Mr. Kabir (aged 59 years), an Indian citizen, frequently travels abroad for commercial ventures as well as for leisure trips. For the financial year…

CA Intermediate · Taxation · MTP · September 2026
Mr. Kabir (aged 59 years), an Indian citizen, frequently travels abroad for commercial ventures as well as for leisure trips. For the financial year 2025-26, he departed from Mumbai airport on 20th April 2025 and returned to India on 15th October 2025. Over the 7 years immediately preceding this previous year, his cumulative stay in India was less than 700 days. Based on the following particulars, determine his residential status and compute his total income for the Assessment Year 2026-27, assuming he has opted out of the default tax regime. (i) Long-term capital gains amounting to ₹ 1,12,000 from sale of equity shares in Alpha India Ltd. (a listed Indian entity). The transaction proceeds were directly credited to his overseas bank account in London. (ii) Gross dividend income of ₹ 40,000 received from an Indian enterprise, Beta Industries Ltd. To fund this investment, he had borrowed capital from an NRI friend, Mr. Dev, on 2nd April 2025. The interest payable on this loan for the P.Y. 2025-26 was ₹ 10,000. (iii) Interest earned on a post office savings bank account totalling ₹ 9,500.

Suggested Answer and Working Notes:

Determination of Residential Status: An individual is said to be a resident in India for a previous year if he fulfills any one of the following basic conditions: (i) stays in India for a total period of 182 days or more during the relevant previous year, or (ii) stays in India for at least 60 days during the previous year and stayed for 365 days or more during the 4 years immediately preceding that previous year. Mr. Kabir, being an Indian citizen, satisfies the first basic condition as he was present in India for 188 days (20+17+30+31+31+28+31) during the previous year 2025-26. Therefore, he is a resident in India for the A.Y. 2026-27. Furthermore, a resident individual would be "Resident but Not Ordinarily Resident" (RNOR) if he fulfils any of the following additional conditions: (i) He has been a non-resident in India in 9 out of the 10 previous years preceding the relevant previous year, or (ii) He has been in India for a total period of 729 days or less during the 7 years immediately preceding the relevant previous year. Since Mr. Kabir's stayed in India during the 7 years immediately preceding the previous year 2025-26 was less than 700 days, his status would be “Resident but Not Ordinarily Resident (RNOR)” for the A.Y. 2026-27. Computation of Total Income of Mr. Kabir for the A.Y. 2026-27 as per normal provision of the Act Particulars Amount (₹) Amount (₹) Long-term capital gains on the sale of listed equity shares of an Indian company (Alpha India Ltd.) is taxable in India since the income accrued or arisen in India, regardless of the fact that the proceeds were credited to a bank account in the UK. 1,12,000 Income from Other Sources Dividend received from Beta Industries Ltd. (taxable as it accrued/arisen in India) 40,000 Less: Interest expenditure on loan taken for investment (restricted to 20% of dividend income) (8,000) 32,000 Interest on post office savings bank account 9,500 Less: Exemption under section 10(15) (3,500) 6,000 Gross Total Income 1,50,000 Less: Deduction under Section 80TTA (Interest on Post office savings bank account allowed up to a maximum of 10,000) (6,000) Total Income 1,44,000

Topics: Paper 3A: Income Tax Laws

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