1. Facts of the Case
- Mr. A is a non-resident for the Assessment Year 2020–21, as per the provisions of the Income Tax Act, 1961.
- He has earned ₹5,00,000 in India under the head “Income from Other Sources”.
- He also earned a salary of ₹50,00,000 from his employer in the USA, which was received and earned abroad.
Mr. A seeks advice regarding:
- His taxability in India for the above incomes, and
- What income should be included in his total income under the Indian Income Tax Law.
2. Issues in the Case
- What income is taxable in India for a person who qualifies as a Non-Resident under the Income Tax Act?
- Whether the salary earned in the USA is taxable in India in Mr. A’s case?
- How much tax is payable by Mr. A on the income that is taxable in India?
3. Legal Principles Covered to Support the Case
A. Residential Status – Section 6 of the Income Tax Act, 1961
- As per Section 6, an individual is considered Non-Resident (NR) in India if:
- He has not stayed in India for 182 days or more during the relevant financial year, or
- Does not satisfy the basic or additional conditions of residency.
Mr. A qualifies as a non-resident for A.Y. 2020–21.
B. Scope of Total Income – Section 5(2)
As per Section 5(2) of the Income Tax Act:
“The total income of a non-resident includes only the income which:
- Is received or deemed to be received in India,
- Or accrues or arises or is deemed to accrue or arise in India.”
Therefore, Mr. A is taxable in India only on:
- ₹5,00,000 (Income from Other Sources) earned in India.
Salary of ₹50,00,000 earned and received in the USA is not taxable in India, as it neither accrues nor is received in India.
C. Tax Rates Applicable – AY 2020–21
- Non-residents are taxed as per slab rates for individuals, without benefit of rebate under Section 87A.
- Basic exemption limit = ₹2,50,000 (for non-senior NR individuals).
- No deduction under Section 80C to 80U is available unless the income is from sources eligible for such deduction.
- Surcharge and health & education cess @ 4% apply where applicable.
4. Possible Judgement / Tax Calculation
| Particulars | Amount (₹) |
|---|---|
| Income from Other Sources (in India) | ₹5,00,000 |
| Salary from USA (Not taxable in India) | NIL |
| Gross Total Income (Taxable in India) | ₹5,00,000 |
➤ Tax Liability Calculation (AY 2020–21 Slab Rates)
| Slab | Rate | Tax (₹) |
|---|---|---|
| 0 – 2,50,000 | NIL | 0 |
| 2,50,001 – 5,00,000 | 5% | ₹12,500 |
| Total Tax Before Cess | ₹12,500 | |
| Add: Health & Edu Cess @ 4% | ₹500 | |
| Total Tax Payable | ₹13,000 |
Final Tax Liability of Mr. A = ₹13,000
