MODULE – 3 RESIDENTIAL STATUS

INCIDENCE OF TAX

Incidence of Tax refers to the identification of the income of the assessee that must be considered
for calculation of tax .

Incidence of Tax or Tax Liability of Total Income on the basis of Residential Status:
Resident :U/s 5(1) The total Income of a resident shall include.
a) Any income which is received or is deemed to be received in India during relevant P.Y
b) Any Income which accrues /arises/deemed to arise in India during relevant P.Y
c) Any Income which accrues and is received outside India during relevant P.Y

Resident but not ordinarily Resident:U/s 5 (1): The total Income of NOR includes

a) Any Income ,which is received or deemed to be received in India during relevant P.Y
b) Any income which accrues or arises or is deemed to accrue or arises in India during
relevant p.Y
c) Any Income which accrues/arises and is received outside India during relevant P.Y.

Non-Resident :U/s 5(2): The total income of a non-Resident shall include.

a) Any income which is received or is deemed to arise in India during the P.Y
b) Any income which accrues or arises is deemed to accrue or arise in India .

Chart showing the Incidence of Tax for different Types of status

Different kinds of Incomes Resident Resident Non-

& & but not Resident
Ordinarily Ordinarily
Resident Resident

1. Income earned or deemed to be earned in Taxable Taxable Taxable

India but received outside India
2. Income earned or deemed to be earned Taxable Taxable Taxable
outside India but received in India
3. Income earned and received in India or Taxable Taxable Taxable
income deemed to be earned and received
in India
4. Income earned or deemed to be earned Taxable Not Not
and received outside India Taxable Taxable
 5. Income earned and received outside India Taxable Taxable Not
from a business controlled or profession Taxable
setup in India income may or may not be
remitted to India
6. Income earned and received outside India Taxable Not Not
from a business controlled or profession Taxable Taxable
setup outside India
7. Past untaxed income brought into India Not Not Not
during the relevant P.Y taxable Taxable Taxable

8. Gifts received from relatives or at the time Not Not Not

of marriage or by will , it is tax free ,fully Taxable Taxable Taxable
exempt.
9. Gift from a friend /non-relatives exceeding Taxable Taxable Taxable
Rs.50,000
10. Dividend from an Indian company is Taxable Taxable Taxable
fullyTaxable (from A.Y 21-22)
11. Dividend from a co-operative societies Taxable Taxable Taxable

12. Dividend from foreign company received Taxable Taxable Taxable

inIndia

Problems under Incidence of Tax:

Problem – 1: [Link] furnishes the following details of her income for the previous year
2022-23.

1. Income accrued in America but received in India Rs.19,000.

2. Interest on U.K Govt. Securities/bonds 1/3 of which received in India ,Rs.15000
3. Salary received in India for services rendered in Germany Rs.28,000
4. Income from agriculture in Bangladesh received and spent there only Rs.16000
5. Income from profession in china received there. The profession was set up in India Rs.12000
6. Income accrued in India but received in china Rs.14,000
7. Income earned outside India in preceding years but remitted in India during P.Y Rs.36,000
8. Gift in foreign currency from a relative received in India Rs.10,000
9. Profit from a hotel business at Singapore Rs.90,000
10. Dividend declared in Sydney but received in India Rs.12,000

Compute the total Income of Ms. Roopa for the A.Y 2021-22 ,If she is 1) Resident 2) Not
Ordinarily Resident , 3) Non-Resident.

Solution : Computation of Gross Total Income of Ms. Roopa for the A.Y 2023-24
[Link] Particulars Resident Resident Non- resident
& But Not
Ordinary Ordinary
Resident Resident

1 Income Accrued in America but received 19,000 19,000 19,000

in India Rs.19000

(Income arised o/s India but received in

India)

2. Interest on U.K Govt. Securities/bonds 1/3 15000 5000 5000

ofwhich received in India ,Rs.15000
(15000x1/3) (15000x1/3)
(Income arised O/s India ,partially [Link]
India )
3 Salary received in India for 28000 28000 28000
services rendered in Germany
Rs.28,000

(Income arised o/s India but Rd. in India )

4 Income from agriculture in Bangladesh 16000 Not taxable Not Taxable

received and spent there only Rs.16000

(Income arised and Rd.o/s India )

5 Income from profession in china received 12,000 12,000 Not taxable

there. The profession was set up in India
Rs.12000

(Income arised o/s India,Rd o/s India but

Head office is in India )
6 Income accrued in India but received in 14,000 14000 14000
chinaRs.14,000

(Income arised in India but Rd. in China)

 8 Gift in foreign currency from a relative Exempt Exempt Exempt
received in India Rs.10,000

9 Profit from a hotel business at Singapore 90,000 Not Taxable Not taxable
Rs.90,000

(income arised and Rd o/s India , Head office

also o/s India )
10 Dividend declared in Sydney but received in 12,000 12,000 12,000
India Rs.12,000

(income arised o/s India but Rd. in India)

GROSS TOTAL INOMCE 206000 90,000 78,000

Problem : 2 Following are the Taxable Income of sri Ram for the A.Y 2023-24:

1. Income from transfer of a long term capital assets situated in India Rs.60,000
2. Interest on debentures of a company at London which was received in India Rs.18,000
3. Interest received from John a non-Resident ,on the loan provided to him for a business
carried on in India Rs.15,000
4. Royalty received in Germany from kiran a resident in India for Technical services
providedfor a business carried on in Germany Rs.60,000
5. Fees from an Indian company ,carrying on a business at Germany from technical services
rendered at Germany having been directly deposited by the company In his bank A/c in
India Rs.90,000.
6. Profit from Business in Indonesia .This business is controlled from Delhi (60% of the
profitdeposited in a bank there and 40 % remitted to India) Rs.40000
7. Interest on German Development Bonds Rs.60,000 (2/5th is received in India ).
8. Income from agriculture in Bangladesh (received there but later on Rs.50,000 remitted to
India)Rs.1,80,000.
9. Income from property in Sri Lanka received there (Rs.80,000 is used in Sri lanka and the
balance remitted to India) Rs.1,20,000.
10. Income from business Kenya which is controlled from Bangalore (Rs.18,000 received in
Bangalore)Rs.78000.
11. Dividend paid by an Indian Company received in Canada Rs.56,000
12. Past untaxed profit Rs.1,05,000 brought to India during 2020-21
13. Interest on savings Bank deposit in state Bank of India Rs.1000
Find out [Link] Ram ‘s Gross Taxable Income for the A.Y 2021-22 ,If he is ;
1. Resident and Ordinarily Resident
2. Resident but not ordinarily Resident
3. Non-Resident.
Solution:

[Link] Particulars Resident & Resident but Non-

Ordinarily not ordinary Resident
Resident resident
1 Income from transfer(sale ) of a long term 60,000 60,000 60,000
capital assets situated in India Rs.60,000

(Income arised in India and Received in

India)

2 Interest on debentures of a company at 18,000 18,000 18,000

London which was received in India
Rs.18,000

(Income arised o/s India but received in

india )
3 Interest received from John a non- 15,000 15,000 15,000
Resident ,on the loan provided to him for a
business carried on in India Rs.15,000

(Income arised in India ,Received in India)

4 Royalty received in Germany from kiran a 60,000 Not Taxable Not Taxable
resident in India for Technical services (control
provided for a business carried on in (control &
Germany Rs.60,000 mgt o/s &
India) Mgt
(Income arised & Received o/s India and
No
control and Mgt also o/s India)
tApplicable)
5 Fees from an Indian company ,carrying on 90,000 90,000 90,000
a business at Germany from technical
services rendered at Germany having been
directly deposited by the company In his
bank A/c in India Rs.90,000.

(income arised o/s India but received in

India)
6 Profit from Business in Indonesia .This 40,000 40,000 Not Taxable
business is controlled from Delhi (60% of
 the profit deposited in a bank there and 40 (bcz control
% remitted to India) Rs.40000 & mgt is in
India)
(Income arised & Rd o/s India , Control &
Mgt is in India )

7 Interest on German Development Bonds 60,000 (full) 24,000 24,000

th
Rs.60,000 (2/5 is received in India ).
(60,000x2/5) (60,000x2/5)
(income arised o/s India but partially
received in India)

8 Income from agriculture in Bangladesh 180000 Not Taxable Not Taxable

(received there but later on Rs.50,000
remitted to India) Rs.1,80,000

(Income arised o/s India & received o/s

India, later on remittance shall be ignored,
shall not be treated as [Link] India)

9 Income from property in Sri Lanka 120000 Not Taxable Not Taxable
received there (Rs.80,000 is used in Sri
lanka and the balance remitted to India)
Rs.1,20,000.

(income arised o/s India & received o/s

India) (later remittance shall be ignored )

10 Income from business in Kenya which is 78,000 78,000 18000

controlled from Bangalore (Rs.18,000
received in Bangalore)Rs.78000.

(income arised o/s India but partially

received in India and Control is in India )

11 Dividend paid by an Indian Company 56000 56000 56000

received in Canada Rs.56,000 ( Now
 companies will not deduct tax on
Dividends)
12 Past untaxed profit Rs.1,05,000 brought to Not Not Taxable Not Taxable
India during 2020-21 Taxable

(it is Taxable in the year in which income

earned by filing separate IT return)not
taxable in 19-20

13 Interest on savings Bank deposit in state 1000 1000 1000

Bank of India Rs.1000

(Income arised & Received in India)

GROSS TOTAL INCOME 778000 382000 282000

Problem -3:

[Link] furnished the following particulars of his income for the P.Y 2022-23:

1. Profit from business in Mysore but controlled from London Rs.72,000

2. Profit on sale of building in Mangalore but received in Dubai Rs.1,48,000
3. Pension from Indian company received in London Rs.36,000
4. Gift in cash from a relative received in India Rs.60,000
5. Profit from sale of plant at London (one half of is received in India) Rs.146000
6. Profit from sale of plant at Delhi (one half is received in London)Rs.102000.
7. Dividend received in London from a company registered in India but mainly operating
inLondon Rs 17,000.
8. Rental income from a property in Nepal deposited by the tenant in a foreign branch of an
Indian Bank operating there Rs.12,000.
9. Dividend received in UK from an American Company out of which Rs.2000 were
remittedto India. Rs.10,000
10. Salary drawn for 3 months for working in Indian Embassy’s office in Australia and
salaryreceived there Rs.10,000
11. Pension received in Belgium for services rendered in India with a ltd company. Rs.20,000
12. Profit from Business in Uk controlled from India Rs.60,000.

Compute [Link]’s Gross Taxable Income for the A.Y 2023-24 : if he is A) Resident
B)Not ordinarily Resident, C) Non-Resident.
 Solution:

[Link] Particular’s Resident Resident Non-

& but not Resident
Ordinary Ordinary
Resident resident
1 Profit from business in Mysore but 72,000 72,000 72,000
controlled from London Rs.72,000

(Income arised & received in India

,butcontrol is o/s India)
2 Profit on sale of building in Mangalore 1,48,000 1,48,000 1,48,000
butreceived in Dubai Rs.1,48,000

(Profit arised in India but received o/s

India)
3 Pension from Indian company received in 36,000 36,000 36,000
London Rs.36,000

(Income arised In India but received in

London)

4 Gift in cash from a relative received Exempt Exempt Exempt

inIndia Rs.60,000
5 Profit from sale of plant at London 1,46,000 73,000 73,000
(one half of is received in India)
Rs.146000 (146000x1/2) (146000x1/2)

(income Arised in London but ½ is

received in India)
6 Profit from sale of plant at Delhi (one 102000 102000 102000
halfis received in London) Rs.102000.

(Income arised in India but ½ of the

amount received o/s India )

7 Dividend received in London from a 17000 17000 17000

company registered in India but mainly
operating in London Rs 17,000. (Taxable
 in the hands of the Assessee from A.Y 21-
22)
8 Rental income from a property in Nepal 12,000 12,000 12,000
deposited by the tenant in a foreign branch
of an Indian Bank operating there
Rs.12,000.

(Income arised o/s India & Received in

Inida) (direct deposit to Indian bank is
treated as Rd in India)
9 Dividend received in UK from an 10,000 NOT NOT
American Company out of which Rs.2000 TAXABL TAXABL
were remitted to India. Rs.10,000 E E

(Income arised o/s India & received o/s

india )
10 Salary drawn for 3 months for working in 10,000 10,000 10,000
Indian Embassy’s office in Australia and
salary received [Link].10,000

(Income arised in India, received in

Australia) (Indian Govt is giving salary)

11 Pension received in Belgium for services 20,000 20,000 20,000

rendered in India with a ltd company.
Rs.20,000

(income arised in India but Rd. o/s India )

12 Profit from Business in Uk controlled 60,000 60,000 Not Taxable

fromIndia Rs.60,000.

(income arised & Rd. o/s India But

Controlis in India )

GROSS TOTAL INCOME 6,33,000 5,50,000 4,90,000

Problem – 4: From the following information of Mr. Nagaraj compute his gross total income for
the A.Y 2023-24 ,if he is a) Resident, b) Not ordinarily Resident, c) Non- Resident

1. Profit from Business in cyelon controlled from India (1/3 profit received in India) Rs.30,000
2. Salary received in India for services rendered in Kuwait Rs.35000
3. Profit on sale of plant at Singapore (1/2 is received in India ) Rs.2,50,000.
4. Profit on sale of property at Bangalore (1/2 is received in Hong-kong) Rs.50,000
5. Interest on UK development Bonds Rs.200,000 of which Rs.1,00,000 remitted to India.
6. Profit from business in Mangalore ,the control is from USA Rs.30,000
7. Income from Business in Mysore but received in Holland Rs.50000
8. Profit from business in Pakistan controlled from India (40% profit received in
India)Rs.6,00,000
9. Salary and allowances from UNO Rs.3,00,000
10. Interest and dividends from units of UTI Rs.20,000
11. Income from Transfer of Long term Capital asset in India Rs.60,000
12. Royalty received in Germany from [Link] ,a resident in India for Technical services
provided for a business carried on in Germany Rs.70,000.
13. Interest on England Development Bonds (1/5th received in India ) Rs.1,00,000.
14. Income from Public Provident Fund Rs.20,000 (SG)

Solution :

[Link] Particular’s Resident & Resident but Non-Resident

Ordinarily not ordinary
Resident resident
1 Profit from Business in cyelon 30,000 30,000 (since 10,000
controlled from India (1/3 profit control in
received in India) India)
Rs.30,000 (30000x1/3)

(Income arised o/s India, partially rd in

India but control is in India)

2 Salary received in India for services 35,000 35,000 35,000

rendered in Kuwait Rs.35000

(income arised o/s India but [Link]

India)

3 Profit on sale of plant at Singapore (1/2 is 250000 125000 125000

received in India) Rs.2,50,000.
 (Income arised o/s India but partially Rd,
In India)
(250000x1/2) (250000x1/2)

4 Profit on sale of property at Bangalore 50,000 50,000 50,000

(1/2 is received in Hong-kong) Rs.50,000

(Income arised in India but

partially Rd, o/s India)
5 Interest on UK development Bonds 2,00,000 Not Taxable Not Taxable
Rs.200,000 of which Rs.1,00,000
remitted to India.

(Income arised o/s India & Rd. o/s India )

6 Profit from business in Mangalore ,the 30,000 30,000 30,000

control is from USA Rs.30,000

(Income arised &Rd. In India but

Controlis in USA)
7 Income from Business in Mysore but 50,000 50,000 50,000
received in Holland Rs.50000

(Income earned In India but Rd.o/s India)

8 Profit from business in Pakistan 6,00,000 6,00,000 2,40,000

controlled from India (40% profit
receivedin India)Rs.6,00,000
(6,00,000x40%)
(Income earned o/s India, Partially [Link]
Inida, but Control is in India)
9 Salary and allowances from UNO Exempt Exempt Exempt
Rs.3,00,000
(as per the
Act)
10 Interest and dividends from units of Exempt Exempt Exempt
UTIRs.20,000 (Unit Trust of India)
11 Income from Transfer of Long term 60,000 60,000 60,000
Capital asset in India Rs.60,000

(Income earned in India & Rd. In India)

12 Royalty received in Germany from 70,000 Not Taxable Not Taxable
[Link] ,a resident in India for
Technical services provided for a
business carried on in Germany
Rs.70,000.

(Income earned o/s India & Rd. o/s India)

13 Interest on England Development Bonds 1,00,000 20,000 20,000

(1/5th received in India ) Rs.1,00,000.

(income arised o/s India but partially Rd

(1,00,000x1/5) (1,00,000x1/5)
in India)
14 Income from Public Provident Fund Exempt Exempt Exempt

GROSS TAXABLE INCOME 14,75,000 10,00,000 6,20,000

Problem – 5:

From the following particular’s of [Link] compute his gross total income .for the
P.Y [Link] he is a) Resident, b) Not ordinarily Resident c) Non- Resident.

1. Salary received in India for services rendered in Pakistan Rs.30,000

2. Profit from Business in Singapore controlled from India (1/3 profit received in
India)Rs.30,000
3. Agriculture income earned in Nepal Rs.25,000
4. Salary received in New York from an Indian IT Co. Rs.3,60,000
5. Interest earned on UK government securities received in London Rs.56,000,out of which
a sum of Rs.30,000 remitted to India.
6. Income from agriculture in Colombo(srilanka) deposited there in a bank there is Rs.95,000
,out of which Rs.40,000 received in Chennai.
7. Interest on bonds of central Government of India Rs.28,000
 8. Dividend on shares from foreign company Rs.7500, received in Japan.
9. Payment from public provident fund Rs.20,000
10. Commission received in India for the services given in Nepal Rs.10,000
11. Share of Income from HUF Rs.12,000.
12. Income from Business in Chennai managed from srilanka Rs.25,000
13. Income from Business in Kuwait ,business being controlled from Mumbai (Rs.25,000 is
received in India)Rs.65,000.
14. Income from agriculture in Bangladesh remitted to India Rs.10,000
15. Income from Indian Partnership firm Rs.5,000.
16. Interest earned from on post office Savings Bank A/c Rs.3000

Solution:

Particular’s Resident Resident but Non-

& not ordinary Resident
Ordinaril resident
yResident
1. Salary received in India for services rendered 30,000 30,000 30,000
in Pakistan Rs.30,000

2. Profit from Business in Singapore controlled 30,000 30,000 10,000

from India (1/3 profit received in
India)Rs.30,000

3. Agriculture income earned in Nepal Rs.25,000 25,000 Not Taxable Not

(Agriculture Land o/s India) Taxable
4. Salary received in New York from an Indian IT 3,60,000 -- ---
Co. Rs.3,60,000

5. Interest earned on UK government securities 56,000 -- ---

received in London Rs.56,000,out of which a
sum of Rs.30,000 remitted to India.

6. Income from agriculture in Colombo(srilanka) 95,000

deposited there in a bank Rs.95,000 ,out of
which Rs.40,000 received in Chennai.
7. Interest on bonds of central Government of 28,000 28,000 28,000
India Rs.28,000
8. Dividend on shares from foreign company 7500 -- --
Rs.7500,received in Japan.
9. Payment from public provident fund Rs.20,000 Exempt Exempt Exempt
 10. Commission received in India for the services 10,000 10,000 10,000
given in Nepal Rs.10,000

11. Share of Income from HUF Rs.12,000. Exempt Exempt Exempt

12. Income from Business in Chennai managed 25,000 25,000 25,000

from srilanka Rs.25,000

13. Income from Business in Kuwait ,business 65000 65000 25000

being controlled from Mumbai (Rs.25,000 is
received in India)Rs.65,000.

14. Income from agriculture in Bangladesh 10,000 -- --

remitted to India Rs.10,000

15. Income from Indian Partnership firm Rs.5,000. Exempt Exempt Exempt

16. Interest earned from on post office Savings Bank Exempt Exempt Exempt
A/c Rs.3000
Gross Taxable Income 741000 188000 128000