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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Kaveri Exports Ltd is a company incorporated in India. All its directors live abroad and all board meetings are held in Dubai during 2026-27. It earns Rs. 40 lakh from a business in Dubai, controlled from Dubai. What is its residential status and tax position on this foreign income?

The company is resident in India because it is an Indian company, regardless of management being in Dubai. A resident company is taxed on its worldwide income, so the Rs. 40 lakh Dubai business income is taxable in India.

  1. ANon-resident; the Dubai income is not taxable in India
  2. BResident, because it is an Indian company; its global income including the Dubai income is taxable in IndiaCorrect
  3. CNot ordinarily resident; only income from business controlled from India is taxable
  4. DResident, but foreign income is taxable only if received in India

Explanation

An Indian company is always resident in India regardless of where it is managed, so POEM abroad is irrelevant. A resident is taxed on global income, hence the Rs. 40 lakh Dubai income is taxable. Treating it as non-resident wrongly applies the POEM test to an Indian company.

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