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CMA Intermediate · Direct and Indirect Taxation · Income from Other Sources

Mr. Raman, a resident and ordinarily resident individual, earned interest of ₹40,000 on a deposit with a bank in Dubai during the tax year. It was not remitted to India and was only credited abroad. Under section 5 of the Income-tax Act, 2025, what amount is includible in his total income on this interest?

₹40,000 is included. A resident and ordinarily resident person is taxed on income from whatever source derived, including income that accrues or arises outside India. Non-receipt in India does not matter, and the limitation to business or profession income applies only to not ordinarily resident persons.

  1. A₹40,000, because a resident is taxed on income accruing outside IndiaCorrect
  2. BNil, because it was not received in India
  3. C₹20,000, being half of the interest
  4. DNil, because foreign income is taxed only when it is a business income

Explanation

Section 5(1)(c) includes in a resident's total income all income accruing or arising outside India. The restriction to business controlled or profession set up in India applies only to a not ordinarily resident person. Mr. Raman is ordinarily resident, so the full ₹40,000 is included.

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