Mr. Shrestha, a resident individual aged 34 years, furnishes the following information relating to the previous year 2025-26: Gross receipts from…

CA Final · Direct Tax Laws and International Taxation · RTP · May 2026
Mr. Shrestha, a resident individual aged 34 years, furnishes the following information relating to the previous year 2025-26: Gross receipts from business carried on from Jaipur -26,00,000 Expenditure incurred in respect of earning such receipts (to the extent allowable as per the provisions of the Income-tax Act) -3,50,000 Rent received in Country M in respect of a residential property situated therein -95,000 per month. Expenditure incurred in relation to current repairs and maintenance of the property -5,25,000 Receipt from agricultural operations in Country M's companies -18,00,000 Expenditure incurred in earning such agricultural income -8,50,000 Dividend income from Country M -4,20,000 The taxation regime of Country M provides the following: (i) Agricultural income is exempt in country M (ii) All other incomes (after providing for deductions for expenses) taxable at flat rate of 20%. Compute total income and the net tax liability of Shrestha on the assumption that there is no DTAA between India and Country M and he has not opted out of default tax regime contained in section 115BAC(1A).

Suggested Answer and Working Notes:

Computation of total Income and net tax liability of Mr. Shrestha for AY 2026-27 ₹ ₹ Income from House Property in country M Net Annual Value [Rent received (₹ 95,000 x 12)] 11,40,000 Less: Standards Deduction @30% 3,42,000 7,98,000 Profits and gains from business or profession Gross receipts from business in India 26,00,000 Less: Expenditure incurred in earning such receipts 3,50,000 22,50,000 Income from other sources Agricultural Income [not exempt u/s 10(1)] 18,00,000 Less: Expenditure Incurred in earning such income 8,50,000 Since agricultural income from country M is not exempt, expenses incurred will be allowed as deduction 9,50,000 Dividend income from Country M's Companies 4,20,000 13,70,000 Gross total income/Total Income 44,18,000 Tax on total income [₹ 3,00,000 (Upto 24,00,000) + 30% on 20,18,000] 9,05,400 Add: Health and Education Cess @4% 36,216 9,41,616 Less: Relief u/s 91 Average rate of tax in India: 9,41,616 x 100/44,18,000 21.31% Rate of tax in Country M 20% Doubly taxed income: Rental Income in country M - Lower of the following: 6,15,000 Taxable in India 7,98,000 Taxable in Country M [(₹ 95,000 × 12) - 5,25,000] 6,15,000 7,98,000 Dividend income 4,20,000 10,35,000 Rebate under section 91 in respect of doubly taxed income of 10,35,000@20%. 2,07,000 Net tax liability 7,34,616 Net tax liability (Rounded off) 7,34,620

Topics: Double Taxation Relief

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