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CMA Final · Direct Tax Laws and International Taxation · Assessment of Individuals including Non-residents

Ms Sneha Kulkarni, a citizen of India, has Indian-source income of Rs. 40 lakh in the current tax year. She is liable to tax in no other country because she lives in a jurisdiction that levies no income tax, and she stayed in India for only 90 days this year, with fewer than 365 days in the four preceding years. What is her residential status for the tax year?

She is resident but not ordinarily resident. Being a citizen with income above Rs. 15 lakh and no tax liability in any other country, she is deemed resident under section 6(7), and section 6(13)(c) classifies such a deemed resident as not ordinarily resident.

  1. ANon-resident, as she stayed less than 182 days
  2. BResident and not ordinarily resident, as a deemed resident citizen under section 6(7)Correct
  3. CResident and ordinarily resident, as she is deemed resident and no other condition applies
  4. DResident and ordinarily resident, because income exceeds Rs. 15 lakh

Explanation

Section 6(7) deems a citizen resident if he is not liable to tax elsewhere and total income excluding foreign-source income exceeds Rs. 15 lakh. Ms Kulkarni meets all these conditions, so she is deemed resident. Under section 6(13)(c), a citizen deemed resident under 6(7) is only not ordinarily resident, so the 'ordinarily resident' options are wrong.

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