9,000
5 Dividend from a Malaysian company received in Malaysia 15,000 8,000
6 Cash gift received from a friend on Mrs. Leena’s 50th - 51,000
birthday
7 Agricultural income from land in Maharashtra 7,500 4,000
8 Past foreign untaxed income brought to India 5,000 -
9 Fees for technical services rendered in India received in 25,000 -
Malaysia
10 Income from a business in Pune (Mrs. Geetha receives 12,000 15,000
50% of the income in India)
11 Interest on debentures in an Indian company (Mrs. 18,500 14,000

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Geetha received the same in Malaysia)
12 Short-term capital gain on sale of shares of an Indian 15,000 25,500
company
13 Interest on savings account with SBI 12,000 8,000
Gross Total Income 1,27,500 1,30,500
Less: Deduction u/s 80C in respect of Life Insurance - 30,000
premium paid
Less: Deduction u/s 80TTA in respect of Interest on -10,000 -8,000
deposits in saving A/c
Total Income 1,17,500 92,500

Working Notes:
(1) MRS. Geetha is a non-resident since she has been living in Malaysia since 1988. Mrs.
Leena, who is settled in Indore, is a resident.
(2) In case of a resident, his global income is taxable as per section 5(1). However, as per
section 5(2), in case of a non-resident, only the following income are chargeable to tax:
(a) Income received or deemed to be received in India; and
(b) Income accruing or arising or deemed to accrue or arise in India.
Therefore, fees for technical services rendered in India would be taxable in the hands of
Mrs. Geetha, even though she is a non-resident. The income referred to in SL No. 10, 11, 12
and 13 are taxable in the hands of both Mrs. Geetha and Mrs. Leena since they accrue or
arise in India.
(3) Income from Profession in Malaysia, (set up in India) received there by Mrs. Geetha is
not taxable since it accrues and received outside India.
(4) Agricultural income from a land situated in India is exempt under section 10(1) in the
case of both non-residents and residents.
(5) Interest on savings bank deposit is eligible for deduction u/s 80ITA subject to maximum
limit of ₹10,000.

Illustration 23:
Computation of GTI: Computation of GTI: Mr. Rajnesh, a citizen of India, serving in the Ministry
of Finance in India and transferred to High Commission of Australia on 15th March 2023. He did
not come to India during the financial year 2023-24. His income during the financial year 2023-
24 is given here under:
Particulars ₹
Salary from Government of India 7,20,000
Foreign Allowances from Government of India 6,00,000
Rent from a house situated at London, received in London 3,60,000
Interest accrued on National Saving Certificate during the year 2023-24 45,000
Compute the Gross total income of Mr. Rajnesh for the Assessment Year 2024-25.

Solution 23:
Mr. Rajnesh did not visited India during Financial Year 2023-24, hence he is non-resident in
India. Since Mr. Rajnesh is an Indian citizen being government employee his salary income is
deemed to accrue or arise in India and is taxable in India. Thus even if he is non-resident in
India, the salary income will be taxable in India.
Computation of Gross Total Income (amounts in ₹):
Particulars ₹ ₹

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Income under the head Salaries
Salary 7,20,000
Foreign Allowances from Government of India (Such allowance is Nil
exempt u/s 10(7))
Gross Salary 7,20,000
Less: Standard deduction u/s16(ia) 50,000 6,70,000
Income from House Property
Rent from house property situated in London, received in India (It will Nil
not be taxable, since he is non-resident)
Income from other sources
Interest accrued on National Saving Certificate during the year 2023-24 45,000
Gross Total Income 7,15,000
Illustration 24:
Determination of residential status and scope of total income: DAISY Ltd., a foreign company,
incorporated in USA and engaged int the manufacturing and distribution of diamonds, set up a
branch office in India in June 2023. The branch office was required to purchase uncut and un-
assorted diamonds from dealers of Mumbai and export them to USA. During the Previous Year
2023-24, profit from such export amounted to ₹75 lakhs.
Out of 20 shareholders of DAISY Ltd., 12 shareholders are non-resident in India. All the major
decisions were taken through Board Meetings held at USA.
(i) Determine the residential status of DAISY Ltd. for the Assessment Year 2024-25
(ii) Discuss the tax treatment of profit from export business.

Solution 24:
(i) Residential Status of Daisy Ltd.: According to Section 6(3) of the Income tax Act, 1961, a
foreign company is said to be resident in India in any previous year, if its place of
effective management, in that year, is in India.
"Place of effective management" means a place where key management and
commercial decisions that are necessary for the conduct of the business of an
entity as a whole, are in substance made.
Since in case of Daisy Ltd., all the major decisions were taken through Board Meetings
held at USA, hence it will be non-resident in India.
(ii) According to Explanation l(b) to Section 9(1)(i), in the case of a non-resident, no
income shall be deemed to accrue or arise in India to him through or from operations
which are confined to the purchase of goods in India for the purpose of export. Thus,
export profits of 75 lakhs shall not be taxable in India in hands of DAISY Ltd.

Illustration 25:
Computation of GTI: Compute the Gross Total Income in the hands of an individual, if he is –
(a) a resident and ordinary resident; and
(b) a non-resident for the A.Y. 2024-25
S.No. Particulars Amount (₹)
1 Interest from German Derivative Bonds (1/3 received in India)
rd 21,000
2 Income from agriculture land situated in Malaysia, remitted to 51,000
India
3 Income earned from business in Dubai, controlled from India (₹ 75,000
20,000 received in India)

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4 Profit from business in Mumbai, controlled from Australia 1,75,000
5 Interest received from Mr. Ashok (NRI) on loan provided to him 35,000
for business in India
6 Dividend from Brown Ltd., an Indian Co. 30,000
7 Profit from business in Canada controlled form Mumbai (60% of 60,000
profits deposited in a bank in Canada and 40% remitted to India)
8 Amount received from an NRI for the use of know-how for his 8,00,000
business in Singapore
9 Dividend received from foreign company in India 25,000
10 Past years untaxed foreign income brought to India 50,000

Solution 25:
Computation of Gross total income (amount in ₹):
S.No. Particulars Resident Non-
Resident
1 Interest from German Derivative Bonds (1/3rd received 21,000 7,000
in India)
2 Income from agriculture land situated in Malaysia, 51,000 -
remitted to India
3 Income earned from business in Dubai, controlled from 75,000 20,000
India (₹ 20,000 received in India)
4 Profit from business in Mumbai, controlled from 1,75,000 1,75,000
Australia
5 Interest received from Mr. Ashok (NRI) on loan provided 35,000 35,000
to him for business in India
6 Dividend from Brown Ltd., an Indian Co. 30,000 30,000
7 Profit from business in Canada controlled form Mumbai 60,000 -
(60% of profits deposited in a bank in Canada and 40%
remitted to India)
8 Amount received from an NRI for the use of know-how 8,00,000 -
for his business in Singapore
9 Dividend received from foreign company in India 25,000 25,000
10 Past years untaxed foreign income brought to India 50,000 -
Gross Total Income 12,72,000 2,92,000

Working Notes:
(1) In case of a resident, his global income is taxable as per Section 5(1). However, as per
Section 5(2), in case of a non- resident, only the following income are chargeable to tax:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India
The income referred to in SI. No. (iv), and (v) are taxable in India whether assessee is
resident or non-resident since they accrue or arise in India.
Interest on German derivatives Bonds would be fully taxable in case of resident,
whereas only 1/3"' which is received in India is taxable in the hands of Non-resident.
(2) Dividend received from foreign company in India will be taxable in both cases since it is
received in India.
(3) In case of non-resident, Receipt in India is chargeable to tax and not remittance. Hence,

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Profit from business in Canada controlled from Mumbai and Agricultural Income from
land situated in Malaysia will not be taxable in case of non-resident. No exemption will be
available in respect of agricultural income from Malaysia, since agricultural income from
land situated in India is exempt from tax under Section 10(1).
(4) In case use of know how is outside India, Income from it does not accrue or arise in
India. Hence, it will not be taxable in case of non-resident.

Illustration 26:
Computation of GTI: The following are the incomes of Shri Subhash Chandra, a citizen of India for
the previous year 2023-24:
(i) Income from business in India ₹ 2,00,000. The business is controlled from London and ₹
60,000 were remitted to London.
(ii) Profits from business earned in Japan ₹ 70,000 of which ₹ 20,000 were received in India.
This business is controlled from India.
(iii) Untaxed income of ₹ 1,30,000 for the year 2020-21 of a business in England which was
brought in India on 3rd March, 2024.
(iv) Royalty of ₹ 4,00,000 received from Shri Ramesh, a resident for technical service provided
to run a business outside India.
(v) Agricultural income of ₹90,000 in Bhutan.
(vi) Income of ₹ 73,000 from house property in Dubai, which was deposited in bank at Dubai.
Compute Gross total income of Shri Subhash Chandra for the A.Y. 2024-25, if he is-
(a) A resident and ordinary resident, and
(b) A resident and not ordinarily resident

Solution 26:
Computation of Gross total income of Shri Subhash Chandra (amount in ₹):
Particulars Resident NOR
(i) Income from business in India 2,00,000 2,00,000
(ii) Profits from business earned in Japan controlled from India 70,000 70,000
(iii) Untaxed income from business in England - -
(iv) Royalty received from resident for technical services provided to 4,00,000 -
run a business outside India (Income is deemed to accrue or
arise outside India)
(v) Agricultural income in Bhutan 90,000 -
(vi) Income from house property in Dubai which was deposited in 51,100 -
Dubai Bank [₹73,000 less standard deduction 30% of ₹73,000]
Gross Total Income 8,11,100 2,70,000

Illustration 27:
Scope of total income: Mr. Thomas, a non-resident and citizen of Japan entered into following
transactions during the previous year ended 31-03-2024. Examine the tax implications in the
hands of Mr. Thomas for the Assessment Year 2024-25 as per Income-tax Act, 1961. (Give brief
reasoning)
(1) Interest received from Mr. Marshal, a non-resident outside India (The borrowed fund is
used by Mr. Marshal for investing in Indian company's debt fund for earning interest).
(2) Received 10 lakhs in Japan from a business enterprise in India for granting license for
computer software (not hardware specific).
(3) He is also engaged in the business of running news agency and earned income of news
and views in India for transmission outside India.

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INCOME TAX
(4) He entered into an agreement with SKK & Co., a partnership firm for transfer of
technical documents and design and for providing services relating thereto, to set up a
Denim Jeans manufacturing plant, in Surat (India). He charg ed 10 lakhs for these
services from SKK & Co.

Solution 27:
(1) Not taxable, since interest payable by a non-resident to another non-resident would be
deemed to accrue or arise in India only if the borrowed fund is used for the purposes of
business or profession carried on by him in India. In this case, it is used for investing in
Indian company's debt fund for earning interest and not for the purposes of business or
profession. Hence, it is not taxable in India.
(2) Royalty includes, inter alia, consideration for grant of license for computer software.
Hence, the amount of t 10 lakhs payable by a resident (business enterprise in India) for
grant of license for computer software would be royalty which is deemed to accrue or
arise in India in the hands of Mr. Thomas, a non-resident, since it is for the purpose of
business in India. Hence, the royalty is taxable in India.
(3) No income shall be deemed to accrue or arise to Mr. Thomas through or from activities
which are confined to the collection of news and views in India for transmission outside
India. Hence, t 10 lakhs is not taxable in India in the hands of Mr. Thomas.
(4) ₹ 10 lakhs is deemed to accrue or arise in India to Mr. Thomas, a non-resident, since it
represents royalty/ fees for technical services paid for services utilized in India, in this
case, for setting up a Denim Jeans manufacturing plant in Surat. Hence, the same would
be taxable in India in the hands of Mr. Thomas.

Illustration 28:
Scope of total income: Examine title tax implications of the following transactions for the A.Y.
2024-25: (Give brief reason)
(i) received salary of ₹7,50,000 and allowances oft 2,40,000 during the previous year 2023-
24 for rendering his services in Japan. He is an Indian citizen having status of non-resident
in India for the previous year 2023-24.
(ii) Ms. Juhl, a non-resident in India is engaged in operations which are confined to purchase
of goods in India the purpose of export. She has earned t 2,50,000 during the previous
year 2023-24.
(iii) Mr. Naveen, a non-resident in India, has earned t 3,00,000 as royalty for a patent right made
available to Mr. Rakesh who is also a non-resident. Mr. Rakesh has utilized patent rights for
development of a product in India and 50% royalty is received in India and 50% outside
India.
(iv) Mr. James, a NRI, borrowed t 10,00,000 on 01--04--2023 from Mr. Akash who is also a non-
resident and invested such money in the shares of an Indian Company. Mr. Akash has
received interest@ 12% per annum.

Solution 28:
(i) As per section 9(1)(iii), salaries (including, inter alia, allowances) payable by the
Government to a citizen of India for services rendered outside India shall be deemed to
accrue or arise in India.
Thus, salary received from Government by Mr. Rahul, being a non-resident of t 7,50,000
for rendering services in Japan would be taxable in his hands, after allowing standard
deduction of ₹ 50,000.
However, any allowance or perquisites paid or allowed outside India by the
Government to a citizen of India for rendering services outside India will be fully

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exempt u/s 10(7). Hence, ₹2,40,000, being the allowance would be exempt.
(ii) In the case of a non-resident, no income shall be deemed to accrue or arise in India to
him through or from operations which are confined to the purchase of goods in India
for the purpose of export.
Thus, income of t 2,50,000 arising in the hands of Ms. Juhl would not be taxable in her
hands in India, since her operations are confined to purchase of goods in India for the
purpose of export.
(iii) Royalty payable by a non-resident would be deemed to accrue or arise in India in the
hands of the recipient only when such royalty is payable in respect of any right,
property or information used for the purposes of a business or profession carried on by
such non-resident in India or earning any income from any source in India.
In the present case, since Mr. Rakesh, a non-resident, paid the royalty of ₹3,00,000 for a
patent right used for development of a product in India, the same would be taxable in India
in the hands of the recipient, Mr. Naveen, a non-resident, irrespective of the fact that only
50% of the royalty is received in India.
(iv) Interest payable by a non-resident on the money borrowed for any purpose other than
a business or profession in India, would not be deemed to accrue or arise in India.
In the present case, since Mr. James, a non-resident borrowed the money for investment in
shares of an Indian company, the interest on such borrowing oft 1,20,000 10,00,000 x
12%) payable to Mr. Akash, a non-resident would not be deemed to accrue or arise to him
in India. Hence, the same would not be taxable in India in the hands of Mr. Akash.

Illustration 29:
Determination of Residential Status and Computation of Total Income: Mr. Prashant (aged
35 years) is an Australian citizen who is settled in Australia and visits India for 125 days in
every financial year since past 11 year During the F.Y. 2023-24, he visited India for a total
period of 200 days. The purpose of his visit was to meet his family members who are settled in
India and also for managing his family members who are settled in India and also for managing
his business in Sri Lanka through his office in Chennai, India.
During the P.Y. 2023-24, he has the following incomes:
(A) Income from business in Australia controlled form Australia – ₹ 20,00,000
(B) Income from business in Sri Lanka controlled form Chennai – ₹ 16,00,000
(C) Short-term capital gains on scale of shares of an Indian company received in Australia –
₹ 50,000. The shares were sold online from Australia.
(D) Income from agricultural land in Australia, received there and then brought to India–
₹ 2,00,000
Find out the residential status of Mr. Prashant and compute his total income for A.Y. 2024-25

Solution 29:
Determination of Residential status of Mr. Prashant:
Mr. Prashant is an Australian citizen who comes on a visit to India for 125 days in every financial
year since the past 11 year During the P.Y. 2023-24, he visited India for 200 days. Since he
stayed in India for 182 days or more during the P.Y. 2023-24, he would be resident in India for
the A.Y. 2024-25.
An individual is said to be "Resident but not ordinarily resident [RNOR]" in India in any
previous year, if he satisfies any one of the following conditions:
- He is a non-resident in at least 9 out of 10 previous years preceding the relevant
previous year; or
- His stay in India in the last 7 years preceding the relevant previous year is 729 days or

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less.
Mr. Prashant does not satisfy either of the above conditions on account of being resident in
more than 1 year out of 10 years and stay in India for 875 days in the 7 years preceding the P.Y.
2023- 24. Hence, he is a Resident and Ordinarily Resident in the P.Y. 2023-24.
Computation of Total Income of Mr. Prashant for A.Y. 2024-25:
Particulars Amount (₹)
(i) Income from business in Australia 20,00,000
(ii) Income from business in Sri Lanka 16,00,000
(iii) Short-term capital gains on sale of shares of an Indian company 50,000
(iv) Income from agricultural land in Australia [would not be exempt, since it 2,00,000
is not from an agricultural land in India]
Total Income 38,50,000

Illustration 30:
Determination of Residential Status and its effect on Tax incidence: Mr. Sarthak, an individual and
Indian citizen living abroad (Dubai), a tax haven, since year 2005 and never came to India for a
single day since then, earned the following incomes during previous income year 2023-24:
Particulars Amount (₹)
(i) Income accrued and arisen in Dubai not taxable in Dubai (being tax 20,00,000
haven)
(ii) Income accrued and arisen in India 5,00,000
(iii) Income deemed to accrue and arise in India 8,00,000
(iv) Income arising in Dubai from a profession set up in India 10,00,000

(I) Determine the residential status of Mr. Sarthak and taxable income for the previous year
2023-24 (assuming no other income arise during the previous year).
(II) What would be your answer if income arising in Dubai from a profession set up in India is
₹ 2 lakhs instead of ₹ 10 lakhs.
(III) What would be your answer, if Mr. Sarthak born in Dubai and his parents were born in
India?

Solution 30:
(I) Mr. Sarthak is an Indian citizen living in Dubai since 2005 who never came to India for a
single day since then, he would not be a resident in India for the P.Y. 2023-24 on the
basis of number of days of his stay in India as per section 6(1). However, since he is an
Indian citizen -
► having total income (excluding income from foreign sources) oft 23 lakhs,
which exceeds the threshold of t 15 lakhs during the previous year; and
► not liable to tax in Dubai, he would be deemed resident in India for the
previous year 2023-24 by virtue of section 6(1A).
A deemed resident is always a resident but not ordinarily resident in India
(RNOR).

Computation of Total Income for A.Y. 2024-25:

Particulars (₹)
(i) Income accrued and arisen in Dubai not taxable in Dubai (not taxable -

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INCOME TAX
in case of an RNOR)
(ii) Income accrued and arisen in India (taxable) 5,00,000
(iii) Income deemed to accrue and arise in India (taxable) 8,00,000
(iv) Income arising in Dubai from a profession set up in India would be 10,00,000
taxable in case of RNOR
Total Income 23,00,000

(II) If income arising in Dubai from a profession set up in India is ₹ 2 lakhs instead of ₹ 10
lakhs, his total income (excluding income from foreign sources) would be only ₹ 15
lakhs. Since the same does not exceed the threshold limit of ₹ 15 lakhs, he would not
be deemed resident. Accordingly, he would be non-resident in India for the P.Y. 2023-
24 and hence, his total income would be only ₹ 13 lakhs (aggregate of (ii) and (iii)
above i.e., ₹ 5 lakhs + ₹ 8 lakhs).

(III) If Mr. Sarthak is born in Dubai and his parents were born in India, he would not be
an Indian citizen, but he may qualify as person of Indian origin. In such case, the
provisions relating to deemed resident would not apply to him. Accordingly, he
would be non-resident in India during the P.Y. 2023-24 and his total income would
be ₹ 13 lakhs.

Note: In sub-part III., it is inferred that he is not a citizen of India since he is not born in
India. It is assumed that he has not applied for citizenship by fulfilling the other specified
eligibility conditions.

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2.21 | P a g e