Fundamental of Taxation

Assignment

Answer 1

Introduction

In India, the determination of a person's residential status for tax designs is administered by
the arrangements of the Personal Tax Act, 1961. The Demonstration gives rules to recognize
whether an individual is a resident, non-resident, or resident yet not ordinarily resident
(RNOR). The residential status is pivotal as it decides the extent of taxable pay and the
appropriateness of different tax arrangements.

Concept and Application

The determination of residential status depends on two essential variables:

Physical Presence:

 The Demonstration considers the quantity of days an individual spends in India during
a financial year (April 1 to Walk 31) to decide their residential status. The
accompanying measures are utilized:
 Resident: An individual is viewed as a resident on the off chance that they fulfill any
of the accompanying circumstances:
 They are available in India for 182 days or seriously during the financial year, OR
 They are available in India for 60 days or really during the financial year and have
been in India for 365 days or more in the first four financial years.
 Non-resident: In the event that an individual doesn't meet any of the circumstances
referenced above, they are viewed as non-resident for tax purposes.

Resident yet Not Ordinarily Resident (RNOR):

  The idea of RNOR applies to people who qualify as residents yet don't have normal
resident status. To be named a RNOR, an individual should meet one of the
accompanying circumstances in the past three financial years:
 They have been non-resident in India for the vast majority of years going before that
year, OR
 They have been in India for a sum of 729 days or less during the seven financial years
going before that year. It's vital to take note of that the tax treatment for residents,
non-residents, and RNORs vary regarding their worldwide pay and taxability in India.

Moreover, there are sure exemptions and extraordinary arrangements for explicit cases, for
example, Indian residents leaving India for employment, group individuals from Indian boats,
or people who are considered to be of Indian beginning. These exemptions might alter the
standards referenced previously.

The residential status determination is finished consistently, taking into account a person's
physical presence in India and the former financial years. It's fitting to keep up with exact
records of movement and remain subtleties to accurately decide the residential status.

If it's not too much trouble, note that the data gave here is an overall outline, and explicit
cases might have extra contemplations. It's prescribed to counsel a tax proficient or allude to
the Personal Tax Represent exact and definite direction on deciding residential status in India.

To decide the residential status of Mr. Krishna Kumar and the HUF for the assessment year
(A.Y.) 2022-23, we want to consider the arrangements of the Personal Tax Act, 1961. The
residential status is resolved in light of the person's physical presence in India during the
important financial year and the previous years.

Individual Residential Status:

Mr. Krishna Kumar's residential status for the assessment year 2022-23 (financial year 2021-
22) will rely upon his physical presence in India during that year and the previous years.

In light of the data gave, Mr. Krishna Kumar visited India from 1.8.2021 to 7.02.2022. We
want to work out the quantity of days he remained in India during the financial year 2021-22:

Number of days from 1.8.2021 to 31.03.2022 = 213 days

Since the quantity of days surpasses 182 days, Mr. Krishna Kumar's visit in India during the
financial year 2021-22 is over 182 days. Thus, he will qualify as a resident in India for the
assessment year 2022-23.

HUF Residential Status:

For a Hindu Undivided Family (HUF), the residential status is resolved in light of the control
and the board of the undertakings of the HUF. For this situation, it is expressed that all policy
choices of the HUF are taken in Singapore.

In the event that the control and the executives of the HUF's issues are entirely arranged
external India, the HUF will be viewed as a non-resident for tax purposes in India. Thusly, in
view of the data gave, the HUF will be delegated a non-resident for the assessment year
2022-23.

A Hindu Undivided Families (HUF) is viewed as an inhabitant of India if all or a piece of its
administration and control are situated there. On the off chance that the Karta (which
incorporates the review progressive karta) fulfills either of the accompanying prerequisites,
an occupant HUF is viewed as inhabitant as well as customarily inhabitant in India: (I) he has
been an occupant in India for something like 2 out of the 10 years that followed the pertinent
year; and (ii) he has gone in India for no less than 730 days during the 7 years quickly going
before the schedule year being referred to. Karta is thought of as an occupant yet not a
common inhabitant if the previously mentioned prerequisites are not really met. On the off
chance that HUF's organization and control are found altogether beyond India, it is viewed as
non-inhabitant. Rather than burning through 730 days or more in India over the seven years
preceding to the important year, the Krishna Kumar Bangur just dwelled there for 191 days.
Accordingly, The Krishna Kumar Bangur is certainly not an Indian resident.

Conclusion

Mr. Krishna Kumar will be treated as a resident individual for the assessment year 2022-23
due to his stay in India exceeding the threshold limits. On the other hand, the HUF, with its
control and management located in Singapore, will be treated as a non-resident for the same
assessment year. It is important to note that the residential status of an individual and an HUF
may have implications on their tax obligations and the applicability of certain provisions of
the Indian tax laws.

Answer 2

Introduction

Even if foreign income is not brought into India, it is still subject to income tax if it accrues
or arises outside of India. The restrictions imposed by foreign countries on the transfer of
income do not exempt individuals from paying income tax. However, until the laws in the
foreign country change to allow or restrict the transfer of funds to India, no action can be
taken to recover the assessed tax amount related to foreign income earned outside of India.

Concept and Application

Your brother cannot be taxed if he gives you Rs. 50,000,000. Any gift received (without
restriction) in celebration of a wedding is tax-free in the recipient's hands. Gifts acquired
other than on a marriage-related event are only free from tax if they come from relatives.

If these presents are from non-relatives and the value of the gift is lower than Rs. 50,000, they
are excluded. Gifts received on any other occasion than a wedding will be subject to income
tax in all other situations.

Resident Status - ordinary resident

Particulars Tax status Rs.
Income earned from business in Singapore which is controlled from the
Indore, out of which 50000 received in India taxable 50000

Income from house property in Dubai deposited in a bank of Dubai taxable 30000
Interest on Bonds received in Dubai from Adani limited non taxable 0
Gift received on the occasion of his wedding from brother non taxable 0
taxable
Gift received on the occasion of his marriage anniversary from best friend 90000-50000 40000
Total taxable amount 120000
Resident Status - not ordinarily resident
Tax
Particulars Status Rs.
Income earned from business in Singapore which is controlled from the
Indore, out of which 50000 received in India taxable 50000

Income from house property in Dubai deposited in a bank of Dubai,

latter on remitted to India taxable 30000
non
Interest on Bonds received in Dubai from Adani limited taxable 0
non
Gift received on the occasion of his wedding from brother taxable 0
taxable
Gift received on the occasion of his marriage anniversary from best 90000-
friend 50000 40000
12000
Total taxable amount 0

Resident Status - Non-Resident

Tax
Particulars Status Rs.
Income earned from business in Singapore which is controlled from the taxabl
Indore, out of which 50000 received in India e 90000
Income from house property in Dubai deposited in a bank of Dubai, latter
on remitted taxabl
to India e 30000
non
taxabl
Interest on Bonds received in Dubai from Adani limited e 0
non
taxabl
Gift received on the occasion of his wedding from brother e 55000
Gift received on the occasion of his marriage anniversary from best friend taxabl 90000
 e
26500
Total taxable amount 0

A resident in India who is not an ordinary resident must fulfill two conditions to be
considered a Resident but Not Ordinarily Resident (RNOR). Firstly, they must have been
present in India for less than seven years or 729 days during the relevant period. Secondly, if
they were a non-resident Indian (NRI) for nine out of the ten years preceding that year, they
will be considered an RNOR.

Advantages of having RNOR status include exemption from income tax for various types of
income, such as rent from overseas, dividends or interest from securities and deposit
investments, withdrawals from foreign retirement accounts, capital gains from overseas, and
interest on NRE deposits as well as FCNR deposits if converted into RFC.

RNORs can maintain their RNOR status for a continuous period of three years after returning
to India. It is important to note that once an individual attains resident status, all their income,
irrespective of its origin, becomes taxable in India unless specific exceptions are provided in
the Double Taxation Avoidance Agreement (DTAA) between India and the country where
the foreign income originates.

Section 9 of the Internal Revenue Code explains that income is deemed to accrue or arise in
India regardless of where an individual resides. This applies even if the gain is from the
transfer or sale of property in India, payment for goods or services rendered in India, salary
from the Indian government for work done outside of India by a resident of India, or dividend
payout from an Indian company sent outside of India.

Conclusion

For individuals who qualify as Resident but Not Ordinarily Resident (RNOR), there are
advantages in terms of tax exemptions for certain types of income. Maintaining RNOR status
can provide tax benefits for a continuous period after returning to India. However, it is
important to be aware that once an individual attains resident status, their global income
becomes taxable in India, unless specific exceptions apply under the Double Taxation
Avoidance Agreement (DTAA) with the relevant country.

Residency status determination is crucial, and individuals should be mindful of the criteria to
determine their status as residents or non-residents. Meeting the requirements for RNOR
status can offer tax efficiency for overseas transactions, while being classified as an Indian
resident entails taxation on all income, regardless of its origin.

Answer 3 (a)

Introduction

In India, the tax regulations with respect to gifts got during weddings are represented by the
Personal Tax Act, 1961. Gifts given to somebody on their wedding day are not expose to tax.
There exists what is going on, outside getting hitched, in which getting money as a gift is
excluded from tax. Accordingly, monetary gifts got on unique events like birthdays and
anniversaries will be taxed.

Concept and Application

1. Exemption for Gifts from Family: Gifts received from family members are
generally exempt from taxation. However, the definition of "relative" has been a
matter of debate. For the purpose of taxation, relatives typically include parents,
siblings, spouse, and lineal ascendants or descendants.

2. Taxability of Gifts from Friends: Friends are not considered "relatives" under the
definition mentioned above. Therefore, gifts received from friends may be subject to
taxation, provided they meet certain criteria for taxing gifts.

3. Exception for Gifts on Wedding Day: Gifts given to someone on their wedding day
are generally not subject to tax. This special occasion exemption applies specifically
to wedding gifts. However, for other situations like birthdays and anniversaries,
financial gifts may be taxable.

4. Monetary Gifts Exceeding Rs. 50,000: If a person or Hindu Undivided Family

(HUF) receives monetary gifts exceeding Rs. 50,000 in a year, they may be subject to
tax. This applies to gifts received within India or from overseas sources.

5. Assessment of Taxability: It is important to consider the "aggregate value" of gifts

received throughout the year. The total value of all gifts received, rather than just a
 single gift, determines whether the gifts are taxable. If the total value of gifts received
exceeds Rs. 50,000, they may be subject to taxation.

6. Understanding Gift Tax Regulations: Taxability of gifts is a topic that taxpayers

often inquire about. It is essential to familiarize oneself with the regulations governing
the taxability of gifts received by individuals and HUFs. Different rules may apply to
each category.
Particulars Taxable Rs.
Gift of Rs.80000 received from her family friends on the occasion of
her daughter’s wedding 80000-50000 30000
Taxable amount 30000

Conclusion

While gifts from relatives are by and large absolved from tax collection, gifts from
companions might be liable to burden assuming they meet the measures for burdening gifts.
Exemptions exist for gifts given on wedding days, which are normally not burdened. It is
critical to survey the total worth of presents got all through the year to decide their taxability.
The total amount of each of these gifts collected during the year would thus be subject to tax
if the total value of gifts exceeded Rs. 50,000.

Answer 3 (b)

Introduction

In the given situation, Mrs. Rashi got a gold wristband worth Rs. 5,00,000 from her sibling
living in Singapore. How about we dissect the tax ramifications of this exchange.

Gift Tax in India: In India, the gift tax was annulled powerful from October 1, 1998.
Accordingly, gifts got by an individual are by and large not expose to tax under the Personal
Tax Act, 1961.

Concept and Application

Exclusion for Gifts from Relatives: Gifts got from relatives are explicitly absolved from
taxation. Relatives commonly incorporate guardians, kin, mate, and lineal ascendants or
relatives. Since the gold wristband was introduced by Mrs. Rashi's sibling, who falls inside
the meaning of a relative, the gift ought to be excluded from tax.

Abroad Gifts: Gifts got from people living external India are additionally not expose to tax,
gave the gifts are given by relatives. For this situation, the sibling dwells in Singapore, which
is outside India. However long the sibling qualifies as a relative, the gift ought to in any case
be excluded from tax.

Taking into account the above focuses, it tends to be reasoned that the gold arm band worth
Rs. 5,00,000 got by Mrs. Rashi from her sibling living in Singapore would be absolved from
tax. The gift falls inside the exception models for gifts from relatives and isn't dependent
upon taxation under the Indian personal tax regulations.

It is essential to take note of that while the actual gift may not be taxable, any pay procured
from the gift, like interest or profits, might be likely to tax according to the relevant tax
regulations.

When an item or asset is given to an individual without any expectation of receiving

something in return, and its fair market value (FMV) exceeds $50,000, the FMV is
considered for determining the taxable amount. Alternatively, if an item is exchanged for
consideration, and the FMV minus the consideration exceeds $50,000, the FMV minus the
consideration is used to calculate the value of the gift.

A gift certificate is a legal document that transfers ownership without involving any monetary
exchange. It signifies the transfer of assets based on affection and goodwill, rather than
monetary compensation. The necessity of creating a gift certificate in every situation may not
always be clear when it comes to complying with gift regulations.

Particulars Taxable Rs.

gold bracelet worth Rs. 5,00,000 presented by her brother living
in Singapore. Above < 50000 450000
Taxable amount 450000

Conclusion
While gifts from family members are generally exempt from taxation, gifts from friends may
be subject to tax if they meet the criteria for taxing gifts. Exceptions exist for gifts given on
wedding days, which are usually not taxed. It is important to assess the aggregate value of
gifts received throughout the year to determine their taxability. Keeping up-to-date with the
relevant tax regulations is crucial in understanding the tax treatment of financial donations.