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 Frequently Asked Questions
1. Why RTP’s, MTP’s and PYP’s?
RTP’s, MTP’s, and PYP’s are extremely important to ensure that you reproduce ICAI language.
These questions train you to understand what is important and what is expected of you.
At least 41% of questions* are asked from previous RTP’s, MTP’s and PYP’s.

2. What is included?
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selected will be available. There will be references to the marks and the attempt from which
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related to those specific concepts are only included in the corresponding chapter of the new
scheme. A comprehensive reconciliation of the chapters between the new scheme and the old
scheme is provided on the following page.

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*This is on an average based on the last 11 attempts

 Taxa on
Reconcilia on of chapters of the new scheme (May’24) with old course
New Chapter Name as per NEW Syllabus Comparison with
Chapter chapters of Old
No. Scheme
SECTION A: Income Tax Law
1 Basic Concepts Same
2 Residence and Scope of Total Income Same
3 Heads of Income
3.1 Salaries Same
3.2 Income from House Property Same
3.3 Profits and Gains of Business or Profession Same
3.4 Capital Gains Same
3.5 Income from Other Sources Same
4 Income of Other Persons included in Assesse’s Total Same
Income
5 Aggregation of Income, Set-Off and Carry Forward of Same
Losses
6 Deductions from Gross Total Income Same
7 Advance Tax, Tax Deduction at Source and Tax Collection Same
at Source
8 Provisions for filing Return of Income and Self- Same
Assessment
9 Income Tax Liability – Computation and Optimisation Same

SECTION B: Goods & Service Tax

1 GST in India – An Introduction Same
2 Supply under GST Same
3 Charge of GST Same
4 Place of Supply * Not a part of CA inter
syllabus in the old
scheme
5 Exemptions from GST Same
6 Time of Supply Same
7 Value of Supply Same
8 Input Tax Credit Same
9 Registration Same
10 Tax Invoice; Credit and Debit Notes Same
11 Accounts and Records** Not a part of CA inter
syllabus in the old
scheme
12 E-Way Bill ** Not a part of CA inter
syllabus in the old
scheme
13 Payment of Tax Same
14 Tax Deduction at Source and Collection of Tax at Source Not a part of CA inter
*** syllabus in the old
scheme
15 Returns Same

* This chapters were earlier a part of CA Final Paper 8: Indirect Tax in chapter 5
** These chapters were earlier a part of CA Final Paper 8: Indirect Tax in chapter 11
*** This chapters were earlier a part of CA Final Paper 8: Indirect Tax in chapter 12
(second part)
 Table of Contents
Sr. Particulars Page Number
No
Section A
1 Basic Concepts 1.1 – 1.16
2 Residence and Scope of Total Income 2.1 – 2.43
3.1 Salaries 3.1-1 – 3.1- 25
3.2 Income from House Property 3.2-1 – 3.2-16
3.3 Profits and Gains of Business or Profession 3.3-1 – 3.3-36
3.4 Capital Gains 3.4-1 – 3.4-35
3.5 Income from Other Sources 3.5-1 – 3.5-13
4 Income of Other Persons included in Assessee’s Total Income 4.1 - 4.22
5 Aggregation of Income, Set-Off and Carry Forward of Losses 5.1 – 5.40
6 Deductions from Gross Total Income 6.1 – 6.19
7 Advance Tax, Tax Deduction at Source and Tax Collection at 7.1 – 7.35
Source
8 Provisions for filing Return of Income and Self Assessment 8.1 – 8.21
9 Income Tax Liability – Computation and Optimization 9.1 – 9.92
10 Case Scenarios- Direct Tax Laws 10.1- 10.30
Section B
1 GST in India – An Introduction 1.1 – 1.4
2 Supply under GST 2.1 – 2.10
3 Charge of GST 3.1 – 3.17
4 Place of Supply 4.1 – 4.15
5 Exemptions from GST 5.1 – 5.22
6 Time of Supply 6.1 – 6.10
7 Value of Supply 7.1 – 7.34
8 Input Tax Credit 8.1 – 8.42
9 Registration 9.1 – 9.23
10 Tax Invoice; Credit and Debit Notes 10.1 – 10.12
11 Accounts and Records 11.1 – 11.3
12 E-Way Bill 12.1 – 12.8
13 Payment of Tax 13.1 – 13.10
14 Tax Deduction at Source and Collection of Tax at Source 14.1 – 14.9
15 Returns 15.1 – 15.9
16 Case Scenarios – Indirect Tax Laws 16.1 – 16.30

This includes:
21 MTPs: March’18, April’18, Aug’18, Oct’18, May’19, April’19, Oct’19, May’20, Oct’20,
March’21, April’21, Oct ’21, Nov ’21, March ’22, April ’22, Sep ’22, Oct ’22, March
’23, April '23, Sep ’23 & Oct ‘23
11 PYPs: May’18, Nov’18, May’19, Nov’19, Nov’20, Jan’21, July ’21, Dec ’21, May’22, Nov
’22, May ‘23
12 RTPs: May’18, Nov’18, May’19, Nov’19, May’20, Nov’20, May’21, Nov ’21, May ’22, Nov
’22, May ’23, Nov ‘23
 1.1

Chapter 1
Basic Concepts
Question 1
Explain the difference between Circulars and Notifications in the context to the Income-tax Act, 1961.
(MTP 3 Marks, Aug’18)
Answer 1
Difference between Circulars and notifications
Circulars Notifications
Circulars are issued by CBDT. Notifications are issued by the Central Government.
The CBDT is also empowered to issue notifications.
Circular are issued with certain specific Central Government issues notifications to affect the
problems and to clarify doubt regarding provisions of the Act and CBDT issues notifications to
the scope and meaning of certain make and amend Income-tax Rules.
provisions of the Act.
The department is bound by the Notifications are binding in nature. Both department
circulars. While such circulars are not and assesses are bound by the notifications.
binding on the assesses, they can take
advantage of beneficial circulars.

Question 2
Compute the tax liability of Ms. Kajal for A.Y. 2024-25, a female resident aged 40 years, where her total
income is ₹2,00,50,000 comprising of business income. Ms. Kajal opts for the provisions of section 115BAC.
(MTP 3 Marks April 22)
Answer 2
Computation of tax liability of Ms. Kajal under section 115BAC for the A.Y.2024-25
₹ ₹
(A) Tax payable including surcharge on total income of
₹ 2,00,50,000
Up to ₹ 2,50,000 ₹ 3,00,000 Nil Nil
₹ ₹ 3,00,000 – ₹ 6,00,000 [₹ 3,00,000 @ 5%] 15,000 15,000
₹ 6,00,001 – ₹ 9,00,000 [₹ 3,00,000 @ 10%] 30,000 30,000
₹ 9,00,001 – ₹ 12,00,000 [₹3,00,000 @ 15%] 45,000 45,000
₹ 12,00,001 – ₹ 15,00,000 [₹3,00,000 @ 20%] 60,000 60,000
Above ₹ 15,00,000 @30% 55,65,000
Add: Surcharge @ 25% (since total income exceeds 57,15,000
₹ 2 crore but does not exceed ₹ 5 crore)
14,28,750 71,43,750
(B) Tax payable on total income of ₹ 2 crore [(₹ 15,000 plus
₹ 30,000 plus ₹ 45,000 plus ₹ 60,000 plus ₹ 62,500 plus 65,55,000
₹ 55,50,000) plus surcharge @15%]
(C) Excess tax payable (A)-(B) 5,88,750
(D) Marginal Relief (₹ 5,88,750 – ₹ 50,000, being the amount of 5,38,750
income in excess of ₹ 2,00,00,000)
(E) Tax payable before cess (A – D) 66,05,000
Add: Health and education cess @4% 2,64,200
Tax payable 68,69,200
Alternative Presentation
Chapter 1 Basic Concepts
 1.2

Computation of tax liability of Ms. Kajal for the A.Y.2024-25

₹ ₹
(A) Tax payable including surcharge on total income of
₹ 2,00,50,000
Upto ₹ 2,50,000 ₹ 3,00,000 Nil Nil
₹ ₹ 3,00,000 – ₹ 6,00,000 [₹ 3,00,000 @ 5%] 15,000 15,000
₹ 6,00,001 – ₹ 9,00,000 [₹ 3,00,000 @ 10%] 30,000 30,000
₹ 9,00,001 – ₹ 12,00,000 [₹3,00,000 @ 15%] 45,000 45,000
₹ 12,00,001 – ₹ 15,00,000 [₹3,00,000 @ 20%] 60,000 60,000
Above ₹ 15,00,000 @30% 55,65,000
Add: Surcharge @ 25% (since total income exceeds 57,15,000
₹ 2 crore but does not exceed ₹ 5 crore)
14,28,750 71,43,750

(B) Tax payable on total income of ₹ 2 crore [(₹ 15,000 plus

₹ 30,000 plus ₹ 45,000 plus ₹ 60,000 plus ₹ 62,500 plus 65,55,000
₹ 55,50,000) plus surcharge @15%]
(C) Total income less ₹ 2 crore 50,000
(D) Tax payable on total income of ₹ 2 crore plus excess of total 66,05,000
income over ₹ 2 crore (B + C)
(E) Tax payable: Lower of A and D 66,05,000
Add: Health and education cess @4% 2,64,200
Tax payable 68,69,200
(F) Marginal Relief (A -D) 5,38,750

Question 3
Examine with brief reasons whether the following statements are true or false with reference to the
provisions of the Income-tax Act, 1961:
(a) Mr. Qureshi, a shareholder of a closely held company, holding 15% shares, received advances from that
company which is to be deemed as dividend from an Indian Company, hence exempted under section
10(34).
(b) Rent of Rs. 72,000 received by Mr. X for letting out agricultural land for a movie shooting is an
agricultural income and hence exempt under section 10(1). (MTP 4 Marks, Oct’18)
Answer 3
i. False: As per section 10(34), only income by way of dividend referred to in section 115 -O shall be exempt
in the hands of shareholders. Dividend distribution tax under section 115 -O is not leviable on deemed
dividend under section 2(22) (e) and hence, such deemed dividend is not exempt under section 10(34),
in the hands of Mr. Qureshi.
As per amendment dividend u/s 2(22)(a)/(b)/(c)/(d)/(e) from an Indian Company will now be taxable
normal rates in the hands of the Shareholder Assesses. Interest Income incurred to earn such income will
be allowed as a deduction but only upto 20% of such income. No deduction of commission/remuneration
paid to any other person. DDT has been abolished.

ii. False: Agricultural income means, inter alia, any rent or revenue derived from land which is situated in
India and is used for agricultural purposes. In the present case, rent is being derived from letting out of
agricultural land for a movie shoot, which is not an agricultural purpose. In effect, the land is not being
put to use for agricultural purposes. Therefore, Rs. 72,000, being rent received by Mr. X from letting out
of agricultural land for movie shooting, is not exempt under section 10(1). The same is chargeable to tax

Chapter 1 Basic Concepts

 1.3

under the head “Income from other sources

Question 4 (Includes concepts of Residence & Scope of Total Income)

Miss Deepika, a citizen of India, got married to Mr. John of Australia and left India for the first time on
20.8.2023. She has not visited India again during the P.Y. 2023-24. She has derived the following income for
the year ended 31-3-2024:
Particulars Rs.
(i) Income from sale of centrifuged latex processed from rubber plants 1,50,000
grown in Kanyakumari.
(ii) Income from sale of coffee grown and cured in Kodagu, Karnataka 2,00,000
(iii) Income from sale of coffee grown, cured, roasted and grounded in 5,00,000
Colombo. Sale consideration was received in Chennai.
(iv) Income from sale of tea grown and manufactured in West Bengal. 12,00,000
(v) Income from sapling and seedling grown in a nursery at Cochin. Basic 2,00,000
operations were not carried out by her on land.
You are required to determine the residential status of Miss Deepika and compute the business income and
agricultural income of Miss. Deepika for the Assessment Year 2024-25. (MTP 7 Marks, Oct’20)
Answer 4
Miss Deepika is said to be resident if she satisfies any one of the following basic conditions:
(i) Has been in India during the previous year for a total period of 182 days or more
(or)
(ii) Has been in India during the 4 years immediately preceding the previous year for a total period of 365
days or more and has been in India for at least 60 days during the previous year.
Miss Deepak’s stay in India during the P.Y.2023-24 is 142 days [30+31+30+31+20] which is less than
182 days. However, her stay in India during the P.Y.2023-24 exceeds 60 days. Since, she left India
for the first time, her stay in India during the four previous years prior to P.Y.2023-24 would be more
than 365 days. Hence, she is a resident for P.Y.2023-24.
Further, Miss Deepika would be “Resident and ordinarily resident” in India in during the previous year
2023-24, since her stay in India in the last seven previous years prior to P.Y.2023-24 is more than 730
days and she must be resident in the preceding ten years.
Computation of business income and agricultural income of Miss Deepika for A.Y. 2024-25
Particulars Income Business Agricultural
Income Income
₹ ₹
(I) Income from sale of centrifuged latex processed
from rubber plants grown in Kanyakumari
(Apportioned between business and agricultural 1,50,000 52,500 97,500
income in the ratio of 35:65 as per Rule 7A of
Income-tax Rules, 1962)
(ii) Income from sale of coffee grown and cured in
Kodagu, Karnataka (Apportioned between
business and agricultural income in the ratio of 2,00,000 50,000 1,50,000
25:75, as per Rule 7B (1) of the Income-tax Rules,
1962)
(iii) Income from sale of coffee grown, cured, roasted
and grounded in Colombo and received in Chennai 5,00,000 5,00,000
[See Note 1 below] -
(iv) Income from sale of tea grown and manufactured
in West Bengal (Apportioned between business 12,00,000 4,80,000 7,20,000
and agricultural income in the ratio of 40:60 as
per Rule 8 of the Income-tax Rules, 1962)

Chapter 1 Basic Concepts

 1.4

(v) Income from sapling and seedling grown in a

nursery at Cochin. Basic operations were not 2,00,000 - 2,00,000
carried out on land [See Note 2 below]
22,50,000 10,82,500 11,67,500
Notes:
(1) Since MS Deepika is resident and ordinarily resident in India for A.Y. 2024-25, her global income is taxable
in India. Entire income from sale of coffee grown, cured, roasted and grounded in Colombo is taxable as
business income since such income is earned from sale of coffee grown, cured, roasted and grounded
outside India i.e., in Colombo.
(2) As per Explanation 3 to section 2(1A), income derived from sapling or seedlings grown in a nursery would
be deemed to be agricultural income, whether or not the basic operations were carried out on land. Hence,
income of Rs.2,00,000 from sapling and seedling grown in a nursery at Cochin is agricultural income.

Question 5
For the Assessment year 2024-25, the Gross Total Income of Mr. Manas, a resident in India aged 65 years,
was Rs.8,18,240 which includes long-term capital gain of Rs.2,45,000 and Short-term capital gain of Rs.
98,000. The Gross Total Income also includes interest income of Rs. 15,000 from savings bank deposits with
banks. Mr. Manas has invested in PPF Rs.1,40,000 and also paid a medical insurance premium Rs. 31,000.
Mr. Manas also contributed Rs. 40,000 to Public Charitable Trust eligible for deduction under section 80G
by way of an account payee cheque. Compute the total income and tax thereon of Mr. Manas. (MTP 7
Marks, Oct’18)
Answer 5
Computation of total income and tax payable by Mr. Manas for the A.Y. 2024-25
Particulars Rs. Rs.
Gross total income including long term capital gain 8,18,240
Less: Long term capital gain 2,45,000
5,73,240
Less: Deductions under Chapter VI-A:
Under section 80C in respect of PPF deposit 1,40,000
Under section 80D (it is assumed that premium of Rs.31,000 is paid by 30,000
otherwise than by cash. The deduction would be restricted to 31,000
Rs.30,000 (as per amendment Rs. 50,000 is the limit for senior
citizen.), since Mr. Manas is a senior citizen)
Under section 80G (See Notes 1 & 2 below) 19,662
Under section 80TTA (See Note 3 below) 10,000 2,00,662
Total income (excluding long term capital gains) 3,72,578
Total income (including long term capital gains) 6,17,578
Total income (rounded off) 6,17,580
Tax on total income (including long-term capital gains of Rs.2,45,000)
LTCG Rs.2,45,000 x 20% 49,000
Balance total income Rs.3,72,580 3,629
52,629
Add: EC & HSEC @ 4% (as per amendment) 1,580
2105
Total tax liability 54,734
Total tax liability (rounded off) 54,730
Notes:
1. Computation of deduction under section 80G:
Particulars Rs.
Gross total income (excluding long term capital gains) 5,73,240
Less: Deduction under section 80C, 80D & 80TTA 1,80,000

Chapter 1 Basic Concepts

 1.5

3,93,240
10% of the above 39,324
Contribution made 40,000
Lower of the two eligible for deduction under section 80G 39,324
Deduction under section 80G – 50% of Rs.39,324 19,662

2. Deduction under section 80G is allowed only if amount is paid by any mode other than cash, in case of
amount exceeding Rs. 2,000. Therefore, the contribution made to public charitable trust is eligible for
deduction since it is made by way of an account payee cheque.
3. Deduction of up to Rs. 10,000 under section 80TTA is allowed, inter alia, to an individual assesses if gross
total income includes interest income from deposits in a saving account with bank.

Question 6
Examine with reasons whether the following receipts are taxable or not under the provisions of Income-tax
Act, 1961.
(a) Mr. Akash received a sum of ₹ 3,00,000 as compensation from “Sahayata Foundation” towards the loss of
property on account of Flood Disaster at Chennai.
(b) Rent of ₹ 60,000 received for letting out agricultural land for a movie shooting.
(c) Dividend of ₹ 17 lakhs received by Mr. Yatin during P.Y. 2023-24 from A Ltd., a domestic company.
(d) Agricultural income of ₹ 1,30,000 of Mr. Sunil from a land situated in Canada. (RTP May ’18)
Answer 6
Taxability of receipts under the provisions of Income-tax Act, 1961
Taxable/Not Reason
taxable
(a) Taxable As per section 10(10BC), any amount received or receivable by an individual as
compensation, on account of any disaster, from the Central Government, State
Government or a local authority is exempt from tax, to the extent the individual
has not been allowed deduction under any other provision of Income-tax Act,
1961 on account of any loss or damage caused by such disaster.
However, in this case, since Mr., Akash has received a compensation of ₹
3,00,000 from Sahayata Foundation, and not from the Central Government or
State Government or local authority, no exemption will be available under
section 10(10BC) and the same is chargeable to tax.
(b) Taxable Agricultural income is exempt from income-tax as per section 10(1). Agriculture
income means, inter alia, any rent or revenue derived from land which is
situated in India and is used for agricultural purposes.
In this case, rent is being derived from letting out of agricultural land for a movie
shoot, which is not an agricultural purpose. In effect, the land is not being put to
use for agricultural purposes. Therefore, ₹ 60,000, being rent received from
letting out agricultural land for movie shooting, is not exempt under section 10(1)
and the same is chargeable to tax.
(c) Partly taxable Dividend received from a domestic company is subject to dividend distribution
(Taxable) tax in the hands of domestic company under section 115-O.
Dividend income received from an Indian company, which is subject to dividend
distribution tax, is exempt under section 10(34). However, dividend in excess of
₹ 10 lakhs received, inter alia, by an individual is chargeable to tax under section
115BBDA and not exempt under section 10(34).
Therefore, in this case, dividend received up to ₹ 10 lakh is exempt in the hands
of Mr. Yatin under section 10(34). ₹ 7 lakh, being dividend in excess of ₹ 10 lakh,
is taxable in his hands @10% as per section 115BBDA.
Chapter 1 Basic Concepts
 1.6

As per amendment dividend u/s 2(22)(a)/(b)/(c)/(d)/(e) from an Indian

Company will now be taxable normal rates in the hands of the Shareholder
Assesses. Interest Income incurred to earn such income will be allowed as a
deduction but only up to 20% of such income. No deduction of
commission/remuneration paid to any other person. DDT has been abolished.
(d) Taxable Agricultural income from a land situated in any foreign country is not exempt
under section 10(1) and hence, is chargeable to tax.
Therefore, in this case, agricultural income of ₹ 1,30,000 of Mr. Sunil from land
situated in Canada is taxable.

Question 7
Mr. Charan grows paddy and uses the same for the purpose of manufacturing of rice in his own Rice Mill.
He furnished the following details for the financial year 2023-24:
- Cost of cultivation of 40% of paddy produce is ₹ 9,00,000 which is sold for ₹ 18,50,000.
- Cost of cultivation of balance 60% of paddy is ₹ 14,40,000 and the market value of such paddy is ₹
28,60,000.
- Incurred ₹ 3,60,000 in the manufacturing process of rice on the balance (60%) paddy.
The rice was sold for ₹ 38,00,000.
Compute the Business income and Agricultural Income of Mr. Charan for A.Y. 2024-25. (RTP Nov ’18)
Answer 7
Computation of Business Income and Agriculture Income of Mr. Charan for A.Y. 2024-25
Particulars Business Agricultural Income
Income
₹ ₹ ₹
Sale of Rice
Business income
Sale Proceeds of Rice 38,00,000
Less: Market Value of paddy (60%) 28,60,000
Less: Manufacturing expenses 3,60,000
5,80,000
Agricultural Income
Market value of paddy (60%) 28,60,000
Less: Cost of cultivation 14,40,000
14,20,000
Sale of Paddy
Agricultural Income
Sale proceeds of paddy produce (40%) 18,50,000
Less: Cost of cultivation 9,00,000
9,50,000
23,70,000

Question 8
Mr. Rana, a resident and ordinarily resident aged 42 years, manufactures rubber from the latex processed
from rubber plants grown in Kerala. Thereafter, he sold the rubber for ₹ 47 lakhs. The cost of growing rubber
plants was ₹ 25 lakhs and the cost of manufacturing rubber was ₹ 7 lakhs. He has no other income during
the previous year 2023-24. Compute his tax liability for the Assessment Year 2024-25. (RTP May ’19)

Chapter 1 Basic Concepts

 1.7

Answer 8
In cases where the assesses himself grows rubber plants and manufactures rubber processed from latex
obtained from rubber plants in India, then, as per Rule 7A, 35% of profit on sale of rubber is taxable as
business income under the head “Profits and gains from business or profession”, and the balance 65% is
agricultural income, which is exempt from tax.
Profits from manufacture and sale of rubber processed from latex = ₹ 47 lakhs – ₹ 25 lakhs – ₹ 7 lakhs = ₹ 15
lakhs
Agricultural Income = 65% of ₹ 15 lakhs = ₹ 9.75 lakhs
Business Income = 35% of ₹ 15 lakhs = ₹ 5.25 lakhs.
The tax liability of Mr. Rana has to be computed applying the concept of partial integration, since his total
income comprises of both agricultural income and non- agricultural income and his agricultural income
exceeds ₹ 5,000 p.a and his non- agricultural income exceeds the basic exemption limit i.e., ₹ 2,50,000
(applicable, in his case).
Accordingly, his tax liability would be computed in the following manner:
Computation of tax liability of Mr. Rana for the A.Y. 2024-25
Particulars ₹
Tax on total income of ₹ 15,00,000, being agricultural income and non-agricultural income 2,62,500
Less: Tax on agricultural income and basic exemption limit i.e., ₹ 12,25,000 [₹ 9,75,000
plus ₹ 2,50,000] 1,80,000
82,500
Add: Health and Education cess@4% 3,300
Total Tax liability 85,800

Question 9
Explain with brief reasons, whether the following income can be regarded as agricultural income, as per the
provisions of the Income-tax Act, 1961:
(i) Rent received for letting out agricultural land for a movie shooting.
(ii) Income from sale of seedlings in a nursery adjacent to the agricultural lands owned by an assesses.
(RTP Nov ’20)
Answer 9
i) Rent received for letting out agricultural land for a movie shooting:
As per section 2(1A), “agricultural income” means, inter alia,
• any rent or revenue derived from land
• which is situated in India and is used for agricultural purposes.
In the present case, rent is being derived from letting out of agricultural land for a movie shoot, which
is not an agricultural purpose and hence, it does not constitute agricultural income.
ii) Income from sale of seedlings in a nursery:
As per Explanation 3 to section 2(1A), income derived from saplings or seedlings grown in a nursery is
deemed to be agricultural income, whether or not the basic operations were carried out on land.
Therefore, the amount received from sale of seedlings in a nursery adjacent to the agricultural lands
owned by the assesses constitutes agricultural income.

Question 10
Briefly explain the purpose for which the words "PROVISO" and "EXPLANATION" are incorporated under
various sections of the Income-tax Act, 1961. (PYP 4 Marks, May’18)

Chapter 1 Basic Concepts

 1.8

Answer 10
Proviso: The Proviso to a section is incorporated to specify the exception(s) to the provision contained in
the respective section i.e., the proviso spells out the cases where the provision contained in the respective
section would not apply or where the provision contained in the respective section would apply with
certain modification.
Explanation: An Explanation is incorporated in a section to provide a clarification relating to the provision
contained in that section. Generally, an Explanation is clarificatory in nature.

Question 11
Mr. Rajat Saini, aged 32 years, furnishes the following details of his total income for the A.Y. 2024-25:
Income from Salaries 27,88,000
Income from House Property (Computed) 15,80,000
Interest Income from FDR's 7,22,000
He has not claimed any deduction under Chapter VI-A. You are required to compute tax liability of Mr. Rajat
Saini as per the provisions of Income-tax Act, 1961. Assume that he has not opted for 115BAC. (PYP 5 Marks,
Nov’18, PYP May ’20)
Answer 11
Computation of tax liability of Mr. Rajat Saini for the A.Y. 2024-25
Particulars ₹ ₹
Income from Salaries 27,88,000
Income from house property (computed) 15,80,000
Interest income from FDR’s 7,22,000
Total Income 50,90,000
Tax Liability
(A) Tax payable including surcharge on total income
of ₹ 50,90,000
Upton ₹ 2,50,000 Nil
₹ 2,50,001 – ₹ 5,00,000 @ 5% 12,500
₹ 5,00,001 – ₹ 10,00,000 @ 20% 1,00,000
₹ 10,00,001 – ₹ 50,90,000 @30% 12,27,000
13,39,500
Add: Surcharge @ 10%, since total income exceeds ₹ 50 lakhs but does 1,33,950 14,73,450
not exceed ₹ 1 crore.
(B) Tax Payable on total income of ₹ 50 lakhs
(₹ 12,500 plus ₹ 1,00,000 plus ₹ 12,00,000, being 30% of ₹ 40,00,000) 13,12,500
(C) Excess tax payable (A)-(B) 1,60,950
(D) Marginal Relief (₹ 1,60,950 – ₹ 90,000, being the amount of 70,950
income in excess of ₹ 50,00,000)
Tax payable (A)-(D) [ ₹ 14,73,450 – ₹ 70,950] 14,02,500
Add: Education cess@1% and SHEC@2% 42,075
Add: EC & SHEC @ 4% 56,100
Tax Liability 14,58,600
Tax Liability (Rounded off) 14,58,600

EXAMINERS’ COMMENTS ON THE PERFORMANCE OF EXAMINEES:

Many examinees were not clear with the concept of marginal relief and hence were not able to
compute the tax liability correctly applying the said concept.
Chapter 1 Basic Concepts
 1.9

Question 12
Mr. X a resident, aged 56 years, till recently was a successful businessman filing his return of incomes
regularly and promptly ever since he obtained PAN card. During the COVID- Pandemic period his business
suffered severely and he incurred huge losses. He was not able to continue his business and finally on 1st
January, 2024 he decided to wind-up his business which he also promptly intimated to the jurisdictional
Assessing Officer about the closure of his business.
The Assessing Officer sent him a notice to tax income of A.Y. 2024-25 during the A.Y. 2023-24 itself. Does
the Assessing Officer have the power to do so? Are there any exceptions to the general rule “Income of the
previous year is assessed in the assessment year following the previous year”? (PYP 4 Marks Nov ‘22)
Answer 12
Yes, he has the power to do so.
Since the business of Mr. X is discontinued on 1st January, 2024, the income of the period from 1.4.2023 to
1.1.2024 may, at the discretion of the Assessing Officer, be charged to tax in A.Y.2024-25 itself.

Following are the other exceptions to the general rule “Income of the previous year is assessed in the
assessment year following the previous year” i.e., the income of the previous year is assessed in the
previous year itself.

(i) Shipping business of non-resident

(ii) Persons leaving India with no present intention of returning
(iii) AOP/BOI/Artificial Juridical Person formed for a particular event or purpose and likely to be
dissolved
(iv) Persons likely to transfer property to avoid tax.

Question 13
The assesses is found to be the owner of the gold (market value of which is ₹ 50,00,000) during the financial
year ending 31-03-2024 but he recorded to have spent ₹ 10,00,000 in acquiring the same. Explain how the
Assessing Officer will deal with the issue. (PYP 2 Marks May’22)
Answer 13
As per section 69B, if the assesses is found to be the owner of gold (market value of which is ₹ 50 lakhs)
during the financial year ending 31.3.2024 but he has recorded to have spent only ₹ 10 lakhs in acquiring it,
the Assessing Officer can add the difference of the market value of such gold and ₹ 10 lakhs i.e., ₹ 40 lakhs
as the income of the assesses for A.Y.2024-25, if the assesses offers no satisfactory explanation thereof.
Such income would be chargeable to tax@78% (@60% plus surcharge @25% and cess @4%).

Question 14
Examine with reasons whether the following statements are correct/incorrect with regard to the provisions
of Income-tax Act, 1961:
Cash credit of ₹ 1,50,000 were traced in the books of accounts of Mr. Yogesh for which no explanation about
its source was provided. Such income is taxable @30% under section 115BB in the hands of Yogesh. (RTP
Nov ‘23)
Answer 14
The statement is incorrect.
Unexplained cash credit is taxable @60%plus surcharge @25% plus cess @4% under section 115BBE.

Question 15
Discuss the taxability of the following transactions giving reasons, in the light of relevant provisions, for
your conclusion. Attempt any two out of the following three parts:
(i) Mr. Rajpal took a land on rent from Ms. Shilpa on monthly rent of ₹ 10,000. He sub- lets the land to Mr.
Manish for a monthly rent of ₹ 11,500. Manish uses the land for grazing of cattle required for agricultural
activities. Mr. Rajpal wants to claim deduction of ₹ 10,000 (being rent paid by him to Ms. Shilpa) from
the rental income received by it from Mr. Manish.
Chapter 1 Basic Concepts
 1.10

(ii) Mr. Netram grows paddy on land. He then employs mechanical operations on grain to make it fit for
sale in the market, like removing hay and chaff from the grain, filtering the grain and finally packing the
rice in gunny bags. He claims that entire income earned by him from sale of rice is agricultural income
not liable to income- tax since paddy as grown on land is not fit for sale in its original form (PYP 4 Marks,
Jan’21)
Answer 15
(i) The rent or revenue derived from land situated in India and used for agricultural purposes would be
agricultural income under section 2(1A) (a). Therefore, rent received from sub-letting of the land used for
grazing of cattle required for agriculture activities is agricultural income. The rent can either be received
by the owner of the land or by the original tenant from the sub-tenant.
Accordingly, rent received by Mr. Rajpal from Mr. Manish for using land for grazing of cattle required for
agricultural activities is agricultural income exempt u/s 10(1). As per section 14A, no deduction is allowable
in respect of exempt income.
(ii) The income from the process ordinarily employed to render the produce fit to be taken to the market
would be agricultural income under section 2(1A) (b)(ii). The process of making the rice ready from paddy
for the market may involve manual l operations or mechanical operations, both of which constitute
processes ordinarily employed to make the product fit for the market.
Accordingly, the entire income earned by Mr. Netram from sale of rice is agricultural income.

Question 16
Mr. Avani, a resident aged 25 years, manufactures tea leaves from the Tea plants grown by him in India.
These are then sold in the India market for ₹ 40 lakhs. The cost of growing tea plants was ₹ 15 lakhs and the
cost of manufacturing tea leaves was ₹ 10 lakhs. Compute her tax liability for the Assessment Year 2024-25.
(PYP 7 Marks, May’18)
Answer 16
Computation of tax liability of Ms. Avani for the A.Y. 2024-25
In cases where the assesse himself grows tea leaves and manufactures tea in India, then, as per Rule 8 of
40% of profit on sale of tea is taxable as business income under the head “Profits and gains from business
or profession”, and the balance 60% is agricultural income, which is exempt from tax.
Profits from manufacture and sale of tea = ₹ 40 lakhs – ₹ 15 lakhs – ₹ 10 lakhs = ₹ 15 lakhs
Agricultural Income = 60% of ₹ 15 lakhs = ₹ 9 lakhs Business Income = 40% of ₹ 15 lakhs = ₹ 6 lakhs.
The tax liability of Ms. Avani has to be computed applying the concept of partial integration, since her total
income comprises of both agricultural income and non-agricultural income and her agricultural income
exceeds ₹ 5,000 p.an and her non-agricultural income exceeds the basic exemption limit i.e., ₹ 2,50,000
(applicable, in her case).
Accordingly, her tax liability would be computed in the following manner:
Particulars ₹
Tax on total income of ₹ 15,00,000, being agricultural income 2,62,500
and non-agricultural income
Less: Tax on agricultural income and basic exemption limit i.e.,
₹11,50,000 [₹ 9,00,000 plus ₹ 2,50,000] 1,57,500
1,05,000
Add: Education cess@2% 2,100
Secondary & higher education cess@1% 1,050
Add: EC & SHEC @ 4% (as per amendment) 4,200
Total Tax liability 1,09,200

Chapter 1 Basic Concepts

 1.11

Question 17
Mr. Kabra is engaged in the business of growing and curing (further processing) coffee in the state of
Karnataka. The whole of coffee grown in his plantation is cured. Relevant information pertaining to the year
ended 31-03-2024 are given hereunder:
PARTICULARS AMOUNT ₹
Opening balance of the car as on 01-04-2023 3,00,000
Opening balance of machinery as on 01-04-2023 15,00,000
Expenses incurred in growing coffee 3,10,000
Expenses of curing coffee 3,00,000
Sale value of cured coffee 22,00,000
The car is used for the agricultural operations and the machine was used for coffee curing business
operations. Compute the income arising from the above activities for the assessment year 2024-25 and the
written down value as on 01-04-2024 (WDV as on 31-03-2024 less depreciation for the P.Y. 2023-24). (PYP
4 Marks May’22)
Answer 17
Computation of Income from growing and curing coffee of Mr. Kabra for A.Y. 2024-25
Particulars Amount Amount
(₹) (₹)
Income from growing and curing coffee
Sale value of cured coffee 22,00,000
Less: Expenses incurred in growing coffee 3,10,000
Depreciation on Car (15% of ₹ 3,00,000) 45,000
3,55,000
Less: Expenses of curing coffee 3,00,000 18,45,000
Depreciation on machinery (15% of ₹ 15,00,000) 2,25,000 5,25,000
13,20,000
Business Income [25% of ₹ 13,20,000] 3,30,000
Agricultural Income [75% of ₹ 13,20,000] 9,90,000
Computation of Written Down Value as on 1.4.2024
Opening balance of Car as on 1.4.2023 3,00,000
Less: Depreciation@15% on ₹ 3 lakh 45,000
WDV of car as on 1.4.2024 2,55,000
Opening balance of machinery as on 1.4.2023 15,00,000
Less: Depreciation@15% on ₹ 15 lakh 2,25,000
WDV of machinery as on 1.4.2024 12,75,000

Question 18
Mr. Jay is having total income of ₹ 6,90,000 during the P.Y. 2023-24 consisting of Income from business of
₹ 40,000, lottery winnings (gross) ₹ 5,60,000, income by way of salary (computed) ₹ 1,20,000 and loss from
house property ₹ 30,000. Compute his tax liability and advance tax obligations for A.Y. 2024-25. (MTP 4
Marks, Oct’21)
Answer 18
Computation of tax liability and advance tax obligations of Mr. Jay for A.Y. 2024-25
Particulars ₹ ₹
Income from salary (computed) 1,20,000
Less: Set-off loss from house property (30,000) 90,000
Loss from house property 30,000
Chapter 1 Basic Concepts
 1.12

Less: Set-off against salary income (30,000) -

Income from business 40,000
Lottery winning 5,60,000
Total Income 6,90,000
Tax liability
Tax @30% on lottery income 1,68,000
Tax on other income of ₹ 1,30,000 (Nil, since it does not -
exceed the basic exemption limit of ₹ 2,50,000)
1,68,000
Add: Health and education cess@4% 6,720
Total tax liability 1,74,720
Less: TDS on lottery income under section 194B 1,68,000
Net tax payable 6,720
Since tax payable for the P.Y. 2023-24 is less than ₹ 10,000, Mr. Jay is not
liable to pay advance tax.

MULTIPLE CHOICE QUESTIONS (MCQS)

1. XYZ LLP falls under which category of person?

(a) Firm
(b) Company
(c) Association of persons
(d) Artificial judicial person (MTP 1 Mark, May’20)
Ans :(c)

2. Under the provisions of the Income-tax Act, 1961, the term “Person” would not include:
(a) A body corporate incorporated in a country outside India
(b) A Limited Liability Partnership (LLP)
(c) Indian branch of a foreign company
(d) A local authority (MTP 1 Mark, April’19)

Ans :(c)

3. (Also includes concepts of Income Which Do Not Form a Part of Total Income)
Mr. Devansh has agricultural income of Rs.2,30,000 and business income of Rs.2,45,000. Which of the
following statements are correct?
(a) Agricultural income has to be aggregated with business income for tax rate purposes.
(b) No aggregation is required since agricultural income is less than basic exemption limit.
(c) No aggregation is required since business income is less than basic exemption limit.
(d) Agricultural income is exempt under section 10(1) but the same has to be aggregated with
business income, since it exceeds Rs. 5,000. (MTP 1 Mark, March’19)
Ans: (c)

4. Miss Nish (68 years) is a resident individual. For the Assessment Year 2024-25, she has following income:
Long-term capital gain on transfer of equity shares Rs.1,80,000 (Securities Transaction Tax has been paid
on acquisition and transfer of the said shares) Other income Rs.2,75,000. Calculate the tax liability of Miss
Nish for Assessment Year 2024-25. Assume that she has not opted for 115BAC.

Chapter 1 Basic Concepts

 1.13

(a) Nil
(b) Rs. 5670
(c) Rs. 5,720
(d) Rs. 8,320 (MTP 2 Marks, Nov’21)
Ans: (c)

5. Mr. Ashutosh, aged 65 years and a resident in India, has a total income of ₹ 3,20,00,000, comprising long
term capital gain taxable under section 112 of ₹ 57,00,000, long term capital gains taxable under section
112A of ₹ 65,00,000 and other income of ₹ 1,98,00,000. What would be his tax liability for A.Y. 2024-25.
Assume that Mr. Ashutosh has not opted for the provisions of section 115BAC.
(a) ₹ 90,05,880
(b) ₹ 97,25,690
(c) ₹ 97,34,400
(d) ₹ 97,22,440 (MTP 2 Marks, Oct’21)
Ans: (d) Answer is amended to (a)

6. During the P.Y.2023-24, Mr. Rohan has ₹ 80 lakhs of short-term capital gains taxable u/s 111A, ₹ 70 lakhs
of long-term capital gains taxable u/s 112A and business income of ₹ 2.90 crores. Which of the following
statements is correct?
(a) Surcharge@25% is leviable on income-tax computed on total income of ₹ 4.40 crores
(b) Surcharge@15% is leviable on income-tax computed on total income of ₹ 4.40 crore
(c) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 1.50 crore; in
respect of business income of ₹ 2.90 crores, surcharge is leviable@25% on income-tax
(d) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 1.50 crore; in
respect of business income of ₹ 2.90 crores, surcharge is leviable@37% on income-tax
(MTP 2 Marks Sep’22)
Ans: (c)

7. Mr. Ashish’s total income comprises of long-term capital gains on sale of land ₹ 5 lakhs; short-term capital
gains on sale of STT paid listed equity shares ₹ 2 lakhs; income from lottery ₹ 1 lakh and savings bank
interest ₹ 30,000. He invests ₹ 1.50 lakhs in PPF. His tax liability for A.Y.2024-25, assuming that he is a
resident Indian of the age of 40 years and does not opt for the provisions of section 115BAC, is –

(a) ₹ 1,64,800
(b) ₹ 1,66,400
(c) ₹ 1,14,400
(d) ₹ 1,13,300 (MTP 2 Marks Oct’22)
Ans: (c)

8. The Gupta HUF in Maharashtra comprises of Mr. Harsh Gupta, his wife Mrs. Nidhi Gupta, his son Mr.
Deepak Gupta, his daughter-in-law Mrs. Deepti Gupta, his daughter Miss Preeti Gupta. Which of the
members of the HUF are eligible for coparcenary rights?
(a) Only Mr. Harsh Gupta and Mr. Deepak Gupta
(b) Only Mr. Harsh Gupta, Mr. Deepak Gupta and Miss Preeti Gupta
(c) Only Mr. Harsh Gupta, Mr. Deepak Gupta, Mrs. Nidhi Gupta and Mrs. Deepti Gupta
(d) All the members are co-parceners (MTP 1 Mark March ‘23)
Ans: (b)

9. Sham Singh spends ₹ 1,00,000 on cultivation and harvesting of his agricultural produce. 50% of the
production is sold for ₹1,10,000 and rest is stored for self-consumption. What is the amount of the
agricultural income?

Chapter 1 Basic Concepts

 1.14

(a) Rs. 60,000

(b) Rs. 1,10,000
(c) Rs.1,20,000
(d) Rs. 1,00,000 (MTP 2 Marks, Oct’20)
Ans: (a)

10. Which of the following incomes are exempt incomes as per the provisions of Income-tax Act, 1961?
(i) Allowance paid by Government to a citizen of India for rendering services outside India
(ii) Death-cum-retirement gratuity received by a government employee
(iii) Any sum received under a life insurance policy taken on 01.05.2023, if the premium payable
for any of the years exceeds 10% of the actual capital sum assured.
(iv) Any payment from National Pension System Trust to an employee on account of closure of
his NPS account.
(a) (I), (ii), (iii), (iv)
(b) (I) & (ii)
(c) (I), (ii) & (iv)
(d) (ii) & (iv) (MTP 1 Mark, Oct’19)
Ans: (b)

11. Which of the following statements is/are true in respect of taxability of agricultural income under the
Income-tax Act, 1961?
(i) Any income derived from saplings or seedlings grown in a nursery is agricultural income exempt
from tax u/s 10(1).
(ii) 60% of dividend received from shares held in a tea company is agricultural income exempt from
tax u/s 10(1).
(iii) While computing income tax liability of an Assesses aged 50 years, agricultural income is required
to be added to total income only if net agricultural income for the P.Y. exceeds Rs. 5,000 and the
total income (including net agricultural income) exceeds Rs.2,50,000.
(iv) While computing income tax liability of an Assesses aged 50 years, agricultural income is required
to be added to total income only if net agricultural income for the P.Y. exceeds Rs. 5,000 and the
total income (excluding net agricultural income) exceeds Rs.2,50,000.
Choose from the following options:
(a) (I) and (iii)
(b) (ii) and (iii)
(c) (I) and (iv)
(d) (I), (ii) and (iv) (MTP 2 Marks, Oct’19)
Ans: (c)

12. Income derived from farm building situated in the immediate vicinity of an agricultural land (not assessed
to land revenue) would be treated as agricultural income if such land is situated in –
(a) an area at a distance of 3 kms from the local limits of a municipality and has a population of 80,000 as
per last census
(b) an area within 1.5 kms from the local limits of a municipality and has a population of 12,000 as per
last census
(c) an area within 2 kms from the local limits of a municipality and has a population of 11,00,000 as per
last census
(d) an area within 8 kms from the local limits of a municipality and has a population of 10,50,000 as per
last census (MTP 1 Mark March ‘23)
Ans: (a)

Chapter 1 Basic Concepts

 1.15

13. Mr. Ajay is a recently qualified doctor. He joined a reputed hospital in Delhi on 01.01.2024. He earned
total income of ₹ 3,40,000 till 31.03.2024. His employer advised him to claim rebate u/s 87A while filing
return of income for A.Y. 2024-25. Assume that he does not opt for 115BAC. He approached his father to
enquire regarding what is rebate u/s 87A of the Act. His father told him:
(i) An individual who is resident in India and whose total income does not exceed ₹ 3,50,000 is entitled to
claim rebate under section 87A.
(ii) An individual who is resident in India and whose total income does not exceed ₹ 5,00,000 is entitled to
claim rebate under section 87A.
(iii) Maximum rebate allowable under section 87A is ₹ 5,000.
(iv) Rebate under section 87A is available in the form of exemption from total income.
(v) Maximum rebate allowable under section 87A is ₹ 2,500.
(vi) Rebate under section 87A is available in the form of deduction from tax liability.
As a tax expert, do you agree with the explanation given by Mr. Ajay’s father? Choose the correct option
from the following:
(a) (ii), (iii), (vi)
(b) (i), (v), (vi)
(c) (ii), (iii), (iv)
(d) (i), (iv), (v)
(e) (ii) (v)(vi) (RTP May’19)

Ans: (As per amendment the answer is (e) as the Rebate is now available an individual who is resident in India and
whose total income does not exceed ₹ 5,00,000 and Maximum rebate allowable under section 87A is ₹ 12,500)

14. During the P.Y.2023-24, Mr. Ranjit has short-term capital gains of ₹ 95 lakhs taxable under section 111A,
long-term capital gains of ₹ 110 lakhs taxable under section 112A and business income of ₹ 90 lakhs.
Which of the following statements is correct?
(a) Surcharge@25% is leviable on income-tax computed on total income of ₹ 2.95 crore, since total
income exceeds ₹ 2 crore.
(b) Surcharge@15% is leviable on income-tax computed on total income of ₹ 2.95 crore.
(c) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 2.05 crore; in
respect of business income, surcharge is leviable@25% on income- tax, since total income exceeds ₹
2 crore.
(d) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 2.05 crore;
surcharge@10% is leviable on income-tax computed on business income, since the same exceeds ₹
50 lakhs but is less than ₹ 1 crore. (RTP Nov ’19)
Ans: (b)

15. Mr. Ajay is found to be the owner of two gold chains of 50 gms each (market value of which is ₹ 1,45,000
each) during the financial year ending 31.3.2024 but he could offer satisfactory explanation for ₹ 50,000
spent on acquiring these gold chains. As per section 115BBE, Mr. Ajay would be liable to pay tax of –
(a) ₹ 1,87,200
(b) ₹ 2,26,200
(c) ₹ 1,49,760
(d) ₹ 1,80,960 (RTP May ’20)
Ans: (a)

Chapter 1 Basic Concepts

 1.16

16. Mr. Rishabh, aged 65 years and a resident in India, has a total income of ` 4,50,00,000, comprising long
term capital gain taxable under section 112 of ` 85,00,000, long term capital gain taxable under section
112A of ` 75,00,000 and other income of ` 2,90,00,000. What would be his tax liability for A.Y. 2024-25.
Assume that Mr. Rishabh has opted for the provisions of section 115BAC. (RTP May ’23, MTP 2 Marks Sep
’23)
(a) ` 1,41,40,750
(b) ` 1,38,86,990
(c) ` 1,38,84,390
(d) ` 1,39,81,240
Ans: (b) (As per amendment in the tax structure as per 115BAC the answer will be none of them it is Rs 1,38,50,200)

17. Mr. Anay (aged 25) has an agricultural income of ₹ 2,10,000 and business income of ₹ 2,35,000. Which of
the following statement is correct?
(a) Agricultural income always has to be aggregated with business income for rate purposes
(b) No aggregation is required since business income which constitutes his total income, is less than basic
exemption limit
(c) No aggregation is required since agricultural income is less than basic exemption limit
(d) Agricultural income is exempt under section 10(1) but the same has to be aggregated with business
income, since it exceeds ₹ 5,000. (RTP May ’19)
Ans: (b)

18. Mr. A has taken two ULIPs. ULIP “X” is issued on 1.1.2023 and ULIP “Y” on 1.5.2023. The sum assured of
ULIP “X” and ULIP “Y” is ₹ 30 lakhs and ₹ 40 lakhs, respectively. The annual premium paid by Mr. A during
the P.Y. 2023-24 is ₹ 3 lakhs and ₹ 4 lakhs, respectively. What would be the taxability of the consideration
received by Mr. A on maturity of both the ULIPs?
(a) Consideration received on the maturity of ULIP “X” would be exempt u/s 10(10D) while the profits
and gains from receipt of consideration on the maturity of ULIP “Y” would be taxable.
(b) Consideration received on the maturity of ULIP “Y” would be exempt u/s 10(10D) while the profits
and gains from receipt of consideration on the maturity of ULIP “X” would be taxable.
(c) Consideration received on the maturity of both ULIP “X” and ULIP “Y” would be
exempt u/s 10(10D)
(d) The profits and gains from receipt of consideration on the maturity of both ULIP “X” and ULIP “Y”
would be taxable. (RTP May ’22)
Ans: (a)

Chapter 1 Basic Concepts

 2.1

Chapter 2
Residence & Scope of Total Income
Question 1 illustration
Mr. Anand is an Indian citizen and a member of the crew of a Singapore bound Indian ship engaged in
carriage of passengers in international traffic departing from Chennai port on 6th June, 2023. From the
following details for the P.Y. 2023-24, determine the residential status of Mr. Anand for A.Y. 2024- 25,
assuming that his stay in India in the last 4 previous years (preceding P.Y. 2023-24) is 400 days: (Old & New
SM) (Same concept different figures RTP Nov’20)
Particulars Date
Date entered into the Continuous Discharge Certificate inrespect of 6th June, 2023
joining the ship by Mr. Anand
Date entered into the Continuous Discharge Certificate inrespect of 9th December,2023
signing off the ship by Mr. Anand
Answer 1
In this case, since Mr. Anand is an Indian citizen and leaving India during P.Y. 2023-24 as a member of the crew
of the Indian ship, he would be resident in India if he stayed in India for 182 days or more.
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 Chennai port) and having its destination at a port outside India (i.e.,
the Singapore port). Hence, the voyage is an eligible voyage for the purposes of section 6(1).
Therefore, the period beginning from 6th June, 2023 and ending on 9th December, 2023, being the dates
entered into the Continuous Discharge Certificate in respect of joining the ship and signing off from the ship
by Mr. Anand, an Indian citizen who is a member of the crew of the ship, has to be excluded for computing the
period of his stay in India. Accordingly, 187 days [25+31+31+30+31+30+9] have to be excluded from the period
of his stay in India. Consequently, Mr. Anand’s period of stay in India during the P.Y. 2023- 24 would be 179
days [i.e., 365 days – 187 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.

Question 2
Mr. Thomas, a citizen of Japan, comes to India for the first time during the P.Y. 2019-20. During the
financial years 2019-20, 2020-21, 2021-22, 2022-23 and 2023-24, he was in India for 50 days, 65 days, 95
days, 150 days and 75 days, respectively. Determine his residential status for the A.Y. 2024-25. Examine
the tax implications in the hands of Mr. Thomas for the Assessment Year 2024-25 of the following
transactions entered by him.
(1) Interest received from Mr. Michel, a non-resident outside India (The borrowed fund is used by Mr. Michel
for investing in Indian company's debt fund for earning interest).
(2) He is also engaged in the business of running news agency and earned income of Rs. 5 lakhs from
collection of news and views in India for transmission outside India.
He entered into an agreement with ABC & Co., a partnership firm for transfer of technical documents and
design and for providing services relating thereto, to set up a Steel manufacturing plant, in India. He
charged Rs. 15 lakhs for these services from ABC & Co.
(MTP 7 Marks, Nov’21)
Answer 2
Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one
of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period of
365 days or more and has been in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the above

Chapter 2 Residence & Scope of Total Income

 2.2

conditions are not satisfied, the individual is a non-resident. During the previous year 2023-24, Mr.
Thomas was in India for 75 days and during the 4 years preceding the previous year 2023-24, he was
in India for 360 days (i.e. 50+ 65+ 95+ 150 days).
The total stay of the Mr. Thomas during the previous year in India was less than 182 days and during
the four years preceding this year was for 360 days. Therefore, due to non-fulfillment of any of the two
conditions for a resident, he would be treated as non-resident for the Assessment Year 2024-25.
(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) 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, Rs. 10 lakhs
are not taxable in India in the hands of Mr. Thomas.
(3) Rs. 10 lakhs are 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 Steel
manufacturing plant in India. Hence, the same would be taxable in India in the hands of Mr. Thomas.

Question 3
Miss Bhanushali, an American National, got married to Mr. Vikas of India in New York on 3rd February,
2023 and came to India for the first time on 14-02-2023. She left for New York on 11-08-2023. She
returned to India again on 20-02-2024.
She received the following gifts from her relatives and friends during 01 -04-2023 to 31-03-2024 in India:
- From parents of husband Rs. 71,000
- From married sister of husband Rs. 21,000
- From two very close friends of her husband Rs. 1,41,000 and Rs. 1,21,000 Rs. 2,62,000
(i) Determine her residential status and compute the total income chargeable to tax for the Assessment Year
2024-25.
(ii) Will the residential status change if she had returned to India again on 20-01-2024 instead of 20-02-2024?
(MTP 7 Marks, April’21)
Answer 3
Determination of residential status and computation of total income of Miss Bhanushali (if she returned
to India on 20.2.2024)
Particulars Rs.
Under section 6(1), an individual is said to be resident in India in any previous
year, if he/she satisfies any one of the following conditions:
(I) He/she has been in India during the previous year for a total period of 182
days or more, or
(ii) He/she has been in India during the 4 years immediately preceding
the previous year for a total period of 365 days or more and has been in India
for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above,
he/she is a resident. If both the above conditions are not satisfied, the
individual is a non-resident.
Therefore, the residential status of Miss Bhanushali, an American National,
for A.Y.2024-25 has to be determined on the basis of her stay in India during
the previous year relevant to A.Y. 2024-25 i.e. P.Y.2023-24
and in the preceding four assessment years.
Her stay in India during the previous year 2023-24 and in the preceding four
years are as under:
P.Y. 2023-24
01.04.2023 to 11.08.2024 133 days
20.02.2024 to 31.03.2025 40 days
Chapter 2 Residence & Scope of Total Income
 2.3

Total 173 days

Four preceding previous years
P.Y.2022-23 [14.2.2023 to 31.3.2024] 47 days
P.Y.2021-22 Nil
P.Y.2020-21 Nil
P.Y.2019-20 Nil
Total 47 days
The total stay of Miss Bhanushali during the previous year in India was less than
182 days and during the four years preceding this year was for 47 days.
Therefore, due to non-fulfillment of any of the two conditions for a resident,
she would be treated as non-resident for the Assessment Year 2024-25.
Computation of total income of Miss Bhanushali for the A.Y. 2024-25.
Income from other sources
Gifts received from non-relatives is chargeable to tax as per section 56(2) (x)
if the aggregate value of such gifts exceeds Rs. 50,000.
- Rs. 71,000 received from parents of husband would be exempt, since Nil
parents of husband fall within the definition of ‘relatives’ and gifts from a
relative are not chargeable to tax.
- Rs. 21,000 received from married sister-in-law is exempt, since sister of Nil
husband falls within the definition of relative and gifts from a relative are not
chargeable to tax.
- Gift received from two friends of her husband Rs. 1,41,000 and Rs. 1,21,000
aggregating to Rs. 2,62,000 is taxable under section 56(2)(x) since the
aggregate of Rs. 2,62,000 exceeds Rs. 50,000. 2,62,000
Total Income 2,62,000
Determination of residential status of Miss Bhanushali (if she returned to India on 20.1.202 4)
Yes, the Answer would change, if she had returned to India again on 20.1.2024 instead of 20.2.2024.
In such case, her stay in India during the previous year 2023-24 would be:
01.04.2023 to 11.08.2023 133 days
20.01.2024 to 31.03.2024 71 days
Total 204 days
Since she satisfies the condition of stay in India for more than 182 days during the previous year 2023-24,
she would become resident in India. She would be a resident but not ordinarily resident in India for A.Y.
2024-25, since her stay in India in the preceding seven years is less than 730 days (it is only 47 days) 1.

Question 4
Determine the residential status and total income of Mr. Raghu for the assessment year 2024-25 from
the information given below.
Mr. Raghu (age 62 years), an American citizen, is employed with a multinational company in Gurugram.
Mr. Raghu holds a senior level position as researcher in the company, since 2012. To share his knowledge
and finding in research, company gave him an opportunity to travel to other group companies outside
India while continuing to be based at the Gurugram office.
The details of his travel outside India for the financial year 2023-24 are as under:
Country Period of stay
USA 25 August, 2023 to 10 November, 2023
UK 20 November, 2023 to 23 December, 2023
Germany 10 January, 2024 to 24 March, 2024
During the last four years preceding the previous year 2023-24, he was present in India for 380 days.
During the last seven previous years preceding the previous year 2023-24, he was present in India for 700
Chapter 2 Residence & Scope of Total Income
 2.4

days. During the P.Y. 2023-24, he earned the following incomes:

(1) Salary Rs. 15,80,000. The entire salary is paid by the Indian company in his Indian bank account.
(2) Dividend amounting to Rs. 48,000 received from Treat Ltd., a Singapore based company, which was
transferred to his bank account in Singapore.
(3) Interest on fixed deposit with Punjab National Bank (Delhi) amounting to Rs. 10,500 was credited to
his saving account. (MTP 7 Marks, March’21)
Answer 4
Determination of residential status
Mr. Raghu would be a resident in India in P.Y. 2023-24, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365
days or more and has been in India for at least 60 days in the previous year.
If he satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are
not satisfied, he would be a non-resident.
During the P.Y. 2023-24 Mr. Raghu stayed in India for 179 days i.e., 365 days – 186 days [78 days + 34 days
+ 74 days] and 380 days i.e., more than 365 days during the 4 preceding previous years. He satisfies the
second basic condition for being a resident. Hence, he is a resident in India for A.Y.2024-25.
(a) A person would be “Not ordinarily Resident” in India in any previous year, if such person, inter alia,
(b) has been a non-resident in 9 out of 10 previous years preceding the relevant previous year; or
(c) has during the 7 previous years immediately preceding the relevant previous year been in India for 729 days
or less.
For the previous year 2023-24, Mr. Raghu would be “Resident but not ordinarily resident” since he stayed
for less than 729 days during the 7 previous years immediately preceding P.Y. 2023-24.
Computation of total income of Mr. Raghu for A.Y.2024-25
Particulars Amount
(Rs.)
(1) Salary from Indian company received in a bank account in India 15,00,000
Less: Standard deduction u/s 16(IA) 50,000 14,50,000
(2) Dividend of Rs. 48,000 received from Singapore based company Nil
transferred to his bank account in Singapore is not taxable in the hands
of the resident but not ordinarily resident since the income has neither
accrued or arisen in India nor has it been received in India.
(3) Interest on fixed deposit with PNB credited to his savings bank account 10,500
is taxable in the hands of Mr. Raghu as Income from other sources, since
it has accrued and arisen in India and is also received in India.
Gross Total Income 14,60,500
Less: Deduction u/s 80TTB 10,500
Total Income 14,50,000

Question 5
Simran, a Chartered Accountant, is presently working in a firm in India. She has received an offer for the
post of Chief Financial Officer from a company at New York. As per the offer letter, she should join the
company at any time between 1st September, 2023 and 31st October, 2023. She approaches you of your
advice on the following issues to mitigate her tax liability in India:
(a) Date by which she should leave India to join the company;
(b) Direct credit of part of her salary to her bank account in Delhi maintained jointly with her mother to
meet requirement of her family.
(c) Period for which she should stay in India when she comes on leave. (MTP 7 Marks, May’20)
Answer 5
The following category of individuals will be treated as resident in India only if the period of their stay in
India during the relevant previous year is 182 days or more: -
- Indian citizens, who leave India in any previous year, inter alia, for purposes of employment outside
Chapter 2 Residence & Scope of Total Income
 2.5

India, or
- Indian citizen or person of Indian origin engaged outside India, inter alia, in an employment, who comes
on a visit to India in any previous year.
(a) Since Simran is leaving India for the purpose of employment outside India, she will be treated as
resident only if the period of her stay during the previous year amounts to 182 days or more. Therefore,
Simran should leave India on or before 28th September, 2023, in which case, her stay in India during
the previous year would be less than 182 days and she would become non-resident for the purpose of
taxability in India. In such a case, only the income which accrues or arises in India or which is deemed
to accrue or arise in India or received or deemed to be received in India shall be taxable. The income
earned by her in New York would not be chargeable to tax in India for
A.Y. 2024-25, if she leaves India on or before 28th September, 2023.
(b) If any part of Simian’s salary will be credited directly to her bank account in Delhi then, that part of her
salary would be considered as income received in India during the previous year under section 5 and
would be chargeable to tax under Income-tax Act, 1961, even if she is a non-resident. Therefore, Simran
should receive her entire salary in New York and then remit the required amount to her bank account
in Delhi in which case, the salary earned by her in New York would not be subject to tax in India.
(c) In case Simran visits India after taking up employment outside India, she would be covered in the
second exception provided above and she will be treated as resident only if the period of her stay
during the relevant previous year amounts to 182 days or more. Therefore, when Simran comes India
on leave, she should stay in India for less than 182 days during the relevant previous year so that her
status remains as a non-resident for the relevant previous year. Moreover, she should not visit India
again during the current previous year i.e. P.Y. 2023-24.

Question 6
1. Explain with reasons whether the following transactions attract income-tax in India in the hands of
recipients:
(i) Salary paid to Mr. Dinesh, a citizen of India Rs.20,00,000 by the Central Government for the services
rendered in London.
(ii) Royalty paid to Raja, a non-resident by Ms. Mute, a resident for a business carried on in Sri Lanka.
2. Ms. Anjali, a non-resident, residing in London since 1995, came back to India on 19-02-2022 for permanent
settlement in India. Explain the residential status of Ms. Anjali for the Assessment Year 2024-25 in
accordance with the various provisions of Income-tax Act, 1961. (MTP 7 Marks, March’19)
Answer 6
i. Taxability of certain receipts under the Income-tax Act, 1961
Sl. Taxable/ Amount
No. Not Taxable liable to tax Reason
(Rs.)
1 2 3 4
(I) Taxable 20,00,000 Salaries payable by the Government to a citizen of India for
service rendered outside India shall be deemed to accrue or arise
in India as per section 9(1)(iii). Mr. Dinesh is a citizen of India.
Therefore, salary paid by the Central Government to him for
services rendered in London would be deemed to accrue or arise
in India in his hands.
(ii) Not Taxable - Royalty paid by a resident to a non-resident in respect of a
business carried on outside India would not be taxable in the
hands of the non-resident, as the same would not be deemed to
accrue or arise in India as per the exception mentioned in section
9(1)(vi)(b). Therefore, royalty paid by Mute, a resident, to Raja, a
non-resident, for a business carried on in Sri Lanka would not be
deemed to accrue or arise in India.
Note - It is assumed that the royalty was not received in India.

Chapter 2 Residence & Scope of Total Income

 2.6

ii. Determination of residential status of Ms. Anjali for the A.Y. 2024-25
Ms. Anjali is a resident since she has stayed in India for 365 days during the P.Y.2023-24. Therefore,
she satisfies the condition of stay in India for a period of 182 days or more in the relevant previous
year as per the requirement under section 6(1).
As per section 6(6), an individual is said to be “not ordinarily resident” in India in any previous year,
if he has:
(a) been a non-resident in India in nine out of ten previous years preceding the relevant previous year;
or
(b) during the seven previous years immediately preceding the relevant previous year, been in India
for a period of, or periods amount in all to, 729 days or less.
Ms. Anjali must, therefore, satisfy either of the conditions to qualify as a not-ordinarily resident.
Ms. Anjali was a non-resident in India up to A.Y.2022-23.
She was resident in India only for P.Y. 2022-23 (A.Y.2023-24) out of the ten previous years
preceding P.Y. 2023-24 (A.Y.2024-25). This implies that she has been a non- resident in India in
nine out of ten previous years preceding P.Y. 2023-24 (A.Y. 2024-25).
Further, she was in India only for a period of 406 days [i.e., 10 days in February, 2022 + 31 days in
March 2022 + 365 days during the P.Y.2022-23] in the seven previous years preceding P.Y. 2023-
24 (A.Y. 2024-25).
Therefore, since Ms. Anjali satisfies both the conditions for “not-ordinarily resident”, her
residential status for A.Y.2024-25 would be “Resident but not ordinarily resident”.

Question 7
Compute the total income of Mr. Rajesh, aged 45 years, an Indian citizen for A.Y. 2024-25. On
22.09.2023, he left India for the first time to work as an officer of a company in Canada. He earns the
following income during the previous year 2023-24:
Sr. Particulars (Rs.)
No.
1. Interest on Canada Development Bonds (only 50% of interest 40,000
received in India)
2. Dividend from Canadian company received in Canada 20,000
3. Short term capital gain on sale of shares of an Indian company 90,000
received in India
4. Interest on savings bank deposit in UCO Bank, Delhi 12,000
5. Income from Profession in Canada (set up in India), out of which 15,000
Rs.10,000 is received in India
6. Agricultural income from a land situated in Gujarat 45,000
7. Rent received in Canada in respect of house property at Canada 60,000
(MTP 7 Marks, April’19)
Answer 7
Under section 6(1), an individual is said to be resident in India in any previous year if he satisfies any one
of the following conditions -
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period
of 365 days or more and has been in India for at least 60 days in the previous year.
In the case of Indian citizens leaving India for employment, the period of stay during the previous
year must be 182 days instead of 60 days given in (ii) above.
(As per amendment in case of Indian citizen or person of Indian origin, having total income more than Rs.
15,00,000 (other than income from foreign source) then the second basic condition is applicable and instead
of 60 days in the previous year, 120 days are considered)
During the previous year 2023-24, Mr. Rajesh, an Indian citizen, was in India for 175 days only (i.e.,
Chapter 2 Residence & Scope of Total Income
 2.7

30+31+30+31+31+22 days). Thereafter, he left India for employment purposes.

Since he does not satisfy the minimum criteria of 182 days, he is a non-resident for the A.Y. 2024-25.
Computation of total income of Mr. Rajesh for the A.Y. 2024-25
S. No. Particulars Non-Resident
(Rs.)
1. Interest on Canada Development Bond (See Note 1) 20,000
2. Dividend from Canadian Company received in Canada (See Note 2) -
3. Short term capital gain on sale of shares of an Indian company received in India 90,000
4. Interest on savings bank deposit in UCO Bank, Delhi 12,000
5. Income from profession in Canada (set up in India) out of which 10,000
Rs.10,000 is received in India (See Note 1)
6. Agricultural income from a land in Gujarat (See Note 3) -
7. Income from house property at Canada (See Note 4) -
Gross Total income 1,32,000
Less: Deduction under Chapter VI-A Section 80TTA (See Note 5) 10,000
Total Income 1,22,000
Notes:
(1) As per section 5(2), in case of a non-resident, only the following incomes are chargeable to tax in India:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India.
Therefore, only that part of interest income and income from profession which is received in India would
be taxable in his hands.
(2) Dividend received in Canada from a Canadian based company would not be taxable in the hands of Mr.
Rajesh since it has neither accrued nor arisen in India nor is it received in India.
(3) Agricultural income from a land situated in India is exempt under section 10(1) in the case of both non-
residents and residents.
(4) Rental income from property in Canada would not be taxable, since it is neither accrued or arisen in India
nor it is received in India.
(5) In case of an individual other than senior citizen, interest upto Rs.10,000 from savings account with, inter
alia, a bank is allowable as deduction under section 80TTA, irrespective of the residential status.

Question 8
Mrs. Bhawna and Mrs. Prerna are sisters and they earned the following income during the Financial Year
2023-24. Mrs. Bhawna is settled in Malaysia since 1992 and visits India for a month every year. Mrs.
Prerna is settled in Indore since her marriage in 2000. Compute the Gross total income of Mrs. Bhawna
and Mrs. Prerna for the assessment year 2024-25:
Sl. Particulars Mrs. Mrs.
No. Bhawna Prerna
(Rs.) (Rs.)
(i) Income from Profession in Malaysia, (set up in India) received 15,000
there
(ii) Profit from business in Delhi, but managed directly from 40,000 -
Malaysia
(iii) Rent (computed) from property in Malaysia deposited in a 1,20,000 -
Bank at Malaysia, later on remitted to India through approved
banking channels.
(iv) Dividend from PQR Ltd., an Indian Company 5,000 9,000
(v) Agricultural income from land in Maharashtra 7,500 4,000
Chapter 2 Residence & Scope of Total Income
 2.8

(vi) Past foreign untaxed income brought to India 5,000 -

(vii) Fees for technical services rendered in India received in 25,000 -
Malaysia
(viii) Income from a business in Pune (Mrs. Bhawna receives 50% 12,000 15,000
of the income in India)
(MTP 10 Marks, Oct’18)
Answer 8
The residential status of Mrs. Bhawna and Mrs. Prerna has to be determined on the basis of the number
of days of their stay in India. Since Mrs. Bhawna is settled in Malaysia since 1992, she would be a non-
resident for A.Y. 2024-25. Her visit to India for a month every year would not change her residential status.
However, Mrs. Prerna would be resident and ordinarily resident for A.Y. 2024-25, since she is settled in
India permanently since 2000. Based on their residential status, the gross total income of Mrs. Bhawna and
Mrs. Prerna would be determined as follows:
Computation of Gross Total Income of Mrs. Bhawna & Mrs. Prerna for the A.Y. 2024-25
S. No. Particulars Mrs. Bhawna Mrs. Prerna
(Non-Resident) (Resident)(Rs.)
(Rs.)
(i) Income from profession in Malaysia (set up in India) - -
received there (See Note below)
(ii) Profit from business in Delhi, but managed directly 40,000 -
from Malaysia (See Note below)
(iii) Rent (computed) from property in Malaysia - -
deposited in a Bank at Malaysia, later on remitted
to India through approved banking channels (See
Note below)
(iv) Dividend from PQR Ltd. an Indian Company 5,000 9,000
[Exempt under section 10(34), both in the hands of
non- resident and resident]
As per amendment dividend u/s
2(22)(a)/(b)/(c)/(d)/(e) from an Indian Company will
now be taxable normal rates in the hands of the
Shareholder Assessee. Interest Income incurred to
earn such income will be allowed as a deduction but
only upto 20% of such income. No deduction of
commission/remuneration paid to any other person.
DDT has been abolished.
(v) Agricultural income from land in Maharashtra - -
[Exempt under section 10(1), both in the hands of
non- resident and resident].
(vi) Past foreign untaxed income brought to India [Not - -
taxable, since it does not represent income of the
P.Y.2023-24].
(vii) Fees for technical services rendered in India, but 25,000 -
received in Malaysia (See Note below)
(viii) Income from a business in Pune (Mrs. Bhawna 12,000 15,000
receives 50% of the income in India) (See Note
below)
Gross Total income 82,000 24,000

Chapter 2 Residence & Scope of Total Income

 2.9

Note:
As per section 5(1), global income is taxable, in case of a resident. However, as per section 5(2), only the
following incomes are chargeable to tax, in case of a non-resident:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India.
Therefore, income from profession in Malaysia and rent from property in Malaysia received in Malaysia
by Mrs. Bhawna, a non-resident, would not be taxable in India, since both the accrual and receipt are
outside India.
However, profit from business in Delhi would be taxable in India in the hands of Mrs. Bhawna, even though
it is managed directly from Malaysia.
Further, by virtue of section 9(1)(vii), fees for technical services rendered in India would also be taxable
in the hands of Mrs. Bhawna, since it is deemed to accrue or arise in India.
The entire income from a business in Pune is taxable in the hands of both Mrs. Bhawna and Mrs. Prerna
due to their accrual/deemed accrual in India, even though a part of income from business in Pune is
received by Mrs. Bhawna outside India.

Question 9
Miss Kaira, an American national, got married to Mr. Ramesh of India in USA on 1.03.2023 and came to
India for the first time on 20.03.2023. She left for USA on 20.9.2023. She returned to India again on
27.03.2024. She has earned the following income during the financial year 2023-24.
Sr. Particulars Amount (Rs.)
No.
1. Dividend from American company, received in America 20,000
2. Profits from a profession in Delhi, but managed directly from America 50,000
3. Long term capital gain on sale of shares of an Indian company, 60,000
received in India
4. Interest on savings bank deposit in SBI, Delhi 17,000
5. Agricultural income from a land situated in Tamilnadu 55,000
6. Rent (computed) from property in America deposit in a Bank there, 1,00,000
later on remitted to India
7. Cash gift received from a friend on her birthday on 16.8.2020 51,000
8. Past foreign untaxed income brought to India 70,000
Determiner her residential status and compute the total income chargeable to tax for the Assessment
Year 2024-25. (MTP 10 Marks, Aug’18)
Answer 9
Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one
of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period of
365 days or more and has been in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the above
conditions are not satisfied, the individual is a non-resident.
Therefore, the residential status of Miss Kaira, an American National, for A.Y.2024-25 has to be determined
on the basis of her stay in India during the previous year relevant to A.Y. 2024-25 i.e. P.Y.2023-24 and in the
preceding four assessment years.
Her stay in India during the previous year 2023-24 and in the preceding four years are as under:
P.Y. 2023-24
01.04.2023 to 20.09.2023 - 173 days
27.03.2024 to 31.03.2024 - 5 days
Total 178 days
Chapter 2 Residence & Scope of Total Income
 2.10

Four preceding previous years

P.Y.2022-23 [1.4.2022 to 31.3.2023] - 12 days
P.Y.2021-22 [1.4.2021 to 31.3.2022] - Nil
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
P.Y.2019-20 [1.4.2019- to 31.3.2020] - Nil
Total 12 days
The total stay of the assesse during the previous year in India was less than 182 days and during the four
years preceding this year was for 12 days. Therefore, due to non-fulfillment of any of the two conditions for
a resident, she would be treated as non-resident for the Assessment Year 2024-25.
Computation of total income of Mrs. Kaira for the A.Y. 2024-25
S. No. Particulars (Non-Resident)
(Rs.)
1. Dividend from American company, received in America (Note 1) -
2. Profit from profession in Delhi, but managed directly from 50,000
America (Note 2)
3. Long-term capital gain on sale of shares of an Indian company 60,000
(Note 2)
4. Interest on savings account with SBI (Note 2) 17,000
5. Agricultural income from land in Tamilnadu [Exempt under section -
10(1)]
6. Rent (computed) from property in America deposited in a Bank at -
America, later on remitted to India (Note 1)
7. Cash gift received from a friend on Mrs. Kaira birthday on 51,000
16.8.2023 Note: As per section 56(2)(x), cash gifts received from a
non-relative would be taxable, if the amount exceeds Rs. 50,000
in aggregate during the previous year.
8. Past foreign untaxed income brought to India [Not taxable, since -
it does not represent income of the P.Y.2023-24].
Total Income 1,78,000
Notes:
(1) As per section 5(1), global income is taxable, in case of a resident. However, as per section 5(2), only the
following incomes are chargeable to tax, in case of a non-resident:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India.
Therefore, dividend from American company received in America, rent from property in America by Mrs.
Kaira, a non-resident, would not be taxable in India, since both the accrual and receipt are outside India.
(2) Profits from profession in Delhi, long term capital gains and interest on saving account with SBI are taxable in
the hands of Mrs. Kaira, since such incomes are deemed to accrue or arise in India during the P.Y. 2023-24.

Question 10
Mr. Kunal is an Indian citizen and a member of the crew of a Thailand bound Indian ship engaged in
carriage of passengers in international traffic departing from Port Blair on 10 th July, 2023. His stay in India
in the last 4 previous years (preceding P.Y. 2023-24) is 375 days and last seven previous years (preceding
P.Y.203-24) is 729 days:
Particulars Date
Date entered into the Continuous Discharge Certificate in respect of 10th July, 2023
joining the ship by Mr. Kunal
Date entered into the Continuous Discharge Certificate in respect of 21st January, 2024
signing off the ship by Mr. Kunal
Chapter 2 Residence & Scope of Total Income
 2.11

He earned following income during the previous year 2023-24

Dividend from Thailand Company received in Thailand ₹ 30,000
Short term capital gains on sale of shares of an Indian company ₹ 25,000
Interest on savings account with Post office ₹ 13,000
Past foreign untaxed income brought to India during the previous year ₹ 5,000
Cash gift received from non-relative ₹ 20,000
Income from agricultural land in Nepal received there and then brought to India ₹ 18,000
Interest received from a non-resident on moneys borrowed for the purpose of business in Delhi ₹
1,50,000.
From the above details for the P.Y. 2023-24, compute the total income of Mr. Kunal for A.Y. 2024-25.(MTP
10 Marks,March’18)
Answer 10
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 Port Blair) and having its destination at a port
outside India (i.e., the Thailand port). Hence, the voyage is an eligible voyage for the purposes of section
6(1).
Therefore, the period beginning from 10th July, 2023 and ending on 21st January, 2024, being the dates
entered into the Continuous Discharge Certificate in respect of joining the ship and signing off from the
ship by Mr. Kunal, an Indian citizen who is a member of the crew of the ship, has to be excluded for
computing the period of his stay in India. Accordingly, 196 days [22+31+30+31+30+31+21] have to be
excluded from the period of his stay in India. Consequently, Mr. Kunal’s period of stay in India during the
P.Y. 2023-24 would be 169 days [i.e., 365 days – 196 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.
Based on the residential status, the total income of Mr. Kunal would be determined as follows
Computation of total income of Mr. Kunal for the A.Y. 2024-25
S. No. Particulars (₹)
(i) Dividend from Thailand Company received in Thailand (Note 2) -
(ii) Short term capital gain on sale of shares of an Indian company 25,000
(iii) Interest on savings account with Post office (Note 3) 9,500
(iv) Past foreign untaxed income brought to India during the previous year -
[Not taxable, since it does not represent income of the P.Y.2023-24]
(v) Gift received from non-relative -
[As per section 56(2)(x), cash gifts received from a non-relative would be
taxable,
if the amount exceeds ₹ 50,000 in aggregate during the previous year]
(vi) Income from agricultural land in Nepal received there and then brought to -
India (Note 2)
(vii) Interest received from a non-resident on moneys borrowed for the purpose
of business in Delhi (Note 4) 1,50,000
Gross Total income 1,84,500
Less: Deductions under Chapter VIA
Section 80TTA 9,500
(In case of an individual, interest upto ₹ 10,000 from savings account with, inter alia, a
post office is allowable as deduction under section 80TTA)
Total Income 1,75,000
Notes:
(1) Since the residential status of Mr. Kunal 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
Chapter 2 Residence & Scope of Total Income
 2.12

irrelevant.
(2) As per section 5(2), only the following incomes are chargeable to tax in India, in case of a non- resident:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India.
Therefore, dividend from Thailand Company received in Thailand and Income from agricultural land in Nepal
received there and then brought to India by Mr. Kunal, a non-resident, would not be taxable in India, since
both the accrual and receipt are outside India.
(3) The interest on Post Office Savings Bank Account, would be exempt under section 10(15) (i), only to the
extent of ₹ 3,500 in case of an individual account.
(4) As per section 9(1)(v)(c), interest payable by a non-resident on moneys borrowed and used for the
purposes of business carried on by such person in India shall be deemed to accrue or arise in India in the
hands of the recipient.

Question 11
Mr. Sushant furnished the following particulars of his income for the year ended 31.3.2024.
Particulars ₹
(a) Income earned from business in Dubai which is controlled from Delhi 80,000
(₹ 65,000 is received in India)
(b) Pension for services rendered in India but received in Dubai (computed) 24,000
(c) Dividend from an Oil Company, a Dubai based company, received in Dubai 15,000
(d) Rent from property in Dubai, deposited in a bank in Dubai and later on, 70,000
remitted to India through approved banking channels
(e) Dividend from Sunset Ltd., an Indian company, received in Dubai 78,000
(f) Interest on money borrowed by Mr. Dipish, a non-resident, for the purpose of 55,000
investment in shares of ABC Ltd., an Indian company
(g) Agricultural income from a land in Bhutan, received in India 25,000
Compute his gross total income for the assessment year 2024-25, if he is:
(i) Resident and ordinarily resident;
(ii) Resident but not ordinarily resident;
(iii) Non-resident (MTP 7 Marks March 22)
Answer 11
Computation of gross total income of Mr. Sushant for the A.Y. 2024-25
Resident & Resident but Non-
Particulars ordinarily not ordinarily Resident
resident resident
₹ ₹ ₹
(a) Income earned from business in Dubai which is 80,000 80,000 65,000
controlled from Delhi, out of which ₹ 65,000 is
received in India
(b) Pension for services rendered in India but received 24,000 24,000 24,000
in Dubai (computed)
(c) Dividend received in Dubai from an Oil company, a 15,000 - -
Dubai based company
(d) Rent from property in Dubai, deposited in a bank in 49,000 - -
Dubai
(e) Dividend from Sunset Ltd., an Indian Company 78,000 78,000 78,000

Chapter 2 Residence & Scope of Total Income

 2.13

(f) Interest on money borrowed by Mr. Dipish, a non- 55,000 - -

resident, for the purpose of investment in shares of
ABC Ltd., an Indian company
(g) Agricultural income from a land in Bhutan, received 25,000 25,000 25,000
in India (Taxable)
Gross Total Income 3,26,000 2,07,000 1,92,000
Notes:

(a) As per section 5(1), global income is taxable in case of a resident. However, as per section 5(2), in case of
a non-resident, only the following incomes are chargeable to tax in India:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or deemed to accrue or arise in India.
Further, the income which accrues or arise outside India would be chargeable to tax in case of resident
but not ordinarily resident in India, only if such income is derived from a business controlled in India.
Accordingly, the entire income earned from business in Dubai which is controlled from Delhi would be
chargeable to tax in the hands of Mr. Sushant if he is a resident in India or resident but not ordinarily
resident. However, if he is non-resident then only that part of income which is received in India would be
taxable in his hands.
(b) Agricultural income from a land in Bhutan, received in India is taxable in all cases.
(c) Pension for services rendered in India but received in Dubai and dividend from Sunset Ltd., an Indian
company would be taxable in all cases, since it has accrued or arisen in India.
(d) Dividend from a Dubai based company, received in Dubai and interest on money borrowed by Mr. Dipish,
a non-resident, for the purpose of investment in shares of ABC Ltd., an Indian company, would be taxable
in the hands of Mr. Sushant, only if he is resident and ordinarily resident in India. If he is a resident but not
ordinarily resident or a non-resident, the same would not be taxable in his hands in India since it has
neither accrued nor arisen in India nor is it received in India.
(e) Likewise, rental income from property in Dubai would also be taxable only if he is resident in India. 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 gross total income of a resident and ordinarily resident.
₹
Rent received (assumed as gross annual value) 70,000
Less: Deduction under section 24 (30% of ₹ 70,000) 21,000
Income from house property 49,000

Question 12
Mr. Krishna (aged 58 years), a citizen of India, serving in the Ministry of Finance in India, was transferred
to Indian Embassy in UK on 15th March 2023. His income during the financial year 2023-24 is given
hereunder:
Particulars ₹
Rent from a house situated at UK, received in UK. Thereafter, remitted to 5,25,000
Indian bank account.
Interest on Post office savings bank account in India 4,500

Chapter 2 Residence & Scope of Total Income