Explain in the context of provisions contained under the Income-Tax Act, 1961, the Income test and the Assets test with reference to passive foreign investment company.

Income Test Under the Income test, a foreign corporation is considered a Passive Foreign Investment Company 'PFIC' if 75% or more of the foreign corporation's gross income for the taxable year consist of passive income. Passive income includes dividends, interest, royalties, rents, annuities, net gains from certain commodities transactions, net foreign currency gains, income equivalent to interest, payment in lieu of dividends, income from notional contracts and income from certain personal service contracts. Assets Test Under the Assets test, a foreign corporation is considered a PFIC if 50% or more of the foreign corporation's assets produce or are held to produce passive income. In applying the Assets Test, the fair market value of the assets is generally used worked out on FMV method. The general exception is a foreign corporation that is not publically traded and is a controlled foreign corporation, which must use the adjusted basis (the basis method) of its assets in applying the Assets Test. A tax payer may also elect to utilize the basis method, but, once this is done, may not change back to the FMV method without IRS content.