1

CA Jasmeet Singh

Practice Session 6
Topic : Total Income & tax Computation

Computation of Total Income

Illustration 01 [PYQ Nov 2021]
The following is the Profit and Loss Account of Mr. Aditya, aged 58 years, a resident, for
the year ended 31.03.2025:
Particulars ₹ Particulars ₹
Rent 60,000 Gross Profit 1,85,000
Repair of car 3,000 Gift of cash from a friend
Personal expenses 5,000 (received on 15.09.2022) 25,000
Medical expenses 4,500 Sale of car 17,000
Salary 18,000 Interest on income-tax refund
Depreciation on car 3,000 3,000
Advance income-tax 1,500
Net Profit 1,35,000
2,30,000 2,30,000
Other information:
1. Aditya bought a car during the year for ₹ 20,000. He charged depreciation @ 15% on
the value of the car. The above car was sold during the year for ₹ 17,000. The use of
the car was 3/4,hfor business and 1/4'h for personal use.
2. Medical expenses were incurred for the treatment of Nikita, his wife.
3. Salary had been paid on account of car driver.
4. Rent includes arrears of rent from April, 21 to October 2024 @ ₹ 5,000 p.m., paid in
cash on 1.11.2024.
5. Mr. Aditya had also let out a house property at a monthly rent of ₹ 25,000. The
annual letting value is considered to be ₹ 2,50,000. The municipal taxes are ₹ 6,000,
out of which ₹ 3,000 are paid by the tenant and ₹ 3,000 are yet to be paid by Mr.
Aditya. Interest on loan taken for the house property is ₹ 20,000.
6. Mr. Aditya’s minor daughter received ₹ 75,000 from stage acting. Interest on
company deposits of Mr. Aditya’s daughter (deposit was made out of income from
stage acting) was ₹ 10,000.
7. Aditya incurred an expense of ₹ 50,000 on the medical treatment of his dependant
son, who has disability of more than 80%.
8. Aditya had taken a loan during the year 2024-25 for the education of his son, who is
pursuing B. Com in Delhi University. Interest paid on the same during the year was ₹
10,000.
Compute the total income of Mr. Aditya for the assessment year 2025-26.

Solution
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CA Jasmeet Singh

Computation of Total Income

Particulars ₹
1. Income from House Property (Refer Working Note 1) 1,90,000
2. Profits and Gains of Business or Profession (Refer Working Note 2) 1,44,250
3. Income from Other Sources (Refer Working Note 3) 11,500
3,45,750
Less: Deductions under Chapter Vl-A
U/s 80DD Expenses on Medical Treatment of Son (Severe 1,25,000
Disability)
U/s 80E Interest on Education Loan 10,000 (1,35,000)
Total Income 2,10,750
Working Note 1:
Computation of Income from House Property (Let out Property)
Particulars ₹
Gross Annual Value (25,000 x 12) 3,00,000
Less: Municipal Taxes paid (No deduction as actual payment Nil
not made by Assessee. Amount paid by Tenant is not
allowable as deduction.)
Net Annual Value 3,00,000
Less: Deductions u/s 24
30% of NAV (₹ 3,00,000 x 30%) 90,000
Interest on Borrowed Capital 20,000 (1,10,000)
Income from House Property 1,90,000
Working Note 2:
Computation of Profits and Gains of Business or Profession
Particulars ₹ ₹
Net Profit as per Profit & Loss Account - given 1,35,000
Add:
Arrears of Rent paid in Cash, disallowed u/s 40A(3)
(Apr to Oct = 7 x 5,000 pm.) 35,000
Repairs of Car - 1/4th not allowed being personal use = 1 /4th of 750
3,000
Personal expenses not allowable u/s 40(a)(iia) 5,000
Medical Expenses incurred for Spouse, being personal 4,500
expenses disallowed
Car Driver Salary - 1/4 of Car Driver Salary not allowed being 4,500
used for personal use
Depreciation on Car - considered separately 3,000
Advance Income Tax, not allowable u/s 40(a)(ii) 1,500 54,250
Less:
Gift from Friend - considered separately 25,000
Sale of Car - considered separately 17,000
Interest on Income Tax Refund - considered separately 3,000 45,000
Profits and Gains from Business or Profession 1,44,250
Working Note 3:
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CA Jasmeet Singh

Computation of Income from Other Sources

Particulars ₹ ₹
1. Interest on Income Tax Refund 3,000
2. Cash Gift from Friend (not taxable since amount is
less than ₹ 50,000) Nil
3. Income earned by Minor Daughter from Stage Acting
(i.e. by exercise of Skill, Talent, etc.), is assessable
only in her hands, and not clubbed in the Parent’s
hands. However, Interest on Bank Deposit shall be
included, i.e. clubbed in Parent’s hands u/s 64(1 A) 10,000
Less: Exemption u/s 10(32) (1,500) 8,500
Total Income Other Sources 11,500

Illustration 02 [PYQ Jan 2021]

Mr. Krishna (aged 65 years), a furniture manufacturer, reported a profit of ₹ 5,64,44,700
for the previous year 2024-25 after debiting/crediting the following items:
Debits:
1. ₹ 20,000 paid to a Gurudwara registered u/s 80G of the income-tax Act, in cash
where no cheques are accepted.
2. ₹ 48,000 contributed to a university approved and notified u/s 35(1)(ii) to be used for
scientific research.
3. Interest paid ₹ 1,67,000 on loan taken for purchase of E-vehicle on 15- 05-2023 from a
bank. The E-vehicle was purchased for the personal use of his wife.
4. His firm has purchased timber under a forest lease of ₹ 20,00,000 for the purpose of
business.
Credits:
1. Income of ₹ 4,00,000 from royalty on patent registered under the Patent Act
received from different resident clients. No TDS was needed to be deducted by any
of the clients.
2. He received ₹ 3,00,000 from a debtor which was written off as bad in the year 2018-
19. Amount due from the debtor (which was written off as bad) was ₹ 5,00,000, out
of which tax officer had only allowed ₹ 3,00,000 as deduction in computing the total
income for assessment year 2019- 20.
3. He sold some furniture to his brother for ₹ 7,00,000. The fair market value of such
furniture was ₹ 9,00,000.
Other information:
1. Depreciation in books of accounts is computed by applying the rates prescribed
under the Income tax laws.
2. Mr. Krishna purchased a new car of ₹ 12,00,000 on 1st September, 2024 and the same
was put to use in the business on the same day. No depreciation for the same has
been taken on car in the books of account.
3. Mr. Krishna had sold a house on 30th March, 2022 and deposited the long term
capital gains of ₹ 25,00,000 in capital gain account scheme by the due date of filing
return of income for that year. On 1sl March, 2025, he sold another house property in
which he resided for ₹ 1 crore. He earned a long term capital gain of ₹ 50,00,000 on
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CA Jasmeet Singh

sale of this property. On 25th March, 2025, he withdrew money out of his capital gain
account and invested ₹ 1 crore on construction of one house.
4. Mr. Krishna also made the following payments during the previous year 2024-25
• Lump-sum premium of ₹ 30,000 paid on 30th March, 2025 for the medical policy
taken for self and spouse. The policy shall be effective for five years i.e. from 30th
March, 2025 to 29th March, 2030.
• ₹ 8,000 paid in cash for preventive health check-up of self and spouse.
Compute the total income and tax payable by Mr. Krishna for the assessment year 2025-
26.

Solution
Computation of total income of Mr. Krishna for A.Y. 2025-26
Particulars ₹ ₹ ₹
1 Income from business or profession
Net profit as per profit and loss account 5,64,44,700
Add: Items of expenditure debited but
not allowable while computing business
income
1. Donation to Gurudwara in cash [not 20,000
allowable as deduction since it is not
incurred wholly and exclusively for
business purpose. Since the amount is
already debited, the same has to be
added back while computing business
income]
2. Interest on loan taken for purchase of 1,67,000
e-vehicle [Interest on loan for
purchase of e- vehicle for personal
purpose is not allowed as deduction
from business income since the same
is not incurred wholly and exclusively
for business purpose. Since it is
already debited, the same has to be
added back while computing business
income]
3. Sale of furniture to brother at less — 1,87,000
than FMV [The provisions of section
40A(2) are not applicable in case of
sale transaction, even if the same is to
a related party. Therefore, no
adjustment is necessary in respect of
difference of 7 2 lakh]
5,66,31,700
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CA Jasmeet Singh

Less: Items of income credited but not

taxable or taxable under any other head
of income
4. Royalty on patent [Not taxable as 4,00,000
business income since Mr, Krishna is
engaged in manufacturing business,
Since the amount is already credited
to profit and loss account, the same
has to be reduced while computing
business income]
5. Bad debt recovered [Actual bad debt 2,00,000 6,00,000
is 7 2 lakhs i.e.,₹ 5 lakhs less ₹ 3 lakh,
being the amount of bad debt
recovered, Bad debt written off is ₹ 3
lakhs, Bad debt recovered to the
extent of ₹ 1 lakh being excess of bad
debt recovered over actual bad debt
would be deemed to be business
income, Since the entire ₹ 3 lakhs is
credited to the profit and loss
account, ₹ 2 lakhs has to be reduced]
5,60,31,700
Less: Allowable expenditure
6. Depreciation on car [₹ 12 lakh x 30%, 3,60,000
since car is purchased between
23.8.2024 and 31.3. 2025 and put to use
for more than 180 days in the
P.Y.2024-25]
5,56,71,700
II Capital Gain
Long term capital gain on sale of house 50,00,000
property
Less: Exemption under section 54 [Since 50,00,000 —
whole amount of long term capital gain is
invested in construction of house within
the stipulated time limit.]
[Capital gain of ₹ 25 lakhs in capital gain
account scheme is not taxable in P.Y.
2024-25, since the same is withdrawn and
invested in construction of house within
the stipulated time limit. The remaining
amount of ₹ 75 lakhs invested in
construction of house is eligible for
exemption u/s 54, subject to a maximum
of ₹ 50 lakhs being long-term capital gain
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CA Jasmeet Singh

on sale of house property during the

P.Y.2024-25]
III Income from Other Sources
Royalty on patent [Taxable as “income 4,00,000
from other sources", since he is engaged
in business of manufacturing furniture]
Gross Total Income 5,60,71,700
Less: Deduction under Chapter Vl-A
Deduction under section 80D
— Mediclaim premium for self and
spouse [In case of lump sum premium for
medical policy, deduction is allowed for
equally for each relevant previous years.
[₹ 30,000/6 years, being relevant 5,000
previous years in which the insurance is
in force]
— Preventive health check up of self and 5,000 10,000
spouse [Preventive health check up paid
in cash allowed to the extent of ₹ 5,000]
Deduction under section 80EEB 1,50,000
[Since the loan is sanctioned by Bank
during the P.Y. 2023-24, interest on loan
taken for purchase of e-vehicle is allowed
to the extent of ₹ 1,50,000]
Deduction under section 80G —
[Donation of ₹ 20,000 to Gurudwara not
allowable as deduction since amount
exceeding ₹ 2,000 paid in cash]
Deduction under section 80RRB 3,00,000 4,60,000
[Deduction in respect of royalty on
patent registered under the Patent Act
subject to a maximum of ₹ 3 lakh]
Total income 5,56,11,700
Computation of tax liability of Mr. Krishna for A.Y. 2025-26
Particulars ₹ ₹
Tax on total income of ₹ 5,56,11,700
Upto ₹ 3,00,000 Nil
₹ 3,00,001 - ₹ 5,00,000 [@5% of ₹ 2 lakh] 10,000
₹ 5,00,001 - ₹ 10,00,000 [@20% of ₹ 5,00,000] 1,00,000
₹ 10,00,001-₹ 5,56,11,700 [@30% of ₹ 5,46,11,700] 1,63,83,510 1,64,93,510
Add: Surcharge @ 37%, since total income exceeds ₹ 61,02,598.7
5,00,00,000
2,25,96,108.7
Add: Health and education cess @4% 9,03,844.348
Total tax liability 2,34,99,953.048
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CA Jasmeet Singh

Less: TCS u/s 206C(1) @ 2.5% on ₹ 20 lakh i.e., timber 50,000

TCS u/s 206C(1F)@1%of ₹ 12 lakh i.e., sale of motor car 12,000
where consideration exceeds ₹ 10 lakh
TDS u/s 194-IA@1% of ₹ 1 crore i.e., sale of immovable 1,00,000 1,62,000
property where consideration is ₹ 50 lakh or more
Tax payable 2,33,37,953.048
Tax payable (rounded off) 2,33,37,950

Illustration 03 [PYQ July 2021]

Mr. Ashish, a resident individual, aged 43 years, provides professional services in the
field of interior decoration. His Income & Expenditure A/c for the year ended 31st March,
2025 is as under:
Expenditure ₹ Income ₹
To Employees' Remuneration By Consultancy 58,80,000
& Benefits 13,66,000 Charges
By Interest on Public
To Office & Administrative Provident Fund (PPF)
Exp. 3,14,000 Account 60,000
To General Expenses 75,000 By Interest on Savings
Bank Account 20,000
To Electricity Expenses 65,000
To Medical Expenses 80,000 By Interest on National
To Purchase of Furniture 48,000 Savings Certificates
To Depreciation 90,000 VIII Issue (for 3rd
year) 21,000
To Excess of income over
exp. 39,43,000
59,81,000 59,81,000
The following other information relates to financial year 2024-25:
(i) The expenses on Employees' Remuneration & Benefits includes :
(a) Family Planning expenditure of ₹20,000 incurred for the employees which was
revenue in nature. The same was paid through account payee cheque.
(b) Payment of salary of ₹25,000 per month to sister-in-law of Mr. Ashish, who was
in-charge of the Accounts & Receivables department. However, in comparison to
similar work profile, the reasonable salary at market rates is ₹20,000 per month.
(ii) Amount received by Mr. Ashish as Employees' Contribution to EPF for the month
of February, 2025 - ₹10,000 was also deposited after the due date under the
relevant Act relating to EPF.
(iii) Medical Expenses of ₹80,000 as appearing in the Income & Expenditure A/c was
expensed for the treatment of father of Mr. Ashish. His father was 72 years old
and was not covered by any health insurance policy. The said payment of
₹80,000 was made through account payee cheque.
(iv) General expenses as appearing in the Income & Expenditure A/c, includes a sum
of ₹25,000 paid to Ms. Anjaleen on 5th January, 2025 as commission for securing
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CA Jasmeet Singh

work from new clients. This payment was made to her without deduction of tax
at source.
(v) Written down value of the depreciable assets as on 1st April, 2024 were as
follows:
Professional Books ₹90,000
Computers ₹35,000
(vi) The new Furniture as appearing in the Income & Expenditure A/c. was purchased
on 31st August, 2024 and was put to use on the same day. The payment was made
as under:
• ₹ 18,000 paid in cash at the time of purchase of new furniture on 31/08/22.
• ₹ 19,000 paid by account payee cheque on 05/09/2024 as balance cost of new
furniture and
• ₹ 11,000 paid in cash on 31/08/24 to the transporter as freight charges for the new
furniture.
(vii) Mr. Ashish purchased a car on 02/04/2023 for ₹3,35,000 for personal use.
However, on 30/04/2024 he brought the said car for use in his profession. The fair
market value of the car as on 30/04/2024 was ₹2,50,000.
(viii) Mr. Ashish made a contribution of ₹ 1,00,000 in his PPF A/c on 31/01/2025.
(ix) The Gross Professional Receipts of Mr. Ashish for P.Y. 2023-24 was ₹ 52,00,000.
Compute the total income and tax liability of Mr. Ashish for A.Y. 2025-26, assuming that
he has not opted for payment of tax under section 115BAC. Ignore provisions relating to
AMT and under section 14A relating to disallowance of expenditure incurred in relation
to income not includible in total income.

Solution
Computation of total Income of Mr. Ashish for A.Y. 2025-26
Particulars ₹ ₹ ₹
I Income from business or profession
Excess of income over expenditure 39,43,000
Add: Items debited but not allowable while
computing business income
1. Family planning expenditure incurred 20,000
for employees [not allowable as
deduction since expenditure on family
planning for employees is allowed only
to a company assessee/not allowed in
case of individuals. Since the amount is
debited to Income and Expenditure
Account, the same has to be added back
for computing business income]
2. Salary payment to sister-in-law in excess Nil
of market rate [Any expenditure
incurred for which payment is made to a
relative, to the extent it is considered
unreasonable is disallowed. However,
sister-in-law is not included in the
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CA Jasmeet Singh

definition of “relative” for the purpose

of section 40A(2).
3. Therefore, no adjustment is required for
excess salary paid to Mr. Ashish’s sister-
in law]
4. Employees’ Contribution to EPF [Sum 10,000
received by the assessee from his
employees as contribution to EPF is
income of the employer. Deduction in
respect of such sum is allowed only if
such amount is credited to the
employee’s account on or before due
date under the relevant Act. Since, the
employees contribution to EPF for
February 2025 is deposited after the due
date under the relevant Act, deduction
would not be available]
5. Medical expenses for the treatment of 80,000
father [Not allowed as deduction since it
is a personal expenditure / not an
expenditure incurred for the purpose of
business of Mr. Ashish. Since the amount
is debited to Income and Expenditure
Account, the same has to be added back
for computing business income]
6. Commission to Ms. Anjaleen without 7,500
deduction of tax at source -[Mr. Ashish
would be liable to deduct tax at source
on commission since his gross receipts
from profession exceeded ₹50 lakhs
during F.Y. 2023 -24.Since commission
has been paid with out deduction of tax
at source, hence 30% of ₹25,000, being
commission paid without deducting tax
at source, would be disallowed under
section40(a)(ia) while computing the
business income of A.Y.2025-26]
7. Depreciation as per books of account 90,000
Purchase of Furniture [not allowable, 48.000 2,55,500
since it is a capital expenditure]
41,98,500
Less: Depreciation as per Income • tax Rules
1. On Professional Books [₹ 90,000 x 40%] 36,000
2. On Computers [₹ 35,000 x 40%] 14,000
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CA Jasmeet Singh

On Furniture [₹19,000 x 10%, since it has 1,900

been put to use for more than 180 days
during the year] [Any expenditure for
acquisition of any asset in respect of
which payment or aggregate of
payment made to a person, otherwise
than by an a/c payee cheque/ bank draft
or use of ECS or through prescribed
electronic mode, exceeds ₹ 10,000 in a
day, such expenditure would not form
part of actual cost of such asset. Hence,
₹ 18,000 and ₹ 11,000 paid on 31.8.2024 in
cash would not be included in the actual
cost of furniture]
On Car [3,35,000 x 15%] [Actual cost of 50,250 1,02,150
car would be the purchase price of the
car to Mr. Ashish, i.e.,₹ 3,35,000]
40,96,350
Less: Items of income credited but not
taxable or taxable under any other head of
income
3. Interest on Public Provident Fund 60,000
[Exempt]
4. Interest on Saving bank account [Taxable 20,000
under the head “ Income from other
sources”]
5. Interest on National Savings Certificates 21,000
VIII Issue (3rd Year) [Taxable under the
head “Income from other sources”]
1,01,000
39,95,350
II Income from Other sources
Interest on savings bank account 20,000
Interest on National Savings 21,000
Certificates VIII Issue (3rd Year) 41,000
40,36,350
Less: Deduction under Chapter Vl-A
Deduction under section 80C
Gross Total Income
Contribution to PPF 1,00,000
Interest on NSC (3rd Year) (Reinvested) 21,000 1,21,000
Deduction under section 80D
Medical expenses for the treatment of 50,000
father [Since Mr. Ashish’s father is a senior
citizen and not covered by any health
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CA Jasmeet Singh

insurance policy, payment for medical

expenditure by a mode other than cash
would be allowed as deduction to the extent
of ₹ 50,000]
Deduction under section 80TTA
Interest on savings bank account to the 10,000 1,81,000
extent of ₹ 10,000
Total income 38,55,350
Computation of tax liability of Mr. Ashish for A.Y. 2025-26
Particulars ₹ ₹
Tax on total income of ₹ 38,55,350
Upto ₹ 2,50,000 Nil
₹ 2,50,001 - ₹ 5,00,000[@5% of ₹ 2.50 lakh] 12,500
₹ 5,00,001 -₹ 10,00,000[@20% of ₹ 5 lakh] 1,00,000
₹ 10,00,001-₹ 38,55,350 [@30% of ₹ 28,55,350] 8,56,605
Add: Health and education cess @ 4% 9,69,105
38,764
Tax libality 10,07,869
Tax liability (rounded off) 10,07,870

Illustration 04 [PYQ Dec 2021]

Mr. Shivansh, a resident and ordinarily resident aged 61 years, is engaged in the
business of manufacturing of motor parts. He is subject to tax audit under section 44AB
of Income Tax Act, 1961. He has provided following information:
Profit & Loss Account for the year ended 31s1 March, 2025
Particulars (₹) Particulars (₹)
To Administrative 4,30,000 By Gross Profit 58,30,000
expenses By Profit on sale of 2,00,000
To Salaries & wages 20,00,000 asset of scientific
To Interest on loans 7,50,000 research
To Depreciation 6,17,000
To Professional fees 2,70,000 By Winning from lottery 31,500
To Rent, rates & taxes 2,80,000 (Net of TDS @30%)
To Travelling & conveyance 1,40,000
To Net Profit 15,74,500
Total 60,61,500 Total 60,61,500
Explanatory information:
1. Opening and closing stock of finished goods were undervalued by 10%. Opening
stock of ₹ 4,50,000 and Closing stock of ₹ 5,58,000 was shown.
2. Salaries & wages include following items :
(a) Contributed 20% of basic salary in National Pension Scheme referred to section
80CCD regarding salary paid to an employee Mr. Ganesh who has withdrawn
basic salary of ₹ 3,00,000, and Dearness allowance is 40% of basic salary. 50% of
Dearness allowance forms part of the salary.
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CA Jasmeet Singh

(b) Some of the employees opted for retirement under the voluntary retirement
scheme; a sum of ₹ 2,40,000 was paid to them on 1st January, 2025.
3. Interest on loan includes interest paid @ 15% per annum on loan of ₹ 12,00,000 which
was taken from State Bank of India on 01.05.2023 for purchase of new electric car of
₹ 15,00,000. The car is used for personal purpose.
4. Depreciation allowable as per Income Tax Rules, 1962 is ₹ 4,50,000 but during the
calculation of such depreciation following addition was not considered:
Motor car purchased for ₹ 3,00,000 for supply of finished goods to dealers on 25-08-
2024.
5. An asset was purchased for ₹ 6,00,000 on 17-11-23 for conducting scientific research
and the deduction was claimed under section 35 of the Income-tax Act, 1961. This
asset was sold on 05-09-2024 for a consideration of ₹ 8,00,000.
Other information:
A plot of Industrial land which was used by Mr. Shivansh for business purpose for last 10
years was compulsorily acquired by Central Government on 07.05.2024. The
compensation of ₹ 12,00,000 was received on 27,02.2025. Such property was purchased
by him on 08.08.2005 for ₹ 2,00,000. He has purchased another plot of industrial land
on 21.04.2025 for ₹ 6,00,000. Government has also paid ₹ 54,000 as interest on such
compensation on 28.03.2025.
Cost Inflation Indices: F.Y. 2024-25 : 363, F.Y. 2005-06: 117 Compute the total income and
tax liability of Mr. Shivansh for the assessment year 2025-26 assuming that he has not
opted provisions of section 115BAC. Ignore Provisions relating to AMT.

Solution
Computation of total income of Mr, Shivansh for A.Y. 2025-26
Particulars ₹ ₹ ₹
I. Income from business or profession
Net Profit 15,74,500
Add: Items debited but not allowable/item
not credited but taxable while computing
business income:
— Employer’s contribution to NPS in 24,000
excess of 10% of salary - Employer’s
contribution to the extent of 10% of salary
i.e., basic salary plus dearness allowance
forming part of salary would be allowed as
deduction. Thus, excess contribution i.e., ₹
24,000 [₹ 60,000, being 20% of ₹ 3,00,000
less ₹ 36,000 being 10% of ₹ 3,60,000 ₹
3,00,000 + 20% of ₹ 3,00,000] has to be
added back.
— VRS expenditure-1/5lh of expenditure on 1,92,000
voluntary retirement scheme is allowable
over a period of five years u/s 35DDA. Since
whole amount of expenditure is debited to
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CA Jasmeet Singh

Profit and Loss A/c, 4/5th has to be added

back [₹ 2,40,000 x 4/5].
— Interest on loan taken for purchase of 1,65,000
electric car used for personal purpose not
allowable as deduction while computing
business income as being expense of
personal nature. Thus, ₹ 1,65,000 [₹
12,00,000 x 15% x 11/12] has to be added
back, since the same forms part of interest
on loan debited to profit and loss account.
— Sale proceeds of asset acquired for 6,00,000
conducting scientific research taxable as
business income under section 41 (3) in the
year of sale to the extent of lower of t
6,00,000 (being the deduction allowed u/s
35) and ₹ 8,00,000 being the excess of sale
proceeds and deduction allowed u/s 35 i.e.,
(₹ 8,00,000 + ₹ 6,00,000) over the capital
expenditure incurred of ₹ 6,00,000
— Undervaluation of stock [(₹ 5,58,000 - ₹ 12,000
4,50,000) x 10/90]
Note: Alternatively, undervaluation of
closing stock i.e., ₹ 62,000 can be added
back and under valuation of opening stock
i.e., ₹ 50,000 can be reduced from net
profits.
— Depreciation as per books of A/c 6,17,000
16,10,000
31,84,500
Less: Depreciation as per Income-tax Rules 4,50,000
Depreciation on Motor car purchased for 45,000 4,95,000
supply of finished goods [₹3,00,000x 15%]
26,89,500
Less: Items of income credited to profit
and loss account but not taxable or taxable
under any other head of income:
— Profit on sale of asset of scientific 2,00,000
research [Taxable under the head “Capital
Gains”]
— Winning from lottery [Taxable under 31,500 2,31,500
the head “Income from other sources”]
24,58,000
II. Capital Gain Short-term capital gains
Sale of asset acquired for conducting
scientific research:
 14
CA Jasmeet Singh

Sales consideration 8,00,000

Less: Cost of acquisition 6,00,000
Short- term capital gain Long-term capital 2,00,000
gains
Compulsory acquisition of industrial plot
by the Central Government taxable as per
section 45(5):
Compensation received 12,00,000
Less: Indexed cost of acquisition 6,20,513
[₹2,00,000 x 363/117]
Long-term capital gain [since such plot is 5,79,487
held for more than 24 months]
Less: Exemption u/s 54D
— Acquisition of industrial plot within 3 6,00,000 - 2,00,000
years
III. Income from other sources
Winning from lottery [₹ 31,500 x 100/70] 45,000
Interest on enhanced compensation 54,000
Less: 50% of enhanced compensation 27,000 27,000 72,000
Gross Total Income 27,30,000
Less: Deduction under Chapter Vl-A
Deduction under section 80EEB
Interest on loan taken for purchase of 1,50,000
electric vehicle allowable as deduction to
the extent of
Total Income (rounded of) 25,80,000
Computation of tax liability of Mr. Shivansh for A.Y.2025-26
Particulars ₹ ₹
Tax on winning from lottery @30% of ₹ 45,000 13,500
Tax on total income (excluding winning from lottery) of ₹
25,35,000
Upto ₹ 3,00,000 [since Mr. Shivansh, a senior citizen, he is Nil
eligible for higher exemption limit]
₹ 3,00,001 - ₹ 5,00,000[@5% of ₹ 2.00 lakh] 10,000
₹ 5,00,001 -₹ 10,00,000[@20% of ₹ 5 lakh] 1,00,000
₹ 10,00,001 - ₹ 25,35,000 [@30% of ₹ 15,35,000] 4,60,500
5,70,500
5,83,500
Add: Health and education cess @4% 23,340
Tax liability 6,06,840
Tax liability (rounded off) 6,06,840

Illustration 05 [PYQ May 2022]

From the following particulars furnished by Mr. Suresh, aged 53 years, a resident Indian
for the previous year ended March 31, 2025, you are requested to compute his total
 15
CA Jasmeet Singh

income and tax Payable for the Assessment Year 2025-26. (Assuming he do not opt for
the Section 115BAC):
(i) He sold his vacant land on 09.12.2024 for ₹ 15 lakhs. The Stamp Duty Value (SDV)
of land at the time of transfer was ₹ 19 lakhs. The fair market value of the land as
on 1st April, 2001 was ₹ 6 lakhs (SDV is ₹ 5,00,000). This land was acquired by him
on 5.08.1996 for ₹ 3.40 lakhs. He had incurred registration expenses of ₹ 15,000
at that time. The cost of inflation index for the year 2024-25 and 2001 -02 are 363
and 100 respectively.
(ii) He owns an industrial undertaking established in a Special Economic Zone (SEZ)
and which had commenced operation during the financial year 2022-23. Total
turnover of the undertaking was ₹ 300 lakhs, which includes ₹ 120 lakhs from
export turnover. This industrial undertaking fulfils all the conditions of Section
10AA of the Income-tax Act, 1961. Profit from this industrial undertaking is ₹ 30
lakhs.
(iii) He has income of ₹ 10,000 from crossword puzzles and ₹ 15,000 gross interest
from bank fixed deposit.
(iv) Tuition fees of ₹ 36,000 for his three children to a school. The fees being ₹ 12,000
p.a. per child.

Solution
Computation of Total Income and Tax Payable by Mr. Suresh for A.Y. 2025 -26
Particulars Amount Amount
(₹) (₹)
Profits and gains from business or profession
Profit from SEZ undertaking 30,00,000
Capital Gains
Long term capital gain on sale of-vacant land [since land
held for a period of more than 24 months, it is long-term
capital asset]
As per section 50C, Full value of consideration would be 19,00,000
stamp duty value since it exceeds 110% of actual sale
consideration
Less: cost of acquisition 5,00,000
Cost of acquisition, being higher of 14,00,000
- Actual cost (₹ 3,40,000 + ₹ 15,000) ₹ 3,55,000
- lower of FMV of ₹ 6,00,000 and ₹ 5,00,000
stamp duty value of ₹ 5,00,000 as on 1.4.2001
Income from other sources
Income from crossword puzzles 10,000
Interest on fixed deposit 15,000
25,000
Gross Total Income 44,25,000
Less: Deductions under Chapter Vl-A
Under section 80C - Tuition fees of two children 24,000
Less: Deduction under section 10AA 12,00,000
 16
CA Jasmeet Singh

(₹ 30,00,000 x 120 lakhs/300 lakhs) x 100 %, being 3rd year of

operation
Total Income 32,01,000
Computation of Tax payable on total income under the
regular provisions of the Income-tax Act, 1961
Tax on LTCG @ 12.5% of ₹ 14,00,000 1,75,000
Tax on income from crossword puzzles @30% of ₹ 10,000 3,000
Tax on remaining amount of ₹ 17,91,000 3,49,800
[₹ 2,37,300 (30% of ₹ 7,91,000) + ₹ 1,12,500]
5,27,800
Add: Health and education cess @4% 21,112
Tax Payable under the regular provisions of the Act 5,48,912
Tax Payable under the regular provisions of the Act 5,48,910
(rounded off)
Computation of Adjusted Total Income and Alternate Min mum Tax (AMT) payable
Particulars Amount (₹)
Total Income computed under the regular provisions of the Act 32,01,000
Add: Deduction u/s 10AA 12,00,000
Adjusted Total Income 44,01,000
Alternate Minimum Tax@18.5% 8,14,185
Add: Health and Education cess @4% 32,567.4
AMT 8,46,752.4
AMT (rounded off) 8,56,750
Since the regular income-tax payable is less than the AMT payable, the adjusted total
income of ₹ 44,01,000 shall be deemed as the total income and tax is leviable@18.5%
thereof plus cess@4%. Therefore, his tax liability would be ₹ 8,56,750.
However, he would be entitled to AMT credit of ₹ 3,07,840 (₹ 8,56,750 - ₹5,48,910)

Illustration 06 [PYQ Nov 2022]

Dr. Rohan, 82 years old resident surgeon, having his Nursing Home in Mumbai, gives the
following particulars for the year ended on 31.03.2025.
Receipts ₹ Payments ₹
Op. Balance b/d 1,25,000 Salary to Staff 3,50,000
Fees from visits to other 5,85,000 Taxes & Insurance 26,000
hospitals (net)
Fees for March, 2024 Entertainment 1,10,000
received in April, 2024 Expenses
IPD 40,000 OPD 45,000 85,000 Purchase of Television 48,000
Dividend from shares (net) 18,900 Gift to daughter-in-law 60,000
Fees received during the 10,25,000 Interest on loan for 65,000
year repairs to property
Gifts received from 45,000 Personal medical 70,000
relatives of patients expenses
 17
CA Jasmeet Singh

Honorarium for painting 22,500 Deposits in PPF A/c. 55,000

services in Jai Hind Art
School (net)
Income Tax Refund 12,100 Nursing Home expenses 3,75,000
(Including interest ₹ 1,500)
Prof, fees paid for 1,20,000
consulting services
Purchase of furniture at 1,35,000
home
Personal Expenses 3,00,000
Balance c/f 2,04,500
19,18,500 19,18,500
Other Information :
(a) He keeps his books of accounts on cash basis and has not opted for the provisions of
section 44ADA.
(b) Salary includes ₹ 60,000 paid to his sister who is a qualified nurse paid in cash.
(c) Entertainment expenses includes ₹ 25,000 for dinner to doctors in a five star hotel.
(d) Interest on loan for repairs to property includes ₹ 40,000 for his residential
property.
(e) His daughter in law earned income of ₹ 10,000 from the amount received as gift.
(f) Fixed Assets values as on 01.04.2022 are as under :-
Nursing Home Equipment's ₹ 2,20,000, Medical Books (incl. annual publications ₹
10,000) ₹ 35,000, Laptop ₹ 40,000.
(g) Television purchased for nursing home purpose on 21.09.2024 is put to use on
03.10.2024.
(h) He has donated ₹ 10,000 towards PM CARES Fund on 15.08.2024.
You are required to:
Compute the total income and tax payable by him for A.Y. 2025-26 as per the regular
provisions of the Income-tax Act, 1961. Assume that he has not opted for section 115
BAC.
What will be his total income and tax payable, if he opts for the provisions of section
44ADA Will it be more beneficial for him to adopt 44ADA ?

Solution
Computation of total income and tax payable by Dr. Rohan for A.Y. 2025-26 as per the
regular provisions of the Act:
Particulars ₹ ₹ ₹
I Income from house property
Annual value [Assuming residential property Nil
self-occupied]
Less: Deduction under section 24(b)
Interest on loan for repairs to property, ₹ 30,000
40,000, restricted to
Loss from self-occupied property (30,000)
 18
CA Jasmeet Singh

[Can be set-off against Profits and gains of

business or profession or Income from other
sources]
II Profits and gains from business and profession
Gross Receipts
Fees from visits to other hospitals [5,85,000/ 6,50,000
90%]
Fees for March 2024 received in April 2024 85,000
[Fees for March 2024 is chargeable to tax
during P.Y. 2024-25, since Dr. Rohan is following
cash system of accounting] [40,000 + 45,000]
Fees received during the year 10,25,000 17,60,000
Less: Permissible deductions
Salary to staff [Salary paid to his sister who is a 2,90,000
qualified nurse in cash disallowed under
section 40A(3), since such cash payment
exceeds ₹ 10,000] [₹ 3,50,000 - ₹ 60,000]
Taxes and insurance 26,000
Entertainment expenses, including dinner to 1,10,000
doctors [Assuming that the entire sum was
incurred wholly and exclusively for business
purpose]
Interest on loan for repair to property [to the 25,000
extent relating to business] = ₹ 65,000 - ₹
40,000, relating to residential property
Nursing home expenses 3,75,000
Professional fees paid for consulting services 1,20,000 9,46,000
8,14,000
Less: Depreciation under section 32
Nursing home equipment's [2,20,000 x 15%] 33,000
Note: Nursing home equipment would be
eligible for depreciation @15%, being the
general rate for plant and machinery. The main
solution has, accordingly, been worked out
applying 15%. However, if such equipment are in
the nature of life saving medical equipment,
they would be eligible for higher depreciation
@40%. If 40% rate is applied, depreciation
would be ₹ 88,000
Medical books [35,000 x 40%] 14,000
Laptop [40,000 x 40%] 16,000
Television [48,000 x 15%, since the television is 7,200 70,200
put to use for 180 days during the P.Y. 2024-25]
Note: Television would be eligible for
depreciation @15%. However, television
 19
CA Jasmeet Singh

connected to laptop or other medical

equipment and used by Doctor may be
classified as plant and machinery eligible for
depreciation @40%. If 40% rate is applied,
depreciation for TV would be ₹ 19,200.
Also, it is possible to take a view that Television 7,43,800
is furniture and fixtures qualifying for
depreciation @10%. If 10% rate is applied,
depreciation for TV would be ₹ 4,800.
III Income from Other Sources
Dividend from shares [18,900/90%] 21,000
Honorarium for painting services in Jai Hind Art 25,000
School [22,500/90%]
Honorarium (Alternative without TDS) - 22,500
Note: In the question, it is mentioned that Dr.
Rohan has received Honorarium for painting
services in Jai Hind Art School (Net) of ₹ 22,500.
Since the threshold limit for deducting tax at
source under section 194J is ₹ 30,000, there is
no requirement to deduct tax at source on such
income. Accordingly, question can be answered
without grossing up the amount of honorarium
of ₹ 22,500. ,
Interest on income-tax refund 1,500
Gift received from relative of patients [exempt Nil
u/s 56(2) (x)]
Income earned from gift to daughter in law 10,000 57,500
[Income earned by daughter in law from asset
gifted without consideration to her by Dr.
Rohan is includible in the hands of Dr. Rohan]
Gross Total Income 7,71,300
Less: Deduction under Chapter Vl-A
Deduction under section 80C
Deposits in PPF 55,000
Deduction under section 80D
Medical expenses to the extent of ₹ 50,000 50,000
since Dr. Rohan is a senior citizen (assuming he
has not taken any medical insurance policy)
Deduction under section 80G
Donation towards PM CARES Fund 10,000 1,15,000
Total Income 6,56,300
Tax Payable
Upto ₹ 5,00,000 [since Dr. Rohan is aged 80 Nil
years or above]
₹ 5,00,001 to ₹ 6,56,300 [₹ 1,56,300 @20%] 31,260 31,260
 20
CA Jasmeet Singh

Add: HEC@4% 1,250

Tax liability 32,510
Less: TDS on fees from visits to other hospitals 65,000
TDS on dividend from shares 2,100
TDS on honorarium for painting services in Jai 2,500 69,600
Hind art School
Tax Refundable 37,090

Computation of total income and tax payable by Dr. Rohan for A.Y. 2025-26 if he opts for
section 44ADA
Particulars ₹ ₹
I Income from house property
Loss from self occupied property (30,000)
II Income from business or profession
Income from profession [17,60,000 x 50%]
[No other expenditure or depreciation is allowed] 8,80,000
III Income from Other Sources 57,500
Gross Total Income 9,07,500
Less: Deduction under Chapter Vl-A 1,15,000
Total Income 7,92,500
Tax Payable
Upto ₹ 5,00,000 Nil
₹ 5,00,001 to ₹ 7,92,500 [2,92,500@20%] 58,500 58,500
Add: HEC@4% 2,340
Tax liability 60,840
Less: TDS 69,600
Tax Refundable 8,760
Since tax refundable in case Dr. Rohan opts for the provisions of section 44ADA is
lower than the regular provisions of the Act, it would be beneficial for him not to
opt for section 44ADA and get his books of account audited and declare income
under the regular provisions.

Illustration 07 [PYQ May 2023]

Mr. Bhasin, a resident individual, aged 52 years, provides management consultancy
services to various corporate and non-corporate clients. His Income & Expenditure A/c
for the year ended 31st March, 2025 is as under:
Expenditure Amount Income Amount
(₹) (₹)
To Employees' 15,00,000 By Gross Receipts from Profession 60,60,000
Remuneration (last year ₹ 75,00,000) (No TDS was
deducted from any of the receipts)
To Office & 5,00,000 By Interest on Savings Bank 25,000
Administrative Account
Expenses
 21
CA Jasmeet Singh

To Rates and Taxes 15,000 By Winnings from Lottery (Net of 99,500

cost of lottery tickets of ₹ 500/-)
To Interest Expenses 80,000 By Rent Received 2,40,000
To Office Rent 2,40,000
To Insurance 72,000
Premium
To Professional Fees 2,00,000
To Depreciation on 1,20,000
Computers
To Excess of Income 36,97,500
over Expenditure
64,24,500 64,24,500
The following details relates to F.Y.2024-25:
(i) Employees' Remuneration includes a sum of ₹ 3,00,000 paid to his wife, Mrs. Beena
who is working as a manager in his office. She does not have any technical or
professional qualification or experience required for the job. The payment of salary
was as per market rates in comparison to similar work profile.
(ii) Mr. Bhasin owns a big house with 2 independent units. Unit -1 (with 50% floor area)
has been let out for residential purposes at a monthly rent of ₹ 20,000 for the entire
year. Unit -2 (with the balance 50% of the floor area) is used by Mr. Bhasin as his
residence-cum-office. Other particulars of the house are:
Municipal Valuation- ₹ 3,60,000 p.a.
Fair Rent - ₹ 4,20,000 p.a.
Standard Rent under Rent Control Act - ₹ 4,00,000 p.a.
(iii) Rates and Taxes include a sum of ₹ 10,000 paid as municipal taxes of the house.
(iv) Interest expenses represent interest on capital borrowed from a nationalised bank
for the construction of the house. The construction was completed in F.Y.2010-11.
Neither the loan nor the interest was paid till the due date of filing the return of
income.
(v) Based on the actual rent received for Unit-1, Mr. Bhasin has debited ₹ 2,40,000 as
notional rent for Unit-2 which is used for his profession.
(vi) The expenses on insurance premium of ₹ 72,000 represents lump-sum health
insurance premium paid by Mr. Bhasin for 3 years effective from 1st July, 2024 to 30th
June, 2027 for himself, his spouse and two dependent children. The said insurance
premium was paid through account payee cheque.
(vii) The expenses on professional fees paid includes a sum of ₹ 1,00,000 paid to a Mr.
Raunak, an Indian resident on which no tax was deducted at source.
(viii) There was only one block containing computers which came into existence only
on 2nd April, 2024 when new laptops (for ₹ 1,60,000), printers and scanners (for ₹
40,000) were purchased. He charged depreciation @ 60% on the entire cost of ₹
2,00,000 and debited the amount to Income & Expenditure A/c.
(ix)Mr. Bhasin has also taken a loan of ₹ 5,00,000 from a nationalised bank for higher
education of his son. During F.Y.2024-25, he repaid principal of ₹ 75,000 along with
interest of ₹ 40,000. This amount is not reflected in Income and Expenditure
Account.
 22
CA Jasmeet Singh

You are required to compute the total income under proper heads of income of Mr.
Bhasin for A.Y.2025-26 under regular provisions of Income-tax Act 1961, assuming that
he has not opted to pay tax under Section 115BAC. Also calculate the total tax payable
by him.

Solution
Computation of total income and tax payable by Mr. Bhasin for A.Y. 2025-26
Particulars ₹ ₹ ₹
I Income from Salaries
Salary of Mrs. Beena [Remuneration paid 3,00,000
by Mr. Bhasin to his wife Mrs. Beena who
is employed as a manager in his office
would be included in his hands, since
Mrs. Beena does not have any technical
or professional qualification or
experience required for the job]
Less: Standard deduction u/s 16(ia) 50.000 2,50,000
II Income from house property
Let out portion (Unit 1 - 50% area)
Gross Annual Value [Higher of expected 2,40,000
rent of ₹ 2,00,000 and actual rent of ₹
2,40,000 (₹ 20,000 x 12)]
[Expected rent is higher of municipal
value of ₹ 1,80,000 (3,60,000 x 50%) and
fair rent of ₹ 2,10,000 (₹ 4,20,000 x 50%),
restricted to standard rent of ₹ 2,00,000
(₹ 4,00,000 x 50%)]
Less: Municipal taxes paid for let out 5,000
portion (₹ 10,000 x 50%)
Net Annual Value (NAV) 2,35,000
Less: Deduction under section 24
(a) 30% of NAV 70,500
(b) Interest on capital borrowed for 40,000
construction of house relating to let out
portion (80,000 x 50%), (allowed on
accrual basis)
Income from let out portion 1,24,500
Self-occupied (Unit 2 - 25%)
[Since Unit 2 representing 50% of the
floor area is used for residence as well as
business purpose, it is assumed that it is
equally used for residence and business
purpose]
Gross Annual Value Nil
 23
CA Jasmeet Singh

Less: Municipal taxes [not allowed for Nil

self- occupied property]
Net Annual Value Nil
Less: Deduction under section 24(b)
Interest on loan for construction of
house, ₹80,000 x 50% x1/2 (allowable on
accrual basis)
Loss from self-occupied portion (20,000)
[Loss from self-occupied portion can be 1,04,500
set off against income from let out
portion]
III Profits and gains from business and
profession
Excess of income over expenditure
Add: Expenses debited to Income & 36,97,500
Expenditure A/c but not allowable as
deduction
Remuneration paid to his wife Mrs. —
Beena [As per section 40A(2)
remuneration paid to Mrs. Beena is
allowed, since it is as per market rates]
Municipal taxes attributable to let out 7,500 -
and self- occupied portions not allowable
[₹ 10,000 x 75%]
Interest on capital borrowed for 60,000
construction of house attributable to let
out and self- occupied portion not
allowable [₹ 80,000 x 75%]
Interest on capital borrowed from bank 20,000
for construction of house attributable to
business portion i.e., 25% of ₹80,000 [not
allowable, since it is not paid on or
before due date of filing return of
income by virtue of section 43B]
Notional rent for Unit 2 used for business 2,40,000
or profession [not allowable under
section 30, since Mr. Bhasin himself is the
owner of the property]
Insurance premium [Personal 72,000
expenditure not allowable]
Professional fees to Mr. Raunak without 30,000
deducting TDS [₹ 1,00,000 x 30%] [Mr.
Bhasin is required to deduct TDS on
professional fees payment to Mr. Raunak
since his gross receipts from profession
 24
CA Jasmeet Singh

exceeds ₹ 50 lakhs during the P.Y. 2023-

24. 30% of the sum paid to Mr. Raunak,
resident without deducting tax to be
disallowed in P.Y. 2024-25]
Depreciation as per books 1,20,000 5,49,500
42,47,000
Less: Income credited to Income &
Expenditure A/c but not taxable as
business income
Interest on savings bank account [taxable 25,000
under the head “Income from other
sources”]
Winnings from lottery [taxable under the 99,500
head “Income from other sources”]
Rent received [taxable under the head 2,40,000 3,64,500
“Income from house property”]
38,82,500
Less: Depreciation allowable [2,00,000 (₹ 80,000
1,60,000, being new laptops + ₹ 40,000,
being printers) x 40%, i.e., 64,000+16,000
as it was put to use for more than 180
days in the P.Y. 2024-25. Printers and
scanners for ₹ 40,000 are eligible for
higher depreciation of 40%]
IV Income from Other Sources 38,02,500
Interest on savings bank account 25,000
Winnings from Lottery [No expenditure 1,00,000
or allowance is allowed from lottery
income]
1,25,000
Gross Total Income 42,82,000
Less: Deduction under Chapter Vl-A
Deduction under section 80D
Medical insurance premium [₹ 72,000 x 18,000
1/4, being the previous years in which
insurance would be in force] [allowable
for self, spouse and dependent children]
Deduction under section 80E
Interest on loan taken from a 40,000
nationalised bank for higher education of
son
Deduction under section 80TTA
Interest on saving bank account to the 10,000 68,000
extent of
Total Income 42,14,000
 25
CA Jasmeet Singh

Tax Payable
On lottery income [30% of ₹ 1,00,000] 30,000
On other income of ₹ 41,14,000
Upto ₹ 2,50,000 Nil
₹ 2,50,000 @5% [₹ 2,50,000 - ₹ 5,00,000 12,500
₹ 5,00,000 @20% [₹ 5,00,000 - ₹10,00,000] 1,00,000
₹ 31,14,000 @30% [₹ 10,00,000 - 9,34,200 10,46,700 10,76,700
₹41,14,000]
Less: HEC@4% 43,068
Tax liability 11,19,768
Less: TDS on lottery winnings @30% u/s 30,000
194B
Tax payable 10,89,768
Tax payable (rounded off) 10,89,770

Illustration 08 [RTP Sep 2024]

Mr. Anand, a resident Indian aged 45 years, has provided you the following information
for the previous year ended on 31.03.2025
(i) He owns an industrial undertaking established in a SEZ and which had commenced
operation during the financial year 2019-20. Total turnover of the undertaking was ₹
200 lakhs. Export turnover received in India in convertible foreign exchange on or
before 30.9.2025 is ₹ 120 lakhs. This industrial undertaking fulfills all the conditions
of section 10AA of the Income-tax Act, 1961. Profit from this industry is ₹ 35 lakhs.

(ii) Mr. Anand sold equity shares of different Indian companies on 14th March, 2025:
Name Sale value Purchase price Acquired No. of FMV as
(per share) (per on shares on 31.1.2018
share)
Sam Ltd. ₹ 150 ₹ 120 (STT 2nd Feb, 2000 -
paid at 2025
acquisition)
Jam Ltd. ₹ 100 ₹ 72 (STT 16th April, 1250 50
paid at 2017
acquisition)
CII – F.Y. 2017-18: 272; F.Y. 2024-25: 363
Sale proceeds were subject to brokerage of 0.1% and securities transaction tax of 0.125%
on the gross consideration.
(iii) He made payment of ₹ 90,000 on 1.9.2024 vide cheque towards medical insurance as
lumpsum premium for himself and his wife till 31.8.2028. He also made cash
payment of ₹ 7,500 towards preventive health checkup for himself and his wife.
(iv) He received royalty of ₹ 2,88,000 from abroad for a book authored by him in the
nature of artistic. The rate of royalty as 16% of value of books and expenditure made
for earning this royalty was ₹ 40,000. The amount remitted to India till 30th
September, 2025 is ₹ 2,50,000.
 26
CA Jasmeet Singh

(v) He received income-tax refund of ₹15,750 (including interest ₹ 1,750) relating to

the assessment year 2024-25.
(vi) He occupies ground floor of his residential building and has let out first floor for
residential use for a monthly rent of ₹ 15,000. He has paid municipal taxes of ₹
30,000 for the current financial year. Both floors are of equal size. He has taken a
loan from bank of ₹ 50 lakhs for the construction of this property in 2020 and has
repaid ₹ 2,05,000 (including interest ₹1,00,000) during the year 2024-25.
(vii) Mr. Anand deposited ₹ 1,30,000 in Public Provident Fund and ₹ 80,000 in 5 years
term deposit in the name of his minor son, Aman.
You are required to compute the total income and tax liability of Mr. Anand under
section 115BAC as well as under normal provisions for the A.Y. 2025-26. Ignore AMT
provisions.

Solution
Computation of total income and tax liability of Mr. Anand for
A.Y. 2025-26 under section 115BAC
Particulars ₹ ₹ ₹
I. Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received is
taken as GAV, in the absence of other 1,80,000
information]

Less: Municipal taxes paid by him in 15,000

the P.Y. 2024-25 pertaining to let out
portion [₹ 30,000/2]
Net Annual Value (NAV) 1,65,000
Less: Deduction u/s 24
(a) 30% of ₹ 1,65,000 49,500
(b) Interest on loan [₹ 1,00,000/2] 50,000 99,500
Self-occupied portion [Ground Floor] 65,500
Annual Value Nil
[No deduction is allowable in respect
of municipal taxes paid]
Net Annual Value (NAV) Nil
Less: Interest on loan [Not allowable
under section 115BAC] Nil 65,500
II. PGBP
Income from SEZ unit 35,00,000
III. Capital Gains
Short-term capital gains on sale of
equity shares of Sam Ltd. (since held
for not more than 12 months)
Full Value of Consideration [2000 x ₹ 3,00,000
150]
 27
CA Jasmeet Singh

Less: Brokerage @ 0.1% 300

Net sale consideration 2,99,700

Less: Cost of acquisition [₹ 2000 x 2,40,000 59,700

120]
Long-term capital gains on sale of
equity shares of Jam Ltd. (since held
for more than 12 months)
Full Value of Consideration [1250 x ₹ 1,25,000
100]
Less: Brokerage @ 0.1% 125
Net sale consideration 1,24,875
Less: Cost of acquisition [No
indexation benefit would be
available] 90,000 34,875 94,575
Higher of cost of acquisition of ₹
90,000 (72 x 1250) and
₹ 62,500, being lower of FMV of ₹
62,500 and full value of consideration
IV. of ₹ 1,25,000
Income from Other Sources
Royalty from artistic book 2,88,000
Less: Expenses incurred for earning
royalty 40,000
2,48,000
Interest on income-tax refund 1,750
2,49,750
Gross Total Income 39,09,825
Less: Deduction under Chapter VI-A -
[Not allowable under section 115BAC]
Total Income 39,09,825
Total Income (Rounded off) 39,09,830

Tax on total income of ₹ 39,09,830

Tax on LTCG exceeding ₹ 1.25 lakhs @12.5% u/s 112A -
Tax on STCG of ₹ 59,700 @20% u/s 111A 11,940
Tax on remaining total income of ₹ 38,15,255
Upto ₹ 3,00,000 Nil
₹ 3,00,001 - ₹ 7,00,000[@5% of ₹ 4 lakhs] 20,000
₹ 7,00,001 - ₹ 10,00,000[@10% of ₹ 3 lakhs] 30,000
₹ 10,00,001 - ₹ 12,00,000[@15% of ₹ 2 lakhs] 30,000
₹ 12,00,001 - ₹ 15,00,000[@20% of ₹ 3 lakhs] 60,000
₹ 15,00,001 - ₹ 38,15,255[@30% of ₹ 23,15,255] 6,94,577 8,34,577
8,46,517
Add: Health and education cess@4% 33,861
 28
CA Jasmeet Singh

Tax liability 8,80,378

Tax liability (Rounded off) 8,80,380

Computation of total income and tax liability of Mr. Anand for

A.Y. 2025-26 under normal provisions of the Act
Particulars ₹ ₹ ₹
Gross Total Income as per section 115BAC 39,09,825
Less: Interest on loan for self
occupied property [₹ 1,00,000/2] 50,000
Gross Total Income as per 38,59,825
normal provisions of the Act

Less: Deduction u/s 10AA [Since the 21,00,000

industrial undertaking is established in SEZ,
it is entitled to deduction u/s 10AA @100% of
export profits, since P.Y.2024-25, being the
5th year of operations]
[Profits of the SEZ x Export Turnover
received in India in convertible foreign
exchange on or before 30.9.2025/Total
Turnover] x 100%
[₹ 35 lakhs x ₹ 120 lakhs/ ₹ 200
lakhs x 100%]
Less: Deduction under Chapter VI-A
Deduction under section 80C
Repayment of housing loan 1,05,000
Public Provident Fund 1,30,000
5 years Term deposit (not allowed as
deduction in the name of minor son) -
Restricted to 2,35,000 1,50,000
Deduction under section 80D
Medical insurance premium [90,000 x 1/5] 18,000
Preventive health check up of ₹ 7,500,
subject to maximum of ₹ 5,000 5,000 23,000
Deduction under section 80QQB 2,10,000
Royalty [₹ 2,88,000 x15/16 = ₹ 2,70,000,
restricted to amount brought into India in
convertible

foreign exchange ₹ 2,50,000 minus

₹ 40,000 expenses already allowed as
deduction while computing royalty income]

Total Income 3,83,000

Total Income (Rounded off) 13,76,825
 29
CA Jasmeet Singh

13,76,830
Tax on total income of ₹ 13,76,830
Tax on LTCG exceeding ₹ 1.25 lakhs @12.5% u/s 112A -
Tax on STCG of ₹ 59,700 @20% u/s 111A 11,940
Tax on remaining total income of ₹ 12,82,255
Upto ₹ 2,50,000 Nil
₹ 2,50,001 - ₹ 5,00,000[@5% of ₹ 2,50,000] 12,500
₹ 5,00,001 - ₹ 10,00,000[@20% of ₹ 5,00,000] 1,00,000
₹ 10,00,001 - ₹ 12,82,255[@30% of ₹ 2,82,255] 84,677 1,97,177
2,09,117
Add: Health and education cess@4% 8,365
Tax liability 2,17,482
Tax liability (rounded off) 2,17,480

Illustration 09 [RTP May 2024]

Mr. Rajesh is a working partner in M/s Sunflower Associates, a partnership firm. Mr.
Rajesh has contributed ₹ 15 lakhs as capital in the firm.
Partnership deed authorises payment of interest to partners @ 13% and also payment of
remuneration to partners @20,000 per month. Whole of the remuneration is allowable
as deduction to M/s Sunflower Associates.
Mr. Rajesh has set up a unit in SEZ in May, 2018. The total turnover, export turnover and
net profit for the year ended 31.3.2025 were ₹ 120 lakhs, ₹ 45 lakhs and ₹ 7.5 lakhs
respectively. Out of the export turnover of ₹ 45 lakhs, only ₹ 40 lakhs has been received
in convertible foreign exchange by 30.9.2025.
During the P.Y. 2024-25, Mr. Rajesh has commenced a business of warehousing facility
for storage of edible oil. The net profit of this business as per profit & loss account is ₹
7,50,000. The following items are debited to Profit & Loss Account:
(i) Personal drawings ₹ 70,000
(ii) Advance income-tax paid ₹ 1,00,000
(iii) Purchase of warehouse building of ₹ 10 lakhs on 10.6.2024 for the purpose of
storage of edible oil.
The following items are credited to Profit & Loss account:
(i) Interest on saving bank account with post office ₹ 15,000
(ii) Interest on fixed deposit with SBI ₹ 20,000
(iii) Dividend from Indian companies (Gross) ₹ 32,000
He has paid the premium of ₹ 60,000 on life insurance policy in the name of her married
daughter. The policy was taken on 1.10.2018 and the sum assured being ₹ 5,00,000.
Compute the total income and tax payable by Mr. Rajesh for the A.Y. 2025-26 under
default tax regime and normal provisions of the Act.

Solution
Computation of total income of Mr. Rajesh for the A.Y. 2025-26 under default tax regime
under section 115BAC
Particulars Amount (in ₹)
I Profits and gains of business and profession
 30
CA Jasmeet Singh

Income from firm M/s Sunflower Associates

Interest on capital@13% p.a. on ₹ 15 lakhs, 1,80,000
restricted to 12%, which is the maximum
deduction allowable in the hands of the firm
Salary to Mr. Rajesh as a working partner, 2,40,000 4,20,000
which is allowable as deduction in the hands of
firm (₹ 20,000 x 12)
Profit from SEZ unit
Net profit from SEZ unit 7,50,000
Income from warehousing facility for storage
of edible oil
Net profit as per profit and loss account 7,50,000
Less: Income credited to profit and loss
account but taxable under the head ‘Income
from Other Sources’
Interest on savings bank A/c with post office 15,000
Interest on fixed deposit with SBI 20,000
Dividend from Indian companies (Gross) 32,000
6,83,000

Add: Payments not allowable as deduction

Advance income-tax paid disallowed u/s 1,00,000
40(a)(ii)
Personal drawings disallowed u/s 37 70,000
Purchase of building 10,00,000
18,53,000
Less: Depreciation on building [₹ 10,00,000 x 1,00,000 17,53,000
10%]
Income from Other Sources
Interest on savings bank A/c with 15,000
II post office
Less: Exempt under section 10(15) 3,500 11,500
Interest on fixed deposit with SBI 20,000
Dividend from Indian companies (Gross) 32,000 63,500
Gross Total Income/ Total Income 29,86,500
[No deduction under section 80C, 80TTA and
10AA would be allowable]

Computation of tax payable under default tax regime for A.Y. 2025-26
₹ ₹
Tax on total income of ₹ 29,86,500
On first ₹ 3,00,000 Nil
₹ 3,00,001 – ₹ 7,00,000 [@5% of ₹ 4 lakhs] 20,000
₹ 7,00,001 – ₹ 10,00,000 [@10% of ₹ 3 lakhs] 30,000
₹ 10,00,001 – ₹ 12,00,000 [@15% of ₹ 2 lakhs] 30,000
 31
CA Jasmeet Singh

₹ 12,00,001 – ₹ 15,00,000 [@20% of ₹ 3 lakhs] 60,000

₹ 15,00,001 - ₹ 29,86,500 [@30% of ₹ 14,86,500] 4,45,950
5,85,950
Add: Health and Education cess @4% 23,438
6,09,388
Less: Advance income-tax paid 1,00,000
Tax payable 5,09,388
Tax Payable (Rounded off) 5,09,390

Computation of total income of Mr. Rajesh for the A.Y. 2025-26 under normal provisions
of the Act
Particulars Amount (in ₹)
Gross Total Income as per section 115BAC 29,86,500
Less: Deduction under section 10AA 1,25,000 28,61,500
[₹ 7,50,000 x 40,00,000/ ₹ 1,20,00,000 x
50%, being seventh year of operation]
Less: Deduction under Chapter VI-A
Deduction under section 80C
Life insurance premium [maximum 10% of sum 50,000
assured]
Deduction under section 80TTA
Interest on saving bank account with post office, 10,000 60,000
restricted to
Total Income 28,01,500

Computation of tax payable by Mr. Rajesh for A.Y. 2025-26 under the regular provisions
of the Act
Particulars ₹ ₹
Tax on total income of ₹ 28,01,500
Upto ₹ 2,50,000 Nil
₹ 2,50,001 – ₹ 5,00,000 [@5% of ₹ 2.50 lakhs] 12,500
₹ 5,00,001 – ₹ 10,00,000 [@20% of ₹ 5 lakhs] 1,00,000
₹ 10,00,001 - ₹ 28,01,500 [@30% of ₹ 18,01,500] 5,40,450 6,52,950
Add: Health and education cess@4% 26,118
Total tax liability 6,79,068
Less: Advance income-tax paid 1,00,000
Tax payable 5,79,068
Tax payable (rounded off) 5,79,070

Computation of adjusted total income and AMT of Mr. Rajesh for

A.Y. 2025-26
Particulars ₹
Total Income (computed above as per regular provisions of income 28,01,500
tax)
Add: Deduction under section 10AA 1,25,000
 32
CA Jasmeet Singh

Adjusted Total Income 29,26,500

Alternative Minimum Tax@18.5% 5,41,403
Add: Health and education cess@4% 21,656
Total tax liability 5,63,059
Less: Advance income-tax paid 1,00,000
Tax payable 4,63,059
Tax payable (rounded off) 4,63,060
Since alternate minimum tax payable is less than the regular income-tax payable, tax
payable under normal provisions of the Act is ₹ 5,79,070.

Illustration 10 [PYQ May 2024]

Mr. Sahil, resident Indian aged 40 years, a Manufacturer at Chennai, gives the following
Manufacturing, Trading and Profit & Loss Account for the year ended 31.03.2025.
Manufacturing, Trading and Profit & Loss Account
for the year ended 31.03.2025
Particulars ₹ Particulars ₹
To Opening Stock 71,000 By Sales 43,50,000
To Purchase of Raw By Closing Stock 2,00,000
Materials 17,20,500
To Manufacturing
Wages & Expenses 5,80,500
To Gross Profit 21,78,000
Total 45,50,000 Total 45,50,000
To Administrative By Gross Profit 21,78,000
Charges 2,90,000 By Dividend From
To SGST Penalty Paid Domestic Companies 15,000
(It is not compensatory 7,000 By Winning from
nature)

To GST Paid 1,10,000 Lotteries (Net of TDS) 10,500

(TDS 4,500)
To General Expenses 55,000 By Profit on Sale of
To Miscellaneous Expenses Shares 45,000
1,50,500
To Loss on Sale of Shares 20,000
To Interest to Bank (on 60,000
Machinery term loan)
To Depreciation 2,00,000
To Net Profit 13,56,000
Total 22,48,500 Total 22,48,500

Following are the further information relating to Financial Year 2024 -2025:
(i) Administrative Charges include ₹ 46,000 paid as commission to brother of Assessee.
The Commission amount at the market rate in ₹ 36,000.
 33
CA Jasmeet Singh

(ii) The assessee paid ₹ 33,000 in cash to a Transport Carrier on 26.12.2024. This amount
is included in Manufacturing Expenses. (Assume that the provisions relating to TDS
are not applicable on this payment.)
(iii) A Sum of ₹ 4,000 per month was paid as salary to a staff throughout the year and
this has not been recorded in books of account.
(iv) Bank Term Loan Interest actually paid upto 31.03.2024 was ₹ 20,000 and the balance
was paid in October 2025.
(v) Miscellaneous Expenses include ₹ 10,000 contributed to Prime Minister's Relief
Fund.
(vi) Loss on Sale of Shares represents shares sold within a period of 6 months from the
date of purchase.
(vii) Profit on Sale of Shares represents shares held for 2 years & Securities
Transaction Tax was paid on it.
(viii) Housing Loan Principal repaid during the year was ₹ 50,000 and it relates to
residential property occupied by him. Interest on Housing Loan was ₹ 2,60,000.
Housing Loan was taken from Canara Bank. (Value of house property is ₹ 45 Lakhs,
loan value ₹ 25 Lakhs and sanction date 31.03.2017).
These amounts were not dealt with in the Profit and Loss Account given above.
(Assume this housing loan is eligible for 80EE deduction).
(ix)Deprecation allowable under the Act to be computed on the basis of following
information:
Plant & Machinery (Depreciation Rate @15%) ₹
Opening WDV (as on 01.04.2024) 12,00,000
Additions During the year (Used for more than 180 Days) 2,00,000
Total Additions during the year 4,00,000
Note: Ignore Additional Depreciation u/s 32(1)(iia)
Compute the total income and tax liability of Mr. Sahil for the A.Y. 2025 -26 if he has
exercised the option of shifting out of the default tax regime provided under Section
115BAC(1A).

Solution
Computation of total income and tax liability of Mr. Sahil for A.Y. 2025-26
Particulars ₹
Income from house property
Annual value of self-occupied property Nil
Less: Deduction under section 24(b)
Interest on housing loan of ₹ 2,60,000 2,00,000
restricted to ₹ 2,00,000
(2,00,000)
Profits and gains of business or profession
Net Profit 13,56,000
Add: Expenses debited to Profit and loss
A/c but not allowable as deduction or to be
considered under other head
 34
CA Jasmeet Singh

- Commission paid to brother [Commission paid to a related 10,000

person/relative to the extent it is excessive to market rate is
disallowed under section 40A(2)]

- Cash payment to a Transport Carrier [Not disallowed under Nil

section 40A(3) since the limit for one time cash payment is
₹ 35,000 in respect of payment to transport operators]
- Interest to bank on term loan [Interest paid to bank after the 40,000
due date of filing of return under section 139(1) is disallowed as
per section 43B]
- Contribution to Prime Minister’s Relief Fund [Not allowable since 10,000
the same is not incurred wholly and exclusively for business
purpose]
- SGST Penalty paid [SGST penalty paid is not compensatory in 7,000
nature and therefore, not allowable]
- Loss on sale of shares 20,000
- Depreciation as per books of account 2,00,000
16,43,000
Less: Incomes credited to profit and loss account but not taxable
as business income
- Dividend from Domestic Companies 15,000
- Winnings from lotteries 10,500
- Profit on sale of shares 45,000
15,72,500
Less: Depreciation allowable as per Income- tax Rules,1962
On Plant & Machinery [@15% on ₹ 14,00,000, being
opening WDV of ₹ 12 lakhs and additions put to use for more than 2,25,000
180 days of ₹ 2 lakhs + @7.5% on ₹ 2,00,000, being additions put to
use for less than 180 days]
13,47,500
[8% of sales i.e. ₹ 43,50,000 x 8%1 assuming entire amount of sales
are not received by A/c payee cheque or A/c payee draft or ECS or 3,48,000
other electronic prescribed modes]
Business Income 13,47,500
[As per section 44AD, in case of Mr. Sahil, being an eligible
assessee, a sum equal to ₹ 3,48,000 (8%1 of total turnover i.e., ₹
43,50,000) or as the case may be, a sum higher than the aforesaid
sum claimed to have been earned by him would be deemed to be
the business income. In this case, since Mr. Sahil has maintained
books of account, he can claim the higher sum actually earned ₹
13,47,500 as his income from business.] (See Note below the
solution for alternate answer)
Less: Set off of loss from house property as per section 71(3A) 2,00,000
11,47,500
 35
CA Jasmeet Singh

Add: Salary paid to staff not recorded in the books [Assuming the 48,000
expenditure is in the nature of unexplained expenditure, the
same is deemed to be income as per section 69C of Mr. Sahil. No
deduction would be allowed in respect of such expenditure.]
Alternatively, it is possible to assume that the salary not recorded
in the books of account was an erroneous omission and the
assessee has offered satisfactory explanation about the source of
such expenditure. In such a case, it would not be considered as
deemed income and the same would be allowed as deduction
11,95,500

while computing business income on the basis of

books of accounts. In such a case, business income,
total income and tax liability (rounded off) would
be ₹ 10,99,500, ₹ 10,44,500 and ₹ 1,23,080.
III Capital Gains
Long term capital gains taxable u/s 112A [Since 45,000
shares are held for 2 years and STT has been paid]
Less: Set off of short term capital loss as per section 20,000 25,000
70(2)
IV Income from Other Sources
Dividend from Domestic Companies 15,000
Winning from lotteries (₹ 10,500 + ₹ 4,500) 15,000
30,000
Gross Total Income 12,50,500
Less: Deduction under Chapter VI-A
Deduction under section 80C
Principal repayment of housing loan 50,000
Deduction under section 80EE
Interest on housing loan of ₹ 60,000 [₹ 2,60,000 50,000
– ₹ 2,00,000, allowed u/s 24(b)] allowable under
section 80EE upto ₹ 50,000
Deduction under section 80G
Contribution to Prime Minister’s Relief Fund2 10,000 1,10,000
Total Income 11,40,500
Tax Liability
Tax on LTCG of ₹ 25,000 u/s 112A [Exempt upto ₹ Nil
1.25 lakh]
Tax on winning from lotteries of ₹ 15,000 @30% 4,500

Tax on unexplained expenditure of ₹ 48,000 @60% 28,800

Tax on balance income of ₹ 10,52,500 at slab rate
Upto ₹ 2,50,000 Nil
From ₹ 2,50,001 to ₹ 5,00,000 @5% 12,500
From ₹ 5,00,001 to ₹ 10,00,000 @20% 1,00,000
 36
CA Jasmeet Singh

From ₹ 10,00,001 to ₹ 10,52,500 @30% 15,750 1,28,250

Add: Surcharge @25% on tax on unexplained 1,61,550
expenditure of ₹ 28,800 7,200
1,68,750
Add: Health and education cess @4% 6,750
Tax Liability 1,75,500

Note – Alternatively, if Mr. Sahil claims his business income as ₹ 3,48,000 i.e., 8% of total
turnover under section 44AD, his total income and tax liability would undergo a change.

Illustration 11 [PYQ Sep 2024]

Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12 years), provide
the following details of their income/losses for the previous year 2024-25:
Mr. Suraj
(i) Salary received as a partner from a partnership firm - ₹ 6,15,000
He is a working partner in the firm and the salary is as per the limits prescribed under
section 40(b)
(ii) Income (loss) from house property:
Brought forward loss from House -A (let out) - ₹ 96,000 Current year loss from House B
(let out) - ₹ 2,30,000
(iii) Interest received on enhanced compensation - ₹ 2,00,000
It relates to transfer of a piece of land in the financial year 2019-20.
Out of the above ₹ 35,000 relates to previous year 2024-25 and the balance relate to
preceding previous year.
(iv) Gift from grandfather's younger sister by cheque - ₹ 1,25,000
(v) Dividend on listed equity shares of domestic companies (Gross) - ₹ 50,000
(vi) On 1st December 2024, Mr. Suraj received ₹ 75 lakhs as maturity proceeds from his
life insurance policy which was taken on 1st May 2012. He paid ₹ 6,00,000 as annual
premium and the sum assured was ₹ 65 lakhs.

Mrs. Megha
(i) Current year loss from business. (She carried on this business with funds which Mr.
Suraj gifted to her) - ₹ 8,10,000.
(ii) Mrs. Megha purchased a house property from her "Stridhan" and gifted the same to
her minor son, Dev on 1stApril, 2024 out of love and affection. The FMV of the house
on the date of transfer was ₹ 51 lakhs.

Master Dev
Rent received from house property received from Mrs. Megha - ₹ 35,000 p.m.
Compute total income of Mr. Suraj, Mrs. Megha and Dev for the assessment year 2025-
26 assuming Mr. Suraj has decided to pay tax under default tax regime provided under
section 115BAC, whereas Mrs. Megha and Dev have opted out of the default tax regime.
Briefly explain the reasons for the treatment of each item.

Solution
 37
CA Jasmeet Singh

Computation of total income of Mr. Suraj, Mrs. Megha and minor son Dev for A.Y. 2025-
26
Particulars Mr. Suraj Mrs. Megha Dev [Under
[Under default [Under normal normal
tax regime] provisions] provisions]
₹ ₹ ₹
Income from house property
Annual Value [As per section 27, 4,20,000
Mrs. Megha is the deemed
owner of the house property
transferred to minor son, Dev
without consideration though
such property is acquired from
her “Stridhan”] [₹ 35,000 x12]
Less: Deduction @30% of NAV 1,26,000
Brought forward loss from 2,94,000
House A [Not allowed to be set- -
off against income from other
heads]
Current year loss of Mr. Suraj -
from House – B [Not allowed to
be set-off against income from
other heads since Mr. Suraj is
paying tax under default tax
regime]

PGBP
Salary from partnership firm 6,15,000
Less: As per section 70, set off of
current year loss from 6,15,000
business of ₹ 8,10,000 to the
extent of [Current year loss
from business of his wife is
allowed to be set off in the
hands of Mr. Suraj since funds
for business is gifted by him]
Income from Other Sources -
Interest on enhanced 2,00,000
compensation [Taxable in the
year it is received]
Less: Deduction @50% 1,00,000
1,00,000
Gift from grandfather’s sister 1,25,000
[Taxable under section 56(2)(x),
since grandfather’s sister is not
 38
CA Jasmeet Singh

a relative and the amount of gift

exceeds ₹ 50,000]
Dividend on shares (gross) 50,000
Maturity proceeds from LIC -
[Exempt under section 10(10D)
since the annual premium
payable does not exceed 10% of
sum assured]

Less: Set off of remaining 2,75,000

business loss of ₹ 1,95,000 1,95,000
Gift of house property from 80,000
Mrs. Megha to Dev [Exempt
since the gift is from a relative
i.e., from his mother] Nil
Taxable Income 80,000 2,94,000 -

Illustration 12 [RTP Nov 2023]

Mr. Jain, a resident individual, aged 40 years, suffers from severe disability as certified
by medical authority. He gives the following information for the previous year 2024-25 -
(i) He has paid life insurance premium by cheque ₹ 27,000 to insure his life. The
insurance policy was taken on 27.8.2018 and the sum assured is ₹ 2,20,000.
(ii) He had written a literary book for Rochak Publication. A lump sum amount of
royalty income earned in the previous year 2024-25 amounted to ₹ 9,00,000.
Expenses incurred for writing the book amounted to ₹ 40,000.
(iii) His friends gifted a statue of Goddess Saraswati to his daughter Ms. Diya (aged 14
years) on the successful completion of her secondary school. Fair market value of
the statue is ₹ 65,000.
(iv) He received a gold chain worth ₹ 68,000 from his in-laws on the occasion of his
marriage anniversary
(v) He had deposited ₹ 70,000 in fixed deposit with SBI in the name of his minor son in
September 2024. Interest earned on such deposit ₹ 5,500.
(vi) He donated ₹ 5,000 in cash to a NGO (the NGO was registered under section 80G of
the Income-tax Act, 1961).
(vii) He had taken a loan of ₹ 38,00,000 for the purchase of a house property valuing
₹ 45,00,000 for self-occupation from a financial institution on 1st May 2022. He
repaid ₹ 1,80,000 during the P.Y. 2024-25 out of which ₹ 1,05,000 is towards principal
payment and the balance is for interest on loan.
Compute the total income of Mr. Jain for the A.Y. 2025-26 if he does not opt for the
provisions of section 115BAC.

Solution
Computation of total income of Mr. Jain for the A.Y.2025-26
Particulars ₹ ₹
Income from house property
 39
CA Jasmeet Singh

NAV Nil
Less: Interest on loan 75,000
(75,000)
Income from Other Sources (75,000)
Royalty 9,00,000
Less: Expenses incurred for writing book 40,000 8,60,000
Value of statue of Goddess Saraswati 65,000

[The fair market value of the statue (sculpture) 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 considering clubbing provisions
is higher than his wife].
Less: Exemption under section 10(32) 1,500 63,500
Value of Gold Chain -
[The Fair market value of ₹ 68,000 of gold chain received on
occasion of his marriage anniversary would be exempt, since
it is received from a relative.]
Interest on fixed deposit in the name of his son 5,500
[It would be included in the hands of Mr. Jain, assuming his
income before considering clubbing provisions is higher
than his wife]
Less: Exemption under section 10(32) 1,500 4,000
Gross Total Income 8,52,500
Less: Deduction under Chapter VI-A
Deduction under section 80C
Life insurance premium [Since Mr. Jain suffers from severe 27,000
disability, premium upto 15% of the sum assured ₹ 2,20,000
would be allowed, as the policy is taken after 31.3.2012]
Repayment of principal amount for housing loan 1,05,000 1,32,000
Deduction under section 80G
Donation to an NGO registered under section 80G [Not -
allowable since the donation is made in cash of a sum
exceeding ₹ 2,000]
Deduction under section 80QQB
Royalty income of a resident from literary book 3,00,000
Deduction under section 80U [Since Mr. Jain suffers from 1,25,000
severe disability]
Total income 2,95,500

Illustration 13 [RTP May 2021]

Mr. Dhruv, a person of Indian origin and citizen of Country X, got married to Ms. Deepa,
an Indian citizen residing in Country X, on 4th February, 2024 and came to India for the
first time on 20-02-2024. He left for Country X on 12th August, 2024. He returned to India
 40
CA Jasmeet Singh

again on 20-01-2025 with his wife to spend some time with his parents-in law for 30 days
and thereafter returned to Country X on 18.02.2025.
He received the following gifts from his relatives and friends of her wife during 01-04-
2024 to 31-03-2025 in India:
- From parents of wife ₹ 1,01,000
- From married sister of wife ₹ 11,000
- From very close friends of his wife ₹ 2,82,000
(i) Determine his residential status and compute the total income chargeable to tax
along with the amount of tax payable on such income for the Assessment Year 2025-
26.
(ii) Will your answer change if he has received ₹ 16,00,000 instead of ₹ 2,82,000 from
very close friends of his wife during the previous year 2024-25 and he stayed in India
for 400 days during the 4 years preceding the previous year 2024-25?

Solution
(i) Determination of residential status and computation of total income and tax
payable of Mr. Dhruv
Under section 6(1), an individual, being a person of Indian origin and who comes on a
visit to India during the previous year and his total income other than the income from
foreign source exceeds ₹ 15,00,000, is said to be resident in India, if he stayed in India
for a total period of 120 days or more during that previous year and for 365 days or
more during the 4 years immediately preceding the relevant previous year.
However, in case, the total income other than the income from foreign source does not
exceed ₹ 15,00,000, the said individual is said to be resident in India, only if he stayed in
India for a total period of 182 days or more during that previous year.
Since in the present case, total income other than from foreign source, of Mr. Dhruv, a
person of Indian origin does not exceed ₹ 15,00,000, he would be said to be resident in
India, only if he stayed in India for 182 days or more during the previous year 2024-25
relevant to A.Y. 2025-26.
His stay in India during the previous year 2024-25 is as under:
P.Y. 2024-25
01.04.2024 to 12.08.2024 - 134 days
20.01.2025 to 18.02.2025 - 30 days
Total 164 days
Since Mr. Dhruv has stayed in India during the previous year for less than 182 days, he is
said to be non-resident. Accordingly, his total income and tax payable would be
computed in the following manner:
Computation of total income and tax payable of Mr. Dhruv for the A.Y. 2025-26
Particulars ₹
Income from other sources
Cash gifts received from non-relatives is chargeable to tax as per section
56(2)(x) if the aggregate value of such gifts exceeds ₹ 50,000.
- ₹ 1,01,000 received from parents of wife would be exempt, since Nil
parents of wife fall within the definition of ‘relatives’ and gifts from a
relative are not chargeable to tax.
 41
CA Jasmeet Singh

- ₹ 11,000 received from married sister-in-law is exempt, since sister of Nil

wife falls within the definition of relative and gifts from a relative are
not chargeable to tax.
- Gift received from close friends of his wife of ₹ 2,82,000 is taxable
under section 56(2)(x) since the said sum exceeds ₹ 50,000. 2,82,000
Total Income 2,82,000
Tax on total income of ₹ 2,82,000 [5% of ₹ 32,000 in excess of 1,600
₹ 2,50,000, being the basic exemption limit]
Add: Health and Education cess@4% 64
Total tax payable 1,664
Total tax payable (rounded off) 1,660

(ii) Determination of residential status and computation of total income and tax
payable of Mr. Dhruv (if he has received cash gifts from non-relative for ₹
16,00,000):
Where an individual, being a person of Indian origin comes on visit to India and he is
having total income other than income from foreign sources exceeding ₹ 15 lakhs
during the previous year, such individual is said to be resident in India, if he stays in
India during the previous year for 120 days or more and for 365 days or more during the
4 years immediately preceding the relevant previous year. As per section 6(6),
such individual whose stay in India is for 120 days or more but less than 182 days in the
P.Y. 2024-25 would be resident but not ordinarily resident irrespective of his residential
status or no. of days of stay in India in the immediately preceding PYs.
Mr. Dhruv, is a person of India origin who has come on a visit to India during the
previous year. Since his total income other than income from foreign sources exceeds
₹ 15,00,000; and his stay in India is for 164 days during the P.Y. 2024-25 and for 400 days
during the 4 years immediately preceding the P.Y. 2024-25, he is resident but not
ordinarily resident in India for the P.Y. 2024-25.
In such case, his total income and tax payable would be computed in the following
manner:
Computation of total income and tax payable of Mr. Dhruv for the A.Y. 2025-26
Particulars ₹
Income from other sources
Cash gifts received from non-relatives is chargeable to tax as per
section 56(2)(x) if the aggregate value of such gifts exceeds ₹ 50,000.
- ₹ 1,01,000 received from parents of wife would be exempt, since Nil
parents of wife fall within the definition of ‘relatives’ and gifts from a
relative are not chargeable to tax.
- ₹ 11,000 received from married sister-in-law is exempt, since sister Nil
of wife falls within the definition of relative and gifts from a relative
are not chargeable to tax.
- Gift received from close friends of his wife of ₹ 16,00,000 is taxable
under section 56(2)(x) since the amount of cash gifts exceeds ₹
50,000. 16,00,000
Total Income 16,00,000
 42
CA Jasmeet Singh

Tax on total income of ₹ 16,00,000 1,70,000

Upto ₹ 3,00,000 Nil
₹ 3,00,001 – ₹ 7,00,000 [₹ 4,00,000 @ 5%] 20,000
₹ 7,00,001 – ₹ 10,0,000 [₹ 3,00,000 @ 10%] 30,000
₹ 10,00,001 – ₹ 12,00,000 [₹ 2,00,000 @ 15%] 30,000
₹ 12,00,001 – ₹ 15,00,000 [₹ 3,00,000 @ 20%] 60,000
₹ 15,00,001 – ₹ 16,00,000 [₹ 1,00,000 @ 30%] 30,000
Add: Health and Education cess@4% 6,800
Total tax payable 1,76,800
Note – Since his tax payable as per normal provisions is ₹ 3,04,200 [₹ 2,92,500 (₹ 1,12,500
plus 30% on ₹ 6,00,000 income exceeding ₹ 10,00,000) plus ₹ 11,700, being health and
education cess @4%], which is higher than the tax payable computed as per
concessional tax rates available under section 115BAC, it is beneficial for him to opt for
section 115BAC.

Illustration 14 [MTP May 2022]

From the given information, you are required to compute the tax payable by Mr. Akash,
a manufacturer and distributor of fertilizers and other agricultural products, aged 61
years, for the A.Y. 2025-26.
Trading and Profit and Loss Account of Mr. Akash
Particulars Amount Particulars Amount
(in ₹) (in ₹)
To Opening Stock 24,21,000 By sales 3,12,50,100
To Purchases 2,28,00,500 By Closing stock 26,00,100
To Direct expenses 4,12,040
To Freight inward 2,92,000
To Gross Profit c/d 79,24,660
3,38,50,200 3,38,50,200
To Salaries and wages 17,12,000 By Gross Profit b/d 79,24,660
To General expenses 3,65,000 By Dividend income from 17,20,000
Indian companies (Gross)
To Rates and taxes 2,20,000 By Interest received on FDs 1,08,000
(Net of tax)
To Interest paid On 2,845 By Rent received 7,20,000
late payment of GST
To Income-tax paid 3,45,000 By Income-tax refund 18,000
for F.Y. 2023-24
To Interest paid to NBFC 1,20,000
To Depreciation 1,82,000
To Net Profit 75,43,815
1,04,90,660 1,04,90,660
Additional information:
(i) Closing stock of P.Y. 2024-25 was undervalued by ₹ 25,000.
(ii) Rates and taxes include ₹ 1,000 paid towards late filing of his Income-tax return for
Assessment Year 2024-25 under section 234F of lncome-tax Act.
 43
CA Jasmeet Singh

(iii) Salaries include ₹ 15,000 paid on single day by way of cash to his accountant.
(iv) Interest paid on loan of ₹ 10,00,000 taken from a Non-Banking Finance company.
Out of the loan, amount of ₹ 2 lakhs was used for personal purpose and the balance
was used for business purpose. No TDS was deducted while payment of interest.
(v) An amount of ₹ 45,000 was paid by cheque during the year towards health
insurance policy covering himself, his spouse and his children.
(vi) General expenses include advertisement expense of ₹ 20,000 paid by cheque
towards an advertisement in a souvenir published by local political party.
(vii) Income-tax refund includes ₹ 2,000 towards interest.
(viii) Depreciation charged is as per Income-tax Rules, however, it does not include
depreciation on a new Maruti Van purchased and put to use on 23rd September,
2024 for his business use. The cost of the vehicle is ₹ 2,10,000.
(ix)Advance Tax paid during the year is ₹ 15 lakhs.
(x) Turnover for the year ending 31.03.2024 was ₹ 3.08 crores.
(xi)Tax has been deducted at source on income, wherever required.
Mr. Akash does not want to opt for the provisions of section 115BAC.

Solution
Computation of Total Income of Mr. Akash for the A.Y.2025-26
Particulars ₹ ₹ ₹
Income from house property
Annual value (rent received has been taken as 7,20,000
annual value, due to absence of information relating
to expected rent in the question)
Less: Deduction u/s 24(a)
30% of Annual Value 2,16,000
Profits and gains of business or profession 5,04,000
Net profit as per profit and loss account 75,43,815
Add: Expenses/Payments debited to profit and loss
account but not allowed
- Fee for late filing of income-tax return for 1,000
A.Y. 2024-25 – disallowed
- Salary paid to an accountant in cash exceeding 15,000
₹ 10,000 – disallowed under section 40A(3)
- Interest paid to NBFC on loan which is used for 24,000
personal purposes (₹ 1,20,000 x 2,00,000/ 10,00,000)
– not allowed as per section 37
- Interest paid to NBFC on which tax is not deducted 28,800
attracts disallowance @30% of ₹ 96,000 [Since Mr.
Akash’s turnover for the immediately preceding
previous year i.e., P.Y. 2023-24 exceeds ₹ 1 crore, he
is required to deduct tax at source.
Disallowance@30% of interest is attracted for non-
deduction of tax at source]
- Income-tax paid for F.Y. 2023-24 3,45,000
 44
CA Jasmeet Singh

- Interest paid on late payment of GST, allowed, -

since it is not for infraction of law but is
compensatory in nature.
- Advertisement expenses towards an
advertisement in a souvenir published by local 20,000 4,33,800
political party [disallowed under section 37(2B)]
Add: Undervaluation of Closing stock 25,000
Less: Income chargeable under other heads and 80,02,615
income not chargeable to tax but credited to profit
and loss account
- Dividend income from Indian companies 17,20,000
- Interest on FDs (Net of taxes) (Gross income 1,08,000
taxable under the head “Income from other
sources”
- Rent received (taxable under the head “Income 7,20,000
from house property”
- Income-tax refund 18,000 25,66,000
54,36,615
Less: Depreciation on Motor car purchased and
put to use on 23.9.2024 [₹2,10,000 x 15%] 31,500 54,05,115
Income from Other Sources
Dividend income 17,20,000
Interest on fixed deposits (₹1,08,000 x 100/90) 1,20,000
Interest on income-tax refund 2,000 18,42,000
Gross Total Income 77,51,115
Less: Deduction under Chapter VI-A
Section 80D
Health insurance premium of ₹45,000 paid for self, 45,000
spouse and his children allowable as deduction
sine Mr. Akash is a senior citizen
Section 80GGC
Expenditure towards advertisement in a souvenir
published by local political party not allowable as 45,000
deduction
Total Income 77,06,115
Total Income (rounded off) 77,06,120

Computation of tax payable by Mr. Akash for the A.Y.2025-26

Particulars ₹
Upto ₹3,00,000 Nil
₹ 3,00,001 – ₹ 5,00,000 [i.e., ₹2,00,000@5%] 10,000
₹ 5,00,001 – ₹10,00,000 [i.e., ₹5,00,000@20%] 1,00,000
₹ 10,00,001 above [i.e., 67,06,120 @30%] 20,11,836 21,21,836
 45
CA Jasmeet Singh

Add: Surcharge @10%, since total income exceeds ₹ 50,00,000 2,12,184

23,34,020
Add: Health and Education cess@4% 93,361
Tax Liability 24,27,381
Less: Advance tax paid 15,00,000
Tax deducted at source on interest on FDs under section 194A 12,000
Tax deducted at source on dividend income under section 194 1,72,000
Tax payable 7,43,381
Tax payable (Rounded off) 7,43,380

Illustration 15 [MTP May 2023]

Mr. Sonu, General Manager of Akon Ltd., Delhi, furnishes the following particulars for
the financial year 2024-25:
(i) Salary ₹ 46,000 per month
(ii) Value of medical facility in a hospital maintained by the company ₹ 7,000
(iii) Rent free accommodation owned by the company
(iv) Housing loan of ₹ 6,00,000 given on 01.04.2020 at the interest rate of 6% p.a. (No
repayment made during the year). The rate of interest charged by State Bank of
India (SBI) as on 01.04.2024 in respect of housing loan is 10%.
(v) Gifts in kind made by the company on the occasion of wedding anniversary of Mr.
Sonu ₹ 4,750.
(vi) A four seater dining table was provided to Mr. Sonu at his residence. This was
purchased by the company on 1.5.2021 for ₹ 60,000 and sold to Mr. Sonu on 1.8.2024
for ₹ 30,000.
(vii) Personal purchases through credit card provided by the company amounting to
₹ 10,000 was paid by the company. No part of the amount was recovered from Mr.
Sonu.
(viii) A Maruti Suzuki car which was purchased by the company on 16.7.2021 for ₹
2,50,000 was sold to Mr. Sonu on 14.7.2024 for ₹ 80,000.
Other income received by the assessee during the previous year 2024-25:
Particulars ₹
(a) Interest on Fixed Deposits with a company 5,000
(b) Income from specified mutual fund 3,000
(c) Interest on bank fixed deposits of a minor married 3,000
daughter
(ix)Contribution to LIC towards premium under section 80CCC ₹ 1,00,000
(x) Deposit in PPF Account made during the year 2024-25 ₹ 40,000
Compute the taxable income of Mr. Sonu for the Assessment year 2025-26 assuming he
is not opting for section 115BAC.

Solution
Computation of taxable income of Mr. Sonu for the A.Y. 2025-26
Particulars ₹ ₹
(a) Income from Salaries (See Working Note below) 6,85,200
(b) Income from Other Sources
 46
CA Jasmeet Singh

(i) Interest on fixed deposit with a company 5,000

(ii) Income from specified mutual fund 3,000
(iii) Interest on Fixed Deposit received by minor
daughter (₹ 3,000 - ₹ 1500) 1,500 9,500
Gross total income 6,94,700
Less: Deductions under Chapter VI-A
Section 80C – PPF 40,000
Section 80CCC 1,00,000 1,40,000
Total Income 5,54,700
Working Note:
Computation of salary income of Mr. Sonu for the A.Y. 2025-26
Particulars ₹
Salary [₹ 46,000 x 12] 5,52,000
Medical facility [in the hospital maintained by the company is _
exempt]
Rent free accommodation
10% of salary is taxable (i.e. ₹ 5,52,000 × 10% as per Rule 3(1)) 55,200
Valuation of perquisite of interest on loan
[Rule 3(7)(i)] – Perquisite value would be 10% as reduced by actual rate of 24,000
interest charged i.e. [10% - 6% = 4% x ₹ 6,00,000]
Gift given on the occasion of wedding anniversary ₹ 4,750 is exempt, since -
its value is less than ₹ 5,000
Use of dining table for 4 months
[₹ 60,000 x 10 /100 x 4 /12] 2,000
Perquisite on sale of dining table
Cost 60,000
Less: Depreciation on straight line method @ 10% for 3 years 18,000
Written Down Value 42,000
Less: Amount paid by the assessee 30,000 12,000
Purchase through credit card – not being a privilege but 10,000
covered by section 17(2)(iv)
Perquisite on sale of car
Original cost of car 2,50,000
Less: Depreciation from 16.7.2021 to 15.7.2022 @ 20% 50,000
2,00,000
Less: Depreciation from 16.7.2022 to 15.7.2023 @ 20% 40,000
Value as on 14.07.2024- being the date of sale to employee 1,60,000
Less: Amount received from the assessee on 14.07.2024 80,000 80,000
Gross Salary 7,35,200
Less: Standard deduction under section 16(ia) 50,000
Taxable Salary 6,85,200
Note: Under Rule 3(7)(viii), while calculating the perquisite value of benefit to the
employee arising from the transfer of any movable asset, the normal wear and tear is
to be calculated in respect of each completed year during which the asset was put to
use by the employer. In the given case the third year of use of car is completed on
 47
CA Jasmeet Singh

15.7.2024 whereas the car was sold to the employee on 14.7.2024. The solution worked
out above provides for wear and tear for only two years.

Illustration 16 [MTP Nov 2023]

Mr. Raj, aged 52 years a resident Indian, has furnished the following particulars for the
year ended 31.03.2025:
(i) He occupies ground floor of his residential building and has let out first floor for
residential use at an annual rent of ₹ 3,34,000. He has paid municipal taxes of ₹
30,000 for the current financial year. Both these floors are of equal size.
(ii) As per interest certificate from ICICI bank, he paid ₹ 1,80,000 as interest and ₹
95,000 towards principal repayment of housing loan borrowed for the above
residential building.
(iii) He owns an industrial undertaking established in a SEZ and which had commenced
operation during the financial year 2021-22. Total turnover 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.
He employed 20 new employees for the said industrial undertaking during the
previous year 2024-25. Out of 20 employees, 12 were employed on 1st May 2024 for
monthly emoluments of ₹ 18,000 and remaining were employed on 1st August 2024
on monthly emoluments of ₹ 12,000. All these employees participate in recognised
provident fund and they are paid their emolument s directly to their bank accounts.
(iv) He earned ₹ 30,000 and ₹ 45,000 as interest on saving bank deposits and fixed
deposits respectively.
(v) He also sold his vacant land on 01.12.2024 for ₹ 15 lakhs. The stamp duty value of land
at the time of transfer was ₹ 16 lakhs. The FMV of the land as on 1st April, 2001 was ₹
4.8 lakhs and Stamp duty value on the said date was ₹ 4 lakhs. This land was
acquired by him on 15.09.1997 for ₹ 2.80 lakhs. He had incurred registration
expenses of ₹ 12,000 at that time. The cost of inflation index for the financial year
2024-25 and 2001-02 are 363 and 100 respectively.
(vi) He paid insurance premium of ₹ 49,000 towards life insurance policy of his son, who
is not dependent on him.
You are requested to compute his total income and tax liability of Mr. Raj for the
Assessment Year 2025-26, Assume Mr. Raj does not opt for the provisions of section
115BAC.

Solution
Computation of total income of Mr. Raj for A.Y. 2025-26
Particulars ₹ ₹ ₹
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received is taken as GAV, 3,34,000
in the absence of other information]
Less: Municipal taxes paid by him in the P.Y.
2024-25 pertaining to let out portion [₹ 30,000/2] 15,000
 48
CA Jasmeet Singh

Net Annual Value (NAV) 3,19,000

Less: Deduction u/s 24
(i) 30% of ₹ 3,19,000 95,700
(ii) Interest on housing loan [₹ 1,80,000/2] 90,000 1,85,700
Self-occupied portion [Ground Floor] 1,33,300
Annual Value Nil
[No deduction is allowable in respect of municipal
taxes paid]
Less: Interest on housing loan 90,000
(90,000)
Income from house property [₹ 1,33,300 – ₹ 43,300
90,000]
II Profits and gains of business or profession
Income from SEZ unit 45,00,000

III Capital Gains

Long-term capital gains on sale of land (since held
for more than 24 months)
Full Value of Consideration [Actual consideration 15,00,000
of ₹ 15 lakhs, since stamp duty value of ₹ 16 lakhs
does not exceed actual consideration by more
than 10%]
Less: Cost of acquisition 4,00,000 11,00,000
Cost of acquisition
Higher of -
- Actual cost ₹ 2.80 lakhs + ₹ 0.12 lakhs = ₹ 2.92
lakhs and
- Fair Market Value (FMV) as on 1.4.2001 = ₹ 4.8
lakhs but cannot exceed stamp duty value of ₹ 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 45,000 75,000
Gross Total Income 57,18,300
Less: Deduction u/s 10AA 13,50,000
[Since the industrial undertaking is established in
SEZ, it is entitled to deduction u/s 10AA@100% of
export profits, since P.Y.2024-25 being the 4th
year of operations]
[Profits of the SEZ x Export Turnover/Total
Turnover] x 100%
[₹ 45 lakhs x ₹ 120 lakhs/ ₹ 400 lakhs x 100%]
Less: Deduction under Chapter VI-A
Deduction under section 80C
Repayment of principal amount of housing loan 95,000
 49
CA Jasmeet Singh

Insurance premium paid on life insurance policy

of son allowable, even though not dependent on 49,000
Mr. Raj 1,44,000
Deduction under section 80JJAA 9,43,200
30% of the employee cost of the new employees
employed during the P.Y. 2024-25 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)]
Deduction under section 80TTA 10,000
Interest on savings bank account, restricted to
₹ 10,000
10,97,200
Total income 32,71,100

Computation of tax liability of Mr. Raj for A.Y.2025-26 under the normal provisions of
the Act
Particulars ₹ ₹
Tax on total income of ₹ 32,71,100
Tax on LTCG of ₹ 11,00,000@12.5% 1,37,500
Tax on remaining total income of 21,71,100
Upto ₹ 2,50,000 Nil
₹ 2,50,001 – ₹ 5,00,000[@5% of ₹ 2.50 lakh] 12,500
₹ 5,00,001 – ₹ 10,00,000[@20% of ₹ 5,00,000] 1,00,000
₹ 10,00,001 – ₹ 21,71,100[@30% of ₹ 11,71,100] 3,51,330 4,63,830
6,01,330
Add: Health and education cess@4% 24,053.2
Total tax liability 6,25,383.2
Tax liability (rounded off) 6,25,380

Computation of tax liability of Mr. Raj for A.Y.2025-26 under the special provisions of
the Act (Alternate Minimum Tax)
Particulars ₹
Computation of adjusted total income
Total income as per the normal provisions of the Act 32,71,100
Add: Deduction u/s 10AA 13,50,000
Deduction u/s 80JJAA 9,43,200
55,64,300
AMT@18.5% 10,29,395.5
Add: HEC@4% 41,175.82
AMT liability 10,70,571.32
AMT liability (rounded off) 10,70,570
Since the regular income tax payable is less than the AMT, the adjusted total income of
 50
CA Jasmeet Singh

₹ 55,64,300 would be deemed to be the total income and tax would be payable @18.5%
plus HEC@4%. The total tax liability would be ₹ 10,70,570. In this case, AMT credit
of ₹ 4,45,190 (₹ 10,70,570 – ₹ 6,25,380) can be carried forward.