Page 50 - DCOM301_INCOME_TAX_LAWS_I

Unit 2: Residential Status and Taxation

Notes
Royalty/fees for Government of India Any Yes
technical services
Royalty/fees for A person resident in Payment is relatable to a business or No
technical services India profession or any other source carried by
the payer outside India
Royalty/fees for A person resident in Payment is relatable to any other source of Yes
technical services India income
Royalty/fees for A person non- Payment is relatable to a business or Yes
technical services resident in India profession or any other source carried by
the payer in India
Royalty/fees for A person non- Payment is relatable to any other source of No
technical services resident in India income

Example: For the assessment year 2006–07 (previous year 2005–06), X is employed in
India and receives ` 24,000 as salary. His income from other sources includes:

Dividend received in London on June 3, 2005: ` 31,000 from a foreign company; share of profit
received in London on December 15, 2005 from a business situated in Sri Lanka but controlled
from India:
` 60,000; remittance from London on January 15,2006 out of past untaxed profit of 2003–04
earned and received there: ` 30,000 and interest earned and received in India on May 11, 2006:
` 76,000. Find out his gross total income, if he is (a) resident and ordinarily resident, (b) resident
but not ordinarily resident, and (c) non-resident for the assessment year 2006–07.

If X is resident and ordinarily resident, his gross total income will be ` 1,15,000 (i.e., ` 24,000 +
` 31,000 + ` 60,000). If X is resident but not ordinarily resident, his gross total income will work
out to be ` 84,000 (i.e., ` 24,000 + ` 60,000). If X is non-resident, his gross total income will come
to ` 24,000.

Notes

1. The remittance from London of ` 30,000 is not taxable in the previous year 2005–06
because it does not amount to “receipt” of income.
2. Although the interest of ` 76,000 earned and received in India is taxable, it is not
included in the total income of the assessment year 2006–07, as it is not earned or
received in the previous year 2005–06. It will, therefore, be included in the total
income of X for the assessment year 2007–08.

Self Assessment

Fill in the blanks:
18. The ……………. of accounting an income would be taxable only when it is received by the
assessee himself or on his behalf.
19. …………. refers to the right to receive income.
20. …………….. to Section 5 specifically provides that an item of income accruing or arising
outside India shall not be deemed to be received in India merely because it is taken into
account in a balance sheet prepared in India.

LOVELY PROFESSIONAL UNIVERSITY 45