Mr. Sunny, a citizen of India is a renowned Indian scientist and is an employee for Indian Research Centre (IRC) in India. IRC has offered to sponsor his research in Country U as he is being one of the finest young talents in his organization. Mr. Sunny has consented to the same. He is very enthusiastic about it as this is his first ever visit outside India. Activities in Country U: (1) IRC sent him on sponsorship basis for a special research program in CASA Foundation in Country U for an initial period from November 1, 2020 - March 31, 2022. Later on, it got extended as referred to in point (3) below. He visited India on Diwali break for a 15-day period from November 1, 2021-November 15, 2021. Rest of the period he was in Country U itself. (2) During his research period in Country U, he received stipend from CASA Foundation @ USD 5,000.00 per month which was directly credited to his overseas bank account in Country U. TDS @ 30% was done by CASA Foundation as per the applicable laws, on 31.03.2022. As per terms of contract the stipend would fall due at the time of completion of the research or at the time of payment, whichever is earlier. IRC paid USD 50 per day as per diem allowance during his stay in Country U which was directly transferred to his overseas account in Country U. No TDS was deducted on the same. He was paid per diem allowance for 22 days for each month. Out of the total per diem allowance received, he could only spend USD 40 against each receipt. (3) Since, his training got extended from April 1, 2022 to September 25, 2022 therefore, he could return to India only on September 26, 2022. The emolument terms continued to be the same till his extended stay in Country U. He was paid stipend for the complete month of September irrespective of his early departure in September. The stipend for the extended period (from 01.04.2022 - 25.09.2022) was paid together on 30.09.2022. TDS as per the applicable laws was also deducted @ 30% on 30.09.2022. The per diem allowance for September, 2022 was for 20 days only. (4) He became a visiting faculty in the StanC University in Country U since Jan 1, 2022 till his return to India. He used to visit University over the weekend as a visiting faculty. He received an honorarium from the University StanC by way of Bank transfer - USD 500 per week in his overseas bank account held in Country U. Payment made & TDS deducted @ 30% on 30.09.2022, for the period Jan 1, 2022 - Sept 30, 2022. He managed to visit for 35 weeks to StanC during his stay in Country U. Out of the same, 22 weeks were visited in FY 22-23. Activities in Country I: (5) Mr. Sunny, while on training in Country U developed a Special Space Software Module which could be customized as per each country's requirements and could be used accordingly. Mr. Sunny registered his Intellectual Property (IP) rights in Country I in September 2022. He earned Royalty income of EURO 10,000.00 from all over the world in his overseas bank account in Country I for FY 22-23. He incurred EURO 500 to register IP in Country I. The tax rate of Country I is 20%. The Royalty is paid to him as on 31.03.2023 after deduction of TDS. TDS is deducted on gross basis. (6) He was also a visiting faculty in Country I and use to deliver lectures on Space and Aeronautical Activities in AleX University in Country I. He earned Honorarium of EURO 5,000.00 during FY 2022-23. No tax was deducted by Country I on this. Activities in India: (7) Mr. Sunny resumed back his scientific research in India in IRC from Oct 1, 2022, itself. He was paid a fixed salary of INR 5,00,000.00 per month since his rejoining. The salary is directly credited to his Indian bank account. (8) He continued to take virtual sessions once he was back to India for the remaining sessions. The university continued to pay him same amount of Honorarium as before for next 24 weeks for FY 22-23. But, he refused to accept the sum directly in his hand and instead instructed them to transfer the same to Research Centre of IRC (RCI) as a voluntary contribution. The contributions made to RCI are 100% eligible for 80G exemption. The StanC University in Country U deducted taxes on the honorarium @30% on 31.03.2023 and transferred rest of the amount to RCI on his behalf. Additional information: (A) Both his overseas bank balances (Country U and Country I) during FY 22-23 did not have an aggregate balance of more than USD 5,000.00 anytime during the year. (B) As per terms of contract the emoluments from overseas would fall due at the time of completion of the research/activity or at the time of payment, whichever is earlier. (C) Mrs. Sunny, an Indian Citizen but is a tax resident of Country I, is a lawyer by profession. She has not visited India during the year. Her income during AY 2023-24 is as follows: Sl. No.Details of incomeAmount in INR (a)Gift form Mr. Sunny received in bank account in India50,00,000.00 (b)Sale of shares of I Co, an unlisted Indian Company50,00,000.00 (c)Gift from Mrs. Gonda, an Indian resident friend, received in her bank account in Country I2,50,000.00 (d)Fees for consultancy services rendered from Country I to I Co, an Indian company.10,00,000.00 (D) Consider SBI Telegraphic Transfer Bank Rate (TTBR) conversion rate as follows: Name of the CurrencyAs on (in INR) Country28.02.202331.03.202330.09.202231.08.2022 Country UUSD80858080 Country IEURO95100-- (E) Mr. Sunny does not want to opt for the provisions of Section 115BAC of the Act (F) Ignore interest liability for the purpose of computing tax liability. Notes: (a) Reference to the Act would mean the Income-tax Act, 1961. (b) Reference to the Rule would mean the Income-tax Rules, 1962. (c) Assume that all the provisions of Foreign Exchange Management Act, 1999 wherever required has been complied with. (d) The DTAA of India with Country U and Country I are in line with OECD Model Convention, 2017 and UN Model Convention, 2017 respectively. (e) The proportionate credit method is being followed by India to provide relief for taxes paid outside India. (f) Consider the exchange rate as on 31.3.23 for the purpose of Black Money Act. Required: Choose the most appropriate alternative for the following MCQs:
Sub-questions (7)
What is the quantum of the penalty under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, if Mr. Sunny is a resident and ordinarily Resident (ROR) for the previous year 2022-23 and if he fails to furnish information about his Bank Accounts in the return of his income for AY 2023-24?
(A) NIL
(B) INR 10 lakhs
(C) INR 5 Lakhs
(D) Amount equivalent to non-disclosure
What would be the tax consequence of the Honorarium refused by Mr. Sunny in India, which of the statement is correct in this respect?
(A) The amount received by RCI will be treated as income and chargeable to tax only in the hands of RCI.
(B) The amount received by RCI will be treated as application of income and chargeable to tax only in the hands of Mr. Sunny and he will also be entitled to exemption u/s 80G.
(C) No amount will be chargeable to tax in the hands of Mr. Sunny as there is a diversion of income at source itself by overriding title.
(D) The amount received by RCI is chargeable to tax both in the hands of Mr. Sunny and RCI.
With regards to the taxability under the provisions of the Act (ignoring provisions of the DTAA, if any), of gift received by Mrs. Sunny in her Country I account from Mrs. Gonda, which of the following statement is correct?
(A) The gift is not taxable in India as it is not received in India.
(B) The gift is taxable in India as it is deemed to accrue or arise in India.
(C) The gift is not taxable in India as Mrs. A2 does not have a business connection in India.
(D) The gift is not taxable in India as Mrs. A2 is a non-resident.
As per the DTAA between India and Country I, royalty arising in Country I to Mr. Sunny will be taxable according to which statement below?
(A) Royalties arising to Mr. Sunny may be taxed only in India.
(B) Royalty arising to Mr. Sunny may be taxed either in India or in Country I under Royalties Article under India-Country I DTAA.
(C) Royalty arising to Mr. Sunny may be taxed both in India and in Country I under Royalties Article under India-Country I DTAA.
(D) Royalties arising to Mr. Sunny may be taxed only in Country I.
What will be the doubly taxed Income of Mr. Sunny in respect of Income earned in Country U and Country I to claim Foreign Tax Credit in India under section 91 of ITA3 for AY 2023-24, assumingly there is no DTAA with both the countries for the purpose of this question?
(A) INR 33,84,000.00 and INR 15,00,000.00 respectively
(B) INR 43,20,000.00 and INR 13,50,000.00 respectively
(C) INR 38,00,000.00 and INR 14,50,000.00 respectively
(D) INR 32,80,000.00 and INR 9,50,000.00 respectively
Determine the Residential status of Mr. Sunny and compute his tax liability in India for FY 2022-23.
What are the implications on non-disclosure of Foreign Assets under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, if while filing the Income Tax Return, Mr. Sunny fails to disclose his Foreign Income and Overseas Assets in India?