CHAPTER ALTERNATIVE TAX REGIME

10

PART-A: INDIVIDUAL/HUF

1) Analysis of Section 115BAC

Introduction:
The alternative taxation regime u/s 115BAC is available only in case of an individual or HUF from the A.Y.
2021-22 onwards. It is optional. Individual/HUF may be resident or Non-resident. Individual may be
salaried/retired employee (having salary income) or a self-employed (having business income) or any
other person (having any other income).

From the A.Y. 2024-25, the alternative tax regime under section 115BAC is the default tax regime for an
Individual/HUF/AOP/BOI/Artificial Juridical person. However, these assesses can avail the benefit of
regular tax regime by exercising the option under section 115BAC (6) – FA 2023

Rate of Income Tax (u/s 115BAC)(1A) – FA 2023

Total Income (Rs.) Applicable tax rate
Taxable Income up to Rs. 3,00,000 NIL
Rs. 3,00,001 to Rs. 6,00,000 5%
Rs. 6,00,001 to Rs. 9,00,000 10%
Rs. 9,00,001 to Rs. 12,00,000 15%
Rs. 12,00,001 to Rs. 15,00,000 20%
Above Rs. 15,00,000 30%

10.1
Important Points need to be remembered under section 115BAC

Rate of Surcharge
Surcharge:
➢ If taxable income exceeds Rs. 50 lakhs but less than Rs. 1 crore. – 10% of IT
➢ If taxable income exceeds Rs. 1 crore but less than Rs. 2 crore – 15& of IT
➢ If taxable income exceeds Rs. 2 crore but less than Rs. 5 crore[FA 2019] – 25% of IT
➢ If taxable income exceeds Rs. 5 crore [FA 2019] – 37% of IT – 25% - from the A.Y. 24-25
1. MMR has been reduced to 39% from the A.Y. 24-25 in case of assesse who wants to pay tax under
alternative tax regime. – FA 2023

The Finance (No. 2) Act, 2019 has levied an enhanced surcharge of 25% and 37%, where the total income
of individuals/HUF/AOPs/BOIs exceeds Rs. 2 crores and Rs. 5 crores, respectively. However, the enhanced
surcharge has been withdrawn on tax payable dividend income and at special rates under section 111A
and 112A/112 on short-term and long-term capital gains arising from;
1) the transfer of equity share in a company or
2) unit of an equity-oriented fund/ business trust,
3) Which has been subject to securities transaction tax
4) Any other Long term capital asset.

10.2
Education Cess:
“Health and Education Cess” shall be levied @ 4% of income tax including surcharge (wherever applicable).

Salaried employee

Exemptions and Exemptions and Important deductions

Loss under the head under Chapter VIA
deductions under head deductions under other
house property
salary Sources (i.e. section 80C to 80U)

i) House rent allowance which

i) Interest on loan taken i) Exemption upto Rs.1500 Deduction under section
is exempt to the extent of the
for self- occupied house available in the case of 80C to 80U
minimum of following 3 limits
property subject to clubbed income of minor
a) Actual HRA received maximum of Rs.2,00,000 child [Sec. 10(32)] {except employer
contribution towards NPS
b) Rent paid 10% of salary ii) Loss under the head ii) Standard deduction in under section 80CCD(2),
c) 50% of salary in 4 big cities house property the case of family pension deduction under section
and 40% of salary in case of [Sec. 57(iia)] 80JJAA and deduction
any other city under section 80LA(1A)}
ii) Leave Travel Concession for
two journeys in a block of 4
years
iii) Tax on employment i.e.
professional tax paid by
employee.
iv) Special Allowance
v) Allowance to MP/MLA
vi) Entertainment Allowance

If the Individual is under default tax regime u/s 115BAC , then the above incentive not available.

Scheme of Partial Intergration of tax on non-agriculture income with income derived from agriculture
income – The scheme of partial intergration is applicable for the A.Y. 24-25, if the assesse pays tax
under the Alternative tax regime under section 115BAC(1A) and he is a resident . (Not applicable in
the case of NR even for AY 24-25)

10.3
 Other Than Salaried employee

Exemptions and Important deductions

Loss under the head Other deduction under under Chapter VIA
deductions under other
house property PGBP
Sources (i.e. section 80C to 80U)

i) Exemption upto
Rs.1500 available in the i) Deduction u/s. 10AA Deduction under
i) Interest on loan taken
case of clubbed income in respect of the SEZ section 80C to 80U
for self- occupied house
of minor child [Sec. unit;
property subject to {except employer
maximum of Rs.2,00,000 10(32)] ii) Additional contribution towards
ii) Standard deduction depreciation u/s. NPS under section
ii) Loss under the head
in the case of family 32(1)(iia); 80CCD(2), deduction
house property
pension [Sec. 57(iia)] iii) Deductions u/s. under section 80JJAA
32AD, 33AB or 33ABA; and deduction under
section 80LA(1A)}
iv) Deduction of
expenditure on
scientific research u/s.
35(1)(ii), 35(1) (iia),
35(1)(iii) or 35(2AA);
v) Deduction u/s. 35AD
or 35CCC;

If the Individual is under default tax regime u/s 115BAC, then above incentive not available.

Additional Points:
(i) An employee whose income is chargeable to tax under section 115BAC (1A) would be entitled for -
- travelling allowance (i.e., allowance granted to meet the cost of travel on tour or transfer) ;
- daily allowance (i.e., allowance granted on tour or for the period of journey in connection with
transfer, to meet the ordinary daily charges incurred by an employee on account of absence from
his normal place of duty);
- conveyance allowance (i.e., allowance granted to meet the expenditure incurred on conveyance
in performance of duties of an office or employment of profit, where free conveyance is not
provided by the employer); and
- exemption in respect of transport allowance granted to an employee who is blind or deaf and
dumb or orthopedically handicapped with disability of the lower extremities of the body to the
extent of Rs 3,200 p.m.

10.4
(ii) An individual, being an employee paying tax as per section 115BAC, would not be entitled for
exemption of perquisite of free food and non-alcoholic beverages provided by an employer through
paid vouchers .
(iii) From the A.Y. 2024-25, standard deduction under section 16(ia)/57(iia) is available to an Individual
who wants to pay tax under the alternative tax regime – FA 2023
(iv) Total income under default tax regime should be computed without set-off of any loss brought forward
or depreciation from any earlier assessment year , where such loss or depreciation is attributable to
any of the deductions listed in (1) above. Such loss and depreciation would be deemed to have been
already given effect to and no further deduction for such loss or depreciation shall be allowed for any
subsequent year.
Where income-tax on total income of the assessee is computed under this section and there is a depreciation
allowance in respect of a block of asset from an earlier assessment year attributable to additional
depreciation u/s 32(1)(iia}, which has not been given full effect to prior to A.Y. 2024-25 and which is not
allowed to be set-off in the A.Y.2024-25 due to section 115BAC corresponding adjustment shall be made to
the WDV of such block of assets as on 1.4.2023 in the prescribed manner i.e., the WDV as on 1.4.2023 will
be increased by the unabsorbed additional depreciation not allowed to be set-off.

Example:
Let us consider the case of Mr. X, who carries on business of manufacturing of steel. He has unabsorbed
depreciation as on 1.4.2023, which includes amount attributable to additional depreciation u/s 32(1)(iia)
of P.Y.2022-23 or any earlier previous year in respect of block of plant and machinery . If he pays tax under
default tax regime under section 115BAC for P.Y.2023-24 relevant to A.Y.2024-25, the amount so
attributable to additional depreciation of earlier year remaining unabsorbed as on 1.4.2023 would not be
eligible for set-off against current year income and no further deduction for such loss or depreciation shall
be allowed for any subsequent year. Accordingly, the WDV of the block as on 1.4.2023 has to be increased
by the said amount not allowed to be set-off.

Time limit for exercising the option to shift out of the default tax regime
(i) In case of an assessee having no income from business or profession: Where such individual/HUF/AoP
(other than a co-operative society)/BOl or Artificial Juridical person is not having income from business
or profession , he/it can exercise an option to shift out/opt out of the default tax regime under this
section and such option has to be exercised along with the return of income to be furnished under
section 139(1) for a previous year relevant to the assessment year. In effect, such
individual/HUF/AoP/Bol or Artificial Juridical person can choose whether or not to exercise the option
of shifting out of the default tax regime in each previous year. He may choose to pay tax under default
tax regime under section 115BAC in one year and exercise the option to shift out of default tax regime
in another year.
(ii) In case of an assessee having income from business or profession: Such individual/HUF! AoP! Bol or
Artificial Juridical person having income from business or profession has an option to shift ouV opt out
of the default tax regime under this section and the option has to be exercised on or before the due

10.5
 date specified under section 139(1) for furnishing the return of income for such previous year and once
such option is exercised, it would apply to subsequent assessment years .
Such person who has exercised the above option of shifting out of the default tax regime for any
previous year shall be able to withdraw such option only once and pay tax under the default tax regime
under section 115BAC for a previous year other than the year in which it was exercised.
Thereafter, such person shall never be eligible to exercise option under this section, except where such
person ceases to have any business income in which case, option under (i) above would be available.

AMT liability not attracted: lndividual/HUF/AoP/Bol or Artificial Juridical person paying tax under default
tax regime under section 115BAC is not liable to alternate minimum tax u/s 115JC. Such person would not
be eligible to claim AMT credit also.

Note: It may be noted that in case of lndividual /HUF/AoP/Bol or Artificial Juridical person not having income
from business or profession, the total income and tax liability (including provisions relating to AMT, if
applicable under normal provisions ) may be computed every year both in accordance with the regular
provisions of the Income-tax Act, 1961 and in accordance with the provisions of section 115BAC, in order to
determine which is more beneficial and accordingly such person may decide whether to pay tax under
default tax regime under section 115BAC or exercise the option to shift out and pay tax under normal
provisions of the Act for that year.

10.6
 2) Table of Section 115BAB, Section 115BAA
Particulars Section 115BAB Section 115BAA
(1) Applicability Domestic manufacturing Any domestic company
company
(2) Rate of Tax 15% 22%
(3) Effective 17.16% (Surcharge @ 10% 25.168% (Surcharge @
rate of Tax always included) 10% always included)
(including
surcharge &cess)
(4) Applicability The rate of tax (i.e. 17.16%) is The rate of tax (i.e. 25.168%) is
of Notwithstanding Notwithstan- ding anything contained in
concessional anythi the income tax act,1961 but subject to the
rate of tax on ng contained in the income provision of chapter XII, other than
total income tax act, 1961 but subject to section 115BA
of company the provision of chapter XII, and 115BAB
other than section 115BA and
115BAA.
Rate of tax on Such income would be subject to tax at the rates mentioned in the said
income covered sections in Chapter XII. Surcharge@10% would be levied on tax computed
under Chapter on such income. HEC@4% would be levied on the income-tax plus
XII [for surcharge.
example, long- Note: While for Sec. 115A, surcharge in all case will depend upon the Total
term capital Income, in the case of sec. 115BAB & sec. 115BAA it will always be loaded
gains @10% irrespective of the total income.
chargeable to
tax u/s 112 and
112A, short-
term capital
gains
chargeable to
tax u/s 111A]
Rate of tax on The applicable tax rate is The applicable tax rate is 25.168% (i.e.,
other income 25.168% (i.e., tax@22%, plus tax @22% plus surcharge@10% plus
in respect of surcharge @10% plus HEC@4%).
which no HEC@4%), if such income has There is, however, no
specific rate of neither been derived from
tax is provided nor is incidental to
in

10.7
 Chapter XII manufacturing or production restriction regarding claim of any
of an article or thing (For deduction or allowance permissible under
example, income from house the relevant provisions of the Act.
property and income from
other sources).
In respect of such income, no
deduction or allowance in
respect of any expenditure or
allowance shall be allowed in
computing such income.
Even the Standard Deduction
u/s. 24(a) will not be available.
Rate of tax on The applicable rate of tax is 25.168% (i.e., tax @ 22%, plus surcharge
STCG derived @10% plus HEC@4%).
from transfer There is, however, no restriction regarding claiming of deduction or
of a capital allowance in this regard.
asset on which
no
depreciation is
allowable
under the Act
(5) Conditions to (i) The company should be NO time limit specified. Both
be fulfilled for setup and registered on or existing companies
availing the after 01.10.2019. and new companies can avail
concessional benefit.
rate of tax and (ii) It should commencing Need not be a manufacturing
exemption manufacturing or production company
from MAT of an article or thing or
business of generating
electricity on or before
31.03.2024.
(iii) It should not be formed by No Similar condition has been
splitting up or the prescribed.
reconstruction of a business
already in existence (except in
case of an undertaking formed
by reconstruction or revival of
a person of the business of
any undertaking referred to in
section 33B in the
circumstances and within
the period specified
therein)

10.8
 (iv) It does not use any machinery No Similar condition has been
or plant previously used for prescribed.
any purpose [Refer Note at
the end]
(v) It does not use any building No Similar condition has been
previously used as a hotel prescribed.
or a convention Centre
[meanings
assigned in section 80-ID(6)]
(vi) It should not be engaged in No Similar condition has been
any business other than the prescribed.
business of manufacture or
production of any article or
thing and research in relation
to, or distribution of, such
article or thing manufactured
or produce by it.
(6) Common The total income should be computed -
condition for all (i) Without providing for deduction under any of the following
sections for provisions -
availing the Section Provision
concessional 10AA Deduction of profit and gains derived from export of
rate of tax and articles or things or
exemption from services by an assessee, being an entrepreneur
from MAT from his unit in SEZ.
32(1)(iia) Additional depreciation @20% or 35%, as the case
may be, of actual cost of new plant and machinery
acquired and installed by manufacturing and power
sector undertaking. Not applicable only on section
115BA.
32AC Deduction to invest considerable amount in Acquisition
and installation of
new plant and machinery. Applicable only on section
115BA.
32AD Deduction @ 15% of actual cost of new plant and
machinery acquired and installed by as assessee in a
manufacturing enterprise located in the notified
backward areas of Andhra Pradesh, Telengana, Bihar
and West Bengal.
33AB Deduction @ 40% of profits and gains of business of
growing and manufacturing tea, coffee or rubber in
India, to the extent deposited with NABARD in
accordance with scheme approved by the

10.9
 Tea/Coffee/Rubber Board.
33ABA Deduction @20% of the profits of a business of
prospecting for, or extraction or production of,
petroleum or natural gas or both in India, to the extent
deposited with SBI in an approved scheme or
deposited in Site Restoration Account.
35(1)(ii)/ Deduction/weighted deduction for payment any
(iia)/(iii) research to association, company, university etc. for
undertaking scientific research or social science or
statistical research.
35(2AA) Weighted deduction @100% of payment to a National
Laboratory or University or IIT or approved specified
person for scientific research.
35(2AB) Weighted deduction @100% of in-house scientific
research expenditure incurred by a company
engaged in the business of biotechnology or in the
business of manufacture or production of an article
or thing.
35AC Deduction @100% of payment to a PSU or a local
authority or to an association or institution approved
by the National Committee for Carrying- out any
eligible project or scheme. Applicable only on section
115BA.
35AD Investment-linked tax deduction for specified
businesses.
35CCC Weighted deduction @100% of expenditure
incurred on notified agricultural extension
project.
35CCD Weighted deduction @100% of expenditure
incurred by a company on notified skill
development project.
80-IA to Deductions from gross total income under chapter VI-
80RRB A other than the provisions of section 80JJAA or
section 80M.
Note – Therefore only the deduction u/s 80JJAA &
(ii) 80M shall be available.
Without set-off of any loss carried forward from any earlier
assessment year, if such loss is attributable to any of the deductions
listed in (i) above [Such loss would be deemed to have been already
(iii) given effect to and no further deduction for such loss shall be
allowed for any Subsequent year]
By claiming depreciation u/s 32 determined in the prescribed
manner. (i.e., in respect of depreciation of any block of assets
entitled to more than 40% shall be restricted to 40%
10.10
 on the written down value of such block of assets) However,
additional depreciation u/s 32(1)(iia) cannot be claimed.
Note – A domestic company exercising option for availing benefit of
lower tax rate under section 115BAA shall not be allowed to claim
set off of any brought forward loss on account of additional
depreciation for an assessment year for which the option has been
exercised and for any subsequent assessment year.
Since there is no time line within which option under section
115BAA can be exercised, a domestic company having brought
forward losses on account of additional depreciation may, if it so
desires, exercise the option after set of the losses so accumulated.
Additional points relevant in the context of section 115BAA:
1. In the case of a person having a Unit in the IFSC, referred to in
section 80LA(1A), which has exercised option for section
115BAA, deduction u/s 80LA would be allowed subject to
fulfilment of the conditions specified in that section
2. Where there is a depreciation allowance in respect of a block
of asset from an earlier assessment year attributable to
additional depreciation u/s 32(1)(iia), which has not been
given full effect to prior to A.Y. 2021-22 and which is not
allowed to be set-off in the A.Y.2021- 22 due to exercise of
option u/s 115BAA from that year, corresponding adjustment
shall be made to the WDV of such block of assets as on
1.4.2020 in the prescribed manner i.e., the WDV as on 1.4.2020
will be increased by the unabsorbed additional depreciation
not allowed to be set-off.
(7) Failure to On failure to satisfy the On failure to satisfy the conditions
satisfy conditions mentioned in mentioned in point no.(6) above in any
conditions point no. (5) and (6) above P.Y., the option exercised would be invalid
in any P.Y., the option in respect of the assessment year relevant
exercised would be invalid in to that previous year and subsequent
respect of the assessment assessment years;
year relevant to that Consequently, the other provisions of the
previous year and Act would apply to the person as if the
subsequent assessment option had not been exercised for the
years; Consequently, the assessment year relevant to that previous
other provisions of the Act year and subsequent assessment years.
would apply to the
person as if the option
had not been exercised for
the assessment year relevant
to that previous year and
subsequent assessment
years. Note – Where option

10.11
 exercised under section
115BAB is rendered invalid
due to violation of
conditions stipulated in
point no.5 [(iv) to (vi)]
above, such person
may exercise option under
section 115BAA
(8) Applicability of Not applicable Not applicable
MAT
(9) Availability of Since it is a new company, Brought forward MAT
set- off of MAT there would be no brought credit cannot be set-off against income
credit brought forward MAT credit u/s 115BAA.
forward from Note -If a company has b/f MAT credit, it
earlier years. can first exhaust the MAT credit, and
thereafter opt for section 115BAA in a
subsequent previous year.
(10) Adjustments If the assessing officer opines No such requirement to make any
for that the course of business adjustment.
transactions between the company and
with persons any other person having close
having close connection therewith is so
connection arranged that the business
transacted between them
produces more than the
ordinary profits to the
company, he is empowered
to take into account the
amount of profits as may be
reasonably deemed to have
been derived there from,
while computing profits and
gains of such company.
In case the arrangement
referred to above involves a
specified domestic
transaction referred to in
section 92BA, then, the
amount of profits from such
transaction would be
determined by considering
the arm’s length price (ALP).

10.12
 The amount, being profits in
excess of the amount of the
profits determined by the
Assessing Officer, shall be
deemed to be the income of
the person.
The income-tax on the
income so deemed shall be
subject to tax @ 34.32% (i.e.,
tax@30% + surcharge @10%
+ HEC@4%)
Note – The extent of
“specified domestic
transaction” referred to in
section 92BA has been
expended to include within
it’s field, any business
transacted between such
persons with close
connection, where one such
person is a company claiming
u/s 115BAB.
(11) Exercise of option The provisions of this section The provisions of this
by the company would apply if beneficial section would apply if
within the owner would exercised in beneficial owner would
prescribed time the prescribed manner on or exercised in the prescribed manner on or
before the due date u/s before the due date u/s 139(1) for
139(1) for furnishing the first furnishing the return of income for any
return of income for any previous year relevant to A.Y.2020-
previous year relevant to 21 or any following A.Y..
A.Y. 2020-21 or any following Once above option
A.Y. Once above option exercised, it would apply to subsequent
exercised, it would apply to assessment years.
Subsequent assessment Further, once option
years. exercised for any previous year, then it
Further, once option cannot be withdrawn for the same or any
exercised for any previous other previous year.
year, then it cannot be Note – The option can be exercised even in
withdrawn for the same or a later year, but once exercised, then it
any other previous year. cannot be withdrawn.
Note – The option has to
be exercised at the time of
furnishing the first of the
returns of the income for

10.13
 any previous year, if a person
fails to so exercise such
option, then it cannot
exercise the option for any
subsequent previous year.

Domestic Company
Note – In relation to point no. 5(iv) in column (3) of the above table, any machinery or plant which was used
outside India by any other person shall not be regarded as machinery or plant previously used for any
purpose, if all the following conditions are fulfilled, that is: -
(a) Such machinery or plant was not, at any time before the date of installation by the person, used in
India;
(b) Such machinery or plant is imported into India from any other country;
(c) Deduction not granted on account of depreciation in respect of such machinery or plant has been
permitted or is permissible under provisions of the Income-tax Act, 1961 in computing the total income
of any person for any period before to the date of installation of the machinery or plant by the person.
Further, where in the case of a person, any machinery or plant or any part there of previously used for any
purpose is put to use by the company and the total value of the machinery or plant or part so transferred
does not exceed 20% of the total value of machinery or plant used by the company, then, the condition
specified that the company does not use any machinery or plant previously used for any purpose would be
deemed to have been complied with.

“The business of manufacture or production of any article or thing shall not include business of
development of computer software in any form or media, mining, conversion of marble blocks or similar
items into slabs, bottling of gas into cylinder, printing of books or production of cinematograph film, or
any other business as may be notified by the Central Government in this behalf"

Question 1:
ABC Ltd. a manufacturing company is engaged in the manufacturing of leather product since 01.11.2020
in the state of Tamil Nadu. As per the statement of profit and loss account for the year ended 31st March
2024, the company showed profit of `120,00,000 after debiting or crediting the following items:
i. Opening and closing stock for the year were `55 lakhs and `45 lakhs respectively. Opening stock was
overvalued by 10% and closing stock was undervalued by 10%.
ii. ABC Ltd. paid `10 lakhs in foreign currency as sales commission during the year without deducting
tax at source to Mr. John, a citizen of U.S.A. and non-resident, for procuring orders from outside India.
iii. `45,000 was paid in cash to Mr. Raj, an employee of the company at the time of his retirement.
iv. Profit on sale of 2000 shares of M/s. VKL ltd. a listed company `3,50,000. These shares were sold on
07.10.2023 for `250 per share. The highest price quoted on stock exchange as on 31.01.2018 was
`175 per share. The said shares were acquired for `75 per share on 10.06.2015. STT was paid both at
the time of purchase and sale of shares.
10.14
v. STCG derived from transfer of capital asset on which no depreciation is allowable under the Act,
`75,000.
vi. Profit of `6 lakhs on sale of plot of land on 24.07.23 to XYZ Ltd. a domestic company, the entire shares
of which were held by the assessee company. The plot was acquired by ABC Ltd. on 30.09.2022.
vii. Credits to the profit and loss account include a dividend of `50,000 received on September 6th, 2023
from a domestic company.
viii. `20,000 paid for expenses in connection with inauguration of new branch opened for expansion of
business.
ix. `20,000 paid as penalty to the Government for the company's failure in performance of a contract
within stipulated time. There was a delay of 4 months and accordingly the company had to pay a
penalty of `5,000 per menth to the government.
x. An amount of `5lakhs was paid to the manager of the company under voluntary retirement scheme.
xi. Interest of `75,000 paid by bank remittance on deposits made by non-resident buyers of goods
manufactured by the company. The said payments were made outside India without deduction of
tax.

Additional Information:
1. During the F.Y. 2023-24, the company has employed 56 additional employees. All these employees
contribute to a recognised provident fund. 39 out of 56 employees joined on 01.06.2023 on a salary
of `15,000 per month. 14 joined on 01.07.2023 on a salary of `45700 per month. 3 joined on
01.11.2023 on a salary of `22,000 per month. The salaries of 9 employees who joined on 01.06.2023
are being settled by bearer cheques every month. Audit under Section 44AB has been done before
due date.
2. The company has paid through bank `120,000 to National fund for rural development.
3. The company opted for 115BAB for concessional rate of tax and exemption from MAT for the
Assessment year 2024-25. Compute the total income and tax payable for AY. 2024-25 with reasons
for treatment of each item.

Solution:
Computation of Total Income of ABC Ltd. for the Assessment Year 2024-25
Sl.No Particulars Amount Amount
Net profit as per Statement of Profit and Loss 1,20,00,000
Add: Items debited but to be considered separately or to be
disallowed:
(i) Opening stock overvalued by 10% [(55 lakhs/110) x 10] 5,00,000
[Overvaluation of opening stock results in suppression of profit.
Therefore we add it back]
Closing stock undervalued by 10% [(54 lakh/90) x 10] 6,00,000
[Undervaluation of closing stock results in reduction of profit.
Therefore we add it back]

10.15
(ii) Payment to Non-resident without deduction of TDS -
As per section 40(a)(i) of the Income-tax Act, any sum (other than
salary) payable outside India or to a non-resident, which is
chargeable to tax in India in the hands of the recipient, shall not be
allowed to be deducted if it is paid without deduction of tax at
source.
ABC Ltd pays 10 Lakh as sale commission to Mr John, a citizen of
USA and Non-resident for procuring orders outside India. Since this
income neither accrues nor arises in India, it is notchargeable to
tax in India and no TDS obligation arises on such payment.
Therefore the entire amount paid to Mr. John is allowed. Since the
same is already debited, no further treatment
is required.
(iii) Payment made to employee at the time of retirement - 40(A)(3) -
read with Rule 6DD
As per Section 40(A)(3) any payment or aggregate of payments
made to a person on a day by any mode other than Account payee
cheque or Account payee draft or Electronic clearing system in
excess of 10,000 shall be disallowed
Rule 6DD specifies cases and circumstances in which a payment
or aggregate of payments exceeding INR 10,000 may be made to
a person in a day through cash payment- This includes payment
made to an employee in cash upto 50,000 at the time of his
retirement.
[Since the same has been already debited, no treatment is
required]
(viii) Expenses in connection with inauguration of a new branch - Since -
this expense is solely in the nature of business expenditure it shall
be allowed. As it is already debited, no further treatment
is required.
(ix) Penalty for non performance of a contract- The payment of -
penalty of 20,000 to government for non performance of contract
shall be allowed. Since it is already debited,, no further
treatment is required
(x) VRS payment to manager- 1/5th of the amount of payment made 4,00,000
under Voluntary retirement scheme shall be allowed to the
company in the previous year.
[4/5th of 5,00,000] shall be added back and allowed in the
following previous years.

10.16
(xi) Payment of interest to Non-resident without deduction of TDS - 75,000
As per section 40(a)(i) of the Income-tax Act, any sum (other than
salary) payable outside India or to a non-resident, which is
chargeable to tax in India in the hands of the recipient, shall not
be allowed to be deducted if it is paid without deduction of tax at
source. Therefore the entire amount shall be added back.
Disallowance under 40(A)(3)- Salaries paid to 9 employees paid by 1,35,000
bearer cheques are to disallowed assuming that they were already
debited in the profit and loss statement
Less: Amounts credited to the profit and loss account but to be
treated separately
(iv) LTCG on sale of listed shares 3,50,000
(v) STCG on transfer of capital asset 75,000
(vi) Profit on transfer of land to subsidiary company 6,00,000
(vii) Dividend received from domestic company 50,000
Profit and gain from Business or profession : 1,26,35,000
LTCG on sale of listed shares u/s 112A 1,50,000
Full value of consideration : 5,00,000
Less: Cost of Acquisition : 3,50,000
Higher of
1. Cost of Acquisition: 1,50,000
2. Lower of
-Full value of consideration on date of transfer : 5,00,000
-Fair market value on 31.01.2018: 350,000
Short term capital gain on transfer of capital asset on which no 75,000
depreciation is allowed
Profit of 6,00,000 on sale of land to XYZ Ltd, a domestic com- -
pany, the entire shares of which is held by ABC Ltd- shall not be
regarded as transfer as it is covered under exempt transfer u/s 47
Capital Gains 2,25,000
Gross Total Income 128,60,000
Less : Deduction under section 80JJAA 14,49,000
30% of additional employee cost incurred during the previous year
shall be allowed as deduction. [30% of 48,30,000]
1. 30 employees x 15,000 x 10 months = 45,00,000
2. 14 employees who joined on 1.7.22 with a salary of 45,700
shall not be eligible for deduction as the maximum
amount of salary for deduction under this section is 25,000
per employee per month.
3. 3 employees x 22,000 x 5 months =3,30,000
TOTAL INCOME 1,14,11,000

10.17
 Tax liability of ABC Ltd for the AY 2023-24 under section 115BAB
On business income- 17.16% on 1,11,86,000 (1,26,35,000 -
14,49,000) 19,19,518
On Capital gain u/s 112A- 11.44% on 50,000 (After reducing
Threshold Limit of Rs. 100000) 5720
On STCG on transfer of capital asset on which no depreciation is
allowable & Dividend Income- 25.168% on 1,25,000 31,460
Total Tax Liability (Rounded off) 19,56,700

NOTE: No other deduction under chapter VI-A except Section 80JJAA and 80M shall be allowed as the
company has opted for concessional rate of tax under 115BAB. [Therefore 1,20,000 paid to the National
fund for rural development shall not be allowed as deduction]

Question 2:
Regal (P) Limited, incorporated on 15th December, 2019, is engaged in manufacture and sale of ceramic
tiles. It commenced manufacturing in the month of January, 2020. The net profit of the company as per
its statement of profit and loss for the year ended 31st March, 2024 is 220 lakh after debiting/crediting
the following items:
(i) One-time license fee off 22 lakh paid to ABC Ltd (an Indian company) for obtaining franchise on 1st
June, 2023.
(ii) 32,000 paid to B & Co., a goods transport operator, in cash on 31st January, 2023 for carrying
company's products to the warehouse.
(iii) Rent off 60,000 p.m. received from letting out a part of its office premises. Municipal tax paid in
respect of the said part of the building is 8,000. The same has been debited to statement of profit
and loss.
(iv) 2 lakh, being contribution to a scientific research association approved and notified under section
35(1)(ii).
(v) 5 lakh paid to a contractor for repair work at the company's factory. No tax was deducted on such
payment.
(vi) Dividend off 10,000 from Gamma Limited earned on 1,000 equity shares off 10 each purchased at f
100 per share on 10th October, 2018. These shares were sold on 1st March, 2024 at 280 per share.
Gain on transfer of these shares credited to books of accounts.
(vii) Depreciation on tangible fixed assets as per books of account 2.20 lakh.

Additional Information:
(i) Depreciation on tangible fixed assets as per Income-tax Rules 2.60 lakh.
(ii) Company has acquired on 15.11.2023, machinery for 20 lakhs and put the same to use on the same
date. Depreciation on such machinery is not included in point (i) above.
(iii) Fair market value of shares of Gamma Limited as on 31st January, 2018 was 110 per share.
(iv) On account of expansion of its activities, 180 new employees joined during the P.Y. 2023-24, the
details of whom are as follows –
10.18
 No. of Date of Regular/Contractual Total monthly emoluments
employees employment per employee (`)
(i) 51 1.4.2023 Regular 23,000
(ii) 46 1.6.2023 Regular 26,000
(iii) 48 1.8.2023 Contractual 27,000
(iv) 35 1.9.2023 Regular 24,000

The emoluments are paid by use of ECS through a bank account and it may be assumed that the employees
participate in recognised provident fund.
Compute the total income of the company and tax liability for the A.Y. 2024-25, assuming that the
company opts for concessional tax regime under section 115BAB.

Solution:
Computation of total income of Regal (P) Ltd. for the A.Y. 2024-25 u/s 115BAB
Particulars ` `
Income from House Property
Rental income [` 60,000 x 12] 7,20,000
[No deduction is allowable in respect of such income, since the company has opted
for concessional regime under section 115BAB. Hence, deduction for municipal taxes
paid and deduction@30% of net annual value is not allowable]
Profits and gains of business or profession
Net profit as per Statement of profit and loss 2,20,00,000
Add: Income debited to statement of profit and loss, but considered separately or 22,00,000
disallowed Licence fee for obtaining franchise
(Franchise is an intangible asset eligible for depreciation @ 25%. Since one-time
licence fee of 22 lakh paid for obtaining franchise has been debited to statement of
profit and loss, the same has to be added back. Depreciation @ 25% has to be
provided in respect of the intangible asset since it has been used for more than 180
days during the year)
Payment in cash to a goods transport operator
[32,000 paid to B & Co., a goods transport operator, in cash is deductible while
computing business income, as the disallowance under section 40A(3) would be
attracted in case of payment to a transport contractor only when such cash payment
exceeds 35,000. Since it is already debited to statement of profit and loss, no further
adjustment is required]
Municipal taxes in respect of let-out part of office
Premises 8,000
[Municipal taxes paid in respect of office premises, debited to Statement of Profit and
Loss has to be added back to compute business income, since same is to be
considered separately under the head "Income from house property"]
Contribution to approved and notified scientific research association 2,00,000
[Not allowable as deduction since company is opting for section 115BAB]
Amount paid to contractor without deduction of tax at source [5 lakhs x 30%] 1,50,000
[Payment to contractor without deduction of tax at source would attract
disallowance at 30% of the expenditure under section 40(a)(ia)]

10.19
Depreciation on tangible fixed assets
[The amount of 2.20 lakh, being depreciation as per books of account, debited to 2,20,000
statement of profit and loss has to be added back]
2,47,78,000
Less: Depreciation under section 32
Tangible fixed assets 2,60,000
Intangible asset (Franchise)
25% of Plant & Machinery 22,00,000 5,50,000
- Normal Depreciation ( 20,00,000 x
7.5%, since put to use for less than 180
days during the P.Y. 2022-23) 1,50,000
- Additional depreciation [not allowable 9,60,000
since company is opting for section 115BAB
2,38,18,000
Less: Income credited to Statement of Profit and Loss, but taxable under other
heads of income
Rental income from letting out of office premises
(Rental income from letting out a part of the office premises is taxable under"Income 7,20,000
from house property". Therefore, it has to be deducted while calculating business
income, since the income has been credited to statement of profit andloss)

Dividend from Gamma Limited

Dividend credited to statement of profit and loss account to be deducted as it is 10,000
taxable under the "Income from other sources"
Capital gain on sale of shares
Gain on transfer of shares to be taxed under the head "Capital Gains" (1000 x 180 1,80,000 2,29,08,000
(280 - 100))

Capital Gains 2,80,000

Sales consideration (280 x 1000 shares)
Less: Cost of acquisition 1,10,000 1,70,000
Higher of
- Actual cost [1,00,000 (100 x 1000))
- 1,10,000, being lower of
- FMV as on 31.1.2018of 1,10,000
[i110 X 1,000)
- Sale consideration of 2,80,000 [ 280 X 1000)
Income from Other Sources
Dividend from Gamma Limited 10,000
Gross Total Income 2,38,08,000
Less: Deduction under section 80JJAA [allowable even though company opts for
section 115BAIB]
30% of additional employee cost of 1,40,76,000
[23,000 x 51 employees employed on 1.4.2021 x 12 months) [See Note below] 42,22,800
Total Income 1,95,85,200
Tax liability 7,000
Tax payable on LTCG @10% on 70,000 in excess of 1,00,000 2,200

10.20
 Tax payable on dividend @22% on 10,000 1,58,400
Tax payable on rental income@22% on 7,20,000 28,02,780
Tax @ 15% on 1,86,85,200 [i.e., business income of 2,29,08,000 - 42,22,800) 29,70,380
Add: Surcharge@10% 2,97,038
32,67,418
Add: Health and education cess@4% 1,30,697
Tax liability 33,98,115
Tax liability (rounded off) 33,98,120

Note - For the purpose of deduction under section 80JJAA, employees employed on 1.6.2023 and 1.8.2023
do not qualify as additional employees, since their monthly emoluments exceed 25,000. Employees
employed on 1.9.2023 also do not qualify as additional employees for P.Y. 2023-24, since they have been
employed for less than 240 days in the P.Y. 2023-24. Therefore, only the employees employed on 1.4.2023
qualify as additional employees for the purpose of deduction u/s 80JJAA for A.Y. 2024-25.

Question 3:
M/s Diamond Industries Ltd., an Indian company, is engaged in assembling and manufacturing of
automobiles and auto components in Indore, Madhya Pradesh. The net profit after debit/credit of the
following amounts to its Statement of Profit and Loss for the year ended 31-03-2024 was 9,50,00,000.
(i) Depreciation calculated as per useful life of its assets 2,80,00,000.
(ii) Donation of 12,00,000 given to a political party by way of account payee cheque.
(iii) The company has paid 50,00,000 on 15-08-2023 to a research institution recognized and notified by
the Central Government which has as its object, undertaking of scientific research.
(iv) Dividend received from foreign company of 15,00,000 in which it holds 30% of the equity share
capital.
(v) Long-term capital gain of 4,00,000 on sale of equity shares on which STT was paid at the time of
acquisition and sale.
(vi) Interest at 10% p.a. on 4,20,00,000 being amount borrowed from State Bank of India on 01-06- 2023
for purchase of machinery. The interest outstanding as on 31-03-2024 was paid on 01-12- 2024.
(vii) Profit of 8,00,000 on sale of a plot of land to PQR Limited, an Indian company, the entire shares of
which are held by the Diamond Industries Ltd. The plot was acquired on 30th June, 2022.
(viii) Salary of 1,00,00,000 to foreign technicians for installation of machinery at the factory premises was
paid.
(ix) The company sold automobile parts for 22,00,000 to M/s ABC Co Engineers, a sole proprietary
concern, on 01.11.2021. On 01.02.2024 12,00,000 was written off in the books as bad debts. The
sole proprietor died on 01.03.2024 and the company managed to collect 11,00,000 towards full and
final settlement on 30.03.2024. The entire amount collected was shown as bad debts recovered and
credited to Statement of Profit and Loss.

10.21
Additional Information:
1. Depreciation computed as per Income-tax Rules, 1962 is 1,50,00,000 other than on the additions in
assets made during the year.
2. Additions made to the assets were as follows:
(i) Office Building 3,00,00,000 - Put to use from 15-12-2023.
(ii) Computers 25,00,000 - Put to use on 11-05-2023.
(iii) Plant and machinery 5,00,00,000 - Installed and put to use on 01-01-2024.
3. The company declared and distributed dividend for the financial year 2023-24 on 31.5.2024 for
`12,00,000.
Compute the total income of the company and tax liability for the assessment year 2024-25, assuming
company opts for concessional tax regime under section 115 BAA. Total turnover of the company for the
P.Y. 2021-22 was 402 crores.

Solution:
Computation of total income and tax liability of M/s Diamond Industries Ltd. for the A.Y. 2024-25 as
per section 115BAA.
Particulars Amount in `
I. Profits and gains of business and profession
Net profit as per Statement of Profit and Loss 9,50,00,000
Add: Items debited but to be considered separately or to be disallowed
(i) Depreciation as per useful life of assets 2,80,00,000
(ii) Donation to political party 12,00,000
[Since donation to political party is not wholly and exclusively for the purpose
of business or profession, it is not allowable as deduction u/s 37. Since the
amount of contribution is debited to statement of profit and loss, the same
has to be added back]
(iii) Contribution to research institution approved and notified by the Central 50,00,000
Government for scientific research
[As per section 35(1)(ii), 100% deduction is allowed for amount paid to a
research institution undertaking scientific research, if such institution is
approved for this purpose and notified by the Central Government However,
since company is opting for section 115BAA, deduction in respect of this
contribution is not allowed. Since the amount of contribution is debited to
statement of profit and loss, the same is required to be added]
(vi) Interest on borrowing paid to State Bank of India (SBI) [10% x 420 lakhs 35,00,000
x 10/12]
[Interest on borrowing from SBI upto 1.1.2024, being the date when
machinery is installed and put to use, is not allowable as deduction since it has
to be capitalized as part of the cost of the asset. Interest for January, February
and March 2024 is disallowed as per section 43B since it is not paid on or
before the due date of filing return of income i.e., 31.10.2024. Since the entire
interest has been debited to the statement of profit and loss, it has to be added
back while computing business income]

10.22
(viii) Salary for installation of machinery 1,00,00,000
[As per ICDS V, expenses which are specifically attributable for bringing the
fixed asset to its working condition would form part of actual cost. Therefore,
salary to foreign technicians for installation of machinery is a capital
expenditure and not allowable as deduction. Since it has been debited to the
statement of profit and loss, it has to be added back while computing business 4,77,00,000
income]
Less: Items credited but not chargeable to tax or chargeable to tax under 14,27,00,000
other head of income/expenses allowed but not debited
(iv) Dividend received from foreign company 15,00,000
[Dividend received from foreign company is taxable under the head “Income
from other Source”. Since the same has been credited to Statement of Profit
and loss, it has to be deducted while computing business income.
(v) Long-term capital gain on sale of equity shares 4,00,000
[Long-term capital gain on sale of equity shares is taxable under the head
“Capital Gains”. Since the same has been credited to Statement of Profit and
loss, it has to be deducted while computing business income.]
(ix) Bad debt recovered 10,00,000
[The deduction of bad debt allowed u/s 36 was ` 12 lakhs out of the total debt
of ` 22 lakhs; Since the amount not written off as bad debt is ` 10 lakhs(` 22
lakhs - ` 12 lakhs) while the amount recovered in respect of such debtis ` 11
lakhs, only the excess sum of ` 1 lakh would be chargeable to tax as
business income. Since the entire amount of ` 11 lakhs recovered has been
credited to the statement of profit and loss, ` 10 lakhs has to be reduced
while computing business income.]
(vii) Profit on sale of plot of land 8,00,000
[Capital gains arising on sale of plot of land are taxable under the “Capital
Gains”. Since the same has been credited to the statement of profit and loss,
the same has to be reduced while computing business income] 37,00,000
13,90,00,000
Less: Depreciation as per Income-tax Rules, 1962 1,50,00,000
Depreciation on assets acquired during the P.Y.
Office Building
[Purchased and put to use on 15.12.2023 [300 lakhs x 10% x 50%, since it has 15,00,000
been put to use for less than 180 days during the year]
Computer
Purchased and put to use on 11.5.2023 [25 lakhs x 40%, since it has been put 10,00,000
to use for 180 days or more during the year]
Plant & Machinery
On P & M installed and put to use on 1.1.2024 [` 624.5 lakhs (` 500 lakhs +
`100 lakhs of salary for installation + ` 24.5 lakhs, being interest from 46,83,750 2,21,83,750
1.6.2023 to 31.12.2023) x 15% x 50%, since it has been put to use for less than
180 days during the year]
Additional depreciation (since company is opting for section 115BAA, — —
additional depreciation is not allowed)
Profits and gains from business or profession
Capital Gain 11,68,16,250

10.23
 Profit on sale of plot of land —
II. [Short-term capital gains arise on sale of plot of land held for less than 24
months. However, in this case, since the transfer is to a 100% subsidiary
company, which is an Indian company, the same would not constitute a
transfer for levy of capital gains tax as per section 47(iv)]
Long-term capital gain on listed equity shares 4,00,000 4,00,000
Income from Other Sources
Dividend received from a foreign company 15,00,000
Gross Total Income 1187162500
Less: Deduction under Chapter VI-A
Deduction under section 80GGB [Donation to political party is not allowable
as deduction to Diamond Industries Ltd., since the company is opting for
section 115BAA]
Deduction under section 80M allowable, even if, company is opting forsection 12,00,000
115BAA, to the extent of lower of dividend received and dividend distributed.
Therefore, `12,00,000, being the amount of dividend distributed allowable as
deduction
Total Income 1,17,516,250

Computation of tax liability as per section 115BAA

Particulars Amount in `
Tax payable on LTCG @10% u/s 112A on 3,00,000, being the LTCG in excess 30,000
of 1,00,000
Tax payable on dividend @22% u/s 115BAA on 3,00,000 [15,00,000 – 66,000
12,00,000 being the amount deduction available under section 80M]
Tax @ 22% on 11,68,16,250 2,56,99,575
2,57,95,575
Add: Surcharge @ 10% 25,79,557
2,83,75,132
Add: Health and education cess @4% 11,35,005
Tax liability 2,95,10,137
Tax liability (rounded off) 2,95,10,140

Question 4
The following are the particulars relating to two Indian companies, namely, Alpha Ltd. and Beta Ltd.,
which are subject to tax audit u/s 44AB, for A.Y.2024-25 –
Particulars Alpha Ltd. Beta Ltd.
Date of setting up! registration Main 1.4.2019 1.11.2023
object Manufacture of steel Manufacture of leather
Place Vaishali, Bihar Ranipet, Tamil Nadu f
Turnover of P.Y. 2021-22 251 crores -
Turnover of P.Y. 2022-23 401 crores -
Turnover of P.Y .2023-24 270crores 120crores
8 crore 5 crore
10.24
 Value of new plant and machinery installed
and put to use on 1.11.2023 5 crore 3 crore
Gross Total Income of P.Y.2023-24 50 750
No. of new employees employed on the date
of setting up/registration the company
No. of new employees employed as on 750
1.4.2021
Monthly emoluments to 750 employees
employed in the respective companies as
mentioned above, by ECS through bank
account: 20,000 per employee 21,000 per employee
250 employees 25,000 per employee 5,000 per employee
250 employees 28,000 per employee 27,000 per employee
250 employees

From the above details -

(i) Compute the tax liability of Alpha Ltd. and Beta Ltd. for A.Y.2024-25 , assuming that Alpha Ltd. has
not opted for any concessional rates earlier and they both avail the beneficial tax rates under the
special provisions of the Income-tax Act, 1961 in the P.Y. 2023-24 by fulfilling the conditions
specified thereunder. Assume that the gross total income reflects the computation under the special
provisions.
(ii) Would it be beneficial for Alpha Ltd. to opt for beneficial tax rates in P.Y. 2023-24 instead of paying
tax under regular provisions of the Income-tax Act, 1961? Examine.

Solution:
(i) Computation of tax liability of Alpha Ltd. and Beta Ltd. under the special provisions of the
Income-tax Act, 1961
Particulars Alpha Ltd. Beta Ltd.
Gross Total Income 5,00,00,000 3,00,00,000
Less: Deduction u/s 80JJAA
Alpha Ltd - [(20,000 x 12 x 250) + (25,000 x 12 4,05,00,000
X 250)] X 30%
Beta Ltd - [(21,000 x 5 x 250) + ( 25,000 x 5 x 1,72,50,000
250)] X 30%
Total Income 95,00,000 1,27,50,000
Computation of tax liability
Tax@22% on 95,00,000[Aspersection115BAA]
20,90,000
Tax@15% on 1,27,50,000 [As per section 19,12,500
115BAB]
Add: Surcharge@10%
2,09,000 1,91,250

10.25
 22,99,000 21,03,750
Add: Health and Education cess@4% 91,960 84,150
Total tax liability 23,90,960 21,87,900

Notes -
(1) Beta Ltd. is a manufacturing company set up on or after 1.10.2019 but before 31.3.2024, hence, it
would be eligible to opt for section 115BAB, and avail benefit of concessional rate of tax@15% plus
surcharge@ 10% and HEC@4%. Alpha Ltd. is eligible to opt for special provisions under section
115BAA, as per which the rate of tax would be 22% plus surcharge@10% and HEC@4%.
(2) Both Alpha Ltd. and Beta Ltd. are eligible to claim deduction u/s B0J JAA, which is a permissible
Chapter VI-A deduction while computing total income under section 115BAA and 115BAB.
In case of Alpha Ltd, 30% of the additional employee cost of new employees employed in the P.Y.
2021-22, can be claimed as deduction u/s 80JJAA for P.Y.2023-24. Out of 750 employees, 250
employees whose emoluments are 20,000 p.m., 250 employees whose emoluments are 25,000 p.m.
qualify as additional employees and 250 employees whose emoluments exceed 25,000 p.m. do not
qualify as additional employees.
In case of Beta Ltd, 750 new employees are employed on 1.11.2023, being the date of setting up,
for which 30% of additional employee cost can be claimed as deduction. Beta Ltd. is engaged in
manufacture of leather, and hence it would be entitled for deduction u/s 80JJAA in the P.Y. 2023-
24, since the eligible employees have been employed for more than 150 days in that year. Thus,
30% of the additional employee cost of 250 employees whose emoluments are 21,000 p.m. and 250
employees whose emoluments are 25,000 p.m. qualify as additional employees, can be claimed as
deduction u/s 80JJAA for P.Y.2023-24

(ii) Computation of tax liability of Alpha Ltd. as per the regular provisions of the Act
Particulars Alpha Ltd.
Gross Total Income (computed under the special provisions) 5,00,00,000
Less: Additional Depreciation [10% of 8 crore, sincetheplant
and machinery has been put to use for less than 180 days in 80,00,000
the P.Y.2023-24]

Gross Total Income (computed under the regular 4,20,00,000

provisions of the Act)
Less: Deduction u/s 80JJAA
[(20,000 X 12 X 250) + ( 25,000 X 12 X 250)] X 30% 4,05,00,000
Total Income 15,00,000

Computation of tax liability

Tax@25% on 15,00,000 [Since turnover of P.Y.2021-22 is lessthan 3,75,000
400 crore]
10.26
 Add: Surcharge (Not applicable, since total income is less than1 Nil
crore)
3,75,000
Add: Health and Education cess@4% 15,000
Total tax liability 3,90,000

Since the tax liability under the regular provisions of the Act is 3,90,000 vis-a-vis tax liability of
23,90,960 computed under section 115BAA, it is not beneficial for Alpha Ltd. to opt for the special
provisions under section 115BAA for A.Y.2024-25.
Hence , Alpha Ltd. should not opt for the special provisions under section 115BAA for A.Y.2024-25.

Question 5
Mr. Harish, aged 66, running business as a proprietor furnishes the particulars of his income for the year
ended 31.03.2024 as under:
(a) Net Profit of Rs.3,65,500 from the wholesale business of textiles and fabrics arrived at after charge
of following expenses in the Profit & Loss Account :
(i) Personal travelling expenses of 12,750.
(ii) Purchase of furniture for shop on 13.6.2023 of 25,000 but charged in shop expenses
(b) He owns a house with two floors constructed with the financial assistance of HDFC, out of which
ground floor is used by him for self-use and first floor was let out on rent for 8,500 p.m. from April
2023. The municipal tax paid for the whole house was of 2,500 and interest paid on housing loan
for the construction was 52,000. Both the floors of the house are identical.
(c) He deposited insurance premium on the life of self of 12,500, wife 13,500, son and daughter of
28,000, repaid housing loan of 50,000 and paid 55,000 by credit card for health insurance of himself
and his family.
Compute the total income and the amount of tax payable by Mr. Harsh on such income for the Assessment
Year 2024-25 assuming that he has exercised the option to shift out of the default tax regime under section
1158A C.

Solution
Computation of total income and tax payable by Mr. Harish for the A.Y. 2024-25 under the normal
provisions of the Act

Particulars ` `
Income from house property
Self-occupied portion (50%)
Annual Value under section 23(2) Nil
Less: Deduction under section 24(b)
Interest on housing loan [` 52,000 × 50%] 26,000

10.27
 Let-out portion (50%) (26,000)
Income of let out portion being rent of ` 8,500 p.m. receivedfor 12
months1
Gross Annual Value under section 23(1) (` 8,500 × 12) 1,02,000
Less: 50% of municipal taxes paid allowable in respect of
rented out portion (i.e., 50% of ` 2,500) 1,250
Net Annual Value (NAV) 1,00,750

Less: Deduction under section 24

30% of NAV under section 24(a) 30,225

Interest on housing loan under section 24(b) 26,000

44,525
18,525
Profits and gains of business or profession
Net profit as per profit and loss account of wholesalebusiness of
textiles and fabrics 3,65,500
Add: Expenses charged in profit and loss account either not
allowable or to be considered separately -
Personal travelling expenses of proprietor 12,750
Purchase of furniture wrongly debited to shop 25,000
expenses
4,03,250

Less: Depreciation on furniture @10% on ` 25,000

2,500 4,00,750
Gross Total Income 4,19,275
Less: Deduction under Chapter VI-A
Under section 80C - Life insurance premium
12,500
Self
Wife 13,500

Son and daughter 28,000

- Housing loan repaid 50,000

1,04,000

Under section 80D [Medical insurance premium]

Mediclaim insurance premium of ` 55,000 [maximum 50,000
deductible is ` 50,000 where it covers a resident senior 1,54,000
citizen]
2,65,275
Total Income 2,65,280

10.28
Total Income (rounded off) Nil

Tax on total income of ` 2,65,280

(The basic exemption limit for senior citizen is ` 3,00,000 forA.Y.2024-
25 under the normal provisions of the Act)

10.29
 STUDANT NOTES

10.30