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CS Executive · Tax Laws and Practice · Income from Other Sources

A non-resident has these items in a tax year: interest on notified bonds bought in foreign currency Rs 2,00,000; long-term capital gain on transfer of such bonds Rs 4,00,000; other taxable income Rs 6,00,000. Ignoring surcharge and cess, which expression correctly gives the tax under section 209 of the Income-tax Act, 2025?

Tax is 10% on the Rs 2,00,000 interest, 12.5% on the Rs 4,00,000 long-term capital gain, plus rates in force on the remaining Rs 6,00,000. Section 209(1) prescribes these separate rates by income type, with rates in force only for the residual total income.

  1. A10% of Rs 2,00,000 + 12.5% of Rs 4,00,000 + rates in force on Rs 6,00,000Correct
  2. B10% of Rs 6,00,000 + rates in force on Rs 6,00,000
  3. C12.5% of Rs 6,00,000 + rates in force on Rs 6,00,000
  4. D10% of Rs 2,00,000 + 10% of Rs 4,00,000 + rates in force on Rs 6,00,000

Explanation

Table Sl. No. 1 taxes interest at 10% (Rs 20,000). Sl. No. 3 taxes LTCG on such bonds at 12.5% (Rs 50,000). Sl. No. 4 applies rates in force to total income reduced by these items, i.e. Rs 6,00,000. Taxing the gain at 10% mistakes the rate for the gain.

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