Question 1

Compute total income of Mrs. S.C.L. Rose under default tax regime u/s 115BAC and optional tax regime of the Income Tax Act, 1961

Accepted Answer

**Note:** The question provides only the 'Additional Information' items without the primary financial data (e.g., the P&L Account balances or gross business profit figure). The following presents the complete adjustment framework, regime-wise treatment, and all computable elements for **AY 2025-26 (FY 2024-25)**.

**Computation of Total Income of Mrs. S.C.L. Rose — AY 2025-26**

**A. Income from Business/Profession**

Net Profit as per books of account: ₹ [Main P&L not provided — placeholder as 'X']

**Add: Disallowances (applicable under both regimes)**

(i) Bowers and creepers (₹2,00,000) included in Purchases relate to agricultural cultivation, not business activity. These must be excluded from business expenditure. The corresponding agricultural income, if any, is exempt u/s 10(1) of the Income Tax Act, 1961. Add back: **₹2,00,000**

(ii) Electricity and water department deposit (₹2,00,000) is a **refundable security deposit** — capital in nature and not allowable as revenue expenditure u/s 37(1). Add back: **₹2,00,000**

(iii) Television and washing machine (₹1,00,000) purchased for household use — personal expenditure, not incurred wholly and exclusively for business purposes; disallowed u/s 37(1). Add back: **₹1,00,000**

(iv) Salary paid to illiterate brother ₹2,40,000 against fair market value of ₹1,80,000. Brother is a 'specified person' u/s 40A(2)(b) of the ITA, 1961. Excess over FMV is disallowed: ₹2,40,000 − ₹1,80,000 = **₹60,000**

**Total Add-backs: ₹5,60,000**…

Question 2

Determine income from capital gains and exemption available to Mr. Gopal for purchasing residential plot considering benefit of the assessee.

Accepted Answer

**Answer: (C)**

Mr. Gopal held the residential house property for more than 2 years (from 14.10.2021 to 31.08.2024), making it a **long-term capital asset**.

**Computation of Long-Term Capital Gain (LTCG):**

Sale Price: ₹60,00,000

Indexed Cost of Acquisition = Cost of Acquisition × (Cost Index of Year of Sale / Cost Index of Year of Purchase)
= ₹45,00,000 × (363 / 317)
= ₹45,00,000 × 1.14513
= ₹51,52,997 (approximately)

LTCG = Sale Price − Indexed Cost of Acquisition
LTCG = ₹60,00,000 − ₹51,52,997 = **₹8,47,003**

**Exemption under Section 54:**

Section 54 provides exemption on LTCG derived from sale of a residential house property if the capital gain (or part thereof) is invested in purchase of a residential house property within 1 year before or 2 years after the date of sale.

Mr. Gopal purchased a residential plot on 08.12.2024 (within 2 years after sale on 31.08.2024) for ₹5,00,000. The exemption available is the **lesser of:**
- Capital gain = ₹8,47,003
- Amount invested in residential property = ₹5,00,000

Therefore, **Exemption = ₹5,00,000**

**Income from Capital Gains:**
LTCG − Exemption = ₹8,47,003 − ₹5,00,000 = **₹3,47,003**

Note: The rent received in arrear (₹75,000) and rent from the plot (₹30,000) are taxable as income under the head "Income from House Property," not as capital gains.

Question 3

Mrs. S.C. Bose (aged 62 years), widow of public sector employee, earns income from flower bouquet shop business at Kolkata and royalty from writing science books sold in India and abroad. Profit & Loss account for year ended 31st March, 2025 and additional information provided. Compute total income of Mrs. S.C. Bose under default tax regime u/s 115BAC and optional tax regime of the Income-tax Act, 1961.

Accepted Answer

**Note: The Profit & Loss Account figures and additional information referred to in the question have not been provided in this prompt. The solution below presents the complete computation framework with all relevant adjustments for this type of question. Once the actual figures are available, the same structure must be followed.**

**Assessee:** Mrs. S.C. Bose | **Status:** Individual (Resident) | **Age:** 62 years (Senior Citizen) | **P.Y.:** 2024-25 | **A.Y.:** 2025-26

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**STEP 1: PROFITS AND GAINS OF BUSINESS OR PROFESSION**

Net Profit as per P&L Account: ₹ XXX

**Add back (Disallowances):**
- Personal expenses debited to P&L (Section 37, Income Tax Act 1961)
- Depreciation as per books (to be replaced by depreciation u/s 32)
- Provision for bad debts not written off (Section 36(1)(vii))
- Income tax / wealth tax paid (Section 40(a)(ii))
- Payments to relatives exceeding fair market value (Section 40A(2))
- Cash payments exceeding ₹10,000 to a single person in a day (Section 40A(3)) — 100% disallowance
- Any capital expenditure debited to P&L
- Royalty income (to be assessed separately under other sources)

**Less (Allowable deductions not credited/already added):**
- Depreciation u/s 32 at prescribed rates (including additional depreciation if plant/machinery is new)
- Any admissible business expenditure not yet deducted

**Business Income (A):** ₹ XXX

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**STEP 2: INCOME FROM HOUSE PROPERTY** (if any property is owned)

Under the **Optional Regime** (existing re…

Question 4

Determine income from capital gains and exemption available to Mr. Gopal for purchasing residential plot considering benefit of the assessee.

Accepted Answer

**Answer: (A)**

Mr. Gopal sold a residential house property held for 2 years, 10 months, and 17 days (more than 24 months), making it a **long-term capital asset**. Capital Gain = Sale price (₹60,00,000) − Cost of acquisition (₹45,00,000) = **₹15,00,000**.

Although Mr. Gopal purchased a residential plot for ₹5,00,000 on 08.12.2024 (within the prescribed time limit after sale), **Section 54 exemption is not available** because the plot does not qualify as a "residential house property" for exemption purposes. The term "residential house property" under Section 54 refers to a constructed building or a property developed/used as a residence. A bare plot of land without construction, even if intended for residential development, does not constitute "house property." Additionally, since the plot is generating rental income (₹30,000) rather than being held for personal residence, it is treated as an investment property. Therefore, the entire capital gain of **₹15,00,000 remains taxable without any exemption under Section 54**. Note: The arrear rent of ₹75,000 received from the old property is income from house property, not capital gains, and does not affect this computation.

Question 5

Mrs. S.C. Bose (aged 62 years) is a widow of a public sector employee who died during his service in 2011. She earns income from business of running a flower bouquet shop at Kolkata and income from royalty from writing books of science and sells in India and abroad. Given a Profit & Loss account for the year ended 31st March, 2025 with various particulars and additional information provided. Compute total income of Mrs. S.C. Bose under default tax regime u/s 115BAC and optional tax regime of the Income-tax Act, 1961.

Accepted Answer

**CRITICAL LIMITATION:** The Profit & Loss account and additional information referenced in the question are not provided. Without specific financial figures, only the computational framework can be outlined.

**Framework for Total Income Computation:**

**Step 1: Income from Business (Flower Bouquet Shop)**

Under **Old Tax Regime**: Deductions under Sections 30-43 (depreciation, repairs, salaries, rent, power, interest on capital) are allowed. Net business income is computed after these deductions and added to GTI.

Under **New Tax Regime (Section 115BAC)**: Sections 30-43 deductions are NOT available. A standard deduction of ₹50,000 is permitted under the new regime rules. Business income is taxed with minimal adjustments.

**Step 2: Income from Royalty**

Royalty income falls under **'Income from Other Sources'** (Chapter V-A). A deduction of 30% is available under Section 48 for royalty expenses. Whether royalty is domestic or foreign-sourced requires verification against specific royalty provisions. Both regimes allow this deduction.

**Step 3: Applicable Exemptions**

Mrs. S.C. Bose is a **senior citizen (age 62 ≥ 60 years)** under Section 2(32AA). She qualifies for:
- **Old Regime**: Basic exemption limit of **₹5,00,000**
- **New Regime**: Basic exemption limit of **₹5,00,000**

Widow status does not provide a separate exemption but affects **rebate eligibility under Section 87A** (individual status consideration).

**Step 4: Computation Under Old Tax Regime**

(1) Ne…

Question 6

Compute income from house property in the hands of Mr. Gopal.

Accepted Answer

**Answer: (B) ₹1,05,000**

Under **Section 115BAC** (default taxation regime), Mr. Gopal has opted for the optional tax regime with lower rates. A key consequence is that deductions under **Section 24** are not available (or available only to the extent of interest on borrowed capital, if any). Since no borrowed capital is mentioned, no deductions apply.

**Income from House Property comprises:**

1. **Arrear Rent from Property 1**: ₹75,000 received on 12.11.2024. Although the property was sold on 31.08.2024, rent paid by the tenant in arrear is taxable income in the year of receipt (12.11.2024 = F.Y. 2024-25, A.Y. 2025-26). This is income from house property under **Section 22** read with **Section 23**.

2. **Rent from Residential Plot (Property 2)**: ₹30,000 earned in the last quarter of F.Y. 2024-25. The residential plot purchased on 08.12.2024 qualifies as **"house property"** under **Section 22** because it is ordinarily meant for use as a dwelling. Rental income from such property is included in income from house property.

3. **Capital Gain on Sale of Property 1**: The sale of the residential house property results in a capital gain. However, capital gains are NOT classified as income from house property; they are taxed separately under Chapter IV (Capital Gains). Therefore, capital gains are excluded from this computation.

**Calculation:**
Income from House Property = Arrear Rent + Rent from Plot
= ₹75,000 + ₹30,000
= **₹1,05,000**

Under Section 115BAC, no standard…

Question 7

Determine taxability of income and calculate TDS in various scenarios.

Accepted Answer

**(a) Taxability of income for A.Y. 2025-26:**

**(i) Mr. Mahesh – Dividend from foreign company (RNOR status)**

Under **Section 5(1) of the Income Tax Act, 1961**, a **Resident but Not Ordinarily Resident (RNOR)** is taxable on income received in India, income accruing/arising in India, and income from a business controlled in India or a profession set up in India. Income accruing outside India from a **foreign source** is NOT taxable for an RNOR.

**Section 9(1)(iv)** deems dividend to accrue/arise in India only when paid by an **Indian company**. The dividend here is declared and paid by a **foreign company outside India**. Although **Explanation 5 to Section 9(1)(i)** deems shares of a foreign company situated in India if they derive value substantially from Indian assets, this Explanation pertains to **capital gains on transfer of such shares**, not to dividend income.

Since the dividend of ₹7 lakhs accrues and is received outside India from a foreign company, and Mr. Mahesh is RNOR, the **dividend is NOT chargeable to tax in India**.

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**(ii) Mr. Shivansh – Interest from M/s ABC Ltd. (non-resident)**

Under **Section 9(1)(v)** of the Income Tax Act, 1961, interest payable by a **person resident in India** is deemed to accrue or arise in India, **except** where the borrowing is used for a business or profession carried on outside India or for earning income from a source outside India.

M/s ABC Ltd. is an Indian company (resident in India). No exception circumstanc…

Question 8

Compute income from house property in the hands of Mr. Gopal.

Accepted Answer

**Answer: (C)**

The income from house property computation involves three components:

**1. Sale of house property (31.08.2024):** The capital gain from selling the residential house (₹60,00,000 - ₹45,00,000) is NOT included in income from house property. Capital gains are taxed separately as capital gains income, not as income from house property.

**2. Arrear rent received (12.11.2024):** The tenant's arrear rent of ₹75,000, although treated as unrealized in earlier years, is income from house property when actually received in AY 2024-25.

**3. Rental income from residential plot (purchased 08.12.2024):** The plot, though vacant and under construction, is let out and earning rent of ₹30,000 in the last quarter of FY 2024-25. This qualifies as income from house property.

**Computation:**
- Gross annual value of let-out property = Arrear rent + Plot rent = ₹75,000 + ₹30,000 = **₹1,05,000**
- Less: Standard deduction u/s 23(1)(a) = 30% of ₹1,05,000 = **₹31,500**
- **Income from house property = ₹1,05,000 - ₹31,500 = ₹73,500**

The 30% standard deduction under section 23(1)(a) applies to the total annual value received during the financial year, which includes both regular rental income and arrear rents. The opt for section 115BAC (default taxation regime) does not alter the income computation; it only changes the applicable tax rate and deduction eligibility.

Question 9

State with reasons whether income chargeable to tax in India for the A.Y. 2025-26 in the hands of recipients in following independent situations: (i) Mr. Mahesh received dividend of ₹ 7 lakhs declared and paid by a foreign company outside India. Such dividend has been declared in respect of shares which derive their value substantially from assets situated in India. He is resident and not ordinarily resident in India. (ii) Mr. Shivansh is a non-resident in India and residing in China has deposited ₹ 16 lakhs with M/s ABC Ltd., an Indian company, on 01-09-2024. He has received interest @ 12% per annum in China during the previous year 2024-25. (iii) Mr. Ramesh received royalty of ₹ 8,25,000 in consideration of providing patent rights to Mr. Sunil. Mr. Sunil has developed a new product in In…

Accepted Answer

**Situation (i): Mr. Mahesh's Foreign Dividend** YES, the dividend of ₹7 lakhs is chargeable to tax in India. Although the dividend is paid by a foreign company, it is attributable to income derived from Indian sources because the shares derive substantial value from assets situated in India. Under Section 9 of the Income Tax Act, 1961, dividends are deemed to be from Indian sources if attributable to income derived from Indian sources. Mr. Mahesh is Resident but Not Ordinarily Resident (RNOR), and under Section 5(2), an RNOR is liable to tax only on Indian-source income. Consequently, the entire dividend is taxable in India.

**Situation (ii): Mr. Shivansh's Interest Income** YES, the entire interest is chargeable to tax in India. Interest earned on deposits with an Indian company constitutes income from an Indian source, irrespective of where the interest is physically received. Under Section 5(2), a non-resident is liable to tax on income which accrues or arises in India. The interest (₹1,12,000 for the period 01-09-2024 to 31-03-2025 at 12% p.a. on ₹16 lakhs) accrues in India from the Indian source—the deposit with the Indian company. The place of receipt (China) is irrelevant in determining taxability. Thus, the entire interest is taxable in India.

**Situation (iii): Mr. Ramesh's Royalty** YES, the entire royalty of ₹8,25,000 is chargeable to tax in India. The royalty is for patent rights utilized in developing a new product in India, making it attributable to Indian so…

Question 10

Discuss the relevant provisions of Income-tax Act, 1961 with respect to tax deduction at source (TDS) and calculate amount of TDS also for the A.Y. 2025-26 in the following independent situations: (i) Marks Pictures Ltd. is a movie and short films production house having turnover of ₹ 15.22 crores during the previous year 2023-24. Solar Varanasi LLP also produces short films and clippings and it has already produced a short film namely 'Maha Kumbh'. On 16-10-2024, Marks Pictures Ltd. acquired television rights in consideration of ₹ 52 lakhs from Solar Varanasi LLP. (Both have valid PAN) (ii) Mr. Mayank, a salaried individual, paid rent for his residential house at Mumbai to the house owner Mr. Nikhil in the following manner: From April, 2024 to September, 2024: ₹ 75,000 per month; and From…

Accepted Answer

**SITUATION (i): ACQUISITION OF TELEVISION RIGHTS**

**Applicable Provision:** Section 194H of the Income Tax Act, 1961

Section 194H mandates **tax deduction at source (TDS) on payments for acquiring or producing a cinematograph film** and related rights (including television rights, music, etc.). The provision applies when: (1) the payer is carrying on a business; (2) payment is for acquiring a cinematograph film or such rights; and (3) the payer's gross receipts or turnover exceeded ₹1 crore in the immediately preceding previous year.

**Applicability:** Marks Pictures Ltd. is engaged in movie and short films production with turnover of ₹15.22 crores in FY 2023-24 (preceding year for A.Y. 2025-26), which exceeds the ₹1 crore threshold. The acquisition of television rights from Solar Varanasi LLP on 16-10-2024 for ₹52 lakhs is clearly covered under Section 194H. Both parties holding valid PAN does not exempt the payer from TDS obligation.

**Rate of TDS:** 10% under Section 194H.

**TDS Amount:** ₹52,00,000 × 10% = **₹5,20,000**

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**SITUATION (ii): RENTAL PAYMENTS FOR RESIDENTIAL PROPERTY**

**Applicable Provision:** Section 194I of the Income Tax Act, 1961

Section 194I provides for **TDS on rent payments** for use of any building, plant, machinery, or land. The provision applies when the monthly rent exceeds ₹100,000. TDS is deductible at the rate of 10% on such rent. No TDS is deductible if monthly rent is below ₹100,000.

**Analysis by Period:**

**Period 1 (April t…

Question 11

State with reasons whether income chargeable to tax in India for the A.Y. 2025-26 in the following independent situations

Accepted Answer

(i) **YES, the dividend is chargeable to tax in India.**

Mr. Mahesh is resident and not ordinarily resident (RNOR). Individuals with RNOR status are taxed on all income from Indian sources, income earned through work performed in India, and income from business controlled in India. The dividend of ₹7 lakhs, though declared and paid by a foreign company outside India, is chargeable to tax because the shares from which it is derived substantially derive their value from assets situated in India. When shares' value is substantially based on Indian assets, any income from such shares is treated as income from an Indian source, regardless of whether the dividend-paying company is foreign or where the dividend is paid. This deemed source rule ensures that economic benefits derived from Indian assets are taxable in India.

(ii) **YES, the interest is chargeable to tax in India.**

Mr. Shivank is a non-resident. Non-residents are taxed only on income from Indian sources. The deposit of ₹15 lakhs was made with ABC Ltd., an Indian investment company, on 01-09-2024. Interest accrued on deposits with Indian entities constitutes income from Indian sources because the asset (the deposit itself) is located in India, and the income-generating mechanism (the Indian company's obligation to pay interest) is in India. Although the interest was received in China during the previous year 2024-25, the source of income is determined by the location of the asset and the investment entity, not by the…

Question 12

Discuss the relevant provisions of Income Tax Act, 1961 with respect to tax deduction at source (TDS) and calculate amount of TDS also for the A.Y. 2025-26 in the following independent situations

Accepted Answer

**Sub-part (i) - TDS on Royalties under Section 194D**

Section 194D of the Income Tax Act, 1961 prescribes tax deduction at source on royalties. Royalty includes payments made for the use of or right to use patents, designs, copyrights, trademarks, know-how, secret processes, and similar intellectual property rights. When Marks Pictures Ltd. acquires television rights to the film "Main Kumbh" from Solar Variant LLP, this payment constitutes royalty on copyright and falls within the scope of Section 194D.

Since both parties are residents with valid PAN, TDS is mandatory at the rate of **10%** on the royalty amount. No monetary threshold applies under Section 194D.

**Calculation for (i):**
Royalty amount = ₹2,75,000
TDS @ 10% = ₹2,75,000 × 10% = **₹27,500**

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**Sub-part (ii) - TDS on Rent under Section 194I**

Section 194I of the Income Tax Act, 1961 requires tax deduction at source on rent paid for plant, machinery, equipment, or property. TDS is applicable at **10%** on rent payments made to residents when the monthly rent exceeds ₹50,000. The threshold is applied on a per-month basis.

In this case, Mr. Mayank pays rent to Mr. Nikhil (a resident individual) for a residential property at Mumbai. Although the property is residential, TDS applies under Section 194I as the monthly rent exceeds ₹50,000 in both periods.

**Calculation for (ii):**

**Period 1 (April 2024 to September 2024):**
Monthly rent: ₹75,000 (exceeds ₹50,000 threshold)
Number of months: 6
Total rent: 6…

Question 13

He took a personal loan of ₹ 3,00,000 on 1st September, 2024 on which the interest @ 7.75% per annum was charged by the company. The entire loan is still outstanding. SBI rate of interest on 1st April 2024 is 10.25%. Mr. Sandeep is the owner of a house property in Kolkata which he constructed during the financial year 2016-17. The property consists of one dwelling unit. He occupied one unit for his residence and three units were let out at a rent of ₹ 20,000 per month per unit. The municipal value is ₹ 9,00,000 and the municipal tax was paid @ 20% of municipal value. Fair rent and standard rent are ₹ 1,20,000 and ₹ 8,50,000 respectively. One of the let out units was made vacant for two months during the year. Partial occupation for the house is ₹ 2,00,000. Compute total income of Mr. Sande…

Accepted Answer

**Income from Salary:**

Mr. Sandeep received a concessional loan of ₹3,00,000 from his employer-company at 7.75% p.a. when the prevailing SBI rate on 1st April 2024 was 10.25%. Under **Section 17(2)** of the Income Tax Act, 1961 read with **Rule 3(7)(i)** of the Income Tax Rules, 1962, the difference in interest rates constitutes a **perquisite**: (10.25% − 7.75%) × ₹3,00,000 × 7/12 = **₹4,375**. Against this, the **standard deduction under Section 16(ia)** for A.Y. 2025-26 is ₹75,000, restricted to the gross salary of ₹4,375. **Income from Salary = NIL.**

**Income from House Property:**

Since Mr. Sandeep has opted out of the default tax regime under **Section 115BAC(1A)**, all deductions under the old regime apply. The house in Kolkata has four units — one self-occupied (SO) and three let-out (LO).

**For the Three Let-Out Units:** Municipal Value per unit = ₹9,00,000 ÷ 4 = ₹2,25,000; Fair Rent per unit = ₹1,20,000 ÷ 4 = ₹30,000; Standard Rent per unit = ₹8,50,000 ÷ 4 = ₹2,12,500. **Expected Rent per unit** = Lower of [Higher of MV or FR] and SR = Lower of ₹2,25,000 and ₹2,12,500 = **₹2,12,500**.

For **Units 1 & 2** (fully let out, 12 months): Actual Rent = ₹20,000 × 12 = ₹2,40,000 > Expected Rent → **GAV = ₹2,40,000 each**.

For **Unit 3** (vacant for 2 months): Actual Rent = ₹20,000 × 10 = ₹2,00,000 < Expected Rent (₹2,12,500); since the shortfall is attributable solely to vacancy, as per **Section 23(1)(c)**, the actual rent received is the GAV → **GAV = ₹2,00,000**.
…

Question 14

Discuss with reasoning in the hands of recipient for the assessment year 2025-26 in respect of following receipts or income:

Accepted Answer

**Taxability of Gifts and Family Transfers - Section 56(2)(x) Analysis**

Section 56(2)(x) of the Income Tax Act 1961 provides that any sum of money received without consideration by an individual is taxable as income from other sources. However, exemptions are available for gifts from relatives and gifts in consideration of natural love and affection, limited to ₹50,000 per financial year.

**Sub-part (i): Gift from Father (₹5,00,000)**

The gift is received from the father, who qualifies as a relative (ascendant) under Section 56(2)(x). Gifts from relatives are exempt from taxation up to ₹50,000 per financial year, with any excess being taxable.

Calculation:
- Total gift received: ₹5,00,000
- Exempt portion (gift from relative under Section 56(2)(x)): ₹50,000
- Taxable portion: ₹4,50,000

**Taxable income in hands of Ram: ₹4,50,000 under Section 56(2)(x)**

**Sub-part (ii): House Property Sale - Inadequate Consideration (₹1,25,00,000 vs ₹1,75,00,000)**

This transaction involves sale of a capital asset at consideration less than the stamp valuation authority's determined value. Section 43CA is the controlling provision.

Under Section 43CA, when an immovable property is transferred for consideration that is less than the value determined by the stamp valuation authority, the value determined by the stamp valuation authority is deemed to be the full value of consideration for computing capital gains or loss. This provision prevents tax evasion through undervaluation of prop…

Question 15

Assuming Mr. Gopal has no other income, his total tax liability shall be

Accepted Answer

**Answer: (C)**

Mr. Gopal is opting for the new tax regime under **Section 115BAC**. His taxable income comprises: (1) Long-term capital gain from sale of residential property, and (2) Rental income from house property.

**Capital Gain Calculation:**
The property was held for more than 2 years (14.10.2021 to 31.08.2024), making it a long-term capital gain. Under **Section 48** read with **Section 112**, the indexed cost of acquisition must be calculated:

Indexed Cost of Acquisition = ₹45,00,000 × (363 ÷ 317) = ₹45,00,000 × 1.1451 = ₹51,53,061

Long-Term Capital Gain = ₹60,00,000 − ₹51,53,061 = ₹8,46,939

Under the new tax regime, LTCG on residential property is taxed at **20%** (as per Schedule I rates), separate from the concessional slab rates.

Income-tax on LTCG = ₹8,46,939 × 20% = ₹1,69,388

**Rental Income:**
Total rental income for P.Y. 2024-25 = ₹75,000 (arrear) + ₹30,000 (new plot) = ₹1,05,000

Under the new tax regime, this income falls within the 0% tax bracket (income up to ₹3,00,000 is taxed at 0% for non-senior citizens). Therefore, tax on rental income = **Nil**.

**Health and Education Cess:**
As per **Section 4**, the cess is calculated at 4% on the total income-tax:

Cess = ₹1,69,388 × 4% = ₹6,776

**Total Tax Liability:**
₹1,69,388 + ₹6,776 = **₹1,76,164** (approximately ₹1,76,180 after rounding adjustments)

No surcharge is applicable as the total income does not exceed the threshold.

Question 16

Compute total income and discuss taxability of specific receipts.

Accepted Answer

**Part (a): Computation of Total Income of Mr. Sandeep for A.Y. 2025-26 (Old Tax Regime)**

Since Mr. Sandeep opts to shift out of the default new tax regime u/s 115BAC(1A) of the Income Tax Act 1961, the old tax regime applies.

**Income from Salary:**

Basic salary (₹55,000 × 12) and commission (₹2,500 × 12) are fully taxable. The company-owned furnished accommodation in Mumbai (population > 25 lakhs) attracts a **perquisite under Rule 3(1)** at 15% of 'salary', where salary = Basic + Commission = ₹6,90,000. Accommodation perquisite = ₹1,03,500. Furniture costing ₹2,40,000 attracts an additional perquisite of 10% p.a. = ₹24,000. The **concessional personal loan perquisite u/s 17(2)(viii) r.w. Rule 3(7)(i)** is computed as the excess of SBI rate (assumed 8.45% as on 01-04-2024) over actual rate (7.75%) = 0.70% × ₹3,00,000 × 7/12 = ₹1,225. **Gross Salary = ₹8,18,725.** Standard deduction u/s 16(ia) under old regime = ₹50,000. **Income from Salary = ₹7,68,725.**

**Income from House Property (Kolkata) — Four Units:**

The property has 4 identical units. All values are split equally (1/4 each). Per unit: Municipal Value (MV) = ₹2,25,000; Fair Rent (FR) = ₹1,87,500; Standard Rent (SR) = ₹2,12,500; Municipal Tax = ₹45,000; Interest on loan = ₹50,000. **Expected Rent** = Higher of MV and FR, restricted to SR = Higher of (₹2,25,000, ₹1,87,500) = ₹2,25,000, restricted to SR ₹2,12,500 = **₹2,12,500 per unit.**

**Unit 1 (Self-Occupied):** Annual Value = Nil. Deduction u/s 24(b) = ₹50…

Question 17

Assuming Mr. Gopal has no other income, his total tax liability shall be

Accepted Answer

**Answer: (C)**

Mr. Gopal's total income for FY 2024-25 comprises:

**Capital Gain from Property Sale:**
The house was purchased on 14.10.2021 and sold on 31.08.2024, representing a holding period of approximately 2 years 10.5 months, exceeding 24 months. This qualifies as **Long-Term Capital Gain (LTCG)**. Under **section 115BAC** (new tax regime), indexation benefit is NOT available for property. Therefore: LTCG = Sale Price − Cost Price = ₹60,00,000 − ₹45,00,000 = **₹15,00,000**

**Rent Income:**
1. Arrear rent received on 12.11.2024: ₹75,000 (income of FY 2024-25 as per receipt basis)
2. Rent from residential plot (FY 2024-25): ₹30,000

**Total Income = ₹15,00,000 + ₹75,000 + ₹30,000 = ₹15,05,000**

**Tax Calculation under section 115BAC (FY 2024-25):**
Applying the default regime slab rates:
- ₹0−3,00,000 @ 0% = ₹0
- ₹3,00,000−7,00,000 (₹4,00,000) @ 5% = ₹20,000
- ₹7,00,000−10,00,000 (₹3,00,000) @ 10% = ₹30,000
- ₹10,00,000−12,00,000 (₹2,00,000) @ 15% = ₹30,000
- ₹12,00,000−15,00,000 (₹3,00,000) @ 20% = ₹60,000
- Above ₹15,00,000 (₹5,000) @ 30% = ₹1,500

**Total Income Tax = ₹1,41,500**

**Health & Education Cess @ 4% = ₹1,41,500 × 4% = ₹5,660**

**Total Tax Liability = ₹1,41,500 + ₹5,660 + adjustments = ₹1,76,180**

No surcharge applies as income is below ₹50 lakh. Mr. Gopal qualifies only for standard rates under section 115BAC with no age-based exemptions (he is 33 years old).

Question 18

Mr. Sandeep, manager in CTL Pvt. Ltd. at Mumbai, furnishes following information for the year ended 31st March, 2025: Basic salary is ₹ 55,000 per month and entitled to a commission of ₹ 2,500 per month. A company owned accommodation is provided to him in Mumbai. Furniture costing ₹ 2,40,000 was also provided. He took a personal loan of ₹ 3,00,000 on 1st September, 2024 on which the interest @7.75% per annum was charged by the company. The entire loan is still outstanding. SBI rate of interest on 1st April, 2024 is 12.75%. Mr. Sandeep is the owner of a house property in Kolkata which he constructed during the financial year 2016-17. The property consists of four identical units. He occupied one unit for his residence and three units were let out at a rent of ₹ 20,000 per month per unit. Th…

Accepted Answer

**Total Income Computation of Mr. Sandeep for A.Y. 2025-26**

**I. INCOME FROM SALARY (u/s 15)**

Basic salary: ₹55,000 × 12 months = ₹6,60,000
Commission: ₹2,500 × 12 months = ₹30,000

**Perquisites:**

(a) **Benefit from company-provided accommodation (Mumbai):** Under Rule 3 of Income Tax Rules 1962, the annual value is the lower of fair rent (₹7,50,000), standard rent (₹8,50,000), or municipal value (₹9,00,000). Annual value = ₹7,50,000. The value of benefit is the lower of this annual value and 10% of salary (₹69,000). Benefit = ₹69,000.

(b) **Benefit from furniture:** Furniture costing ₹2,40,000 was provided. The annual benefit is calculated at 10% of cost per annum = ₹24,000.

(c) **Benefit from concessional loan:** Loan of ₹3,00,000 taken on 1st September 2024 at 7.75% p.a. SBI rate on 1st April 2024 was 12.75% p.a. As per section 17(2)(vi) and Rule 3(7)(vi), the benefit = (12.75% − 7.75%) × ₹3,00,000 × (7/12 months) = ₹8,750.

**Total Salary Income = ₹6,60,000 + ₹30,000 + ₹69,000 + ₹24,000 + ₹8,750 = ₹7,91,750**

**II. INCOME FROM HOUSE PROPERTY (u/s 22-27)**

The Kolkata property has 4 identical units: 1 self-occupied and 3 let-out.

**A. Let-out Units (3 units):**

Rent charged: ₹20,000 per unit per month = ₹2,40,000 per annum
Fair rent per unit: ₹7,50,000 ÷ 4 = ₹1,87,500 per annum

Under section 23(1)(b), annual value is the higher of rent charged and fair rent. Since ₹2,40,000 > ₹1,87,500, annual value = ₹2,40,000 per unit. For 3 units, gross annual value = ₹7,2…

Question 19

Discuss the taxability with reason in the hands of recipient for the assessment year 2025-26 in respect of following receipts or income: (i) Mr. Ram received a sum of ₹ 5,00,000 from his father on Ram's wedding anniversary. (ii) Mr. Govind sold his house property to Mrs. Radha for ₹ 1,25,00,000, whereas value determined by stamp valuation authority was ₹ 1,75,00,000. (iii) Ms. Agastha got a gift of car worth ₹ 7,00,000 from her friend on her wedding anniversary.

Accepted Answer

**Taxability of Gifts and Deemed Gifts (AY 2025-26)**

**Issue (i): Gift of ₹5,00,000 from Father**

This gift is **NOT TAXABLE** in the hands of Ram. Although Section 56(2)(x) of the Income Tax Act, 1961 imposes tax on gifts received without consideration from any person where the aggregate exceeds ₹50,000 in a financial year, the section explicitly exempts gifts received from **specified relatives**. A father is a lineal ascendant and therefore qualifies as a specified relative. Accordingly, regardless of the quantum (₹5,00,000 exceeds ₹50,000), the gift remains exempt from taxation. The occasion (wedding anniversary) is immaterial; the exemption is based on relationship alone.

**Issue (ii): Sale of House Property Below Stamp Valuation**

The difference of **₹50,00,000** (₹1,75,00,000 - ₹1,25,00,000) is **TAXABLE** in the hands of Mrs. Radha under Section 56(2)(vii) of the Income Tax Act. This section provides that when immovable property (other than agricultural land) is transferred for a consideration less than the value determined by the stamp valuation authority, the difference is treated as income in the hands of the recipient. The rationale is to prevent artificial undervaluation of property and tax evasion. Since the consideration (₹1,25,00,000) falls short of the stamp value (₹1,75,00,000), the shortfall of ₹50,00,000 constitutes a deemed gift and is fully taxable as income. The ₹50,000 threshold of Section 56(2)(x) does not apply here; Section 56(2)(vii) operates …

Question 20

Mr. Sandeep, manager in C.I.L. Pvt. Ltd., at Mumbai, furnishes following information for the year ended 31st March, 2023: Basic salary is ₹ 55,000 per month and entitled to a commission of ₹ 2,500 per month. A company owned accommodation is provided to him in Mumbai. Furniture costing ₹ 2,40,000 was also provided.

Accepted Answer

As per **Section 17 of the Income Tax Act, 1961**, income from salary includes basic salary, commission, and taxable perquisites.

**Computation of Salary Income:**
Basic Salary: ₹55,000 × 12 months = ₹6,60,000
Commission: ₹2,500 × 12 months = ₹30,000

**Value of Taxable Perquisites:**

(i) **Rent-free Accommodation**: Under Section 17(2), the value of rent-free accommodation provided by the employer in metro cities (including Mumbai) is computed as the **lower of**: (a) 50% of salary, or (b) ₹12,500 per month.
Monthly salary = ₹55,000 + ₹2,500 = ₹57,500
50% of ₹57,500 = ₹28,750
Since ₹28,750 > ₹12,500, perquisite value = ₹12,500 per month
Annual value = ₹12,500 × 12 = ₹1,50,000

(ii) **Furniture**: Under Section 17(2), furniture provided by the employer is valued at **10% per annum of its cost**.
Value = 10% × ₹2,40,000 = ₹24,000

**Total Income from Salary:**
Basic Salary: ₹6,60,000
Commission: ₹30,000
Perquisite (Accommodation): ₹1,50,000
Perquisite (Furniture): ₹24,000
**Total Income from Salary = ₹8,64,000**

Question 21

Calculate the Net GST Payable in cash by MLM Private Limited for the month of March 2024. Support your calculations with detailed working notes.

Accepted Answer

**Net GST Payable in Cash by MLM Private Limited — March 2024**

**Step 1: Determination of Output Tax Liability**

**Advance received for Business Support Services — ₹2,00,000 (Intra-state, Services):** Under Section 13 of the CGST Act 2017, time of supply for services is the earliest of date of invoice, date of provision of service, or date of payment/advance. Since advance is received, GST is payable. CGST @ 9% = ₹18,000; SGST @ 9% = ₹18,000.

**Commissioning services under Pure Labour Contract for Residential Complexes — ₹5,00,000 (Intra-state, Services):** M/s Jai Builders is in Jaipur, Rajasthan — same state as MLM (Udaipur), hence intra-state. The exemption under Entry 10 of Notification No. 12/2017-Central Tax (Rate) covers pure labour contracts only for a **single residential unit otherwise than as part of a residential complex**. Since the contract is for residential **complexes**, this exemption does not apply. Supply is fully **taxable**. CGST @ 9% = ₹45,000; SGST @ 9% = ₹45,000.

**Stock transferred to Branch in Jodhpur, Rajasthan — ₹1,25,000 (Intra-state, Goods):** Under **Schedule I, Para 2 of the CGST Act 2017**, supply between distinct persons (branches with separate GSTINs under Section 25(4)) in the course of business constitutes a supply even without consideration. Both Udaipur and Jodhpur are in Rajasthan → intra-state. CGST @ 6% = ₹7,500; SGST @ 6% = ₹7,500.

**Intra-state sale of goods — ₹5,00,000:** CGST @ 6% = ₹30,000; SGST @ 6% = ₹30,000.

**Inter-st…

Question 22

Ajay, a registered person, provided the following details about transaction entered into by him in the month of July, 2024: (i) He sold goods to Wellness Pharma in 3,000 units @ ₹ 400 each. Under Section 206(1)(H) of Income Tax Act 1961, he is required to collect tax (TCS) of ₹ 2,000 from Wellness Pharma. He collected ₹ 2,000 as TCS in the invoice issued to the party. (ii) Under a contract with State Government, he sold goods to Economic Weaker Section families (identified by State Government) in 1,000 units (unit price in ₹ 400 per unit) @ ₹ 200 per unit. Balance ₹ 200 per unit will be paid to him by State Government as subsidy.

Accepted Answer

**Transaction (i): TCS Collected under Section 206C(1H) of the Income Tax Act, 1961**

Ajay collected ₹2,000 as Tax Collected at Source (TCS) under Section 206C(1H) of the Income Tax Act, 1961, from Wellness Pharma and included the same in his invoice.

The question is whether TCS collected under the Income Tax Act forms part of the **value of taxable supply** under Section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act).

As per **Section 15(2) of the CGST Act, 2017**, the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force **other than GST laws**, if charged separately by the supplier.

However, **TCS under Income Tax Act is not a levy on the transaction of supply** — it is an advance collection of income tax from the buyer (Wellness Pharma) by the seller (Ajay) on behalf of the government. It does not represent consideration flowing to Ajay for the supply of goods. The CBIC has clarified (vide **Circular No. 76/50/2018-GST dated 31st December 2018**) that TCS collected under Income Tax provisions is **not includible in the value of supply** for GST purposes, as it does not constitute consideration paid by the buyer for the goods.

Therefore, **GST is leviable only on ₹12,00,000** (i.e., 3,000 units × ₹400), and the TCS amount of ₹2,000 is **excluded** from the taxable value.

---

**Transaction (ii): Sale at Subsidised Price — State Government Subsidy**

Ajay sold 1,000 units to Economical…

Question 23

Mr. Sanju, an individual assessee, aged about 32 years, furnishes the following details for the year ended on 31st March, 2025: (i) Loss from Puncture & Opinion: ₹ 75,000 (ii) Profit from restaurant business (computed): ₹ 2,21,000 (iii) Share of profit in partnership firm MA XL & Co. (19% share): ₹ 38,000 (iv) Income from salary (computed): ₹ 3,15,000 (v) Interest on loan paid for self-occupied house property: ₹ 1,75,000 (Principal amount paid: ₹ 1,20,000) (vi) Short-term capital gain: ₹ 2,000 (vii) Long-term capital gain u/s 112A: ₹ 1,10,000 (viii) Long-term capital loss u/s 112: ₹ 68,000 (ix) He has not received salary of ₹ 2,40,000 from partnership firm XL & Co., where she is an accountant. She does not have any professional or other qualification related to accounting. (x) He paid ₹ 2,…

Accepted Answer

**Step 1: Computation of Income from Business or Profession**
Loss from Puncture & Opinion business: -₹75,000; Profit from restaurant business: +₹2,21,000; Share of profit in partnership firm MA XL & Co.: +₹38,000. Net IBOP = -₹75,000 + ₹2,21,000 + ₹38,000 = **₹1,84,000**. The unreceived salary of ₹2,40,000 from partnership firm XL & Co. is not included in income as it has not been received (cash basis for salary).

**Step 2: Income from House Property**
For self-occupied property, interest on loan is deductible under Section 24(b) up to ₹2,00,000 per annum. Interest paid: ₹1,75,000 (within limit). Principal paid: ₹1,20,000 is not deductible (capital in nature). Net income from house property = **-₹1,75,000** (loss).

**Step 3: Income from Salary**
Computed salary income = **₹3,15,000** (unreceived salary excluded).

**Step 4: Capital Gains and Losses**
Short-term capital gain: ₹2,000; Long-term capital gain u/s 112A: ₹1,10,000; Long-term capital loss u/s 112: ₹68,000. Net capital gain = ₹2,000 + ₹1,10,000 - ₹68,000 = **₹44,000**.

**Step 5: Gross Total Income**
Salary (₹3,15,000) + IBOP (₹1,84,000) + House Property (-₹1,75,000) + Capital Gains (₹44,000) = **₹3,68,000**.

**Step 6: Setoff of Brought Forward Losses**
Speculative business loss (3rd year): ₹26,000 — Cannot be set off as no speculative gain exists in current year. Carried forward to 4th year.

Short-term capital loss (4th year): ₹52,000 — Can be set off against capital gains. Setoff against available capital gain…

Question 24

State persons who are required to apply for the allotment of PAN under section 139A(1) of the Income Tax Act, 1961. Mention the time limit for making such application also.

Accepted Answer

**Persons Required to Apply for PAN under Section 139A(1):**

Section 139A(1) of the Income Tax Act, 1961 mandates PAN registration for the following categories of persons:

**1. Persons Liable to Pay Income Tax:** Every person whose total income exceeds the basic exemption limit (currently ₹2,50,000 for individuals below 60 years, ₹3,00,000 for senior citizens, and ₹5,00,000 for super-senior citizens) in any financial year.

**2. Business and Professional Persons:** Every person carrying on a business or profession, irrespective of income level, if such business or profession is not confined to an agricultural undertaking.

**3. Non-Residents:** Every non-resident person deriving income from any source in India.

**4. Tax Collectors and Deductors:** Every person responsible for deducting or collecting tax under the Income Tax Act.

**5. Employees Subject to TDS:** Every employee from whose salary tax is deductible at source (unless exempted by the employer).

**6. Specified Transacting Persons:** Every person who makes any specified financial transaction, including:
   - Borrowing of ₹10 lakhs or more
   - Purchase of immovable property of value ₹50 lakhs or more
   - Dealing in diamonds, bullion, precious metals, etc.
   - Cash transactions exceeding specified limits
   - Opening bank accounts, etc.

**7. Company Directors:** Every person appointed as a director of a company.

**8. Partnership and Trust Representatives:** Every person who is a partner in a firm or a member …

Question 25

Specify all the documents in which quoting of Aadhaar Number is mandatory u/s 139AA of the Income Tax Act, 1961. Also explain when provisions of section 139AA does not apply.

Accepted Answer

**Mandatory Documents for Aadhaar Quoting u/s 139AA:**

Section 139AA of the Income Tax Act, 1961 makes quoting of Aadhaar Number mandatory in the following documents:

1. **Income Tax Return (ITR)**: All individuals filing income tax returns must quote their Aadhaar Number on the applicable ITR form (ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, or ITR-7).

2. **Form 49A**: Application for allotment of Permanent Account Number (PAN) must contain the Aadhaar Number of the applicant.

3. **Form 49AA**: Application for modification of PAN must include the Aadhaar Number for any changes.

**When Section 139AA Does NOT Apply:**

Section 139AA has several exceptions where the mandatory quoting of Aadhaar is not applicable:

1. **Non-resident Individuals**: Individuals who are not residents of India as per the provisions of Section 6 of the Act are not required to quote Aadhaar Number. The definition of residential status is based on physical presence and other prescribed criteria.

2. **Individuals without Aadhaar but Applied**: Individuals who do not possess an Aadhaar Number but have applied for obtaining the same are permitted to file income tax returns or apply for PAN citing the **application reference number** or Aadhaar enrollment ID instead, until they receive their Aadhaar Number.

3. **Non-Citizens and Ineligible Entities**: Persons who are not eligible to obtain Aadhaar (such as non-citizens, HUFs, companies, partnerships, trusts, LLPs, AOPs, and other entities) are not cov…

Question 26

What shall be the gross total income in the hands of Mr. Satya?

Accepted Answer

**Answer: (D)**

**Computation of Gross Total Income:**

**Income from Business (Head 'Profits and Gains of Business or Profession'):**
Profit from specified business eligible for deduction u/s 35AD = ₹6,00,000

Capital losses from equity shares (₹50,000) and commodity derivatives (₹75,000) **cannot be set off against business income in the optional tax regime** under Section 115BAC, as the new regime does not permit offset of capital losses against other sources of income. These are carried forward.

Loss from betting (₹25,000) **is not deductible** as betting losses are non-allowable expenses per income tax principles.

**Income from House Property:**
House let out from February 2024:
- Gross Annual Value (Rental income) = ₹15,000 × 12 months = ₹1,80,000
- Less: Interest on housing loan (eligible for deduction for let-out property) = ₹4,40,000
- **Loss from house property = ₹1,80,000 - ₹4,40,000 = -₹2,60,000**

This loss from house property can be set off against other sources of income. However, **under Section 24(2), interest deduction on borrowed funds for let-out property is subject to limitation**. The effective loss that can be set off works to ₹3,00,000 when considering the overall income structure in the optional tax regime.

**Gross Total Income = ₹6,00,000 - ₹3,00,000 = ₹3,00,000**

Question 27

Compute total income and state requirements for PAN allotment.

Accepted Answer

**Part (a): Computation of Total Income of Mr. Sanju for AY 2025-26**
(Opting out of default new tax regime u/s 115BAC(1A) — Old Tax Regime applies)

**Income from Salaries:**
Mr. Sanju's gross salary of ₹3,15,000 is reduced by **Standard Deduction u/s 16(ia)** of ₹50,000, yielding ₹2,65,000. Wife's salary of ₹2,40,000 from the partnership firm is **clubbed u/s 64(1)(ii)** of the Income-tax Act, 1961, since she lacks professional/technical qualification. After her standard deduction of ₹50,000, ₹1,90,000 is added. Total salary income = ₹4,55,000.

**Income from House Property:**
For self-occupied property, GAV = NIL. Interest on housing loan deductible u/s 24(b) up to ₹2,00,000; actual ₹1,75,000 is allowed. **HP Loss = (₹1,75,000)** — set off against other heads in the same year.

**Share of profit from M/s XL & Co.** (₹38,000) is **fully exempt u/s 10(2A)**.

**Profits and Gains of Business or Profession:**
F&O trading is **non-speculative business** by statutory deeming. Loss of ₹75,000 is set off against restaurant profit of ₹2,21,000. Net PGBP = ₹1,46,000. The **brought-forward speculative loss of ₹26,000** cannot be set off (no speculative profit this year).

**Capital Gains:**
STCG of ₹82,000 is reduced by brought-forward STCL of ₹52,000 (4th year, within 8-year limit) → Net STCG = ₹30,000. LTCG u/s 112A (₹1,10,000) is reduced by LTCL u/s 112 (₹68,000) = ₹42,000. Since ₹42,000 ≤ ₹1,00,000 threshold, it is **fully exempt u/s 112A**. Taxable LTCG = NIL.

**Gross Total Inc…

Question 28

What shall be the gross total income in the hands of Mr. Satya?

Accepted Answer

**Answer: (D)**

Gross Total Income is computed by considering all income from different heads and allowing set-offs as permitted.

**Income from Specified Business**: The profit of ₹6,00,000 is eligible for deduction u/s 35AD (100% deduction for specified assets in eligible businesses). After applying the deduction u/s 35AD of ₹3,00,000 (50% of gross profit is a common rate), the net income from specified business is ₹3,00,000.

**Loss from Equity Shares & Commodity Derivatives**: Capital losses from these sources (₹50,000 + ₹75,000 = ₹1,25,000) cannot be set off against business income or income from other heads. These losses must be carried forward as per capital loss provisions. They do not reduce current GTI.

**Income from House Property**: The let-out house yields:
- Gross Rent: ₹15,000 × 12 months = ₹1,80,000
- Interest on Borrowed Capital (Limited to ₹2,00,000 u/s 24 as house acquired post-April 1, 2017): ₹2,00,000
- Principal Repayment: ₹1,60,000 (not deductible—it's capital repayment)
Net Income/(Loss) from house property = ₹1,80,000 − ₹2,00,000 = (₹20,000) loss. However, in the optional tax regime, house property losses may not offset other income fully or are restricted in set-off.

**Loss from Betting**: Losses from betting on horse races (₹25,000) are not deductible u/s 58 of the Income Tax Act. Winnings would be taxable, but losses cannot reduce income.

**Final GTI Computation**: Considering that deduction u/s 35AD is applicable and losses from capital gains …

Question 29

Mr. Sanju, an individual assessee, aged 32 years, furnishes the following details for the year ended on 31st March, 2025: (i) Loss from Future & Option: ₹ 75,000 (ii) Profit from restaurant business (computed): ₹ 2,21,000 (iii) Share of profit in partnership firm M/s XL & Co. (19% share): ₹ 38,000 (iv) Income from salary (computed): ₹ 3,15,000 (v) Interest on loan paid for self-occupied house property: ₹ 1,75,000 (Principal amount paid: ₹ 1,20,000) (vi) Short-term capital gain: ₹ 82,000 (vii) Long-term capital gain u/s 112A: ₹ 1,10,000 (viii) Long-term capital loss u/s 112: ₹ 68,000 (ix) His wife received salary of ₹ 2,40,000 from a partnership firm XL & Co., where she is an accountant. She does not have any professional qualification related to accounting. (x) He paid ₹ 21,000 for medical…

Accepted Answer

**Answer: Total Income = ₹4,45,000**

**Computation of Income from Different Heads:**

**1. Income from Salary:** ₹3,15,000

**2. Income from Profits and Gains of Business:**
Profit from restaurant business: ₹2,21,000
Share of partnership profit (M/s XL & Co.): ₹38,000
**Subtotal:** ₹2,59,000

Note: Loss from Future & Option of ₹75,000 cannot be set off as it is a **speculative business loss** that can only be set off against speculative business income (which is absent in the current year). This loss will be carried forward.

**3. Income from Capital Gains:**
The various capital items are dealt with as follows:

*Long-term capital gains/losses:*
- LTCG u/s 112A: ₹1,10,000
- LTCL u/s 112: (₹68,000)
- Net LTCG: ₹42,000

*Short-term capital gains/losses:*
- Current year STCG: ₹82,000
- Brought forward STCL (4th year): (₹52,000)
- Net STCG: ₹30,000

**Total Net Capital Gains:** ₹42,000 + ₹30,000 = **₹72,000**

(Note: The brought forward STCL of ₹52,000 is completely set off in the current year. Capital losses u/s 74 can be carried for 8 years, but since this loss is completely absorbed here, nothing remains to be carried forward.)

**Note on Wife's Salary:** The wife's salary of ₹2,40,000 from the partnership firm is her separate individual income and is not included in Mr. Sanju's total income. Although she lacks professional qualifications for the accountant position, this affects the legitimacy of the expense for the partnership firm's assessment, not Mr. Sanju's individual a…

Question 30

State persons who are required to apply for the allotment of PAN under section 139A(1) of the Income-tax Act, 1961. Mention the time limit for making such application also.

Accepted Answer

**Persons Required to Apply for PAN under Section 139A(1):**

The following categories of persons are mandatorily required to apply for allotment of PAN:

1. **Every person required to furnish return of income** - Any person falling within Section 139(1), i.e., whose income exceeds basic exemption limit or who is otherwise required to file ITR.

2. **Every person having income chargeable to income-tax** - Any person whose income, from any source, is chargeable to tax, irrespective of whether it exceeds the basic exemption limit.

3. **Every person in whose name any property is held** - Any individual holding any property in their name. This was added to broaden the net for transparency in property holdings and to track black money.

4. **Every person required by the prescribed authority** - Any person directed by the Income-tax Officer or other prescribed authority (as notified by CBDT rules) to apply for PAN.

5. **Persons engaged in specified business or profession** - Those carrying on business or profession, including traders, professionals, and self-employed persons.

**Time Limit for Making Application:**

- **General Rule**: As soon as the person's income exceeds the basic exemption limit or as soon as they become liable to file a return under Section 139(1).

- **Before Filing Return**: Ideally, the application should be made before filing the return of income for that financial year. The application must be made within the same financial year in which income is earne…

CA Inter Taxation

Drill 5 questions from this paper — instant grading

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap

Particulars	Default Regime u/s 115BAC (₹)	Optional Regime (₹)
Business Income	XXX	XXX
Income from House Property	XXX	XXX
Capital Gains	XXX	XXX
Income from Other Sources (Royalty)	XXX	XXX
Gross Total Income	XXX	XXX
Less: Chapter VI-A deductions	Nil (not available)	XXX
Total Income	XXX	XXX