Mr. Kamal Sharma (Age 32 years) is the Marketing manager in M/s. Patio Systems Ltd. since 01.10.2021. His income for the Financial Year 2024-25 in…

CA Final · Direct Tax Laws and International Taxation · PYQS · September 2025
Mr. Kamal Sharma (Age 32 years) is the Marketing manager in M/s. Patio Systems Ltd. since 01.10.2021. His income for the Financial Year 2024-25 in India consists of (i) Salary (before standard deduction) of 23.50 lakhs; (ii) Interest on Housing loan in respect of property at Delhi (self-occupied by him) of 2,20,000; (iii) Dividend received from Indian companies - 1,90,000/-. (iv) Interest on FDR, 24,000 received on FDR made by Mr. Kamal Sharma in the name of his wife. Mrs. Kamal Sharma, who does not have any other source income. He has the following income for the year ended 31st March 2025 in Country 'K': (i) Income from business in Country K Euro 13,500; (ii) Rent from house property in Country K Euro 8,000; (iii) Municipal taxes in respect of the above house (Not allowed as deduction in Country K) = Euro 800; (iv) Short-term capital gain of Euro 6,000 on sale of shares of companies registered in Country 'K' and sale proceeds were credited in bank account in Country 'K' on 31.03.2025. During F.Y. 2024-25, Mr. Kamal Sharma visited the country K for 30 days. He has never stayed there for more than a month in one financial year. India has not signed any DTAA with Country 'K'. The fiscal year for the purpose of income-tax is the same (both in India and Country 'K'). Rate of tax in Country 'K' is 25% in respect of all incomes. Assume that Rate of 1 Euro 90for all calculation purposes. Compute the total income and net tax liability of Mr. Kamal Sharma for the A.Y. 2025-26 under the default tax regime.

Suggested Answer and Working Notes:

Computation of total income and net tax liability of Mr. Kamal Sharma for A.Y. 2025-26 under section 115BAC Particulars ₹ Income from Salary Gross Salary 23,50,000 Less: Standard Deduction u/s 16(ia) 75,000 22,75,000 Income from House Property Self-occupied property in Delhi Interest on housing loan [Not allowable under default tax regime] - Let out property in Country K Euro Rent from house property in Country K 4 8,000 Less: Municipal taxes paid in Country K 800 7,200 Less: Deduction under section 24(a) @30% 2,160 5,040 Euro 5,040 x 90 4,53,600 Profits and Gains of Business or Profession Income from business in Country K [Euro 13,500 x 90] 12,15,000 Capital Gain Short-term capital gain on sale of shares of companies registered in County K [Euro 6,000 x 90] 5,40,000 Income from Other Sources Dividend received from Indian companies 1,90,000 Interest in FDR [To be included in the total income of Mr. Kamal since FDRs are made by Mr. Kamal] 24,000 2,14,000 Gross Total Income/ Total Income 46,97,600 Tax liability on 46,97,600 Tax on total income [30% of 31,97,600 +1,40,000] 10,99,280 Add: Health and Education cess @4% 43,971 11,43,251 Less: Deduction u/s 91 (See Working Note below) 5,37,573 Net tax liability 6,05,678 Net tax liability (Rounded off) 6,05,680 Working Note: Calculation of deduction under section 91 Average Rate of tax in Country K is 25% Indian Average Rate of tax = 11,43,251/46,97,600 x 100 = 24.34% Doubly taxed income pertaining to Country K = Income from house property of 4,53,600 + Income from Business of 12,15,000 + Capital Gain of 5,40,000 = 22,08,600 Deduction u/s 91 = Lower of average rate of tax in Country K and Indian rate of tax rate of tax x Doubly taxed income = [24.34% x 22,08,600] = 5,37,573

Topics: Double Taxation Relief

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