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CMA Intermediate · Direct and Indirect Taxation · Residential Status and Scope of Total Income

Nirmal, a resident and ordinarily resident individual, has the following items in the tax year: (i) Rs 2,00,000 business income accrued in India and received in India; (ii) Rs 1,50,000 interest accrued in Nepal and received in Nepal; (iii) Rs 90,000 income that accrued in India in this year, already included on accrual basis, and later received in India during the same year, with this being the same amount as in item (i) partly. Item (iii) is Rs 90,000 out of the Rs 2,00,000 in item (i), not an additional income. Compute the total of these items includible in total income.

Total includible income is Rs 3,50,000. The Rs 2,00,000 is taxed once on accrual, the Nepal interest of Rs 1,50,000 is taxable for an ordinarily resident, and the Rs 90,000 receipt is not counted again because section 5(4) bars double inclusion.

  1. ARs 4,40,000
  2. BRs 3,50,000Correct
  3. CRs 2,00,000
  4. DRs 3,60,000

Explanation

Item (i) Rs 2,00,000 is taxable on accrual in India. Item (ii) Rs 1,50,000 is foreign income of an ordinarily resident, taxable under section 5(1)(c). Item (iii) is part of item (i), and section 5(4) prevents inclusion again on the basis of receipt. Total is 2,00,000 + 1,50,000 = Rs 3,50,000. Adding Rs 90,000 again gives the wrong Rs 4,40,000.

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