Examine the tax implications of the following transactions under Income Tax Act, 1961 for the assessment year 2025-26 : (Give brief reason) (a) Government of India has appointed Mr. Ramesh as an ambassador in Sweden. He

Answer 4A(iii) (a) Salary of Ambassador: As per Section 9(1)(iii) of the Income Tax Act, 1961, salaries (including, inter alia, allowances) payable by the Government to a citizen of India for services rendered outside India shall be deemed to accrue or arise in India. Thus, salary received from Government by Mr. Ramesh, being a non-resident of ₹ 7,50,000 for rendering services in Sweden would be taxable in his hands in India, after allowing standard deduction of ₹ 50,000. However, any allowance or perquisites paid or allowed outside India by the Government to a citizen of India for rendering services outside India will be fully exempt u/s 10(7). Hence, ₹ 2,40,000, being the allowance would be exempt. (b) Royalty Income: Royalty payable by a non-resident would be deemed to accrue or arise in India in the hands of the recipient only when such royalty is payable in respect of any right, property or information used for the purposes of a business or profession carried on by such non-resident in India or earning any income from any source in India. In the present case, since Mr. Rajkumar, a non-resident, paid the royalty of ₹ 3,00,000 for a patent right used for development of a product in India, the same would be taxable in India in the hands of the recipient, Mr. Narayanan, a non-resident, irrespective of the fact that only 50% of the royalty is received in India.