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

Sunil, a non-resident, earns Rs 6,00,000 from a business carried on wholly in Germany, accrued and received in Germany. During the year he also receives Rs 1,00,000 in India on behalf of him by his agent, being income that accrued in Germany. What is Sunil's income includible in total income under section 5(2)?

Only Rs 1,00,000 is includible. Section 5(2) taxes a non-resident on income received in India, including receipt by an agent on his behalf, or accruing in India. The Rs 6,00,000 earned and received in Germany falls outside the scope.

  1. ARs 6,00,000
  2. BNil
  3. CRs 7,00,000
  4. DRs 1,00,000Correct

Explanation

Section 5(2) taxes a non-resident only on income received or deemed received in India, or accruing or arising in India. The Rs 6,00,000 accrued and was received outside India, so it is excluded. Receipt in India by or on behalf of the person of Rs 1,00,000 brings that amount into total income. Total is Rs 1,00,000; including Rs 7,00,000 wrongly taxes foreign income of a non-resident.

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