DT - Super 75 - CA Amit Mahajan

july last karna h
CA Amit Mahajan
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I 01 01 - 03
BASIC CONCEPTS 4 44 - 51
INCOME OF OTHER PERSON
INCLUDED IN
TOTAL INCOME
ASSESSES
02 04 - 11
RESIDENCE & SCOPE 5 52 - 59
AGGREGATION OF INCOME,
N
OF TOTAL INCOME SETOFF AND CARRY FORWARD
OF LOSSES
3.1 12- 20
SALARIES 6 60 - 64
DEDUCTIONS FROM GROSS
TOTAL INCOME
D 3.2 21 - 24
INCOME FROM HOUSE
PROPERTY 7 65 - 70
ADVANCE TAX, TAX DEDUCTED
AT SOURCE & INTRODUCTION
TO TAX COLLECTION AT
SOURCE
3.3 25 - 26
8
PROFITS & GAINS FROM
E
BUSINESS PROFESSION 71 - 76
PROVISIONS FOR FILING
RETURN OF INCOME AND
3.4
SELF-ASSESSMENT
27 - 41
CAPITAL GAINS
9 77 - 106
COMPUTATION OF TOTAL
3.5
X
INCOME & TAX PAYABLE
42 - 43
INCOME FROM OTHER
SOURCES
CA Amit Mahajan
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1. BASIC CONCEPTS
(ii) Has been in India during the 4 years immediately preceding the previous
Question 1 (Includes concepts of Residence & Scope of Total Income) year for a total period of 365 days or more and has been in India for at
least 60 days during the previous year.
Miss Deepika, a citizen of India, got married to Mr. John of Australia and left Miss Deepak’s stay in India during the P.Y.2023-24 is 142 days
India for the first time on 20.8.2023. She has not visited India again during [30+31+30+31+20] which is less than 182 days. However, her stay in
the P.Y. 2023-24. She has derived the following income for the year ended India during the P.Y.2023-24 exceeds 60 days. Since, she left India for
31-3-2024: the first time, her stay in India during the four previous years prior to
Particulars Rs. P.Y.2023-24 would be more than 365 days. Hence, she is a resident for
(i) Income from sale of centrifuged latex processed from 1,50,000 P.Y.2023-24.
rubber plants grown in Kanyakumari. Further, Miss Deepika would be “Resident and ordinarily resident” in India
(ii) Income from sale of coffee grown and cured in Kodagu, 2,00,000 in during the previous year 2023-24, since her stay in India in the last
Karnataka seven previous years prior to P.Y.2023-24 is more than 730 days and she
(iii) Income from sale of coffee grown, cured, roasted and 5,00,000 must be resident in the preceding ten years.
grounded in Colombo. Sale consideration was received
in Chennai. Computation of business income and agricultural income of Miss Deepika
(iv) Income from sale of tea grown and manufactured in 12,00,000 for A.Y. 2024-25
West Bengal.
(v) Income from sapling and seedling grown in a nursery 2,00,000 Particulars Income Business Agricultural
at Cochin. Basic operations were not carried out by her Income Income
fully agriculture
on land. ` `
You are required to determine the residential status of Miss Deepika and (I) Income from sale of centrifuged 1,50,000 52,500 97,500
compute the business income and agricultural income of Miss. Deepika for the latex processed from rubber
Assessment Year 2024-25. (MTP 7 Marks, Oct’20) plants grown in Kanyakumari
(Apportioned between business
Answer 1 and agricultural income in the
Miss Deepika is said to be resident if she satisfies any one of the following ratio of 35:65 as per Rule 7A
basic conditions: of Income-tax Rules, 1962)
(i) Has been in India during the previous year for a total period of 182 days
or more (or)
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(ii) Income from sale of coffee 2,00,000 50,000 1,50,000 cured, roasted and grounded outside India i.e., in Colombo.
grown and cured in Kodagu, (2) As per Explanation 3 to section 2(1A), income derived from sapling or
Karnataka (Apportioned seedlings grown in a nursery would be deemed to be agricultural income,
between business and whether or not the basic operations were carried out on land. Hence,
agricultural income in the ratio income of Rs.2,00,000 from sapling and seedling grown in a nursery at
of 25:75, as per Rule 7B (1) of Cochin is agricultural income.
the Income-tax Rules,1962)
(iii) Income from sale of coffee 5,00,000 5,00,000 -
grown, cured, roasted and Question 2
grounded in Colombo and
Mr. Charan grows paddy and uses the same for the purpose of manufacturing
received in Chennai
of rice in his own Rice Mill. He furnished the following details for the financial
[See Note 1 below]
year 2023-24:
(iv) Income from sale of tea grown 12,00,000 4,80,000 7,20,000 - Cost of cultivation of 40% of paddy produce is ` 9,00,000 which is sold
and manufactured in West for ` 18,50,000.
Bengal (Apportioned between - Cost of cultivation of balance 60% of paddy is ` 14,40,000 and the
business market value of such paddy is `28,60,000.
and agricultural income in the - Incurred ` 3,60,000 in the manufacturing process of rice on the balance
ratio of 40:60 as per Rule 8 of (60%) paddy.
the Income-tax Rules, 1962) The rice was sold for ` 38,00,000.
(v) Income from sapling and 2,00,000 - 2,00,000 Compute the Business income and Agricultural Income of Mr. Charan for A.Y.
seedling grown in a nursery at 2024-25. (RTP Nov ’18)
Cochin. Basic operations were
not carried out on land [See Answer 2
Note 2 below] Particulars Business Agricultural Income
22,50,000 10,82,500 11,67,500 Income
` ` `
Notes: Sale of Rice
(1) Since MS Deepika is resident and ordinarily resident in India for A.Y. Business income
2024-25, her global income is taxable in India. Entire income from sale Sale Proceeds of Rice 38,00,000
of coffee grown, cured, roasted and grounded in Colombo is taxable as Less: Market Value of paddy (60%) 28,60,000
business income since such income is earned from sale of coffee grown, Less: Manufacturing expenses 3,60,000

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Agricultural Income 5,80,000 of Income from business of ` 40,000, lottery winnings (gross) ` 5,60,000,
Market value of paddy (60%) 28,60,000 income by way of salary (computed) ` 1,20,000 and loss from house property `
Less: Cost of cultivation 14,40,000 14,20,000 30,000. Compute his tax liability and advance tax obligations for A.Y. 2024-25.
Sale of Paddy (MTP 4 Marks, Oct’21)
Agricultural Income
Sale proceeds of paddy produce 18,50,000 Answer 4
(40%) Computation of tax liability and advance tax obligations of Mr. Jay for A.Y.
Less: Cost of cultivation 9,00,000 9,50,000 2024-25
23,70,000 Particulars ` `
Income from salary (computed) 1,20,000
Less: Set-off loss from house property (30,000) 90,000
Question 3 Loss from house property 30,000
Less: Set-off against salary income (30,000) -
Mr. Netram grows paddy on land. He then employs mechanical operations on Income from business 40,000
grain to make it fit for sale in the market, like removing hay and chaff from Lottery winning 5,60,000
the grain, filtering the grain and finally packing the rice in gunny bags. He Total Income 6,90,000
claims that entire income earned by him from sale of rice is agricultural income Tax liability
not liable to income- tax since paddy as grown on land is not fit for sale in its Tax @30% on lottery income 1,68,000
original form (PYP 4 Marks,Jan’21) -
Tax on other income of ` 1,30,000 (Nil, since it
does not
Answer 3
exceed the basic exemption limit of ` 2,50,000)
The income from the process ordinarily employed to render the produce fit to
1,68,000
be taken to the market would be agricultural income under section 2(1A) (b)(ii).
Add: Health and education cess@4% 6,720
The process of making the rice ready from paddy for the market may involve
Total tax liability 1,74,720
manual l operations or mechanical operations, both of which constitute processes
Less: TDS on lottery income under section 194B 1,68,000
ordinarily employed to make the product fit for the market. Accordingly, the
Net tax payable 6,720
entire income earned by Mr. Netram from sale of rice is agricultural income.
Since tax payable for the P.Y. 2023-24 is less
than ` 10,000, Mr. Jay is not liable to pay
Question 4 advance tax.
Mr. Jay is having total income of ` 6,90,000 during the P.Y. 2023-24 consisting

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RESIDENCE & SCOPE OF

TOTAL INCOME
(i) He has been in India during the previous year for a total period of 182
Question 5 days or more, or
(ii) He has been in India during the 4 years immediately preceding the
Miss Kaira, an American national, got married to Mr. Ramesh of India in USA on previous year for a total period of 365 days or more and has been in
1.03.2023 and came to India for the first time on 20.03.2023. She left for USA India for at least 60 days in the previous year.
on 20.9.2023. She returned to India again on 27.03.2024. She has earned the If an individual satisfies any one of the conditions mentioned above, he is a
following income during the financial year 2023-24. resident. If both the above conditions are not satisfied, the individual is a non-
resident. Therefore, the residential status of Miss Kaira, an American National,
Sr. No. Particulars Amount (Rs.) for A.Y.2024-25 has to be determined on the basis of her stay in India
1. Dividend from American company, received in 20,000 during the previous year relevant to A.Y. 2024-25 i.e. P.Y.2023-24 and in the
America preceding four assessment years. Her stay in India during the previous year
2. Profits from a profession in Delhi, but managed 50,000 2023-24 and in the preceding four years are as under:
directly from America P.Y. 2023-24
3. Long term capital gain on sale of shares of an 60,000 01.04.2023 to 20.09.2023 - 173 days
Indian company, received in India 27.03.2024 to 31.03.2024 - 5 days
4. Interest on savings bank deposit in SBI, Delhi 17,000 Total 178 days
5. Agricultural income from a land situated in Tamilnadu 55,000
6. Rent (computed) from property in America deposit 1,00,000 Four preceding previous years
in a Bank there, later on remitted to India P.Y.2022-23 [1.4.2022 to 31.3.2023] - 12 days
7. Cash gift received from a friend on her birthday on 51,000 P.Y.2021-22 [1.4.2021 to 31.3.2022] - Nil
16.8.2020
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
8. Past foreign untaxed income brought to India 70,000 P.Y.2019-20 [1.4.2019- to 31.3.2020] - Nil
Determiner her residential status and compute the total income chargeable to
Total 12 days
tax for the Assessment Year 2024-25.
(MTP 10 Marks, Aug’18)
The total stay of the assesse during the previous year in India was less than
182 days and during the four years preceding this year was for 12 days.
Answer 5
Therefore, due to non-fulfillment of any of the two conditions for a resident, she
Under section 6(1), an individual is said to be resident in India in any previous
would be treated as non-resident for the Assessment Year 2024-25.
year, if he satisfies any one of the following conditions:

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from property in America by Mrs. Kaira, a non-resident, would not be
Computation of total income of Mrs. Kaira for the A.Y. 2024-25 taxable in India, since both the accrual and receipt are outside India.
S. Particulars (Non-Resident)
No. (Rs.) (2) Profits from profession in Delhi, long term capital gains and interest on
1. Dividend from American company, received in - saving account with SBI are taxable in the hands of Mrs. Kaira, since such
America (Note 1) incomes are deemed to accrue or arise in India during the P.Y. 2023-24.
2. Profit from profession in Delhi, but managed 50,000
directly from America (Note 2) Question 6
3. Long-term capital gain on sale of shares of an 60,000
Indian company (Note 2) Mr. Sarthak, an individual and Indian citizen living in Dubai, since year 2006
4. Interest on savings account with SBI (Note 2) 17,000 and never came to India for a single day since then, earned the following
5. Agricultural income from land in Tamilnadu - incomes during previous year 2023-24:
[Exempt under section 10(1)] Particulars Amount (in `)
6. Rent (computed) from property in America - (i) Income accrued and arisen in Dubai but he is not liable 20,00,000
deposited in a Bank at America, later on remitted to tax in Dubai
to India (Note1)
(ii) Income accrued and arisen in India 5,00,000
7. Cash gift received from a friend on Mrs. Kaira 51,000
(iii) Income deemed to accrue and arise in India 8,00,000
birthday on 16.8.2023 Note: As per section 56(2)
(x), cash gifts received from a non-relative would (iv) Income arising in Dubai from a profession set up in India 10,00,000
be taxable, if the amount exceeds Rs. 50,000 in I. Determine the residential status of Mr. Sarthak and taxable income for
aggregate during the previous year. the previous year 2023- 24 (assuming no other income arise during the
8. Past foreign untaxed income brought to India [Not - previous year).
taxable, since it does not represent income of II. What would be your answer if income arising in Dubai from a profession
the P.Y.2023-24]. set up in India is ` 2 lakhs instead of ` 10 lakhs?
Total Income 1,78,000 III. What would be your answer, if Mr. Sarthak is not an Indian citizen but his
parents were born in India?
Notes: (MTP 6 Marks April ’23, PYP 6 Marks Nov ’22)
(1) As per section 5(1), global income is taxable, in case of a resident.
However, as per section 5(2), only the following incomes are chargeable Answer 6
to tax, in case of a non-resident: I. Mr. Sarthak is an Indian citizen living in Dubai since 2005 who never came
(i) Income received or deemed to be received in India; and to India for a single day since then, he would not be a resident in India for
(ii) Income accruing or arising or deemed to accrue or arise in India. the P.Y. 2023-24 on the basis of number of days of his stay in India as per
Therefore, dividend from American company received in America, rent section 6(1).

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However, since he is an Indian citizen ` having total income (excluding A.Y. 2024-25, if he is
income from foreign sources) of ` 23 lakhs, which exceeds the threshold (a) Resident and ordinarily resident
of ` 15 lakhs during the previous year; and ` not liable to tax in Dubai, (b) Non-resident
he would be deemed resident in India for the P.Y. 2023-24 by virtue of (RTP May ’22, PYP 10 Marks May ’18)
section 6(1A). A deemed resident is always a resident but not ordinarily Particulars Amount (`)
resident in India (RNOR). (i) Capital gain on sale of land in Jaipur to Mr. Ramesh, 1,50,000
Computation of Total Income for A.Y.2024-25 a non- resident, outside India. The consideration is also
Particulars ` received outside India in foreign currency
(i) Income accrued and arisen in Dubai (not taxable in case - (ii) Rent from property in Delhi, let out to a branch of a 1,20,000
of an RNOR) foreign company. The rent agreement is entered outside
(ii) Income accrued and arisen in India (taxable) 5,00,000 India. Monthly rent is also received outside India
(iii) Income deemed to accrue or arise in India (taxable) 8,00,000 (iii) Agricultural income from a land situated in Nepal, 55,000
received in Nepal
(iv) Income arising in Dubai from a profession set up in India 10,00,000
(iv) Interest on savings bank deposit in UCO Bank, Delhi 18,000
would be taxable in case of RNOR
(v) Income earned from business in London which is 60,000
Total income 23,00,000
controlled from Delhi (` 35,000 is received in India)
II. If income arising in Dubai from a profession set up in India is ` 2 lakhs
(vi) Gift received from his daughter on his birthday 55,000
instead of ` 10 lakhs, his total income (excluding income from foreign
(vii) Past foreign taxed income brought to India 37,000
sources) would be only ` 15 lakhs. Since the same does not exceed the
(viii) Fees for technical services rendered to Shine, Ltd., 12,000
threshold limit of ` 15 lakhs, he would not be deemed resident.
a foreign company, for business outside India and
Accordingly, he would be non-resident in India for the P.Y. 2023-24 and
received also outside India
hence, his total income would be only ` 13 lakhs (aggregate of (ii) and
(iii) above i.e., ` 5 lakhs + ` 8 lakhs).
Answer 7
Particulars Resident Non-
III. If Mr. Sarthak is not an Indian citizen and his parents were born in India,
and resident
he would be person of Indian origin. In such case, the provisions relating
ordinarily (`)
to deemed resident would not apply to him.
resident (`)
Capital gain on sale of land in Jaipur to Mr. 1,50,000 1,50,000
Ramesh, a non-resident, outside India and received
Question 7
outside India
From the following particulars of income furnished by Mr. Ashutosh, aged 65
years, pertaining to year ended 31.03.2024, compute the total income for the

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Rent from property in Delhi, received outside India 84,000 84,000 upto ` 50,000 from saving account with, inter alia, a bank is allowable
[` 1,20,000 –30% of ` 1,20,000 under section as deduction under section 80TTB while in case of a non-resident, interest
24(a)] upto ` 10,000 from saving account with, inter alia, a bank is allowable as
Agricultural income from a land situated in Nepal, 55,000 - deduction under section 80TTA.
received in Nepal
Interest on savings bank deposit in UCO Bank, 18,000 18,000 Question 8
Delhi
Income earned from business in London which is 60,000 35,000 Mr. Rajesh Sharma (aged 62 years), an Indian citizen, travelled frequently
controlled from Delhi out of India for his business trip as well as for his outings. He left India from
Gift received from daughter (Not taxable, since - Delhi airport on 29th May 2023 as stamped in the passport and returned
on 27th April 2024. He has been in India for less than 365 days during the
daughter is a relative)
4 years immediately preceding the previous year. Determine his residential
Past foreign taxed income brought to India (Not -
status and his total income for the assessment year 2024-25 from the following
taxable)
information:
Fees for technical services rendered to Shine, Ltd., 12,000 (1) Short term capital gain on the sale of shares of Tilt India Ltd., a listed
a foreign company, for business outside India and Indian company, amounting to ` 58,000. The sale proceeds were credited
received also outside India to his bank account in Singapore.
Gross Total Income 3,79,000 2,87,000 (2) Dividend amounting to ` 48,000 received from Treat Ltd., a Singapore
Less: Deduction under section 80TTB/80TTA based company, which was transferred to his bank account in Singapore.
[Interest on savings bank account subject to a 18,000 10,000 He had borrowed money from Mr. Abhay, a non-resident Indian, for the
maximum of ` 50,000/` 10,000] above-mentioned investment on 2nd April, 2023. Interest on the borrowed
Total Income 3,61,000 2,77,000 money for the previous year 2023-24 amounted to ` 5,800.
Notes (3) Interest on fixed deposit with Punjab National Bank, Delhi amounting to `
1. In case of a resident and ordinarily resident, global income is taxable as 9,500 was credited to his saving bank account. (RTP May ’20)
per section 5(1). However, as per section 5(2), in case of a non-resident,
only the following incomes are chargeable to tax: Answer 8
(i) Income received or deemed to be received in India; and Determination of residential status An individual is said to be resident in India
Income accruing or arising or deemed to accrue or arise in India. in any previous year, if he satisfies any one of the following conditions:
Therefore, agricultural income from a land situated in Nepal, income (i) He has been in India during the previous year for a total period of 182
earned from business in London which is controlled from Delhi, received days or more, or
outside India and fees for technical services from a non-resident for (ii) He has been in India during the 4 years immediately preceding the
business outside India is not taxable in case of non-resident. previous year for a total period of 365 days or more and has been in
2. In case of a senior citizen, being a resident aged 60 years or more, interest India for at least 60 days in the previous year.

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If the individual satisfies any one of the conditions mentioned above, he is In May 2022, she got married to Mr. Ram, an American citizen. Mr. Ram came
a resident. If both the above conditions are not satisfied, the individual is a to India for the first time on 1st May 2021 when he joined an MNC in India.
non-resident. Mr. Rajesh Sharma, an Indian citizen, has not satisfied either He got a promotion and was transferred to Dubai. He left for Dubai on 1st
of the basic conditions for being a resident, since he was in India for only October, 2022. Mrs. Asha accompanied him to Dubai. She started providing
59 days during the previous year 2023-24. Hence, he is non-resident in consultancy there. Both of them came to India for 3 months from June to August
India for A.Y.2024-25. in 2023 to spend time with Asha’s family. Following incomes were earned by
Computation of total income of Mr. Rajesh Sharma for A.Y.2024-25 Mr. Ram and Mrs. Asha during the P.Y. 2023-24.
Particulars Amount (`)
(1) Short-term capital gain on sale of shares of an Indian 58,000 Income of Mr. Ram `
listed company is chargeable to tax in the hands of 1 Salary from company in Dubai (not liable to tax in Dubai) 13,00,000
Mr. Rajesh Sharma, since it has accrued and arisen in 2 Long term capital gain on sale of shares of an Indian 2,50,000
India even though the sale proceeds were credited to company
bank account in Singapore. 3 Income from house property in Delhi (computed) 4,60,000
(2) Dividend of ` 48,000 received from Singapore based Nil 4 Dividend from shares of an Indian company 65,000
company transferred to his bank account in Singapore
is not taxable in the hands of the non-resident since the
Income of Mrs. Asha `
income has neither accrued or arisen in India nor has it
been received in India. Since dividend is not taxable in 1 Profit from consultancy profession in Dubai which was set up 12,00,000
India, interest paid for investment is not allowable as in India (not liable to tax in Dubai)
deduction. 2 Profit from consultancy profession in India 3,00,000
(3) Interest on fixed deposit with Punjab National Bank, 9,500 3 Long term capital gain on sale of shares of British company, 60,000
Delhi credited to his savings bank account is taxable credited to her Dubai bank account
in the hands of Mr. Rajesh Sharma as Income from 4 Short term capital loss on sale of listed shares of an Indian (42,000)
other sources, since it has accrued and arisen in India company
and is also received in India. He would not be eligible Determine the residential status of Mr. Ram and Mrs. Asha and their total
for deduction under section 80TTB, since he is a non-
income for the A.Y. 2024-25 ignoring the provisions of section 115BAC. (RTP
resident.
Nov ‘23)
Total Income 67,500
Answer 9
Question 9 Determination of residential status of Mr. Ram Mr. Ram is an American citizen
who comes on a visit to India during the P.Y. 2023-24 for 3 months. He has
Miss Asha is an Indian citizen. She is a lawyer by profession. She started her been in India from 1st May 2021 to 1st October 2022. Since Mr. Ram has
consultancy profession in India in 2020 with the name “New way associates”. been in India for a period of more than 60 days (i.e., 92 days) during the P.Y.

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2023-24 and for a period of more than 365 days (i.e., 519 days) during the 4 Computation of total Income other than the income from foreign sources
immediately preceding previous years, he satisfies one of the basic conditions of Mrs. Asha
and he is a resident for the A.Y. 2024-25. Particulars of income (`)
Since his period of stay in India during the preceding 7 previous years is less 1 Profit from consultancy profession in Dubai which was set 12,00,000
than 730 days (i.e., 519 days), he is a resident but not-ordinarily resident in up in India [Includible]
India during the A.Y. 2024-25. 2 Profit from consultancy profession in India [Includible] 3,00,000
Since Mr. Ram is a resident but not-ordinarily resident, income which accrues or 3 Long term capital gain on sale of shares of British company -
arises in India, deemed to accrue or arises in India, received in India, deemed [Not includible, since it is a foreign source income]
to be received in India and income derived from business controlled in or a 4 Short term capital loss on sale of listed shares of an Indian -
profession set up in India is chargeable to tax in India in his hands. company [It accrues and arises in India. However, short
term capital loss is not allowed to be set off from business
Computation of total Income of Mr. Ram for the A.Y. 2024-25 or profession income, hence, not includible]
Particulars of income (`) 15,00,000
1 Salary from company in Dubai [Not taxable, since it accrues - Since, total income other than the income from foreign sources of Mrs. Asha
and arises outside India] does not exceed ` 15 lakhs, she would not be a deemed resident. Hence, Mrs.
2 Long term capital gain on sale of shares of an Indian 2,50,000 Asha is a non- resident during the A.Y. 2024-25.
company [Taxable, since it accrues and arises in India] Since Mrs. Asha is a non-resident, income which accrues or arises in India,
3 Income from house property in Delhi [Taxable, since it 4,60,000 deemed to accrue or arises in India, received in India and deemed to be
accrues and arises in India] received in India is chargeable to tax in India in her hands.
4 Dividend from shares of an Indian company [Taxable, since 65,000
it accrues and arises in India] Particulars of income (`)
7,75,000 1 Profit from consultancy profession in Dubai which was set up -
in India [Not taxable]
Determination of residential status of Mrs. Asha Mrs. Asha is an Indian citizen 2 Profit from consultancy profession in India [Taxable, since it 3,00,000
who comes on a visit to India during the P.Y. 2023 -24 for 3 months i.e., 92 accrues and arises in India]
days. Since she does not satisfy any of the basic conditions of staying in India 3 Long term capital gain on sale of shares of British company -
for 182 days or 120 days during the P.Y. 2023-24, she is not a resident in [Not taxable, since it accrues and arises outside India]
India as per section 6(1). 4 Short term capital loss on sale of listed shares of an Indian -
Mrs. Asha would be a deemed resident under section 6(1A) if her total income company [Since, it accrues and arises in India, it is allowed
other than the income from foreign sources exceeds ` 15 lakhs during the P.Y. to be carry forward to A.Y. 2025-26]
2023-24 as she is an Indian citizen and is not liable to tax in Dubai. 3,00,000

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Residential status for P.Y.2022-23 (A.Y.2023-24) – Resident, since he has
Question 10 stayed in India for ≥ 60 days (125 days) in the said P.Y. and ≥ 365 days (
500 days, being 125 days x 4) in the four immediately preceding PYs.
Mr. Prashant (aged 35 years) is an Australian citizen who is settled in Australia
and visits India for 125 days in every financial year since past 11 years. Residential status for P.Y.2021-22 (A.Y.2022-23) – Resident, since he has
During the F.Y. 2023-24, he visited India for a total period of 200 days. The stayed in India for ≥ 60 days (125 days) in the said P.Y. and ≥ 365 days (
purpose of his visit was to meet his family members who are settled in India 500 days, being 125 days x 4) in the four immediately preceding PYs.
and also for managing his family members who are settled in India and also
for managing his business in Sri Lanka through his office in Chennai, India.
Therefore, he satisfies the first condition of being resident in India in at least 2
During the P.Y. 2023-24, he has the following incomes:
out of 10 previous years preceding the relevant P.Y.
(A) Income from business in Australia controlled form Australia - ` 20,00,000
(B) Income from business in Sri Lanka controlled form Chennai - `16,00,000
(C) Short-term capital gains on sale of shares of an Indian company received Second condition
in Australia - `50,000. The shares were sold online from Australia. Stay in India in 7 immediately preceding PYs = 7 x 125 days = 875 days >
(D) Income from agricultural land in Australia, received there and then brought 730 days Since both the conditions are satisfied, he is Resident and Ordinarily
to India - ` 2,00,000 Resident (ROR). In case of ROR, global income would be taxable in India.
Find out the residential status of Mr. Prashant and compute his total income for Accordingly, his total income for A.Y. 2024-25 would as follows:
Assessment Year 2024-25. (PYP 4 Marks May ‘23)
Computation of Total Income of Mr. Prashant for A.Y.2024-25
Answer 10 Particulars `
Determination of Residential Status of Mr. Prashant1 (i) Income from business in Australia 20,00,000
Mr. Prashant is an Australian citizen who comes on a visit to India for 125 (ii) Income from business in Sri Lanka 16,00,000
days in every financial year since the past 11 years. During the P.Y. 2022-23, (iii) Short-term capital gains on sale of shares of an Indian 50,000
he visited India for 200 days. Since he stayed in India for 182 days or more company
during the P.Y. 2023-24, he would be resident in India for the A.Y. 2024-25. (iv) Income from agricultural land in Australia [would not be 2,00,000
exempt, since it is not from an agricultural land in India]
An individual is said to be “Resident and ordinarily resident [ROR]” in India in Total income 38,50,000
any previous year, if he satisfies both the following conditions:
• He is a resident in at least 2 out of 10 previous years preceding the Notes - (1) Alternative manner of determination of whether Mr. Prashant is
relevant previous year; and ROR/ RNOR – “An individual is said to be “Resident but not ordinarily resident
• His stay in India in the last 7 years preceding the relevant previous year [RNOR]” in India in any previous year, if he satisfies any one of the following
is 730 days or more [Refer Note 1 below for alternate presentation] conditions:
First condition

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• He is a non-resident in at least 9 out of 10 previous years preceding the immediately preceding current P.Y.. In such case, his total income would be
relevant previous year; or same as determined in the above solution.
• His stay in India in the last 7 years preceding the relevant previous year • In case if it assumed that he is a PIO whose total income (other than
is 729 days or less. income from foreign sources) for the P.Y.2021-22 and P.Y.2022-23 ≤ ` 15
• Mr. Prashant does not satisfy either of the above conditions on account lakhs, he would be non-resident for P.Y.2021-22 and P.Y.2022-23, since
of being resident in more than 1 year out of 10 years and stay in India his stay in India is for less than 182 days in those years. In such a case, for
for 875 days in the 7 years preceding the P.Y.2023-24. Hence, he is a P.Y.2023-24, he would be RNOR, since he would be non-resident in all the
Resident and Ordinarily Resident in the P.Y.2023-24. 10 years immediately preceding the current P.Y.
• (2) In the absence of information relating to whether Mr. Prashant is a • In such case, the computation of total income for A.Y.2024-25 would be as
person of Indian origin, the above solution has been worked out assuming follows –
that Mr. Prashant is not a person of Indian origin. • Computation of Total Income of Mr. Prashant for A.Y.2024-25
• However, alternate assumption that Mr. Prashant is a person of Indian
origin is also possible since the purpose of his visit was to meet his family Particulars `
members who are settled in India. Accordingly, if it is assumed that he is (i) Income from business in Australia controlled from Australia -
a person of Indian origin, then, for determining whether he is resident in (not taxable in case of RNOR, since it accrues and arises
P.Y.2021-22 and P.Y.2022-23, information relating to his total income outside India)
(excluding income from foreign sources) for the said P.Y.s is required for (ii) Income from business in Sri Lanka (taxable since it is 16,00,000
ascertaining whether the condition of 120 days in the relevant P.Y. + controlled from India)
365 days in the 4 immediately preceding P.Ys would be attracted in his (iii) Short-term capital gains on sale of shares of an Indian 50,000
case. This information is not given in the question. Accordingly, assumptions company (taxable, irrespective of residential status)
would have to be made relating to the applicability of this condition. (iv) Income from agricultural land in Australia [would not be -
• It may be noted that the condition of 120 days in the P.Y. + 365 days in taxable in case of RNOR since it accrues and arises outside
the four immediately preceding PYs for a PIO whose total income (other India]
than income from foreign sources) exceed ` 15 lakhs for determination Total Income 16,50,000
of residential status came into effect only from A.Y.2022-23. Therefore,
in the previous years prior to that, he would be non-resident irrespective
of his total income since the number of days of his stay < 182 days each
year.
• In case if it is assumed that his total income (other than income from foreign
sources) for the P.Y.2021-22 and P.Y.2022-23 > ` 15 lakhs, he would be
ROR since he would be resident in 2 out of 10 years immediately preceding
the current P.Y. and he stayed for 730 days or more in 7 previous years

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3.1. SALARIES
not opted for the provisions of section 115BAC. (New SM) (Same concept
Question 11 different figures & fewer adjustments
MTP 7 Marks Oct’19, PYP 6 Marks, Nov ’18)
Mr. Balaji, employed as Production Manager in Beta Ltd., furnishes you
thefollowing information for the year ended 31.03.2024: Answer 11
(i) Basic salary upto 31.10.2023 Rs.50,000p.m. Computation of Taxable Salary of Mr. Balaji for A.Y. 2024-25
Basic salary from 01.11.2023 Rs. 60,000 p.m. Particulars Rs.
Note: Salary is due and paid on the last day of every month. Basic salary [(`50,000 × 7) + (`60,000 × 5)] 6,50,000
(ii) Dearness allowance @ 40% of basic salary. Dearness Allowance (40% of basic salary) 2,60,000
(iii) Bonus equal to one month salary. Paid in October 2023 on basic salary
Bonus (` 50,000 + 40% of Rs. 50,000) 70,000
plus dearness allowance applicable for that month.
(See Note 1)
(iv) Contribution of employer to recognized provident fund account of the
employee @16% of basic salary. Employers contribution to recognised provident fund in excessof 26,000
(v) Professional tax paid Rs. 2,500 of which Rs. 2,000 was paid by the 12% of salary = 4% of Rs.6,50,000 (See Note 2)
employer. Professional tax paid by employer 2,000
(vi) Facility of laptop and computer was provided to Balaji for both official Perquisite of Motor Car (` 2,400 for 5 months) (See Note 4) 12,000
and personal use. Cost of laptop Rs. 45,000 and computer Rs. 35,000 Gross Salary 10,20,000
were acquired by the company on 01.12.2023. Less: Deduction under section 16
(vii) Motor car owned by the employer (cubic capacity of engine exceeds Standard deduction u/s 16(ia) Rs. 50,000
1.60 litres) provided to the employee from 01.11.2023 meant for both Professional tax u/s 16(iii) (See Note 6) Rs.2,500 52,500
official and personal use. Repair and running expenses of Rs. 45,000 Taxable Salary 9,67,500
from 01.11.2023 to31.03.2024, were fully met by the employer. The
Notes:
motor car was self-driven bythe employee.
1. Since bonus was paid in the month of October, the basic salary of Rs.
(viii) Leave travel concession given to employee, his wife and three children
50,000 for the month of October is considered for its calculation.
(one daughter aged 7 and twin sons aged 3). Cost of air tickets
(economy class) 2. It is assumed that dearness allowance does not form part of salary for
(i) reimbursed by the employer Rs. 30,000 for adults and Rs. 45,000 for three computing retirement benefits.
children. Balaji is eligible for availing exemption this year to the extent 3. As per Rule 3(7)(vii), facility of use of laptop and computer is a tax free
it is permissible in law. Compute the salary income chargeable to tax in perquisite, whether used for official or personal purpose or both.
the hands of Mr. Balaji for theassessment year 2024-25 assuming he has

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4. As per the provisions of Rule 3(2), in case a motor car (engine cubic Particulars `
capacity exceeding 1.60 liters) owned by the employer is provided to Basic salary 6,20,000
the employee without chauffeur for personal as well as office use, the Dearness allowance 4,20,000
value of perquisite shall be Rs. 2,400 per month. The car was provided
Commission 75,000
to the employee from 01.11.2023, therefore the perquisite value has
Entertainment allowance 9,000
been calculated for 5 months.
Medical expenses reimbursed by the employer 18,000
5. Mr. Balaji can avail exemption under section 10(5) on the entire amount
Profession tax (of this, 50% paid by employer) 4,000
of Rs. 75,000 reimbursed by the employer towards Leave Travel
Health insurance premium paid by employer 8,000
Concession since the same was availed for himself, his wife and three
Gift voucher given by employer on her birthday 10,000
children and the journey was undertaken by economy class airfare.
Life insurance premium of Akansha paid by employer 26,000
The restriction imposed for two children is not applicable in case of
Laptop provided for use at home. Actual cost of Laptop to 45,000
multiple births which take place after the first child. It is assumed that
employer Children of the assessee are also using the Laptop
the Leave Travel Concession was availed for journey within India. He is
at home]
eligible to claim benefit of exemption u/s 10(5) since he has exercised
Employer company owns a Maruti Suzuki Swift car, which was
the option of shifting out of the default tax regime provided under provided to the assessee, both for official and personal use.
section 115BAC(1A). Driver was also provided. (Engine cubic capacity more than 1.6
6. As per section 17(2)(iv), a “perquisite” includes any sum paid by the litres). All expenses are met by the employer
employer in respect of any obligation which, but for such payment, Annual credit card fees paid by employer [Credit card is not 7,000
would have been payable by the assessee. Therefore, professional exclusively used for official purposes; details of usage are not
tax of Rs. 2,000paid by the employer is taxable as a perquisite in the available]
hands of Mr. Balaji. Asper section 16(iii), a deduction from the salary
is provided on account of taxon employment You are required to compute the income chargeable under the head Salariesfor
i.e. professional tax paid during the year. the assessment year 2024-25 if she pays tax under default tax regime. (New
Therefore, in the present case, the professional tax paid by the SM, MTP 6 Marks Sep’22, RTP Nov ’20)
employer on behalf of the employee Rs. 2,000 is first included in
the salary and deductionof the entire professional tax of Rs.2,500 is Answer 12
provided from salary. Computation of income chargeable under the head “Salaries”of Ms. Akansha
for A.Y.2024-25 under default tax regime
Question 12
Particulars `
Ms. Akansha, a salaried employee, furnishes the following details for the Basic Salary 6,20,000
financial year 2023-24:

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Dearness allowance 4,20,000 Note:

Commission 75,000 As per Rule 3(7)(iv), the value of any gift or voucher received by the employee
Entertainment allowance 9,000 or by member of his household on ceremonial occasions or otherwise from
Medical expenses reimbursed by the employer is fully taxable 18,000 the employer shall be determined as the sum equal to the amount of such
Professional tax paid by the employer is a taxable perquisite 2,000 gift. However, the value of any gift or voucher received bythe employee
as per section 17(2)(iv), since it is an obligation of the employee or by member of his household below ` 5,000 in aggregate during the
which is paid by the employer previous year would be exempt as per the proviso to Rule 3(7)(iv). In this
Health insurance premium of ` 8,000 paid by the employer is Nil case, the gift voucher of ` 10,000 was received by Ms. Akansha from her
an exempt perquisite [Clause (iii) of proviso to section 17(2)] employer on the occasion of her birthday.
Gift voucher given by employer on Ms. Akansha birthday 10,000 Since the value of the gift voucher exceeds the limit of ` 5,000, the entire
(entire amount is taxable since the perquisite value exceeds ` amount of ` 10,000 is liable to tax as perquisite. The above solution has
5,000) as per Rule 3(7)(iv) been worked out accordingly.
Life insurance premium of Ms. Akansha paid by employer is a 26,000 An alternate view possible is that only the sum in excess of ` 5,000 is taxable
taxable perquisite as per section 17(2)(v) in view of the language of Circular No.15/2001 dated 12.12.2001, which
Laptop provided for use at home is an exempt perquisite as Nil states that such gifts upto ` 5,000 in the aggregate per annum would be
per Rule 3(7)(vii) exempt, beyond which it would be taxed as a perquisite. As per this view,the
Provision of motor car with driver (engine cubic capacity more 39,600 value of perquisite would be ` 5,000. Accordingly, the gross salary andnet
than 1.6 litres) owned by employer to employee, the perquisite salary would be ` 12,21,600 and ` 11,71,600, respectively.
value would be ` 39,600 [` (2,400+ 900)×12] as per Rule
3(2)
Annual credit card fees paid by employer is a taxable perquisite 7,000 Question 13
as per Rule 3(7)(v) since the credit card is not exclusively used
for official purposes and details of usage are not available Mr. Samaksh is a Marketing Manager in Smile Ltd. From the following information,
Gross Salary 12,26,600 you are required to compute his income chargeable under the head Salary for
Less: Deductions under section 16 assessment year 2024-25.
- Standard Deduction as per section 16(ia) 50,000 (i) Basic salary is ` 70,000 per month.
- Entertainment allowance (deductionnot allowable since Ms. Nil (ii) Dearness allowance @ 40% of basic salary
Akansha is not a Government employee) (iii) He is provided health insurance scheme approved by IRDA for which
- Professional tax paid allowable as deduction as per 4000 ` 20,000 incurred by Smile Ltd.
section 16(iii) (iv) Received ` 10,000 as gift voucher on the occasion of his marriage
Income chargeable under the head “Salaries” 11,72,600 anniversary from Smile Ltd.
(v) Smile Ltd. allotted 800 sweat equity shares in August 2023. The shares

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were allotted at ` 450 per share and the fair market value on the date of Gift voucher on the occasion of his marriage 10,000
exercising the option by Mr. Samaksh was ` 700 per share. anniversary [As per Rule 3(7)(iv), the value of any
(vi) He was provided with furniture during September 2019. The furniture is
gift or voucher or token in lieu of gift received by the
used at his residence for personal purpose. The actual cost of the furniture
employee or by member of his household exceeding
was ` 1,10,000. On 31st March, 2024, the company offered the furniture
` 5,000 in aggregate during the previous year is
to him at free of cost. No amount was recovered from him towards the
furniture till date. fully taxable] (See note below)
(vii) Received ` 10,000 towards entertainment allowance. Allotment of sweat equity shares
(viii) Housing Loan@ 4.5% p.a. provided by Smile Ltd., amount outstanding Fair market value of 800 sweat equity shares @ 5,60,000
as on 01.04.2023 is ` 15 Lakhs. ` 50,000 is paid by Mr. Samaksh every ` 700 each
quarter towards principal starting from June 2023. The lending rate of SBI Less: Amount recovered @ ` 450 each 3,60,000 2,00,000
for similar loan as on 01.04.2023 was 8%. Use of furniture by employee 10% p.a. of the 11,000
(ix) Facility of laptop costing ` 50,000 (MTP Mar’21,7 Marks) actual cost of ` 1,10,000
Use of Laptop
Answer 13 Facility of use of laptop is not a taxable perquisite Nil
Computation of income under the head “Salaries” of Mr. Samaksh for the Transfer of asset to employee Value of furniture 1,10,000
A.Y.2024-25 transferred to Mr. Samaksh
Particulars ` ` Less: Normal wear and tear @10% for each 44,000 66,000
Basic Salary [` 70,000 x 12 months] 8,40,000 completed year of usage on SLM basis [1,10,000
Dearness allowance [40% of ` 8,40,000] 3,36,000 x 10% x 4 years (from September 2019 to
Entertainment allowance 10,000 September 2023)
Interest on housing loan given at concessional rate, 49,291 Gross Salary 15,22,291
would be perquisite, since the amount of loan Less: Standard deduction u/s 16 [Actual salary or 50,000
exceeds ` 20,000, For computation, the lending ` 50,000, whichever is less]
rate of SBI on 1.4.2023 @8% has to be considered. Net Salary 14,72,291
Thus, perquisite value would be determined @
3.5% (8% - 4.5%) [See Working Note] Working Note:
Health insurance premium paid by the employer Nil Computation of perquisite value of loan given at concessional rate
[tax free perquisite] For computation, the lending rate of SBI on 1.4.2023 @8% has to be considered.
Thus, perquisite value would be determined @ 3.5% (8% - 4.5%)

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Month Maximum outstanding balance Perquisite value at Motor car owned by the employer (cubic capacity of engine exceeds 1.6 liters)
as on last date of month (`) 3.5% for the month provided to Ms. Aashima from 1st October, 2023 which is used for both official
(`) and personal purposes. Repair and running expenses of ` 60,000 were fully met
April, 2023 15,00,000 4,375 by the company. The motor car was self-driven by the employee.
May, 2023 15,00,000 4,375
June, 2023 14,50,000 4,229 Professional tax paid ` 2,500 out of which ` 2,000 was paid by the employer.
July, 2023 14,50,000 4,229 Her employer has provided her with an accommodation on 1st April 2023 at
a concessional rent. The house was taken on lease by ABC Ltd. for ` 12,000
August, 2023 14,50,000 4,229
p.m. Ms. Aashima occupied the house from 1st December, 2023, ` 4,800 p.m. is
September, 2023 14,00,000 4,083
recovered from the salary of Ms. Aashima. The employer gave her a gift voucher
October, 2023 14,00,000 4,083
of ` 8,000 on her birthday. Ms. Aashima contributes 15% of her salary (Basic
November, 2023 14,00,000 4,083
Pay plus DA) towards recognized provident fund and the company contributes the
December, 2023 13,50,000 3,937.50 same amount. The company pays medical insurance premium to effect insurance
January, 2024 13,50,000 3,937.50 on the health of Ms. Aashima ` 20,000. Assume that she does not opt for 115BAC.
February, 2024 13,50,000 3,937.50 (MTP 7 Marks March 22)
March, 2024 13,00,000 3,792
Answer 14
Note: An alternate view possible is that only the sum in excess of ` 5,000 is Computation of income chargeable to tax under the head “Salaries” in the hands
taxable. In such a case, the value of perquisite would be ` 5,000 and gross of Ms. Aashima for A.Y.2024-25
salary and net salary would be ` 15,17,291 and ` 14,67,291, respectively.
Particulars `
Basic Salary [` 60,000 x 12] 7,20,000
Question 14
Dearness allowance [` 24,000 x 12] 2,88,000
Bonus [` 21,000 x 12] 2,52,000
Ms. Aashima is a Finance manager in ABC limited. She has given the details of her Perquisite of Motor car (`2,400 × 6 months) 14,400
income for the P.Y. 2023-24. You are required to compute the income chargeable [See Note 1]
to tax under the head “Salaries” in the hands of Ms. Aashima from the details Professional tax paid by employer [See Note 2] 2,000
given below: Perquisite value in respect of concessional rent [See 17,040
Basic Salary ` 60,000 p.m. Note 3]
Dearness Allowance ` 24,000 p.m. (40% of which forms part
of retirement benefits)
Bonus ` 21,000 p.m.

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Gift voucher given by employer on Ms. Aashima’s 8,000 the present case, the professional tax paid by the employer on behalf of
birthday (entire amount is taxable since the perquisite the employee ` 2,000 is first included in the salary and deduction of the
value exceeds ` 5,000) [See Note 4] entire professional tax of ` 2,500 is provided from salary.
Employer’s contribution to recognized provident fund 50,976 3. Where the accommodation is taken on lease or rent by the employer, the
in excess of 12% of salary = 15% x [ (` 60,000 + ` actual amount of lease rent paid or payable by the employer or 15%
24,000) x 12] – 12% x {[` 60,000 + ` 9,600 (being (10%) of salary, whichever is lower, in respect of the period during which
40% of ` 24,000)] x 12} = 1,51,200 – 1,00,224 the house is occupied by the employee, as reduced by the rent recoverable
[Salary = Basic Salary + Dearness allowance, to the from the employee, is the value of the perquisite. Actual rent paid by
extent it forms part of pay for retirement benefits] the employer from 1.12.2023 to 31.3.2024 = ` 48,000 [` 12,000 x 4
Medical insurance premium of ` 20,000 paid by the - months] 10% of salary = ` 36,240 [10% x (` 60,000 + ` 9,600 + `
employer to effect an insurance on the health of an 21,000) x 4 months] Salary = Basic Salary + Dearness Allowance, to the
employee is an exempt perquisite extent it forms part of pay for retirement benefits + Bonus Lower of the
above is ` 48,000 ` 36,240 which is to be reduced by the rent recovered
Gross salary 13,52,416
from the employee. Hence, the perquisite value of concessional rent = `
Less: Deduction under section 16
48,000 ` 36,240 – ` 19,200 [` 4,800 x 4 months] = ` 17,040
Standard deduction under section 16(ia) 50,000
(As per amendment it is actual amount of lease rental paid or payable by
Professional tax u/s 16(iii) [See Note 2] 2,500 52,500
the employer or 10% of salary whichever is lower as reduced by rent paid
Salary chargeable to tax 12,99,916
by the employee)
4. As per Rule 3(7)(iv), the value of any gift or voucher received by the
Note:
employee or by member of his household on ceremonial occasions or
1. In case a motor car (engine cubic capacity more than 1.6 litres) owned by
otherwise from the employer shall be determined as the sum equal to the
employer is provided to an employee without chauffeur for both official
amount of such gift. However, the value of any gift or voucher received by
and personal purpose, where the expenses are fully met by the employer,
the employee or by member of his household below ` 5,000 in aggregate
the value of perquisite would be ` 2,400 p.m. The car was provided to Ms.
during the previous year would be exempt as per the proviso to Rule 3(7)
Aashima on 1.10.2023, therefore, the perquisite value has been calculated
(iv). In this case, the gift voucher of ` 8,000 was received by Ms. Aashima
for 6 months.
from her employer on the occasion of her birthday. Since the value of the
2. As per section 17(2)(iv), a “perquisite” includes any sum paid by the employer
gift voucher exceeds the limit of ` 5,000, the entire amount of ` 8,000
in respect of any obligation which, but for such payment, would have been
is liable to tax as perquisite. The above solution has been worked out
payable by the assessee. Therefore, professional tax of ` 2,000 paid by
accordingly. Alternative view - An alternate view is also possible is that
the employer is taxable as a perquisite in the hands of Ms. Aashima. As
only the sum in excess of ` 5,000 is taxable in view of the language of
per section 16(iii), a deduction from the salary is provided on account of
Circular No.15/2001 dated 12.12.2001, which states that such gifts upto
tax on employment i.e. professional tax paid during the year. Therefore, in

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` 5,000 in the aggregate per annum would be exempt, beyond which it I RPF balance as on 31.3.2024 – employee’s and employer’s contribution
would be taxed as a perquisite. As per this view, the value of perquisite during the year – RPF balance as on 1.4.2023 = ` 5,56,500 (`
would be ` 3,000. The salary chargeable to tax, in this case, would be ` 71,46,700 – ` 7,77,600 – ` 7,77,600 – ` 50,35,000)
13,06,676. Favg Balance to the credit of recognized provident fund as on 1st April,
2022 + Balance to the credit of recognized provident fund as on 31st
March, 2023)/2 = (` 50,35,000 + ` 71,46,700)/2 =` 60,90,850
Question 15 Computation of perquisite value taxable u/s 17(2)(vii) and 17(2)(viia) for
A.Y. 2024-25
Mr. Sunil is the CEO of Sheetal Textiles Ltd. His basic salary is `6,00,000 p.m.
1. Perquisite value taxable u/s 17(2)(vii) = ` 7,77,600, being employer’s
He is paid 8% as D.A. He contributes 10% of his pay and D.A. towards his
contribution to recognized provident fund during the P.Y. 2023-24 –
recognized provident fund and the company contributes the same amount. The
` 7,50,000 = ` 27,600
accumulated balance in recognized provident fund as on 1.4.2022, 31.3.2023
and 31.3.2024 is `50,35,000, `71,46,700 and `94,57,700, respectively. 2. Perquisite value taxable u/s 17(2)(viia) = Annual accretion on perquisite
Compute the perquisite value chargeable to tax in the hands of Mr. Sunil u/s taxable u/s 17(2)(vii)
17(2)(vii) and 17(2)(viia) for the A.Y. 2023-24 and A.Y. 2024- 25. = (PC/2)*R + (PC1 + TP1)*R
(RTP May ’22) = (27,600/2) x 0.0910 + (27,600 + 1,261) x 0.0910
Answer 15 = ` 1,256 + ` 2,626
Computation of perquisite value taxable u/s 17(2)(vii) and 17(2)(viia) for = ` 3,882
A.Y. 2023-24 PC Sheetal Textile Ltd.’s contribution in excess of ` 7.5 lakh to
1. Perquisite value taxable u/s 17(2)(vii) = ` 7,77,600, being employer’s recognized provident fund during P.Y. 2022-23 = ` 27,600
contribution to recognized provident PC1 Amount of employer’s contribution in excess of ` 7,50,000 to RPF
fund during the P.Y. 2022-23 – ` 7,50,000 = ` 27,600 in P.Y. 2022-23 = ` 27,600
2. Perquisite value taxable u/s 17(2)(viia) = Annual accretion on TP1 Taxable perquisite under section 17(2)(viia) for the P.Y. 2022-23
= ` 1,261
perquisite taxable u/s 17(2)(vii)
R I/Favg = 7,55,800/83,02,200 = 0.0910
= (PC/2)*R + (PC1 + TP1)*R
= (27,600/2) x 0.0914 + 0 I RPF balance as on 31.3.2024 – employee’s and employer’s
contribution during the year – RPF balance as on 1.4.2023 = `
= ` 1,261
7,55,800 (` 94,57,700 – ` 7,77,600 – ` 7,77,600 – ` 71,46,700)
PC Sheetal Textile Ltd.’s contribution in excess of ` 7.5 lakh to recognized Favg Balance to the credit of recognized provident fund as on 1st April,
provident fund during P.Y.2022-23 = ` 27,600 2023 + Balance to the credit of recognized provident fund as
PC1 Nil on 31st March, 2024)/2 = (` 71,46,700 + ` 94,57,700)/2 = `
TP1 Nil 83,02,200
R I/Favg = 5,56,500/60,90,850 = 0.0914

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Note Answer 16
Since the employee’s contribution to RPF exceeds ` 2,50,000 in the P.Y.2023-24, Since Mr. Honey stays in India for at least 184 days every year, he is resident
interest on ` 5,27,600 (i.e., `7,77,600 – `2,50,000) will also be chargeable and ordinarily resident in India, every year. Therefore, his global income would
to tax. be taxable in India. The salary received by him in India and outside India would
be taxable in India as per the provisions of the Income-tax Act, 1961.
Question 16 Computation of total income from salary of Mr. Honey for the A.Y. 2024-25
Particulars ` `
Mr. Honey is working with a domestic company having a production unit in Basic Salary
the U.S.A. for last 15 years. He has been regularly visiting India for export Salary received outside India for 6 months 3,00,000
promotion of company’s product. He has been staying in India for at least 184 (` 50,000 x 6)
days every year. Salary received in India for 6 months 3,00,000 6,00,000
He submits the following information: (` 50,000 x 6)
Salary received outside India (For 6 months) ` 50,000 P.M Salary received in Children Education and Hostel Allowance
India (For 6 months) ` 50,000 P.M. Amount received from employer 36,000
He has been given rent free accommodation in U.S.A. for which company pays (` 3,000 x 12)
` 15,000 per month as rent, but when he comes to India, he stays in the guest [No exemption is available in respect of Nil 36,000
house of the company. During this period, he is given free lunch facility. allowance received for any education or
During the previous year, company incurred an expenditure of ` 48,000 on this hostel facility of children outside India]
facility. Perquisites:
He has been provided a car of 2000 cc capacity in U.S.A. which is used by him Value of rent-free accommodation in USA 63,600
for both office and private purposes. The actual cost of the car is ` 8,00,000.
Lower of:
But when he is in India, the car is used by him and the members of his family only
-15% 10% of ` 6,36,000 (Basic Salary + 63,600
for personal purpose. The monthly expenditure of car is ` 5,000. His elder son is
Children Education and Hostel Allowance)
studying in India for which his employer spends ` 12,000 per year whereas his
(As per amendment it is actual amount
younger son is studying in U.S.A. and stays in a hostel for which Mr. Honey gets
of lease rental paid or payable by the
` 3,000 per month as combined allowance. employer or 10% of salary whichever
The company has taken an accident insurance policy and a life insurance is lower as reduced by rent paid by the
policy. During the previous year, the company paid premium of ` 5,000 and ` employee)
10,000, respectively. Compute Mr. Honey’s taxable income from salary for the -Rent paid by employer = ` 15,000 x 12 1,80,000
Assessment Year 2024-25. Assume that he does not opt for 115BAC.
Value of guest house in India
(PYP 10 Marks, May’18)

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[not taxable, since it is provided for stay Less: Deductions under section 16 Nil
when he visits India wholly for official Standard deduction (lower of actual salary (50,000)
purposes] or Rs. 50,000) (as per amendment)
Lunch facility provided by employer 48,000 Taxable Salary 8,35,800
[Taxable perquisite, since the value exceeds
Notes:
` 50 per meal] [See Note 1 below]
(1) Lunch facility provided to Mr. Honey is a taxable perquisite as per Rule
Motor car provided by employer [`14,400 84,400
3(7)(iii). The benefit under the proviso to this Rule would be available only
+ ` 70,000] [See Note 2 below]
if the value does not exceed ` 50 per meal. In this case since the value far
Used for both official and personal purposes 14,400
exceeds ` 50 per meal, the benefit under the proviso to Rule 3(7)(iii) is not
for 6 months when he is in US. Hence, the
perquisite value is `14,400 [` 2,400 x available. The above solution has been worked out accordingly. However,
6], since cubic capacity exceeds 1.6 liters, in page 17 of the CBDT Circular No. 29/2017 dated 5.12.2017, the
assuming that expenses are fully met by method of valuation of perquisite of free lunch facility has been explained.
employer As per the said circular, a fixed sum of ` 50 per meal has to be reduced
Used for personal purposes by his family to arrive at the value of perquisite of free food provided by the employer.
members for 6 months If the beneficial view given in the circular is considered for answering this
when he is in India question, an assumption as to the number of working days per month has to
Actual running and maintenance 30,000 be made and thereafter, calculation for 6 months has to be made to arrive
expenditure3 [` 5,000 x 6] at the value of taxable and exempt perquisite of provision of lunch facility.
Normal wear and tear [10% of actual cost 40,000 70,000 3 It is assumed that the same is fully met by the employer
of motor car for 6 months] = ` 8,00,000 x ()In the above solution, the perquisite value of motor car provided by
10% x 6/12 employer has been worked out
Education expenditure of elder son in India 12,000 Particulars `
met by employer [Fully taxable perquisite] Motor car provided by employer [`5,400 + `40,000]
Life insurance premium paid by the employer 10,000 Used for both official and personal purposes for 6 months when 5,400
– any sum payable by the employer to effect he is in US. Hence, the perquisite value is `900 p.m., since cubic
an assurance on the life of the employee is
capacity exceeds 1.6 liters,
a taxable perquisite
Used for personal purposes by his family members for 6 months
Accident insurance premium paid by
when he is in India
employer – exempt perquisite, since such
policy is taken by the employer in business Normal wear and tear [10% of actual cost of motor car for 6 40,000
interest so as to indemnify the company months] = ` 8,00,000 x 10% x 6/12
from payment of compensation. 45,400
Gross Salary 8,85,800 In this case, the taxable salary would be `8,46,800.

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3.2 INCOME FROM HOUSE

PROPERTY
Answer 17
Computation of income from house property of Mr. Ramesh for A.Y. 2024-25
Question 17
Particulars ` `
Annual value is nil (since house is self-occupied) Nil
Mr. Ramesh and Mr. Suresh constructed their houses on a piece of land purchased Less: Deduction under section 24(b)
by them at Mumbai. The built up area of each house was 1,500 sq. ft. ground Interest paid on borrowed capital ` 20,00,000 @ 2,40,000
floor and an equal area in the first floor. Ramesh started construction on 1-04- 12%
2022 and completed on 1-04-2023. Suresh started the construction on 1-04- Pre-construction interest ` 2,40,000/5 48,000
2022 and completed the construction on 30-06-2023. Ramesh occupied the As per second proviso to section 24(b), interest 2,88,000 2,00,000
entire house on 01-04-2023. Suresh occupied the ground floor on 01-07-2023 deduction restricted to
and let out the first floor for a rent of ` 15,000 per month. However, the tenant Loss under the head “Income from house property” (2,00,000)
vacated the house on 31-12-2023 and Suresh occupied the entire house during of Mr. Ramesh
the period 01-01-2024 to 31-03-2024.
Following are the other information.
Computation of income from house property of Mr. Suresh for A.Y. 2024-25
(i) Fair rental value of each unit (ground floor / `1,00,000 per annum
Particulars Ground floor First floor
first floor)
(Self occupied)
(ii) Municipal value of each unit (ground floor / ` 72,000 per annum
first floor) Gross annual value (See Note below) Nil 90,000
(iii) Municipal taxes paid by Less: Municipal taxes (for first floor) 4,000
Ramesh – ` 8,000
Net annual value(A) Nil 86,000
Suresh – ` 8,000
Less: Deduction under section 24
(iv) Repair and maintenance charges paid by Ramesh – ` 28,000
(a) 30% of net annual value 25,800
Suresh – ` 30,000
(b) interest on borrowed capital
Current year interest
Ramesh has availed a housing loan of ` 20 lakhs @ 12% p.a. on 01-04-2022.
` 12,00,000 x 10% = ` 1,20,000 60,000 60,000
Suresh has availed a housing loan of ` 12 lakhs @ 10% p.a. on 01-07-2022.
No repayment was made by either of them till 31-03-2024. Compute income Pre-construction interest
from house property for Ramesh and Suresh for the previous year 2023-24 ` 12,00,000 x 10% x 9/12 = ` 90,000 9,000 9,000
(A.Y. 2024- 25). (MTP 7 Marks April ’23 , March’21, Apr’19) ` 90,000 allowed in 5 equal installments
` 90000/5 = ` 18,000 per annum

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Total deduction under section 24(b) 69,000 94,800 other property of Mr. Sailesh is occupied by the tenant. Unit - 1 remains vacant
Income from house property (A)-(B) (69,000) (8,800) for February and March 2024 when it is not put to any use. Unit - 2 (25%
of the floor area) is used by Mr. Sailesh for the purpose of his business, while
Loss under the head “Income from house (77,800)
Unit - 3 (the remaining 25%) is utilized for the purpose of his residence. Other
property” of Mr. Suresh (both ground floor
particulars of the house are as follows:
and first floor)
Municipal valuation - ` 2,88,000 Fair rent - ` 2,98,000
Note: Computation of Gross Annual Value (GAV) of first floor of Suresh’s house Standard rent under the Rent Control Act - ` 2,78,000 Municipal taxes - `
30,000 paid by Mr. Sailesh
If a single unit of property (in this case the first floor of Suresh’s house) is let out Repairs - ` 7,000
for some months and self-occupied for the other months, then the Expected Rent Interest on capital borrowed for the construction of the property - ` 90,000,
of the property shall be taken into account for determining the annual value. The Ground rent - ` 6,000 and Fire insurance premium paid - ` 60,000.
Expected Rent shall be compared with the actual rent and whichever is higher Income of Sailesh from the business is ` 2,40,000 (without debiting house rent
shall be adopted as the annual value. In this case, the actual rent shall be the and other incidental expenditure).
rent for the period for which the property was let out during the previous year. Determine the taxable income of Mr. Sailesh for the assessment year 2024-25
if he opts to be taxed under section 115BAC. (MTP 7 Marks April 22)
The Expected Rent is the higher of fair rent and municipal value. This should be
considered for 9 months since the construction of property was completed only Answer 18
on 30.6.2023. Computation of taxable income of Mr. Sailesh for A.Y. 2024-25
Expected rent = ` 75,000 being higher of - Particulars Amount Amount
Fair rent = 1,00,000 x 9 /12 = ` 75,000 Municipal Income from house property
value = 72,000 x 9/12 = ` 54,000 Unit - 1 [50% of floor area - Let out]
Actual rent = ` 90,000 (` 15,000 p.m. for 6 months from July Gross Annual Value, higher of
to December, 2023) Gross Annual Value = ` 90,000 (being higher of -Expected rent ` 1,39,000 [Higher of
Expected Rent of ` 75,000 and actual rent of ` 90,000) Municipal Value of ` 1,44,000 p.a. and
Fair Rent of ` 1,49,000 p.a., but restricted
to Standard Rent of ` 1,39,000 p.a.]
Question 18 -Actual rent ` 1,80,000 i.e., [` 20,000 x
10] less unrealized rent of January, 2022
Mr. Sailesh constructed a house in P.Y. 2017-18 with 3 independent units. During ` 20,000
the P.Y. 2023-24, Unit - 1 (50% of floor area) is let out for residential purpose Gross Annual Value 1,80,000
at monthly rent of ` 20,000. Rent of January 2024 could not be collected Less: Municipal taxes [50% of `30,000] 15,000
from the tenant and a notice to vacate the unit was given to the tenant. No

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Net Annual Value 1,65,000

Less: Deductions from Net Annual Value Question 19
(a) 30% of Net Annual Value 49,500
Mr. Madhvan is a finance manager in Star Private Limited. He gets a salary
(b) Interest on loan [50% of ` 90,000] 45,000 70,500
of ` 30,000 per month. He owns two houses, one of which has been let out to
Unit – 3 [25% of floor area – Self occupied] his employer and which is in tum provided to him as rent free accommodation.
Net Annual Value Following details (annual) are furnished in respect of two house properties for
Less: Interest on loan [ Not allowed as Mr. the Financial Year 2023-24.
Sailesh is opting for section 115BAC.] House 1 House 2
Income from house property 70,500 Fair rent 75,000 1,95,000
Profits and gains from business or profession Actual rent 65,000 2,85,000
Business Income [without deducting 2,40,000 Municipal Valuation 74,000 1,90,000
expenditure of Unit - 2 25% floor area Municipal taxes paid 18,000 70,000
used for business purposes] Repairs 15,000 35,000
Less: Expenditure in respect of Unit -2 Insurance premium on building 12,000 17,000
- Municipal taxes [25% of ` 30,000] 7,500 Ground rent 7,000 9,000
- Repairs [25% of ` 7,000] 1,750 Nature of occupation Let-out to Let-out to
- Interest on loan [25% of ` 90,000] 22,500 Star Private Limited Ms. Puja
- Ground rent [ 25% of ` 6,000] 1,500 `17,000 were paid as interest on loan taken by mortgaging House 1 for
- Fire Insurance premium [25% of ` 15,000 48,250 1,91,750 construction of House 2.
60,000] During the previous year 2023-24, Mr. Madhvan purchased a rural agricultural
Taxable Income 2,62,250 land for ` 2,50,000. Stamp valuation of such property is ` 3,00,000.
Determine the taxable income of Mr. Madhvan for the assessment year 2024-
25. All workings should form part of your answer. (PYP 8 Marks, May’19, MTP
Note:
7 Marks Sep ’23)
Alternatively, if as per income-tax returns, unrealised rent is deducted from
GAV, then GAV would be
Answer 19
` 2,00,000, being higher of unexpected rent of ` 1,39,000 and actual rent
Computation of taxable income of Mr. Madhvan for A.Y. 2024-25
of ` 2,00,000. Thereafter, unrealized rent of ` 20,000 and municipal taxes
Particulars ` `
of ` 15,000 would be deducted from GAV of ` 2,00,000 to arrive at the
Salaries
NAV of ` 1,65,000
Basic Salary = ` 30,000 x 12 3,60,000
Rent free accommodation 36,000

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[Lower of lease rental paid or Income from Other Sources

payable by the employer (or) Purchase of rural agricultural land
15% 10% of salary i.e., lower of for a consideration less than stamp
` 65,000 or ` 54,000 ` 36,000, duty value [Not taxable under
being 10% of ` 3,60,000] (As per section 56(2)(x), since rural
amendment it is actual amount of agricultural land is not a capital
lease rental paid or payable by asset]
the employer or 10% of salary Total Income 5,19,400
whichever is lower as reduced by Note - Expenditure on repairs, insurance premium on building and ground
rent paid by the employee) rent are not allowable under the head “Income from house property.”
Gross Salary 3,96,000
Less: Standard deduction u/s 16(IA)
[Actual salary or ` 40,000 (As per 40,000
amendment Rs. 50,000), whichever 50,000
is less]
Net Salary House 1 3,74,000
3,46,000
Income from house property House 2
Municipal value (A) 74,000 1,90,000
Fair rent (B) 75,000 1,95,000
Higher of (A) and (B) = (C) 75,000 1,95,000
Actual rent received 65,000 2,85,000
Gross Annual Value 75,000 2,85,000
[Higher of (C) and Actual rent]
Less: Municipal tax paid 18,000 70,000
Net Annual Value (NAV) 57,000 2,15,000
Less: Deductions u/s 24 17,100 64,500
30% of NAV
Interest on loan Nil 17,000
Income from house property [` 39,900 1,33,500 1,73,400
39,900 + ` 1,33,500]

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3.3 PROFITS & GAINS FROM

BUSINESS PROFESSION
For Heavy goods vehicle
Question 20 : illustration
2 29.08.2023 8 16
1 23.02.2024 2 2
Mr. X commenced the business of operating goods vehicles on 1.4.2023. He
purchased the following vehicles during the P.Y.2023-24. Compute his income 18
under section 44AE for A.Y.2024-25. For goods vehicle other than heavy goods vehicle
2 10.4.2023 12 24
Gross Vehicle Weight (in kilograms) Number Date of purchase
1 15.3.2024 1 1
(1) 7,000 2 10.04.2021
3 16.7.2023 9 27
(2) 6,500 1 15.03.2022
1 02.1.2024 3 3
(3) 10,000 3 16.07.2021
55
(4) 11,000 1 02.01.2022
(5) 15,000 2 29.08.2021 The presumptive income of Mr. X under section 44AE for A.Y.2024-25 would be
-Rs. 6,82,500, i.e., 55 × Rs. 7,500, being for other than heavy goods vehicle +
(6) 15,000 1 23.02.2022
18 xRs. 1,000 x 15 ton being for heavy goods vehicle.
Would your Answer change if the goods vehicles purchased in April, 2023 were
The Answer would remain the same even if the two vehicles purchased in
put to use only in July, 2023? (Old & New SM)(Same concept different figures
April,2023 were put to use only in July, 2023, since the presumptive income has
RTP May’19)
to be calculated per month or part of the month for which the vehicle is owned
Answer 20
by Mr. X.
Since Mr. X does not own more than 10 vehicles at any time during the
previousyear 2023-24, he is eligible to opt for presumptive taxation scheme
under section 44AE. Rs. 1,000 per ton of gross vehicle weight or unladen weight
Question 21
per month or part of the month for each heavy goods vehicle and Rs. 7,500
per month or part of month for each goods carriage other than heavy goods
Mr. Rangamannar resides in Delhi. As per new rule in the city, private cars can
vehicle, owned by him would be deemed as his profits and gains from such
be plied in the city only on alternate days. He has purchased a car on 21-09-
goods carriage. Heavy goods vehicle means any goods carriage, the gross
2023, for the purpose of his business as per following details:
vehicle weight of which exceeds 12,000 kg.
Cost of car (excluding GST) 12,00,000
(1) (2) (3) (4)
Add: Delhi GST at 14% 1,68,000
Number of Date of No. of months for No. of months × No.
Add: Central GST at 14% 1,68,000
Vehicles purchase which vehicle is owned of vehicles [(1) × (3)]
Total price of car 15,36,000

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He estimates the usage of the car for personal purposes will be 25%. that the car is not used for making the above taxable supplies. Accordingly,
He is advised that since the car has run only on alternate days, half the input tax credit would not be available and hence, 1 As per section 49(4),
depreciation, which is otherwise allowable, will be actually allowed. He in case where capital gains arise from subsequent sale of property, which
has started using the car immediately after purchase. Determine the was subject to tax under section 56(2)(x), the value taken into account for the
depreciation allowable on car for the A.Y. 2024-25, if this is the only asset purpose of section 56(2)(x) would be deemed to be the cost of acquisition.
in the block. Rate of depreciation may be taken at 15% If this car were GST would form part of actual cost of car. The above solution has been worked
to be used in the subsequent Assessment Year 2025-26 on the same terms out accordingly. However, input tax credit would be available if it is assumed
and conditions above, what will be the depreciation allowable? Assume that
that the car is used in making the above taxable supplies or in transportation
there is no change in the legal position under the Income-tax Act, 1961.
of goods, the answer would be as follows –
(PYP 4 Marks, Nov’18, RTP Nov ’19)
Alternative Answer
Particulars `
Particulars `
Since the car was put to use for more than 180 days in the
Since the car was put to use for more than 180 days in the
P.Y.2023-24, full depreciation@15% is allowable on the actual
P.Y.2017- 18, full depreciation@15% is allowable on the actual
cost of ` 12 lakh (exclusive of GST of ` 3,36,000), assuming
cost of
that input tax credit is available in respect of GST.
`15,36,000, which is the total price (inclusive of GST). However,
Further, the depreciation actually allowed would be restricted
the depreciation actually allowed would be restricted to 75%,
to 75%, since 25% of usage is estimated for personal use, on
since 25% of usage is estimated for personal use, on which
which depreciation is not allowable.
depreciation is not allowable.
Depreciation for P.Y.2023-24 = 15% x ` 12,00,000 x 75% = 1,35,000
Depreciation for P.Y.2023-24 = 15% x `15,36,000 x 75% = 1,72,800
Written Down Value as on 1.4.2014 = ` 12,00,000 –
Written Down Value as on 1.4.2024 = `15,36,000 – `1,72,800
` 1,35,000 = ` 10,65,000
=
Depreciation for P.Y.2024-25 = 15% x ` 10,65,000 x 75% = 1,19,813
`13,63,200
Depreciation for P.Y.2024-25 = 15% x `13,63,200 x 75% = 1,53,360
Note -
As per section 17(5) of the CGST Act, 2017/Delhi GST Act, 2017, input tax
credit would not be available in respect of motor vehicles except if they are
used for making taxable supply of such vehicles or for transportation of goods or
passengers or for imparting training on driving, flying navigating such vehicles.
In this case, the question mentions that the car is the only asset in the block. In the
absence of any information in the question to the contrary, it is logical to assume

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3.4 CAPITAL GAINS

Question 22 Answer 22
Computation of income chargeable under the head “Capital Gains” of Mrs.
Mrs. Yuvika bought a vacant land for ` 80 lakhs in May 2005. Registration and Yuvika for A.Y.2024-25
other expenses were 10% of the cost of land. She constructed a residential Particulars Rs.(in lakhs) Rs.(in lakhs)
building on the said land for ` 100 lakhs during the financial year 2007-08. She Capital Gains on sale of residential building
entered into an agreement for sale of the above said residential house with Mr.
Actual sale consideration Rs.810 lakhs
Johar (not a relative) in April 2015. The sale consideration was fixed at ` 700
Value adopted by Stamp Valuation Authority
lakhs and on 23-4-2015, Mrs. Yuvika received ` 20 lakhs as advance in cash by
Rs.890 lakhs
executing an agreement. However, due to failure on part of Mr. Johar, the said
negotiation could not materialise and hence, the said amount of advance was [Where the actual sale consideration is less
forfeited by Mrs. Yuvika. than thevalue adopted by the Stamp Valuation
Mrs. Yuvika, again entered into an agreement on 01.08.2023 for sale of this Authority for the purpose of charging stamp duty,
house at ` 810 lakhs. She received ` 80 lakhs as advance by RTGS. The stamp and such stamp duty
duty value on the date of agreement was ` 890 lakhs. The sale deed was value exceeds 110% of the actual sale
executed and registered on 14-1-2024 for the agreed consideration. However, consideration, then, the value adopted by the
the State stamp valuation authority had revised the values, hence, the value of Stamp Valuation Authority shall be taken to be
property for stamp duty purposes was ` 900 lakhs. Mrs. Yuvika paid 1% as the full value of consideration as per section 50C.
brokerage on sale consideration received. However, where the date of agreement is different
Subsequent to sale, Mrs. Yuvika made following acquisition/investments: from the date of registration, stamp duty value
(i) Acquired two residential houses at Delhi and Chandigarh for ` 130 lakhs on the date of agreement can be considered
and ` 50 lakhs, respectively, on 31.1.2024 and 15.5.2024
provided the whole or part of the consideration is
(ii) Acquired a residential house at UK for ` 180 lakhs on 23.3.2024.
received by way of account payee cheque/bank
(iii) Subscribed to NHAI capital gains bond (approved under section 54EC) for
draft or by way of ECS through bank account or
` 50 lakhs on 29-3- 2024 and for ` 40 lakhs on 12-5-2024.
Compute the income chargeable under the head ‘Capital Gains’ of Mrs. Yuvika through prescribed electronic modes on orbefore
for A.Y.2024-25. The choice of exemption must be in the manner most beneficial the date of agreement.
to the assessee.
Cost Inflation Index: F.Y. 2005-06 – 117; F.Y. 2007-08 – 129; F.Y. 2023-24 -
348. (New SM) (Same concept different figures RTP May’20)

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In this case, since advance of Rs. 80 lakh is received Where long-term capital gains exceed Rs. 2 crore,
by RTGS, i.e., one of the prescribed modes, the capital gain arising on transfer of a long-term
stamp duty value on the date of agreement can residential property shall not be chargeable to
be adopted as thefull value of consideration. tax to the extent such capital gain is invested in
However, in the present case since stamp duty the purchase of one residential house property
value on the date of agreement doesnot exceed inIndia, one year before or two years after the
110% of the actual consideration, actual sale dateof transfer of original asset.
consideration would be taken as the full value of Therefore, in the present case, the exemptionwould
consideration) be available only in respect of the one residential
Gross Sale consideration (actual consideration, 810.00 house acquired in India and not in respect of the
since stamp duty value on the date of agreement residential house in UK. It would be more beneficial
does notexceed 110% of the actual consideration) for her to claim the cost ofacquisition of residential
Less: Brokerage @1% of sale consideration 8.10 house at Delhi, i.e., Rs. 130 lakhs as exemption.
(1% of Rs.810 lakhs) Less: Exemption under section 54EC 50.00
Net Sale consideration 801.90 Amount invested in capital gains bonds of
Less: Indexed cost of acquisition NHAIwithin six months after the date of transfer
- Cost of vacant land, Rs. 80 lakhs, plus registration 261.74 (i.e., onor before 13.7.2022), of long-term capital
and other expenses i.e., Rs. 8 lakhs, being 10% of asset, being land or building or both, would
cost of land [` 88 lakhs × 348/117] qualify for exemption, to the maximum extent of
- Construction cost of residential building(`100 269.77 531.51 Rs. 50 lakhs, whether such investment is made in
lakhs x 348/129) the current financial year or subsequent financial
Long-term capital gains 270.39 year.
Since the residential house property was Therefore, in the present case, exemption can
held by Mrs. Yuvika for more than 24 months beavailed only to the extent of Rs. 50 lakh out
immediatelypreceding the date of its transfer, the of Rs. 90 lakhs, even if the both the investments
resultant gain is a long-term capital gain] aremade on or before 13.7.2022(i.e., within six
Less: Exemption under section 54 130.00 months after the date of transfer).
Long term capital gains chargeable to tax 90.39
Note:
Advance of ` 20 lakhs received from Mr. Johar, would have been chargeable

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to tax under the head “Income from other sources”, in the A.Y. 2016-17, as In respect of 1,200 original shares
per section 56(2)(ix), since the same was forfeited on or after 01.4.2014 as a Full value of consideration [1,200 shares x `2,400] 28,80,000
result of failure of negotiation. Hence, the same should not be deducted while Less: Cost of acquisition [1,200 shares x `2,000] 24,00,000 4,80,000
computing indexed cost of acquisition.
Higher of (I) and (ii), below
(I) `900, being original cost of acquisition (` 130)
or FMV as on 1.4.2001 (`900), at the option of the
Question 23
assessee
(ii) `2,000 per share, being the lower of
Mr. Gyaanchand purchased 1200 shares of “A” limited at ` `130 per share on FMV as on 31.1.2018 - `2,000 per share
26.02.1979. “A” limited issued him 600 bonus shares on 20.02.2005. The fair Sale consideration – `2,400 per share
market value of these shares at Mumbai Stock Exchange as on 1.04.2001 was Long term capital gain 7,20,000
`900 per share and `2,000 per share as on 31.01.2018. On 07.07.2023 Mr.
Gyaanchand sold all 1800 shares @ ` 2,400 per share at Mumbai Stock Exchange
and securities transaction tax was paid. Compute capital gain chargeable to tax
in the hands of Mr. Gyaanchand for the A.Y.2024-25. (MTP 4 Marks, Oct’21) Question 24
Answer 23
Aggarwal & Sons, HUF purchased a house property in the year 1950 for
Computation of capital gain of Mr. Gyaanchand for the A.Y.2024-25 `50,000. On 31.10.2023, the HUF was totally partitioned and the aforesaid
house property was given to Mr. Subhash Aggarwal, a member of the family.
Particulars Fair Market value of the house as on 31.10.2023 was `21,00,000. FMV of the
` `
house as on 1.4.2001 was `3,50,000. What will be the tax implications in the
Capital Gains
hands of Mr. Subhash Aggarwal and the HUF? (MTP 3 Marks, Oct’21)
In respect of 600 shares (bonus shares)
Full value of consideration [600 shares x ` 2,400 14,40,000 Answer 24
per share]
Tax implications in the hands of HUF
Less: Cost of acquisition [600 shares x `2,000] 12,00,000 2,40,000 As per section 47, any distribution of capital assets on the total or partial
Higher of (I) and (ii), below partition of a HUF would not be regarded as transfer for the purpose of capital
(I) Nil, being cost of acquisition gains tax.
(ii) ` 2,000 per share, being the lower of FMV as on In this case, Aggarwal & Sons, HUF transferred the asset to Mr. Subhash Aggarwal,
31.1.2018 - `2,000 per share a member of HUF on total partition of the HUF. Hence, the transaction would not
Sale consideration – `2,400 per share be regarded as transfer.

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unlisted company. These shares were issued by the company as bonus shares
Tax implications in the hands of Mr. Subhash Aggarwal on 30-09-1997. The Fair Market Value of these shares as on 01-04- 2001
If an immovable property is received by any person without consideration, the was ` 50 per share.
stamp duty value of such property would be taxed as the income of the recipient Cost Inflation Index for various financial years are as under (MTP 7 Marks,
under section 56(2)(x), if it exceeds `50,000. However, it would not be taxable April’21, PYP 6 Marks Nov 19)
as income if the transfer is by way of a transfer, inter alia, on total or partial
partition of a HUF. 2001-02 100
In the give case, since Mr. Subhash Aggarwal received the house property on 2016-17 264
total partition of the HUF, it would not be taxable in his hand. 2017-18 272
2020-21 301
2023-24 348
Question 25
Answer 25
Computation of amount chargeable to tax under the head “Capital Gains”
Calculate the amount chargeable to tax under the head ‘Capital Gains’ and in the hands of Mr. Naveen
also calculate tax on such gains for A.Y. 2024-25 from the following details Particulars `
provided by Mr. Naveen with respect to sale of certain securities during F.Y. (i) Sale of 10,000 shares of Y Ltd. 65,00,000
2023-24, assuming that the other incomes of Mr. Naveen exceed the maximum on 5.4.2023 @ 650 per share
amount not chargeable to tax. (Ignore surcharge and chess): Sales consideration (10,000 x ` 650)
(i) Sold 10,000 shares of Y Ltd. on 05-04-2023 @ ` 650 per share Y Ltd. is
Less: Cost of acquisition ` 30,00,000
a listed company. These shares were acquired by Mr. Naveen on 05-04-
Higher of:
2016 @` 100 per share. STT was paid both at the time of acquisition as
- Actual cost (10,000 x ` 100) 10,00,000
well as at the time of transfer of such shares which was affected through
a recognized stock exchange. On 31-01-2018, the shares of Y Ltd. were - Lower of: 30,00,000 35,00,000
traded on a recognized stock exchange as under: Highest price - ` 300 per • ` 30,00,000 (` 300 x 10,000), being fair market value
share, Average price - ` 290 per share Lowest price - ` 280 per share as on 31.1.2018 (Highest price of the shares traded on
(ii) Sold 1,000 units of AB Mutual Fund on 20-05-2023 @` 50 per unit 31.1.2018); and
AB Mutual Fund is an equity oriented fund. These units were acquired by Mr. • ` 65,00,000, being full value of consideration on transfer
Naveen on 10- 03-2017 @ ` 10 per unit. STT was paid only at the time Long-term capital gain under section 112A [Since shares
of transfer of such units. On 31 - 01-2018, the Net Asset Value of the units held for more than 12 months and STT is paid both at
of AB Mutual Fund was ` 55 per unit. The units of AB Mutual Fund were not the time of purchase and sale. Benefit of indexation is,
listed on the stock exchange as on 31.1.2018. however, not available on LTCG taxable u/s 112A].
(iii) Sold 100 shares of C Ltd. on 27-09-2023 @ ` 200 per share. C Ltd. is an

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(ii) Sale of 1,000 units of AB Mutual Fund on 20.5.2023 @ 50,000

` 50 per unit Question 26
Sale consideration (1,000 x ` 50)
Mr. Yusuf bought a vacant land for ` 80 lakhs in March 2009. Registration
Less: Cost of acquisition - Higher of - 50,000
and other expenses were 10% of the cost of land. He constructed a residential
- Actual cost (1,000 x ` 10) 10,000
building on the said land for ` 100 lakhs during the financial year 2010-11.
- Lower of: 50,000 He entered into an agreement for sale of the above said residential house with
• ` 55,000 (` 55 x 1,000), FMV, being Net Asset Value as Mr. John (not a relative) in July 2023. The sale consideration was fixed at ` 600
on 31.1.2018; and lakhs and on the date of agreement, Mr. Yusuf received ` 20 lakhs as advance
• ` 50,000, being full value of consideration on transfer in cash. The stamp duty value on that date was ` 620 lakhs.
Long-term capital gain under section 112A [Since shares The sale deed was executed and registered on 10-2-2024 for the agreed
are held for more than 12 months and STT is paid at the consideration. However, the State stamp valuation authority had revised the
time of sale] values, hence, the value of property for stamp duty purposes was
(iii) Sale of 100 shares of C Ltd. on 27.9.2023 @ 200 per 20,000 ` 650 lakhs. Mr. Yusuf paid 1% as brokerage on sale consideration received.
share Subsequent to sale, Mr. Yusuf made following investments:
Sale consideration (100 x ` 200) (i) Acquired a residential house at Delhi for ` 80 lakhs.
17,400 (ii) Acquired a residential house at London for ` 40 lakhs.
Less: Indexed Cost of acquisition [100 x ` 50 (being FMV
(iii) Subscribed to NHAI bond: ` 45 lakhs on 29-5-2024 and ` 15 lakhs on 12-
on 1.4.2001) x 348/100]
7-2024.
Long-term capital gain under section 112 [Since shares 2,600
Compute the income chargeable under the head “Capital Gains” for A.Y. 2024-
are unlisted and held for more than 24 months] 25. The choice of exemption must be in the manner most beneficial to the assessee.
(MTP Oct 20, 7 Marks, RTP May 18)
Computation of tax on such capital gains for A.Y. 2024-25
Particulars ` Cost Inflation Index: F.Y. 2008-09 137
Tax under section 112A @ 10% on long-term capital gains of ` 3,40,000 F.Y. 2010-11 167
34,00,000 [LTCG of ` 35,00,000 (-) ` 1,00,000] arising on sale F.Y. 2023-24 348
of shares of Y Ltd.
Tax under section 112 @ 20% on long-term capital gains of `
2,600 arising
on sale of unlisted shares of C Ltd. 520
Total tax payable 3,40,520

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Answer 26 In this case, since advance of `20 lakh is received

Computation of income chargeable under the head “Capital Gains” for in cash on the date of agreement, stamp duty value
A.Y.2024-25 on the date of registration has to be considered.
Particulars ` (in lakhs) `(in lakhs) Since stamp duty value on the date of registration
Capital Gains on sale of residential building exceeds 105% (110%) of the actual consideration,
Actual sale consideration ` 600 lakhs such stamp duty value on the date of registration
Value adopted by Stamp Valuation Authority ` 650 would be taken as full value of consideration]
lakhs Less: Brokerage@1% of sale consideration (1% of 6.00
Gross Sale consideration 650.00 ` `600 lakhs)
600.00 Net Sale consideration 644.00
[Where the actual sale consideration is less than the
value adopted by the Stamp Valuation Authority for Less: Indexed cost of acquisition 594
the purpose of charging stamp duty, and such stamp - Cost of vacant land, ` Rs 80 lakhs, plus registration
duty value exceeds 105% and other expenses i.e., ` Rs 8 lakhs, being 10% of
(110%) of the actual sale consideration, then, the cost of land [` 88 lakhs × 348/137] 223.53
value adopted by the Stamp Valuation Authority - Construction cost of residential building (`Rs 100
shall be taken to be the full value of consideration lakhs x 348/167) 208.38 431.91
as per section 50C. Long-term capital gains before exemption 182.05
(As per amendment in section 50C if SDV is not more 162.09
than 110% of the consideration, then Consideration Less: Exemption under section 54 80.00
shall be treated as Full Value
of Consideration)
In a case where the date of agreement is different
from the date of registration, stamp duty value on
the date of agreement can be considered provided
the whole or part of the consideration is paid by
way of account payee cheque/bank draft or by
way of ECS through bank account or through any
other prescribed electronics mode on or before the
date of agreement.

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Since the amount of capital gain does not exceed

` Rs 2 crore, the capital gain arising on transfer Question 27
of a long-term residential property shall not be
chargeable to tax to the extent such capital
Mr. Kalyan has a residential house property which was acquired on 12-08-
gain is invested in the purchase of two residential
2005 for ` 2,00,000. The property is sold for ` 22,00,000 in December
house property in India one year before or two
2023. The sub-registrar refused to register the documents for the said value, as
years after the date of transfer of original asset, at according to him, stamp duty value based on State Government guidelines was
the option of the assessee. ` 28,00,000. Mr. Kalyan preferred an appeal to the revenue divisional officer
However, in the present case, the exemption would who fixed the value of the house ` 25,00,000. He acquired another residential
be available only in respect of the residential house house on 31 -03-2024 for ` 17,00;000 for self- occupation. On 01-03-2025,
acquired at Delhi and not in respect of the residential he sold such new residential house for ` 30,00,000.
house in London since the residential house property Compute his capital gain for the A.Y. 2024-25 and 2025-26. (Cost Inflation
should be purchased or constructed in India Index: 2001-02; 2005- 06 and 2023-24 are, 100; 117 and 348) (MTP 4
Less: Exemption under section 54EC Amount 50.00 Marks Oct ‘23)
deposited in capital gains bonds of NHAI within six
months from the date of transfer (i.e., on or before Answer 27
09.08.2020) would Computation of capital gain in the hands of Mr. Kalyan for A.Y. 2024-25
qualify for exemption, to the maximum extent of
`50 lakhs. Particulars `
Therefore, in the present case, exemption can be Full value of consideration 25,00,000
availed only to the extent of `50 lakh out of ` 60 [As per section 50C, in case the actual sale consideration (i.e.,
lakhs, even if the both the investments are made on ` 22 lakhs, in this case) is less than the stamp duty value (i.e., `
or before 09.08.2024 (i.e., within six months from 28 lakhs, in this case) assessed by the stamp valuation authority
the date of transfer). (Sub-registrar, in this case), the stamp duty value shall be deemed
Long term capital gains chargeable to tax 52.05 as the full value of consideration if it exceeds 110% of the sale
32.09 consideration However, if assessee has preferred an appeal to
the Valuation Officer (i.e., revenue divisional officer, in this case)
Note: and the Valuation Officer has fixed the value of the house (i.e.,
Since the residential house property was held by Mr. Yusuf for more than 24 ` 25 lakh, in this case) less than stamp duty value (i.e., ` 28 lakh,
months immediately preceding the date of its transfer, the resultant gain is a in this case), such value determined by the Valuation Officer
long-term capital gain shall be deemed as the full value of consideration.]

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Less: Indexed cost of acquisition [` 2,00,000 x 348/117] 5,94,872

Long-term capital gain [Since the residential house is held for 19,05,128 Liabilities Amount Assets Amount
more than 24 months] (` In lacs) (` In lacs)
Less: Exemption under section 54 Own Capital 1,850 Fixed Assets:
Purchase of new residential house property on 31.3.2024 (i.e., Accumulated P & L balance 870 Unit PT 250
within two years Liabilities: Unit QL 170
from the date of transfer of residential house) 17,00,000 Unit PT 190 Unit RS 950
Taxable long term capital gain 2,05,128 Unit QL 260 Other Assets:
Unit RS 340 Unit PT 790
Computation of capital gains in the hands of Mr. Kalyan for A.Y. 2025-26 Unit QL 860
Particulars ` Unit RS 490
Full value of consideration 30,00,000 Total 3,510 Total 3,510
Less: Cost of acquisition [As per section 54, if the new residential
Other information:
house purchased (i.e., on 31.3.2024, in this case) is transferred
(i) Slump sale consideration on transfer of Unit RS was ` 1540 lacs.
within 3 years of its
purchase (i.e., on 1.3.2025, in this case), and the cost of Nil
(ii) Fixed Assets of Unit RS includes land which was purchased at ` 90 lacs in
acquisition of the new house (i.e., ` 17 lakhs, in this case) is lower the year 2013 and was revalued at ` 180 lacs.
than the long-term capital gain (i.e., ` 19,34,188, in this case),
the cost of acquisition of such new residential house shall be (iii) Other fixed assets are reflected at ` 770 lacs, (i.e., ` 950 lacs less value
taken as Nil, while computing capital gains on sale of the new of land) which represents written down value of those assets as per books.
residential house] The written down value of these assets is ` 630 lacs as per Income- tax Act,
Short term capital gain [Since the residential house is held for a 30,00,000 1961.
period less than 24 months]
(iv) Unit RS was set up by Mr. Pratap in December, 2011.
Compute the Capital Gains arising in the hands of Mr. Pratap from slump
sale of Unit RS for Assessment year 2019-20. Note: Cost Inflation Indices for
Question 28 the financial year 2011-12 and financial year 2023-24 are 184 and 348,
respectively.(RTP May ’19, PYP 10 Marks ,May 18)
Mr. Pratap, a proprietor has transferred his unit RS to Mr. Raj by way of Slump
Sale on December 7, 2023. The summarised Balance Sheet of Mr. Pratap as on
that date is given below:

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Answer 28 However, any change in the value of assets on account of revaluation shall
Computation of capital gain on slump sale of Unit RS for A.Y. 2024 -25 not be considered for this purpose.
Particulars ` (3) For calculating aggregate value of total assets of the undertaking or
Full value of consideration 15,40,00,000 division in case of slump sale in case of depreciable assets, the written
(As per amendment The fair market value of capital asset down value of block of assets determined in accordance with the provisions
would be higher of: FMV1- being the fair market value contained in section 43(6) of Income-tax Act, 1961 is to be considered and
of capital assets transferred by way of slump sale & for all other assets, book value is to be considered.
FMV2- being the fair market value of the consideration (4) Since Unit RS is held by the assessee for more than 36 months, the capital
(monetary or non- monetary) received or accruing as a gain arising from slump sale is a long-term capital gain.
result of transfer by way of slump sale) (5) Indexation benefit is not available in case of slump sale
Less: Deemed cost of acquisition (Net worth is deemed to be 8,70,00,000
the cost of acquisition) [Refer Working Note below]
Long-term capital gain [Since the Unit is held for more than 6,70,00,000
36 months] Question 29
Working Note: Net worth of Unit-RS

Particulars ` Determine the capital gains/loss and tax liability in the following scenarios for
Cost of Land (Revaluation not to be considered) 90,00,000 the A.Y. 2024-25 assuming the assessees does not have any other source of
WDV of other depreciable fixed assets as per the Income- 6,30,00,000 income:
tax Act, 1961 (i) On 12th December, 2023, 1,200 shares of X Ltd., a listed company are
Other Assets (book value) 4,90,00,000 sold by Mr. Vishal, a non- resident, @ ` 1,550 per share and STT was paid
at the time of sale of shares. These shares were acquired by him on 25th
12,10,00,000
May, 2017 @ ` 425 per share by paying STT at the time of purchase.
Less: Liabilities 3,40,00,000
The price at which these shares were traded in National Stock Exchange on
Net worth 8,70,00,000 31st January, 2018 is as follows –
Particulars Amount in `
Notes:
Highest Trading Price 680
(1) In case of slump sale, net worth of the undertaking transferred shall be
Average Trading Price 610
deemed to be the cost of acquisition and cost of improvement as per section
Lowest Trading Price 540
50B.
(2) “Net worth” of the undertaking shall be the aggregate value of total assets
(ii) Mr. Kabir, a resident aged 45 years, is the owner of residential house which
of the undertaking or division as reduced by the value of liabilities of such was purchased on 1st August, 2021 for ` 19,00,000. He sold the said
undertaking or division as appearing in the books of accounts.

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house on 25th September, 2023 for ` 24,50,000. Valuation as per stamp Full value of consideration [Actual 24,50,000
valuation authorities was ` 25,50,000 as on the date of sale. CII – 2021- consideration, since stamp duty value does not
22: 317; 2023-24: 348 (RTP Nov ‘23) exceeds 110% of actual sale consideration]
Answer 29 Less: Indexed cost of acquisition [` 19,00,000 20,85,804
Particulars Amount ` x 348/317]
(i) Long-term capital gain on transfer of 1,200 Long term capital gain/ Total Income 3,60,631
shares of X Ltd. [Taxable u/s 112A @10% on
Total Income (Rounded off) 3,64,196
amount exceeding ` 1,00,000]
Long-term capital gain taxable u/s 112 12,839
Full value of consideration [1,200 x ` 1,550] 18,60,000
@20% on ` 64,196 [`3,64,196 – `3,00,000,
Less: Cost of acquisition 8,16,000
being unexhausted basic exemption limit] (As
Higher of
per amendment in the new scheme the basic
(i) Cost of acquisition [1,200 x ` 425] 5,10,000
limit is increased to ` 3,00,000)
(ii) Lower of fair market value of such shares 8,16,000 Less: Rebate under section 87A [Since the total 12,500
as on 31.1.2018 and sale consideration
income does not exceed ` 5 lakhs]
[1,200 x 680]
339
Fair market value of listed equity shares as
on 31.1.2018 [Highest price quoted on the Add: Health and Education Cess@4% 385
recognized stock exchange i.e., ` 680 per Tax liability 14
share Tax liability (Rounded off) 400
sale consideration ` 1,550 per share sale
consideration ` 1,550 per share
Long term capital gain taxable u/s 112A/ 10,44,000 Question 30
Total Income
Tax on long-term capital gain exceeding ` 1 94,400 Mr. Govind purchased 600 shares of “Y” limited at ` 130 per share on
lakh i.e., ` 9,44,000 @10% 26.02.1979. “Y” limited issued him, 1,200 bonus shares on 20.02.1984. The fair
Add: Health and Education Cess@4% 3,776 market value of these share at Mumbai Stock Exchange as on 1.04.2001 was
Tax liability 98,176 ` 900 per share and ` 2,000 per share as on 31.01.2018. On 31.01.2022 he
Tax liability (Rounded off) 98,180 converted 1000 shares as his stock in trade. The shares were traded at Mumbai
Stock Exchange on that ·date at a high of ` 2,200 per share and closed for the
(ii) Since Mr. Vishal is a non-resident, benefit of
unexhausted basic exemption limit would not day at ` 2,100 per share. On 07.07.2023 Mr. Govind sold all 1800 shares @`
be available to him. 2,400 per share at Mumbai Stock Exchange and securities transaction tax was
Sale of residential house [Long-term capital paid. Compute total income of Mr. Govind for the assessment-year 2024-25.
asset, since held for more than 24 months] (PYP 5 Marks, Nov’20)

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Answer 30 In case of bonus shares - FMV as on 1.4.2001
Computation of total income of Mr. Govind for the A.Y.2024-25 (Nil or ` 900, at the option of the assessee)
Particulars ` `
I Profits and gains of business and profession (ii) ` 2,000 per share, being the lower of
Full value of consideration [1000 shares x ` 24,00,000 FMV as on 31.1.2018 - ` 2,000 per share
2,400 per share] Sale consideration – ` 2,400 per share
Less: FMV on the date of conversion (` 2,100
x 1000 shares] [See Note below] 21,00,000 3,00,000 Note –
II Capital Gains Explanation to section 55(2) (ac) defines “fair market value” as the highest price
In respect of 800 shares held as capital asset of capital asset quoted on the stock exchange only for the purpose of the said
up- to the date of sale clause (ac) i.e., to arrive at the FMV as on 31.1.2018 for computing cost of
Full value of consideration [800 shares x ` 19,20,000 acquisition of shares.
2,400 per share] However, the question states two prices on 31.1.2023, being the date of conversion
Less: Cost of acquisition [800 shares x ` 16,00,000 3,20,000 of capital asset into stock in trade for which we have to consider the definition of
2,000] (See Working Note below) “fair market value” as per section 2(22B). As per this definition, FMV refers to the
In respect of 1,000 shares converted into price that the capital asset would ordinarily fetch on sale in the open market on
stock in trade on 31.1.2023 (Capital gains is the relevant date.
taxable in the P.Y.2023-24, when the stock in In the question, two prices are given on the relevant date i.e., the date of
trade is sold) conversion of capital asset into stock in trade, namely, the highest price and the
Full value of consideration [1000 shares x ` 21,00,000 closing price. The above solution is given considering the closing price as the FMV
2,100, being FMV on the date of conversion] as on 31.1.2023. Alternatively, highest price can also be considered as the FMV
Less: Cost of acquisition [1000 shares x ` 20,00,000 1,00,000 as on 31.1.2023. In such case, the total income of Mr. Govind would be computed
2,000] (See Working Note below) in the following manner:
Total Income 7,20,000
Working Note - Cost of acquisition (per share) Alternate Answer
Higher of (I) and (ii), below 2,000 Computation of total income of Mr. Govind for the A.Y.2024-25
(I) ` 900 per share, being
In case of shares purchased - Original cost of Particulars ` `
acquisition (` 130) or FMV as on 1.4.2001 (` I Profits and gains of business and profession
900), at the option of the assessee Full value of consideration [1000 shares x ` 24,00,000
2,400 per share]

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Less: FMV on the date of conversion (` 2,200 Note -

x 1000 shares] [See Note above] 22,00,000 2,00,000 It is possible to take a view that since no STT was paid on the date of conversion
II Capital Gains of capital asset, being listed shares into stock in trade, capital gains have to be
In respect of 800 shares held as capital asset computed u/s 112 and not 112A. If this view is taken, the total income of Mr.
up to the date of sale Govind would, accordingly, be computed in the following manner:
Full value of consideration [800 shares x ` 19,20,000
Computation of total income of Mr. Govind for the A.Y.2024-25
2,400 per share]
Particulars ` `
Less: Cost of acquisition [800 shares x `
16,00,000 3,20,000 I Profits and gains of business and profession
2,000] (See Working Note below)
Full value of consideration [1000 shares x 24,00,000
In respect of 1,000 shares converted into 2,00,000
` 2,400 per share]
stock in trade on 31.1.2023 (Capital gains is
taxable in the P.Y.2023-24, when the Less: FMV on the date of conversion (` 2,100 21,00,000 3,00,000
stock in trade is sold) x 1000 shares] [See Note below]
Full value of consideration [1000 shares x ` 22,00,000 II Capital Gains
2,200, being FMV on the date of conversion] In respect of 800 shares held as capital asset
[See Note above] up- to the date of sale
Less: Cost of acquisition [1000 shares x `
20,00,000 ` 2,400 per share]
2,000] (See Working Note below)
Less: Indexed cost of acquisition [800 shares 25,05,600
x ` 900 x 348/100] (See Working Notes 1
Working Note - Cost of acquisition (per share)
and 2 below)
Higher of (I) and (ii), below 2,000
In respect of 1,000 shares converted into (5,85,600)
(I) ` 900 per share, being
stock in trade on 31.1.2023 (Capital gains is
In case of shares purchased - Original cost of
taxable in the P.Y.2023-24, when the stock in
acquisition (` 130) or FMV as on 1.4.2001 (`
trade is sold)
900), at the option of the assessee
In case of bonus shares - FMV as on 1.4.2001
` 2,100, being FMV on the date of conversion]
(Nil or ` 900, at the option of the assessee)
Less: Cost of acquisition [1000 shares x ` 900 29,79,000
(ii) ` 2,000 per share, being the lower of
x 331/100] (See Working Notes 1 and 2
FMV as on 31.1.2018 - ` 2,000 per share
below)]
Sale consideration – ` 2,400 per share (8,79,000)

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Long-term capital loss to be carried forward (14,64,600) on the relevant date i.e., the date of conversion of capital asset into stock in
= (5,85,600) + (8,79,000) = trade, namely, the highest price and the closing price. The above solution is given
considering the closing price as the FMV as on 31.1.2023. Alternatively, highest
Total Income 3,00,000 price can also be considered as the FMV as on 31.1.2023. In such case, the total
Working Note – income of Mr. Govind would be computed in the following manner:
1. Cost of acquisition (per share)
Alternate Answer
Higher of (I) and (ii), below i.e., ` 900 per share
(I) ` 900 per share, being the FMV as on Particulars ` `
1.4.2001 I Profits and gains of business and profession
(ii) In case of shares purchased - Original cost of Full value of consideration [1000 shares x ` 24,00,000
acquisition (` 130) 2,400 per share]
In case of bonus shares – Nil Less: FMV on the date of conversion (`
2. In case of 800 shares sold during the year, 2,200 x 1000 shares] [See Note above] 22,00,000 2,00,000
the CII of F.Y.2023-24 i.e., 348 has to be II Capital Gains
considered to calculate indexed cost of In respect of 800 shares held as capital
acquisition. In case of 1000 shares converted asset up- to the date of sale
into stock in trade on 31.1.2023, the CII of the Full value of consideration [800 shares x 19,20,000
year of conversion, i.e., F.Y.2022-23 i.e., 331 `2,400 per share]
has to be considered to compute the indexed Less: Indexed cost of acquisition [800 shares 25,05,600
cost of acquisition. x ` 900 x 348/100] (See Working Notes 1
and 2 below)
Note – In respect of 1,000 shares converted into (5,85,600)
Explanation to section 55(2) (ac) defines “fair market value” as the highest price stock in trade on 31.1.2019 (Capital gains
of capital asset quoted on the stock exchange only for the purpose of the said is taxable in the P.Y.2019-20, when the
clause (ac) i.e., to arrive at the FMV as on 31.1.2018 for computing cost of stock in trade is sold)
acquisition of shares. Full value of consideration [1000 shares x ` 21,00,000
However, the question states two prices on 31.1.2023, being the date of 2,200, being FMV on the date of conversion]
conversion of capital asset into stock in trade for which we have to consider the Less: Cost of acquisition [1000 shares x ` 29,79,000
definition of “fair r market value” as per section 2(22B). As per this definition, 900 x 331/100] (See Working Notes 1
FMV refers to the price that. The capital asset would ordinarily fetch on sale and 2 below)]
in the open market on the relevant date. In the question, two prices are given

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Long-term capital loss to be carried forward (8,79,000) and occupied for own residence. Punjab National Bank has sanctioned a loan
= (5,85,600) + (8,79,000) = (14,64,600) of ` 35,50,000 (80% of stamp value) at the interest rate of 12% per annum
on 01.05.2023 and disbursement was made on 01.06.2023. She does not
own any other residential house on the date of sanction of loan. Principal
Working Note –
amount of ` 1,30,000 was paid during the financial year 2023-24.
1. Cost of acquisition (per share)
Higher of (I) and (ii), below i.e., ` 900 per share Cost Inflation Indices: 2023-24: 348, 2012-13: 200
(I) ` 900 per share, being the FMV as on Compute total income of Ms. Mishika for the assessment year 2024 -25
1.4.2001 assuming that she has not opted for the provisions under section 115BAC.
(ii) In case of shares purchased - Original cost (PYP 7 Marks Dec ‘21)
of acquisition (` 130) Answer 31
In case of bonus shares – Nil Computation of total income of Ms. Mishika for the A.Y.2024 -25
2. In case of 800 shares sold during the year, Particulars Amount (`) Amount (`)
the CII of F.Y.2023-24 i.e., 348 has to be Income from house property [Self-occupied] Nil
considered to calculate indexed cost of
Net Annual Value Nil
acquisition. In case of 1000 shares converted
Less: Interest on housing loan of ` 3,55,000 [` 2,00,000
into stock in trade on 31.1.2023, the CII of
35,50,000 x 12% x 10/12 months] restricted to
the year of conversion, i.e., F.Y.2022-23 i.e.,
` 2,00,000/-
331 has to be considered to compute the
(2,00,000)
indexed cost of acquisition.
Less: Set-off of loss against long-term capital 2 ,00,000
gains
Long-term capital gains on transfer of land
Question 31
under specified agreement Since Ms. Mishika
transferred her share in the project after issue of
Ms. Mishika has entered into an agreement with M/s CVM Build Limited on completion certificate, capital gains on transfer of
25.04.2020 in which she agrees to allow such Company to develop a shopping land handed over to developer under specified 82,80,000
mall on land owned by her in New Delhi. She purchased such land on 05.05.2012 agreement in the P.Y. 2020-21 would be taxable
for ` 15,00,000. In consideration, M/s CVM Build Limited will provide 20% in the previous year 2023-24, being the year
share in shopping mall to Mishika. The certificate of completion of shopping mall in which certificate of completion is issued as
was issued by authority as on 26.12.2023. On such date, Stamp duty value of per section 45(5A). Accordingly, capital gain
shopping mall was ` 4,14,00,000. Subsequently on 18.03.2024, she sold her arising in respect of land would be- Full value
15% share in shopping mall to Mr. Ketav in consideration of `65,00,000. of consideration, being 20% share in shopping
She has also purchased a house on 09.05.2023 in consideration of ` 46,00,000 mall [Stamp duty value on the date of issue of
completion certificate (` 4,14,00,000 x 20%)]

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Less: Indexed of cost of acquisition [` 15,00,000 26,10,000 Deduction under section 80C – repayment of 1,30,000
x 348/200] principal amount of housing loan
Long-term capital gain 56,70,000 Deduction under section 80EEA – Ms. Mishika 1,50,000 2,80,000
Less: Deduction under section 54F would be eligible for deduction of interest on
Deduction in respect of amount invested for housing loan (` 3,55,000 - ` 2,00,000 = `
purchase of a residential house acquired within 1,55,000) to the extent of ` 1,50,000, since
one year prior to date of transfer would be stamp duty value of the house does not exceed
allowable proportionately, since amount invested ` 45,00,000 [being ` 44,37,500 (` 35,50,000
is less than the net consideration. Accordingly, 31,50,000 x 100/80)] and she does not own any other
deduction would be ` 29,05,180 (` 56,70,000 x residential house on thedate of sanction of loan.
`46,00,000 / ` 82,80,000) Total Income 23,30,000
Long-term capital gains 25,20,000 Total Income (rounded off) 23,30,000
Less: Set-off of loss from house property [It is Note -
beneficial to set-off loss from house property As per section 45(5A), any capital gains arising from the transfer of a capital
against long-term capital gains, since in case asset, being land or building or both, under a specified agreement, is chargeable
of Ms. Mishika total income comprises of LTCG to income-tax as income of the previous year in which the certificate of completion
taxable@20% and STCG taxable at normal is issued by the competent authority. In the above solution, the CII of F.Y.2023-24
slab rates; and she can claim deduction of has been considered on the basis of parity, since, as per section 45(5A), it is the
` 2,80,000 under Chapter VI-A against STCG of 2,00,000 stamp duty value of the developed property (shopping mall, in this case) on the
` 2,90,000. Moreover, the remaining STCG would date of issue of certificate of completion (26.12.2023), which is deemed as the
also not be taxable since it would be below the full value of consideration for transfer of land handed over to the developer.
basic exemption limit]
23,20,000 Alternate view -
Short-term capital gains Sale of 15% share in The definition of transfer, inter alia, includes any arrangement or transaction
shopping mall [short-term capital asset, since held where any rights are handed over in execution of part performance of contract,
for not more than 24 months] even though the legal title has not been transferred. Hence, in case of ‘specified
agreement(s)’, ‘transfer’ takes place at the time when the owner of the immovable
Net Sales consideration 65,00,000
property hands over the same to the developer i.e., in F.Y.2020-21 in this case
Less: Cost of acquisition, being the full value of
consideration taxable on transfer of land [` 62,10,000
4,14,00,000 x 15%]
Short-term capital gains 2,90,000
Gross Total Income 26,10,000
Less: Deductions under Chapter VI-A (allowable
against short-term capital gains of ` 2,90,000)

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3.5 INCOME FROM OTHER

SOURCES
under the head “Income from other sources”. Hence, `35 lakh, being `35
(i.e., `110 - `75) x 1,00,000 shares, would be chargeable under section
Question 32 56(2)(viib).
(iii) If shares are issued at `115 each and FMV of share is ` 125 each, no
amount would be chargeable to tax even though the shares were issued
XYZ (P) Ltd. was incorporated during P.Y. 2023-24 having a paid up capital of at a premium, since shares are issued at a price which is less than the fair
` 25 lakhs. In order to increase its capital, the company further issues 1,00,000 market value.
shares (having face value of ` 100 each) during the year at par as on 1.9.2023.
The FMV of such shares as on 1.9.2023 was ` 75.
(i) Determine the tax implications of the above transaction in the hands of
Question 33
company, assuming it is the only transaction made during the year.
(ii) Will your Answer change, if shares were issued at ` 110 each?
(iii) What will be your answer, if shares were issued at ` 110 and FMV of the
Ms. Julie received following amounts during the previous year 2023-24.
shares was `125 as on 1.9.2023? (MTP 4 Marks March 22)
(1) Received loan of ` 5,00,000 from the ABC Private Limited, a closely held
company engaged in textile business. She is holding 10% of the equity
Answer 32
share capital in the said company. The accumulated profit of the company
The provisions of section 56(2)(viib) would be attracted, where consideration is was ` 2,00,000 on the date of the loan.
received from a resident person by a company, other than a company in which (2) Received Interest on enhanced compensation of ` 5,00,000. Out of this
public are substantially interested, in excess of the face value of shares i.e., interest, ` 1,50,000 relates to the previous year 2020-21, ` 1,90,000
where shares are issued at a premium. In such a case, the difference between relates to previous year 2021-22 and ` 1,60,000 relates to previous year
the consideration received and the fair market value would be chargeable to 2022-23. She paid ` 1 lakh to her advocate for his efforts in the matter.
tax under the head “Income from Other Sources”. Discuss the tax implications, if any, arising from these transactions in her
(i) In this case, since XYZ (P) Ltd., a closely held company issued 1,00,000 hand with reference to Assessment Year 2024-25. (PYP 4 Marks, Nov’20)
shares (having face value of `100 each) at par i.e., ` 100 each, though
issue price is greater than FMV, no amount would be chargeable to tax as Answer 33
income from other sources. (1) Any payment by way of loan by a closely held company to its shareholder
(ii) In this case, since shares are issued at a premium, the amount by which the holding not less than 10% of voting power is deemed as dividend, to the
issue price of extent of accumulated profits of the company. Accordingly, out of ` 5 lakhs
`110 each exceeds the FMV of ` 75 each would be chargeable to tax given by ABC Pvt. Ltd. to Ms. Julie, loan to the extent of ` 2 lakhs would be

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treated as deemed dividend for the A.Y.2024-25. Such dividend would,

however, be taxable@30% in the hands of ABC Ltd. Consequently, it would
be fully exempt in Julie’s hands under section 10(34).
As per amendment dividend u/s 2(22)(a)/(b)/(c)/(d)/(e) from an Indian
Company will now be taxable normal rates in the hands of the Shareholder
Assessee. Interest Income incurred to earn such income will be allowed
as a deduction but only upto 20% of such income. No deduction
of commission/remuneration paid to any other person. DDT has been
abolished.
(2) Interest on enhanced compensation is chargeable to tax under the head
“Income from other sources” in the year of receipt, after providing for
deduction of 50% of such income. Accordingly, ` 2,50,000 [` 5,00,000 –`
2,50,000, being 50% of ` 5 lakh] would be chargeable to tax in the hands
of Ms. Julie under the head “Income from Other Sources” for the A.Y.2024-
25.

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4. INCOME OF OTHER PERSON INCLUDED

IN ASSESSES TOTAL INCOME
Profit for P.Y.2022-23 to 1,50,000 2,50,000 4,00,000
Question 34 be apportioned on the 3 5
basis of capitalemployed 4,00,000 × 8 4,00,000 × 8
Mr. Vaibhav started a proprietary business on 01.04.2022 with a capital of
on the first day of the
` 5,00,000. He incurred a loss of ` 2,00,000 during the year 2022-23. To
previousyear i.e. as on
overcome the financial position, his wife Mrs. Vaishaly, a software Engineer,
1.4.2021 (3:5)
gave a gift of ` 5,00,000 on 01.04.2023, which was immediately invested in
the business by Mr. Vaibhav. He earned a profit of ` 4,00,000 during the year
2023-24. Compute the amount to be clubbed in the hands of Mrs. Vaishaly for Therefore, the income to be clubbed in the hands of Mrs. Vaishaly for the
the A.Y. 2024-25. If Mrs. Vaishaly gave the said amount as loan, what would be A.Y.2024-25 is ` 2,50,000.
the amount to be clubbed? (Old & New SM, RTP May’23) In case Mrs. Vaishaly gave the said amount of ` 5,00,000 as a bona fide
loan,then, clubbing provisions would not be attracted.
Answer 34 Note: The provisions of section 56(2)(x) would not be attracted in the hands of
Section 64(1)(iv) of the Income-tax Act, 1961 provides for the clubbing of income Mr. Vaibhav, since he has received a sum of money exceeding ` 50,000 without
in the hands of the individual, if the income earned is from the assets (other than consideration from a relative i.e., his wife.
house property) transferred directly or indirectly to the spouse of the individual,
otherwise than for adequate consideration or in connection with an agreement to
Question 35
live apart. In this case, Mr. Vaibhav received a gift of ` 5,00,000 on 1.4.2023
from his wife Mrs. Vaishaly, which he invested in his business immediately. The
Suresh gifted `10 lakhs to his wife, Shagun on her birthday on, 29th February,
income to be clubbed in the hands of Mrs. Vaishaly for the A.Y. 2024-25 is
2023. Shagun lent such amount to Kinjal on 1st April, 2023 for six months on
computed as under:
which she received interest of ` 75,000. The said sum of ` 75,000 was invested
in shares of a listed company on 5th October, 2023, which were sold for `
Particulars Mr. Vaibhav’s Capital Total (`) 90,000 on 30th March, 2024. Securities transactions tax was paid on purchase
capital contributionout and sale of such shares. In in whose hands the above income shall be included
contribution (`) of gift from Mrs. in A.Y.2024-25. Support your answer with brief reasons. (MTP 3 Marks, Oct’21,
Vaishaly (`) Mar’19, RTP Nov ’18, Nov’19)
Capital as on 1.4.2022 3,00,000 5,00,000 8,00,000
(5,00,000 – Answer 35
2,00,000) In computing the total income of any individual, there shall be included all such

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income as arises directly or indirectly, to the spouse of such individual from assets Answer 36
transferred directly or indirectly, to the spouse by such individual otherwise than Interest on loan
for adequate consideration or in connection with an agreement to live apart. As per section 64(1)(iv), in computing the total income of any individual, there
shall be included all such income as arises directly or indirectly, to the spouse
Interest on loan: Accordingly, ` 75,000, being the amount of interest on loan of such individual from assets transferred directly or indirectly, to the spouse by
received by Mrs Shagun, wife of Mr. Suresh, would be includible in the total such individual otherwise than for adequate consideration or in connection with
income of Mr. Suresh, since such loan was given out of the sum of money received an agreement to live apart.
by her as gift from her husband. Accordingly, ` 50,000, being the amount of interest on loan received by Ms.
Nisha, wife of Mr. Nishant, would be includible in the total income of Mr. Nishant,
Short-term capital gain: Income from the accretion of the transferred asset is since such loan was given by her out of the sum of money received by her as
not liable to be included in the hands of the transferor and, therefore, short-term gift from her husband.
capital gain of ` 15,000 (` 90,000, being the sale consideration less ` 75,000,
being the cost of acquisition) arising in the hands of Mrs Shagun from sale of Loss from business
shares acquired by investing the interest income of `75,000 earned by her (from Since the capital was invested in business by Ms. Nisha on 1st April, 2023,
the loan given out of the sum gifted by her husband), would not be included in and capital invested was entirely out of the funds gifted by her husband, the
the hands of Mr. Suresh. Thus, such income is taxable in the hands of Mrs. Shagun. entire loss of ` 15,000 from the business carried on by Ms. Nisha would also be
includible in the total income of Mr. Nishant.
Since income includes loss as per Explanation 2 to section 64, clubbing provisions
Question 36 would be attracted even if there is loss and not income.
Capital Gain on sale of shares of listed company

Nishant gifted ` 10 lakhs to his wife, Nisha on her birthday on, 1st January, The short-term capital gain of ` 25,000 (` 75,000, being the sale consideration
2023. Nisha lent ` 5,00,000 out of the gifted amount to Krish on 1st April,
less ` 50,000, being the cost of acquisition) arising in the hands of Ms. Nisha from
2023 for six months on which she received interest of ` 50,000. The said sum of
sale of shares acquired by investing the interest income of ` 50,000 earned by
` 50,000 was invested in shares of a listed company on 15th October, 2023,
her (from the loan given out of the sum gifted to her by her husband), would not
which were sold for ` 75,000 on 30th December, 2023.Securities transaction
tax was paid on such sale. The balance amount of gift was invested as capital be included in the hands of Mr. Nishant.
by Nisha in a newly business started on 1.4.2023. She suffered loss of ` 15,000 Income from the accretion of the transferred asset is not liable to be included in
in the business in Financial Year 2023-24.In whose hands the above income and the hands of the transferor and therefore such income is taxable in the hands of
loss shall be included in Assessment Year 2024 -25? Support your answer with Ms. Nisha. Since securities transaction tax has been paid, such short-term capital
brief reasons. (MTP 4 Marks April ’23 & Oct ‘20) gain on sale of listed shares is taxable@15% in the hands of Ms. Nisha.

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Question 37 However, the interest income earned by his spouse on fixed deposit of `3 lakhs
alone would be included in the hands of Mr. Vijay’s brother and not the interest
Mr. Vijay gifted a sum of ` 4 lakhs to his brother’s wife on 19-6-2023. On 21- income on the entire fixed deposit of `4 lakhs, since the cross transfer is only to
7-2023, his brother gifted a sum of ` 3 lakhs to Mr. Vijay’s wife. The gifted the extent of `3 lakhs.
amounts were invested as fixed deposits in banks by Mr Vijay and wife of Mr.
Vijay’s brother on 01-8-2023 at 9% interest. Examine the consequences of the
above under the provisions of the Income-tax Act, 1961 in the hands of Mr.
Question 38
Vijay and his brother. (MTP 4 Marks, May’20
Mrs and Mr. Naresh Yadav have two minor children Mahi and Nonu. The
Answer 37
following are the receipts in the hands of Mahi and Nonu during the year ended
In the given case, Mr. Vijay gifted a sum of `4 lakhs to his brother’s wife on 31-3-2023:
19.06.2023 and simultaneously, his brother gifted a sum of `3 lakhs to Mr. (i) Mahi received a gift of ` 85,000 from her friend’s father on the occasion
Vijay’s wife on 21.07.2023. The gifted amounts were invested as fixed deposits of her birthday.
in banks by Mr. Vijay and his brother’s wife. These transfer are in the nature (ii) Nonu won a prize money of `3,00,000 in National Sports competition.
of cross transfer Accordingly, the income from the assets transferred would be This was invested in debentures of a company, from which interest of `
assessed in the hands of the deemed transferor because the transfer are so 25,000 (gross) accrued during the year.
intimately connected to form part of a single transaction and each transfer Mr. Marsh’s income before considering clubbing provisions is higher than
constitutes consideration for the other by being mutual or otherwise. that of his wife. Explain how these items will be considered for taxation
under the provisions of the Income Tax Act, 1961. Detailed computation of
If two transactions are inter-connected and are part of the same transaction income is not required. (MTP 5 Marks, Oct’19)
in such a way that it can be said that the circuitous method was adopted as a
device to evade tax, the implication of clubbing provisions would be attracted. Answer 38
It was so held by the Apex Court in CIT vs. Keshavji Morori (1967) 66 ITR 142. (I) Gift received from non-relative by minor daughter Mahi
Gift of ` 85,000 received by minor daughter Mahi, from non-relative
would be taxable, since the amount of gift exceeds ` 50,000. It would
Accordingly, the interest income arising to Mr. Vijay in the form of interest on
be included in the hands of her father, Mr. Naresh Yadav, since his
fixed deposits would be included in the total income of Mr. Vijay and interest income before considering clubbing provisions is higher than that of
income arising in the hands of his brother’s wife would be taxable in the hands his wife.
of Mr. Vijay’s brother as per section 64(1), to the extent of amount of cross Exemption of `1,500 would be allowed in respect of the aggregate
transfer i.e., `3 lakhs. income of minor daughter
This is because both Mr. Vijay and his brother are the indirect transferor of the income Mahi so included in the hands of Mr. Naresh Yadav under section
to their respective spouses with an intention to reduce their burden of taxation. 10(32)

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(ii) Prize money of ` 3,00,000 in National Sports Competition/Interest Mr. Shashank and Mrs Kajal do not have any other income during the P.Y.
2023-24. Compute the total income of Mr. Shashank and Mrs. Kajal for
on debentures received by minor son Nonu
A.Y. 2024-25.(MTP 6 Marks,Aug’18)
Income derived by a minor child from any activity involving application
of his/her skill, talent, specialised knowledge and experience is not
Answer 69
to be included in the hands of parent. Hence, the prize money of `
Computation of Total income of Mr. Shashank and Mrs Kajal for the A.Y.
3,00,000 won in National Sports Competition by minor son Nonu from
2024-25
exercise of special talent would not be included in the income of either
Particulars Mr. Mrs.
parent.
Shashank Kajal (`)
However, interest of ` 25,000 on debentures has to be included in
(`)
the hands of her father, Mr. Naresh Yadav, even if the investment
Salary income (` 30,000 x 12) Less standard 3,10,000
is made out of income arising from application of special talent.
deduction ` 50,000 (As per
Exemption of `1,500 would be allowed in respect of the aggregate
amendment)
income of minor son Nonu so included in the hands of Mr. Naresh Yadav
Income from house property [` 2,40,000 (` 20,000 1,68,000
under section 10(32).
x 12) less standard deduction of 30%] (Note 1)
Income from other sources
Question 39 Interest on fixed deposit with State bank of India (` 40,000
4,00,000 x 10%) (Note 2)
Profits and gains from business or profession
Mr. Shashank is an employee of KML (P) Ltd. drawing a monthly salary of ` Profits earned by Mrs Kajal from her business (Note 3,00,000 6,00,000
30,000. He provides you the following information for the previous year 2023- 3)
24: Income before including income of minor child under 8,18,000 6,00,000
(i) He had a fixed deposit of ` 4,00,000 with State Bank of India with interest section 64(1A)
@10%. He instructed bank to credit such interest on deposit to the saving Income from other sources
account of Mr. Ram, his sister’s son, to help him in his higher education. Minor son Sandeep - Income from company deposit 1,48,500
(ii) He gifted a flat to Mrs. Kajal (wife of Mr. Shashank) on April 1, 2023. (Note 4)
During the previous year 2023- 24, she received a rent of ` 20,000 p.m. Total income 9,66,500 6,00,000
from letting out the flat.
(iii) He gifted ` 10,00,000 to Mrs Kajal on 1st April, 2023 which Mrs Kajal Notes:
invested in her business on the same day. Capital in the business before
(1) According to section 27(i), an individual who transfers any house property
such investment was ` 20,00,000. She earned profits from business for the
to his or her spouse otherwise than for adequate consideration or in
financial year 2023-24 of ` 9,00,000.
(iv) His minor son Sandeep earned income from company deposit of ` 1,50,000.

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connection with an agreement to live apart, shall be deemed to be the

owner of the house property so transferred. Hence, Mr. Shashank shall Therefore, the income to be clubbed in the hands of Mr. Shashank for the
be deemed to be the owner of the flat gifted to Mrs Kajal and hence, A.Y.2024-25 is ` 3,00,000. Note: The provisions of section 56(2)(x) would
the income arising from the same shall be computed in the hands of Mr. not be attracted in the hands of Mrs Kajal, since she has received a sum of
Shashank. money exceeding ` 50,000 without consideration from a relative i.e, her
Note: The provisions of section 56(2)(x) would not be attracted in the hands of husband.
Mrs Kajal, since she has received immovable property without consideration (4) As per section 64(1A), the income of the minor child is to be included in the
from a relative i.e., her husband. total income of the parent whose total income (excluding the income of minor
(2) As per section 60, in case there is a transfer of income without transfer of child to be so clubbed) is greater. Further, as per section 10(32), income of
asset from which such income is derived, such income shall be treated as a minor child which is includible in the income of the parent shall be exempt
income of the transferor. Therefore, the fixed deposit interest of ` 40,000 to the extent of ` 1,500 per child.
transferred by Mr. Shashank to Mr. Ram shall be included in the total income Therefore, the income of ` 1,50,000 received by minor son Sandeep from
of Mr. Shashank. company deposit shall, after providing for exemption of ` 1,500 under section
(3) Section 64(1)(iv) provides for the clubbing of income in the hands of the 10(32), be included in the income of Mr. Shashank, since Mr. Shashank’s
individual, if the income earned is from the assets transferred directly or income of ` 8,68,000 (before including the income of the minor child) is
indirectly to the spouse of the individual, otherwise than for adequate greater than Mrs Kajal’s income of ` 6,00,000. Therefore, `1,48,500 (i.e.,
consideration or in connection with an agreement to live apart. In this case `1,50,000 – `1,500) shall be included in Mr. Shashank’s income. It is assumed
Mrs Kajal received a gift of ` 10,00,000 on 1.4.2023 from her husband that this is the first year in which clubbing provisions are attracted.
which she invested in her business on the same day. The income to be
clubbed in the hands of Mr. Shashank for the A.Y. 2024-25 is computed as
under: Question 40
Particulars Ms Kajal’s capital Capital contribution Total (`)
contribution (`) out of gift from Mr.
Shashank (`) Mr. Om has gifted a house property valued at ` 50 lakhs to his wife, Mrs. Uma,
Capital as on 1.4.2023 20,00,000 10,00,000 30,00,000 who in turn has gifted the same to Mrs. Pallavi, their daughter-in-law. The house
was let out at ` 25,000 per month throughout the year. Compute the total income
Profit for P.Y. 2023- 6,00,000 3,00,000 9,00,000
of Mr. Om and Mrs. Pallavi.
24 to be apportioned (9,00,000 x 2/3) (9,00,000 x 1/3)
Will your answer be different if the said property was gifted to his son, husband
on the basis of capital
of Mrs. Pallavi? (MTP 4 Marks March ’23, Old & New SM)
employed on the first
day of the previous Answer 40
year i.e. as on 1.4.2023 As per section 27(i), an individual who transfers otherwise than for adequate
(2:1)

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consideration any house property to his spouse, not being a transfer in connection husband’s parent, without consideration. Gift of house property by Mr. Om to
with an agreement to live apart, shall be deemed to be the owner of the house Mrs. Pallavi, via Mrs. Uma, can be viewed as an indirect transfer by Mr. Om to
property so transferred. Mrs. Pallavi.
Therefore, in this case, Mr. Om would be the deemed owner of the house property
transferred to his wife Mrs. Uma without consideration.
As per section 64(1)(vi), income arising to the son’s wife from assets transferred,
Question 41
directly or indirectly, to her by an individual otherwise than for adequate
consideration would be included in the total income of such individual.
Mr. Manoj, a bhajan singer of Rajasthan and his wife Mrs. Daya furnish the
Income from let-out property is ` 2,10,000 [i.e., ` 3,00,000, being the actual
following information relating to the A.Y. 2024-25.
rent calculated at ` 25,000 per month less ` 90,000, being deduction under
section 24@30% of ` 3,00,000]
In this case, income of ` 2,10,000 from let-out property arising to Mrs. Pallavi, 1 Income of Mr. Manoj - Professional bhajan singer 5,65,000
being Mr. Om’s son’s wife, would be included in the income of Mr. Om, applying (computed)
the provisions of section 27(i) and section 64(1)(vi). Such income would, therefore, 2 Salary income of Mrs. Daya (Computed) 3,80,000
not be taxable in the hands of Mrs. Pallavi. 3 Loan received by Mrs. Daya from Ramu & Jay (P) Ltd. 2,50,000
In case the property was gifted to Mr. Om’s son, the clubbing provisions under (Mrs. Daya holds
section 64 would not apply, since the son is not a minor child. Therefore, the 35% shares of the Co. The Co. has incurred losses since
income of ` 2,10,000 from letting out of property gifted to the son would be its inception 2 years back)
taxable in the hands of the son. 4 Income of their minor son Ganesh from winning singing 2,50,000
It may be noted that the provisions of section 56(2)(x) would not be attracted reality show on T.V.
in the hands of the recipient of house property, since the receipt of property in 5 Cash gift received by Ganesh from friend of Mr. Manoj 21,000
each case was from a “relative” of such individual. Therefore, the stamp duty on winning the show
value of house property would not be chargeable to tax in the hands of the 6 Interest income received by minor married daughter 40,000
recipient of immovable property, even though the house property was received Gudia from deposit with Ramu & Jay Pvt Ltd.
by her or him without consideration. Compute total taxable income of Mr. Manoj & Mrs. Daya for the A.Y. 2024-25
if they opt for the provisions of section 115BAC.
Note - (MTP 5 Marks Sep ’23, PYP 5 Marks Nov’19)
The first part of the question can also be answered by applying the provisions
Answer 41
of section 64(1)(vi) directly to include the income of ` 2,10,000 arising to Mrs.
Computation of Taxable income of Mr. Manoj for A.Y. 2024-25
Pallavi in the hands of Mr. Om. [without first applying the provisions of section
Particulars `
27(i) to deem Mr. Om as the owner of the house property transferred to his
wife Mrs. Uma without consideration], since section 64(1)(vi) speaks of clubbing Professional income (bhajan singer) 5,65,000
of income arising to son’s wife from indirect transfer of assets to her by her Income of minor son – Ganesh

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- Income from winning singing reality show on T.V. Nil

Income derived by a minor child from any activity involving Question 42
application of his/her skill, talent, specialized knowledge and
experience is not to be included in the hands of parent. Hence,
` 2,50,000 earned by minor son Ganesh from reality show on Mr. Dharmesh who is 45 years old and his wife Mrs. Anandi who is 42 years old
TV would not be included in the income of either parent. furnished the following information:
- Cash gift received by Ganesh from friend of Mr. Manoj Nil
on winning the show The cash gift received by his minor son S. No. Particulars Amount (`)
Ganesh (not on account of her skill) from his friends would not (i) Salary income (computed) of Mrs. Anandi 9,60,000
be taxable, since its value does not exceed ` 50,000. (ii) Income of minor son “A” who suffers from disability 3,08,000
Income of minor married daughter – Gudia specified in section 80U
Interest income on deposit with Ramu & Jay Pvt. Ltd. 40,000 (iii) Income of minor daughter “C” from script writing for 1,86,000
Less: Exempt under section 10(32) [Since Mr. Manoj has opted - Television Serials
for the provisions of section 115BAC, exemption u/s 10(32) (iv) Income from garment trading business of Mr. Dharmesh 17,50,000
would not be available] (v) Cash gift received by minor daughter “C” on 02-10- 45,000
(Income of minor daughter would be included in the hands of 2020 from friend of Mrs. Anandi, on winning of a story
Mr. Manoj, since his income, before including minor daughter’s writing competition
income, is higher than his wife’s income). (vi) Income of minor son “B” form scholarship received from 1,00,000
Taxable Income 6,05,000 his school
(vii) Income of minor son “B” from fixed deposit with Punjab 5,000
Computation of Taxable income of Mrs. Daya for A.Y. 2024-25 National Bank, made out of income earned from
Particulars ` scholarship
Salary income (computed) 3,80,000
Loan received from Ramu & Jay (Pvt.) Ltd. Nil Compute the total income of Mr. Dharmesh and his wife Mrs. Anandi for
[Such loan amount would not be considered as deemed Assessment Year 2024- 25 assuming that they have not opted to be taxed
dividend under section 2(22)(e), even though Mrs. Daya has under section 115BAC.
substantial interest (holding 20% shares or more) in the Ramu (PYP 5 Marks July’21, MTP 5 Marks Oct ’23)
& Jay (Pvt.) Ltd., a closely held company, since the company
does not have any accumulated profits on account of losses
incurred in last 2 years from inception]
Taxable Income 3,80,000

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Answer 42 Income of minor daughter “C”
Computation of Total Income of Mr. Dharmesh and Mrs. Anandi for A.Y. Income of ` 1,86,000 from script writing for
2024-25 television serials [Income derived by a minor
child from any activity involving application
Particulars Mr. Mrs. of his/her skill, talent, specialized knowledge Nil
Dharmesh Anandi and experience is not to be included in the
Amount (`) hands of the parent]
Salary income (computed) 9,60,000 Hence, clubbing provisions will not apply in
Income from garment trading business 17,50,000 this case/no adjustment is required.
Total Income before including income of 17,50,000 9,60,000 Cash gifts of ` 45,000 received from
minor children friend of Mrs. Anandi [Gift not exceeding `
Income of minor son “A” 50,000 received from a non-relative is not
Income of ` 3,08,000 of minor son A who taxable under section 56(2)(x)]
suffers from disability specified in section Hence, clubbing provisions will not apply in Nil
80U [Since minor child A is suffering from this case / no adjustment is required.
disability specified under section 80U, Gross Total Income/ Total Income 17,53,500 9,60,000
hence, his income would not be included
in the income of the parent but would be Note -
taxable in the hands of the minor child] As per section 10(16), scholarships granted to meet the cost of education
Income of minor son “B” is exempt from tax. The purpose of scholarship received by minor son B is
Income of ` 1,00,000 from scholarship - explicitly not mentioned in the question. However, scholarships given by
[Exempt u/s 10(16)] schools are generally in the form of financial assistance for meeting the cost
Income from fixed deposit with PNB 5,000 of education. Hence, it is logical to assume that the scholarship to B has been
[Since Mr. Dharmesh’s income is greater granted to him to meet his cost of education. Based on this assumption, the same
than that of Mrs. Anandi, income of minor has been treated as exempt from tax u/s 10(16). Alternate view - However,
son B from fixed deposit would be included in absence of specific information, it is possible to assume thatsuch scholarship
in the hands of Mr. Dharmesh. Interest from has been granted on account of B’s exceptional academic achievementsi.e.,
bank deposit has to be included in Mr. involving application of his skill, talent, specialised knowledge and experience
Dharmesh’s income, even if deposit is made and hence would be covered under the proviso to section 64(1A) and thus
out of income earned from scholarship] should not be included in the income of parent.
Less: Exemption under section 10(32) 1,500 3,500

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5. AGGREGATION OF INCOME, SET-
OFF AND CARRY FORWARD OF LOSSES
Profits and gains of business or profession

Question 43 Income from speculation business 40,000
Less: Loss from toy business set off 40,000 Nil
Capital gains
Compute the total income of Mr. Praveen (aged 48), a resident Indian, from
Long-term capital gains from sale of urban land 2,50,000
the following information relating to the financial year ended 31.3.2024. Also,
show the items eligible for carry forward. Less: Long term capital loss on sale of listed shares 1,10,000
on which STT is
Particulars `
paid can be set off as per section 74(1), since
Income from salaries 2,20,000
long-term capital gain
Loss from house property 2,50,000
arising on sale of such shares is taxable under
Loss from toy business 1,30,000 section 112A
Income from speculation business 40,000 1,40,000
Loss from specified business covered by section 35AD 20,000 Less: Loss from toy business set off 90,000 50,000
Long-term capital gains from sale of urban land 2,50,000 Income from other sources
Long-term capital loss from sale of listed shares in recognized 1,10,000 Income from betting 45,000
stock exchange
Gross total income 1,15,000
(STT paid at the time of acquisition and sale of shares)
Less: Deduction under section 80C(life insurance 20,000
Loss from card games 32,000 premium paid)
Income from betting (Gross) 45,000 Total income 95,000
Life Insurance Premium paid (10% of the capital sum assured) 50,000
(MTP 7 Marks, April’21, Old SM, RTP May ’18) Losses to be carried forward:
Answer 43
Particulars `
Computation of total income of Mr. Praveen for the A.Y.2024-25
(1) Loss from house property (`2,50,000 – `2,00,000) 50,000
Particulars ` `
(2) Loss from toy business (`1,30,000 - `40,000 - `90,000) Nil
Salaries
(3) Loss from specified business covered by section 35AD 20,000
Income from salaries 2,20,000
Notes:
Less: Loss from house property set-off against 2,00,000 20,000
(i) As per section 71(3A), loss from house property can be set-off against any
salary as per section 71(1) & 71(3A)

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other head of income to the extent of `2,00,000 only.
As per section 71B, balance loss not set-off can be carried forward to the Particulars Amount (`)
next year for set- off against income from house property of that year. It Loss from speculative business MNO 12,000
can be carried forward for a maximum of eight assessment years i.e., up Income from speculative business BPO 25,000
to A.Y. 2032-33, in this case. Loss from specified business covered under section 35AD 45,000
(ii) Loss from specified business covered by section 35AD can be set-off only
Income from salary (computed) 4,18,000
against profits and gains of any other specified business. Therefore, such
Loss from house property 2,20,000
loss cannot be set off against any other income. If loss cannot be so set-
off, the same has to be carried forward to the subsequent year for set-off Income from trading business 2,80,000
against profits and gains of any specified business, if any, in that year. As Long-term capital gain from sale of urban land 2,05,000
per section 73A (2), such loss can be carried forward indefinitely for set- Long-term capital loss on sale of equity shares (STT not 85,000
off against profits of any specified business. paid)
(iii) Business loss cannot be set off against salary income. However, business Long-term capital loss on sale of listed equity shares 1,10,000
loss of ` 90,000 (`1,30,000 – ` 40,000 set-off against income from in recognized stock exchange (STT paid at the time of
speculation business) can be set-off against long-term capital gains from acquisition and sale of shares)
sale of urban land. Consequently, the taxable long-term capital gains Short-term capital loss under section 111A 85,000
would be ` 50,000.
(iv) Loss from card games can neither be set off against any other income, nor Following are the brought forward losses:
can it be carried forward. (1) Brought forward loss from speculative business MNO ` 18,000 relating to
(v) For providing deduction under Chapter VI-A, gross total income has to be A.Y. 2020-21.
reduced by the amount of long- term capital gains and casual income. (2) Brought forward loss from trading business of ` 12,000 relating to A.Y.
Therefore, the deduction under section 80C in respect of life insurance 2018-19. Unabsorbed depreciation ` 1,00,000 relating to A.Y. 2023-24
premium paid has to be restricted to ` 20,000 [i.e., Gross Total Income of
`1,15,000 – ` 50,000 (LTCG) – ` 45,000 (Casual income)]. Assume Mr. Farhan has furnished his return of income on or before the due
(vi) Income from betting is chargeable at a flat rate of 30% under section date specified under section 139(1) in all the above previous yea` (MTP
115BB and no expenditure or allowance can be allowed as deduction 7 Marks, March’21)
from such income, nor can any loss be set-off against such income.
Answer 44
Computation of Gross total income of Mr. Farhan for the A.Y.2024-25
Question 44
Particulars ` `
Compute the gross total income of Mr. Farhan and show the items eligible for carry Salaries
forward and the assessment years up to which such losses can be carry forward
Income from Salary 4,18,000
from the following information furnished by him for the year ended 31-03-2024:

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Less: Loss from house property set-off against (2,00,000) 2,18,000 Less: Short-term capital loss under section 111A (10,000)
salary as per section 71(2) -
[As per section 71(3A), loss from house property Gross Total Income 3,86,000
to the extent of ` 2,00,000 can be set-off
against any other head of income.] Items eligible for carried forward to A.Y.2025-26
Profits and gains of business or profession
Income from trading business 2,80,000 Particulars `
Less: Brought forward loss from trading business Loss from house property 20,000
of A.Y. 2015-16 can be set off against current As per section 71B, balance loss not set-off can be carried
year income from trading business as per forward to the next year for set-off against income from
section 72(1), since the eight-year time limit as (12,000) house property of that year. It can be carried forward for a
specified under section 72(3), within which set- maximum of eight assessment years i.e., up to A.Y. 2032-33,
off is permitted, has not expired. in this case.
Less: Unabsorbed depreciation (1,00,000) 1,68,000 Loss from specified business under section 35AD 45,000
Income from speculative business BPO 25,000 Loss from specified business under section 35AD can be set-
Less: Loss from speculative business MNO set- (12,000) off only against profits of any other specified business. If loss
off as per section 73(1) cannot be so set-off, the same has to be carried forward to
Loss from speculative business MNO brought the subsequent year for set off against income from specified
forward from A.Y. business, if any, in that year. As per section 73A(2), such loss
2020-21 as per section 73(2), can be set off (13,000) - can be carried forward indefinitely for set-off against profits
to the extent of ` 13,000. Balance loss will be of any specified business .
lapsed, since four years his expired Short-term capital loss under section 111A 75,000
Capital Gains Short-term capital loss under section 111A can be set-off
Long term capital gain on sale of urban land 2,05,000 against long term or short term capital gains. If it cannot be
Less: Long term capital loss on sale of shares so set-off, it has to be carried forward to the next year for
(STT not paid) set- off as per section 71(3) (85,000) set-off against capital gains, if any, in that year. It can be
Less: Long-term capital loss on sale of listed carried forward for a maximum of eight assessment years,
equity shares on which STT is paid can also be i.e., up to A.Y.2032-33, in this case, as specified under section
set-off as per section 71(3), since long-term 74(1).
capital arising on sale of such shares is taxable (1,10,000)
under section 112A

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Income from profession 10,00,000 8,00,000

Question 45 Less: Loss from house property (can be 2,00,000
set-off to the extent of ` 2,00,000, as
per section 71(3A).
Mr. Suresh is Lawyer by profession and his income from profession for the year
Capital gains
2023-24 is ` 10,00,000. From the information given by him, you are required
Long term capital gains on sale of 1,20,000
to compute his total income for A.Y. 2024-25 and the losses to be carried
equity shares under section 112A
forward assuming that he files his income tax returns every year before due
date. Long term capital gain under section 3,00,000
112
Particulars ` Less: Short term capital loss set off (4,20,000) Nil
Income of minor son Raj from company deposit 1,60,000 against long- term capital gain as per
Income of minor daughter Rashmi (professional dancer) 15,00,000 section 74
from her dance performances Income from other sources
Interest from Canara bank received by Rashmi on deposit 15,000 Income of minor son Raj
made out of income earned from her dance performances Income from company deposit includible 1,60,000
Loss from house property (computed) 2,50,000 in the hands of Mr. Suresh as per section
Short term capital loss 6,00,000 64(1A)
Long-term capital gain from equity shares under section 1,20,000 Less: Exemption in respect of income of 1,500 1,58,500
112A minor child u/s 10(32)
Long term capital gain under section 112 3,00,000 Income of minor daughter Rashmi
Short term capital loss under section 111A 5,00,000 Income of ` 15,00,000 of minor Nil
daughter Rashmi (professional dancer)
Assume that Mr. Suresh does not opt for the provisions of section 115BAC not includible in the hands of parent,
and his income before considering clubbing provisions is higher than that since such income is earned on account
of his wife. (MTP 6 Marks March 22) of her special skills
Interest received on deposit with 15,000
Answer 45 Canara Bank made out of amount
Computation of Total Income of Mr. Suresh for A.Y. 2024-25 earned on account of her special talent
Particulars ` ` ` is includible as per section 64(1A),
Profits and gains from business and
profession

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since interest income arises out of Nil S. No. Particulars (`)

deposit made and not on account of her 1. Income from salary (Computed) 8,20,000
special skills 2. Income from house property (let out) (Net Annual 1,20,000
Less: Exemption in respect of income of 1,500 13,500 1,72,000 Value)
minor child u/s 10(32) 3. Share of profit from firm in which she is partner 48,000
Total Income 9,72,000 4. Loss from specified business covered under section 67,000
35AD
Losses to be carried forward to A.Y.2025-26 5. Income from textile business before adjusting the 3,30,000
Particulars ` following items:
Loss from house property [` 2.50,000 – ` 2,00,000] 50,000 (a) Current year depreciation 53,000
Short term capital loss under section 111A 5,00,000 (b) Unabsorbed depreciation of earlier year 1,85,000
Short term capital loss (other than above) [` 6,00,000 – ` (c) Brought forward loss of textile business of the 1,90,000
1,80,000 A.Y. 2021-22
4,20,000]
6. Long-term capital gain on sale of debentures (unlisted) 1,50,000
Note –
7. Long-term capital loss on sale of equity shares (STT 1,50,000
Short-term capital loss under section 111A can be set-off against long-term
not paid)
capital gains under section 112 & 112A. In such a case, the losses to be carried
8. Long-term capital gain on sale of equity shares listed 2,50,000
forward to A.Y.2025-26 would be as under –
in recognized stock exchange (STT paid at the time of
acquisition and sale)
Particulars ` 9. Dividend from units of UTI 1,15,000
Loss from house property [` 2.50,000 – ` 2,00,000] 50,000 10. Repayment towards housing loan taken from a 4,85,000
Short term capital loss under section 111A [` 5,00,000 – ` scheduled bank. Out of this ` 3,28,000 was towards
4,20,000] 80,000 payment of interest and rest towards principal.
Short term capital loss (other than above) 6,00,000
Compute the Gross Total Income of Ms. Aarti and ascertain the amount of
loss that can be carried forward. Ms. Aarti has always filed her return within
Question 46 the due date specified under section 139(1) of the Income-tax Act, 1961. She
does not want to opt for 115BAC.(MTP 7 Marks April ’23, RTP Nov’21)
Ms. Aarti, a resident individual, provides the following information of her
income/losses for the year ended on 31st March, 2024:

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Answer 46 Less: Brought forward loss of textile 1,90,000
Computation of gross total income of Ms. Aarti for the A.Y.2024-25 business
Particulars ` ` Less: Set-off of unabsorbed depreciation 87,000 Nil
Salary Income (computed) 8,20,000 to the extent of ` 87,000 against
Less: As per section 71(3A), loss from business income
house property of ` 2,44,000 can be 2,00,000 6,20,000 Capital Gains
set-off, to the extent of Long-term capital gains on sale of listed 2,50,000
Income from House Property equity shares (STT paid)
Net Annual Value of House Property 1,20,000 Less: Balance unabsorbed depreciation 98,000
Less: Deduction u/s 24 of ` 98,000 set-off
(a) 30% of NAV 36,000 Long-term capital gains on sale of listed 1,52,000 1,52,000
(b) Interest on housing loan 3,28,000 3,64,000 equity shares [Tax is payable u/s 112A
Loss from house property (2,44,000) @10% on the amount exceeding `
Less: Loss eligible for set-off against 2,00,000 1,00,000]
salary income restricted to Long-term capital gains on sale of 1,50,000
Loss to be carried forward to A.Y. 2025- debentures
26 for set-off against income from house (44,000) Less: Set-off of long-term capital loss 1,50,000 Nil
property, if any, in that year. on sale of equity shares (STT not paid)
Profits and gains of business or [Since long-term capital gain on sale of
profession unlisted debentures are taxable @20%
Share of profit from firm [Exempt u/s - and long-term term capital gain on sale
10(2A)] of listed shares in excess of ` 1,00,000
Loss from specified business u/s 35AD - taxable @10%, it is beneficial to set-
`67,000 [can be set- off only against off long-term loss against LTCG on sale
income from any specified business. of debentures]
Hence, it has to be carried forward to Income from Other Sources
A.Y.2025-26] Dividend from units of UTI [Taxable in 1,15,000
Income from textile business 3,30,000 the hands of the unitholders]
Less: Current year depreciation 53,000 Gross Total Income 8,87,000
2,77,000

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Brought forward business loss from manufacturing business (35,000)

Losses to be carried forward to A.Y.2025-26 ` Unabsorbed normal depreciation (10,000)
Losses from specified business [can be carried forward 67,000 Brought forward loss from the activity of owning and (50,000)
indefinitely for set- off against income from any specified maintaining the race horses
business]
Loss from house property [can be carried forward upto 8 44,000 Compute the Gross total income of Mr. Rajesh for the Assessment Year 2024-
successive assessment years for set-off against income from 25 and the amount of loss, if any, that can be carried forward if he wants to
house property] opt for the provisions of section 115BAC for the first time.
(RTP May ’22)
Question 47 Answer 47
Computation of gross total income of Mr. Rajesh for A.Y. 2024-25
Particulars Amount (`) Amount
Mr. Rajesh, a resident individual, furnished the following information in respect (`)
of income and loss earned by him for the F.Y. 2023-24 Income from Salary 3,40,000
Less: Loss under the head “Income from house
Particulars Amount (`) property” [Loss from house | property is not allowed
Income from Salary 3,40,000 to be set off with any other head of income since
Long term capital loss on sale of shares of Reliance Ltd. (1,15,000) Mr.
STT has been paid both at the time of acquisition and Rajesh is opting for section 115BAC] - 3,40,000
sale
Loss from let out property in Delhi (75,000) Income from house property
Interest on self-acquired property in Mumbai (50,000) Self-occupied property [Interest u/s 24(b) is not -
Winnings from lottery tickets 40,000 allowed in case of self- occupied property since Mr.
Cost of acquisition of lottery tickets 10,000 Rajesh is opting for section 115BAC]
Profit and gains from manufacturing business (after 96,000 Loss from let out property [Carried forward to A.Y. (75,000) -
deducting normal depreciation of ` 10,000 and 2025-26]
additional depreciation of ` 4,000) Profit and gains from business or profession
Long term capital gains on sale of house property 1,40,000 Profit and gains from manufacturing business 96,000
The other details of brought forward losses and unabsorbed depreciation
pertaining to A.Y. 2023-24 are as follow:

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Add: Additional depreciation not allowable in case 4,000

of section 115BAC
1,00,000
Less: Brought forward loss from manufacturing 35,000
business
Less: Unabsorbed normal depreciation 10,000 55,000
Capital Gains
Long term capital gains on sale of house property 1,40,000
Less: long term capital loss on sale of shares on (1,15,000) 25,000
which STT is paid can also be set-off as per section
74(1), since long-term capital gain arising on sale
of such shares is taxable under section 112A
Income from Other Sources
Winnings from lottery tickets 40,000
Gross Total Income 4,60,000
Losses to be carried forward to A.Y. 2025-26

Particulars Amount
(`)
Loss from let out property in Delhi 75,000
Loss from the activity of owning and maintaining the race horses 50,000
Notes -
1. As per section 74A(3), loss from the activity of owning and maintaining the
race horses cannot be set-off against income from any source other than
the activity of owning and maintaining race horse.
2. As per section 58, no expenditure is allowed from the lottery winnings.

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6. DEDUCTIONS FROM GROSS

TOTAL INCOME
Section Particulars ` `
80C Deposit in public provident fund 1,50,000
Question 48 Life insurance premium paid ` 62,000 40,000
(deduction restricted to ` 40,000,
being 10% of ` 4,00,000, which is the
Compute the deduction available to Mr. Dhyanchand under Chapter VI-A for sum assured, since the policy was taken
A.Y.2024-25. Mr. Dhyanchand, aged 65 years, is working with ABC Ltd. His on or after 01.04.2012)
income comprises of salary of ` 18,50,000 and interest on fixed deposits of Five year term deposit with bank 45,000
` 75,000. He submits the following particulars of investments and payments
2,35,000
made by him during the previous year 2023-24:
Restricted to 1,50,000
- Deposit of ` 1,50,000 in public provident fund
- Payment of life insurance premium of ` 62,000 on the policy taken on 80CCD(1) Contribution to NPS of the Central
01.4.2017 to insure his life (Sum assured – ` 4,00,000). Government, ` 1,60,000 [` 2,10,000
- Deposit of ` 45,000 in a five year term deposit with bank. – ` 50,000, being deduction under
- Contributed ` 2,10,000, being 15% of his salary (basic salary plus section 80CCD(1B)], restricted to 10%
dearness allowance, which forms part of retirement benefits) to the NPS of of salary [` 2,10,000 x 10/15] [See
the Central Government. A matching contribution was made by ABC Ltd. Note 1]
- On 1.4.2023, mediclaim premium of ` 1,08,000 and ` 80,000 paid as 1,40,000
lumpsum to insure his and his wife (aged 58 years) health, respectively for 2,90,000
four years 80CCE Aggregate deduction under section
- Incurred ` 46,000 towards medical expenditure of his father, aged 85 80C and 80CCD(1), ` 2,90,000, but 1,50,000
years, not dependent on him. No insurance policy taken for his father. restricted to
- He spent ` 6,000 for the preventive health-check up of his wife.
80CCD(1B) ` 50,000 would be eligible for 50,000
- He has incurred an expenditure of ` 90,000 for the medical treatment of
deduction in respect of contribution to
his mother, being a person with severe disability.
NPS of the Central Government
(MTP 7 Marks, Mar 21, RTP May ’19)
80CCD(2) Employer contribution to NPS, restricted 1,40,000
Answer 48 to 10% of salary [See Note 2]
Deduction available to Mr. Dhyanchand under Chapter VI-A for A.Y.2024-25

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80D (i) (a) Medical insurance premium for 47,000 Dhyanchand to claim deduction under section 80CCD(1B) first in respect of
self and his wife, deduction would contribution to NPS. Thereafter, the remaining amount of ` 1,60,000 can be
be equal to ` 47,000 (` 27,000 + claimed as deduction under section 80CCD(1), subject to a maximum limit of
` 20,000), being 1/4th of lumpsum 10% of salary i.e. ` 1,40,000.
premium, since policies would be in (2) The entire employer’s contribution to notified pension scheme has to be first
force for four previous years included under the head “Salaries” while computing gross total income and
(b) Preventive health check up ` 6,000 thereafter, deduction under section 80CCD(2) would be allowed, subject to
for wife restricted to ` 3,000 (` a maximum of 10% of salary. Deduction under section 80CCD(2) is also not
50,000 - ` 47,000, since maximum subject to the overall limit of ` 1,50,000 under section 80CCE.
allowable deduction is ` 50,000 in case 3,000
assessee or one of the family member is
Question 49
senior citizen)
50 000
(ii) Medical Expenditure for his father
Mr. Rajkumar, a proprietor has set up a unit in Special Economic Zone (SEZ) and
would be fully allowed as deduction, 46,000 other unit at Domestic Tariff Area (DTA). He provides the following details for the
since no insurance policy is taken on his previous year 2023-24.
name
Total of (i) and (ii) 96,000 Particulars Rajkumar Proprietorship (`) Unit in DTA (`)
80DD Deduction of ` 1,25,000 in respect of Total Sales 7,50,00,000 3,00,00,000
expenditure on medical treatment of 1,25,000 Export Sales 4,50,00,000 1,50,00,000
his mother, being a person with severe Net Profit 90,00,000 15,00,000
disability would be allowed irrespective
of the fact that amount of expenditure Compute the quantum of eligible deduction under section 10AA of the Income-
incurred is ` 90,000 tax Act, 1961, for the Assessment Year 2024-25, in the following situations:
80TTB Interest on fixed deposits with b a n k 50,000 (i) If both the units were set up and start manufacturing from 20-07-2015.
of ` 75,000, deduction restricted to (ii) If both the units were set up and start manufacturing from 04-10-2020.
Deduction under Chapter VI-A 6,11,000 (MTP 5 Marks, March’18, Old SM)
Notes: Answer 49
(1) The deduction under section 80CCD(1B) would not be subject to overall limit Computation of deduction under section 10AA of the Income-tax Act, 1961
of ` 1.50 lakh under section 80CCE. Therefore, it is more beneficial for Mr. As per section 10AA, in computing the total income of Mr. Rajkumar from his

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unit located in a Special Economic Zone (SEZ), which begins to manufacture
or produce articles or things or provide any services during the previous year = Profits of Unit in SEZ×
relevant to the assessment year commencing on or after 01.04.2006 but before 300 lakhs
1st April 2021, there shall be allowed a deduction of 100% of the profit and =75 lakhs X X 100%= Rs50_____________lakhs
450 lakh
gains derived from export of such articles or things or from services for a period
of first five consecutive assessment years beginning with the assessment year The unit set up in Domestic Tariff Area is not eligible for the benefit of deduction
relevant to the previous year in which the undertaking begins to manufacture under section 10AA in respect of its export profits, in both the situations.
or produce such articles or things or provide services, as the case may be, and
50% of such profits for further five assessment years subject to fulfillment of Working Note:
other conditions specified in section 10AA. Computation of total sales, export sales and net profit of unit in SEZ
Particulars Rajkumar Unit in DTA (`Rs) Unit in SEZ (Rs.)
Computation of eligible deduction under section 10AA [See Working Note
Proprietorship (`Rs)
below]:
Total Sales 7,50,00,000 3,00,00,000 4,50,00,000
(i) If unit in SEZ was set up and began manufacturing from 20-07-2015:
Export Sales 4,50,00,000 1,50,00,000 3,00,00,000
Since A.Y. 2024-25 is the 9th assessment year from A.Y. 2016-17,
Net Profit 90,00,000 15,00,000 75,00,000
relevant to the previous year 2015-16, in which the SEZ unit began
manufacturing of articles or things, he shall be eligible for deduction of
50% of the profits derived from export of such articles or things, assuming
Question 50
all the other conditions specified in section 10AA are fulfilled.
Export turnover of Unit in SEZ X 50%
= Profits of Unit in SEZ×
Total turnover of Unit in SEZ Mr. Anay manufactures toys in a factory located in Noida. His profit from the
manufacture of toys for Assessment year 2024-25 is ` 1.85 crore and total
300 lakhs turnover is ` 18.70 crore.
=75 lakhs X X 50%= `Rs25 lakhs
450 lakh On 1st April 2023, there were 100 employees engaged in his factory. Due to
increase in demand of his products, he employed 140 additional employees
(ii) If Unit in SEZ was set up and began manufacturing from 04-10-2020: during the previous year 2023-24 comprises of:
Since A.Y.2024-25 is the 4th assessment year from A.Y. 2021-22, relevant (a) 15 casual employees employed on 15th April 2023 till 31st January 2024
to the previous year 2020-21, in which the SEZ unit began manufacturing on monthly emolument of ` 22,000 per month
of articles or things, he shall be eligible for deduction of 100% of the (b) 40 regular employees employed on 1st May, 2023 on monthly emolument
profits derived from export of such articles or things, assuming all the other of ` 22,000 per month
conditions specified in section 10AA are fulfilled. (c) 25 contractual employees employed on 1st July 2023 for 2 years on
monthly emolument of ` 15,000 per month

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(d) 35 regular employees employed on 1st August, 2023 on monthly emolument Less: Casual workmen employed on 15th April 2023, 15
of ` 30,000 per month who do not participate in the recognised provident
(e) 25 regular employees employed on 1st October, 2023 on monthly
fund
emolument of ` 22,000 per month
Regular employees employed on 1st August 2023, 35
Compute the deduction under Section 80JJAA, if available to Mr. Anay for
since their total monthly emoluments exceed `
Assessment year 2024-25, assuming that monthly emoluments were paid
by use of ECS. The regular and contractual employees participate in the 25,000
recognised provident fund while casual employees do not. Regular employees employed on 1st October 25 75
Would your answer be different if Mr. Anay is engaged in the manufacture 2023, for a period of less than 240 days during
of apparel? Examine. the P.Y.2023-24
[Note - Ignore the amount of deduction available under section 80JJAA to Total number of additional employees employed 65
Mr. Anay, for the employees employed in preceding previous years, while during the P.Y.2023-24
computing the deduction under 80JJAA for the assessment year 2024-25]
(RTP Nov ’18) Yes, the answer would be different, if Mr. Anay is engaged in the business of
manufacture of apparel. Since the number of days of employment in a year
Answer 50 has been relaxed from 240 days to 150 days in case of apparel industry,
Computation of deduction under section 80JJAA wages paid to regular employees employed on 1.10.2023 would also qualify
Mr. Anay is eligible for deduction under section 80JJAA since he is subject for deduction under section 80JJAA for A.Y. 2024-25.
to tax audit under section 44AB for A.Y.2018-19, as his total turnover from Additional employee cost = ` 1,30,55,000 + ` 33,00,000 (` 22,000 x
business exceeds ` 1 crore and he has employed “additional employees” 6 x 25) = ` 1,63,55,000
during the P.Y.2017 -18. Deduction under section 80JJAA = 30% of ` 1,63,55,000 = ` 49,06,500
Additional employee cost = [` 22,000 × 40 new regular employees × 11
months] + [` 15,000 per month × 9 months × 25 new contractual employees]
= ` 96,80,000 + ` 33,75,000 = ` 1,30,55,000 Question 51
Deduction under section 80JJAA = 30% of ` 1,30,55,000 = ` 39,16,500.
Mr. Jain, a resident individual, aged 40 years, suffers from severe disability
Working Note: Number of Additional employees employed during the as certified by medical authority. He gives the following information for the
P.Y.2023 -24 previous year 2023-24 -
(i) He has paid life insurance premium by cheque ` 27,000 to insure his
Particulars No. of additional
life. The insurance policy was taken on 27.8.2018 and the sum assured is
employees
` 2,20,000.
Total number of additional employees employed during 140 (ii) He had written a literary book for Rochak Publication. A lump sum amount
the year

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of royalty income earned in the previous year 2022-23 amounted to ` Less: Exemption under section 10(32) 63,500
9,00,000. Expenses incurred for writing the book amounted to ` 40,000. Value of Gold Chain -
(iii) His friends gifted a statue of Goddess Saraswati to his daughter Ms. Diya [The Fair market value of ` 68,000 of gold chain
(aged 14 years) on the successful completion of her secondary school. Fair
received on occasion of his marriage anniversary
market value of the statue is ` 65,000.
would be exempt, since it is received from a relative.]
(iv) He received a gold chain worth ` 68,000 from his in-laws on the occasion
of his marriage anniversary Interest on fixed deposit in the name of his son 5,500
(v) He had deposited `70,000 in fixed deposit with SBI in the name of his [It would be included in the hands of Mr. Jain,
minor son in September 2023. Interest earned on such deposit ` 5,500. assuming his income before considering clubbing
(vi) He donated ` 5,000 in cash to a NGO (the NGO was registered under provisions is higher than his wife]
section 80G of the Income-tax Act, 1961). Less: Exemption under section 10(32) 1,500 4,000
(vii) He had taken a loan of `38,00,000 for the purchase of a house property Gross Total Income 8,52,500
valuing `45,00,000 for self- occupation from a financial institution on 1st May
Less: Deduction under Chapter VI-A
2021. He repaid `1,80,000 during the P.Y. 2023- 24 out of which ` 1,05,000
is towards principal payment and the balance is for interest on loan. Deduction under section 80C
Compute the total income of Mr. Jain for the A.Y. 2024-25 if he does not opt for Life insurance premium [Since Mr. Jain suffers from 27,000
the provisions of section 115BAC. (RTP Nov ‘23) severe disability, premium upto 15% of the sum
Answer 51 assured ` 2,20,000 would be allowed, as the policy
Computation of total income of Mr. Jain for the A.Y.2024-25 is taken after 31.3.2012]
Particulars Repayment of principal amount for housing loan 1,05,000 1,32,000
` `
Deduction under section 80G
Income from house property (75,000)
Donation to an NGO registered under section 80G -
NAV Nil
[Not allowable since the donation is made in cash of
Less: Interest on loan 75,000
a sum exceeding `2,000]
Income from Other Sources (75,000)
Deduction under section 80QQB
Royalty 9,00,000
Royalty income of a resident from literary book 3,00,000
Less: Expenses incurred for writing book 40,000 8,60,000
Deduction under section 80U [Since Mr. Jain suffers 1,25,000
Value of statue of Goddess Saraswati 65,000 from severe disability]
[The fair market value of the statue (sculpture) Total income 2,95,500
received by his minor daughter as gift (not on account
of her skill) from his friends would be taxable, since
its value exceeds ` 50,000. It would be included in
the hands of Mr. Jain, assuming his income before 1,500
considering clubbing provisions is higher than his
wife].

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7. ADVANCE TAX, TAX DEDUCTED AT SOURCE &

INTRODUCTION TO TAX COLLECTION AT SOURCE
Answer 52
Question 52 (i) On payment of LIC maturity proceeds - The annual premium exceeds
10% of sum assured in respect of a policy taken after 31.3.2012, and
consequently, the maturity proceeds of Rs. 95,000 would not be exempt
Examine & explain the TDS implications in the following cases along with reasons u/s 10(10D) in the hands of Ms. Sarla. However, tax deduction provisions
thereof, assuming that the deducted are residents and having a PAN which they u/s 194-DA are not attracted since the maturity proceeds are less than Rs.
have duly furnished to the respective detectors. 1 lakh.
(i) Ms. Sarla received a sum of Rs. 92,000 on 30th September 2023 towards (ii) On payment of sale consideration for purchase of residential house
maturity proceeds of LIC taken on 1st October 2014 for which sum assured property - Since the sale consideration of house property is less than
was Rs. 80,000 and annual premium was Rs. 10,000. Rs. 50 lakhs, Mr. Arun is not required to deduct tax at source u/s 194-IA,
(ii) Mr. Rohit transferred a residential house property to Mr. Arun for Rs. 45 irrespective of the fact that the stamp duty value is more than the sale
lacs. The stamp duty value of such property is Rs. 55 lacs.
consideration as well as the threshold limit of Rs. 50 lakhs. As per amendment
(iii) Akash (P) Limited pays the following amounts to Mr. Santosh during previous
tax is to be deducted at source if consideration or SDV is Rs 50,00,000 or
year 2023-24:
more since SDV is Rs 55,00,000 TDS u/s 194-IA will be applicable @ 1%
(1) Rs. 22,000 towards fee for professional services
(2) Rs. 18,000 towards royalty. of consideration or SDV whichever is higher. TDS of Rs 55,000 will be cut.
(iv) Payment of Rs. 1,75,000 made to Mr. Ankit for purchase of bag according (iii) On payment of fee for professional services and royalty – Under section
to specifications of M/s. Packaging Limited. However, no material was 194J, the threshold limit of Rs. 30,000 is specified separately for, inter alia,
supplied for such bag by Packaging Limited or its associates to Mr. Ankit. fees for professional services and royalty. Therefore, Akash (P) Limited is
(v) ABC Private Limited pays Rs. 12,000 to Ms. Deepika, its director, on not required to deduct tax at source under section 194J either on fee of
1.5.2023 towards sitting fee which is not taxable u/s 192. Rs. 22,000 for professional services or on royalty of Rs. 18,000 paid to
(vi) Rashi Limited is engaged by Jigar Limited for the sole purpose of business Mr. Santosh, since the payment under each category does not exceed the
of operation of call center. On 18-03-2024, the total amount credited by independent threshold Rs. 30,000 specified thereunder.
Jigar Limited in the ledger account of Rashi Limited is Rs. 70,000 regarding (iv) On payment for purchase of bag according to specifications - As per
service charges of call center. The amount is paid through cheque on 28- section 194C, the definition of “work” does not include the manufacturing
03-2024 by Jigar Limited. or supply of product according to the specification by customer in case the
(vii) Ms. Mohit won a lucky draw prize of Rs. 21,000. The lucky draw was material is purchased from a person other than the customer or its associate,
organized by M/s. Maximus Retail Ltd. for its customer. (MTP 7 Marks,
being a person related to the customer in such manner as defined u/s 40A(2)
April’21, PYP 7 Marks , May ’19)
(b).

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(vi) On payment of call center service charges- Since Rashi Limited is (3) Generally, tax is required to be Generally, tax is required to be
engaged only in the business of operation of call center, Jigar Limited is deducted at the time of credit to collected at source at the time of
required deduct tax at source@2% on the amount of Rs. 70,000 u/s 194J the account of the payee or at debiting of the amount payable by
on 18.3.2024 i.e., at the time of credit of call center service charges to the the time of payment, whichever is the buyer of certain goods to the
account of Rashi Limited, since the said date is earlier than the payment earlier. account of the buyer or at the time
date i.e., 28.3.2024. However, in case of payment of of receipt of such amount from the
(vii) On payment of prize winnings of Rs. 21,000 salary, payment in respect of said buyer, whichever is earlier.
Tax is deductible @ 30% under section 194B by M/s. Maximus Retail Ltd.., life insurance policy etc., tax is However, in case of sale of motor
from the prize money of Rs. 21,000 payables to the customer, since the required to be deducted at the vehicle of the value exceeding `
winnings exceed Rs. 10,000. time of payment. 10 lakhs, tax collection at source is
required at the time of receipt of
sale consideration.
Question 53
Mention the significant differences between TDS and TCS. Question 54

(MTP 3 Marks, Oct’20) (RTP May ’18)
Examine the applicability of tax deduction at source provisions, the rate
Answer 53 andamount of tax deduction in the following cases for the financial year 2023-
Significant Differences between TDS and TCS 24:
TDS TCS (1) Payment of ` 27,000 made to Jacques Kallis, a South African cricketer, by
(1) TDS is tax deduction at source TCS is tax collection at source. an Indian newspaper agency on 02-07-2023 for contribution of articles in
(2) Person responsible for paying is Seller of certain goods or provider relation to the sport of cricket.
(2) Payment made by a company to Mr. Ram, sub-contractor, ` 3,00,000 with
required to deduct tax at source of services is responsible for
outstanding balance of ` 1,20,000 shown in the books as on 31-03-2024.
at the prescribed rate. collecting tax at source at the
(3) Winning from horse race ` 1,50,000 paid to Mr. Shyam, an Indian resident.
prescribed rate from the buyer.
(4) ` 2,00,000 paid to Mr. A, a resident individual, on 22-02-2024 by the
Person who grants license or State ofUttar Pradesh on compulsory acquisition of his urban land. (MTP 4
lease (in respect of any parking Marks, March’19, Old SM)
lot, toll plaza, mine or quarry) is
responsible for collecting tax at Answer 54
source at the prescribed rate from (1) Section 194E provides that the person responsible for payment of any amount
the licensee or lessee, as the case to a non-resident sportsman who is not a citizen of India for contribution
may be.

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of articles relating to any game or sport in India in a newspaper has to Compute the interest chargeable under section 201(1A). (MTP 3 Marks Oct 22)
deduct tax at source@20%. Further, since Jacques Kallis, a South African
cricketer, is a non-resident, health and education cess@4% on TDS should Answer 55
also be added. Interest under section 201(1A) would be computed as follows –
Therefore, tax to be deducted = ` 27,000 x 20.80% = ` 5,616. Particulars `
(2) Provisions of tax deduction at source under section 194C are attracted 1% on tax deductible but not deducted i.e., 1% on ` 5,000 250
in respect of payment by a company to a sub-contractor. Under section for 5 months
194C, tax is deductible at the time of credit or payment, whichever is 1½% on tax deducted but not deposited i.e. 1½% on ` 990
earlier @ 1% in case the payment is made to an individual. Since the 11,000 for 6 months2
aggregate amount credited or paid during the year is ` 4,20,000, tax is 1,240
deductible @ 1% on ` 4,20,000. 2
As per TRACES, interest is computed for 7 months
Tax to be deducted = ` 4,20,000 x 1% = ` 4,200
(3) Under section 194BB, tax is to be deducted at source, if the winnings from
horse races exceed ` 10,000. The rate of deduction of tax at source is Question 56
30%.
Hence, tax to be deducted = ` 1,50,000 x 30% = ` 45,000. Mr. Sachal, a resident individual aged 54, furnishes his income & other details
(4) As per section 194LA, any person responsible for payment to a resident, for the P.Y. 2023-24:
any sum in the nature of compensation or consideration on account of (i) Income of ` 8,10,000 from wholesale cloth business, whose accounts are
compulsory acquisition under any law, of any immovable property, audited u/s 44AB.
is required to deduct tax at source, if such payment or the aggregate (ii) Income from other sources ` 2,70,000.
amountof such payments to the resident during the financial year exceeds (iii) Tax deducted at source ` 25,000.
` 2,50,000.In the given case, there is no liability to deduct tax at source as (iv) Advance tax paid ` 1,03,000 during the P.Y. 2023-24.
the payment made to Mr. A does not exceed ` 2,50,000. Return of income filed on 11-12-2024. Calculate the interest payable
under section 234B of the income- tax Act, 1961. Assume that the return
of income would be processed on the same day of filing of return. What
are the consequences for delay in furnishing return of income under the
Question 55
Income-tax Act, 1961? Examine, making the required computations in this
case.
An amount of ` 50,000 was paid to Mr. Rakesh on 1.9.2022 towards fees
(RTP May ’18)
for professional services without deduction of tax at source. Subsequently,
another payment of ` 60,000 was due to Mr. Rakesh on 31.1.2023, from which
tax@10% (amounting to ` 11,000) on the entire amount of ` 1,10,000 was
deducted. However, this tax of ` 11,000 was deposited only on 22.7.2023.

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Answer 56 and advance tax paid i.e., ` 13,960 rounded off to ` 13,900 under Rule 119A
Computation of interest payable under section 234B by Mr. Sachal of Income-tax Rules, 1962
Particulars ` Interest u/s 234A = ` 13,900 x 1% x 2 = ` 278 Fee for late filing of return
Tax on total income of ` 10,80,000 [Business income of ` 1,36,500 under section 234F
8,10,000 + Since Mr. Sachal has furnished his return of income after the due date but
Income from other sources of ` 2,70,000] before 31.12.2024 and his total income exceeds ` 5 lakhs, a fee of ` 5,000
Add: Education cess and SHEC@3% (4% as per amendment) 5,460 will be payable by him.
Tax on total income 1,41,960
Less: Tax deducted at source 25,000
Assessed Tax 1,16,960 Question 57
90% of assessed tax 1,05,264
Mr. Shikhar, aged 52 years, provides you the following information and
Advance tax paid 1,03,000
requests you to determine his advance tax liability with due dates for the
Interest under section 234B is leviable since advance tax of `
financial year 2023-24.
1,03,000
Estimated tax liability for the financial year 2023-24 ` 85,000
paid is less than ` 1,05,264, being 90% of assessed tax
Tax deducted at source for this year ` 15,000
Number of months from 1st April, 2024 to 11th December, 9
2024, being the date of processing of return
(i) Would your Answer change if Mr. Shikhar is eligible for and has opted
Interest under section 234B@1% per month or part of a month 1,251 for presumptive tax provisions under section 44AD and his tax liability is
for 9 months on ` 13,900 [i.e., difference between assessed tax entirely on account of such income (ignore TDS)?
of ` 1,16,960 and advance tax of ` 1,03,000 paid, being ` (ii) What would be your Answer if, instead of section 44AD, he is eligible for
13,960 which is rounded off to ` 13,900 under Rule 119A of and has opted for presumptive tax provisions under section 44AE? (RTP
Income-tax Rules, 1962] Nov ’18) (Same concept different figures MTP 4 Marks, March’19, RTP
Consequences for delay in filing return of income on or before the due date May ’18)
Interest under section 234A and fee under section 234F would be attracted
for filing return of income beyond the due date specified under section 139(1). Answer 57
Interest under section 234A
Since Mr. Sachal’s accounts are audited under section 44AB, the due date for Determination of Advance Tax Liability of Mr. Shikhar
filing of return for A.Y. 2024- 25, in his case, is 31.10.2024. Mr. Sachal has Particulars `
filed his return on 11.12.2024 i.e., interest under section 234A will be payable Estimated tax liability for the financial year 2023-24
for 2 months (from 1.11.2024 to 11.12.2024) @ 1% per month or part of Less: Tax deducted at source
month on the amount of tax payable on the total income, as reduced by TDS Tax payable

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Due Date of Amount payable ` (i) XY a partnership firm is selling its product ‘R’ through the E-commerce
installment Platform provided by AB Ltd. (E- commerce Operator). AB Ltd., credited
in its books of account, the account of XY on 28th February, 2024 by sum
On or before 15th Not less liability than 15%
of ` 4,90,000 for the sale of product R, made during the month February,
June, 2023 of advance tax 10,500
2024. Mr. Rai, who purchased product ‘R’ through the platform provided
On or before 15th Not less than 45% of 21,000 by AB Ltd. made payment of ` 60,000 directly to XY on 21st February,
September, 2023 advance tax liability less (` 31,500, being 2024.
amount paid in earlier 45% of (ii) ABC Ltd is a producer of natural gas. During the year it sold natural gas
installment ` 70,000 - ` 10,500) worth ` 26,50,000 to M/s Deep Co., a partnership firm. It also incurred `
On or before 15th Not less than 75% of 21,000 1,70,000 as freight for the transportation of gas. It raised the invoice and
December, 2023 advance tax liability (52,500, being 60% clearly segregated the value of gas as well as the transportation charges.
less amount paid in earlier of (iii) ABC LLP paid job charges to XYZ, a partnership firm for doing embroidery
installment(s) ` 70,000 work on the fabric supplied by the ABC LLP during the previous year 2023-
- ` 31,500) 24 as under
On or before 15th Whole of the advance tax 17,500
March, 2024 liability less amount paid in (70,000, being BILL NO. DATE AMOUNT `
earlier installment(s) 100% of 1 30-04-2023 27,000
` 70,000 - ` 52,500) 57 30-06-2023 25,000
105 30-09-2023 28,000
In case he is eligible for presumptive tax provisions under section 44AD and his 151 30-12-2023 32,000
entire tax liability is on account of such income, he can pay his entire advance
tax liability in one installment on or before 15.3.2024, without attracting interest (PYP 6 Marks, May’22, MTP 6 Marks Oct ’23)
under section 243C. Answer 58
This benefit would, however, not be available if he is eligible for and has opted (i) AB Ltd, an e-commerce operator is required to deduct tax @1% under
for presumptive tax provisions under section 44AE, in which case he has to pay section 194-O on ` 5,50,000 (i.e., ` 4,90,000 credited on 28.2.2023
his advance tax in four installments as indicated above, failing which interest plus deemed payment of ` 60,000 on 21.2.2024, being payment directly
under section 234C would be attracted. made by Mr. Rai to the e-commerce participant XY), being the gross
amount of sale of product ‘R’ of XY, an e-commerce participant, since such
sale is effected in February, 2024 is facilitated by AB Ltd. through its e-
Question 58 commerce platform.
Hence, TDS u/s 194O = 1% on ` 5,50,000 = ` 5,500
Discuss the liability of tax deduction at source under the Income-tax Act, 1961
in respect of the following cases with reference to A.Y. 2024-25.

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(ii) Since ABC Ltd., being the producer of the natural gas, sells as well as to ` 1,12,000), the TDS provisions under section 194C would get attracted
transports the gas to M/s. Deep Co., the purchaser, till the point of delivery, on the entire sum of ` 1,12,000. Tax has to be deducted @ 2% (since
where the ownership of gas is simultaneously transferred to M/s. payment is to a firm, XYZ) on the entire amount of ` 1,12,000, from the last
Deep Co, the manner of raising the invoice (whether the transportation payment of ` 32,000 on 30.12.2023.
charges are embedded in the cost of gas or shown separately) does not Hence, TDS u/s 194C = ` 2,240.
alter the basic nature of such contract which remains essentially a ‘contract
for sale’ and not a ‘works contract’ as envisaged in section 194C.
Therefore, in such circumstances, the TDS provisions would not be attracted
on `1,70,000, being the component of gas transportation charges paid by
M/s. Deep Co. to ABC Ltd.
Alternate Answer:
The above solution is based on Circular No. 9/2012 dated 17.10.2012,
wherein it has been clarified that in case the Owner/Seller of the gas sells
as well as transports the gas to the purchaser till the point of delivery,
where the ownership of gas to the purchaser is simultaneously transferred,
the manner of raising the sale bill, does not alter the basic nature of such
contract which remains essentially a ‘contract for sale’ and not a ‘works
contract’ as envisaged in section 194C of the Act.
Since, the Question is silent on the timing of the transfer of ownership of the
gas to the purchaser, an assumption that the ownership of the gas to the
purchaser is transferred before its transportation is possible. In such a case,
the transportation of gas after transfer of ownership may be considered
as a separate contract for transportation of gas i.e. ‘works contract’ u/s
194C, and hence TDS @ 2% has to be deducted by M/s. Deep Co. on `
1,70,000/- i.e. ` 3,400/-.
(iii) In this case, the individual contract payments (through the bills dated
30.4.2023, 30.6.2023 and 30.9.2023) made by ABC LLP to XYZ does
not exceed ` 30,000. However, since the aggregate amount paid to
XYZ during the P.Y. 2023-24 exceeds ` 1,00,000 (on account of the last
payment of ` 32,000, due on 30.12.2023, taking the total from ` 80,000

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8. PROVISIONS FOR FILING RETURN OF INCOME

AND SELF-ASSESSMENT
Question 59
Question 60
Explain with brief reasons whether the return of income can be revised under
section 139(5) of the Income-tax Act, 1961 in the following cases: Mr. Salish, a resident individual aged 54, furnishes his income & other details for
(i) Belated return filed under section 139(4). the P.Y. 2023-24:
(ii) Return already revised once under section 139(5). (i) Income of Rs.8,10,000 from wholesale cloth business, whose accounts are
(iii) Return of loss filed under section 139(3). audited u/s 44AB.
(MTP 3 Marks, March’18, PYP 4 Marks May ’22) (ii) Income from other sources Rs.2,70,000.
(iii) Tax deducted at source Rs. 25,000.
Answer 59 (iv) Advance tax paid Rs.1,03,000 during the P.Y. 2023-24.
Any person who has furnished a return under section 139(1) or 139(4) can file a Return of income filed on 11-12-2024. Calculate the interest payable
revised return at any time before three months prior to the end of the relevant under section 234B of the Income tax Act, 1961. Assume that the return of
income would be processed on the same day of filing of return.
assessment year or before the completion of assessment, whichever is earlier,
What are the consequences for delay in furnishing return of income under
if he discovers any omission or any wrong statement in the return filed earlier.
the Income-tax Act, 1961?
Accordingly,
Examine, making the required computations in this case. Assume that 115BAC
(i) A belated return filed under section 139(4) can be revised. is not opted. (MTP 5 Marks, April’19)
(ii) A return revised earlier can be revised again as the first revised return
replaces the original return. Therefore, if the assessee discovers any omission Answer 60
or wrong statement in such a revised return, he can furnish a second revised Computation of interest payable under section 234B by Mr. Salish
return within the prescribed time i.e. at any time before three months prior Particulars Rs.
to the end of the relevant assessment year or before the completion of Tax on total income of Rs.10,80,000 [Business income of 1,36,500
assessment, whichever is earlier. It implies that a return of income can be Rs.8,10,000 +
revised more than once within the prescribed time.
Income from other sources of Rs.2,70,000]
(iii) A return of loss filed under section 139(3) is deemed to be return filed
under section 139(1), and therefore, can be revised under section 139(5).
Tax on total income 1,41,960
Less: Tax deducted at source 25,000

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Assessed Tax 1,16,960 will be payable by him.

90% of assessed tax 1,05,264 (As per amendment If return is filed after due date and the total income is
Advance tax paid 1,03,000 under Rs 5,00,000 then late filing fee will be Rs. 1000 and if total income
Interest under section 234B is loveable since advance tax of exceeds Rs. 5,00,000 the late filing fee will be Rs. 5,000.)
Rs.1,03,000 paid
is less than Rs.1,05,264, being 90% of assessed tax
Question 61
Number of months from 1st April, 2024 to 11the December, 9
2024, being the date of processing of return
Mr. Prince, a senior citizen, has reported a Total Income ` 1,90,000. He has
Interest under section 234B@1% per month or part of a 1,251
claimed exemption of ` 50,000 under section 54EC in respect of long term
month for 9 months capital gain on sale of house property anddeductions under Chapter VI-A
on Rs.13,900 [i.e., difference between assessed tax of amounting to ` 1,50,000 for the previous year 2023-24. Is he liable to file his
Rs.1,16,960 and return of income under section 139(1) for the Assessment year 2024-25? If so
advance tax of Rs.1,03,000 paid, being Rs.13,960 which is why? (MTP 3 Marks March 22, RTP May ’19)
rounded off to
Rs.13,900 under Rule 119A of Income-tax Rules, 1962] Answer 60
As per sixth proviso to section 139(1), every person, being an individual whose
Consequences for delay in filing return of income on or before the due date total income without giving effect to the provisions of, inter alia, section 54EC
Interest under section 234A and fee under section 234F would be attracted for and Chapter VI-A exceeds the basic exemption limit, is compulsorily required to
filing return of income beyond the due date specified under section 139(1). furnish return of income on or before the due date.
Interest under section 234A Therefore, in the present case, Mr. Prince, a senior citizen is required to file
Since Mr. Salish’s accounts are audited under section 44AB, the due date for return of income, since his total income of ` 3,90,000 before giving effect to
filing of return for A.Y. 2024-25, in his case, is 30.09.2024 31.10.2024. Mr. the exemption under section 54EC and deduction of ` 1,50,000 under Chapter
Salish has filed his return on 11.12.2024 i.e., interest under section 234A will VI-A, exceeds the basic exemption limit of ` 3,00,000 applicable in his case.
be payable for 32 months (from 1.11.2024 to 11.12.2024) @ 1% per month
or part of month on the amount of tax payable on the total income, as reduced
by TDS and advance tax paid i.e., Rs. 13,960 rounded off to Rs. 13,900 under Question 62
Rule 119A of Income-tax Rules, 1962 Interest u/s 234A = Rs.13,900 x 1% x 2
= Rs.417 Rs 278 Mr. Ram furnished his return of income for the A.Y. 2024 -25 on 20.07.2024.
Fee for late filing of return under section 234F Due to missing information for payment of taxes in the return of income, the
Since Mr. Sailesh has furnished his return of income after the due date but Assessing Officer considers it defective under section 139(9) of the Income-
before 31.12.2019 and his total income exceeds Rs.5 lakhs, a fee of Rs. 5,000 tax Act, 1961.

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(i) What are the consequences if defect is not rectified within the time Accordingly, Mr. X can furnish updated return for A.Y. 2024-25 as on 31.3.2026
allowed? and on 28.2.2027.
(ii) Specify the remedies available if not rectified within time allowed by
the Assessing Officer? (MTP 3 Marks March ‘23) However, he cannot furnish such return as on 31.5.2027, since such date falls
after 31.3.2027.
Answer 62
i. If the defect is not rectified within the period of 15 days or such further Mr. X would be liable to pay additional income-tax
extended period, then, the return would be treated as an invalid return. - @25% of tax and interest payable, if updated return is furnished after
The consequential effect would be the same as if the assessee had failed the expiry of the time limit available under section 139(4) or 139(5) i.e.,
to furnish the return. 31st December 2024 and before the expiry of 12 months from end of
ii. The Assessing Officer has the power to condone the delay and treat relevant assessment year i.e., 31.3.2025
the return as a valid return, if the assessee has rectified the return after - @50% of tax and interest payable, if updated return is furnished after the
the expiry of 15 days or the further extended period, but before the expiry of 12 months from end of relevant assessment year i.e., 31.3.2025
assessment is made. and before the expiry of 24 months from end of relevant assessment year
i.e., 31.3.2027.
Accordingly, Mr. X is liable to pay additional income-tax in case he furnished
Question 63 his updated return as on
(i) 31.3.2026 - ` 71,250 [25% of 2,85,000, being tax of ` 2,50,000 plus
interest of ` 35,000]
Mr. X would like to furnish his updated return for the A.Y. 2024-25. In case he (ii) 28.2.2027 of ` 1,42,500 [50% of 2,85,000, being tax of ` 2,50,000
furnished his updated return of income, he would be liable to pay ` 2,50,000
plus interest of ` 35,000]
towards tax and ` 35,000 towards interest after adjusting tax and interest
paid at the time filing earlier return. You are required to examine whether
Mr. X can furnish updated return
Question 64
(i) as on 31.3.2026
(ii) as on 28.2.2027
(iii) as on 31.5.2027 Mr. Aakash has undertaken certain transactions during the F.Y.2023 -24, which
If yes, compute the amount of additional income-tax payable by Mr. X are listed below. You are required to identify the transactions in respect of
at the time of filing his updated return. (MTP 3 Marks April ‘23) which quoting of PAN is mandatory in the related documents –
(RTP May ’23)
Answer 63 Opening a current account with HDFC Bank
Mr. X may furnish an updated return of his income for A.Y. 2024-25 at any time 1. Opening a current account with HDFC Bank
within 24 months from the end of the relevant assessment year i.e., 31.3.2027.’

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2. Sale of shares of ABC (P) Ltd. for `1,50,000 S. Assessee Authorised Persons
3. Purchase of two wheeler motor vehicle of `1 lakh No.
4. Purchase of a professional laptop of `3 lakhs (a) HUF whose karta is absent from Any other adult member of the
India HUF
Answer 64 (b) Company where the company is Liquidator
Transaction Is quoting of PAN mandatory in being wound up
related documents? (c) Local authority The principal officer
1. Opening a current account with Yes, quoting of PAN is mandatory (d) Individual who is mentally His guardian or any other person
HDFC Bank on opening of a current account incapacitated from attending to competent to act on his behalf
by a person with bank. his affairs
2. Sale of shares of ABC (P) Ltd. for Yes, since the amount for sale of
`1,50,000 unlisted shares exceeds
Question 66
`1,00,000
3. Purchase of two wheeler motor Since the purchase is of two
Mr. Sitaram is engaged in the business of trading of cement having turnover of
vehicle of `1 lakh wheeler motor vehicle, quoting of
`10 crores during the financial year 2023-24. As a tax consultant advise him
PAN is not mandatory
what are the particulars to be furnished under section 139(6A) along with Return
4. Purchase of a professional laptop Yes, since the amount paid
of Income?
of `3 lakhs exceeds `2,00,000
(PYP 4 Marks Dec ‘21)
Answer 66
Since Mr. Sitaram’s turnover from business of trading of cement is `10 crores
Question 65
which exceeds `1 crore, being the threshold limit for tax audit under section
44AB, he is subjected to tax audit.
Who is authorized to verify the return of income of the following assessees?
Accordingly, Mr. Sitaram, is required to furnish the following particulars along
(a) HUF whose Karta is absent from India
with his return of income -
(b) Company where the company is being wound up
(i) the report of audit referred to in section 44AB.
(c) Local authority
(ii) the particulars of the location and style of the principal place where he
(d) Individual who is mentally incapacitated from attending to his affairs
carries on the business or profession and all the branches thereof.
(RTP Nov ‘23)
Answer 65
Person authorized to verify return of income

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Question 67 Question 68
Due to some inconsistent information provided in the return of income furnished Mr. A employed with B Pvt. Ltd. residing in Chennai, filed his return of Income on
under Section 139(1), the Assessing Officer considers it defective under Section 30 th July. He has no other income other than salary. He however has failed to
139(9) of the Income-tax Act, 1961. link his Aadhar with PAN as on return filing date.
(i) How, the Assessing Officer would deal with the issue? (i) What is the last date for linking Aadhar with PAN?
(ii) What are the consequences if defect is not rectified within the time allowed? (ii) What is the consequence for him if he has linked the Aadhar with PAN on
Specify the remedies available if not rectified within time allowed by the 31 st August 2022?
Assessing Officer? (iii) Are there any exceptions provided under section 139AA from quoting of
(PYP 4 Marks May’22) Aadhar number? (PYP 4 Marks Nov ‘22)
Answer 67
(i) Where the Assessing Officer considers that the return of income furnished Answer 68
by the assessee is defective, Every person who has been allotted PAN as on 1st July, 2017, and who is eligible
- he may intimate the defect to the assessee and to obtain Aadhar Number, has to intimate his Aadhar Number to prescribed
- give him an opportunity to rectify the defect within a period of 15 authority on or before 31st March, 2022.
days from the date of such intimation. Since, Mr. A fails to link his Aadhar number with PAN on or before 31.3.2022,
The Assessing Officer has the discretion to extend the time period consequently, at the time of linking his Aadhaar number with PAN on 31.8.2022,
beyond 15 days, on an application made by the assessee. he would be liable to pay fee of `1,000 as per section 234H.
(ii) If the defect is not rectified within the period of 15 days or such further Yes, the following are the exceptions -
extended period, then, the return would be treated as an invalid An individual who does not possess the Aadhar number or Enrolment ID and is:
return. The consequential effect would be the same as if the assessee (i) residing in Assam, Jammu & Kashmir and Meghalaya;
had failed to furnish the return. (ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iii) The Assessing Officer has the power to condone the delay and treat (iv) not a citizen of India
the return as a valid return, if the assessee has rectified the return after
the expiry of 15 days or the further extended period, but before the Question 69
assessment is made.
What is the time limit within which an updated return can be filed? Also enumerate
the circumstances in which updated return cannot be furnished.
(PYP 4 Marks May’23)

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Answer 69
Any person may furnish an updated return of his income or the income of any
other person in respect of which he is assessable, for the previous year relevant
to the assessment year at any time within 24 months from the end of the relevant
assessment year.
Circumstances in which updated return cannot be furnished
No updated return can be furnished by any person for the relevant assessment
year, where
(a) an updated return has been furnished by him for the relevant assessment
year
(b) any proceeding for assessment or reassessment or recomputation or revision
of income is pending or has been completed for the relevant assessment
year in his case;
(c) he is such person or belongs to such class of persons, as may be notified by
the CBDT.
(d) an updated return is a loss return
(e) the updated return has the effect of decreasing the total tax liability
determined on the basis of return furnished under section 139(1)/(4)/(5) /
original or revised return
(f) the updated return results in refund or increases the refund due on the
basis of return furnished under section 139(1)/(4)/(5) / original or revised
return.
Note – Any three of the above circumstances can be mentioned.

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9. COMPUTATION OF TOTAL INCOME & TAX

disallowed + = jo business se related nhi h
PAYABLE
p&l mai business se related wale ko kuch nhi karna h To Interest paid to 1,15,000
NBFC
Question 70 To Depreciation 1,82,000
To Net Profit 73,55,815
From the following information provided by Mr. Suresh, aged 43 years and a 1,03,21,660 1,03,21,660
wholesale dealer, for the A.Y. 2024-25, you are required to compute the tax The following additional information is provided by him: add to profit
payable by him. (a) Closing stock of previous year 2023-24 was undervalued by Rs. 55,000.
Trading and Profit and Loss Account of Mr. Suresh (b) Rates and taxes include Rs. 1,000 paid towards late filing of his Income-
Particulars Amount in Particulars Amount in tax return for Assessment Year 2023-24 under section 234F of lncome-
Rs. Rs. tax Act.
To Opening Stock 24,21,000 By Sales 2,62,50,100 (c) Salaries include Rs. 30,000 paid on single day by way of cash to his
To Purchases 2,06,00,500 By Closing stock 52,00,100 accountant. more than 10k disallowed
To Direct expenses 4,12,040 (d) Interest paid on loan of Rs. 10,00,000 taken from a Non-Banking Finance
To Freight inward 2,65,000 company. Out of the loan, amount of Rs. 2 lakhs was used for personal
purpose and the balance was used for business purpose. No TDS was
To Gross Profit c/d 77,51,660
deducted while paying the interest on loan.
3,14,50,200 3,14,50,200
(e) An amount of Rs. 35,000 was paid by cheque during the year towards
To Salaries and 17,15,000 By Gross Profit b/d 77,51,660
health insurance policy covering himself, his spouse and his children. 25k deductio
wages
(f) General expenses include Advertisement expense of Rs. 25,000 paid by
To General 3,65,000 By dividend from 17,20,000 cheque towards an advertisement in a souvenir published by local political
expenses Indian companies party.
(gross) (g) Income-tax refund includes Rs. 2,500 towards interest. ifos
To Rates and taxes 2,40,000 By Interest received 1,11,000 (h) Depreciation charged is as per Income-tax Rules is Rs. 2,20,000 allowed
on FDs (Net of (i) Advance Tax paid during the year is Rs. 9 lakhs.
tax) [FD made on (j) TDS has been deducted on interest received on FD.100% allowed
1.8.2023] (k) Turnover for the year ending 31.03.2023 was Rs. 2.58 crores.
To Interest paid on 3,845 By Rent received 7,20,000 (MTP 14 Marks,Nov’21) (Same concepts different figures MTP 14 Marks
late filing of GST Mar’22)
To Income-tax paid 3,45,000 By Income-tax 19,000
for FY 2022-23 Refund

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Answer 70 - Interest paid to NBFC on which tax 27,600

Computation of Total Income of Mr. Suresh for the A.Y.2024-25 is not deducted attracts disallowance
Particulars Rs. Rs. Rs. @30% of Rs. 92,000 under section
Income from house property 40(a)(ia) [Since Mr. Suresh’s turnover
Annual value (rent received has been 7,20,000 for the immediately preceding previous
taken as annual value, due to absence year i.e., P.Y. 2022-23 exceeds Rs. 1
of information relating to expected crore, he is required to deduct tax at
rent in the Question) source. Disallowance@30% of
Less: Deduction u/s 24(a) interest is attracted for non-deduction
30% of Annual Value 2,16,000 5,04,000 of tax at source]
Profits and gains of business or - Income-tax paid for F.Y. 2022-23 3,45,000
profession - Interest paid on late filing of GST, Nil
Net profit as per profit and loss 73,55,815 allowed, since it is not for infraction of
account law but is compensatory in nature.
Add: Expenses/Payments debited - Advertisement expenses towards an
to profit and loss account but not advertisement in a souvenir published
allowed by local political party [under section 25,000 6,33,600
37(2B)]
- Depreciation as per books of 1,82,000 Add: Undervaluation of Closing stock 55,000
account 80,44,415
Fee for late filing of income-tax return 1,000 Less: Income chargeable under other
for A.Y. 2023- 24 – disallowed heads and income not chargeable to
Salary paid to an accountant in cash 30,000 tax but credited to profit and loss
exceeding Rs. 10,000 – disallowed account
under section 40A(3) - Dividend from Indian companies 17,20,000
- Interest paid to NBFC on loan which 23,000 (taxable under the head “Income from
is used for personal purposes (Rs. other sources”)
1,15,000 x 2,00,000/ 10,00,000) – - Interest on FDs (Net of taxes) (Gross 1,11,000
not allowed as per section 37 income taxable under the head
“Income from other sources”

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- Rent received (taxable under the 7,20,000 Rs. 5,00,001 – Rs.10,00,000 [i.e., Rs. 1,00,000 20,85,276
head “Income from house property” 5,00,000@20%]
- Income-tax refund 19,000 25,70,000 Rs. 10,00,001 above [i.e., Rs. 65,75,920 19,72,776
54,74,415 @30%]
Less: Depreciation as per Income-tax 2,20,000 52,54,415 20,85,276
Rules Add: Surcharge @10%, since total income 2,08,528
Income from Other Sources exceeds Rs. 50,00,000
Dividend from Indian companies 17,20,000 22,93,804
Interest on fixed deposits (Rs. 1,20,000 Add: Health and Education cess@4% 91,752
1,11,000 x 100/92.5, since tax Tax Liability 23,85,556
was deducted at source @7.5%) Less: Advance tax 9,00,000
Interest on income-tax refund 2,500 18,42,500 Tax deducted at source on interest on FDs under 9,000
Gross Total Income 76,00,915 section 194A
Less: Deduction under Chapter VI-A Tax payable 14,76,556
Section 80D Tax payable (rounded off) 14,76,560
Health insurance premium paid 25,000
for self, spouse and his children Computation of tax liability of Mr. Suresh as per section 115BAC for
allowable as deduction to the extent A.Y.2024-25
Rs. 25000 Particulars Rs.
Section 80GGC Gross total Income as per regular provisions of the Act 76,00,915
Expenditure towards advertisement in Nil 25,000 Less: Deduction u/s 10AA/ Deduction under Chapter VI-A -
a souvenir published by local political [No deduction under section 10AA or under Chapter VI-A is
party not allowable as deduction allowed]
Total Income 75,75,915 Total Income as per section 115BAC 76,00,915
Total Income (Rounded Off) 75,75,920 Total Income as per section 115BAC (rounded off) 76,00,920
Tax on total income of 76,00,920 19,80,276
Computation of tax payable by Mr. Suresh for the A.Y.2024-25 Upto `2,50,000 `3,00,000 Nil
Particulars Rs. `3,00,000 – `6,00,000 [`3,00,000 @ 5%] 15,000
Upto Rs. 2,50,000 Nil ` 6,00,001 – `9,00,000 [`3,00,000 @ 10%] 30,000
Rs. 2,50,001 – Rs. 5,00,000 [i.e., Rs. 12,500 `9,00,001 – `12,00,000 [`3,00,000 @ 15%] 45,000
2,50,000@5%]

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`12,00,001 – `15,00,000 [`3,00,000 @ 20%] 60,000 Rs. 4,000 per month and rent paid for house in Chennai is Rs. 7,000 per
month.
Above `15,00,000 @30% (61,00,920 @ 30%)
(ii) He owns a commercial building at Mumbai, which is let out on 1.7.2022 at
18,30,276
a monthly rent of Rs. 46,000 to ABC Ltd. He paid municipal taxes of Rs.
19,80,276 27,000 and Rs. 25,000 for the financial year 2022-23 and 2023-24 on
Add: Surcharge @10%, since total income exceeds Rs. 1,98,028 31-3-2024 and 20-4-2024, respectively. Fair rent of the building is Rs.
50,00,000 33,000 p.m.
21,78,304 (iii) He purchased 4000 unlisted shares of Maharaja Limited on 25-2-2008
Add: Health and education cess@4% 87,132 for Rs. 80,000. Company declared bonus in the ratio of 1:1 on 15th
Total tax liability 22,65,436 March, 2008. Mr. Josh sold 3000 bonus shares on 15.01.2021 for Rs.
Less: Advance tax 9,00,000 2,00,000 to his friend Mr. Mehul through unrecognized stock exchange.
Tax deducted at source on interest on FDs under section 9,000 (Cost Inflation Index: 2007-08: 129, 2023-24: 348)
194A (iv) In April, 2023, he received dividend of Rs. 9,00,000 from ABC Ltd., an
Tax payable 13,56,436 Indian company. The dividend is declared by the company in P.Y. 2022-23
and the company has paid dividend distribution tax on the same.
Tax payable (rounded off) 13,56,440
(v) Interest from saving bank account with SBI Bank Rs. 15,000 and lottery
Since tax liability as per section 115BAC is lower than the tax
winnings (Net of TDS@30%) is Rs. 21,000.
liability under normal provisions of the Act, it is beneficial for
ifos mai gross aata h net pgbp mai aata h
Mr. Suresh to exercise option under section 115BAC. He has He paid the following amounts during the P.Y. 2023-24:
to exercise this option on or before the due date of furnishing (a) Deposits in Public Provident Fund Rs. 1,50,000.
the return of income. Further, he is having income from business (b) Medical insurance premium paid for health of his wife Rs. 19,000 and for
or profession during the P.Y.2020- 21, if he opts for section health of dependent son Rs. 12,000 through cheque.
115BAC for this previous year, the said provisions would (MTP 14 Marks, April’21, PYP 14 Marks May ’19)
apply for subsequent assessment years as well.
Answer 71
Computation of total income of Mr. Josh for the A.Y.2024-25
Question 71 Particulars Rs. Rs.
Salaries
You are required to compute the total income and tax payable by Mr. Josh, Basic Salary = Rs. 51,000 x 12 6,12,000
aged 48 years, from the following information provided by him for the
Dearness Allowance (DA) = Rs. 10,000 x 12 1,20,000
Assessment Year 2024-25. Mr. Josh does not want to opt for section 115BAC
House Rent Allowance (HRA) = Rs. 4,000 x 12
for the A.Y. 2024-25:
Rs. 48,000
(i) Basic Salary @ Rs. 51,000 per month, Dearness allowance @ Rs. 10,000
per month (Part of salary for retirement benefits), House rent allowance

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Less: Least of the following exempt u/s 10(13A) 37,200 Less: Exempt under section 10(34), since dividend
Rs. 10,800 distribution tax has been paid on such dividend 9,00,000
(i) HRA actually received = Rs. 4,000 x 12 = (as per amendment dividend is taxable in the Nil
Rs. 48,000 hands of shareholder)
(ii) Rent paid (-) 10% of salary [Rs. 84,000 (i.e., Interest from saving bank account with SBI Bank 15,000
Rs. 7,000 x 12) (-) Lottery winnings [21,000 x 100/70] 30,000
Rs. 73,200 (10% of salary i.e., 10% of Rs. 9,45,000
7,32,000 (Basic Gross Total Income 21,35,100
Salary + DA)] = Rs. 10,800 Less: Deduction under Chapter VI-A
(iii) 50% of salary [50% of Rs. 7,32,000 (Basic Section 80C
Salary + DA)] = Rs. 3,66,000 Deposits in PPF 1,50,000
Gross Salary 7,69,200 Section 80D
Less: Standard deduction u/s 16(ia) 50,000 Medical insurance premium for wife and 25,000
7,19,200 dependent son Rs. 31,000, restricted to Rs
Income from house property 25,000
Gross Annual Value [Rs. 46,000 x 9, being the 4,14,000 Section 80TTA
higher of actual rent received and fair rent] | Interest on saving bank account with SBI 10,000
Less: Municipal tax paid during the P.Y. 2023-24 27,000 1,85,000
Net Annual Value 3,87,000 Total Income 19,50,100
Less: Deduction u/s 24 [30% of Net Annual 1,16,100
Value] Computation of tax liability of Mr. Josh for A.Y. 2024-25
2,70,900 Particulars Rs. Rs.
Capital Gains Tax on total income of Rs. 19,50,100
Full value of consideration 2,00,000 Tax on long-term capital gains of Rs. 40,000
Less: Cost of acquisition of bonus shares allotted Nil 2,00,000@20% u/s 112
on or after 1.4.2001 Tax on lottery income of Rs. 30,000 @30% u/s 9,000
Long-term capital gains (since bonus shares are 2,00,000 115BB
held for a period of more than 24 months) Tax on other income of Rs. 17,20,100 [Rs.
Income from Other Sources 10,50,100 – Rs. 2,00,000, capital gains – Rs.
Dividend received from ABC Ltd., an Indian 9,00,000 30,000, lottery income]
company Upto Rs. 2,50,000 Nil

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Rs. 2,50,001 – Rs. 5,00,000 [i.e., Rs. 12,500 Motor car loan from SBI 5,00,000 Life Insurance Premium 49,000
2,50,000@5%] @12% p.a. interest (Sum Assured Rs.
Rs. 5,00,001 – Rs. 10,00,000 [i.e., Rs. 1,00,000 5,00,000]
5,00,100@20%] Sale receipts of 5,800 listed 5,95,000 Motor car (Acquired in 9,50,000
Rs. 10,00,001 –Rs.17,20,100 [i.e., Rs. 2,16,030 equity shares (sold on 31st January 2024 by way
7,20,100@30%] March 2024) of NEFT) capital exp
3,77,530 Books bought by way 80,000
of A/c payee cheque
in the month of May,
Tax liability 3,92,631
June and September
Less: Tax deducted at source
2023 (annual
TDS on lottery income 9,000 publications)
TDS on rent u/s 194I [Rs. 4,14,000 x 10%] 41,400 Computer acquired 52,000
TDS on Dividend (Rs. 9,00,000*10%) 90,000 1,40,400 on 1-11-2023 for
Tax Payable 2,52,231 professional use
Tax Payable (rounded off) 2,52,230 (payment made by
A/c payee cheque)
Domestic drawings 6,23,000
Question 72 Motor car 72,000
maintenance
You are required to compute the total income and tax liability of Mr. Alok, Public Provident Fund 1,50,000
aged 58 years, a resident individual. Mr. Alok is an advocate and furnishes subscription
you the receipts and payments account for the financial year 2023-24. Closing balances (31-
Receipts and Payments Account 03-2024)
Receipts Rs. Payments Rs. Cash & Bank 61,000
Opening Balance Staff salary and bonus 17,50,000 61,35,000 61,35,000
(01-04-2023) to clerks
Cash & Bank 80,000 Other general 22,00,000 Other information:
study in capital gain
and administrative (i) Listed equity shares on which STT was paid were acquired in August 2016
expenses for Rs. 1,21,800. The fair market value of such shares as on 31st January
Fee from legal services 49,60,000 Office rent 1,48,000 2018 and on 1st April 2018 was Rs. 75 per share and Rs. 85 per share,
respectively.
(ii) Motor car was put to use for both official and personal purposes.1/ 3rd

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of the motor car is for personal purpose. No interest on car loan was paid
Less: Municipal taxes paid by Mr. 8,200
during the previous year 2023-24.
(iii) Mr. Alok purchased a flat in Kanpur for Rs. 35,00,000 in July 2016 cost of Alok
which was partly financed by a loan from Punjab National Housing Finance Net annual value 4,11,800
Limited of Rs. 25,00,000, his own- savings Rs. 1,00,000 and a deposit Less: Deductions under section 24
from Repco Bank for Rs. 9,00,000. The flat was given to Repco Bank on (a) 30% of Net Annual Value 1,23,540
lease for 10 years @ Rs. 35,000 per month. The following particulars are (b) Interest on house borrowing 2,01,500
GAV
relevant: (allowed in full in case of let out
(a) Municipal taxes paid by Mr. Alok Rs. 8,200 per annum property)
(b) House insurance Rs. 11,000 86,760
As per interest certificate issued by Punjab National Housing Finance Profits and gains of business or
Limited for the financial year 2023- 24, he paid Rs. 1,80,000 towards profession Income from profession
principal and Rs. 2,01,500 as interest.
Fees from legal services 49,60,000
(iv) He earned Rs. 1,20,000 in share speculation business and lost Rs. 1,80,000
Less: Expenses allowable as
in commodity speculation business.
(v) Mr. Alok received a gift of Rs. 21,000 each from four of his family friends. deduction
(vi) He contributed Rs. 1,21,000 to PM Cares Fund by way of bank draft. - Staff salary and bonus 17,50,000
(vii) He donated to a registered political party Rs. 3,50,000 by way of cheque. - Other general and administrative 22,00,000
(viii) He follows cash system of accounting. expenses
(ix) Cost Inflation Index : F.Y. 2016-17 – 264; F.Y. 2018-19 – 280; F.Y. 2023- - Office rent 1,48,000
24 – 348 - Motor car maintenance (Rs. 48,000
Assume Mr. Alok is not willing to opt for the provisions of section 115BAC. 72,000 x 2/3)
- Car loan interest – not allowable, 41,46,000
(MTP 14 Marks, March’21, RTP May’19)(Same concepts different figures since Mr. Alok follows cash system of
fewer adjustments MTP 14 Marks May’20, PYP 10 Marks May’18) accounting and no interest is paid -
during the previous year)
Answer 72 8,14,000
Computation of total income and tax liability of Mr. Alok for A.Y. 2024-25 Less: Depreciation u/s 32
- Motor car Rs. 9,50,000 x 15% x 47,500
Particulars Rs. Rs. Rs. 50% x 2/3, being put to use for less
Income from house property than 180 days
Gross annual value1 (Rs. 35,000 x 4,20,000 - Books being annual publications 32,000
12) [Rs. 80,000 x 40%]

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Computer @40% of Rs. 52,000 x 10,400 89,900 Capital Gains 5,95,000

50%, since the same is put to use for Long-term capital gains on sale of
less than 180 days 5800 listed shares Sale consideration
7,24,100 Less: Cost of acquisition is higher of 4,35,000
For the P.Y. 2023-24, the - Cost of acquisition 1,21,800
gross receipts of Mr. Alok is - Lower of Rs. 4,35,000 (Rs. 75 x 4,35,000 1,60,000
Rs. 49,60,000. Since, it does not 5800), being fair market value as
exceed Rs. 50,00,000, he is eligible on 31.1.2018 and Rs. 5,95,000,
to opt for presumptive tax scheme being full value of consideration on
under section 44ADA In such case, transfer
his professional income would be Income from other sources 84,000
Rs. 24,80,000, being 50% of Rs. Cash Gift of Rs. 84,000 i.e., Rs.
49,60,000 21,000 x 4, received from his four
It is more beneficial for Mr. Alok to friends is taxable u/s 56(2)(x), since
declare profit of Rs. 7,24,100 as per aggregate amount of cash gifts
books of accounts which is lower than exceeds Rs. 50,000
the profits computed on presumptive Gross Total Income 10,54,860
basis under section 44ADA. However, Less: Deductions under Chapter
for declaring lower profits, he has VI-A Section 80C
to maintain books of account under Life insurance premium 49,000
section 44AA and get the same Repayment of housing loan 1,80,000
audited under section 44AB PPF subscription 1,50,000
Income from share speculation 1,20,000 3,79,000
business Restricted to Rs. 1,50,000 1,50,000
Less: Loss from commodity speculation Section 80G
business set off against income from Contribution to PM Cares Fund 1,21,000
share speculation business. Balance 1,20,000 Nil 7,24,100 (100% of Rs. 1,21,000) by
loss of Rs. 60,000 from commodity way of bank draft Section 80GGC
speculation business to be carried Donation to registered political 3,50,000
forward to A.Y. 2025-26 party made by way of cheque

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6,21,000 Employer’s contribution to R.P.F. 20% of basic salary

Total Income 4,33,860 Interest credited in the R.P.F account@15% p.a., `15,000
Arrears of rent received from XYZ Limited ` 75,000
Tax liability Received interest `10,000 from Axis Bank Savings account during the year,
Tax @10% under section 112A on 6,000 and interest of `12,040 (gross) from the debentures of M/s. Coal India Ltd.
long-term capital gains exceeding He made payment through cheque `15,370 towards premium on Life insurance
Rs. 1,00,000 i.e., Rs. 60,000 policies and `22,500 for Mediclaim Insurance Policy for his major dependent
Tax @5% on Rs. 23,860 [Rs. 1,193 daughter.
2,73,860 (total income excluding He had contributed `1,196 pm towards Atal Pension Yojana and `5,000 pm
LTCG u/s 112A) - Rs. 2,50,000, towards Sukanya Sarnridhi account.
being basic exemption limit XYZ Limited has taken residential house of Mr. Raj as Company’s guest house
and later purchased from him in the year 2020 at market value for `75 lakhs.
7,193
Purchase cost was only `10 lakhs in April, 2008.
Less: Rebate u/s 87A [Since the total 1,193
During August, 2023, Mr. Raj had sold his gold chain and a diamond ring for
income does not exceed Rs. 5 lakhs.
`3,99,000 which he had purchased in April, 2008 for `1,13,000.
Rebate u/s 87A is not available on
Donation of `11,000 to Prime Minister’s National Relief Fund were given during
tax on LTCG taxable u/s 112A]
the year by way of cheque. (CII for 2008-09:113, 2019-20: 289, 2023-24:
6,000
348)(MTP 14 Marks,Oct’20)
Add: Health and Education 240
(The full value of consideration of diamond ring has been changed from Rs
cess@4%
3,40,000 lakhs to Rs. 3,99,000 Lakhs to keep the essence of the question)
Tax liability 6,240
Answer 73
Computation of total Income and tax payable by Dr. Saxena for the A.Y.
Question 73 2019 -20
Particulars ` `
From the following information provided by Mr. Raj, aged 42 years working as Income from Salaries
a manager in XYZ Limited, for the year ended 31.3.2024, you are required to Basic Salary (`25,000 x 12) 3,00,000
compute his total income and tax payable for the A.Y. 2024-25. Dearness Allowance (`3,00,000 x 1,50,000
Basic salary `25,000 p.m. 50%)
DA (50% of it is meant for retirement benefits) 50% Basic Pay Employer’s contribution to recognized
Own contribution to Recognized Provident Fund (R.P.F.) `30,000 provident fund:

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Actual contribution [20% of `3,00,000] 60,000 LIC premium [It is assumed that premium 15,370
Less: Exempt [12% of `3,75,000 (basic 45,000 15,000 does not exceed 10%/20% of sum
salary + 50% of dearness allowance, assured, as the case may be]
which forms part of retirement benefits)] Deposit in Sukanya Samridhi Scheme 60,000 1,05,370
Interest credited in recognized 15,000 [`5,000 x 12]
provident fund account@15% p.a. Section 80CCD(1B)
Less: Exempt up to 9.5% p.a. 9,500 5,500 Contribution to Atal Pension Yojana, a 14,352
Income from house property 4,70,500 notified pension scheme
Arrears of rent [Taxable under section 75,000 Section 80D - Mediclaim Insurance for 22,500
25A, even if Mr. Raj is no longer the major dependent daughter
owner of house property] Section 80G – Donation to PM National 11,000
Less: 30% of arrears of rent 22,500 52,500 Relief Fund [100%]
Capital gain on sale of guest house: Section 80TTA – Interest on savings
As the sale was made in the year 2020, bank account (allowed in full upto ` 10,000 1,63,222
the capital gain does not relate to Nil 10,000)
assessment year 2024-25. Total Income 4,32,818
Capital Gain on jewellery [Long term, Total Income (rounded off) 4,32,820
since the capital assets are held for Tax Liability
more than 36 months] Tax on Long-term Capital Gains @20% 10,200
Full value of consideration 3,99,000 of `51,000
Less: Indexed cost of acquisition [` 3,48,000 51,000 Tax on balance income of `3,81,820 6,591 16,791
1,13,000 x 348/113] Less: Rebate under section 87A would
Income from Other Sources be lower of `12,500 or tax liability,
Interest from savings bank account 10,000 since the total income does not exceed 12,500
Interest on debentures 12,040 22,040 `5,00,000
Gross total Income 5,96,040 4,291
Less: Deductions under Chapter VI-A Add: Health and Education cess @4% 172
Section 80C Tax liability 4,463
Own contribution to RPF 30,000 Less: TDS on interest on debenture 1,204
Tax payable 3,259
Tax payable (Rounded off) 3,260

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Purchased on 15.9.2023 by cash in single payment 2,00,000

Purchased on 12.12.2023 by account payee cheque 3,00,000
Question 74
Second hand machinery purchased on 30.4.2023 by bearer 1,25,000
cheque in single payment
Mr. Ashwin, a resident individual aged 61, furnishes the following information
(All assets added during the year were put to use immediately after purchase)
pertaining to the year ended 31.3.2024: One-fifth of the car expenses are towards estimated personal use of the
(i) He is a working partner in ASC & Co. He has received the following amounts assessee. Salary includes Rs. 15,000 paid by way of a single cash payment to
from the firm: Interest on capital at 15% : Rs.3,00,000 manager.
Salary as working partner (at 1% of firm’s sales) (allowed fully to the (iii) In February, 2021, he had sold a house at Mumbai. Arrears of rent relating
firm) : Rs.90,000 to this house amounting to Rs.75,000 was received in March, 2024.
(ii) He is engaged in a business of manufacturing. The Profit and Loss account
pertaining to this proprietary business (summarised form) is as under: (iv) Details of his Savings and Investments are as under:
Particulars Rs.
Particulars Rs. Particulars Rs.
Life insurance premium for policy in the name of his major
To Salaries 1,20,000 By Gross profit 12,45,500 son employed in a multinational company, at a salary of
To Bonus 48,000 By Interest on Bank 49,500 Rs.10 lakhs p.a. (Sum assured Rs.2,00,000) (Policy taken on 30,000
FD 1.07.2013)
To Car expenses 50,000 (Net of TDS) Contribution to PPF 70,000
To Machinery repairs 2,34,000 By Agricultural 60,000 Medical Insurance premium for his mother aged 79, who is not 52,000
income dependent on him
To Advance tax 70,000 By Pension from LIC
To Depreciation on: Jeevan Dhara 24,000 You are required to compute the total income and tax liability of Mr. Ashwin
- Car 3,00,000 for the assessment year 2024-25.
- Machinery 1,25,000 (MTP 14 Marks, April’19, RTP May ’18)
To Net profit 4,32,000
13,79,000 13,79,000 Answer 74
Computation of total income of Mr. Ashwin for the A.Y. 2024-25
Details of assets: Particulars Rs. Rs.
Particulars Rs. Income from house property
Opening WDV of assets are as under: Car 3,00,000 Arrears of rent received in respect of
Machinery (Used during the year for 179 days) 6,50,000 the Bangalore house
Additions to machinery: taxable under section 25A [Note 1] 75,000

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Less: Deduction @ 30% 22,500 52,500 (qualifies for deduction, even though
Profits and gains of business or the mother is not dependent on the 50,000
profession assessee, subject to a maximum of
(a) Own business [Note 3] 6,32,500 Rs.50,000)
(b) Income from partnership firm [Note Section 80TTB
2] Interest on bank FD 55,000
Interest on capital 2,40,000 (subject to a maximum of Rs.50,000) 50,000 1,90,000
[As per section 28(v), chargeable in Total Income 9,04,000
the hands of the partner only to the
extent allowable as deduction in the Computation of tax liability of Mr. Ashwin for the A.Y. 2024-25
firm’s hand i.e. @12%] Salary of Particulars Rs.
working partner (Since the same has Tax on Agricultural income plus non-agricultural income i.e., 1,02,800
been fully allowed as deduction in the Rs.9,64,000
hands of the firm) 90,000 3,30,000 Less: Tax on agricultural income plus basic exemption limit i.e., 3,000
Income from other sources Rs.3,60,000
(a) LIC Jeevan Dhara pension 24,000 99,800
(b) Interest from bank FD (gross) 55,000 79,000 Add: Health and education cess @4% 3,992
Gross Total Income 10,94,000 Tax liability 1,03,792
Less: Deductions under Chapter VIA Less: TDS 5,000
Section 80C Less: Advance Tax 70,000
Life insurance premium for policy Tax Payable 28,792
in the name of major son qualifies Tax Payable (rounded off) 28,790
for deduction even though he is not 20,000 Notes:
dependent on the assessee. However, (1) As per section 25A, any arrears of rent received will be chargeable to
the same has to be restricted to 10% tax, after deducting a sum equal to 30% of such arrears, as income from
of sum assured i.e. 10% of Rs.2,00,000 house property in the year of receipt, whether or not the assessee is the
Contribution to PPF 70,000 90,000 owner of the house property.
Section 80D (2) The income by way of interest on capital and salary of Mr. Ashwin from the
Mediclaim premium for mother, a 52,000 firm, ASC & Co., in which he is a working partner, to the extent allowed as
senior citizen deduction in the hands of the firm under section 40(b), has to be included
in the business income of the partner as per section 28(v). Accordingly,

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Rs.3,30,000 [i.e., Rs.90,000 (salary) + Rs.2,40,000 (interest@12%)] Depreciation @15% on Rs.3,00,000 45,000
should be included in his business income. Less: 1/5th for personal use 9,000
(3) Computation of income from own business Depreciation on Car allowable as deduction 36,000
Particulars Rs. Rs. On Machinery:
Net profit as per profit and loss account 4,32,000 Opening WDV 6,50,000
Less: Items credited to profit and loss account not Additions during the year (used for more than
treated as business income 180 days)
Interest on bank FD (Net of TDS) 49,500 - New Machinery purchased on 15.9.23 2,00,000
Agricultural income 60,000 - Second hand machinery purchased on 30.4.23
Pension from LIC Jeevan Dhara 24,000 1,33,500 1,25,000
2,98,500 Additions during the year (used for less than 180
Add: Items debited to profit and loss account days) 3,00,000
to be Normal Depreciation
disallowed/considered separately Depreciation @15% on Rs.6,50,000 97,500
Advance tax 70,000 [As per second proviso to section 43(1), the
Depreciation: expenditure for acquisition of asset, in respect
- Car 3,00,000 of which payment to a person in a day exceeds
- Machinery 1,25,000 Rs.10,000 has to be ignored for computing
Car expenses disallowed for personal use 10,000 actual cost, if such payment is made otherwise
(Rs.50,000 x 1/5) than by way of A/c payee cheque/ bank draft
Salary to manager disallowed under section or ECS. Accordingly, depreciation on second
40A(3) since it hand machinery purchased on 30.4.2023 and on
is paid in cash and the same exceeds Rs.10,000 15,000 5,20,000 new machinery purchased on 15.9.2023 is not
8,18,500 allowable since the payment is made otherwise
Less: Depreciation (See Working Note below) 1,86,000 than by A/c payee cheque/A/c payee draft/
Income from business 6,32,500 ECS to a person in a day]
Working Note: Depreciation @ 7.5% on Rs.3,00,000 22,500
Computation of depreciation allowable under the income-tax Act, 1961 Total normal depreciation on machinery (A) 1,20,000
Particulars Rs. Rs.

On Car:

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Where an asset acquired during the year is put Name Sale value Purchase price Acquired on No. of
to use for less than 180 days, 50% of the rate (per share) (per share) shares
of depreciation is allowable. This restriction does A Ltd. Rs.150 Rs.120 (STT paid 2nd Feb, 2023 200
not apply to assets acquired in an earlier year. at acquisition)
Additional depreciation (B) B Ltd. Rs.82 Rs.62 16thApril, 2023 125
New machinery CII – F.Y. 2018-19: 280; F.Y. 2017-18: 272; F.Y. 2023-24- 348
Used for less than 180 days = 10% of Rs.3,00,000 30,000 Sale proceeds were subject to brokerage of 0.1% and securities transaction
Total permissible depreciation on machinery 1,50,000 tax of 0.125% on the gross consideration. He received income-tax refund of
(A) + (B) Rs.5,750 (including interest Rs.750) relating to the assessment year 2023-24.
(iv) Mr. Satish made payment of Rs.80,000 vide cheque no. 245315 towards
Depreciation allowable under section 32 1,86,000
medical insurance as lumpsum premium for himself and his wife for 4
years. He also made cash payment of Rs.8,000 towards preventive health
checkup for himself and his wife.
Question 75
(v) Mr. Satish deposited Rs.1,30,000 in Public Provident Fund and Rs.80,000
in 5 years term deposit in the name of his minor son, Aryan.
Mr. Satish, aged 47 years, is serving in a public limited company as General Compute the total income and tax liability of Mr. Satish for the Assessment
Manager (Finance). His total emoluments for the year ended 31st March, 2024 Year 2024-25.Assume that he has not opted for 115BAC.
are as follows: (MTP 14 Marks, March’19)
Basic Salary Rs.5,40,000
HRA (Computed) Rs.1,80,000 Answer 75
Transport allowance Rs.22,000 Computation of total income of Mr. Satish for the A.Y. 2024-25
Apart from the above, his employer has sold the following assets to him on 1 Particulars Rs.
st January, 2024: Income from salaries [Working Note (1)] 9,66,000
(i) Laptop for Rs.20,000 (Acquired in September, 2022 for Rs.1,20,000) Income from house property [Working Note (2)] 1,00,000
(ii) Car 1800 cc for Rs.3,20,000 (purchased in April, 2021 for Rs.8,50,000)
Capital gain [(Working Note 3)]
He also owns a residential house, let out for a monthly rent of Rs.15,000.
Long-term capital gains 5,970
The fair rental value of the property for the let out period is Rs.1,50,000.
Short-term capital gains 2,490
The house was self -occupied by him from 1st January, 2024 to 31st March,
2024. He has taken a loan from bank of Rs.20 lacs for the construction of Income from other sources: Interest on income-tax 750
the property, and has repaid Rs.1,05,000 (including interest Rs.40,000) refund
during the year. Gross Total Income 10,75,210
(iii) Mr. Satish sold equity shares of different Indian companies on 14 th March, Less: Deduction under Chapter VIA
2024: Deduction under section 80C

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- Public Provident Fund 1,30,000 Less: Amount paid to the employer 20,000
5 years Term deposit (not allowed as deduction - Perquisite value of laptop (A) 40,000
in the name of minor son) Car
- Repayment of housing loan (principal) 65,000 Cost [April, 2021] 8,50,000
Restricted to 1,95,000 1,50,000 Less: Depreciation for the 1st year (April,22 to 1,70,000
Deduction under section 80D [Working Note (4)] 25,000 March,23) @ 20% of WDV
Total Income 9,00,210 WDV [April, 2022] 6,80,000
Less: Depreciation for the 2nd year (April,23 to 1,36,000
Computation of tax payable by Mr. Satish for the A.Y. 2019 -20 March,24) @ 20% of WDV
Particulars Rs. WDV [April, 2023] 5,44,000
Tax on LTCG of Rs.5,970 [Exempt u/s 112A] - Less: Amount paid to the employer 3,20,000
Tax on STCG of Rs.2,490 u/s 111A @15% 374 Perquisite value of car (B) 2,24,000
Tax on balance income of Rs.8,91,750 90,850 Perquisite value (A) + (B) 2,64,000
91,224 Gross Salary 10,06,000
Add: Health and Education cess@4% 3,649 Less: Standard Deduction under section 16(ia) 40,000
Total tax payable 94,873 (as per amendment Rs. 50,000) 50,000
Tax liability (Rounded off) 94,870 Income chargeable under the head “Salaries” 9,56,000
Working Notes:
(2) Income from house property
(1) Income from salaries Section 23(2) provides that the annual value of a self-occupied house
Particulars Rs. Rs. shall be taken as Nil. However, section 23(3) provides that the benefit of
Basic Salary 5,40,000 self-occupation would not be available if the house is actually let during
HRA (computed) 1,80,000 the whole or part of the previous year. This implies that the benefit of
Transport allowance 22,000 taking the annual value as „Nil” would be available only if the house is
Perquisites (relating to sale of movable assets by self-occupied for the whole year.
employer) In this case, therefore, the benefit of taking annual value as „Nil” is not
Laptop available since the house is self- occupied only for 3 months. In such a
Cost [September, 2022] 1,20,000 case, the gross annual value has to be computed as per section 23(1).
Less: Depreciation at 50% for one completed 60,000 Accordingly, the fair rent for the whole year should be compared with the
year actual rent for the let-out period and whichever is higher shall be adopted
WDV [September, 2023] 60,000 as the Gross Annual Value.

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exempt under section 112A. Shares in B Ltd. are held for less than 12 months
Particulars Rs. Rs. and hence the capital gains arising on sale of such shares is a short-term capital
Gross Annual Value (higher of fair rent for the 2,00,000 gain chargeable to tax @15% as per section 111A, since the transaction is
whole year and actual rent for the let-out period) subject to securities transaction tax. It may be noted, however, that securities
Fair rent for the whole year = Rs.1,50,000 ! 12/9 2,00,000 transaction tax is not a deductible expenditure.
Actual rent received = Rs.15,000 ! 9 1,35,000 Short-term capital gains arising from sale of shares of B Ltd.
Less: Municipal taxes Nil Particulars Rs.
Net Annual Value (NAV) 2,00,000 Sale consideration (Rs. 82 X 125) 10,250
Less: Deductions under section 24 Less: Brokerage @ 0.1% 10
30% of NAV 60,000 Net sale consideration 10,240
Interest on loan [See Note below] 40,000 1,00,000 Less: Cost of acquisition (Rs. 62 x 125) 7,750
Income from house property 1,00,000 Short-term capital gains 2,490
Note: It is presumed that the interest of Rs.40,000 paid on housing loan (4) Deduction under section 80D
represents the interest actually due for the year. As per section 80D, in a case where mediclaim premium is paid in lumpsum
(3) Income chargeable as “Capital Gains” for more than one year by an individual, to effect or keep in force
Section 112A exempts long-term capital gain on sale of equity shares an insurance on his health or health of his spouse, then, the deduction
of a company upto Rs.1 lakh, if securities transaction tax is paid both at allowable under this section for each of the relevant previous year would
the time of sale and acquisition of such shares. Such long-term capital be equal to the appropriate fraction of such lump sum payment. Hence,
gain in excess of Rs.1 lakh is taxable @10%. Since Mr. Satish has held deduction under section 80D would be Rs.20,000 i.e, Rs.80,000 x ¼ in
shares of A Ltd. for more than 12 months and securities transaction tax has respect of mediclaim and Rs.8,000 for preventive health check up, subject
been paid on such sale and at the time of acquisition of shares, the gains to maximum of Rs.5,000. Thus, overall deduction under section 80D would
arising from sale of such shares is a long-term capital gain and the same be Rs.25,000.
would be taxable under section 112A. As per section 48, the benefit of
indexation would not be applicable on such equity shares. The long term
capital gain arising from sale of shares of A Ltd.
Particulars Rs. Question 76
Sale consideration (Rs.150 x 200) 30,000
Less: Brokerage @ 0.1% 30 Mr. Rajan, aged 54 years, engaged in a business as sole proprietor. He is
Net sale consideration 29,970 resident and ordinarily resident for the previous year 2023-24. The Profit &
Less: Cost of acquisition (Rs.120 x 200) 24,000 Loss A/c for the year ending 31-03-2024 is given below:
long-term capital gains 5,970
Since, the long term capital gain do not exceed Rs.1 lakh, the same would be

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Particulars Rs. Particulars Rs. The land was acquired in August 2021 for `1,10,000 from his friend.
(viii) Rent paid includes `50,000 paid towards rent for his residence in Nagpur
Salary 36,000 Gross Profit 5,60,900
and `10,000 for hiring a Maruti Van for business purpose.
Fire Insurance 28,500 Interest on 6,750
(ix) Municipal tax includes `10,000 paid as tenant.
Debentures
(x) Paid premium on life insurance policy taken for his handicapped daughter
Income-tax 30,000 Cash Gift 51,000 `50,000 (suffering from disability mentioned in section 80U). The policy
Sundry Expenses 56,000 was taken on 01-04-2016 and the minimum sum assured is `3,00,000.
Advertisement 36,000 (xi) Interest shown in the Profit & Loss A/c, paid on loan borrowed for his own
Household expenses 50,000 business purposes. It includes `10,000 payable to a non-resident on which
Depreciation 29,800 tax has not been deducted.
Contribution to IIT Mumbai 1,00,000 Compute the total income of Mr. Rajan for the Assessment Year 2024-25.
for an approved (MTP 10 Marks, March’18)
scientific research Answer 76
programme Computation of total income of Mr. Rajan for A.Y. 2024-25
Municipal Taxes paid for 36,000 Particulars Working `
house property Note Nos.
Investment in NSC 10,000 Income from house property I. 95,900
Printing & Stationery 12,000 Profit and gains of business or profession II. 2,23,100
Interest 24,000 Long term capital gains III. 1,70,000
Rent paid 60,000 Income from other sources IV. 7,500
Net Profit 1,10,350 Gross Total Income 4,56,500
6,18,650 6,18,650 Less: Deduction under Chapter VI-A V. 55,000
Mr. Rajan also furnishes the following additional information: Total Income 4,01,500
(i) Cash gift was received on the occasion of his son’s marriage from his
maternal uncle. Working Notes:
(ii) Interest on debentures is net of taxes. Debentures are listed on recognised
I. Computation of income under the head “Income from House Property”
stock exchange.
Particulars `
(iii) He owns a house property in Nagpur. 50% of the property is used by him
for his own business and 50% let out for residential purpose. Let-out portion – 50%
(iv) Rent received from 50% let out portion during the year was `1,50,000. Gross Annual Value 1, 50,000
(v) Fire insurance includes `15,000 paid for house property owned by him. (Rent received has been taken as the Gross Annual Value
(vi) Depreciation is computed as per the Income-tax Rules, 1962. in the absence of other information relating to Municipal
(vii) He has sold a vacant land in July, 2023 for `1,50,000. The State Stamp Value, Fair Rent and Standard Rent)
Value of the site was `2,80,000.

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Less: Municipal taxes paid in respect of let out portion [50% (vi) Investment in NSC (Deduction allowed under 10,000
of `26,000 (`36,000 - `10,000, being municipal taxes 13,000 section 80C
paid as tenant)] (vii) Interest payable to a non-resident, as tax has 10,000
Net Annual Value (NAV) 1,37,000 not been deducted at source [Section 40(a)(i)]
Less: Deduction under section 24@30% of NAV 41,100 (viii) Rent paid for his residence [Personal expenses 50,000
Income from House Property 95,900 not allowed as deduction as per section 37]
2,80,500
II. Computation of income under the head “Profits and gains of business Less: Weighted deduction@150% for contribution
or profession” to IIT, Mumbai for scientific research programme
Particulars ` ` approved under section 35(2AA) [`1,00,000
Net profit as per Profit and Loss account 1,10,350 × 150%] Deduction reduced to 100 % as per
Add: Expenses debited to profit and loss account amendment 3,90,850
but not allowable or to be considered separately 1,50,000
(i) Fire Insurance [50% of `15,000, disallowed 7,500 1,00,000
since relating to let- out portions of house 2,90,850
property owned by him] Less: Income credited to Profit & Loss Account but
(ii) Income-tax [disallowed as per section 40(a)(ii)] 30,000 not taxable under this head:
(iii) Household expenses [Personal expenses are 50,000 (i) Cash gifts 51,000
disallowed by virtue of section 37] (ii) Interest on debentures 6,750 57,750
(iv) Contribution to IIT, Mumbai for approved 1,00,000 Profits and gains from business and profession 2,33,100
scientific research programme to be considered
separately III. Computation of income under the head “Capital Gains”
(v) Municipal Taxes paid as tenant [Personal 10,000 Particulars ` `
expenses are disallowed by virtue of section Capital gains
37] Actual Sale consideration 1,50,000
(v) Municipal Taxes paid in respect of let-out 13,000 Value adopted by Stamp Valuation Authority 2,80,000
portions [50% of `26,000 | (`36,000 - Gross Sale consideration 2,80,000
`10,000, being municipal taxes paid as a
tenant) disallowed, since incurred for personal
purposes]

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[In case the actual sale consideration declared Deduction under section 80GG
by the assessee is less than the value adopted by [Since Mr. Rajan is staying in a rented premise in
the Stamp Valuation Authority for the purpose of Nagpur itself, he would not be eligible for deduction
charging stamp duty, then, the value adopted by under section 80GG as he owns a house in Nagpur
the Stamp Valuation Authority shall be taken to be which he has let out. NIL
the full value of consideration as per section 50C] Deduction under Chapter VI-A 55,000
(As per amendment in section 50C if SDV is
not more than 110% of the consideration, then
Consideration shall be treated as Full Value of Question 77
Consideration) Less: Cost of acquisition
Short term capital gain [Since vacant land is held You are required to compute the total income and tax liability of Mr. Neeraj
by Mr. Rajan for not more than 24 months] 1,70,000 for the A.Y. 2024-25 from the following information given by him for the year
ended 31.3.2024. Mr. Neeraj, aged 61 years, a resident individual, engaged
IV. Computation of income under the head “Income from other sources” in a wholesale business of stationary products. He is also a partner in BAC &
Particulars ` Co., a partnership firm.
Cash gift received on the occasion of his son’s marriage from Nil
hismaternal uncle would not be taxable, since maternal uncle Sl. Particulars ` `
fall within the definition of relative. No.
Interest on debentures(gross)[` 6,750 × 100/90](Therateof 7,500 (i) Interest on capital received from BAC & Co., 1,40,000
TDSunder section 194A is10%) at 14% [in accordance with the partnership
Income chargeable under this head 7,500 deed]
(ii) Share of profit from the firm 44,000
V. Computation of deduction under Chapter VI-A (iii) Salary as working partner (fully allowed in 1,00,000
the hands of the firm)
Particulars ` `
(iv) Interest from bank on fixed deposit (Net of 49,500
Deduction under section 80C
TDS)
Investment in NSC 10,000
(v) Interest on saving bank account 13,300
LIC Premium paid `50,000 [deduction restricted to (vi) Income-tax refund received relating to 34,500
15% of `3,00,000, being the capital sum assured, assessment year 2023-24 including interest
since the policy was taken after 31.3.2013 to insure of `1,400
the life of his disabled daughter] 45,000 55,000 (vii) Net profit from wholesale business 6,60,000
Amounts debited include the following:

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- Depreciation as per books 34,000 Arrears of rent 1,35,000

- Motor car expenses 40,000 (taxable under section 25A even if Mr.
- Municipal taxes for the shop 7,000 Neeraj is not the owner of the house
(For two half years; payment for one half property in the P.Y.2023-24)
year made on 12.7.2023 and for the other Less: Deduction@30% 40,500 94,500
on 31.12.2023) Profits and gains of business or profession
- Salary to manager by way of a single 22,000 Income from wholesale business
cash payment Net profit as per books 6,60,000
(viii) The WDV of the assets (as on 1.4.2023) Add: Amount debited to P & L A/c, not
used in above wholesale business is as allowable as deduction
under: - Depreciation as per books 34,000
- Computers 2,40,000 - Disallowance of municipal taxes paid
- Computer printer 1,50,000 for the second half-year under section
(ix) Motor car acquired on 31.12.2023 (20% 6,80,000 43B, since the same was paid after the
due date of filing of return of income (`
used for personal use) 7,000/2) 3,500
(x) He owned a house property in Mumbai 1,35,000 - Disallowance under section 40A(3) in
which was sold in January, 2018. He
respect of salary paid in cash since the
received arrears of rent in respect of the
same exceeds `10,000 22,000
said property in October, 2023.
- 20% of car expenses for personal use 8,000
(x) LIP paid for independent son 60,000
7,27,500
(xi) PPF of his wife 70,000
Less: Depreciation allowable (Note 1) 1,96,800
(xii) Health insurance premium paid by way of 35,000
Income from firm 5,30,700
A/c payee cheque for self
Share of profit from the firm is exempt -
(xiii) Contribution toward Prime Minister National 50,000
Relief Fund under section 10(2A)
Assume Mr. Neeraj does not want to opt for the provisions of section 115BAC. Interest on capital from partnership firm 1,20,000
(MTP 14 Marks April 22) (Same concept different figures RTP Nov’20) (Note 2)
Salary as working partner fully taxable 1,00,000 2,20,000 7,50,700
Answer 77 Income from other sources 69,700
Computation of total income of Mr. Neeraj for the A.Y.2024-25 Interest on bank fixed deposit (Gross) 55,000
Particulars [`49,500 x 100/90]
` ` `
Interest on saving bank account 13,300
Income from house property

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Interest on income-tax refund 1,400 the firm, the same is includible as business income in the hands of the
Gross total income 9,14,900 partner. Since interest is paid in accordance with partnership deed,
Less: Deduction under Chapter VIA 2,65,000 maximum interest allowable as deduction in the hands of the firm is 12%
(Note 3) p.a. Therefore, interest @12%
Total Income 6,49,900 p.a. amounting to `1,20,000 would be treated as the business income of
Mr. Neeraj.
Computation of tax liability of Mr. Neeraj for the A.Y.2024-25 (3) Deduction under Chapter VI-A
Particulars ` Particulars ` `
Upto `3,00,000 Nil Under section 80C
10,000 LIP for independent son 60,000
`3,00,001 – `5,00,000 [i.e., `2,00,000@5%]
PPF paid in wife’s name 70,000
`5,00,001 – `6,49,900 [i.e., `1,49,900@20%] 29,980
1,30,000
39,980
Since the maximum deduction under section 80C is
Add: Health and Education cess@4% 1,599
`1,50,000, the entire sum of `1,30,000 would be
Tax Liability 41,579
allowed as deduction 1,30,000
Tax payable (Rounded off) 41,580
Under section 80D
Health insurance premium taken for himself is fully 35,000
Notes:
allowable as deduction, since he is a senior citizen
(1) Depreciation allowable under the Income-tax Rules, 1962
Under section 80G
Opening Rate Depreciation
Contribution towards PM National Relief Fund
WDV/ Actual
eligible for 100% deduction without any qualifying
cost
limit 50,000
Block 1 Computers 2,40,000 40% 96,000
Computer 1,50,000 40% 60,000
Under section 80TTB
printer
Interest on deposits in case of senior citizen, 50,000
Block 2 Motor Car 6,80,000 15% 51,000 [50% of 40,800 restricted to
15% is allowable, Total deduction 2,65,000
since it is put to
use for less
than 180 days]
Less: 20% disallowance for personal use 10,200 1,96,800
(2) Only to the extent the interest is allowed as deduction in the hands of

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and long term capital gain of `15,000 from sale of property.
Question 78 (vi) Other income of Mr. Sonu includes
- Interest from saving bank account of `2,00,000
Mr. Sonu, aged 30 years, submits the information of following transaction/ - Cash gift of `75,000 received from daughter of his sister on his
income during the P.Y. 2023-24 birthday.
(i) Mr. Sonu owns two house properties in Delhi. The details in respect of these - Income from betting of `34,000
properties are as under - Income from card games of `46,000
- Loss on maintenance of race horses of `14,600
House 1 Self- House 2
Compute the total income of Mr. Sonu for the Assessment Year 2024-25
occupied Let-out
and the losses to be carried forward assuming that he does not opt to be
Rent received per month Not applicable `50,000 taxed under section 115BAC . (MTP 10 Marks April 22)
Municipal taxes paid `7,500 Nil
Interest on loan (taken for purchase of `2,50,000 `3,00,000 Answer 78
property) Computation of Total Income of Mr. Sonu for A.Y. 2024-25
Principal repayment of loan (taken from `2,00,000 `3,00,000 Particulars ` `
HDFC bank) Income from house property
House1 [Self-occupied]
(ii) Mr. Sonu had another house in Delhi. During financial year 2017-18, he
Net annual value -
had transferred the said house to Ms. Varsha, daughter of his brother
without any consideration. House would go back to Mr. Sonu after the life Less: Interest on loan [upto `2,00,000] 2,00,000 (2,00,000)
time of Ms. Varsha. The transfer was made with a condition that 15% of House 2 [Let out]
rental income from such house shall be paid to Mrs. Sonu. Rent received by Gross annual value1 [`50,000 x 12] 6,00,000
Ms. Varsha during the previous year 2023-24 from such house property Less: Municipal taxes -
is `6,50,000. Net annual value 6,00,000
(iii) Mr. and Mrs. Sonu forms a partnership firm with equal share in profits. Less: Deductions from Net Annual Value
Mr. Sonu transferred a fixed deposit of `50 lakhs to such firm. Firm had (a) 30% of Net Annual Value 1,80,000
no income or expense other than the interest of `6,00,000 received from (b) Interest on loan 3,00,000 1,20,000
such fixed deposit. Firm distributed the entire surplus to Mr. and Mrs. Sonu
at the end of the year.
(iv) Mr. Sonu holds preference shares in M/s A Pvt. Ltd. He instructed the
company to pay dividends to Ms. Chandni, daughter of his servant. The
transfer is irrevocable for the life time of Chandni. Dividend received by
Ms. Chandni during the previous year 2023-24 is `10,00,000.
(v) Mr. Sonu has a short term capital loss of `16,000 from sale of property

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House in Delhi [Since Mr. Sonu receives direct Dividend on preference shares [Taxable in the 10,00,000
or indirect benefit from income arising to his hands of Mr. Sonu as per section 60, since he
brother’s daughter, Ms. Varsha, from the transfer transferred the income, i.e.,
of house to her without consideration, such income dividend, without transferring the asset, i.e.,
is to be included in the total income of Mr. Sonu preference shares]
as per proviso to section 62(1), even though the Interest from saving bank account 2,00,000
transfer may not be revocable during lifetime of Cash gift [Taxable as per section 56(2)(x), since 75,000
Ms. Varsha] sum of money exceeding `50,000 is received
Gross Annual Value2 6,50,000 from his niece, who is not a relative]
Less: Municipal taxes - Income from betting [No loss is allowed to be set 34,000
Net Annual Value 6,50,000 off against such income]
Less: Deductions from Net Annual Value Income from card games [No loss is allowed to be 46,000 13,55,000
(a) 30% of Net Annual Value 1,95,000 set off against such income]
(b) Interest on loan - 4,55,000 Gross Total Income 17,30,000
Profits and gains from business or profession 3,75,000 Less: Deduction under Chapter VI-A
Share of profit from firm [Exempt u/s 10(2A)] - Deduction under section 80C [Principal repayment 1,50,000
Exempt income cannot be clubbed of loan `5 lakh, restricted to `1,50,000]
Capital Gains Deduction under section 80TTA [Interest from 10,000 1,60,000
Long term capital gain from sale of property 15,000 savings bank account]
Less: Short-term capital loss can be set-off Total Income 15,70,000
against both short- term capital gains and long-
term capital gains3. Short term capital loss of ` Losses to be carried forward to A.Y. 2025-26
16,000 set off against long-term capital gains Particulars Amount
to the extent of `15,0004. Balance short term 15,000 - (`)
capital loss of `1,000 to be carry forward to Short term capital loss [`16,000 – `15,000] 1,000
A.Y.2025-26 Loss on maintenance of race horses [Loss incurred on 14,600
Income from other sources maintenance of race horses cannot be set-off against income
from any source other than the activity of owning and
maintaining race horses. Hence, such loss has to be carried
forward to A.Y.2025-26]

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1 Rent receivable has been taken as the gross annual value in the absence (v) He paid `40,000 as life insurance premium taken on the life of his married
of other information daughter who is not dependent on him. The sum assured is `5,00,000 and
2 Rent receivable has been taken as the gross annual value in the absence the policy was taken on 1.4.2017.
of other information (vi) He paid `45,000 by cheque towards health insurance policy covering
3 as per section 74(1) himself, his spouse and his children.
4 as per section 74(1) (vii) On 1.7.2023, Mr. Rishabh withdrew `1.5 crores in cash from three current
accounts maintained by him with HSBC. There are no other withdrawals
during the year. He regularly files his return of income.
You are required to compute the total income and tax payable by Mr.
Question 79
Rishabh for the A.Y. 2024 -25, in the manner so that he can make maximum
tax savings.
Mr. Rishabh, a resident individual, aged 54 years, is engaged in the business of (MTP 14 Marks April ’23, RTP May’22)
manufacturing clothes. He earned profit of `82,45,000 as per profit and loss
account after debiting and crediting the following items. Answer 79
(i) Depreciation `15,40,000
(ii) Short term capital gains on transfer of listed equity shares in a company
Computation of total income of Mr. Rishabh for A.Y. 2024-25 under the
on which STT is paid `10,00,000
regular provisions of the Act
(iii) He received income-tax refund of `15,550 which includes interest on
refund of `4,550.
(iv) Dividend income from Indian companies `15,00,000 Additional Particulars ` ` `
information – I Income from business or profession
(i) Mr. Rishabh installed new plant and machinery for `65 lakhs on 1.10.2023 Net profit as per profit and loss account 82,45,000
which was put to use on 1.1.2024. Depreciation (including additional Add: Items of expenditure not
depreciation) on this amount of `65 lakhs is included in the depreciation allowable while computing business
debited to profit and loss account which has been computed as per Income- income
tax Rules.
(ii) Mr. Rishabh took a loan from SBI of `50 lakhs on 15.9.2023 @10.5%
p.a. to purchase such plant and machinery. Total interest upto 31.3.2024
has been paid on 31.3.2024 and the same has been debited to profit
and loss account. Interest is charged by the bank on monthly basis.
(iii) Advance tax paid during the year is `17,50,000
(iv) Rishabh purchased goods for `40 lakhs from Mr. Ram, his brother. The
market value of the goods is `35 lakhs.

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(i) Interest on loan taken for purchase 1,53,125 Less: Depreciation on interest on loan
of plant & machinery [Interest capitalised to plant and machinery
from the date on which capital `1,53,125, being the amount of 11,484
was borrowed till the date on interest on loan taken for purchase
which asset was first put to use, of plant and machinery from the
not allowable as deduction under date on which capital was borrowed
section 36(1)(iii). till the date on which asset was first
Accordingly, interest of `1,53,125 put to use, shall be capitalized
[`50,00,000 x 10.5% x 3.5/12] Normal depreciation @15% x 50%
has to be added back, since the on such interest
same is debited to the profit and Additional depreciation @20% x 15,313 26,797
loss account] 50% on such interest [Since plant
(ii) Purchase of goods at a price higher 5,00,000 6,53,125 & machinery was put to use for less
than the fair market value than 180 days in P.Y. 2023-24, it
[The difference between the is eligible for 50% of the rate of
purchase price (`40 lakhs) and depreciation]
the fair market value (`35 lakhs) 63,55,778
has to be added back as per
II Capital Gains
section 40A(2) since the purchase
Short term capital gains on transfer 10,00,000
is from a related party, i.e., his
of listed equity shares
brother and at a price higher than
III Income from Other Sources
the fair market value]
Interest on income-tax refund 4,550
Less: Items of income to be treated Dividend from Indian companies 15,00,000 15,04,550
separately under the respective head 15,550 88,98,125 Gross Total Income 88,60,328
of income Less: Deductions under Chapter VI-A 40,000
(i) Income-tax refund including interest - Deduction under section 80C
on refund of `4,550 Life insurance premium for married
(ii) Dividend from Indian companies 15,00,000 daughter [Allowable as deduction
(ii) Short term capital gains on transfer 10,00,000 25,15,550 though she is not dependent, since
of listed equity shares child of an individual whether
63,82,575 dependent or not

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falls within the meaning of term 65,000 Add: Health and education cess@4% 1,01,248
“Person”. Accordingly, whole of the Total tax liability 26,32,457
amount of `40,000 is allowable Less: TDS u/s 194N @ 2% on `50 lakhs, being 1,00,000
as it does not exceed 10% of the the cash withdrawals exceeding `1 crore
`5,00,000, being the sum assured]
Less: Advance tax paid 17,50,000 18,50,000
Tax payable 7,82,457
- Deduction under section 80D 25,000
Tax payable (rounded off) 7,82,460
Health insurance premium for self,
spouse and children [Allowable as
deduction, since it is paid otherwise Computation of total income of Mr. Rishabh as per section 115BAC for
than by way of cash. However, it is A.Y. 2024-25
to be restricted to `25,000 Particulars ` `
Total Income 87,95,328 Gross Total Income as per regular provisions of 88,60,328
Total Income (Rounded off) 87,95,330 the Income-tax Act
Add: Additional depreciation on plant and
Computation of tax payable by Mr. Rishabh for A.Y. 2024-25 under the machinery
regular provisions of the Act - On interest which is capitalised 15,313
Particulars ` ` - On cost of plant and machinery [`65 lakhs x 6,50,000 6,65,313
Tax on total income of `87,95,330 20% x 50%]
Tax on short term capital gains on transfer of 1,50,000 Gross Total Income/ Total Income as per section 95,25,641
listed equity shares 115BAC
@15% u/s 111A [`10,00,000 x 15%] [No deduction under section 10AA or under
Tax on other Income of `77,95,330 Chapter VI-A allowable except u/s 80JJAA]
Upto `2,50,000 Nil Total Income as per section 115BAC (rounded 95,25,640
`2,50,001 – `5,00,000 [@5% of `2.50 lakh] 12,500 off)
`5,00,001 – `10,00,000 [@20% of `5,00,000] 1,00,000 21,51,099
Computation of tax liability as per section 115BAC
`10,00,001- `77,95,330 [@30% of `67,95,330] 20,38,599
Particulars ` `
Add: Surcharge @10%, since total income 23,01,099
exceeds `50,00,000 but does not exceed `1 Tax on total income of `95,25,640
crore Tax on STCG of `10,00,000@15% u/s 111A 1,50,000
2,30,110 Tax on remaining total income of `85,25,640
25,31,209

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Upto `2,50,000 `3,00,000 Nil

`3,00,000 – `6,00,000 [`3,00,000 @ 5%] 15,000
15,000
Question 80
`6,00,001 – `9,00,000 [`3,00,000 @ 10%] 30,000
30,000
Mr. Dheeraj, aged 48 years, a resident Indian has furnished the following
`9,00,001 – `12,00,000 [`,00,000 @ 15%] 45,000
particulars for the year ended 31.03.2024:
45,000 (i) He occupies ground floor of his residential building and has let out first
`12,00,001 – `15,00,000 [`3,00,000 @ 20%] 60,000 floor for residential use at an annual rent of `3,34,000. He has paid
60,000 municipal taxes of `30,000 for the current financial year. Both these floors
Above `15,00,000 @30% [`70,25,640@30%] 21,07,692 are of equal size.
22,57,692 (ii) As per interest certificate from ICICI bank, he paid `1,80,000 as interest
Add: Surcharge @10%, since total income and `95,000 towards principal repayment of housing loan borrowed for
exceeds `50,00,000 but does not exceed `1 2,25,769 the above residential building in the year 2017.
crore (iii) He owns an industrial undertaking established in a SEZ and which had
commenced operation during the financial year 2021-22. Total turnover
24,83,461
of the undertaking was `400 lakhs, which includes `120 lakhs from export
turnover. This industrial undertaking fulfills all the conditions of section
10AA of the Income-tax Act, 1961. Profit from this industry is `45 lakhs.
Less: TDS u/s 194N @ 2% on `50 lakhs, being 1,00,000 (iv) He employed 20 new employees for the said industrial undertaking during
the cash withdrawals exceeding `1 crore the previous year 2023-24. Out of 20 employees, 12 were employed on
Less: Advance tax paid 17,50,000 18,50,000 1st May 2023 on monthly emoluments of `18,000 and remaining were
Tax payable 7,32,799 employed on 1st August 2023 on monthly emoluments of `12,000. All
Tax payable (rounded off) 7,32,800 these employees participate in recognised provident fund and they are
Since tax payable as per section 115BAC is higher than the tax payable as paid their emoluments directly to their bank accounts.
per normal provisions of the Income- tax Act, 1961, it is beneficial for Mr. (v) He earned `30,000 and `45,000 as interest on saving bank deposits and
Rishabh not to exercise option under section 115BAC. In such case, the tax fixed deposits respectively.
payableby him would be `7,82,460 as per the regular provisions of the Act. (vi) He also sold his vacant land on 01.12.2023 for `13 lakhs. The stamp duty
value of land at the time of transfer was `14 lakhs. The FMV of the land
as on 1st April, 2001 was `4.8 lakhs and Stamp duty value on the said
Since tax payable as per section 115BAC is lower than the tax payable as per
date was `4 lakhs. This land was acquired by him on 15.9.1997 for `2.80
normal provisions of the Income-tax Act, 1961, it is beneficial for Mr. Rishabh
lakhs. He had incurred registration expenses of `12,000 at that time. The
to exercise option under section 115BAC. In such case, the tax payableby him cost of inflation index for the financial year 2023-24 and 2001-02 are
would be `732,800 as per the regular provisions of the Act.

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348 and 100 respectively.
Less: Interest on housing loan 90,000
(vii) He paid insurance premium of `49,000 towards life insurance policy of his
Income from house property [` (90,000) 43,300
son, who is not dependent on him.
1,33,300 – ` 90,000]
You are requested to compute his total income and tax liability of Mr. II Profits and gains of business or
Dheeraj for the Assessment Year 2024-25, in the manner so that he can profession
make maximum tax savings. Income from SEZ unit 45,00,000
III Capital Gains
(RTP Nov ’21)(MTP 14 Marks Oct ’23) Long-term capital gains on sale of
(The full value of consideration of land has been changed from Rs 14 land (since held for more than 24
lakhs to Rs. 14.88 Lakhs & the stamp duty value has been changed from months)
14 lakhs to 15 lakhs to keep the essence of the question) Full Value of Consideration [Actual
consideration of `14,88,000, since
Answer 80 stamp duty value of `15 lakhs does
Particulars ` ` ` not exceed actual consideration by 14,88,000
I Income from house property more than 10%]
Let out portion [First floor] Less: Indexed Cost of acquisition [` 13,92,000 96,000
Gross Annual Value [Rent received is 3,34,000 4,00,000 x 348/100]
taken as GAV, in the absence of other Cost of acquisition
information] Higher of -
Less: Municipal taxes paid by him in - Actual cost `2.80 lakhs + `0.12
the P.Y. 2023-24 pertaining to let out lakhs =`2.92 lakhs and
portion [`30,000/2] 15,000 - Fair Market Value (FMV) as on
Net Annual Value (NAV) 3,19,000 1.4.2001 = `4.8 lakhs but cannot
Less: Deduction u/s 24 exceed stamp duty value of `4
(a) 30% of `3,19,000 95,700 lakhs.
(b) Interest on housing loan [` 90,000 1,85,700 IV Income from Other Sources
1,80,000/2] Interest on savings bank deposits 30,000
Self-occupied portion [Ground Floor] 1,33,300 Interest on fixed deposits 45,000 75,000
Annual Value Nil Gross Total Income 47,14,300
[No deduction is allowable in respect
of municipal taxes paid]

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Less: Deduction u/s 10AA 13,50,000 Particulars ` `

[Since the industrial undertaking is Tax on total income of `22,67,100
established in SEZ, it is entitled to Tax on LTCG of `96,000@20% 19,200
deduction u/s 10AA@100% of Tax on remaining total income of 21,71,100
export profits, since P.Y.2023-24 Upto `2,50,000 Nil
being the 3rd year of operations] ` 2,50,001 – `5,00,000[@5% of `2.50 lakh] 12,500
[Profits of the SEZ x Export Turnover/ 1,00,000
`5,00,001 – `10,00,000[@20% of `5,00,000]
Total Turnover] x 100%
`10,00,001 – `21,71,100[@30% of 3,51,330 4,63,830
[`45 lakhs x `120 lakhs/ `400
`11,71,700]
lakhs x 100%]
4,83,030
Less: Deduction under Chapter VI-A
Deduction under section 80C
Repayment of principal amount of 95,000
Tax liability (rounded off) 5,02,350
housing loan
Insurance premium paid on life
Computation of tax liability of Mr. Dheeraj for A.Y.2024-25 under the
insurance policy of son allowable,
even though not dependent on Mr. 49,000 1,44,000 special provisions of the Act (Alternate Minimum Tax)
Dheeraj Particulars `
Deduction under section 80JJAA 9,43,200 Computation of adjusted total income
30% of the employee cost of the Total income as per the normal provisions of the Act 22,67,100
new employees employed during Add: Deduction u/s 10AA 13,50,000
the P.Y. 2023-24 allowable as Deduction u/s 80JJAA 9,43,200
deduction [30% of `31,44,000 [` 45,60,300
23,76,000 (12 x 18,000 x 11) + `
AMT@18.5% 8,43,656
7,68,000 (8 x 12,000 x 8)]
Add: HEC@4% 33,746
Deduction under section 80TTA
Interest on savings bank account, AMT liability 8,77,402
restricted to `10,000 10,000 10,97,200 AMT liability (rounded off) 8,77,400
Total income 22,67,100 Since the regular income tax payable is less than the AMT, the adjusted total
income of `45,60,300 would be deemed to be the total income and tax
Computation of tax liability of Mr. Dheeraj for A.Y.2024-25 under the would be payable @18.5% plus HEC@4%. The total tax liability would be
normal provisions of the Act `8,77,400. In this case, AMT credit of `3,75,050 (`8,77,400 – `5,02,350) can
be carried forward.

CA Amit Mahajan
#LetsCrackTax
Mr. Dheeraj also can opt to pay tax as per the provisions of section 115BAC `9,00,001 – `12,00,000 [`3,00,000 @ 15%] 45,000
if tax liability thereunder is lower. In such case, the AMT provisions would not `12,00,001 – `15,00,000 [`3,00,000 @ 20%] 60,000
apply on him. The computation of total income and tax liability as per the 60,000
provisions of section 115BAC would be as follows: Above `15,00,000 @30% 6,79,530 8,29,530
8,48,730
Computation of total income of Mr. Dheeraj as per section 115BAC for Add: Health and education cess@4% 33,949
A.Y. 2024 -25 Total tax liability 8,82,679
Particulars ` ` Tax liability (rounded off) 8,82,680
Gross Total Income as per regular provisions of 47,14,300 Since tax liability as per section 115BAC is higher than the tax liability of
the Income-tax Act `8,77,400 being higher of AMT liability and tax liability computed as per
Add: Interest on borrowing in respect of self- normal provisions of the Income- tax Act, 1961, it is beneficial for Mr. Dheeraj
occupied house property not allowable as not to exercise option under section 115BAC. In such case, his tax liability,
deduction as per section 115BAC 90,000 therefore, would be ` 8,77,400. Moreover, Mr. Dheeraj would also be eligible
Gross Total Income as per section 115BAC 48,04,300 to claim carry forward of AMT credit of `3,75,050.
Less: Deduction under section 80JJAA
30% of the employee cost of the new employees
employed during the P.Y. 2020-21 allowable as
deduction [30% of `31,44,000 [` 23,76,000 (12
x 18,000 x 11) + `7,68,000 (8 x 12,000 x 8)] 9,43,200
No deduction under section 10AA or under
Chapter VI-A allowable except u/s 80JJAA 9,43,200
Total income 38,61,100
Computation of tax liability as per section 115BAC

Particulars ` `
Tax on total income of `38,61,100
Tax on LTCG of `96,000@20% 19,200
Tax on remaining total income of `37,65,100
Upto `2,50,000 `3,00,000 Nil Nil
``3,00,000 – `6,00,000 [` 3,00,000 @ 5%] 15,000
`6,00,001 – `9,00,000 [` 3,00,000 @ 10%] 30,000

DT - Super 75 - CA Amit Mahajan

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july last karna h

DIRECT TAX Super 75 1

DIRECT TAX Super 75 2

DIRECT TAX Super 75 3

RESIDENCE & SCOPE OF

DIRECT TAX Super 75 4

DIRECT TAX Super 75 5

DIRECT TAX Super 75 6

DIRECT TAX Super 75 7

DIRECT TAX Super 75 8

DIRECT TAX Super 75 9

DIRECT TAX Super 75 10

DIRECT TAX Super 75 11

DIRECT TAX Super 75 12

DIRECT TAX Super 75 13

Dearness allowance 4,20,000 Note:

DIRECT TAX Super 75 14

DIRECT TAX Super 75 15

DIRECT TAX Super 75 16

DIRECT TAX Super 75 17

DIRECT TAX Super 75 18

DIRECT TAX Super 75 19

DIRECT TAX Super 75 20

3.2 INCOME FROM HOUSE

DIRECT TAX Super 75 21

DIRECT TAX Super 75 22

Net Annual Value 1,65,000

DIRECT TAX Super 75 23

[Lower of lease rental paid or Income from Other Sources

DIRECT TAX Super 75 24

3.3 PROFITS & GAINS FROM

DIRECT TAX Super 75 25

DIRECT TAX Super 75 26

3.4 CAPITAL GAINS

DIRECT TAX Super 75 27

DIRECT TAX Super 75 28

DIRECT TAX Super 75 29

DIRECT TAX Super 75 30

(ii) Sale of 1,000 units of AB Mutual Fund on 20.5.2023 @ 50,000

DIRECT TAX Super 75 31

Answer 26 In this case, since advance of `20 lakh is received

DIRECT TAX Super 75 32

Since the amount of capital gain does not exceed

DIRECT TAX Super 75 33

Less: Indexed cost of acquisition [` 2,00,000 x 348/117] 5,94,872

DIRECT TAX Super 75 34

Working Note: Net worth of Unit-RS

DIRECT TAX Super 75 35

DIRECT TAX Super 75 36

DIRECT TAX Super 75 37

Less: FMV on the date of conversion (` 2,200 Note -

DIRECT TAX Super 75 38

DIRECT TAX Super 75 39

DIRECT TAX Super 75 40

DIRECT TAX Super 75 41

3.5 INCOME FROM OTHER

DIRECT TAX Super 75 42

treated as deemed dividend for the A.Y.2024-25. Such dividend would,

DIRECT TAX Super 75 43

4. INCOME OF OTHER PERSON INCLUDED