Question 1

Mr. Ayush, a resident individual, aged 62 years, is a qualified medical practitioner running his own clinic. His Income & Expenditure A/c for the year ending 31.3.2026 shows: Income from consultation fees ₹74,28,000, salary from True Care Hospitals ₹10,80,000, rental income from house property ₹2,40,000, dividend from foreign companies (gross) ₹60,000. Expenditure includes staff salary ₹7,20,000, administrative expenses ₹11,64,000, rent of clinic ₹5,76,000, conveyance ₹1,44,000, power & fuel ₹1,44,000, interest on housing loan ₹2,20,000, interest on education loan for son ₹1,56,000, amount paid to scientific research association ₹1,50,000. For part-time employment with True Care Hospitals: Basic pay ₹85,000 p.m., transport allowance ₹5,000 p.m. During the year, his son had medical treatmen…

Accepted Answer

**Computation of Total Income of Mr. Ayush for A.Y. 2026-27**

Mr. Ayush is a resident individual aged 62 years (Senior Citizen). His income falls under four heads: Salaries, Income from House Property (IFHP), Profits and Gains of Business/Profession (PGBP), and Income from Other Sources.

**A. INCOME FROM SALARIES**

Mr. Ayush receives salary from True Care Hospitals as a part-time employee. His **Basic Pay** is ₹85,000 × 12 = ₹10,20,000 and **Transport Allowance** is ₹5,000 × 12 = ₹60,000 (fully taxable; general transport allowance exemption was withdrawn from F.Y. 2018-19). Gross Salary = ₹10,80,000. The free medical treatment received by his son (worth ₹1,60,000) at True Care Hospitals is **exempt from perquisite taxation** under Section 17(2)(ii) of the Income Tax Act, 1961, since the treatment was provided in a hospital maintained by the employer. **Standard deduction u/s 16(ia)** of ₹75,000 is available under both regimes (as amended by Finance Act 2024). **Income from Salaries = ₹10,05,000** (both regimes).

**B. INCOME FROM HOUSE PROPERTY**

The house has two portions: Ground Floor (self-occupied by Mr. Ayush from 01.10.2025) and First Floor (let-out at ₹40,000 p.m. from 01.10.2025). The house was under reconstruction from 01.04.2025 to 30.09.2025. **Interest on housing loan** = ₹1,20,000 (Apr–Sep 2025) + ₹1,00,000 (Oct–Mar 2026) = ₹2,20,000. Since reconstruction completed within P.Y. 2025-26, the entire ₹2,20,000 is treated as current-year interest (no pre-construct…

Question 2

Varnika Pvt. Ltd., a registered supplier of goods and services at Kolkata has furnished the following information for the month of February: (i) Intra-State supply of taxable goods including ₹1,00,000 received as advance in January, invoice for entire sale value issued on 15th February: ₹4,00,000. (ii) Purchase of goods from a composition dealer, registered in Kolkata: ₹5,50,000. (iii) Services provided by way of labour contracts for repairing a single residential unit otherwise than as part of residential complex (Intra-State): ₹1,00,000. (iv) Membership of a club availed for employees working in the factory (Intra-State): ₹1,75,000. (v) Goods transport services received from a GTA who exercised option to pay tax @18% (Inter-State): ₹2,00,000. (vi) Inter-State services provided by way of …

Accepted Answer

**Computation of Minimum GST Payable in Cash by Varnika Pvt. Ltd. for February**

**STEP 1 — DETERMINATION OF OUTPUT TAX LIABILITY**

**(i) Intra-State supply of taxable goods — ₹4,00,000 (advance ₹1,00,000 taxed in January)**
As per Section 12 of the CGST Act 2017, for supply of goods, time of supply is the date of invoice or date of receipt of payment, whichever is earlier. The advance of ₹1,00,000 was received in January — tax was already discharged in January. Only the balance ₹3,00,000 (i.e., ₹4,00,000 − ₹1,00,000) becomes taxable in February when the invoice is issued.
CGST @ 9% on ₹3,00,000 = ₹27,000 | SGST @ 9% = ₹27,000

**(ii) Purchase from composition dealer — Nil output tax**
This is an inward supply. A composition dealer cannot collect or pass on ITC (Section 10 of CGST Act). No output tax arises for Varnika here.

**(iii) Labour contracts for repairing a single residential unit — Taxable (Intra-State)**
The exemption under Entry 10 of Notification 12/2017-CT(Rate) covers pure labour contracts of **construction / original works** pertaining to a single residential unit otherwise than as part of a residential complex. **Repairing** does not constitute 'original works'; hence this service is taxable.
CGST @ 9% on ₹1,00,000 = ₹9,000 | SGST @ 9% = ₹9,000

**(iv) Club membership for employees — Nil output tax**
This is an inward supply (Varnika availing the service). No output tax. ITC is blocked under Section 17(5)(b)(ii) of CGST Act (membership of club, health and f…

Question 3

"Royal Studio", a photography firm, has commenced providing photoshoot services in Delhi from the beginning of current financial year 2025-26. It has provided the following details of turnover for the various quarters till December 2025: Q1 (April-June 2025): ₹20 lakh, Q2 (July-September 2025): ₹30 lakh, Q3 (October-December 2025): ₹40 lakh. Applicable tax rate is 18%. Royal Studio wishes to pay tax at a lower rate and opts for the composition scheme. Advise whether it can do so and calculate the amount of tax payable for each quarter.

Accepted Answer

**Eligibility of Royal Studio for Composition Scheme**

Royal Studio is a service provider (photography services). Under **Section 10(2A) of the Central Goods and Services Tax Act, 2017**, a supplier of services (or mixed supplier) whose **aggregate turnover in the preceding financial year did not exceed ₹50 lakh** may opt for the composition scheme and pay tax at **6% (3% CGST + 3% SGST)** on turnover.

Since Royal Studio **commenced business in FY 2025-26 itself**, its preceding year turnover is NIL, which is below ₹50 lakh. Therefore, it can validly opt for the composition scheme at the time of commencement. Delhi is not a special category state, so the ₹50 lakh threshold (and not any reduced limit) applies.

**Quarter-wise Eligibility and Tax Computation**

**Q1 (April – June 2025):** Turnover for the quarter = ₹20 lakh. Cumulative aggregate turnover = ₹20 lakh, which is below ₹50 lakh. Royal Studio remains eligible under the composition scheme.
Tax payable = ₹20 lakh × 6% = **₹1,20,000** (₹60,000 CGST + ₹60,000 SGST).

**Q2 (July – September 2025):** Turnover for the quarter = ₹30 lakh. Cumulative aggregate turnover = ₹20 lakh + ₹30 lakh = ₹50 lakh. The threshold is ₹50 lakh; aggregate turnover has reached but has **not exceeded** ₹50 lakh. Royal Studio remains eligible for the composition scheme in Q2.
Tax payable = ₹30 lakh × 6% = **₹1,80,000** (₹90,000 CGST + ₹90,000 SGST).

**Q3 (October – December 2025):** Turnover for the quarter = ₹40 lakh. Cumulative aggregate tu…

Question 4

What is the amount of salary chargeable under the head "Salaries" to Mr. Nikhil for A.Y. 2026-27?

Accepted Answer

**Answer: (B)**

Mr. Nikhil worked from April 1, 2025 to July 31, 2025 (4 months) before resignation.

**Salary Computation for P.Y. 2025-26 (A.Y. 2026-27):**

**Inclusions in Salary:**

(1) **Basic Pay:** ₹45,000 × 4 months = ₹1,80,000

(2) **Dearness Allowance:** ₹4,500 × 4 months = ₹18,000 (forms part of retirement benefits but is taxable as per Section 17(1) read with Section 17(2))

(3) **Medical Allowance:** ₹5,000 × 4 months = ₹20,000 (taxable as cash allowance)

(4) **Entertainment Allowance:** ₹2,500 × 4 months = ₹10,000 (fully taxable under Section 17(2))

(5) **Commission:** ₹10,000 × 4 months = ₹40,000 (taxable as part of salary)

(6) **Employee's Contribution to RPF:** ₹7,500 × 4 months = ₹30,000 (forms part of salary as per Section 17(2)(v); though deductible under Section 80C, it is included in salary computation for determining tax on salary)

(7) **Interest Accrued on RPF:** Interest for 4 months on employee's contribution = ₹7,500 × 4 × 13% ÷ 12 months = ₹1,300 (taxable)

**Exclusions from Salary:**

Employer's contribution to RPF: ₹30,000 is **fully excluded** from salary as per Section 17(2)(vi) (recognized provident fund contributions up to 12% of salary and excess also potentially excludable under specific conditions; standard treatment excludes the contribution)

**Total Salary Chargeable = ₹1,80,000 + ₹18,000 + ₹20,000 + ₹10,000 + ₹40,000 + ₹30,000 + ₹1,300 = ₹2,99,300**

Question 5

What is the effective date of registration for Mr. Vyansh?

Accepted Answer

**Answer: (A)**

Mr. Vyansh becomes liable to register under Section 22 of the CGST Act, 2017 when his aggregate turnover exceeds the prescribed limit of ₹20,00,000 in the immediately preceding calendar month. The case states that on 30th June, his turnover exceeded ₹20,00,000 and reached ₹20,05,000. Therefore, he became liable to register on 30th June, 2017.

Under Rule 9 of the CGST Rules, 2017, the effective date of registration is determined as follows:
- Where an application is made **before** the liability date: effective from the liability date
- Where an application is made **after** the liability date: effective from the actual date of liability

Since Mr. Vyansh applied for registration on 15th July (which is **after** 30th June when he became liable), Rule 9(1)(b) applies. The registration is effective **from the date he actually became liable to register**, which is **30th June, 2017**.

The fact that the registration certificate was issued on 25th July does not change the effective date. The effective date remains 30th June, the date on which liability arose. This is consistent with the principle that a person's GST registration obligations are backdated to the date of actual liability, not to the date of certificate issuance.

Question 6

What is the amount of deduction available to Mr. Nikhil under Chapter VI-A for A.Y. 2026-27?

Accepted Answer

**Answer: (D) Nil**

Mr. Nikhil purchased the house property on 1.12.2025 for ₹90 lakhs with a loan of ₹45 lakhs @ 10% p.a. While the property was purchased with self-occupation, the critical disqualifying factor is the **property value of ₹90 lakhs**.

For **Section 80EE** (Interest on housing loan): Although there is no explicit property value limit under Section 80EE per se, it applies to first-time homebuyers with loans up to ₹45 lakhs. However, Section 80EE has been superseded in most beneficial scenarios by Section 80EEA.

For **Section 80EEA** (inserted by Finance Act 2019 from A.Y. 2020-21): This section provides additional deduction of interest up to ₹2,00,000 per annum for first-time homebuyers taking loans for self-occupied residential property. However, it has a **critical condition**: the value of the residential property shall **not exceed ₹60 lakhs**. Since Mr. Nikhil's property value is ₹90 lakhs, he is **ineligible under Section 80EEA**.

While interest on housing loan remains deductible, it falls under **Section 24(1)(vi)** (not Chapter VI-A). Section 24 is in Chapter III-D (Income from House Property) and is NOT a Chapter VI-A deduction.

Regarding other potential Chapter VI-A deductions: Employee's contribution to RPF during employment (Apr-Jul 2025: ₹7,500 × 4 = ₹30,000) is deductible under **Section 80C**, not Section 80EE/80EEA. The housing interest deduction cannot be claimed separately under Chapter VI-A due to the property value limit breach.

Theref…

Question 7

Mr. Vyansh can issue a revised tax invoice till which date?

Accepted Answer

**Answer: (D)**

When a person becomes liable for GST registration and has issued tax invoices for supplies made before registration, revised invoices can be issued under **Rule 12(1) of CGST Rules 2017**.

Key Facts:
- Mr. Vyansh became liable for registration from 1st July (when turnover exceeded ₹20,00,000 on 30th June).
- Invoice for ₹6,00,000 was issued on 22nd July (before registration on 25th July).
- Invoice for ₹5,00,000 was issued on 7th August (after registration).

Rule 12(1) provides that a revised tax invoice can be issued within **30 days from the date of issue of the original invoice OR before furnishing the GST return for the relevant period, whichever is later**.

For the 22nd July invoice (July return period):
- 30 days from 22nd July = 21st August
- July return due by 25th August (extended deadline for newly registered persons)
- The later deadline = **25th August**

For the 7th August invoice (August return period):
- 30 days from 7th August = 6th September
- August return due by 11th September
- The later deadline = 11th September

Since the question asks the overall deadline till which a revised invoice can be issued, and considering the most restrictive deadline from the supplies covered, **Mr. Vyansh can issue revised tax invoices till 25th August** for supplies made before his actual registration.

Question 8

What is the total income of Mr. Nikhil for A.Y. 2026-27?

Accepted Answer

**Answer: (B)**

For A.Y. 2026-27 (P.Y. 2025-26), Mr. Nikhil's total income comprises:

**1. Income from Salaries (April to July 2025 - 4 months):**
Basic pay (₹45,000 × 4) = ₹1,80,000; Dearness Allowance forming part of retirement benefits (10% of Basic × 4) = ₹18,000; Medical allowance = ₹20,000; Entertainment allowance = ₹10,000; Commission = ₹40,000; Employer's contribution to RPF = ₹30,000. Gross salary = ₹2,98,000. Less: Employee's contribution to RPF = ₹30,000. **Salary income = ₹2,68,000**. After applying Standard Deduction under Section 16(ia) of ₹50,000, **income from salaries = ₹2,18,000**.

**2. Income from Business (October 2025 to March 2026 - 6 months):**
The stated annual profit of ₹51 lakhs, proportionalized for 6 months of operation = **₹25,50,000**.

**3. Interest on RPF:**
Interest accrued on RPF ₹14,300 is taxable under the head "Other Sources" as it does not fall within the exemption under Section 89(1) (which exempts withdrawal of entire RPF amount after 10 years of service, but interest accrued is separately taxable in the year of accrual if not withdrawn). **= ₹14,300**

**4. Income from House Property:**
Nil. For self-occupied property under Section 23(1)(a), Annual Value is Nil. Under Section 24(1)(vi), interest on borrowed capital during construction and one year after completion is deductible, but the property was purchased ready-made on 1.12.2025, so no deduction is available. Stamp duty of ₹6,25,000 is a capital expenditure and not deductible.

…

Question 9

Eligible input tax credit that can be availed by Mr. Vyansh for the month of July is?

Accepted Answer

**Answer: (B)** CGST ₹15,750 & SGST ₹15,750

For GST input tax credit eligibility, the critical factors are: (i) inputs must be received on or after the date of GST registration, and (ii) they must be used for making taxable supplies.

**Analysis of transactions in July:**

**Capital Goods (5th July): ₹4,50,000** — Purchased before GST registration (certificate issued 25th July). Under the GST law, ITC on capital goods received before the date of registration is **not eligible**. The purchase on 5th July is before the registration date of 25th July, so no ITC can be claimed.

**Service Supply to Mr. Yuvan (22nd July): ₹6,00,000** — The service was completed and invoice issued on 22nd July, which is **before registration** (25th July). Since Mr. Vyansh was not a registered person on 22nd July, this is not a taxable supply under GST. Consequently, input tax on supplies/services used for this unregistered supply is not eligible for ITC.

**Input Services (25th-31st July): ₹1,75,000** — These input services were received **after registration** (25th July) and relate to an output service to be provided in August. Since the August supply will be a taxable supply by a registered person, the input services used for that supply are **eligible for ITC**. The input services amount to ₹1,75,000, on which GST is payable at the rate of 9% CGST + 9% SGST.

**Calculation:** ₹1,75,000 × 9% = ₹15,750 (for each of CGST and SGST).

Question 10

The time of supply of services provided by Mr. Vyansh to Mr. Vedant is?

Accepted Answer

**Answer: (A) 7th August**

For services under **Section 13(2) of the CGST Act, 2017**, the time of supply is the **earlier of** (a) the date on which the invoice is issued, or (b) the date on which payment is received, **subject to a maximum period of 30 days from the date of supply**. In this case: service completed on 6th August, invoice issued on 7th August, payment received on 29th August. The earlier of invoice date (7th August) and payment date (29th August) is **7th August**, which falls within 30 days of the supply date (6th August). Therefore, time of supply is 7th August.

Question 11

What will be the tax liability of July month if Mr. Vyansh is paying tax under section 10(2A) of the CGST Act, 2017?

Accepted Answer

**Answer: (C)** CGST ₹18,000 & SGST ₹18,000

The critical issue is that Mr. Vyansh made a supply on 22nd July (invoice issued) for ₹6,00,000, but his GST registration was issued only on 25th July. Normally, GST can only be charged from the date of registration onwards.

However, under **Section 10(2A) of the CGST Act 2017**, there is a special provision for supplies made before registration by persons who are subsequently registered. This section provides for taxation at a **discounted/reduced rate** rather than complete exemption.

For supplies made before the date of registration but by a person who subsequently becomes registered, Section 10(2A) allows taxation at a reduced rate of **6%** (3% CGST + 3% SGST) instead of the normal rate of 18% (9% CGST + 9% SGST).

**Calculation for July:**
Output supply: ₹6,00,000
Tax at discounted rate of 6% under Section 10(2A):
- CGST @ 3% = ₹18,000
- SGST @ 3% = ₹18,000

Note: The input services availed from 25th July to 31st July (₹1,75,000) are for output service to be provided in August, and the capital goods purchased on 5th July cannot be credited as they were purchased before registration. Therefore, they do not reduce the July tax liability.

Question 12

Mr. Dhruv, an Indian citizen aged 32 years, a Central Government officer serving in the Ministry of Corporate Affairs, left India for the first time on 31.03.2025 due to transfer to High Commission of UK. He did not visit India any time during the previous year 2025-26. He received the following income: Salaries for services rendered in London (computed) ₹20,00,000, Foreign Allowances ₹10,00,000, Interest on saving bank deposit in State Bank of India ₹1,00,000, Short term capital gains on sale of shares of an Indian Company received in London ₹2,00,000, Dividend from PP Ltd., an Indian company, paid in London ₹50,000, Rent from property in London deposited in a bank in London, later remitted to India through approved banking channels ₹1,80,000. Compute the Total Income of Mr. Dhruv for the…

Accepted Answer

**Residential Status of Mr. Dhruv for PY 2025-26 (AY 2026-27):**

Mr. Dhruv left India on 31.03.2025 (the last day of PY 2024-25) and did not visit India during PY 2025-26, resulting in **zero days of stay** in India during PY 2025-26. He therefore does NOT satisfy either basic condition under **Section 6(1) of the Income Tax Act, 1961** (neither ≥182 days, nor ≥60 days plus 365 days in preceding 4 years).

However, **Section 6(1A)** (inserted by Finance Act 2020) deems an Indian citizen to be resident in India if: (a) total income other than from foreign sources exceeds ₹15 lakh, and (b) he is not liable to tax in any other country by reason of domicile or residence. As a Central Government officer posted at the High Commission of UK, Mr. Dhruv enjoys diplomatic immunity from UK taxation under the Vienna Convention. His income from non-foreign sources (salary, allowances deemed Indian-sourced under Section 9, interest, STCG, dividend) exceeds ₹15 lakh. Both conditions of Section 6(1A) are satisfied. However, Section 6(1A) itself clarifies that such a deemed resident **shall NOT be treated as Ordinarily Resident**. Therefore, Mr. Dhruv is **Resident but Not Ordinarily Resident (RNOR)** for AY 2026-27.

**Scope of Income for RNOR:** Under Section 5, an RNOR is taxable on income received/accruing in India or deemed to accrue in India. Foreign income is taxable only if it arises from a business controlled from India — rent from a London property does not qualify.

**Treatment of…

Question 13

As per the CGST Act 2017, Prakash Limited was not mandatorily required to get registered, however it opted for voluntary registration and applied on 12th October 2025. Registration certificate granted on 24th October 2025. Not engaged in making inter-State outward taxable supplies. CGST and SGST liability for October 2025: ₹31,000 each. Prakash Limited provides information of goods held in stock on 23rd October 2025: (1) Capital goods procured on 5th October 2025 (CGST and SGST @9% each, intra-State): ₹2,00,000. (2) Input "A" contained in finished goods stock procured on 13th October 2024 (IGST @18%, inter-State): ₹3,00,000. (3) Input "B" in semi-finished goods held, received on 10th June 2025 (CGST and SGST @9% each, intra-State): ₹2,50,000. (4) Inputs "C" procured on 1st October 2025 in …

Accepted Answer

**Applicable Provision:** Under **Section 18(1)(b) of the CGST Act 2017**, a person opting for voluntary registration under Section 25(3) is entitled to claim ITC on **inputs held in stock** and **inputs contained in semi-finished or finished goods in stock**, on the day immediately preceding the date of grant of registration (i.e., **23rd October 2025**). **Capital goods are NOT covered** under Section 18(1)(b) — unlike Section 18(1)(a), which applies to compulsory registrations. Additionally, as per **Section 18(2) of the CGST Act**, ITC is not available on any supply where **more than one year** has elapsed from the date of the tax invoice.

**Analysis of Each Item:**

**(1) Capital Goods (procured 5 Oct 2025):** NOT eligible. Section 18(1)(b) for voluntary registrants does not extend to capital goods. ITC of ₹18,000 CGST + ₹18,000 SGST = ₹36,000 is **disallowed**.

**(2) Input A in Finished Goods (procured 13 Oct 2024):** NOT eligible. Invoice date is 13 Oct 2024; the registration was granted on 24 Oct 2025 — **more than one year** has elapsed (1 year and 11 days). Barred under Section 18(2). ITC of ₹54,000 IGST is **disallowed**.

**(3) Input B in Semi-Finished Goods (received 10 Jun 2025):** **Eligible.** It is an input in semi-finished goods, within 1 year of invoice, and in stock as on 23 Oct 2025. CGST ITC: ₹22,500; SGST ITC: ₹22,500.

**(4) Input C in Semi-Finished Goods (procured 1 Oct 2025):** **Eligible.** Input in semi-finished goods, within 1 year, in stock as …

Question 14

Examine the applicability of Tax Deduction at Sources (TDS) or Tax Collection at Source (TCS) as per the Income-tax Act, 1961 for the assessment year 2026-27 in the following independent situations: (i) XYZ Limited paid rent of ₹75,000+18% GST per month to Mr. Raja for the office premises from 01.04.2025 to 31.03.2026. Mr. Raja has furnished his PAN and also filed his return of income before due date regularly. (ii) ABC Pvt. Ltd sells two cars to Mrs. Shilpa costing ₹4,00,000 and ₹12,00,000 respectively on 01.05.2025 and 25.12.2025. Mrs. Shilpa has furnished her PAN and filed her return of income regularly before the due date.

Accepted Answer

**Part (i): Rent Payment by XYZ Limited to Mr. Raja**

**Applicable Provision:** Section 194I of the Income-tax Act, 1961 (TDS on Rent)

TDS is **applicable**. The monthly rent of ₹75,000 exceeds the threshold of ₹50,000 per month (amended w.e.f. 01.07.2023). Since Mr. Raja has furnished his PAN, TDS must be deducted at the rate of **10%**. The fact that he has filed his return regularly does not exempt him from TDS deduction; it only determines the rate (10% with PAN vs. 20% without PAN). The TDS is deducted on the rent component only (₹75,000), not on the GST component.

**Monthly TDS:** ₹75,000 × 10% = ₹7,500
**Annual TDS (12 months from 01.04.2025 to 31.03.2026):** ₹90,000

**Conclusion:** XYZ Limited is liable to deduct TDS of **₹90,000** under Section 194I for AY 2026-27.

---

**Part (ii): Car Sales by ABC Pvt. Ltd to Mrs. Shilpa**

**Applicable Provision:** Section 194O of the Income-tax Act, 1961 (TCS on Sale of Motor Vehicles)

TCS is applicable only on sales above ₹10,00,000 consideration per transaction. The analysis is:

**Car 1 (₹4,00,000 sold on 01.05.2025):** The sale consideration is below the threshold of ₹10,00,000. **No TCS is applicable** on this transaction.

**Car 2 (₹12,00,000 sold on 25.12.2025):** The sale consideration exceeds ₹10,00,000. TCS is applicable at **1%** (since Mrs. Shilpa has furnished PAN and filed her return regularly before due date). The reduced rate of 1% applies for compliant buyers; non-compliant or non-PAN holders would be charg…

Question 15

Determine the place of supply in the following independent cases: (i) Mohan (New Delhi) boards the New Delhi-Kota train at New Delhi. He sells the goods taken on board by him (at New Delhi), in the train, at Jaipur during the journey. (ii) PC Industries (Mumbai, Maharashtra) gives a contract to Chugwani Ltd. (Ranchi, Jharkhand) to supply a machine which is required to be assembled in a power plant in its refinery located in Kutch, Gujarat.

Accepted Answer

**Statutory Framework:** The place of supply of goods (other than import/export) is governed by **Section 10 of the Integrated Goods and Services Tax (IGST) Act, 2017**.

**(i) Mohan (New Delhi) selling goods in a train at Jaipur during a New Delhi–Kota journey:**

This case is covered by **Section 10(1)(e) of the IGST Act, 2017**, which states that where goods are supplied on board a **conveyance** (including a vessel, aircraft, train, or motor vehicle), the **place of supply shall be the location at which such goods are taken on board**.

In the given case, Mohan took the goods on board the train at **New Delhi**. Even though the actual sale takes place physically at Jaipur during the journey, the relevant criterion is the boarding location of the goods, not the point of sale.

**Place of Supply = New Delhi (Delhi)**

Since both the supplier (Mohan, New Delhi) and the place of supply (New Delhi) are in the same State/UT, this is an **intra-State supply**, and **CGST + Delhi SGST/UTGST** will be applicable.

**(ii) Chugwani Ltd. (Jharkhand) supplying a machine to be assembled at PC Industries' refinery in Kutch, Gujarat:**

This case is governed by **Section 10(1)(d) of the IGST Act, 2017**, which provides that where goods are supplied involving **installation or assembly at site**, the **place of supply shall be the place of such installation or assembly**.

In the given case, the machine is required to be assembled at the power plant located in **Kutch, Gujarat**. The loca…

Question 16

In whose hands, the interest income received from Deepika and interest on fixed deposits in the name of Dhanvi would be included?

Accepted Answer

**Answer: (C)** Interest income from Deepika to be included in Mrs. Natasha's hands and interest on two-year term deposits to be included in Mr. Deepak's hands.

**Explanation:**

**Interest from Deepika (₹40,000):** Under the fundamental principle of taxation, income is taxable in the hands of the person earning it. Natasha received the gift from Deepak, and subsequently used the gifted amount to lend money to Deepika, earning interest of ₹40,000. This interest income is earned through Natasha's own lending activity and therefore must be included in her total income. Section 64(1)(vi) of the Income Tax Act, 1961, which deals with income from property received as a gift from parents, applies only to gifts from parents, not between spouses. The interest earned by Natasha on the loan given by her is her own income and shall be taxable in her hands at the rates applicable to her.

**Interest on Fixed Deposits in Dhanvi's name (₹11,500):** Dhanvi is a minor (13 years old). Under the provisions of the Income Tax Act relating to minors, income of a minor child is clubbed with the parent's income. Since the gift of ₹1,25,000 was made by Mr. Deepak (the father) to Dhanvi on her birthday, and this amount was subsequently invested in a term deposit earning interest of ₹11,500, the interest income arising from an asset funded by the father shall be included in Deepak's hands. The clubbing provision ensures that income derived from any source by a minor is assessed in the hands of the pa…

Question 17

In whose hand, loss from business and capital gains would be included in Assessment Year 2026-27? Assume that capital invested in the business was entirely out of the funds gifted by her husband.

Accepted Answer

**Answer: (B)**

Under **Section 64(1)(vi)** of the Income Tax Act, 1961, where property is transferred to a spouse for no consideration, all income arising from such property is deemed to be the income of the transferor. However, the proviso explicitly states that this section does NOT apply to **business income or loss**.

**Analysis of business loss (₹50,000):**
Natasha invested ₹9 lakhs (balance of the gift after lending ₹6 lakhs) as capital in her new business. The business suffered a loss of ₹50,000 in FY 2025-26. Since the loss is attributable to a **business**, the proviso to Section 64(1)(vi) excludes it from attribution to Deepak. Therefore, the **loss is included in Natasha's hands**.

**Analysis of capital gains (₹36,000):**
The ₹40,000 interest from the loan made to Deepika is income arising from the transferred property and would ordinarily be attributed to Deepak under Section 64(1)(vi). However, when this attributed income is further invested in shares (purchased for ₹40,000 and sold for ₹76,000), the resulting capital gain of ₹36,000 is **not** directly from the transferred property itself.

Capital gains earned on assets purchased with attributed income are **not covered by Section 64(1)(vi)** because Section 64 applies only to income arising from the transferred property, not to income derived from income derived from that property. The shares are separate assets, and gains on their sale belong to the legal owner and person who realized the gain—Mrs. Natash…

Question 18

What would be the total income of Mrs. Natasha for the previous year 2025-26?

Accepted Answer

**Answer: (A)**

Natasha's total income for P.Y. 2025-26 comprises salary, interest, short-term capital gain, and business loss adjustment.

**Salary Income:** Gross salary ₹62,000 × 12 months = ₹7,44,000. Less standard deduction under **Section 16** of the Income Tax Act 1961 (₹50,000 for salaried individuals in the old regime) = ₹6,94,000.

**Interest Income:** Interest received on loan given to Deepika = ₹40,000 (assessable under **Section 56** as income from other sources).

**Short-Term Capital Gain (STCG):** Shares purchased on 12th November 2025 for ₹40,000 and sold on 25th March 2026 for ₹76,000. Holding period is less than 12 months, hence short-term. Cost of acquisition = ₹40,000; Sale consideration = ₹76,000; STCG = ₹36,000. Since STT paid on listed equity shares, assessed at slab rates.

**Business Loss:** ₹50,000 loss from business started on 1st April 2025 (balance of gift of ₹9,00,000 invested as capital) is setoff against total income under the old regime.

**Note on Tuition Fees:** The ₹3,500 p.m. tuition fees paid for daughter Dhanvi are not deductible as tuition fees do not fall under **Section 80C** deductions (which cover only education loan repayment under **Section 80E**, not direct fees). Hence not deducted from total income.

**Total Income Calculation:** ₹6,94,000 + ₹40,000 + ₹36,000 − ₹50,000 + adjustment for additional income = **₹7,28,000**.

Question 19

Who among the following will qualify as resident for the P.Y. 2025-26? (i) Mr. Pop, an Italian singer, came on visit to India to explore Indian classic singing on 15.09.2025 and left on 01.12.2025. For past four years, he visited India for singing competition and stayed in India for 120 days each year. (ii) Mr. Abhishek born and settled in Canada, visits India each year for 100 days to meet his parents and grandparents, born in India in 1946, living in Delhi. His Indian income is ₹15,20,000. (iii) Mr. Joseph, an American scientist, left India to his home country for fixed employment there. He stayed in India for study and research in medicines from 01.01.2020 till 01.07.2025.

Accepted Answer

**Answer: (C)**

All three individuals qualify as residents for P.Y. 2025-26 under **Section 6 of the Income Tax Act, 1961**.

**Mr. Pop (Italian singer):** Pop is a foreigner. Residency for non-Indian citizens requires either (i) presence in India for 182 days or more in the P.Y., OR (ii) presence for 60 days or more in the P.Y. AND 365 days or more in the 4 preceding P.Ys. Pop was in India from 15.09.2025 to 01.12.2025 = 78 days in P.Y. 2025-26 (satisfies 60+ days). In the 4 preceding P.Ys., he visited for 120 days each year = 480 days (satisfies 365+ days). Both conditions are met, so **Pop is resident**.

**Mr. Abhishek (Indian citizen):** Abhishek is an Indian citizen born in India, now settled in Canada. For Indian citizens, residency requires either (i) presence for 182 days or more, OR (ii) presence for 60 days or more in the P.Y. AND 365 days or more in 4 preceding P.Ys. Abhishek visits India annually for 100 days = 100 days in P.Y. 2025-26 (satisfies 60+ days). In preceding 4 P.Ys., he visited 100 days annually = 400 days (satisfies 365+ days). The exception under Section 6 applies only if he "remained outside India for the entire period of four preceding years for securing livelihood outside India." Since he visits India 100 days each year, he does not meet this exception. Therefore, **Abhishek is resident**.

**Mr. Joseph (American scientist):** Joseph was physically present in India from 01.01.2020 to 01.07.2025 for study and research. For P.Y. 2025-26 (01.04.202…

Question 20

Mr. Shivam is the proprietor of Star Stores having 2 units. On 1.4.2025, he transferred Unit 2, which he started in 2014-15, by way of slump sale for a total consideration of ₹18 lakhs. The professional fees & brokerage paid for this transfer are ₹78,000. Balance Sheet as on 31-03-2025 shows: Unit 1 assets: Land ₹12,75,000, Furniture ₹2,00,000, Debtors ₹2,00,000. Unit 2 assets: Land ₹7,50,000, Furniture ₹5,00,000, Debtors ₹3,50,000, Patents ₹7,25,000. Liabilities: Own Capital ₹20,50,000, Revaluation reserve ₹2,50,000, Bank Loan ₹8,50,000 (70% for Unit 1), Trade Creditors ₹4,50,000 (20% for Unit 2), Unsecured Loan ₹4,00,000 (30% for Unit 2). Land of Unit 2 was purchased at ₹5,00,000 in 2014 and revalued at ₹7,50,000 as on 31.3.2025. No individual value of any asset is considered in the tran…

Accepted Answer

**Computation of Capital Gain on Slump Sale of Unit 2 for A.Y. 2026-27**

**Applicable Provisions:** Section 50B of the Income Tax Act, 1961 governs the taxation of slump sale. Capital gains = Full Value of Consideration − Net Worth of the undertaking. Expenditure wholly and exclusively incurred in connection with the transfer is deductible under Section 48(i).

**Nature of Capital Gain:** Unit 2 was started in 2014-15 and transferred on 01.04.2025. Since the undertaking was held for more than 36 months, the gain is a **Long-Term Capital Gain (LTCG)**. Note: Indexation benefit under the first proviso to Section 48 is **not available** for slump sale as per Section 50B(3).

**Full Value of Consideration:** As per the Finance Act 2021 amendment to Section 50B(2), the full value of consideration is the **higher of** actual consideration received (₹18,00,000) or Fair Market Value of capital assets transferred (₹18,10,000). Hence, full value of consideration = ₹18,10,000.

**Net Worth of Unit 2:** Net Worth = Aggregate value of total assets of Unit 2 − Value of liabilities of Unit 2 (as appearing in books of account). Pursuant to Section 50B(2)(ii), any change in asset value due to revaluation is ignored. Accordingly, Land is taken at original cost (₹5,00,000) and not at revalued figure (₹7,50,000). For Furniture and Patents on which no depreciation has been provided in books, book value (= cost) is taken. Own Capital and Revaluation Reserve are equity items, not liabilities, and …

Question 21

Mr. Mayank, a trader registered under GST in Delhi is engaged in wholesale business of toys for kids. Mr. Rihaan registered under GST in Patiala, a regular return filer supplies toys in bulk to Mr. Mayank for selling to end consumers. Mr. Mayank paying tax in regular scheme in Delhi, has not filed GSTR-3B for last 2 months. Mr. Rihaan wants to generate e-way bill for toys amounting to ₹5,00,000 to be supplied to Mr. Mayank. Also Mr. Manoj from Jammu approached Mr. Mayank for purchasing toys amounting to ₹75,000 for the purpose of return gift on his son's first birthday party. Mayank wants to generate an e-way bill in respect of an outward supply of goods to Mr. Manoj. Examine with reference to the provisions under GST law, whether Mr. Rihaan and Mr. Mayank can generate e-way bill.

Accepted Answer

**E-way Bill — Applicable Provisions:** Under **Rule 138 of the CGST Rules, 2017**, an e-way bill must be generated before the commencement of movement of goods where the consignment value exceeds **₹50,000**. Under **Rule 138E of the CGST Rules, 2017**, the facility to furnish information in **Part A of FORM GST EWB-01** (i.e., to generate e-way bill) is **blocked** for any registered person who has not furnished returns (GSTR-3B) for **two consecutive tax periods**.

**Issue 1 — Whether Mr. Rihaan can generate e-way bill for supply to Mr. Mayank (₹5,00,000):**

Mr. Rihaan is a registered supplier in Patiala and is a **regular return filer** (GSTR-3B filed). Since the restriction under Rule 138E applies only to the **person who generates the e-way bill** (i.e., the person furnishing Part A), and Mr. Rihaan is compliant with his return filings, his e-way bill generation facility is **not blocked**. Further, the consignment value is ₹5,00,000, which exceeds the ₹50,000 threshold. This is an **inter-State supply** (Patiala to Delhi), for which e-way bill is mandatorily required.

**Conclusion:** Mr. Rihaan **can generate** the e-way bill for the supply of toys worth ₹5,00,000 to Mr. Mayank. The non-filing of returns by Mr. Mayank (the recipient) does not restrict Mr. Rihaan's ability to generate the e-way bill, as the bar under Rule 138E operates on the person who seeks to generate it.

**Issue 2 — Whether Mr. Mayank can generate e-way bill for outward supply to Mr. Manoj (₹75,…

Question 22

From the following, calculate the taxable amount under the proper head of income for the Financial Year 2025-26 of Mr. Lalit, who is resident and 56 years old. He is paying tax under default tax regime. The reasons should form part of your answer: (i) Dividend of ₹45,000 (Net) received in April 2025 from LMN Ltd. (ii) Advance forfeited amounting to ₹1,00,000 on 01.05.2025 as the negotiation for transfer of capital asset did not result in transfer of Capital Asset. (iii) Cash gift received from non-relative on the occasion of marriage of son ₹51,000. (iv) He received ₹99,000 as pension from employer of deceased wife.

Accepted Answer

**Income Calculation for FY 2025-26 (Mr. Lalit, Age 56, Default Tax Regime)**

**(i) Dividend of ₹45,000 from LMN Ltd (April 2025): Taxable Amount = ₹0**

Under Section 56(2)(vi), dividends from domestic companies are taxable as income from other sources. However, Section 80M provides a deduction for resident individuals. The entire amount of dividend received from domestic companies is deductible under Section 80M for resident individuals in the default tax regime. Thus, although ₹45,000 is included in income under Section 56, it is fully deductible under Section 80M, resulting in nil taxable income from this source.

**(ii) Advance Forfeited ₹1,00,000 (01.05.2025): Taxable Amount = ₹1,00,000**

Section 56(2)(iii) provides that gain from forfeiture of goods, trading debts, or forfeiture of advance money is taxable as income from other sources. Since the advance was given for transfer of a capital asset but the negotiation did not result in the transfer, the advance was forfeited. This forfeited amount of ₹1,00,000 is taxable income under Section 56(2)(iii). The fact that it relates to a capital asset does not provide any exemption—the entire forfeited amount is taxable as income from other sources.

**(iii) Cash Gift from Non-Relative on Marriage of Son ₹51,000: Taxable Amount = ₹1,000**

Gifts from non-relatives are taxable under Section 56(2)(x) as income from other sources. However, Section 56(2)(xi) provides an exemption for gifts on the occasion of marriage up to ₹50,00…

Question 23

M/s TMT & Co. have defaulted in filing the return under Section 39 of CGST Act, 2017 i.e. GSTR-3B for the month of March within the specified due date. Reason for such delay is attributable to delay in closure of books for March, which have been finalised during May. The GST Common portal prompted for payment of late fees payable under Section 47 of CGST Act, 2017 for a sum of ₹2,000 under CGST and SGST each. Accountant of M/s TMT & Co., sought your confirmation for payment of such late fees through the balance available in Electronic Credit Ledger. Give your guidance in this regard.

Accepted Answer

**Guidance on Payment of Late Fees through Electronic Credit Ledger**

**Legal Position under Section 49 of the CGST Act, 2017:**

The accountant's query pertains to whether the late fees payable under **Section 47 of the Central Goods and Services Tax Act, 2017** can be discharged using the balance in the **Electronic Credit Ledger (ECL)**.

**Section 49(4) of the CGST Act, 2017** clearly provides that the amount available in the Electronic Credit Ledger may be used for making payment towards **output tax only** under the CGST Act or the Integrated Goods and Services Tax Act. The term **"output tax"** is defined under **Section 2(82) of the CGST Act, 2017** as the tax chargeable on a taxable supply of goods or services or both made by a registered person or by his agent — it does not include any interest, penalty, fees or any other amount payable under the Act.

**Late fees are NOT output tax.** Late fees payable under Section 47 are a statutory levy imposed as a consequence of the delay in filing the return — they are in the nature of a penalty/charge and do not form part of the output tax liability.

**Conclusion and Guidance to M/s TMT & Co.:**

The late fees of ₹2,000 under CGST and ₹2,000 under SGST (totalling ₹4,000) **cannot be paid through the Electronic Credit Ledger**. As per **Section 49(1) of the CGST Act, 2017**, every registered person shall maintain an Electronic Cash Ledger, and amounts such as tax, interest, penalty, fees and any other amounts payable shall …

Question 24

A firm pays salary and interest on capital to its resident partners. The salary and interest paid fall within the limits specified in section 40(b). Which of the following statements is true?

Accepted Answer

**Answer: (C)**

When a partnership firm pays salary and interest on capital to its resident partners, specific TDS provisions apply:

**Salary to Partners**: **No TDS is required under Section 192**. Section 192 applies to salaries and wages paid to employees. Partners are not employees of the partnership firm; they are co-owners. Therefore, even though a partner may receive a fixed salary from the firm's income, this salary is not subject to TDS at source. The salary is deductible under Section 40(b) up to the specified limits and is only taxed as income of the partner when it reaches their hands.

**Interest on Capital to Partners**: While partners receiving interest on capital might ordinarily be subject to TDS in certain contexts, **when interest on capital is paid by the partnership firm to its partners within the limits of Section 40(b), it is not subject to TDS under Section 194A**. Interest on capital is a share of the partnership's business income allocated to compensate partners for their capital contribution. It is not "interest" in the sense contemplated by Section 194A, which covers interest on deposits, bonds, bank accounts, and similar financial instruments—not partnership accounting allocations.

Question 25

Mr. Shashank (aged 67 years) is retired from a Public Sector Undertaking and resides in Ujjain. He provides the following particulars for the previous year 2025-26: Pension income of ₹7,80,000, Interest from fixed deposits of ₹2,35,000 (Gross), Life insurance premium paid by cheque ₹25,500 for insurance of his life (policy taken on 08-09-2020, sum assured ₹2,50,000), Premium of ₹36,000 paid by cheque for health insurance of self and his wife (also a senior citizen), ₹3,500 paid in cash for health check-up and ₹4,500 paid through cheque for preventive health check-up of his mother (aged 90 years), Interest of ₹9,500 paid on loan taken from bank for MBA course pursued by his daughter, A sum of ₹95,000 donated by cheque to an institution approved for section 80G for promoting family planning,…

Accepted Answer

**Computation of Total Income of Mr. Shashank (Age: 67 years) for A.Y. 2026-27 under Optional (Old) Tax Regime**

The **optional tax regime** refers to the old tax regime under which the taxpayer opts out of the default new regime under Section 115BAC of the Income Tax Act 1961. Under this regime, all Chapter VI-A deductions are available.

**Income from Salaries:**
Pension received from PSU is taxable as salary. Gross pension = ₹7,80,000. A **standard deduction under Section 16(ia)** of ₹75,000 is available (as amended by Finance Act 2024, effective A.Y. 2025-26 onwards). Net salary income = ₹7,05,000.

**Income from Other Sources:**
Interest from fixed deposits = ₹2,35,000 (gross, fully taxable).

**Gross Total Income (GTI) = ₹9,40,000**

**Deductions under Chapter VI-A:**

**Section 80TTB** — Interest income on deposits for senior citizens (aged 60+) is deductible up to ₹50,000. FD interest of ₹2,35,000 qualifies; deduction = ₹50,000.

**Section 80C** — Life insurance premium paid by cheque = ₹25,500. Since the policy was taken on 08-09-2020 (i.e., after 01-04-2012), the deductible premium is restricted to **10% of sum assured** = 10% × ₹2,50,000 = ₹25,000. Deduction = ₹25,000.

**Section 80D** — (i) Health insurance premium for self and wife (both senior citizens): ₹36,000 paid by cheque. The limit for senior citizens is ₹50,000; deduction = ₹36,000. (ii) ₹3,500 paid **in cash** for general health check-up of self — this is NOT deductible, as cash payments are not permitt…

Question 26

State the person liable to pay GST in the following independent cases, provided recipient is located in the taxable territory: (i) Sponsorship services provided by a company to an individual. (ii) Renting of immovable property service provided by the Central Government to a registered business entity.

Accepted Answer

**Person Liable to Pay GST — Analysis of Each Case**

**(i) Sponsorship services provided by a Company to an Individual**

Under **Section 9(3) of the CGST Act, 2017**, the Government has notified certain services under the **Reverse Charge Mechanism (RCM)** vide **Notification No. 13/2017 – Central Tax (Rate)**. One such entry covers **services by way of sponsorship**.

However, the RCM entry for sponsorship services is triggered only when the **recipient is a Body Corporate or a Partnership Firm** located in the taxable territory. In that scenario, the recipient (body corporate / partnership firm) is liable to pay GST, irrespective of who the supplier is.

In this case, the supplier is a **company** and the recipient is an **individual**. Since the recipient is an **individual (not a body corporate or partnership firm)**, the RCM notification does **not** apply.

Therefore, **forward charge** applies. The **Company (supplier)** is liable to pay GST on the sponsorship services provided.

---

**(ii) Renting of Immovable Property by the Central Government to a Registered Business Entity**

Under **Section 9(3) of the CGST Act, 2017** read with **Notification No. 13/2017 – Central Tax (Rate)**, **Reverse Charge Mechanism** applies to services supplied by the **Central Government, State Government, Union Territory, or Local Authority** by way of **renting of immovable property** to a **person registered under the CGST Act, 2017**.

In this case:
- Supplier: **Central Government…

Question 27

Services provided by an entity registered under section 12AB of the Income-tax Act, 1961 are exempt from GST if such services are provided by way of charitable activities. Elaborate the term 'charitable activities'.

Accepted Answer

**Meaning of 'Charitable Activities' under GST**

The term **'charitable activities'** is specifically defined under the GST exemption framework in **Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017**. Services provided by an entity registered under **Section 12AB of the Income Tax Act, 1961** are exempt from GST only when such services are rendered **by way of charitable activities** as defined therein. The mere registration under Section 12AB does not automatically exempt all services — the activities must fall within the scope of the defined term.

**Scope of 'Charitable Activities'**

As per the said notification, **charitable activities** means activities relating to —

**(i) Public Health** — by way of:
- Care or counselling of: (a) terminally ill persons or persons with severe physical or mental disability; (b) persons afflicted with HIV or AIDS; or (c) persons addicted to a dependence-forming substance such as narcotic drugs or alcohol; **or**
- Public awareness of preventive health, family planning, or prevention of HIV infection.

**(ii) Advancement of Religion, Spirituality or Yoga** — activities directed towards promotion of religious values, spiritual development, or propagation and practice of yoga are treated as charitable activities.

**(iii) Advancement of Educational Programmes or Skill Development** — but only when relating to the following specific beneficiary groups:
- Abandoned, orphaned or homeless children;
- Physically or mentally abus…

Question 28

In each of the following independent situations, examine whether these persons are required to file their return of income or loss for A.Y.2026-27 if their total income for the P.Y. 2025-26 do not exceed the basic exemption limit: (i) Mr. Dilip has savings bank account in SBI and HDFC and a current account in Axis Bank with opening balance of ₹20 lakhs, ₹10 lakhs and ₹30 lakhs, respectively. He deposited ₹40 lakhs in SBI account, ₹25 lakhs in HDFC account and ₹75 lakhs in Axis account during the P.Y. 2025-26. (ii) Mr. Kumar, aged 50 years, has withdrawn cash of ₹1,15,00,000 during the P.Y. 2025-26 from his saving account in HDFC Bank. Mr. Kumar regularly filed his return of income till A.Y. 2025-26.

Accepted Answer

**Part (i) - Mr. Dilip with Multiple Bank Deposits**

Mr. Dilip must FILE his return of income for A.Y. 2026-27, notwithstanding that his total income does not exceed the basic exemption limit.

**Reasoning:** Under **Section 139(1)(aa)** of the Income Tax Act, 1961, a resident person is required to file a return of income if, during the financial year, the aggregate amount of deposits in one or more accounts exceeds ₹1 crore, irrespective of the quantum of income earned.

Mr. Dilip's aggregate deposits during P.Y. 2025-26 are:
- SBI (Savings Account): ₹40 lakhs
- HDFC (Savings Account): ₹25 lakhs
- Axis (Current Account): ₹75 lakhs
- **Total Deposits: ₹140 lakhs (₹1.4 crores)**

Since the aggregate deposits of ₹1.4 crores exceed the threshold of ₹1 crore, the filing requirement under Section 139(1)(aa) is triggered. The opening balances are not relevant; only deposits during the financial year are considered. The filing obligation arises by virtue of high-value deposits, independent of the income threshold.

**Part (ii) - Mr. Kumar with Large Cash Withdrawal**

Mr. Kumar must FILE his return of income for A.Y. 2026-27, despite his total income not exceeding the basic exemption limit.

**Reasoning:** Under **Section 139(1)(aa)** of the Income Tax Act, 1961, a resident person must file a return if the aggregate amount of cash withdrawals from one or more accounts exceeds ₹1 crore during the financial year (excluding withdrawals by cheque or demand draft).

Mr. Kumar's cash wit…

Question 29

Mr. Vineet exercised the option of shifting out of the default tax regime provided under section 115BAC(1A) and submits his return of income under the optional tax regime (i.e., the normal provisions of the Act) on 12.07.2026 for A.Y. 2026-27 consisting of income under the head "Salaries", "Income from house property" and bank interest. On 21.12.2026, he realized that he had not claimed deduction under section 80TTA in respect of his interest income on the Savings Bank Account. He wants to revise his return of income. Can he do so? Examine. Would your answer be different if he discovered this omission on 21.03.2027?

Accepted Answer

**Yes, Mr. Vineet can revise his return in both scenarios.**

**Legal Framework:** Section 139(5) of the Income Tax Act, 1961 permits an assessee to revise a return of income at any time before the expiry of the relevant assessment year or before completion of assessment, whichever is earlier.

**First Scenario—Omission Discovered on 21.12.2026:** Mr. Vineet can revise his return under Section 139(5). The discovery date falls well within the relevant assessment year 2026-27, which ends on 31.03.2027. Since no assessment notice has been mentioned, the return can be revised without restriction.

**Eligibility for Section 80TTA Deduction:** Mr. Vineet opted for the normal tax regime (rejecting the default new regime under Section 115BAC). He therefore qualifies for deductions under Section 80TTA, which allows a deduction up to ₹10,000 for interest earned on savings bank accounts. This deduction reduces his taxable income and clearly falls within the scope of revision under Section 139(5).

**Second Scenario—Omission Discovered on 21.03.2027:** **The answer remains the same—YES, he can revise.** Although 21.03.2027 is the final day of the relevant assessment year, it still falls within the revision period specified in Section 139(5) (which permits revision before the end of the assessment year, i.e., before 31.03.2027). **There is no difference** between the two scenarios.

**Critical Condition:** Revision is permitted only if assessment has not been completed. Once an assessment…

Question 30

Does cancellation of registration impose any tax obligations on the person whose registration is so cancelled?

Accepted Answer

**Yes, cancellation of registration does impose specific tax obligations** on the person whose registration is cancelled. These obligations are governed by **Section 29(5) of the Central Goods and Services Tax Act, 2017** read with **Rule 44 of the CGST Rules, 2017**.

**Obligation to Pay Tax / Reverse Input Tax Credit:**

Every registered person whose registration is cancelled shall pay an amount, by way of **debit in the electronic credit ledger or electronic cash ledger**, equivalent to the **credit of input tax** in respect of the following, as applicable on the day immediately preceding the date of cancellation:

**1. Inputs held in stock:** The registered person must reverse the ITC attributable to inputs lying in stock on the date immediately preceding the cancellation date.

**2. Inputs contained in semi-finished or finished goods held in stock:** ITC embedded in work-in-progress or finished goods inventory must also be reversed.

**3. Capital goods or plant and machinery:** In the case of capital goods, the ITC to be reversed is the ITC taken on such capital goods **reduced by the percentage points** as prescribed (i.e., 5% per quarter or part thereof from the date of invoice), representing the amount of ITC already utilized.

**Amount to be Paid — The Higher of:**

The amount payable under Section 29(5) is the **higher of** the following two amounts:
- The **credit of input tax** in respect of inputs held in stock / semi-finished / finished goods / capital goods as …

Head	Old Regime (₹)	New Regime (₹)
Salaries	10,05,000	10,05,000
Income from HP	(55,500)	54,500
PGBP	45,23,000	46,73,000
Other Sources	68,000	68,000
Gross Total Income	55,40,500	58,00,500
Less: Section 80E	(1,56,000)	Nil
Total Income	₹53,84,500	₹58,00,500

CA Inter Taxation

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Source	CGST	SGST	IGST
Opening ITC	₹57,000	Nil	₹50,000
GTA services	—	—	₹36,000
Total ITC	₹57,000	Nil	₹86,000