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

Sunita is an Indian citizen who lives in a country that levies no income tax. She was not in India at all during the current tax year. Her total income, excluding income from foreign sources, is Rs. 22 lakh from Indian rental and business sources. She was a non-resident in 9 of the ten preceding tax years. What is her residential status for the current tax year?

Sunita is resident but not ordinarily resident. As an Indian citizen not liable to tax elsewhere and with Indian-source income above Rs. 15 lakh, she is deemed resident under the special provision. A citizen deemed resident in this way is classified only as not ordinarily resident.

  1. ANon-resident, because she spent no days in India
  2. BResident and ordinarily resident, because she is a citizen with Indian income above Rs. 15 lakh
  3. CResident but not ordinarily resident, because she is deemed resident under section 6(7)Correct
  4. DNon-resident, because she was non-resident in nine of the last ten years

Explanation

Section 6(7) deems a citizen resident if she is not liable to tax in any other country due to domicile or residence, and has total income above Rs. 15 lakh other than foreign-source income. Sunita meets all three conditions, so she is deemed resident despite no stay in India. Under section 6(13)(c), a citizen deemed resident under section 6(7) is only not ordinarily resident. Hence she is resident but not ordinarily resident, not ROR.

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