CA Abhishek Mittal
CA Sakshi Mittal
Scope of Total Income / Incidence of Tax [Section 5]:
Scope of total income is according to the residential status of the assessee.
Resident and Ordinarily Resident (ROR) [Section 5(1)]
The total income of any previous year of a person who is a resident and ordinarily
resident includes all income from whatever source derived, which –
is received or is deemed to be received in India in such year by such person.
accrues or arises or is deemed to accrue or arise to him in India during such year.
accrues or arises to him outside India during such year.
Resident but Not Ordinarily Resident (R+NOR) [Section 5(1)]
The total income of any previous year of a person who is a resident and not ordinarily
resident includes the following incomes –
income which is received or is deemed to be received in India in such year by such
person or
income which accrues or arises or is deemed to accrue or arise to him in India during
such year or
income which accrues or arises to him outside India, if it is derived from a business
controlled in or a profession set up in India.
Non-Resident (NR) [Section 5(2)]
The total income of any previous year of a person who is non-resident includes all income
from whatever source derived which –
is received or is deemed to be received in India in such year by such person or
accrues or arises or is deemed to accrue or arise to him in India during such year.
Tax Incidence/Scope of Total Income
Type of Income
Residential Status
ROR NOR NR
1. Income received in India Taxable Taxable Taxable
2. Income deemed to be received in India Taxable Taxable Taxable
2
3. Income which accrues or arises or is deemed to
accrue or arise to the assessee in India in the previous
year
Taxable Taxable Taxable
4. Income which accrues or arises to the assessee
outside India and is also received outside India
Taxable Not Taxable Not
Taxable
5. Income which accrues or arises to the assessee
outside India and is also received outside India but it
is either from a business controlled from India or from
a profession set up in India
Taxable Taxable Not
Taxable
6. Past untaxed income (earned and received abroad)
remitted to India in previous year
Not Taxable Not Taxable Not
Taxable
Received in India means first receipt in India. If an income is received first outside India
and then subsequently remitted to India, it shall be treated as received outside India
i.e. remittance of fund is not taxable in India.
Past untaxed profits shall not be considered to be income of the current year in any case.
Example: Mr. R has one house in UK and rent has been received directly in India. It will
be considered to be income received in India and it is chargeable to tax in case of all the
three status, but if Mr. R has one bank account with Bank of UK, New York and rent has
been deposited in that account and subsequently the bank has transferred the amount
to Mr. R in India, it will be considered to be income received outside India, because
income has already been received outside India and subsequently it was remitted to
India.
Similarly, if Mr. R has income from agriculture in Nepal and it was deposited in the
branch of an Indian bank in Nepal, subsequently the amount was remitted in India, it
will be considered to be income received outside India.
Example: Mr. K earns the following income during the financial year 2015-16:
1. Income from house property in London, received in India 60,000
2. Profits from business in Japan and managed from there (received in Japan) 9,00,000
3. Dividend from foreign company, received in India 30,000
4. Dividend from Indian company, received in England 50,000
5. Profits from business in Kenya, controlled from India, Profits received in Kenya 3,00,000
6. Profits from business in Delhi, managed from Japan 7,00,000
7. Capital gains on transfer of shares of Indian companies, sold in USA and gains were
received there 2,00,000
8. Pension from former employer in India, received in Japan 50,000
9. Profits from business in Pakistan, deposited in bank there 20,000
10. Profits on sale of asset in India but received in London 8,000
11. Past untaxed profits of UK business of 2014-15 brought into India in 2015-16 90,000
12. Interest on Government securities accrued in India but received in Paris 80,000
13. Interest on USA Government securities, received in India 20,000
14. Salary earned in Bombay, but received in UK 60,000
15. Income from property in Paris, received there 1,00,000
(Presume all the above incomes are computed incomes)
Determine the gross total income of Mr. K if he is (i) resident and ordinarily resident,
resident but not ordinarily resident, non-resident in India during the FY 2015-16
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