20-04-2022

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Scope of
Total Income
AY 2022-23

Classroom Deliberations

CA. Dr. Prithvi Ranjan Parhi

© CA (Dr) Prithvi R Parhi 1 /42

Scope of Total Income

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• Section 5 provides the scope of total income

in terms of the residential status of the
assessee because the incidence of tax on any
person depends upon his residential status.
Residential
Status
• The scope of total income of an assessee
depends upon the following three important
considerations: Place of
accrual/
Receipt
1. the residential status of the assessee;
2. the place of accrual or receipt of income, Time of
whether actual or deemed; and accrual/
3. the point of time at which the income had Receipt
accrued to or was received by or on behalf of
the assessee. © CA (Dr) Prithvi R Parhi 2 /42

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Residential Status
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Person Categories

Assessee

Individual / HUF All other assessee

Resident in India Deemed

Non-Resident Resident Non-Resident
Individual: 182 d in PY or Resident
in India in India in India
60d in PY & 365 in 4 preceding PY (Individual)

Resident & Resident but not

Ordinary resident Ordinary resident
in India in India
Individual : Resident 2/10 PY +
730 days in 7 PY immediately
Preceding the relevant PY © CA (Dr) Prithvi R Parhi 3 /42

Taxability

Resident / Resident but

Resident & Not Ordinarily Resident Non Resident
Ordinarily Resident

Any Income; Any Income; Any Income;

1. Received in India 1. Received in India 1. Received in India
2. Deemed to be received 2. Deemed to be received 2. Deemed to be received
in India in India in India
3. Accrues or arises in India 3. Accrues or arises in India 3. Accrues or arises in India
4. Deemed to accrue or arise 4. Deemed to accrue or arise 4. Deemed to accrue or arise
in India. in India. in India.

5. Any income which 5. Any income which

accrues or arises accrues or arises
outside India. outside India.*

9:46 AM * If it is derived from a business controlled in or a 4

profession set ©
upCAin(Dr) Prithvi R Parhi
India.

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1. Resident and ordinarily resident

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• The total income of a resident assessee would, under

section 5(1), consist of:
1. income received or deemed to be received in India during
the previous year;
2. income which accrues or arises or is deemed to accrue or
arise in India during the previous year; and
3. income which accrues or arises outside India even if it is not
received or brought into India during the previous year.

• In simpler terms, a resident and ordinarily resident has to

pay tax on the total income accrued or deemed to accrue,
received or deemed to be received in or outside India
during the relevant previous year.

© CA (Dr) Prithvi R Parhi 5 /42

2. Resident but not ordinarily resident

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• The total income of a resident assessee would, under section

5(1), consist of:
1. income received or deemed to be received in India
during the previous year;
2. income which accrues or arises or is deemed to accrue
or arise in India during the previous year; and
3. income derived from a business controlled in or
profession set up in India, even though it accrues
or arises outside India.

All other income accruing or arising outside India which is not received or
deemed to be received or deemed to accrue or arise in India would not be
included in his total income.

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Resident but not ordinarily resident

• Under section 5(1), the computation of total income
of resident but not ordinarily resident is the same as
in the case of resident and ordinarily resident
except for the fact that the income accruing or
arising to him outside India is not to be included in
his total income.

• However, where such income is derived from a

business controlled in or profession set up in India,
then it must be included in his total income even
though it accrues or arises outside India.

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3. Non-resident
• A non-resident’s total income under section
5(2) includes:

1. income received or deemed to be received in

India in the previous year; and
2. income which accrues or arises or is deemed to
accrue or arise in India during the previous year.

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NR’s Salary in NRE A/c

[Circular No.13/2017, dated 11.04.2017 and Circular No.17/2017, dated
26.04.2017]

Income by way of salary, received by non-resident

seafarers, for services rendered outside India on a
foreign going ship (with Indian flag or foreign flag)
and received into the NRE bank account maintained
with an Indian bank shall not be included in the total
income.

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Accrue and arises :

• Accrue and arises : In plain English means earned.
• Accrue refers to the right to receive income, whereas due refers to the
right to enforce payment of the same. For e.g. salary for work done in
December will accrue throughout the month, day to day, but will
become due on the salary bill being passed on 31st December or 1st
January.

• Example 1: Interest on Government securities is usually payable on

specified dates, say on 1st January and 1st July. In all such cases, the
interest would be said to accrue from 1st July to 31st December and on
1st January, it will fall due for payment.

Similarly, on Government securities, interest payable on specified dates

arise during the period of holding, day to day, but will become due for
payment on the specified dates.

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Received in India;
• If the first & absolute possession is obtained in India.

• The receipt of income refers to only the first occasion

when the recipient gets the money under his control.

• Therefore, when once an amount is received as income,

remittance or transmission of that amount from one
place or person to another does not constitute receipt of
income.

• Remittances are not taxable India, as receipts are

different from remittances.

• TDS shall be deemed to be received by assessee and

shall be included in his income.
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Income deemed to be received in India [Section 7]

Amount
transferred
Contribution in excess Contribution by the from
of 12% of salary to Central Government or unrecognised
Recognized provident any other employer in provident fund
fund or the P.Y. under a to recognised
interest credited in pension scheme provident fund
excess of 9.5% p.a referred u/s 80CCD (being the
(Annual accretion to employer's
the credit of RPF) contribution
and interest
thereon)

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Deemed to be received in India

1. Tax deducted at source –Sec 198
2. Clubbed income – Sec 60 to 64
3. Un explained / unrecorded investments –Sec 69
4. Unexplained /unrecorded money –Sec 69A
5. Accretion of balance at the credit of recognized PF. (Interest in
excess of 9.5%)-Sec 7(i)
6. Excess contribution of employer to RPF ( Excess of 12% of
salary) –Sec-7(ii)
7. Transfer balance of RPF to the extent taxable (URPF to RPF) –
Sec7(ii)
8. Contribution made to notified employee pension scheme.
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Taxability
Particulars of Income ROR RNOR NR

1 Any income received or deemed to be received in India whether

earned in India or elsewhere.

2 Any income which accrues or arises or deemed to be accrue or

arise in India, during the Previous Year whether received in India
or elsewhere.
3 Any income which accrues or arises outside India & received
outside India from a business controlled from India

4 Any income which accrues or arises outside India & received

outside India in the Previous Year from a profession not
controlled from India.
5 Any income which accrues or arises outside India & received
outside India during the previous years preceding the Previous
Year & remitted to India during Previous year.
16 /42
© CA (Dr) Prithvi R Parhi

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Dividend ( Sec -8)

Any dividend
( as defined u/s 2(22)(a)-e))
Interim dividend
declared by a company or
distributed or paid

Shall be deemed to be the Shall be deemed to be the

income of the previous year income of the previous year
in which it is in which it is

Declared / Distributed/ Unconditionally made

Paid, as the case may be. available .
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Income Deemed to Accrue or arise in India- Sec-9

1. Property Income ~ If situated in India

Note :
Capital asset being shares of a company
registered outside India, shall be deemed to be
situated in India, if
the shares derive directly or indirectly its value
substantially from the assets located in India.

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Income Deemed to Accrue or arise in India

- Sec-9
2. Business income ~
Thro’ business/ professional connection in
India

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Business Connection-Sec 9(1)(i)
NR has an authority in India who habitually
1. Concludes contracts
2. Maintains stock
3. Secures order

Does not include;

1. Business of which all the operations are not carried out in India
2. Purchase for export.
3. Availing broker services
4. Collection of news & views ~ News agency business
5. Shooting ~ Cinematography business *
6. Activities confined to display of rough diamonds in Special Notified
Zones (SNZs)

*The individual, partner, shareholder should not be Indian citizen/

Resident)

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3. Salary-Sec 9(1)(ii)
• Deemed to be earned in India if,
a) services are rendered in India.

b) services are rendered outside India provided it is payable to;

-Govt Employee who is citizen of India
Notes:
Allowances to Govt employees for services outside India are
exempt u/s 10(7).
LTC for the period of service rendered in India shall be deemed to
accrue in India.
Pension received abroad for services rendered abroad ~
-Not taxable in India for NR & RNOR
-but chargeable to ROR.
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Income Deemed to Accrue or arise in India

4. Dividend Income ~ Paid by an Indian Co. outside India.

Dividend paid to NR is deemed to be accrue or arise in India only

on Payment & not on Declaration/ Distribution.

Note : Dividend from Indian company is exempt u/s 10(34)

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5. Interest : Deemed to Accrue or arise in India

Payer Condition

Indian Govt No Condition

Resident in India Fund must not be used outside India

(Fund must be used in India or unused)

Non Resident in India Fund must be used in India

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6. Royalty: Deemed to Accrue or arise in India

Payer Condition
Indian Govt No Condition
Resident in India Right/ Property/ Information must not be
used outside India

(Right/ Property/ Information must be

used in India or unused)
Non Resident in India Right/ Property/ Information must be used
in India
Note :
Shall not accrue/ arise in India;
If paid by a resident to non resident manufacturer
For transfer of right
in respect of computer software/equipment
Under approved policy

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7. Fee for Technical Services:

Deemed to Accrue or arise in India
Payer Condition

Indian Govt No Condition

Resident in India Services must not be used

outside India

(Services must be used in India

or unused)

Non Resident in India Services must be used in India

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8. Income from Property

Deemed to Accrue or arise in India:
• Movable/ immovable/ tangible/ intangible : if
situated in India.

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Apportionment of Income in case of NR

• If AO is of the opinion that income arising to NR
can not be definitely ascertained, he may
apportion in the following manner;

1. As a % of turnover as he deems fit.

2. (Business Income as per IT Act X (Receipts so

accruing or arising ) / Total Receipts of the Business)

3. Any other manner as he deems fit.

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Thank You
CA. Dr. Prithvi Ranjan Parhi
Mail: prithvi.baps@gmail.com

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