ICAI MODULE QUESTIONS

SM 1. Mr. A (aged 35 years) submits the following particulars pertaining to the AY 2021-22.
Particulars Rs.
Income from salary (computed) Rs. 4,00,000
Loss from self-occupied property (-) Rs. 70,000
Loss from let-out property (-) Rs. 1,50,000
Business loss (-) Rs. 1,00,000
Bank interest (FD) received Rs. 80,000
Compute the total income of Mr. A for the AY 2021-22.
Answer: Computation of total income of Mr. A for the AY 2021-22
Particulars Amount (Rs) Amount (`)
Income from salary Rs. 4,00,000
Less: Loss from house property of Rs. 2,20,000 to be restricted to 2 (-) Rs. 2,00,000 Rs. 2,00,000
lakhs by virtue of section 71(3A)
Balance loss of Rs. 20,000 from house property to be carried
forward to next AY
Income from other sources (interest on fixed deposit with bank) Rs. 80,000
Business loss set-off Business loss of Rs. 20,000 to be carried (-) Rs. 1,00,000 -
forward for set-off against business income of the next AY
Gross total income [See Note below] Rs. 2,00,000
Less: Deduction under Chapter VI-A Nil
Total income Rs. 2,00,000
Note: Gross Total Income includes salary income of Rs. 2,00,000 after adjusting loss of Rs. 2,00,000 from
house property. The balance loss of Rs. 20,000 from house property to be carried forward to next
assessment year for set-off against income from house property of that year.
Business loss of Rs. 1,00,000 is set off against bank interest of 80,000 & remaining business loss of Rs.
20,000 will be carried forward as it cannot be set off against salary income.

SM 2. Mr. B, a resident individual, furnishes the following particulars for PY 2020-21:

Particulars Rs.
Income from salary (computed) Rs. 45,000
Income from house property Rs. (24,000)
Income from non-speculative business Rs. (22,000)
Income from speculative business Rs. (4,000)
Short-term capital losses Rs. (25,000)
Long-term capital gains Rs. 19,000
What is the total income chargeable to tax for the AY 2021-22?

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Answer: Total income of Mr. B for AY 2021-22
Particulars Amount (Rs.) Amount (Rs.)
Income from salaries Rs. 45,000
Income from house property Rs. (24,000)
Profits & gains of business & profession
Business loss to be carried forward [Note 1] Rs. (22,000)
Speculative loss to be carried forward [Note 2] Rs. (4,000) Rs. 21,000
Capital Gains
Long term capital gain Rs. 19,000
Short term capital loss Rs. (25,000)
Short term capital loss to be carried forward [Note 3] Rs. (6,000)
Taxable income Rs. 21,000

Note 1: Business loss cannot be set-off against salary income. Therefore, loss of Rs. 22,000 from the non-
speculative business cannot be set off against the income from salaries. Hence, such loss has to be carried
forward to the next year for set- off against business profits, if any.

Note 2: Loss of Rs. 4,000 from the speculative business can be set off only against the income from the
speculative business. Hence, such loss has to be carried forward.

Note 3: Short term capital loss can be set off against both short term capital gain & long-term capital gain.
Therefore, short term capital loss of Rs. 25,000 can be set-off against long-term capital gains to the extent
of 19,000. The balance short term capital loss of Rs. 6,000 cannot be set-off against any other income &
has to be carried forward to the next year for set-off against capital gains, if any.

SM 3. During the P.Y. 2020-21, Mr. C has the following income & the brought forward losses:
Particulars Rs.
Short term capital gains on sale of shares Rs. 1,50,000
Long term capital loss of AY 2019-20 Rs. (96,000)
Short term capital loss of AY 2021-22 Rs. (37,000)
Long term capital gain Rs. 75,000
What is the capital gain taxable in the hands of Mr. C for the AY 2021-22?
Answer: Taxable capital gains of Mr. C for AY 2021-22
Particulars Rs. Rs.
Short term capital gains on sale of shares Rs. 1,50,000
Less: Brought forward short-term capital loss of the AY 2021-22 Rs. (37,000) Rs.1,13,000
Long term capital gain Rs. 75,000
Less: Brought forward LTCL of AY 2019-20 [See Note below] Rs. (75,000) Nil
Taxable short-term capital gains 1,13,000

Note: Long-term capital loss cannot be set off against short-term capital gain. Hence, the unadjusted long-
term capital loss of AY 2019-20 of Rs. 21,000 (i.e. Rs. 96,000 – Rs. 75,000) can be carried forward to the
next year to be set-off against long-term capital gains of that year.

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SM 4. Mr. D has the following income for the PY 2020-21:
Particulars Rs.
Income from the activity of owning & maintaining the race horses Rs. 75,000
Income from textile business Rs. 85,000
Brought forward textile business loss (relating to AY 2020-21) Rs. 50,000
Brought forward loss from the activity of owning & maintaining the race horses (relating Rs. 96,000
to AY 2018-19)
What is the total income in the hands of Mr. D for AY 2021-22?
Answer: Total income of Mr. D for AY 2021-22
Particulars Rs. Rs.
Income from the activity of owning & maintaining race horses Rs. 75,000
Less: Brought forward loss from the activity of owning & maintaining Rs. 96,000
race horses
Loss from the activity of owning & maintaining race horses to be carried Rs. (21,000)
forward to AY 2022-23
Income from textile business Rs.85,000
Less: Brought forward business loss from textile business. Rs. 50,000 Rs. 35,000
Total income Rs. 35,000
Note: Loss from the activity of owning & maintaining race horses cannot be set- off against any other
source/head of income.

SM 5. Mr. E has furnished his details for the AY 2021-22 as under:

Particulars Rs.
Income from salaries (computed) Rs. 1,50,000
Income from speculation business Rs. 60,000
Loss from non-speculation business Rs. (40,000)
Short term capital gain Rs. 80,000
Long term capital loss of AY 2019-20 Rs. (30,000)
Winning from lotteries (Gross) Rs. 20,000
What is the taxable income of Mr. E for the AY 2021-22?
Answer: Computation of taxable income of Mr. E for the AY 2021-22
Particulars Rs. Rs.
Income from salaries Rs. 1,50,000
Income from speculation business Rs. 60,000
Less : Loss from non-speculation business Rs. (40,000) Rs. 20,000
Short-term capital gain Rs. 80,000
Winnings from lotteries Rs. 20,000
Taxable income Rs. 2,70,000
Note: Long term capital loss can be set off only against long term capital gain. Therefore, long term capital
loss of Rs. 30,000 has to be carried forward to the next AY.

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 TEST YOUR KNOWLEDGE
Q1. Compute the gross total income of Mr. F for AY 2021-22 from the information given below –
Particulars Rs.
Income from house property (computed) Rs. 1,25,000
Income from business (before providing for depreciation) Rs. 1,35,000
Short term capital gains on sale of unlisted shares Rs. 56,000
Long term capital loss from sale of property (brought forward from AY 2020-21) Rs. (90,000)
Income from tea business Rs. 1,20,000
Dividends from Indian companies carrying on agricultural operations (Gross) Rs. 80,000
Current year depreciation Rs. 26,000
Brought forward business loss (loss incurred six years ago) Rs. (45,000)
Answer:
Particulars Rs. Rs.
Income from house property (Computed) Rs. 1,25,000
Income from business
Profits before depreciation Rs. 1,35,000
Less: Current year depreciation Rs. 26,000
Less: Brought forward business loss Rs. 45,000
Rs. 64,000
Income from tea business (40% is business income) Rs. 48,000 Rs. 1,12,000
Capital gains
Short term capital gains Rs. 56,000
Income from Other Sources
Dividend income (taxable in the hands of shareholders) Rs. 80,000
Gross Total Income 3,73,000

Note:
1. Dividend from Indian companies is fully taxable in the hands of shareholders at normal rates of tax.
2. 60% of the income from tea business is treated as agricultural income & therefore, exempt from tax;
3. Long-term capital loss can be set-off only against long-term capital gains. Therefore, LTCL of Rs. 90,000
brought forward from AY 2021-22 cannot be set-off in the AY 2021-22, since there is no LTCG in that
year. It has to be carried forward for set-off against LTCG, if any, during AY 2022-23.

Q2. Mr. Soohan submits the following details of his income for AY 2021-22:
Particulars Rs.
Income from salary Rs. 3,00,000
Loss from let out house property (-) Rs. 40,000
Income from sugar business Rs. 50,000
Loss from iron ore business b/f (discontinued in P.Y. 2015-16) Rs. (-) 1,20,000
Short term capital loss Rs. (-) 60,000

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 Long term capital gain Rs. 40,000
Dividend Rs. 5,000
Income received from lottery winning (Gross) Rs. 50,000
Winnings from card games (Gross) Rs. 6,000
Agricultural income Rs. 20,000
Short-term capital loss under section 111A Rs. (-) 10,000
Bank interest on Fixed deposit Rs. 5,000
Calculate gross total income & losses to be carried forward.
Answer: Computation of Gross Total Income of Mr. Soohan for the AY 2021-22
Particulars Rs. Rs.
Salaries
Income from salary Rs. 3,00,000
Less: Loss from house property set-off against salary income as per
section 71
Rs. (40,000) Rs. 2,60,000
Profits & gains of business or profession

Income from sugar business Rs. 50,000

Less: Brought forward loss from iron-ore business set- off as per Rs. (50,000) Nil
section 72(1)
Balance business loss of Rs. 70,000 of P.Y.2015-16to be carried
forward to AY 2022-23
Capital gains

Long term capital gain Rs. 40,000

Less: Short term capital loss set-off Rs. (40,000) Nil
Balance short-term capital loss of Rs. 20,000 to be carried forward
Short-term capital loss of Rs. 10,000 under section 111A also to be
carried forward
Income from other sources
Dividend (fully taxable in the hands of shareholders) Rs. 5,000
Winnings from lottery Rs. 50,000
Winnings from card games Rs. 6,000
Bank interest Rs. 5,000 Rs. 66,000
Gross Total Income Rs. 3,26,000
Losses to be carried forward to AY 2022-23
Loss of iron-ore business (Rs. 1,20,000 – Rs. 50,000) Rs. 70,000
Short term capital loss (Rs. 20,000 + Rs. 10,000) Rs. 30,000
Notes:
1. Agricultural income is exempt under section 10(1)
2. It is presumed that loss from iron-ore business relates to P.Y.2015-16, the year in which the
business was discontinued.

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Q3. Mr. Batra furnishes the following details for year ended 31.03.2021:
Particulars
Short term capital gain Rs. 1,40,000
Loss from speculative business Rs. 60,000
Long term capital gain on sale of land Rs. 30,000
Long term capital loss on sale of unlisted shares Rs. 1,00,000
Income from business of textile (after allowing current year depreciation) Rs. 50,000
Income from activity of owning and maintaining race horses Rs. 15,000
Income from salary (computed) Rs.1,00,000
Loss from house property Rs. 40,000
Following are the brought forward losses:
1. Losses from activity of owning & maintaining race horses-pertaining to AY 2018-19 Rs. 25,000.
2. Brought forward loss from business of textile Rs. 60,000 - Loss pertains to AY 2013-14.
Compute gross total income of Mr. Batra for AY 2021-22. Also determine the losses eligible for carry
forward to the AY 2022-23.
Answer: Computation of Gross Total Income of Mr. Batra for AY 2021-22
Particulars Rs. Rs.
Salaries Rs. 1,00,000 Rs. 60,000
Less: Current year loss from house property Rs. (40,000)
Profit & gains of business or profession
Income from textile business Rs. 50,000
Less: Loss from textile business brought forward from AY 2013-14 Rs. 60,000
Balance business loss of AY 2013-14 [See Note 1] Rs. (10,000) NIL
Income from the activity of owning & maintaining race horses Rs. 15,000
Less: Loss from activity of owning & maintaining race horses brought
forward from AY 2018-19 Rs. 25,000
Loss to be carried forward to AY 2022-23 [See Note 2] Rs. (10,000) NIL
Capital Gain
Short term capital gain Rs. 1,40,000
Long term capital gain on sale of land Rs. 30,000
Less: Long term capital loss on sale of unlisted shares Rs. 1,00,000
Loss to be carried forward to AY 2022-23 [See Note 3] Rs. (70,000) NIL
Gross Total Income Rs.
2,00,000

Losses to be carried forward to AY 2022-23

Particulars Rs.
Current year loss from speculative business [See Note-4] Rs. 60,000
Current year long term capital loss on sale of unlisted shares Rs. 70,000
Loss from activity of owning & maintaining of race horse pertaining to AY 2018-19 Rs. 10,000

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Notes:
1. As per section 72(3), business loss can be carried forward for a maximum of eight AY s immediately
succeeding the AY for which the loss was first computed. Since the eight years period for carry forward
of business loss of AY 2013-14 expired in AY 2021-22, the balance unabsorbed business loss of Rs. 10,000
cannot be carried forward to AY 2022-23.
2. As per section 74 A (3), the loss incurred on maintenance of race horses cannot be set-off against
income from any source other than the activity of owning & maintaining race horses. Such loss can be
carried forward for a maximum period of 4 AY s.
3. Long-term capital loss on sale of unlisted shares can be set-off against long- term capital gain on sale
of land. The balance loss of Rs. 70,000 cannot be set-off against short term capital gain or against any
other head of income. The same has to be carried forward for set-off against long-term capital gain of
the subsequent AY. Such long-term capital loss can be carried forward for a maximum of eight AY s.
4. Loss from speculation business cannot be set-off against any income other than profit & gains of another
speculation business. Such loss can, however, be carried forward for a maximum of four years as per
section 73(4) to be set- off against income from speculation business.

Q4. Mr. A furnishes you the following information for the year ended 31.03.2021:
(i) Income from plying of vehicles (computed as per books) (He owned 5 light goods Rs. 3,20,000
vehicles throughout the year)
(ii) Income from retail trade of garments (Computed as per books) (Sales turnover
1,35,70,000) Rs. 7,50,000
Mr. A had declared income on presumptive basis under section 44AD for the first
time in AY 2020-21. Assume 10% of the turnover during the previous year 2020-21
was received in cash & balance through A/c payee cheque & all the payments in
respect of expenditure were also made through A/c payee cheque or debit card.
(iii) He has brought forward depreciation relating to AY 2019-20 Rs. 1,00,000
Compute taxable income of Mr. A & his tax liability for the AY 2021- 22 with reasons for your computation.
Assuming that he does not opt for section 115 BAC.
Answer: Computation of total income & tax liability of Mr. A for AY 2021-22
Particulars Rs.
Income from retail trade – as per books (See Note 1 below) Rs. 7,50,000
Income from plying of vehicles – as per books (See Note 2 below) Rs. 3,20,000
Rs. 10,70,000
Less : Set off of brought forward depreciation relating to AY 2019- 20 Rs. 1,00,000
Total income Rs. 9,70,000
Tax liability Rs. 1,06,500
Add: Health & Education cess @4% Rs. 4,260
Total tax liability Rs. 1,10,760

Note:
1. Income from retail trade: Presumptive business income under section 44AD is Rs.8,41,340 i.e., 8% of Rs.
13,57,000, being 10% of the turnover received in cash & 6% of Rs. 1,22,13,000, being the amount of sales
turnover received through A/c payee cheque. However, the income computed as per books is Rs.
7,50,000 which is to be further reduced by the amount of unabsorbed depreciation of Rs. 1,00,000.
Since the income computed as per books is lower than the income deemed under section 44AD, the
assessee can adopt the income as per books.

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 However, if he does not opt for presumptive taxation under section 44AD, he has to get his books of
accounts audited under section 44AB, since his turnover exceeds 1 crore (the enhanced limit of Rs. 5
crores would not available, since more than 5% of the turnover is received in cash). Also, his case would
be falling under section 44AD (4) & hence tax audit is mandatory. It may further be noted that he cannot
opt for section 44AD for next five AY if he does not opt for section 44AD this year.

2. Income from plying of light goods vehicles: Income calculated under section 44AE (1) would be Rs. 7,500
x 12 x 5 which is equal to Rs. 4,50,000. However, the income from plying of vehicles as per books is Rs.
3,20,000, which is lower than the presumptive income of Rs. 4,50,000 calculated as per section 44AE
(1). Hence, the assessee can adopt the income as per books i.e. Rs. 3,20,000, provided he maintains
books of account as per section 44AA & gets his accounts audited & furnishes an audit report as
required under section 44AB.

It is to be further noted that in both the above cases, had presumptive income provisions been opted, all
deductions under sections 30 to 38, including depreciation would have been deemed to have been given
full effect to & no further deduction under those sections would be allowable.
If the assessee opted for income to be assessed on presumptive basis, his total income would be as under:
Particulars Rs.
Income from retail trade under section 44AD [Rs. 13,57,000 @ 8% plus Rs. Rs. 8,41,340
1,22,13,000 @6%]
Income from plying of light goods vehicles under section 44AE [Rs. 7,500 x 12 x 5] Rs. 4,50,000
Rs. 12,91,340
Less: Set off of brought forward depreciation – not possible as it is deemed that it Nil
has been allowed & set off
Total income Rs. 12,91,340
Tax thereon Rs. 1,99,902
Add : Health & Education cess @4% Rs. 7,996
Total tax liability Rs. 2,07,898
Total tax liability (rounded off) Rs. 2,07,900

Q5. Mr. Aditya furnishes the following details for PY 2020-21:

Loss from speculative business A Rs. 25,000
Income from speculative business B Rs. 5,000
Loss from specified business covered under section 35AD Rs. 20,000
Income from salary (computed) Rs. 3,00,000
Loss from house property Rs. 2,50,000
Income from trading business Rs. 45,000
Long-term capital gain from sale of urban land Rs. 2,00,000
Long-term capital loss on sale of shares (STT not paid) Rs. 75,000
Long-term capital loss on sale of listed shares in recognized stock exchange (STT paid at Rs. 1,02,000
the time of acquisition & sale of shares)
Following are the brought forward losses:
1. Losses from owning & maintaining of race horses pertaining to AY 2019-20 Rs. 2,000.
2. Brought forward loss from trading business Rs. 5,000 relating to AY 2016-17.
Compute the total income of Mr. Aditya & show the items eligible for carry forward.

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Answer: Computation of total income of Mr. Aditya for the AY 2021-22
Particulars Rs. Rs.
Salaries
Income from Salary Rs. 3,00,000
Less: Loss from house property set-off against salary income as per section
71(3A) Rs. 2,00,000 Rs. 1,00,000
Loss from house property to the extent not set off i.e. Rs. 50,000 (Rs. Rs. 50,000
2,50,000 – Rs. 2,00,000) to be carried forward to AY 2022-23
Profits & gains of business or profession
Income from trading business Rs. 45,000
Less: Brought forward loss from trading business of AY 2016-17 can be set
off against current year income from trading business as per section 72(1),
since the eight year time limit as specified under section 72(3), within which
set-off is permitted, has not expired.
Rs. 5,000 Rs. 40,000
Income from speculative business B Rs. 5,000
Less: Loss from speculative business A set-off as per section 73(1) Rs. 25,000
Loss from speculative business A to be carried forward to AY 2022-23 as
per section 73(2) Rs. 20,000
Loss from specified business covered under section 35AD to be carried
forward for set-off against income from specified business as per section Rs. 20,000
73A.
Capital Gains
Long term capital gain on sale of urban land Rs. 2,00,000
Less: Long term capital loss on sale of shares (STT not paid) set-off as per
section 74(1)] Rs. 75,000
74(1), since long-term capital arising on sale of such shares is taxable under
section 112A Rs. 1,02,000 Rs. 23,000
Total Income 1,63,000

Q6. Mr. Garg (resident) furnishes the following particulars of his income & other details for PY 2020-21:
(1) Income from Salary (computed) Rs. 15,000
(2) Income from business Rs. 66,000
(3) Long term capital gain on sale of land Rs. 10,800
(4) Loss on maintenance of race horses Rs. 15,000
(5) Loss from gambling Rs. 9,100
Other details of unabsorbed depreciation & brought forward losses pertaining to AY 2021-22 are as follows:
Particulars Rs.
(1) Unabsorbed depreciation Rs. 11,000
(2) Loss from Speculative business Rs. 22,000
(3) Short term capital loss Rs. 9,800
Compute GTI of Mr. Garg for AY 2021-22 & the amount of loss, if any that can be carried forward or not.

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Answer:
Particulars
(i) Income from salary Rs. 15,000
(ii) Profits & gains of business or profession Rs .66,000
Less: Unabsorbed depreciation brought forward from AY 2021-22
(Unabsorbed depreciation can be set-off against any head of income Rs. 11,000 Rs. 55,000
other than “salary”)
(iii) Capital gains
Long-term capital gain on sale of land Rs. 10,800
Less: Brought forward short-term capital loss
[Short-term capital loss can be set-off against both short-term capital
gains & long-term capital gains as per section 74(1)] Rs. 9, 800 Rs. 1,000
Gross Total Income Rs. 71,000
Amount of loss to be carried forward to AY 2022-23
Particulars Rs.
(1) Loss from speculative business [to be carried forward as per section 73] Rs. 22,000
[Loss from a speculative business can be set off only against income from another
speculative business. Since there is no income from speculative business in the
current year, the entire loss of Rs. 22,000 brought forward from AY 2021-22 has to
be carried forward to AY 2022-23 for set-off against speculative business income
of that year. It may be noted that speculative business loss can be carried forward
for a maximum of four years as per section 73(4), i.e., upto AY 2024-25]
(2) Loss on maintenance of race horses [to be carried forward as per section 74A] Rs. 15,000
[As per section 74A(3), the loss incurred in the activity of owning & maintaining race
horses in any AY cannot be set-off against income from any other source other than
the activity of owning & maintaining race horses. Such loss can be carried forward
for a maximum of four AY s i.e., upto AY 2025-26]
(3) Loss from gambling can neither be set-off nor be carried forward.

Q7. Following are the details relating to Mr. Srivatsan (resident) age 57, relating to PY 2020-21:
Particulars Rs.
Income from salaries (computed) Rs. 2,20,000
Loss from house property Rs. 1,90,000
Loss from cloth business Rs. 2,40,000
Income from speculation business Rs. 30,000
Loss from specified business covered by section 35AD Rs. 20,000
Long-term capital gains from sale of urban land Rs. 2,50,000
Loss from card games Rs. 32,000
Income from betting (Gross) Rs. 45,000
Life Insurance Premium paid (10% of the capital sum assured) Rs. 45,000
Compute the total income & show the items eligible for carry forward.

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 Answer: Computation of total income of Mr. Srivatsan for the AY 2021-22
Particulars Rs. Rs.
Salaries
Income from salaries Rs. 2,20,000
Less: Loss from house property Rs. 1,90,000 Rs. 30,000
Profits & gains of business or profession
Income from speculation business Rs. 30,000
Less: Loss from cloth business set off Rs. 30,000 Nil
Capital gains
Long-term capital gains from sale of urban land Rs. 2,50,000
Less: Loss from cloth business set off Rs. 2,10,000 Rs. 40,000
Income from other sources
Income from betting Rs. 45,000
Gross Total Income Rs. 1,15,000
Less: Deduction under section 80C (life insurance premium paid) Rs. 30,000
Total income Rs.85,000
Losses to be carried forward:
Particulars Rs.
(1) Loss from cloth business (Rs. 2,40,000 – Rs. 30,000 – Rs. 2,10,000) Nil
(2) Loss from specified business covered by section 35AD Rs. 20,000
Notes:
(i) Loss from specified business covered by section 35AD can be set-off only against profits & gains of any
other specified business. Therefore, such loss cannot be set off against any other income. The
unabsorbed loss has to be carried forward for set-off against profits & gains of any specified business
in the following year.
(ii) Business loss cannot be set off against salary income. However, the balance business loss of Rs. 2,10,000
(Rs. 2,40,000 – Rs. 30,000 set-off against income from speculation business) can be set-off against
long-term capital gains of Rs. 2,50,000 from sale of urban land. Consequently, the taxable long-term
capital gains would be Rs. 40,000.
(iii) Loss from card games can neither be set off against any other income, nor can be carried forward.
(iv) For providing deduction under Chapter VI-A, gross total income has to be reduced by the amount of
long-term capital gains & casual income. Therefore, the deduction under section 80C in respect of life
insurance premium paid has to be restricted to Rs. 30,000 [i.e., Gross Total Income of Rs. 1,15,000 –
Rs. 40,000 (LTCG) – Rs. 45,000 (Casual income)].
(v) Income from betting is chargeable at a flat rate of 30% u/s 115BB & no expenditure or allowance can
be allowed as deduction from such income, nor can any loss be set-off against such income.

Q8. Mr. Rajat submits the following information for PY 2020-21. He desires that you should:
(a) Compute the total income & (b) ascertain the amount of losses that can be carried forward.
Particular Amount
(i) He has two houses:
(a) House No. I – Income after all statutory deductions Rs. 72,000
(b) House No. II – Current year loss Rs. (30,000)

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 (ii) He has three proprietary businesses:
(a) Textile Business:
(i) Discontinued from 31st October, 2020 – Current year loss Rs. 40,000
(ii) Brought forward business loss of AY 2016-17 Rs. 95,000
(b) Chemical Business:
(i) Discontinued from 1st March, 2018 – hence no profit/loss Nil
(ii) Bad debts allowed in earlier years recovered during this year Rs. 35,000
(iii) Brought forward business loss of AY 2017-18 Rs. 50,000
(c) Leather Business: Profit for the current year Rs. 1,00,000
(d) Share of profit in a firm in which he is partner since 2007 Rs. 16,550
(iii) (a) Short-term capital gain Rs. 60,000
(b) Long-term capital loss Rs. 35,000
(iv) Contribution to LIC towards premium Rs. 10,000
Answer: Computation of total income of Mr. Rajat for AY 2021-22
Particulars Rs. Rs.
1. Income from house property
House No.1 Rs. 72,000
House No.2 (-) Rs. 30,000 Rs. 42,000
2. Profits & gains of business or profession
Profit from leather business Rs. 1,00,000
Bad debts recovered taxable under section 41(4) Rs. 35,000
Rs. 1,35,000
Less: Current year loss of textile business (-) Rs. 40,000
Less: Brought forward business loss of textile business for AY 2016- Rs. Rs.95,000
17 set off against the business income of current year
Rs. 95,000 Nil
3. Capital Gains
Short-term capital gain Rs. 60,000
Gross Total Income Rs. 1,02,000
Less: Deduction under Chapter VI-A
Under section 80C – LIC premium paid Rs. 10,000
Total Income Rs. 92,000
Statement of losses to be carried forward to AY 2022-23
Particulars
Business loss of AY 2017-18 to be carried forward under section 72 Rs. 50,000
Long term capital loss of AY 2021-22 to be carried forward under section 74 Rs. 35,000
Notes:
1. Share of profit from firm of Rs. 16,550 is exempt under section 10(2A).
2. Long-term capital loss cannot be set-off against short-term capital gains. Therefore, it has to be
carried forward to the next year to be set-off against long-term capital gains of that year.

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Q9. Ms. Geeta, a resident individual, provides the following details of her income/losses for PY 2020-21:
(i) Salary received as a partner from a partnership firm Rs. 7,50,000. The same was allowed to the firm.
(ii) Loss on sale of shares listed in BSE Rs. 3,00,000. Shares were held for 15 months & STT paid on sale &
acquisition.
(iii) Long-term capital gain on sale of land Rs. 5,00,000.
(iv) Rs. 51,000 received in cash from friends in party.
(v) Rs. 55,000, received towards dividend on listed equity shares of domestic companies.
(vi) Brought forward business loss of AY 2019-20 Rs. 12,50,000.
Compute GTI of Ms. Geeta for AY 2021-22 & ascertain the amount of loss that can be carried forward.
Answer: Computation of Gross Total Income of Ms. Geeta for AY 2021-22
Particulars Rs. Rs.
Profits & gains of business & profession
Salary received as a partner from a partnership firm is taxable under the Rs. 7,50,000
head “Profits & gains of business & profession”
Less: Brought forward business loss of AY 2019-20 to be set-off against Rs. 7,50,000
business income
Capital Gains Nil
Long term capital gain on sale of land Rs. 5,00,000
Less: Long-term capital loss on shares on STT paid (See Note 2) Rs. 3,00,000 Rs. 2,00,000
Income from other sources
Cash gift received from friends - since the value of cash gift exceeds Rs. Rs. 51,000
50,000, the entire sum is taxable
Dividend received from a domestic company is fully taxable in the hands Rs. 55,000
of shareholders Rs. 1,06,000
Gross Total Income Rs. 3,06,000
Notes:
1. Balance brought forward business loss of AY 2019-20 of Rs. 5,00,000 has to be carried forward to the
next year.
2. Long-term capital loss on sale of shares on which STT is paid at the time of acquisition & sale can be
set-off against long-term capital gain on sale of land since long-term capital gain on sale of shares (STT
paid) is taxable under section 112A.Therefore, it can be set-off against long-term capital gain on sale
of land as per section 70(3)

Q10. Mr. P (resident) furnishes the following particulars of his income & other details for PY 2020-21:
SN Particulars Rs.
(i) Income from salary (computed) Rs. 18,000
(ii) Net annual value of house property Rs. 70,000
(iii) Income from business Rs. 80,000
(iv) Income from speculative business Rs. 12,000
(v) Long term capital gain on sale of land Rs. 15,800
(vi) Loss on maintenance of race horse Rs. 9,000
(vii) Loss on gambling Rs. 8,000
Depreciation allowable under Income-tax Act, 1961 = Rs. 8,000, for which no treatment is given above.

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 The other details of unabsorbed depreciation & brought forward losses (pertaining to AY 2020-21) are:
SN Particulars Rs.
(i) Unabsorbed depreciation Rs. 9,000
(ii) Loss from speculative business Rs. 16,000
(iii) Short term capital loss Rs. 7,800
Compute GTI of Mr. P for AY 2021-22, & the amount of loss that can or cannot be carried forward.
Answer: Computation of Gross Total Income of Mr. P for AY 2021-22
Particulars
(i) Income from salary Rs. 18,000
(ii) Income from House Property
Net Annual Value Rs. 70,000
Less: Deductionunder section24 (30% of Rs. 70,000) Rs. 21,000 Rs. 49,000
(iii) Income from business & profession
(a) Income from business Rs. 80,000
Less : Current year depreciation Rs. 8,000
Rs. 72,000
Less : Unabsorbed depreciation Rs. 9,000 Rs. 63,000
(b) Income from speculative business Rs. 12,000
Less : Brought forward loss from speculative business Rs. 12,000 Nil
(Balance loss of Rs. 4,000 (i.e. Rs. 16,000 – Rs. 12,000) can be carried
forward to the next year)
(iv) Income from capital gain
Long-term capital gain on sale of l& Rs. 15,800
Less: Brought forward short-term capital loss Rs. 7,800 Rs. 8,000
Gross total income Rs. 1,38,000

Amount of loss to be carried forward to the next year:

Particulars
Loss from speculative business (to be carried forward as per section 73) Rs. 4,000
Loss on maintenance of race horses (to be carried forward as per section 74A) Rs. 9,000
Notes:
i. Loss on gambling can neither be set-off nor be carried forward.
ii. As per section 74A(3), the loss incurred on maintenance of race horses cannot be set-off against
income from any other source other than the activity of owning & maintaining race horses. Such loss
can be carried forward for a maximum period of 4 AY s.
iii. Speculative business loss can be set off only against income from speculative business of the current
year & the balance loss can be carried forward to AY 2022-23. It may be noted that speculative
business loss can be carried forward for a maximum of four years as per section 73(4).

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 PAST RTP QUESTIONS
MAY 2018 Q1. Following are the details relating to Mr. Gupta, a resident, relating to PY 2020-21:
Particulars Rs.
Income from Salaries 2,20,000
LTCL from sale of listed shares in RSE (STT paid at time of sale 1,50,000
acquisition)
Loss from Cloth business 2,40,000
Income from speculation business 30,000
Loss from specified business covered by section 35AD 45,000
Long-term capital gains from sale of urban land 2,50,000
Loss from house property 2,50,000
Loss from card games 40,000
Income from betting (Gross) 35,000
Life Insurance Premium paid (Sum assured Rs. 5,00,000) 25,000
Compute his total income for AY 2021-22 & show the items eligible for carry forward.

Answer: Computation of total income of Mr. Gupta for AY 2021-22

SN Particulars Rs. Rs.
1 Salaries 2,20,000
Less: Loss from house property [See Note ] 2,00,000 20,000
2 Loss from House Property (2,50,000)
Less: Adjusted against salaries to the extent of Rs. 2,00,000. (2,00,000) Nil
[HP Loss of Rs. 50,000 is to be carried forward to next AY]
3 Profits & gains of business or profession
Income from speculation business 30,000
Less: Loss from cloth business set off [See Note] 30,000 Nil
4 Capital gains
Long-term capital gains from sale of urban land 2,50,000
Less: LTCL from sale of shares in RSE (1,50,000)
Less: Loss from cloth business set off [See Note] 1,00,000 Nil
5 Income from other sources
Income from betting 35,000
Gross Total Income 55,000
Less: Deduction u/s 80C (life insurance premium paid) [Note] 20,000
Total income 75,000

Losses to be carried forward:

1. Loss from house property (Rs. 2,50,000 – Rs. 2,00,000) = Rs. 50,000.

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 2. Loss from cloth business (Rs. 2,40,000 – Rs. 30,000 – Rs. 1,00,000) = 1,10,000.
3. Loss from specified business u/s 35AD = Rs. 45,000.
Notes:
1. Loss from house property can be set-off against income under any other head to the
extent of Rs. 2,00,000 only. Balance loss of Rs. 50,000 can be carried forward to next
year for set-off against income from house property of that year.
2. Loss from specified business covered by section 35AD can be set-off only against
profits & gains of any other specified business. Therefore, such loss cannot be set off
against any other income. Unabsorbed loss has to be carried forward for set-off
against profits of any specified business.
3. Loss from cloth business to the extent of Rs. 30,000 can be set-off against income from
speculation business.
Remaining business loss of Rs. 2,10,000 (Rs. 2,40,000 – Rs. 30,000) can be set-off
against balance LTCG of Rs. 2,00,000 from sale of urban land.
Remaining business loss cannot be set off against salary income due to restriction
contained in section 71(2A).
4. Loss from card games can neither be set off against any income, nor can it be carried
forward.
5. Deduction under Chapter VI-A is not available from Capital gains & casual income.
Therefore, deduction u/s 80C i.r.o life insurance premium paid has to be restricted to
Rs. 20,000 [i.e., Gross Total Income of Rs. 55,000 – Rs. 20,000 (Casual income)].
6. Income from betting is chargeable to tax at a flat rate of 30% u/s 115BB & no
expenditure or allowance can be allowed as deduction nor can any loss be set-off
against such income.
NOV 2018 Q2. From the following information for PY 2020-21, compute the total income of Mr.
Arihant for AY 2021-22 & show eligible items for carry forward & upto which AY:
Particulars Amount
Long-term capital gain from sale of urban land 2,30,000
Long-term capital loss on sale of shares (STT not paid) 85,000
LTCL on sale of listed shares in RSE (STT paid at the time of acquisition & 1,02,000
sale)
Loss from speculative business X 25,000
Income from speculative business Y 15,000
Loss from specified business covered u/s 35AD 40,000
Income from salary 3,50,000
Loss from house property 2,20,000
Income from trading business 75,000
Following are details of unabsorbed depreciation & the brought forward losses:
1. Unabsorbed depreciation of Rs. 11,000 pertaining to AY 2020-21.
2. Losses from owning & maintaining of race horses pertaining to AY 2020-21: Rs. 5,000.
3. Brought forward loss from trading business Rs. 8,000 relating to AY 2017-18.
Answer: Computation of total income of Mr. Arihant for AY 2021-22
Particulars Rs. Rs.
1 Income from Salary 3,50,000

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 Less: Loss from house property set-off against salary 1,57,000 1,93,000
income
2 House Property (Loss) 2,20,000
Less: Adjusted against Capital gains u/s 112 43,000
Less: Adjusted against salary income 1,57,000 Nil
[Loss of Rs. 20,000 shall be carried forward to next year]
3 Profits & gains of business or profession
Income from trading business 75,000
Less: B/f loss from trading business of AY 2017-18 [Since 8
-year time limit within which set- off is permitted has not 8,000
expired]
Less: Unabsorbed depreciation 11,000 56,000
Income from speculative business Y 15,000
Less: Loss from speculative business X 15,000
4 Capital Gains
Long term capital gain on sale of urban land 2,30,000
Less: LTCL on sale of shares (STT not paid) 85,000
Less: LTCL u/s 112A on sale of listed shares [Note 1] 1,02,000
Less: Loss from House Property 43,000 Nil
Total Income 3,51,000

PC Note: As per section 71(3A), loss from house property to the extent of Rs. 2,00,000
can be set-off against any other head of income. In case of Mr. Avinash, it is more
beneficial to set-off the loss from house property against LTCG since LTCG would be
taxable @ 20%. Accordingly, loss to the extent of Rs. 43,000 is set-off against LTCG & Rs.
1,57,000 set-off against income u/h “Salaries”.

Items eligible for carried forward to AY 2022-23

- Loss from House Property: Rs. 20,000.
- Loss from speculative business X: Rs. 10,000.
- Loss from specified business u/s 35AD: Rs. 40,000.
- Loss from the activity of owning & maintaining race horses: Rs. 5,000.
MAY 2019 Q3. Mr. Rajan incurred loss of Rs. 5.3 lacs in PY 2019-20 in toy business. Against which of
the following income earned during the same year, can he set-off such loss?
(a) Profit of Rs. 2 lacs from wholesale cloth business
(b) Speculative business income of Rs. 80,000
(c) Long-term capital gains of Rs. 1.20 lakhs on sale of land
(d) All of the above

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 Q4. Compute GTI of Mr. Avinash & show the items eligible for carry forward & AYs upto
which such losses can be carry forward from following the information for PY 2020-21:
Particulars Amount
Loss from speculative businesss MNO 12,000
Income from speculative business BPO 25,000
Loss from specified business covered u/s 35AD 45,000
Income from salary (computed) 4,18,000
Loss from house property 2,20,000
Income from trading business 2,80,000
Income from owning & maintaining race horses 8,000
Long-term capital gain from sale of urban land 2,05,000
Long-term capital loss on sale of equity shares (STT not paid) 85,000
Long-term capital loss on sale of listed equity shares in recognized stock 1,10,000
exchange (STT paid at the time of acquisition & sale of shares)
Following are the brought forward losses:
1. Losses from owning & maintaining of race horses pertaining to AY 2019-20: Rs. 12,000.
2. Brought forward loss from speculative business MNO 18,000 relating to AY 2018-19.
3. Brought forward loss from trading business of Rs. 12,000 relating to AY 2017-18.
Assume Mr. Avinash has furnished his ROI before DD u/s 139(1) in all the above PYs.
Answer: Computation of Gross total income of Mr. Avinash for AY 2021-22
Particulars Rs. Rs.
1 Income from Salary 4,18,000 2,28,000
Less: Loss from house property set-off against salary 1,90,000
2 House Property (Loss) 2,20,000
Less: Adjusted against LTCG u/s 112 10,000
Less: Adjusted against salary income [Note 1] 1,90,000
Nil
[Loss of Rs. 20,000 shall be carried forward to next year.
3 Profits & gains of business or profession
Income from trading business 2,80,000
Less: B/f loss from trading business of AY 2016-17 [Since 8-
year time limit within which set- off is permitted has not 12,000 2,68,888
expired]
Income from speculative business BPO 25,000
Less: Loss from speculative business MNO 12,000
Less: B/f Loss from speculative business MNO of AY 2017- 13,000 Nil
18
4 Capital Gains
Long term capital gain on sale of urban land 2,05,000
Less: LTCL on sale of shares (STT not paid) 85,000
Less: LTCL u/s 112A on sale of listed shares [Note 1] 1,10,000 Nil
Total Income 4,96,00

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 Items eligible for carried forward to AY 2022-23
- Loss from House Property: Rs. 20,000.
- Loss from speculative business MNO: Rs. 5,000.
- Loss from specified business u/s 35AD: Rs. 45,000.
- Loss from the activity of owning & maintaining race horses: Rs. 4,000.

NOV 2019 Q4. The details of income/loss of Mr. Kumar for AY 2021-22 are as follows:
Particulars Amount
Income from Salary (Computed) 5,20,000
Loss from self-occupied house property 95,000
Loss from let-out house property 2,25,000
Loss from specified business u/s 35AD 2,80,000
Loss from medical business 1,20,000
Long term capital gain 1,60,000
Income from other sources 80,000

Compute gross total income of Mr. Kumar for AY 2021-22:

(a) Rs. 4,40,000 (b) Rs. 3,20,000 (c) Rs. 1,60,000 (d) Rs. 4,80,000

Q4. Mr. Raghav is a chartered accountant & his income from profession for PY 2020-21
is Rs. 15 Lacs. He provides you with the following information for PY 2020-21:
Particulars Rs.
Income of minor son Rahul from company deposit 1,75,000
Income of minor daughter Riya from her dance performances (profession) 20,00,000
Interest from Canara bank received by Riya on fixed deposit made in 2017 20,000
out of income earned from her dance performances
Gift received by Riya from friend of Mr. Raghav on winning National award 45,000
Loss from house property (computed) 2,50,000
Short term capital loss 6,00,000
Long term capital gain u/s 112 4,00,000
Short term capital loss u/s 111A 10,00,000
Mr. Raghav income before considering clubbing provisions is higher than that of his wife.
Compute Total Income of Mr. Raghav for AY 2021-22 & losses to be carried forward.
Answer: Computation of Total Income of Mr. Raghav for AY 2021-22
Particulars Rs. Rs. Rs.
Profits & gains from business & profession
Income from chartered accountancy profession 15,00,000
Less: Loss from house property (can be set-off to 2,00,000 13,00,000
the extent of RS. 2,00,000, as per section 71(3A).
Capital gains
Long term capital gain u/s 112 4,00,000
Less: STCL set off against LTCG (4,00,000) Nil
Income from other sources

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 1. Income of minor son Rahul
Income from company deposit includible in the 1,75,000
hands of Mr. Raghav as per section 64(1A)
Less: Exemption i.r.o income of minor child u/s (1,500) 1,73,500
10(32)
2. Income of minor daughter Riya
- Income of Rs. 20 Lacs of minor daughter Riya
(professional dancer) not includible in hands of
parent, since such income is earned on account Nil
of special skills.
- Interest received on deposit with Canara Bank
made out of amount earned on account of her
special talent is includible since interest income 20,000
arises out of deposit made & not on account of
her special skills.
1,92,000
- Gift of Rs. 45,000 received by her from friends Nil
of Mr. Raghav is not taxable u/s 56(2)(x), since (1500) 18,500
the aggregate amount from non-relatives does
not exceed Rs. 50,000
- Less: Exemption i.r.o. income of minor child u/s
10(32)
Total Income 14,92,000

Losses to be carried forward to AY 2022-23:

Loss from house property [Rs. 2.50,000 – Rs. 2,00,000] 50,000
Short term capital loss u/s 111A 10,00,000
Short term capital loss (other than above) [Rs. 6,00,000 – Rs. 4,00,000] 2,00,000

PC Note: STCL u/s 111A can also be set-off against LTCG u/s 112. In such a case, the losses
to be carried forward to AY 2022-23 would be as under:
Particulars Rs.
Loss from house property [RS. 2.50,000 – RS. 2,00,000] 50,000
Short term capital loss u/s 111A [RS. 10,00,000 – RS. 4,00,000] 6,00,000
Short term capital loss (other than above) 6,00,000

MAY 2020 No Direct Question was asked.

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 PRACTICE QUESTION BANK
PQ 1. Compute GTI of Mr. F for AY 2021-22 from the information given below: [ICAI – PM + ICAI Ex 1]
Particulars Rs.
Net income from house property 1,25,000
Income from business (before depreciation) 1,35,000
Short term capital gains on sales of shares 56,000
Long term capital loss from sale of property (brought forward from AY 2020-21) (90,000)
Income from tea business 1,20,000
Dividend from Indian companies carrying on agricultural operations 80,000
Current year depreciation 26,000
Brought forward business loss (loss incurred six years ago) (45,000)
Solution: Computation of GTI of Mr. F for AY 2021-22
Particulars Rs. Rs.
Income from house property 1,25,000
Income from business: Profits before depreciation 1,35,000
Less: Current year depreciation (26,000)
Less: Brought forward business loss (incurred 6 years ago) (45,000)
Total Income from Business 64,000
Income from tea business (40% is business income) [1,20,000 × 40 %] 48,000 1,12,000
Income from the capital gains: Short term capital gains 56,000
LTCL from property (cannot be set off against STCG & thus c/f) - 56,000
IFOS: Dividend from Indian company [Taxable w.e.f AY 2021-22] 80,000
Gross Total Income 3,73,000

PQ 2. Mr. Suraj Batra furnishes the following details for PY 2020-21:

Short term capital gain 1,40,000
Loss from speculative business (60,000)
Long term capital gain on sale of land 30,000
Long term capital loss on sale of shares (securities transaction tax not paid) 1,00,000
Income from business of textile (after allowing current year depreciation) 50,000
Income from activity of owning & maintaining race horses 15,000
Income from salary (computed) 1,00,000
Loss from house property (40,000)
Following are the carried forward losses:
(i) Losses from activity of owning & maintaining race horses-pertaining to AY 2018-19: Rs. 25,000.
(ii) Carry forward loss from business of textile Rs. 60,000- Loss pertains to AY 2013-14.
Compute gross total income of Mr. Suraj Batra for AY 2021-22. [NOV 11 + ICAI Ex Q3]

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Solution: Calculation of Gross Total Income of Mr. X for AY 2021-22
1. Income u/h Salary
Salary Income 1,00,000
Less: Loss from house property (40,000) 60,000
2. Income u/h Business/Profession
Income from Business of textile 50,000
Less: Loss b/f from textile business (AY 2013-14) (Balance loss of Rs. 10,000 (50,000) Nil
shall lapse)
3. Income u/h Capital Gains
Short Term Capital Gains 1,40,000
Long Term Capital Gains 30,000
Less: Long term loss (Balance of loss of 70,000 shall be carried forward) (30,000) 1,40,000
4. Income from Other Sources
Income from owning & maintaining race horses 15,000
Less: Loss b/f to be adjusted (AY 2018-19) (Balance b/f loss of Rs. 10,000 to (15,000) Nil
be c/f)
Gross Total Income 2,00,000

Note: Loss from speculative business of AY 2021-22: Rs. 60,000 to be c/f for 4 AYs.

PQ 3. Mr. Shyam (resident) provides the following information for PY 2020-21: [MAY 2017]
Particulars Rs.
Income from textile business 4,60,000
Income from speculation business 25,000
Loss from gambling/betting 30,000
Loss on maintenance of race horse 15,000
Eligible current year depreciation of textile business not adjusted in income given above 5,000
Unabsorbed depreciation of AY 2020-21 brought forward 10,000
Speculation business loss of AY 2020-21 30,000
Compute GTI of Mr. Shyam for AY 2021-22 & any other loss eligible for carry forward.
Solution: Computation of Gross Total Income of Mr. Shyam for AY 2021-22
Income from Textile Business 4,60,000
Less: Current year depreciation (5,000)
Less: Unabsorbed depreciation (10,000)
Income from Textile Business 4,45,000
Income from speculation business 25,000
Less: Brought forward speculation loss (Section 73) (25,000)
Income from Speculation business Nil
Gross Total Income 4,45,000
Note:
1. As per sec 73, Unadjusted Brought Forward Speculation loss of AY 2020-21 shall be carried forward of
5,000.

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2. Loss from Gambling can neither be set off nor carried forward to next year.
3. Loss on maintenance of race horse shall be allowed to be set off from income of maintenance of race
horse only & unadjusted loss of Rs. 15,000 shall be carried forward for 4 years as per section 74A.

PQ 4. Mr. X provides the following details for PY 2020-21 [NOV 2015]

1. Salary from XYZ Ltd. 50,000 p.m
2. Interest on FD with SBI for PY 2020-21 (Net) 72,000
3. Long Term Capital Loss of AY 2019-20 96,000
4. Long term Capital gain 75,000
5. Loss of minor son (Mr. X transferred his own house to his minor son without 90,000
adequate consideration few years back & minor son let it out & suffered loss)
6. Loss of his wife’s business (She carried business with funds Mr. X gifted to her) (2,00,000)
You are required to compute taxable income of Mr. X for AY 2021-22.
Solution: Computation of taxable income of Mr. X for AY 2021-22
1. Income u/h Salary 6,00,000
Less/ Loss u/h house property adjusted (loss of minor son) (90,000) 5,10,000
2. Income from House property Nil
3. Income u/h capital Gains
Long Term Capital Gain 75,000
Less: Loss from Business of his wife (75,000) Nil
4. Income from other sources
Interest Income from Fixed Deposit 80,000
Less: Loss from Business of his wife (Balance Loss of Rs. 45,000 of his wife is (80,000) Nil
to to be c/f)
Gross Total Income 5,10,000

Note:
1. X is a deemed owner of house property transferred to minor son. Thus, it will be considered as X’s Loss.
2. Loss from business of Mrs. X shall also be clubbed.
3. Brought Forward LTCL of AY 2019-20 to be carried forward Rs. 96,000.

PQ 5. Mr. X (aged 61 years) gives the following information for PY 2020-21 [NOV 2012]
Loss from profession 1,05,000
Capital loss on the sale of property - short term 55,000
Capital gains on sale of shares - long term 2,05,000
Loss in respect of self-occupied property 15,000
Loss in respect of let out property 30,000
Share of loss from firm 1,60,000
Income from card games 55,000
Winnings from lotteries 1,00,000
Loss from horse races in Mumbai 40,000
Medical insurance premium paid by cheque 18,000
Compute the total income of Mr. X for AY 2021-22.

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Solution:
1. Income from house property (45,000)
Less: Adjusted against Capital gains 45,000 Nil
2. Profits & gains of business & profession (1,05,000)
Less: Adjusted against Capital gains 1,05,000 Nil
3. Income u/h Capital Gains
Long term capital Gain 2,05,000
Less: Short term capital loss on sale of property (55,000)
Less: Loss from profession (1,05,000)
Less: Loss from House Property (45,000) Nil
4. Income u/h Other Sources
Winning from lottery 1,00,000
Income from card game 55,000 1,55,000
Gross Total Income 1,55,000
Less: Deduction u/s 80D (Deductions are not allowed from casual income) Nil
Total Income 1,55,000

Notes:
1. Share of loss from firm is not allowed to be set off by partner since share of profit from firm is exempt
in the hands of partner u/s 10(2A).
2. Loss from races can neither be set off nor be carried forward.

PQ 6. Mr. PC submits the following information for PY 2020-21:

1 Profit from Business A situated in Nagpur 2,80,000
2 Profit from Business B situated in Pune 1,25,000
3 Loss from Business C in Vegas (business is controlled from India but profits are not 85,000
received in India)
4 Unabsorbed depreciation of business C 45,000
5 Income from house property situated in India 30,000
6 Income from house property situated in USA (rent received in USA) 50,000
Find out the GTI of Mr. PC for AY 2021-22 if he is (a) ROR (b) RNOR & (c) NR.
Solution:
Particulars ROR RNOR NR
1. Business Income
Business A (Profit) 2,80,000 2,80,000 2,80,000
Business B (Profit) 1,25,000 1,25,000 1,25,000
Less: Business C (Loss); [controlled from India; received o/s India] (85,000) (85,000) Nil
Less: Unabsorbed depreciation of business C (45,000) (45,000) Nil
Total 2,75,000 2,75,000 4,05,000
2. Income from house property -
Property in India 30,000 30,000 30,000
Property in USA 50,000 - -
Gross total income 3,55,000 3,05,000 4,35,000

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PQ 7. Income from business = Rs. 1.5 lacs for AY 2021-22 without making following adjustments.
(i) Depreciation for the current year 30,000
(ii) Unabsorbed depreciation brought forward from AY 2020-21 15,000
(iii) Long-term capital loss for the current year 12,000
(iv) Unabsorbed business loss brought forward from AY 2011-12 50,000
(v) Unabsorbed speculation loss brought forward from AY 2019-20 15,000
(vi) Short-term capital loss for the current year 24,000
Compute total income for AY 2021-22 & the loss to be carried forward to next year.
Solution:
Business Income 1,50,000
Less: Depreciation (30,000)
Less: Unabsorbed depreciation b/f from AY 2020-21 (15,000)
Total income 1,05,000

Amount to be carried forward to AY 2022-23:

1. LTCL & STCL for AY 2022-23 can be set off against income u/h capital gains only. It can be carried
forward upto 8 years commencing from AY 2022-23.
2. Unabsorbed speculation loss b/f from AY 2019-20 will be c/f to next AY. It can be set-off against
speculation profit only.
Note: Unabsorbed business loss of Rs. 50,000 b/f from AY 2011-12 can neither be set-off against business
profits of AY 2021-22 nor can it be carried forward to next year because 8 years has already expired.

PQ 8. Mrs. X has income & losses as given below:

1. Income from Salary Rs. 5,00,000
2. Loss u/h House Property Rs. 10,00,000
3. Income u/h Business/Profession Rs. 12,00,000
4. Normal STCG Rs. 2,00,000
5. STCG u/s 111A Rs. 10,00,000
6. Casual Income Rs. 3,00,000
7. B/f Business loss for
PY 2010-11 Rs. 2,00,000
PY 2013-14 Rs. 6,00,000
PY 2014-15 Rs. 3,00,000
Compute tax liability of Mrs. X for AY 2021-22.
Solution: Option 1: Loss of house property is set off from normal income (salary)
1. Income u/h Salary 5,00,000
Less: Loss of house property (2,00,000) 3,00,000
2. Income u/h Business/Profession 12,00,000
Less: B/f business/profession loss PY 2013-14 (6,00,000)
Less: B/f business/profession loss PY 2014-15 (3,00,000) 3,00,000
3. Capital gain
(a) Short term capital gain u/s 111A 10,00,000

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 (b) Normal STCG 2,00,000 12,00,000
4. Income from other sources: Casual Income 3,00,000 3,00,000
Gross Total Income 21,00,000
Computation of Tax Liability
Tax on STCG u/s 111A Rs. 10,00,000 @ 15% 1,50,000
Tax on Casual income Rs. 3,00,000 @ 30% 90,000
Tax on Normal income Rs. 8,00,000 at slab rate 72,500
Tax before HEC + HEC @ 4% [3,12,500 + 4% HEC] 3,25,000

Option 2: Loss of house property is set off from STCG u/s 111 A
1. Income u/h Salary 5,00,000
2. Income u/h Business/Profession 12,00,000
Less: B/f business/profession loss PY 2013-14 (6,00,000)
Less: B/f business/profession loss PY 2014-15 (3,00,000) 3,00,000
3. Capital gains 2,00,000
(a) Short term capital gain u/s 111A 10,00,000
Less: loss of house property (2,00,000) 8,00,000
(b) Short term capital gain u/s 111A 8,00,000
4. Income from other sources: Casual Income 3,00,000
Gross Total Income 21,00,000
Less: Deduction u/s 80C to 80U (1,00,000)
Total Income 20,00,000
Computation of Tax Liability
Tax on STCG u/s 111A: Rs. 8,00,000 @ 15% 1,20,000
Tax on Casual income: Rs. 3,00,000 @ 30% 90,000
Tax on Normal income: Rs. 10,00,000 at slab rate 1,12,500
Tax before HEC + HEC @ 4% [3,22,500 + 4% HEC] 3,35,400

Conclusion: Option I is better.

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