Residential Status Questions and Answers

SECTION – A

Question 1.
State the basic condition u/s 6(1) of Income Tax Act, 1961.
Answer:
The basic condition is:

One should be in India during the relevant previous year for a period of 182 days or more.
One should be in India for a period of 60 days or more during the relevant previous year and 365 days or more during 4 years immediately preceeding the previous year.

Question 2.
State the additional condition u/s 6(6) of Income Tax Act, 1961.
Answer:
The additional is:

A person should be a resident in India for atleast 2 years out of 10 years preceeding the relevant previous year.
He should have stayed in India for a period of 730 days or more during 7 years immediately preceeding the relevant previous year.

Question 3.
When does an individual becomes a resident, but NOR?
Answer:
If an individual satisfied any one of the basic conditions mentioned U/ s 6(1) and fails to satisfy any one or none of the additional conditions mentioned U/s 6(6) he is send to be a resident, but NOR.

Question 4.
Who is a not ordinary resident?
Answer:
An individual is called a not ordinary resident if he satisfies atleast one of the basic conditions and one or none of the additional conditions.

Question 5.
Who is a non resident individual?
Answer:
An individual is called a non resident if he satisfies none of the basic conditions and additional conditions being irrelevant.

Question 6.
Explain the conditions that an individual must satisfy to become a not ordinarily resident.
Answer:
An individual who satisfies any of the basic conditions and fails to satisfies any of the additional conditions shall be a not ordinarily resident.

Indian income received or deemed to be received in India
Income accruing or arising or deemed to accrue or arise in India
For resident but not ordinarily resident, foreign income is taxable only if business controlled or profession set up in India.

Question 7.
In order to prove himself as a resident and ordinary resident, what are additional conditions which need to be fulfilled?
Answer:
In order’to prove himself to be a resident and ordinary resident he should further fulfill both the additional conditions which are follows:

that he was resident of India for two or more previous years out of 10 previous years preceding the relevant previous year and
he was in India for a period of not less than 730 days in 7 previous years preceding the relevant previous year.

Question 8.
What do you mean by incidence of tax?
Answer:
The scope of total income varies according to the residential status of an assessee i.e. the incidence of tax is highest on resident, a little lower on NOR and lowest on NR assessee.

SECTION – B

Question 1.
What are the exceptions to the rule of residential status?
Answer:
Exception to the rule is that the period of 60 days mentioned in basic condition (b) U/S 6(1) shall be extended to 182 days in the following situations:

An Indian citizen who (eaves India during the previous year for the purpose of employment outside India.
An Indian citizen who leaves India during the previous year as a member of crew of an Indian ship.
An Indian citizen or a person of Indian origin who comes to India on a visit during the previous year.

Question 2.
Explain the scope of total income based on residential status (Sec.5).
Answer:

Resident and ordinarily Resident	Resident but not Ordinarily Resident	Non-Resident
(i) Indian Income is always taxable in India not ordinarily of the residential status of the taxpayer.	(i) Indian Income received or deemed to be received in India	(i) Indian Income received or deemed to be received in India.
(ii) Income accruing or arising or deemed to accrue or arise in India.	(ii) Income accruing or arising or deemed to accrue or arise in India	(ii) Income accruing or arising or deemed to accrue or arise in India.
(iii) Foreign Income is taxable in the hands of resident (in case of a firm, an association of persons, a joint stock company and every other person) or resident and ordinarily resident (in case of an individual and a Hindu undivided family) in India.	(iii) For resident but not ordinarily resident, foreign income is taxable only if business controlled or profession set up in India.	(iii) Foreign income: Not taxable in India.

Practical Problems

Question 1.
Mr. P an Indian citizen left India on 28th October 2012 for the first time to U.K. for the purpose of employment. He visits India every year and stays here from 15th April to 10th September since 2015-16. What will be his residential status for the A.Y. 2020-21.
Solution:
The stay in India during the PY 2019-20.
April 16
May 31
June 30
July 31
Aug 31
Sept 10
149 days
As Mr. P is going abroad for the purpose of employment, the basic condition u/s 6(i)(b) is not applicable. His stay in India is less than 182 days (i.e. 149 days), therefore he is a non resident.

Question 2.
Mr. Satish an employee of PQR Co. Ltd. Mysore, has left India for the first time on 16th July 2019 for higher training in U.K. Calculate his residential status for the assessment year 2020-2021.

Question 3.
Mr. Naik who was born and bought up in India, went for further studies to USA on 1st March 2017 and came back to India on 1st October 2017 early in the morning. What is his residential status for the assessment year 2020-21?
Solution:
A.Y = 1.4.2019 to 31.3.2021
P.Y. = 1.4.2019 to 31.3.2020
Previous year stay = 18-19 October, 31 + November 30 + December 31 + January 31 + February 29 + March 31 = 183 days
Therefore he fulfils first basic condition
He fulfils additional condition 2 years out of 10 years and he fulfils 730 days in 7 PPY’s.
Therefore he is ordinarily resident.

Question 4.
Mr. Rama went to England for studies on 5th Aug. 2019 and came back to India on 25 Feb. 2019. He had never been out of India before.
What is Residential Status for the A.Y 2020-2021.
Solution:
He has been in India during the 4 years immediately preceeding the P.Y. more than 365 days and he was in India for at least 60 days in the P.Y. Therefore he is a Resident. Since he satisfies both the additional condition.
During the P.Y. 2019-20, Mr. Rama was in India for 162 days. He has never been out ot India before. Therefore he satisfies the basic condition U/s 6(1)(ii) i.e. U/s 6(6), he is a Resident and Ordinary Resident.

Question 5.
Mr. Pratham, a foreign cricketer comes to India for 100 days every year since the financial year 2019-20.
Find out his residential status for the assessment year 2020-21.
Answer:
Mr. Pratham, is treated as Resident but not ordinarily resident for the current previous year 2019-20. Because he has satisfied one of the basic conditions as per Sec. 6(1) and not both of the additional conditions as per Sec. 6(6).
2018- 19, 2017-18, 2016-17 and 2015-16 total number of days 400 (365 days or more during. 4 years preceding CPY and 100 days during CPY (60 days or more during (PY 2018-19) …2nd basic condition satisfied.
But he was not a resident for at least 2 previous year out of 10 PY preceding CPY as per additional condition.

Question 6.
Mr. Ramesh, a citizen of America, comes to India for the first time on 20.03.2020.
Answer:
On 01.09.2019 he leaves India for Nepal on a business trip. He comes back on 26.02.2020. Determine his residential status for the AY 2020-21.
Solution:
The stay in India during the year

2017 – 2018	Nil
2018 – 2019 (20.3.2019 to 31.3.2019)	12 days
2019 – 2020 (31.3.2019 to 01.09.2019)	153 days
and (26.2.2020 to 31.3.2020)	35 days
	200 days

As Mr. Ramesh satisfies the 1st basic condition U/s 6(1) and does not satisfy both the additional conditions U/s 6(6), he is resident but not ordinery resident.

Question 7.
Mr. Veeresh a citizen of England came to India for the first time on 1.5.2013.
He stayed here without any break for 3 years and left for Singapur on 1.5.2016. He returned to India on 1.4.2017 and went back to England on 1.12.2017. He was pointed back to India on 20.1.2019.
Determine his residential status for the A.Y. 2020-21.
Solution:
Determination of residential status for the assessment year 2020-21

Previous year	Stay in India	Status
2013-14	336 days	Resident
2014-15	365 days	Resident
2015-16	365 days	Resident
2016-17	31 days	Non-resident
2017-18	246 days	Resident
2018-19	Nil	Non-resident
2019-20	71 days	Resident

Mr. Veeresh will be Resident and Ordinarily Resident in India for the A.Y. 2020¬21 because: He satisfies one basic condition and both the additional condition.

Question 8.
Mr. Rishab a citizen of U.K. Came to India for the first time on 1.5.2013.
He stayed here without any break for 3 years and left for Bangladesh on 1.5.2016. He returned to India on 1.4.2018 and went back to U.K. on 1.12.2017. He was posted back to India on 20.1.2020.
Determine his residential status for the A.Y. 2020-21.

Question 9.
Mr. Frank, a citizen of West Indies, was appointed as sales manager in India on 1st April 2014 at Mumbai.
On 25th January, 2017 he went to Uganda on deputation for a period of 3 years, but left his wife and children in India. On 1st May, 2018 he came to India and took with him his family to Uganda on 30th June, 2019. He
returned to India and joined his original job on 24th January, 2020.
Determine the residential status of Mr. Frank for the assessment year 2020-21.
Solution:
Mr. Frank, is a resident and ordinary resident of India assessment year 2020-21 because he satisfied second basic conditions u/s 6(1) [i.e. he was in India for than 60 days (67 days) in the previous year 2019-20 and more than 365 days in 4 years preceding the previous years] and both additional conditions u/s 6(6) [i.e. he was a resident for more than 1 year out of 10 years preceding the previous years he was in India for than 730 days in 7 years preceding the previous years (1089 days).

Question 10.
Mr. Clinton an American came to India for the first time on 1st January 2015.
He stayed here continuously for 2 years. He went back to Newyork on 1-1-2018. Again he came to India on 1-2-2019 on a two years job assignment with a multinational company in India. Determine his residential status for the Assessment Years 2020-21.
Solution:
(a) For Assessment Year 2020-2021
Previous year = 2019-2020 i.e. from 1-4-2019 to 31-3-2020
His stay in India in the previous year is calculated as follows:
Feb 2019 – 28 days
Mar 2019 – 31 days
= 60 days
He doesnot fulfill even one of the basic condition u/s 6(1), therefore he is a non resident for AY 2020-21.
Now since he has stayed in India for 2 years i.e. from 1.1.16 to 1.1.18, he fulfil both the additional condition u/s 6(6). Therefore he is a resident and ordinary resident.

Question 11.
Mr. Kishore went to England for studies on 5th August 2019 and came back to India on 25th February 2020. He had never been out of India before. What is his residential status for the Assessment Year 2020-21?

Question 12.
Following are the incomes of Mr. Rajan for the financial year 2019-20
(i) Interest on SB Deposit in SBM. Delhi. – 1,200
(ii) Income from agriculture in Africa invested in ‘Nepal. – 10,000
(iii) Dividends received in UK from an American company, out of which 2000 were remitted to India. – 10,000
(iv) Salary drawn for 3 months for working in Indian Embassy’s office in Australia and salary received there. – 72,000
(v) Income from House property situated in Pakistan. – 15,000
(vi) Pension received in Belgium for services rendered in India with a Ltd. Company. – 20,000
You are required to compute his gross total income for the A.Y. 2020-21, if he is
(a) A resident
(b) Not ordinary resident and
(c) Non- Resident

Question 13.
Following are the particulars of Mr. George relevant to the previous year 2019-20. Compute his Total Income based on different residential status.
(i) Income from agriculture in Indonesia, one-half of the income is received in Bangalore and the balance is received in Pakistan, 30,000.
(ii) Income from agriculture in Punjab, the whole amount is received in London and used for children education there, 25,000.
(iii) Profit from a business in Chennai, the business is controlled and managed from Colombo, 50% of the profits are received in Colombo, 50,000.
(iv) Profit from a business in Paris, the business is managed from Mumbai, one- half of the profits are received in Bangalore and the balance is remitted to India, 60,000.
(v) Dividend from Microsoft Corporation Ltd., 20,000.
(vi) Share of profit from a partnership firm in Mumbai, 22,000.
(vii) Interest on fixed deposits in State Bank of India, 10,000.
(viii) Interest on SB account in Post Office, 2,000.

Question 14.
Following are the incomes of Mr. Vishnu for the previous year 2019-2020.
(a) Received 20,000 in India, which accrued in England.
(b) 10,000 earned in India but received in England.
(c) 5,000 were earned and received in Africa but brought to India.
(d) 10,000 were earned and received in japan from a business which was controlled and managed in Japan.
(e) 16,000 was untaxed foreign income of some earlier year, which was controlled and managed in Japan.
(f) Interest on Fixed Deposit in State Bank of Mysore, Bangalore 1,200.
(g) Income from agriculture in Africa 10,000
(h) Dividends received in U.K. from an American Company 10,000
(i) Salary income fro three months for working in Indian Embassy’s office in Australia and salary received there 72,000
(j) Income from house property in Mumbai 1,00,000
(k) Interest received on POSB A/c 1,000
(l) Pension income from Belgaum for services rendered in India with a limited company 20,000
(m) Gift from relatives 80,000
Which of the above incomes are taxable if Mr. Vishnu is –
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident Nov 2015

Question 15.
Mr. Krishna furnishes the following particulars of his income earned during the previous year 2019-20
(a) Profit from business in Chennai 50,000
(b) Income from agriculture in Srilanka 1,90,000
(c) Income from property in Mexico received there 2,00,000
(d) Interest on Singapur Development Bonds 1,50,000 (1/3 received in India.
(e) Income from business in Kuwait controlled from Mumbai 85,000 (35,000 received in India)
(f) Dividend from domestic company 1,000
(g) Profit on sale of building in Bangalore received in Nepal 50,000
(h) Income from agriculture in Punjab 1,00,000
(i) Profit on sale of plant at London 50,000 (50% is received in India)
(j) Rent from house property in Nepal received there 20,000
(k) Profit from business in Mysore received in Mandya 25,000
(l) Dividends from U.K. based company received in U.K. 27,000
Compute his gross total income for the assessment year 2020-21.
If he is
(a) Ordinary resident
(b) Not ordinary resident
(c) Non resident

Question 16.
From the following particulars of Mr. Naveen compute his Gross Total Income for the AY 2020-21.
If he is:
(i) Ordinary Resident
(ii) Not ordinarily Resident and
(iii) Non-Resident
(a) Profit from business in England, received in India 24,000
(b) Income from house property in Pakistan received there 20,000
(c) Profit from business in Iran received in India 10,000
(d) Income from house property in Bangladesh deposited in a bank there 10,000
(e) Profit from business in Indonesia deposited in a bank there, this business is controlled from India 30,000
(f) Profit from software business in Bangalore controlled from USA 30,000
(g) Income from Agriculture in Punjab 20,000
(h) Profit from sale of building in India received in Sri Lanka 25,000
(i) Income accrued in Chennai but received in Singapore 32,000
(j) Dividend received from Domestic Company 10,000

Question 17.
Mr. Darshan-earns the following incomes during the financial year 2019-20.
(i) Profits earned from business in Paris 1,60,000 which is controlled from India, half of the profits being received in India.
(ii) Pension from former employer in India, received in U.S.A. – 32,000
(iii) Income from Agriculture in Pakistan and brought to India – 40,000
(iv) Income from property in U.K. and received there – 32,000
(v) Past untaxed foreign income brought into India during the previous year 40,000
(vi) Gift in foreign currency from a relative received in India – 80,000
Determine the Gross Total Income of Mr. Darshan for the A.Y. 2020-2021 if he is
A) Resident
B) Not Ordinarily Resident
C) Non Resident.

Question 18.
Sri Suresh has the following incomes for the financial year.
2019 – 20.
(a) Income from house property situated in U.K. 10,000.
(b) Income from salary received in India for services rendered in USA 58,000
(c) Profits from business in Pakistan controlled from India 1,10,000.
(d) Profit from Delhi business 1,20,000
(e) Agricultural income in India 12,000.
(f) Income earned in Australia and received there but brought to India 80,000.
Compute the income of Sri Suresh for the A.Y 2020-21 if he is
(i) Resident
(ii) Not ordinarily Resident
(iii) Non Resident.

Question 19.
Mr. Akshay furnished the following particulars of his income for the previous year 2019-20.
Determine his taxable income for the A.Y, 2020-21. If his residential status is:
(a) Ordinary resident
(b) Not ordinary resident
(c) Non-resident
(i) Income from business in Hubli 1,00,000
(ii) Profit from business in UK controlled from India 60,000
(iii) Income from House Property in Japan received there 50,000
(iv) Income from business in India received in Pakistan 30,000
(v) Salary received in India for service rendered in USA 70,000
(vi) Interest on deposits With SBI in Mysore 20,000
(vii) Profit from business in Singapore controlled from India (1/3rd received in India) 30,000
(viii) Past untaxed foreign income brought into India 8,000
(ix) Dividend received from a domestic company 5,000
(x) Agricultural income earned in nepal 25,000
(xi) Commission received in India for service given in Japan 10,000
(xii) Income from profession in India but received in France 10,000

Question 20.
Sri Ram submits the following particulars of his income for the year 2019-20.
(a) Income from house property in Hasana received in Paris – 6,50,000
(b) Salary income from an Indian employer received in Newyork for two months – 75,000 p.m.
(c) Income from business in Mumbai received in Bangalore (40% remitted to Nepal) – 12,50,000
(d) Dividend from foreign company received in Chennai – 1,80,000
(e) Income from business in Hongkong and the business is controlled from Tumkur (25% received in Tumkur) – 1,5,00,000
(f) Interest on post office S.B. A/c in Bangalore (account is held in joint names) – 17,500
(g) Income from agricultural land in Sri Lanka (50% received in India) 2,05,000
(h) Share from H.U.F. – 60,000
(i) Royalty received in India for the services rendered in Japan – 6,00,000
(j) Interest earned on U.S. Government Bonds received in London – 1,75,000
(k) Interest on SBI deposits received in Bhutan – 7,080
(l) Past untaxed foreign income brought to India – 6,10,000
(m) Interest on housing loan given to Mr. X for for construction of house in Bangladesh received in Bangalore – 65,020

Question 21.
Mr. Krishan Murthy furnishes the following particulars Of his income for the PY 2019-20:
(a) Interest on German Development Bonds 60,000 (2/5th is received in India).
(b) Income from agriculture in Bangladesh (received there but later on 50.0 remitted to India) 1,80,000
(c) Income from property in Sri Lanka received there (80,000 is used in Sri Lanka and the balance remitted to India) 1,20,000
(d) Income from business in Kenya which is controlled from Bengalure 18.0 received in Bengaluru) 78,000
(e) Dividend paid by an Indian Company received in Canada 56,000
(f) Past untaxed profit 1,05,000 brought to India during 2018-19.
(g) Profit from business in Mysore but controlled from London 72,000
(h) Profit on sale of building in Mangalore but received in Dubai 1,48,000
(i) Pension from Indian Company received in London 36,000
(j) Gift in cash from a relative received in India 60,000
Find out Mr. Krishna Murthy’s Gross Total Income for the AY 2020-21 if he is:
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident and
(c) Non-resident.

Question 22.
Sri Anantha Krishna is an Indian Citizen, went out of India on 28th August 2019 for a service in a company in Japan and came back to India on 1st April, 2019 to meet his family. During the financial year 2019-20 he received the following incomes:
(i) Income from salary in Japan 1,70,000
(ii) Interest on bonds of central government of India 28,000
(iii) Taxable income from house property in Rajasthan 26,500
(iv) Dividend on shares from foreign company 7,500, received in Japan
(v) Income from agricultural land situated in Punja 10,000
(vi) Interest received from a firm in UK remitted to India 9,200
(vii) Payment from public provident fund 20,000
(viii) Commission received in India for the services given in nepal 10,000
(ix) Profit from business in Srilanka 40,000 (business controlled from Chennai) of which 15,000 was received in India.
(x) Profit of the business situated in nepal brought to India 50,000
(xi) Amount brought to India out of past untaxed profit earned in Japan 8,000
(xii) Share of income from HUF 12,000
Calculate the gross total income of Sri Anantha Krishna after ascertaining his residential status for the assessment year 2020- 21.
Solution:
Sri Anantha Krishna is a non-resident individual for the A.Y. 2020 – 21 because he has not satisfied the basic condition u/s 6(1) as he was not in India for a minimum period of 182 days in the previous 2019 – 20. He should be in India in the previous year 2019-20 for a period of 182 days or more, when he left India in the previous year for employment purposes, to call him as resident of India.

Question 23.
From the following particulars of Mr. Thushar compute his gross total income. For the assessment year 2020-21 if he is:
(a) Resident
(b) Not-ordinarily resident
(c) Non resident
(A) Income from business in Hubli 1,00,000
(B) Profit from business in U.K. controlled from India 60,000
(C) Income from house property in Japan not received in India 50,000
(D) Income from business in India but received in Pakistan 30,000
(E) Salary received in India for services rendered in USA 70,000
(F) Interest on deposit with State Bank in Bangalore 20,000
(G) Profit from Business in Singapar controlled from India (1/3 profit received in India) 30,000
(H) Past untaxed foreign income brought into India 8,000
(I) Dividend received from domestic company 5,000
(J) Interest on post office savings bank a/c 1,000
(K) Agricultural income earned in Nepal 25,000
(I) Commission received in India for the services given in Nepal 10,000

Question 24.
From the following particulars of Mr. Manjunath compute his Gross Total Income for the A.Y. 2020-21.
(a) Resident
(b) Not-ordinarily resident
(c) Non-resident
(a) Income from business in Chennai, business managed from Srilanka 25,000
(b) Income from House Property in Mysore 1,00,000
(c) Income from Salary in Japan 1,60,000
(d) Income from business in Kuwait, business being controlled from Mumbai (25,000 is received in India) 65,000
(e) Income from agriculture in Punjab, received in Mumbai 30,000
(f) Income from agriculture in Bangladesh remitted to India 10,000
(g) Profit from sale of building in India 2,50,000
(h) Profit from business in Indonesia; this business controlled from Delhi 40,000
(i) Income from Indian partnership firm 5,000
(j) Interest on Savings Bank deposits in State Bank of India 1,000
(k) Dividend from foreign company received in England 10,000
(l) Interest on German Development Bonds (1/3 received in India) 51,000

Question 25.
Mr. Avipash furnishes the following information of income for the AY 2020- 21. Find out his total income if his Residential status is:
(a) Ordinary Resident
(b) Not-ordinary resident
(c) Non- Resident Indian.
(i) Income from business from Mumbai – 1,00,000
(ii) Profit from business in USA controlled from India – 50,000
(iii) Income from House property in Japan received there – 50,000.
(iv) Income from business in India, but received in London – 30,000
(v) Salary received in India for services rendered in USA – 70,000
(vi) Profits from business in Malaysia controlled from India (1/3 received in India) – 30,000.
(vii) Past untaxed income brought into India – 8,000.
(viii) Dividend received from a domestic company – 5,000
(ix) Agricultural income earned in Nepal – 25,000
(x) Interest earned on Post Office Savings Bank A/c – 3,000
(xi) Interest received on Private Company Securities – 25,000
(xii) Gift in cash from father – 30,000