Taxation - DT Ch 02: Residential Status - Test 3: answer key

Question 1 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. Mr. Ishaan Kapoor is an Indian citizen who has been residing in Canada for the past ten years. He is not liable to tax in Canada due to his non-domicile status. During FY 2026-27, he visited India for 110 days to attend to family matters. His cumulative stay in India during the four years preceding FY 2026-27 was 320 days, and in the seven preceding years, it was 500 days. He was non-resident in 8 out of the 10 tax years preceding FY 2026-27. Despite being outside India, he manages his business operations in Canada from a head office located in Delhi. During FY 2026-27, he earned the following incomes: Salary from an Indian company for services rendered in India ₹12,00,000; Salary from a Canadian company for services rendered in Canada ₹25,00,000; Rent from a property situated in London, received in London and not remitted to India ₹6,00,000; Profit from the Canadian business controlled from Delhi ₹15,00,000; Dividend from a British company received in Canada ₹2,00,000; and Interest on a fixed deposit with an Indian bank ₹1,50,000. In a separate independent transaction, Mr. Kabir, a non-resident, received ₹5,00,000 as dividend from an Indian company outside India and ₹4,00,000 as royalty from an Indian resident for a business carried on outside India, without receiving the same in India.

Based on the facts of Case Scenario-I, what is the total income of Mr. Ishaan Kapoor to be included in his gross total income for FY 2026-27?

1. ₹55,50,000
2. ₹28,50,000 (correct answer)
3. ₹34,50,000
4. ₹43,50,000

Answer: B — ₹28,50,000

Explanation. Mr. Ishaan is an RNOR because his stay is <182 days, he is a person of Indian origin with income >15L but stayed <120 days, and his 7-year cumulative stay is 500 days (<729 days). For an RNOR, income accruing outside India is included only if derived from a business controlled in or profession set up in India. Indian salary (12L) + Canadian business controlled from Delhi (15L) + Indian FD interest (1.5L) = ₹28,50,000. Foreign salary (25L), London rent (6L), and British dividend (2L) are excluded.

Where it goes wrong. Students might include all global income or incorrectly include the foreign salary and rent in the RNOR computation.

Authority. Section 5(2) of the Income-tax Act, 1961; Section 6(6) of the Income-tax Act, 1961

Question 2 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

What is the amount of income deemed to accrue or arise in India for Mr. Kabir under the independent transaction mentioned in Case Scenario-I?

1. ₹9,00,000
2. ₹5,00,000 (correct answer)
3. ₹4,00,000
4. Nil

Answer: B — ₹5,00,000

Explanation. Under section 9(4), dividend paid by an Indian company outside India is deemed to accrue or arise in India (₹5,00,000). However, under section 9(6), royalty paid by a resident to a non-resident is not deemed to accrue in India if it relates to a business carried on outside India and is not received in India. Since the royalty of ₹4,00,000 was for a business outside India, it is not taxable. Total deemed income = ₹5,00,000.

Where it goes wrong. Students might aggregate both receipts or wrongly assume that all payments by a resident to a non-resident are deemed to accrue in India.

Authority. Section 9(4) of the Income-tax Act, 1961; Section 9(6) of the Income-tax Act, 1961

Question 3 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

If Mr. Ishaan Kapoor had stayed in India for 125 days and his Indian income was ₹16,00,000, what would be his residential status for FY 2026-27?

1. Resident but not ordinarily resident under section 6(6) (correct answer)
2. Resident and ordinarily resident under section 6(1)
3. Non-resident under section 6(1)
4. Deemed resident under section 6(1A)

Answer: A — Resident but not ordinarily resident under section 6(6)

Explanation. Mr. Ishaan is an Indian citizen. If his income other than foreign sources exceeds ₹15,00,000 and he stays for 120 days or more, the modified basic condition under section 6(1) applies. Since he stayed 125 days and his Indian income is ₹16,00,000, he satisfies the condition. However, because he satisfies the 120-day rule and his 7-year stay is <729 days, he is RNOR under section 6(6).

Where it goes wrong. Students might classify him as ROR simply because he satisfies the basic condition, ignoring the 729-day RNOR test.

Authority. Section 6(1) proviso of the Income-tax Act, 1961; Section 6(6) of the Income-tax Act, 1961

Question 4 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

In the original facts of Case Scenario-I, if Mr. Ishaan Kapoor was a Resident and Ordinarily Resident, what would be his total income?

1. ₹28,50,000
2. ₹34,50,000
3. ₹43,50,000
4. ₹61,50,000 (correct answer)

Answer: D — ₹61,50,000

Explanation. For an ROR, global income is taxable. We must aggregate all incomes: Indian salary ₹12,00,000 + Canadian salary ₹25,00,000 + London rent ₹6,00,000 + Canadian business controlled from Delhi ₹15,00,000 + British dividend ₹2,00,000 + Indian FD interest ₹1,50,000. The sum is 12 + 25 + 6 + 15 + 2 + 1.5 = ₹61,50,000. The entire global income is brought into the tax net.

Where it goes wrong. Students may forget to include the foreign incomes (salary, rent, dividend) which are exempt only for RNOR and NR.

Authority. Section 5(1) of the Income-tax Act, 1961

Question 5 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. M/s Aryan Tech Solutions Ltd., an Indian company, entered into multiple transactions with M/s Nexus Inc., a foreign company based in the USA, during FY 2026-27. Aryan Tech paid ₹20,00,000 as fees for technical services (FTS) to Nexus Inc. for managerial services utilized in setting up its new plant in India. It also paid ₹10,00,000 as royalty to Nexus Inc. for the use of a patent in a business carried on by Aryan Tech outside India, and ₹5,00,000 as interest on a loan borrowed from Nexus Inc. which was utilized for purchasing machinery for its Indian factory. Nexus Inc. also has a business connection in India through a dependent agent who regularly negotiates and concludes contracts on its behalf. The income reasonably attributable to the operations carried out in India by Nexus Inc. amounts to ₹30,00,000. Furthermore, Nexus Inc. paid a salary of ₹18,00,000 to Mr. Dev, an Indian citizen, for services rendered in the USA to the Government of India, along with a foreign allowance of ₹6,00,000 which was paid outside India. Mr. Dev is not a Government employee but works for a private entity contracted by the Government of India.

Based on Case Scenario-II, what is the total amount of income deemed to accrue or arise in India for M/s Nexus Inc. from the payments made by M/s Aryan Tech Solutions Ltd.?

1. ₹35,00,000
2. ₹30,00,000
3. ₹25,00,000 (correct answer)
4. ₹20,00,000

Answer: C — ₹25,00,000

Explanation. FTS of ₹20,00,000 is deemed to accrue in India under section 9(7) as it is utilized in India. Interest of ₹5,00,000 is deemed to accrue in India under section 9(5) as the loan was used for a business in India. Royalty of ₹10,00,000 is NOT deemed to accrue in India under section 9(6) because it relates to a business carried on outside India. Therefore, the total deemed income is 20,00,000 + 5,00,000 = ₹25,00,000.

Where it goes wrong. Students might include the royalty amount, failing to apply the exception under section 9(6) for business carried on outside India.

Authority. Section 9(5) of the Income-tax Act, 1961; Section 9(6) of the Income-tax Act, 1961; Section 9(7) of the Income-tax Act, 1961

Question 6 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

How much income of M/s Nexus Inc. is taxable in India by virtue of having a business connection through its dependent agent in Case Scenario-II?

1. ₹30,00,000 (correct answer)
2. ₹48,00,000
3. ₹55,00,000
4. Nil

Answer: A — ₹30,00,000

Explanation. Under section 9(1)(i), income arising from a business connection in India is deemed to accrue or arise in India. However, only the income that is reasonably attributable to the operations carried out in India is taxable. The scenario explicitly states that the income reasonably attributable to the operations carried out in India amounts to ₹30,00,000. The entire income of the foreign entity cannot be taxed.

Where it goes wrong. Students might assume the entire global income of Nexus Inc. is taxable, ignoring the proportional attribution rule.

Authority. Section 9(1)(i) of the Income-tax Act, 1961

Question 7 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

What is the taxable amount of salary deemed to accrue or arise in India in the hands of Mr. Dev as per the facts of Case Scenario-II?

1. ₹18,00,000
2. ₹24,00,000
3. ₹6,00,000
4. Nil (correct answer)

Answer: D — Nil

Explanation. Section 9(1)(ii) / Section 9(3)(b) deems salary payable by the Government of India to an Indian citizen for services outside India to accrue in India. However, this provision applies exclusively to the Government of India, not private foreign corporations. Salary paid by Nexus Inc. (a private US company) to a non-resident for services rendered outside India does not accrue or arise in India. Hence, Nil is taxable in India.

Where it goes wrong. Students might read 'contracted by the Government' as being a Government employee and wrongly exempt the foreign allowance.

Authority. Section 9(3)(b) of the Income-tax Act, 1961

Question 8 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

If M/s Nexus Inc. had purchased goods in India for the purpose of export out of India, how would the income from such operations be treated under the Income-tax Act, 1961?

1. Deemed to accrue or arise in India under section 9(1)(i)
2. Fully exempt under section 10(15)
3. Not deemed to accrue or arise in India under section 9(1)(i) (correct answer)
4. Taxable only if payment is received in India

Answer: C — Not deemed to accrue or arise in India under section 9(1)(i)

Explanation. The explanation to section 9(1)(i) specifically excludes certain operations from being considered as a business connection in India. One such exclusion is the purchase of goods in India for the purpose of export out of India. Therefore, any income arising from such operations is not deemed to accrue or arise in India, even if the foreign company has a business connection in India.

Where it goes wrong. Students may think any operations in India constitute a business connection and trigger deemed accrual, missing the specific statutory exceptions.

Authority. Section 9(1)(i) explanation of the Income-tax Act, 1961

Question 9 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Anuradha Sen, a Resident and Ordinarily Resident (ROR) in India, earned ₹8,00,000 from a business situated in Germany, which was controlled from London. She also received ₹3,00,000 as rent from a property in Sri Lanka, which was deposited in a bank in Sri Lanka and later remitted to India. What is the amount taxable in India?

1. ₹8,00,000
2. ₹3,00,000
3. ₹11,00,000 (correct answer)
4. Nil

Answer: C — ₹11,00,000

Explanation. An assessee who is ROR is taxable on their global income under section 5(1). This includes all income accrued or received in India, as well as income accrued or received outside India. The fact that the German business is controlled from London and the Sri Lankan rent was received outside India is irrelevant. The total taxable income is ₹8,00,000 + ₹3,00,000 = ₹11,00,000.

Where it goes wrong. Students might incorrectly apply the RNOR or NR rules and exclude the foreign incomes because they were controlled from outside India or received outside India.

Authority. Section 5(1) of the Income-tax Act, 1961

Question 10 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Varun, a Resident but Not Ordinarily Resident (RNOR), has the following incomes: Profit from a business in Singapore which is controlled from India ₹10,00,000; Profit from a business in Dubai which is controlled from Dubai ₹5,00,000; and Interest on a fixed deposit in an Indian bank ₹2,00,000. What is his total income?

1. ₹12,00,000 (correct answer)
2. ₹17,00,000
3. ₹10,00,000
4. ₹15,00,000

Answer: A — ₹12,00,000

Explanation. Under section 5(1), an RNOR is taxable on income received or accrued in India, and on income accruing outside India only if it is derived from a business controlled in or a profession set up in India. The Singapore business is controlled from India, so ₹10,00,000 is included. The Dubai business is controlled from Dubai, so ₹5,00,000 is excluded. The Indian bank interest of ₹2,00,000 is included. Total = 10L + 2L = ₹12,00,000.

Where it goes wrong. Students might include the Dubai business income, failing to distinguish between business controlled in India versus outside India.

Authority. Section 5(1) of the Income-tax Act, 1961

Question 11 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Nandini, a non-resident, received ₹7,00,000 as salary from a company in Japan for services rendered in Japan. The salary was credited to her bank account in Japan. She also received ₹3,00,000 as interest on a fixed deposit with an Indian bank. What is her total income chargeable to tax in India?

1. ₹10,00,000
2. ₹7,00,000
3. Nil
4. ₹3,00,000 (correct answer)

Answer: D — ₹3,00,000

Explanation. Under section 5(2), a non-resident is chargeable to tax only on income received or deemed to be received in India, or income accruing or arising or deemed to accrue or arise in India. The salary from Japan for services rendered in Japan is neither received nor accrued in India. However, the interest on the Indian fixed deposit is deemed to accrue in India. Therefore, only ₹3,00,000 is taxable in India.

Where it goes wrong. Students may incorrectly include the Japanese salary because she holds an Indian bank account, or they may apply the global income rule.

Authority. Section 5(2) of the Income-tax Act, 1961

Question 12 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Rohan, a non-resident, renders services in India to an Indian company. He was paid ₹5,00,000 for services rendered in India. He was also paid ₹2,00,000 for a rest period in the UK, which was preceded and succeeded by services rendered in India and formed part of his employment contract. What is the amount deemed to accrue in India?

1. ₹5,00,000
2. ₹7,00,000 (correct answer)
3. ₹2,00,000
4. Nil

Answer: B — ₹7,00,000

Explanation. Section 9(3)(a) provides that salary earned in India includes not only income for services rendered in India but also income payable for rest periods or leave periods, provided the rest period is preceded and succeeded by services rendered in India and forms part of the service contract. Therefore, both the ₹5,00,000 for actual services and ₹2,00,000 for the rest period are deemed to accrue in India.

Where it goes wrong. Students may exclude the rest period pay because the services were not physically rendered in India during that specific time.

Authority. Section 9(3)(a) of the Income-tax Act, 1961

Question 13 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

An Indian citizen and non-resident is posted to the Indian Embassy in France. During the tax year, he receives basic salary of ₹12,00,000 and foreign allowances of ₹3,00,000 from the Government of India. What amount of income is chargeable to tax in India (before standard deduction)?

1. ₹15,00,000
2. ₹3,00,000
3. ₹12,00,000 (correct answer)
4. Nil

Answer: C — ₹12,00,000

Explanation. Under Section 9(1)(iii) of the Income-tax Act, income chargeable under the head 'Salaries' payable by the Government to a citizen of India for service outside India is deemed to accrue or arise in India. Under Section 10(7), any allowance or perquisite paid or allowed outside India by the Government to a citizen of India for rendering service outside India is wholly exempt from tax. Therefore, the salary of ₹12,00,000 is chargeable to tax, while foreign allowances of ₹3,00,000 are exempt.

Where it goes wrong. Students may tax the salary under section 9(3)(b) but forget the specific exemption for foreign allowances paid by the Government.

Authority. Section 9(3)(b) of the Income-tax Act, 1961; Schedule III of the Income-tax Act, 1961

Question 14 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

ABC Ltd., an Indian company, declared a dividend of ₹10,00,000 to its shareholders. Mr. John, a non-resident, received his share of ₹2,00,000 in New York. Is this income taxable in India for Mr. John?

1. Yes, deemed to accrue in India under section 9(4) (correct answer)
2. No, exempt under section 10(34)
3. Yes, taxable only if remitted to India
4. No, because it was received outside India

Answer: A — Yes, deemed to accrue in India under section 9(4)

Explanation. Section 9(4) specifically provides that dividend paid by an Indian company outside India is deemed to accrue or arise in India. This provision ensures that non-resident shareholders cannot escape taxation in India merely by receiving the dividend outside India. Therefore, the ₹2,00,000 is taxable in India.

Where it goes wrong. Students may think that because the dividend was received in New York, it is foreign income and not taxable in India.

Authority. Section 9(4) of the Income-tax Act, 1961

Question 15 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Suresh, a resident Indian, borrowed ₹50,00,000 from Mr. David, a non-resident, and used the funds to set up a new manufacturing unit in India. He paid interest of ₹5,00,000 to Mr. David. What is the amount deemed to accrue in India for Mr. David?

1. Nil, because the lender is a non-resident
2. ₹50,00,000
3. ₹5,00,000 (correct answer)
4. Nil, because the loan was taken outside India

Answer: C — ₹5,00,000

Explanation. Under section 9(5), interest payable by a resident is deemed to accrue or arise in India. However, there is an exception where the interest is payable on debt incurred for a business carried on outside India or for earning income from a source outside India. In this case, the loan was used to set up a unit in India, which means it was used for a business carried on in India. Therefore, the interest of ₹5,00,000 is deemed to accrue in India.

Where it goes wrong. Students might apply the exception for businesses carried on outside India, missing that the business was set up in India.

Authority. Section 9(5) of the Income-tax Act, 1961

Question 16 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Ramesh, a resident Indian, pays royalty of ₹8,00,000 to a non-resident for the use of a trademark. The trademark is used for a business carried on by Mr. Ramesh in Sri Lanka. The payment is made outside India. What is the amount deemed to accrue in India for the non-resident?

1. ₹8,00,000
2. ₹4,00,000
3. Nil, because the non-resident has no business connection in India
4. Nil, because the royalty relates to a business carried on outside India (correct answer)

Answer: D — Nil, because the royalty relates to a business carried on outside India

Explanation. Section 9(6) provides that royalty payable by a resident is deemed to accrue in India. However, an exception exists: if the royalty is payable for a right, property, or information used for the purpose of a business or profession carried on by such resident outside India, or for earning any income from a source outside India, it is not deemed to accrue in India. Since the trademark is used for a business in Sri Lanka, the royalty is not taxable in India.

Where it goes wrong. Students may tax the royalty because it is paid by a resident, overlooking the exception for business carried on outside India.

Authority. Section 9(6) of the Income-tax Act, 1961

Question 17 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

M/s Global Inc., a non-resident, pays fees for technical services (FTS) of ₹10,00,000 to M/s Tech Solutions, another non-resident. The FTS is for services utilized by Global Inc. for a business carried on in India. What is the amount deemed to accrue in India?

1. ₹10,00,000 (correct answer)
2. Nil
3. ₹5,00,000
4. Taxable only if the payment is made in India

Answer: A — ₹10,00,000

Explanation. Under section 9(7), FTS payable by a non-resident is deemed to accrue in India if it is payable for services utilized in a business or profession carried on by such non-resident in India. The payment is between two non-residents, but because the services were utilized for a business in India, the income is deemed to accrue in India. Therefore, the entire ₹10,00,000 is taxable in India.

Where it goes wrong. Students may think that because both parties are non-residents, the income cannot be taxed in India.

Authority. Section 9(7) of the Income-tax Act, 1961

Question 18 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A non-resident news agency collected news and views in India and transmitted them out of India. It earned ₹5,00,000 from these operations. Is this income deemed to accrue or arise in India?

1. Yes, because the operations were carried out in India
2. No, due to the specific exception under section 9(1)(i) (correct answer)
3. Yes, because the news agency has a business connection in India
4. Only if the news agency has a permanent establishment in India

Answer: B — No, due to the specific exception under section 9(1)(i)

Explanation. The explanation to section 9(1)(i) provides certain exceptions to the business connection rule. One such exception is the collection of news and views in India for transmission out of India by a non-resident engaged in the business of running a news agency or publishing newspapers, magazines, or journals. Therefore, the income of ₹5,00,000 is not deemed to accrue or arise in India.

Where it goes wrong. Students may apply the general business connection rule, missing the specific exception for news collection and transmission.

Authority. Section 9(1)(i) of the Income-tax Act, 1961

Question 19 · 2 marks · Taxation - DT Ch 02: Residential Status · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Karan, a non-resident, transferred shares of an Indian company to another non-resident in London. The consideration was also received in London. What is the tax treatment of the capital gains arising from this transfer in India?

1. Not taxable in India as the transfer took place outside India
2. Exempt under section 10(38)
3. Taxable in India as the capital asset is situated in India (correct answer)
4. Taxable only if remitted to India

Answer: C — Taxable in India as the capital asset is situated in India

Explanation. Under section 9(1)(i), income accruing or arising through the transfer of a capital asset situated in India is deemed to accrue or arise in India. This applies irrespective of the fact whether the transfer took place outside India or the consideration was received outside India. Since the shares of an Indian company are situated in India, the capital gains are taxable in India.

Where it goes wrong. Students may think that because both parties and the transaction are outside India, the capital gain is not taxable in India.

Authority. Section 9(1)(i) of the Income-tax Act, 1961

Question 20 · 2 marks · Taxation - DT Ch 02: Residential Status · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Ashish, an Indian resident, gifted ₹15,00,000 to his relative Mr. Ben, a non-resident, without any consideration. What is the amount deemed to accrue or arise in India for Mr. Ben under section 9(8)?

1. ₹15,00,000
2. Nil, as it is a gift to a relative (correct answer)
3. ₹7,50,000
4. Taxable only if received in India

Answer: B — Nil, as it is a gift to a relative

Explanation. Section 9(8) provides that any sum paid without consideration by a resident to a non-corporate non-resident is deemed to accrue in India if it is chargeable to tax under section 56(2)(x). However, section 56(2)(x) exempts gifts received from a relative. Therefore, the gift of ₹15,00,000 to a relative is not chargeable to tax under section 56(2)(x), and hence, it is not deemed to accrue in India under section 9(8).

Where it goes wrong. Students may tax the gift under section 9(8) without checking the exemption for relatives under section 56(2)(x).

Authority. Section 9(8) of the Income-tax Act, 1961; Section 56(2)(x) of the Income-tax Act, 1961