CA INT Super 30 Q DT PDF

Super 30 Questions for India Tour CA Inter
Question: 1
Mr. Raj, aged 45 years, commenced operations of the business of a new three-star hotel in Mumbai,
Maharashtra on 1.4.2022. He incurred capital expenditure of ` 90 lakh on land in March, 2022
exclusively for the above business, and capitalized the same in his books of account as on 1st April,
2022. Further, during the P.Y. 2022-23, he incurred capital expenditure of ` 2.50 crore (out of which
` 1 crore was for acquisition of land and ` 1.50 crore was for acquisition of building) exclusively for
the above business. The payments in respect of the above expenditure were made by account payee
cheque. The profits from the business of running this hotel (before claiming deduction under section
35AD) for the A.Y.2023-24 is ` 75 lakh. Mr. Raj is not opting for section 115BAC.
Mr. Viraj, brother of Mr. Raj, has commenced the business of manufacture of apparel on 1.10.2022.
He employed 220 new employees during the P.Y.2022-23, the details of whom are as follows –
No. of Date of employment Regular/Casual Total monthly emoluments per
employees employee (`)
(i) 40 1.10.2022 Regular 24,000
(ii) 80 1.10.2022 Regular 24,500
(iii) 50 1.11.2022 Casual 25,500
(iv) 30 1.11.2022 Regular 25,000
(v) 20 1.12.2022 Casual 24,000
All regular employees participate in Recognized Provident Fund and their emoluments are paid by
account payee cheque. The profits and gains derived from manufacture of apparel that year is ` 80
lakhs and his total turnover is ` 11 crores.
Based on the facts of the case scenario given above, choose the most appropriate answer to the
following questions:
(i) Assuming that Mr. Raj has fulfilled all the conditions specified for claim of deduction under
section 35AD and has not claimed any deduction under Chapter VI-A under the heading “C. –
Deductions in respect of certain incomes”, what would be the quantum of deduction under section
35AD, which he is eligible to claim as deduction for A.Y.2023-24?
(a) ` 340 lakh
(b) ` 250 lakh
(c) ` 190 lakh
(d) ` 150 lakh
(ii) Assuming that Mr. Raj also has another existing business of running a four-star hotel in
Ahmedabad, which commenced operations twenty years back, the profits from which are ` 130
lakh for the A.Y.2023-24, what would be its income chargeable/loss under the head “Profits and
gains of business or profession” for the A.Y.2023-24?
(a) ` 130 lakh
(b) ` 55 lakh
(c) (` 20 lakh)
(d) ` 15 lakh
(iii) If, out of the amount of ` 1 crore paid for acquisition of land in the P.Y.2022-23, ` 50 lakh was
paid by way of cash, what would be the answer to questions (i) and (ii) above?
(a) ` 150 lakh; ` 55 lakh, respectively
(b) ` 100 lakh; ` 105 lakh, respectively
2 Super 30 Questions by CA BB for May-2023 CA Inter
(c) ` 290 lakh; (` 85 lakh), respectively
(d) ` 140 lakh; ` 65 lakh, respectively
(iv) Considering the assumption given in question (ii) above, what would be the tax payable (rounded
off) by Mr. Raj for A.Y.2023-24?
(a) ` 16,73,100
(b) ` 42,03,940
(c) ` 2,73,000
(d) ` 15,21,000
(v) Would Mr. Viraj be eligible for deduction under section 80JJAA in the A.Y.2023 -24? If so, what
is the quantum of deduction?
(a) No, he would not be eligible for deduction u/s 80JJAA since the employees have not been
employed for 240 days in the P.Y.2022-23. He can, however, claim deduction thereunder in
the P.Y.2022-23
(b) Yes; `63,81,000
(c) Yes; ` 58,68,000
(d) Yes; ` 52,56,000
Answer Key
Question No. Answer
I (d)
II (b)
III (a)
IV (b)
V (b)
Question: 2
Mrs. Shalini is a retired Government employee. She was born on 01.04.1943 in India. She is residing
in Delhi. She stayed with her elder son Mr. Nakul from 1st May, 2022 to 15th October, 2022, who is
residing in Australia. She stayed in India for 361 days during the 4 previous years preceding the
previous year 2022-23. During the previous year 2022-23, pension of ` 7,15,461 is credited in her
account with State Bank of India, Uttam Nagar Branch, Delhi after deducting tax at source of ` 14,565.
She received interest of ` 4,352 on her saving A/c with SBI during the previous year 2022-23. She also
received interest of ` 67,500 on Fixed Deposits with Canara Bank in the month of April, 2022.
She has purchased two life insurance policies for her son Mr. Yuvaan and married daughter Mrs. Kajal,
the details of which are as follows:
Person insured Policy Date of payment Sum Assured Premium paid
purchased on of premium
Mr. Yuvaan (50 years 15.10.2021 23.10.2022 ` 9,84,655 ` 1,00,388
old)
Mrs. Kajal (45 years old) 20.09.2021 25.09.2022 ` 2,00,000 ` 17,000
She has taken a medical insurance for herself for which she paid an amount of ` 35,000 towards health
insurance premium by A/c payee cheque. She incurred ` 7,500 towards preventive health check-up of
herself and her husband in cash. She also incurred medical expenditure of ` 25,000 in cash in the month
of January 2023 for her husband. In the month of March 2023, she incurred medical expenditure of `
10,500 for herself, which is paid by account payee cheque. She has given a wristwatch of ` 10,000 on
Super 30 Questions by CA BB for May-2023 CA Inter 3
her husband’s 85th birthday. Her husband is resident in India for the P.Y. 2022-23. Mrs. Shalini does
not opt to pay tax under section 115BAC.
Based on the facts of the case scenario given above, choose the most appropriate answer to the
following questions:
(i) What would be the amount of deduction under Chapter VI-A available to Mrs. Shalini for the A.Y.
2023-24?
(a) ` 2,05,466
(b) ` 2,08,466
(c) ` 2,07,388
(d) ` 2,18,466
(ii) What would be the Gross total income of Mrs. Shalini for the assessment year 2023-24?
(a) ` 7,87,313
(b) ` 8,04,878
(c) ` 7,59,378
(d) ` 8,09,378
(iii) What is the amount of net tax payable/(refundable) of Mrs. Shalini for the A.Y. 2023-24?
(a) (` 10,850)
(b) (` 1,790)
(c) (` 1,080)
(d) (` 450)
(iv) What would be the total income of Mrs. Shalini for the assessment year 2023-24, if she opts to
pay tax under section 115BAC?
(a) ` 7,51,880
(b) ` 8,01,880
(c) ` 7,87,310
(d) ` 8,09,380
(v) What is the amount of net tax payable/(refundable) of Mrs. Shalini for the A.Y. 2023-24, if she
opts to pay tax under section 115BAC?
(a) ` 22,760
(b) ` 13,200
(c) ` 26,200
(d) ` 25,030
(vi) Pankaj gifted an amount of ` 3,00,000 to his wife, Nikki and ` 2,00,000 to his daughter, Pinki
aged 20 years, on 1st April 2019. Both Nikki and Pinki invested the amounts on the same date in
Government of India 11% Taxable Bonds. The interest accrues yearly and is reinvested in the
same bonds. Determine what will be the amount taxable in hands on Nikki for A.Y. 2023-24?
(a) ` 4,473
(b) ` 12,132
(c) ` 33,000
(d) Nil
Answer Key
Question No. Answer
I (a)
II (c)
III (a)
IV (d)
V (c)
VI (b)
Question: 3
Mr. Kamal, a resident and ordinarily resident aged 58 years, is engaged in the business of
manufacturing of steel. 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 31st March, 2023
Particulars (`) Particulars (`)
To Administrative expenses 6,45,000 By Gross Profit 88,45,000
To Salaries & wages 30,00,000 By Profit on sale of asset of scientific 2,00,000
research
To Interest on loans 11,25,000 By Winning from lottery (Net of 47,250
TDS @ 30%)
To Depreciation 9,25,500
To Professional fees 4,05,000
To Rent, rates & taxes 4,20,000
To Travelling & conveyance 2,10,000
To Net Profit 23,61,750 ____________
Total 90,92,250 Total 90,92,250

Explanatory information:
(i) Opening and closing stock of finished goods were undervalued by 10%. Opening stock of `
3,30,000 and Closing stock of ` 4,38,000 was shown.
(ii) Salaries & wages include following items:
(a) Contributed 20% of basic salary in National Pension Scheme referred in section 80CCD for
an employee Mr. Ganesh who has withdrawn basic salary of ` 4,00,000 and Dearness
allowance is 40% of basic salary. 50% of Dearness allowance forms part of the salary.
(b) Some of the employees opted for retirement under the voluntary retirement scheme; a sum
of ` 3,50,000 was paid to them on 1st January, 2023.
(iii) Interest on loan includes interest paid @ 15% per annum on loan of ` 18,00,000 which was taken
from State Bank of India on 01.07.2022 for purchase of new electric car of ` 20,00,000. The car
is used for personal purpose.
(iv) Depreciation allowable as per Income-tax Rules, 1962 is ` 5,50,000 but during the calculation of
such depreciation following addition was not considered:
Motor car purchased for ` 3,50,000 for supply of finished goods to dealers on 25-09-2022.
(v) An asset was purchased for ` 7,00,000 on 17-11-2021 for conducting scientific research and the
deduction was claimed under section 35 of the Income-tax Act, 1961. This asset was sold on 05-
10-2022 for a consideration of ` 9,00,000.
Other information:
A plot of Industrial land which was used by Mr. Kamal for business purpose for last 10 years was
compulsorily acquired by Central Government on 07.10.2021. The compensation of ` 15,00,000 was
received on 27.01.2023. Such property was purchased by him on 08.10.2006 for ` 2,50,000. He has
purchased another plot of industrial land on 15.04.2023 for ` 7,00,000. Government has also paid `
1,05,000 as interest on such compensation on 28.02.2023.
Cost Inflation Indices: FY 2022-23: 331, FY 2021-22: 317, FY 2006-07: 122
Compute the total income and tax liability of Mr. Kamal for the assessment year 2023-24 assuming
that he has not opted for the provisions of section 115BAC.
Answer:
Computation of total income of Mr. Kamal for A.Y. 2023-24
Particulars ` ` `
I. Income from business or profession
Net Profit 23,61,750
Add: Items debited but not allowable/item not
credited but taxable while computing business
income
- Employer’s contribution to NPS in 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., ` 32,000 [` 80,000, being 20% of ` 4,00,000
less ` 48,000 being 10% of` 4,80,000 (` 4,00,000
+ 20% of ` 4,00,000] has to be added back. 32,000
- VRS expenditure - 1/5th of expenditure on
voluntary retirement scheme is allowable over a
period of five years u/s 35DDA. Since whole
amount of expenditure is debited to Profit and Loss
A/c, 4/5th has to be added back [` 3,50,000 x 4/5]. 2,80,000
- Interest on loan taken for purchase of electric car
used for personal purpose not allowable as
deduction while computing business income as
being expense of personal nature. Thus, ` 2,02,500
[` 18,00,000 x 15% x 9/12] has to be added back,
since the same forms part of interest on loan debited
to profit and loss account. 2,02,500
- Sale proceeds of asset acquired for conducting
scientific research taxable as business income
under section 41(3) in the year of sale to the extent
of lower of ` 7,00,000 (being the deduction allowed
u/s 35) and ` 9,00,000 being the excess of sale
proceeds and deduction allowed u/s 35 i.e., (`
9,00,000 + ` 7,00,000) over the capital expenditure
incurred of ` 7,00,000 7,00,000
Particulars ` ` `
- Undervaluation of stock [(` 4,38,000 - ` 3,30,000)
x 10/90] 12,000
Note: Alternatively, undervaluation of closing
stock i.e., ` 48,667 can be added back and under
valuation of opening stock i.e., ` 36,667 can be
reduced from net profits.
- Depreciation as per books of A/c 9,25,500
21,52,000
45,13,750
Less: Depreciation as per Income-tax Rules 5,50,000
Depreciation on Motor car purchased for supply of
finished goods [` 3,50,000 x 15%] 52,500
6,02,500
39,11,250
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 Research
[Taxable under the head “Capital Gains”] 2,00,000
- Winning from lottery [Taxable under the head
“Income from other sources”] 47,250
2,47,250
36,64,000
II. Capital Gain
Short-term capital gains
Sale of asset acquired for conducting scientific
research
Sales consideration 9,00,000
Less: Cost of acquisition 7,00,000
Short- term capital gain 2,00,000
Long-term capital gains
Compulsory acquisition of industrial plot by the
Central Government taxable as per section 45(5)
Compensation received 15,00,000
Less: Indexed cost of acquisition [` 2,50,000 x
317/122] 6,49,590
Long-term capital gain [since such plot is held for more 8,50,410
than 24 months]
Less: Exemption u/s 54D
- Acquisition of industrial plot within 3 years 7,00,000
1,50,410 3,50,410
Particulars ` ` `
III. Income from other sources
Winning from lottery [` 47,250 x 100/70] 67,500
Interest on enhanced compensation 1,05,000
Less: 50% of enhanced compensation 52,500
52,500 1,20,000
Gross Total Income 41,34,410
Less: Deduction under Chapter VI-A
Deduction under section 80EEB
Interest on loan taken for purchase of electric
vehicle allowable as deduction to the extent of 1,50,000
Total Income 39,84,410
Computation of tax liability of Mr. Kamal for A.Y.2023-24
Particulars ` `
Tax on long-term capital gains @20% of ` 1,50,410 30,082
Tax on winning from lottery @30% of ` 67,500 20,250
Tax on total income (excluding LTCG and winning from lottery) of `
37,66,500
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- ` 37,66,500 [@30% of ` 27,66,500] 8,29,950
9,42,450
9,92,782
Add: Health and education cess@4% 39,711
Tax liability 10,32,493
Tax liability (rounded off) 10,32,490
Question: 4
Mr. Aditya is a proprietor of Star Stores having 2 units. On 1.4.2022, he has transferred Unit 2, which
he started in 2004-05, by way of slump sale for a total consideration of ` 18 lakhs. The professional
fees & brokerage paid for this transfer are ` 78,000. His Balance Sheet as on 31-03-2022 is as under:
Liabilities ` Assets Unit 1 ` Unit 2 ` Total
Own Capital 20,50,000 Land 12,75,000 7,50,000 20,25,000
Revaluation reserve 2,50,000 Furniture 2,00,000 5,00,000 7,00,000
Bank Loan (70% for Unit 1) 8,50,000 Debtors 2,00,000 3,50,000 5,50,000
Trade Creditors (20% for Unit 2) 4,50,000 Patents - 7,25,000 7,25,000
Unsecured Loan
(30% for Unit 2) 4,00,000
40,00,000 16,75,000 23,25,000 40,00,000

Other Information:
1. Land of Unit 2 was purchased at ` 5,00,000 in the year 2004 and revalued at ` 7,50,000 as on
31.3.2022.
2. No individual value of any asset is considered in the transfer deed.
3. Patents were acquired on 01-12-2020 on which no depreciation has been provided.
4. Furniture of Unit 2 of ` 5,00,000 were purchased on 01-12-2021 on which no depreciation has
been provided.
5. Fair market value of capital asset transferred by way of slump sale of Unit 2 is ` 18,10,000.
Compute the capital gain for A.Y. 2023-24.
Answer:
As per section 50B, any profits and gains arising from the slump sale effected in the previous year shall
be chargeable to income-tax as capital gains arising from the transfer of capital assets and shall be
deemed to be the income of the previous year in which the transfer took place.
If the assessee owned and held the undertaking transferred under slump sale for more than 36 months
before slump sale, the capital gain shall be deemed to be long-term capital gain. Indexation benefit is
not available in case of slump sale as per section 50B(2).
Computation of capital gain on slump sale of Unit 2
Particulars `
Full value of consideration for slump sale of Unit 2 [Fair market value of capital asset 18,10,000
transferred by way of slump sale (i.e., ` 18,10,000) or fair market value of the
consideration received (value of the monetary consideration received i.e., `
18,00,000) whichever is higher]
Less: Expenses on sale [professional fees & brokerage] 78,000
Net full value of consideration 17,32,000
Less: Cost of acquisition, being the net worth of Unit 2 (Note 1) 13,35,781
Long term capital gains arising on slump sale 3,96,219
(The capital gains is long-term as the Unit 2 is held for more than 36 months)
Notes
1. Computation of net worth of Unit 2
Particulars `
(1) Book value of non-depreciable assets
(i) Land (Revaluation not to be considered) 5,00,000
(ii) Debtors 3,50,000
(2) Written down value of depreciable assets under section 43(6)
(i) Furniture (See Note 2) 4,75,000
(ii) Patents (See Note 3) 4,75,781
Aggregate value of total assets 18,00,781
Less: Current liabilities of Unit 2
Bank Loan [` 8,50,000 x 30%] 2,55,000
Trade Creditors [` 4,50,000 x 20%] 90,000
Unsecured Loan [` 4,00,000 x 30%] 1,20,000 4,65,000
Net worth of unit 2 13,35,781
2. Written down value of furniture as on 1.4.2022
Value of patents `
Cost as on 1.12.2021 5,00,000
Less: Depreciation @ 10% x 50% for Financial Year 2021-22 25,000
WDV as on 1.4.2022 4,75,000
3. Written down value of patents as on 1.4.2022
Value of patents `
Cost as on 1.12.2020 7,25,000
Less: Depreciation @ 25% x 50% for Financial Year 2020-21 90,625
WDV as on 1.4.2021 6,34,375
Less: Depreciation@25% for Financial Year 2021-22 1,58,594
WDV as on 1.4.2022 4,75,781
Question: 5
Mr. Samrat and his wife, Mrs. Komal, holds 12% voting power each in ABC (P) Ltd. Mr. Samrat and
Mrs. Komal are working in ABC (P) Ltd. However, Mrs. Komal is not qualified for the job. From the
following information given in respect of F.Y. 2022-23, you are required to compute the gross total
income of Mr. Samrat and Mrs. Komal for the A.Y. 2023-24
(i) Dividend of ` 22,500 and ` 45,000 is received by Mr. Samrat and Mrs. Komal, respectively, from
ABC (P) Ltd. Mr. Samrat has instructed the company to pay 50% of his dividend to Ms. Kajal,
daughter of his deceased brother.
(ii) Salary earned by Mr. Samrat and Mrs. Komal from ABC (P) Ltd. is ` 8,50,000 and ` 5,50,000,
respectively.
(iii) Business income earned by Mr. Samrat from his sole proprietary business is ` 15,60,000
(iv) Interest on fixed deposit earned by Mrs. Komal of ` 9,00,000.
(v) Their son, Akash, aged 10 years having PAN, received interest of ` 54,000 from bank on a fixed
deposit created by his grandfather in his name.
Answer:
Computation of Gross Total Income of Mr. Samrat and Mrs. Komal for A.Y. 2022-24
Particulars Mr. Samrat Mrs. Komal
` ` ` `
Salary of Samrat 8,50,000 -
Less: Standard deduction under section -
16(ia) 50,000 8,00,000
Salary of Komal 5,50,000 -
Less: Standard deduction under section 50,000 5,00,000 -
16(ia)
[Salary earned by Mrs. Komal has to be
included in the total income of Mr. Samrat,
since he has substantial interest in the
concern (i.e., having 24% voting power in
ABC (P) Ltd., along with his wife) and Mrs.
Komal does not have any professional
qualification for the job.]
Particulars Mr. Samrat Mrs. Komal
` ` ` `
Business Income 15,60,000 -
Dividend income from ABC (P) Ltd. 50,000 50,000
[Taxable in the hands of Mr. Samrat as per [22,500/90 x [45,000/90
section 60, since he transferred the income 100 x 2] x 100]
i.e., dividend without transferring the asset
i.e., shares]
Interest on Fixed Deposit earned by Mrs.
Komal
Total Income (before including minor’s - 9,00,000
income) 29,10,000 9,50,000
Income of minor child to be included in Mr. 60,000
Samrat’s income, since his total income
before including minor’s income is higher
than that of Mrs. Komal. [` 54,000/90 x 100]
Less: Exemption of ` 1,500 u/s 10(32) in
respect of the income of each child so
included. 1,500 58,500
Gross Total Income 29,68,500 9,50,000
Question: 6
Miss Charlie, an American national, got married to Mr. Radhey of India in USA on 2.03.2022 and came
to India for the first time on 16.03.2022. She left for USA on 19.9.2022. She returned to India again on
27.03.2023. While in India, she had purchased a show room in Mumbai on 30.04.2022, which was
leased out to a company on a rent of ` 25,000 p.m. from 1.05.2022. She had taken loan from a bank for
purchase of this show room on which bank had charged interest of ` 97,500 upto 31.03.2023. She had
received the following cash gifts from her relatives and friends during 1.4.2022 to 31.3.2023:
- From parents of husband ` 51,000
- From married sister of husband ` 11,000
- From two very close friends of her husband (` 1,51,000 and ` 21,000) ` 1,72,000
(a) Determine her residential status and compute the total income chargeable to tax along with the
amount of tax liability on such income for the Assessment Year 2023-24.
(b) Would her residential status undergo any change, assuming that she is a person of Indian origin
and her total income from Indian sources is `18,00,000 and she is not liable to tax in USA?
Answer:
I. Under section 6(1), an individual is said to be resident in India in any previous year, if he/she
satisfies any one of the following conditions:
(i) He/she has been in India during the previous year for a total period of 182 days or more, or
(ii) He/she has been in India during the 4 years immediately preceding the previous year for a
total period of 365 days or more and has been in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he/she is a resident. If both
the above conditions are not satisfied, the individual is a non-resident.
Therefore, the residential status of Miss Charlie, an American National, for A.Y.2023-24 has to be
determined on the basis of her stay in India during the previous year relevant to A.Y. 2023-24 i.e.,
P.Y.2022-23 and in the preceding four assessment years.
Her stay in India during the previous year 2022-23 and in the preceding four years are as under:
P.Y. 2022-23
01.04.2022 to 19.09.2022 - 172 days
27.03.2023 to 31.03.2023 - 5 days
Total 177 days
Four preceding previous years
P.Y. 2021-22 [1.4.2021 to 31.3.2022] - 16 days
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
P.Y.2019-20 [1.4.2019 to 31.3.2020] - Nil
P.Y.2018-19 [1.4.2018 to 31.3.2019] - Nil
Total 16 days
The total stay of the assessee during the previous year in India was less than 182 days and during
the four years preceding this year was for 16 days. Therefore, due to non-fulfillment of any of the
two conditions for a resident, she would be treated as non-resident for the Assessment Year 2023-
24.
Computation of total income of Miss Charlie for the A.Y. 2023-24
Particulars ` `
Income from house property
Show room located in Mumbai remained on rent from 2,75,000
01.05.2022 to 31.03.2023 @ ` 25,000/- p.m.
Gross Annual Value [` 25,000 x 11] (See Note 1 below)
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,75,000
Less: Deduction under section 24
30% of NAV 82,500
Interest on loan 97,500 1,80,000 95,000
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.
- `50,000 received from parents of husband would be exempt,
since parents of husband fall within the definition of Nil
‘relative’ and gifts from a relative are not chargeable to tax.
- `11,000 received from married sister of husband is exempt,
since sister-in-law falls within the definition of relative and Nil
gifts from a relative are not chargeable to tax.
- Gift received from two friends of husband ` 1,51,000 and `
21,000 aggregating to ` 1,72,000 is taxable under section
56(2)(x) since the aggregate of ` 1,72,000 exceeds ` 50,000.
1,72,000 1,72,000
(See Note 2 below)
Total income 2,67,000
Computation of tax liability by Miss Charlie for the A.Y. 2023-24
Particulars `
Tax on total income of ` 2,67,000 850
Add: Health and Education cess@4% 34
Total tax liability 884
Total tax liability (rounded off)
880
Notes:
1. Actual rent received has been taken as the gross annual value in the absence of other
information (i.e. Municipal value, fair rental value and standard rent) in the question.
2. If the aggregate value of taxable gifts received from non-relatives exceed ` 50,000 during the
year, the entire amount received (i.e. the aggregate value of taxable gifts received) is taxable.
Therefore, the entire amount of ` 1,72,000 is taxable under section 56(2)(x).
3. Since Miss Charlie is a non-resident for the A.Y. 2023-24, rebate under section 87A would not
be available to her, even though her total income does not exceed ` 5 lacs.
4. The tax liability of Miss Charlie would be the same even if she opts to pay tax as per section
115BAC, since she would be eligible for deduction under section 24(b), for interest on housing
loan in respect of let out property under regular provisions as well as under section 115BAC
of the Income-tax Act, 1961.
II. Residential status of Miss Charlie in case she is a person of Indian origin and her total income
from Indian sources exceeds ` 18,00,000
If she is a person of Indian origin and her total income from Indian sources exceeds ` 15,00,000 (`
18,00,000, in her case), the condition of stay in India for a period exceeding 120 days during the
previous year and 365 days during the four immediately preceding previous years would be
applicable for being treated as a resident. Since her stay in India exceeds 120 days in the P.Y.2022-
23 but the period of her stay in India during the four immediately preceding previous years is less
than 365 days (only 16 days), her residential status as per section 6(1) would continue to be same
i.e., non-resident in India.
Further, since she is not a citizen of India, the provisions of section 6(1A) deeming an individual
to be a citizen of India would not get attracted in her case, even though she is a person of Indian
origin and her total income from Indian sources exceeds ` 15,00,000 and she is not liable to pay
tax in USA.
Therefore, her residential status would be non-resident in India for the previous year 2022-23.
Question: 7
Ms. Purvi, aged 55 years, is a Chartered Accountant in practice. She maintains her accounts on cash
basis. Her Income and Expenditure account for the year ended March 31, 2023 reads as follows:
Expenditure (`) Income (`) (`)
Salary to staff 15,50,000 Fees earned:
Stipend to articled 1,37,000 Audit 27,88,000
Assistants Taxation services 15,40,300
Incentive to articled 13,000 Consultancy 12,70,000 55,98,300
Assistants Dividend on shares of
X Ltd., an Indian
company (Gross) 10,524
Office rent 12,24,000 Income from UTI 7,600
(Gross)
Expenditure (`) Income (`) (`)
Printing and 12,22,000 Honorarium received 15,800
Stationery from various
institutions for
valuation of answer
papers
Meeting, seminar and 31,600 Rent received From 85,600
conference residential flat let out
Purchase of car (for 80,000
official use)
Repair, maintenance 4,000
and petrol of car
Travelling expenses 5,25,000
Municipal tax paid in 3,000
respect of house property
Net Profit 9,28,224
57,17,824 57,17,824
Other Information:
(i) Allowable rate of depreciation on motor car is 15%.
(ii) Value of benefits received from clients during the course of profession is ` 10,500.
(iii) Incentives to articled assistants represent amount paid to two articled assistants for passing IPCC
Examination at first attempt.
(iv) Repairs and maintenance of car include ` 2,000 for the period from 1-10-2022 to 30-09-2023.
(v) Salary includes ` 30,000 to a computer specialist in cash for assisting Ms. Purvi in one
professional assignment.
(vi) The travelling expenses include expenditure incurred on foreign tour of ` 32,000 which was
within the RBI norms.
(vii) Medical Insurance Premium on the health of dependent brother and major son dependent on her
amounts to ` 5,000 and ` 10,000, respectively, paid in cash.
(viii) She invested an amount of ` 10,000 in National Saving Certificate.
(ix) She has paid ` 70,000 towards advance tax during the P.Y. 2022-23. Compute the total income
and tax payable of Ms. Purvi for the assessment year 2023-24.
Answer:
Computation of total income and tax payable of Ms. Purvi for the A.Y.
2023-24 under the regular provisions of the Act
Particulars ` `
Income from house property (See Working Note 1) 57,820
Profit and gains of business or profession (See Working Note 2) 9,20,200
Income from other sources (See Working Note 3) 33,924
Less: Deductions under Chapter VI-A (See Working Note 4) 10,000
Particulars ` `
Total Income (rounded off) 10,01,940
Tax on total income
Upto ` 2,50,000 Nil
` 2,50,001 - ` 5,00,000 @5% 12,500
` 5,00,001 - ` 10,00,000 @20% 1,00,000
` 10,00,001 - `10,01,940 @ 30% 582 1,13,082
Add: Health and Education cess @ 4% 4,523
Total tax liability 1,17,605
Less: Advance tax paid 70,000
Less: Tax deducted at source on dividend income from an Indian 1,052
Company u/s 194
Tax deducted at source on income from UTI u/s 194K 760 1,812
Tax Payable 45,793
Tax Payable (rounded off) 45,790
Computation of tax payable in accordance with the provisions of section 115BAC
Particulars ` `
[Income under the “Income from house property”
“Profits and gains from business or profession” and “Income from
other sources” would remain the same even if Ms. Purvi opts for
special provisions under section 115BAC, since deduction claimed by
her under these heads is allowable even under section 115BAC]
Less: Deductions under Chapter VI-A [No deduction is allowable Nil
under Chapter VI-A, by virtue of section 115BAC(2)]
Total Income (rounded off) 10,11,940
Tax on total income
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 @5% 12,500
` 5,00,000 - ` 7,50,000 @10% 25,000
` 7,50,000 - ` 10,00,000 @15% 37,500
` 10,00,000 – ` 10,11,940 @ 20% 2,388 77,388
Add: Health and Education cess @ 4% 3,096
Total tax liability 80,484
Less: Advance tax paid 70,000
Less: Tax deducted at source on dividend income from Indian 1,052
Companies u/s 194
Tax deducted at source on income from UTI u/s 194K 760 1,812
Tax Payable 8,672
Tax Payable (rounded off) 8,670
Since tax payable as per the provisions of section 115BAC is lower than the tax payable under the
regular provisions of the Income-tax Act, 1961, it would be beneficial for Ms. Purvi to opt for section
115BAC. She has to exercise this option on or before the due date of furnishing the return of income
i.e., 31st October 2023, in her case since she is liable to get her books of account audited. Further, since
she is having income from business or profession during the previous year 2022-23, if she opts for
section 115BAC for this previous year, the said provisions would apply for subsequent assessment
years as well.
Working Notes:
(1) Income from House Property
Particulars ` `
Gross Annual Value under section 23(1) 85,600
Less: Municipal taxes paid 3,000
Net Annual Value (NAV) 82,600
Less: Deduction u/s 24@30% of NAV 24,780 57,820
Note - Rent received has been taken as the Gross Annual Value in the absence of other information
relating to Municipal Value, Fair Rent and Standard Rent.
(2) Income under the head “Profits & Gains of Business or Profession”
Particulars ` `
Net profit as per Income and Expenditure account 9,28,224
Add: Expenses debited but not allowable
(i) Salary paid to computer specialist in cash disallowed under 30,000
section 40A(3), since such cash payment exceeds ` 10,000
(ii) Amount paid for purchase of car is not allowable under section 80,000
37(1) since it is a capital expenditure
(iii) Municipal Taxes paid in respect of residential flat let out
3,000 1,13,000
10,41,224
Add: Value of benefit received from clients during the course of 10,500
profession [taxable as business income under section 28(iv)]
10,51,724
Less: Income credited but not taxable under this head:
(i) Dividend on shares of X Ltd., an Indian company (taxable under 10,524
the head “Income from other sources")
(ii) Income from UTI (taxable under the head “Income from other 7,600
sources")
(iii) Honorarium for valuation of answer papers 15,800
(iv) Rent received from letting out of residential flat 85,600 1,19,524
9,32,200
Less: Depreciation on motor car @15% (See Note(i) below) 12,000
9,20,200
Notes:
(i) It has been assumed that the motor car was put to use for more than 180 days during the previous
year and hence, full depreciation @ 15% has been provided for under section 32(1)(ii).
Note: Alternatively, the question can be solved by assuming that motor car has been put to use for
less than 180 days and accordingly, only 50% of depreciation would be allowable as per the second
proviso below section 32(1)(ii).
(ii) Incentive to articled assistants for passing IPCC examination in their first attempt is deductible
under section 37(1).
(iii) Repairs and maintenance paid in advance for the period 1.4.2023 to 30.9.2023 i.e. for 6 months
amounting to ` 1,000 is allowable since Ms. Purvi is following the cash system of accounting.
(iv) ` 32,000 expended on foreign tour is allowable as deduction assuming that it was incurred in
connection with her professional work. Since it has already been debited to income and
expenditure account, no further adjustment is required.
(3) Income from other sources
Particulars `
Dividend on shares of X Ltd., an Indian company (taxable in the hands of 10,524
shareholders)
Income from UTI (taxable in the hands of unit holders) 7,600
Honorarium for valuation of answer papers 15,800
33,924
(4) Deduction under Chapter VI-A :
Particulars `
Deduction under section 80C (Investment in NSC) 10,000
Deduction under section 80D (See Notes (i) & (ii) below) Nil
Total deduction under Chapter VI-A 10,000
Notes:
(i) Premium paid to insure the health of brother is not eligible for deduction under section 80D, even
though he is a dependent, since brother is not included in the definition of “family” under section
80D.
(ii) Premium paid to insure the health of major son is not eligible for deduction, even though he is a
dependent, since payment is made in cash.
Question: 8
Mr. Rajiv, aged 50 years, a resident individual and practicing Chartered Accountant, furnishes you the
receipts and payments account for the financial year 2022-23.
Receipts and Payments Account
Receipts ` Payments `
Opening balance (1.4.2022) Cash 12,000 Staff salary, bonus and stipend to 21,50,000
on hand and at Bank articled clerks
Fee from professional services 59,38,000 Other administrative expenses 11,48,000
(Gross)
Rent 50,000 Office rent 30,000
Motor car loan from Canara Bank 2,50,000 Housing loan repaid to SBI 1,88,000
(@ 9% p.a.) (includes interest of ` 88,000)
Life insurance premium (10% of 24,000
sum assured)
Motor car (acquired in 4,25,000
Receipts ` Payments `
Jan. 2023 by A/c payee cheque)
Medical insurance premium (for 18,000

self and wife)(paid by A/c Payee
cheque)
Books bought on 20,000
1.07.2022 (annual publications by
A/c payee cheque)
Computer acquired on 1.11.2022 30,000

by A/c payee cheque (for
professional use)
Domestic drawings 2,72,000

Public provident fund subscription 20,000
Motor car maintenance 10,000
Closing balance (31.3.2023) Cash 19,15,000
on hand and at Bank
62,50,000 62,50,000
Following further information is given to you:
(1) He occupies 50% of the building for own residence and let out the balance for residential use at a
monthly rent of ` 5,000. The building was constructed during the year 1997-98, when the housing
loan was taken.
(2) Motor car was put to use both for official and personal purpose. One-fifth of the motor car use is
for personal purpose. No car loan interest was paid during the year.
(3) The written down value of assets as on 1-4-2022 are given below:
Furniture & Fittings ` 60,000
Plant & Machinery ` 80,000
(Air-conditioners, Photocopiers, etc.)
Computers ` 50,000
Note: Mr. Rajiv follows regularly the cash system of accounting.
Compute the total income of Mr. Rajiv for the assessment year 2023-24 assuming that he has not opted
to pay tax under section 115BAC.
Answer:
Computation of total income of Mr. Rajiv for the assessment year 2023-24
Particulars ` ` `
Self-occupied
Annual value Nil
Less: Deduction under section 24(b) Interest on
housing loan
50% of ` 88,000 = 44,000 but limited to 30,000
Loss from self occupied property (30,000)
Particulars ` ` `
Let out property
Annual value (Rent receivable has been 60,000
taken as the annual value in the absence of other
information)
Less: Deductions u/s 24 30% of
Net Annual Value 18,000
Interest on housing loan (50% of ` 88,000) 44,000 62,000 (2,000)
Loss from house property (32,000)
Profits and gains of business or Profession
Fees from professional services 59,38,000
Less: Expenses allowable as deduction Staff salary, 21,50,000
bonus and stipend
Other administrative expenses 11,48,000
Office rent 30,000
Motor car maintenance (10,000 x 4/5) 8,000
Car loan interest – not allowable (since the same has Nil 33,36,000
not been paid and the assessee follows cash system of
accounting)
26,02,000
Motor car Depreciation ` 4,25,000 x 7.5% x 4/5 25,500
Books being annual publications@40% 8,000
Furniture and fittings@10% of ` 60,000 6,000
Plant and machinery@15% of ` 80,000 12,000
Computer@40% of ` 50,000 20,000
Computer (New) ` 30,000 @ 40% x 50% 6,000 77,500 25,24,500
Gross Total income 24,92,500
Less: Deductions under Chapter VI-A
Deduction under section 80C
Housing loan principal repayment 1,00,000
PPF subscription 20,000
Life insurance premium 24,000
Total amount of ` 1,44,000 is allowed as deduction 1,44,000
since it is within the limit of ` 1,50,000
Deduction under section 80D
Medical insurance premium paid ` 18,000 18,000 1,62,000
Question: 9
From the following details, compute the total income and tax liability of Siddhant, aged 31 years, of
Delhi both as per the regular provisions of the Income-tax Act, 1961 and as per section 115BAC for
the A.Y.2023-24. Advise Mr. Siddhant whether he would opt for section 115BAC:
Particulars `
Salary including dearness allowance 3,35,000
Bonus 11,000
Salary of servant provided by the employer 12,000
Rent paid by Siddhant for his accommodation 49,600
Bills paid by the employer for gas, electricity and water provided free of cost at the 11,000
above flat
Siddhant purchased a flat in a co-operative housing society in Delhi for ` 4,75,000 in April, 2015,
which was financed by a loan from Life Insurance Corporation of India of ` 1,60,000@15% interest,
his own savings of ` 65,000 and a deposit from a nationalized bank for ` 2,50,000 to whom this flat
was given on lease for ten years. The rent payable by the bank was ` 3,500 per month. The following
particulars are relevant:
(a) Municipal taxes paid by Mr. Siddhant ` 4,300 (per annum)
(b) House Insurance ` 860
(c) He earned ` 2,700 in share speculation business and lost ` 4,200 in cotton speculation business.
(d) In the year 2017-18, he had gifted ` 30,000 to his wife and ` 20,000 to his son who was aged 11.
The gifted amounts were advanced to Mr. Rajesh, who was paying interest@19% per annum.
(e) Siddhant received a gift of ` 30,000 each from four friends.
(f) He contributed ` 50,000 to Public Provident Fund.
Answer:
Computation of total income and tax liability of Siddhant for the A.Y. 2023-24
Particulars ` `
Salary Income
Bonus 11,000
Value of perquisites:
(i) Salary of servant 12,000
(ii) Free gas, electricity and water 11,000 23,000
3,69,000
Less: Standard deduction under section 16(ia) 50,000
3,19,000
Gross Annual Value (GAV) (Rent receivable is taken as GAV in the 42,000
absence of other information) (` 3,500 × 12)
Particulars ` `
Less: Deductions under section 24
(i) 30% of NAV ` 11,310
(ii) Interest on loan from LIC @15% of ` 1,60,000 [See ` 24,000 35,310 2,390
Note 2]
Income from speculative business
Income from share speculation business 2,700
Less: Loss of ` 4,200 from cotton speculation business set-off to the 2,700 Nil
extent of ` 2,700
Balance loss of ` 1,500 from cotton speculation business has to be
carried forward to the next year as it cannot be set off against any other
head of income.
Income from Other Sources
(i) Income on account of interest earned from advancing money gifted 3,800
to his minor son is includible in the hands of Siddhant as per section
64(1A)
1,500
Less: Exempt under section 10(32)
2,300
(ii) Interest income earned from advancing money gifted to wife has to 5,700
be clubbed with the income of the assessee as per section 64(1)
(iii) Gift received from four friends (taxable under section 56(2)(x) as
the aggregate amount received during the year exceeds ` 50,000) 1,20,000 1,28,000

Less: Deduction under section 80C Contribution to Public Provident
Fund 50,000
Particulars `
Tax on total income of ` 3,99,390 [` 3,99,390 – ` 2,50,000 = ` 1,49,390@5%] 7,470
Less: Rebate u/s 87A, since total income does not exceed ` 5,00,000 7,470
Tax liability Nil
Computation of total income and tax liability of Siddhant in accordance
with the provisions of section 115BAC for the A.Y. 2023-24
Particulars ` `
Salary Income
Bonus 11,000
Value of perquisites:
(i) Salary of servant 12,000
(ii) Free gas, electricity and water 11,000 23,000
3,69,000
Less: Standard deduction under section 16(ia) [not allowable as per Nil
section 115BAC(2)]
3,69,000
Particulars ` `
Gross Annual Value (GAV) (Rent receivable is taken as GAV in the 42,000
absence of other information) (` 3,500 × 12)
Less: Deductions under section 24
(i) 30% of NAV ` 11,310
(ii) Interest on loan from LIC @15% of `1,60,000
[See Note 2] ` 24,000 35,310 2,390
Income from speculative business
Income from share speculation business 2,700
Less: Loss of ` 4,200 from cotton speculation business set-off to the 2,700 Nil
extent of ` 2,700
Balance loss of ` 1,500 from cotton speculation business has to be
carried forward to the next year as it cannot be set off against any other
head of income.
(i) Income on account of interest earned from advancing money gifted 3,800
to his minor son is includible in the hands of Siddhant as per section
64(1A) [Exemption under section 10(32) would not be available]
(ii) Interest income earned from advancing money gifted to wife has to
be clubbed with the income of the assessee as per section 64(1) 5,700
(iii) Gift received from four friends (taxable under section 56(2)(x) as
the aggregate amount received during the year exceeds ` 50,000) 1,29,500
1,20,000

Deduction under section 80C [No deduction under Chapter VI-A would
be allowed as per section 115BAC(2)] Nil
Particulars `
Tax on total income [5% of ` 2,50,000 + 10% of ` 890] 12,589
Add: Health and education cess @4% 504
Tax liability 13,093
Tax liability (rounded off) 13,090
Since Mr. Siddhant is not liable to pay any tax as per the regular provisions of the Income-tax Act,
1961, it would be beneficial for him to not opt for section 115BAC for A.Y.2023-24.
Notes:
(1) It is assumed that the entire loan of ` 1,60,000 is outstanding as on 31.3.2023;
(2) Since Siddhant’s own flat in a co-operative housing society, which he has rented out to a
nationalized bank, is also in Delhi, he is not eligible for deduction under section 80GG in respect
of rent paid by him for his accommodation in Delhi, since one of the conditions to be satisfied for
claiming deduction under section 80GG is that the assessee should not own any residential
accommodation in the same place.
(3) Alternatively, computation total income as per the special provisions of section 115BAC can also
be presented as follows:
Particulars ` `
Total Income as per regular provisions of the Income-tax Act 3,99,390
Add:(i) Standard deduction u/s 16(ia), as it would not be allowable under
the special provisions 50,000
(ii) Exemption under section 10(32), as it would not be available under the 1,500
special provisions
(iii) Deduction under section 80C, as no deduction under Chapter VI-A 50,000 1,01,500
would be allowed under the special provisions
Question: 10
Mr. X, an individual set up a unit in Special Economic Zone (SEZ) in the financial year 2018-19 for
production of washing machines. The unit fulfills all the conditions of section 10AA of the Income-tax
Act, 1961. During the financial year 2021-22, he has also set up a warehousing facility in a district of
Tamil Nadu for storage of agricultural produce. It fulfills all the conditions of section 35AD. Capital
expenditure in respect of warehouse amounted to ` 75 lakhs (including cost of land ` 10 lakhs). The
warehouse became operational with effect from 1st April, 2022 and the expenditure of ` 75 lakhs was
capitalized in the books on that date. Relevant details for the financial year 2022-23 are as follows:
Particulars `
Profit of unit located in SEZ 40,00,000
Export sales of above unit 80,00,000
Domestic sales of above unit 20,00,000
Profit from operation of warehousing facility (before considering deduction under 1,05,00,000
Section 35AD)
Compute income-tax (including AMT under Section 115JC) liability of Mr. X for Assessment Year
2023-24 both as per regular provisions of the Income-tax Act and as per section 115BAC for
Assessment Year 2023-24. Advise Mr. X whether he should opt for section 115BAC.
Answer:
Computation of total income and tax liability of Mr. X for A.Y.2023-24
(under the regular provisions of the Income-tax Act, 1961)
Particulars ` `
Profits and gains of business or profession
Profit from unit in SEZ 40,00,000
Less: Deduction u/s 10AA [See Note (1) below] 32,00,000
Business income of SEZ unit chargeable to tax 8,00,000
Profit from operation of warehousing facility 1,05,00,000
Less: Deduction u/s 35AD [See Note (2) below] 65,00,000
Business income of warehousing facility chargeable to tax 40,00,000
Particulars ` `
Computation of tax liability (under the normal/regular provisions)
Tax on ` 48,00,000 12,52,500
Add: Health and Education cess@4% 50,100
Computation of adjusted total income of Mr. X for levy of Alternate Minimum Tax
Particulars ` `
Total Income (computed above as per regular provisions of 48,00,000
income tax)
Add: Deduction under section 10AA 32,00,000
80,00,000
Add: Deduction under section 35AD 65,00,000
Less: Depreciation under section 32
On building @10% of ` 65 lakhs1 6,50,000 58,50,000
Adjusted Total Income 1,38,50,000
Alternate Minimum [email protected]% 25,62,250
Add: Surcharge@15% (since adjusted total income > ` 1 crore) 3,84,338
29,46,588
Add: Health and Education cess@4% 1,17,863
30,64,451
Tax liability u/s 115JC (rounded off) 30,64,450
Since the regular income-tax payable is less than the alternate minimum tax payable, the adjusted total
income shall be deemed to be the total income and tax is leviable @18.5% thereof plus surcharge@15%
and cess@4%. Therefore, tax liability as per section 115JC is ` 30,64,450.
Computation of total income and tax liability of Mr. X for A.Y.2023-24 (under the provisions of
section 115BAC of the Income-tax Act, 1961)
Particulars ` `
Total Income (as computed above as per regular provisions of 48,00,000
income tax)
Add: Deduction under section 10AA (not allowable) 32,00,000
80,00,000
Add: Deduction under section 35AD 65,00,000
Less: Depreciation under section 32
On building @10% of ` 65 lakhs2 (normal depreciation under 6,50,000 58,50,000
section 32 is allowable)
1,38,50,000
Total Income
1 Assuming the capital expenditure of ` 65 lakhs is incurred entirely on buildings.

2 Assuming the capital expenditure of ` 65 lakhs is incurred entirely on buildings..
Particulars ` `
Computation of tax liability as per section 115BAC
Tax on ` 1,38,50,000 38,92,500
Add: Surcharge@15% 5,83,875
44,76,375
Add: Health and Education cess@4% 1,79,055
Notes:
(1) Deductions u/s 10AA and 35AD are not allowable as per section 115BAC(2). However, normal
depreciation u/s 32 is allowable.
(2) Individuals or HUFs exercising option u/s 115BAC are not liable to alternate minimum tax u/s
115JC.
Since the tax liability of Mr. X under section 115JC is lower than the tax liability as computed u/s
115BAC, it would be beneficial for him not to opt for section 115BAC for A.Y. 2023-24.
Moreover, benefit of alternate minimum tax credit is also available to the extent of tax paid in
excess over regular tax.
AMT Credit to be carried forward under section 115JEE
`
Tax liability under section 115JC 30,64,450
Less: Tax liability under the regular provisions of the Income- tax Act, 1961 13,02,600
17,61,850
Notes:
(1) Deduction under section 10AA in respect of Unit in SEZ =
Export turnover of the Unit in SEZ
Profit of the Unit in SEZ ×
Total turnover of the Unit in SEZ
`80,00,000
` 40,00,000 × = ` 32,00,000
` 1,00,00,000
(2) Deduction@100% of the capital expenditure is available under section 35AD for A.Y.2023-24 in
respect of specified business of setting up and operating a warehousing facility for storage of
agricultural produce which commences operation on or after 01.04.2009.
Further, the expenditure incurred, wholly and exclusively, for the purposes of such specified business,
shall be allowed as deduction during the previous year in which he commences operations of his
specified business if the expenditure is incurred prior to the commencement of its operations and the
amount is capitalized in the books of account of the assessee on the date of commencement of its
operations.
Deduction under section 35AD would, however, not be available on expenditure incurred on
acquisition of land.
In this case, since the capital expenditure of ` 65 lakhs (i.e., ` 75 lakhs – ` 10 lakhs, being expenditure
on acquisition of land) has been incurred in the F.Y.2021-22 and capitalized in the books of account
on 1.4.2022, being the date when the warehouse became operational, ` 65,00,000, being 100% of ` 65
lakhs would qualify for deduction under section 35AD.
Question: 11
Compute total income and tax liability thereon of Mr. Raghav for the A.Y. 2023-24 from the following
details:
Mr. Raghav (aged, 61 years) working in a private company from last 10 years. His salary details for
the financial year 2022-23 are:
(i) Basic Salary 1,70,000 p.m.
(ii) Dearness Allowance (forms part of retirement benefits) 80,000 p.m.
(iii) Commission 32,000 p.m.
(iv) Transport Allowance 5,000 p.m.
(v) Medical Reimbursement 40,000
Mr. Raghav resigned from the services on 30th November, 2022 after completing 10 years and 5
months of service. He was paid gratuity of ` 25 lakhs on his retirement. He is not covered under the
Payment of Gratuity Act, 1972.
He started business of hiring of goods vehicle, purchased 4 small goods vehicle on 10th December,2022
and 4 heavy vehicles having gross weight of 20 MTs each· on 1st January, 2023. He did not maintain
books of accounts for the business of hiring of goods vehicle. Mr. Shivpal, his very close friend gifted
him ` 2 lakhs to purchase the vehicles.
He was holding 30% equity shares in TSP (P) Ltd., an Indian company. The paid up share capital of
company as on 31st March, 2022 was ` 20 lakh divided into 2 lakh shares of` 10 each which were
issued at a premium of ` 30 each. Company allotted shares to shareholders on 1st October, 2013.
He sold all these shares on 30th April, 2022 for ` 60 per share. Equity shares of TSP (P) Ltd. are listed
on National Stock Exchange and Mr. Raghav has paid STT both at the time of acquisition and transfer
of such shares. FMV on 31.1.2018 was ` 50 per share.
On 12.2.2023, interest of fixed deposits of ` 90,000 credited to his SBI Bank. On 30.4.2022,` 5,500
and on 30.12.2022, ` 8,500 credited to interest on saving bank A/c with SBI Bank.
He deposited ` 1,10,000 in PPF A/c. He paid insurance premium of ` 20,000 on his life policy during
the financial year 2022-23. The policy was taken in April 2011 and sum assured was ` 3,00,000. He
also made payment of ` 25,000 towards L.I.C. pension fund and premium of ` 40,000 towards
mediclaim policy for self and ` 20,000 for his wife. All the payment he made by A/c payee cheque.
There was no change in salary of Mr. Raghav from last two years. He does not opt to pay tax as per
section 115BAC.
Cost inflation Index is:
Financial Year Cost Inflation Index
2013-14 220
2022-23 331
Answer:
Computation of Total Income of Mr. Raghav for the A.Y.2023-24
Particulars ` `
Salaries
Basic Salary = 1,70,000 x 8 13,60,000
Dearness Allowance = 80,000 x 8 6,40,000
Commission = 32,000 x 8 2,56,000
Transport Allowance = 5,000 x 8 40,000
Medical reimbursement [Fully taxable] 40,000
Particulars ` `
Gratuity – Amount received 25,00,000
Less: Least of the following exempt u/s 10(10)
(i) Actual Gratuity received ` 25,00,000
(ii) ½ month’s salary for every year of completed
service [ ½ x 2,50,000 (Basic salary plus DA) + x
10] = ` 12,50,000
(iii) Notified limit of ` 20,00,000
Least of the above is exempt 12,50,000
12,50,000
Gross Salary 35,86,000
Less: Standard deduction u/s 16(ia) [Actual salary or` 50,000, 50,000
whichever is less]
Net Salary 35,36,000
Income from business of hiring goods vehicle
Other than heavy goods vehicles = 4 x (` 7,500 p.m.) x (4 months) 1,20,000
Heavy goods vehicles = 4 x (20 MTs x ` 1,000 per MT) x (3 months) 2,40,000
Capital Gains 3,60,000
On transfer of 60,000 shares (2,00,000 x 30%)

Sales consideration [60,000 x ` 60 per share] 36,00,000
Less: Cost of acquisition, higher of – 30,00,000
- Actual cost [60,000 x ` 40 per share] 24,00,000
- Lower of
 FMV on 31.1.2018 [60,000 x50] 30,00,000
 Actual sales consideration [60,000 x 60] 36,00,000
Long-term capital gains u/s 112A (since shares are held for a 6,00,000
period of more than 12 months before transfer)
Gift from friend taxable u/s 56(2)(x) since the same exceeds ` 50,000. 2,00,000
It is fully taxable
Interest on Saving A/c with SBI Bank 14,000
Interest on Fixed deposits with SBI Bank 1,00,000
[Since interest is credited after deduction of at source @ 10%, as the
amount of interest exceeds ` 50,000, amount included in the total
3,14,000
income need to be grossed up (` 90,000 x 100/90)]
Particulars ` `
Section 80C
Deposits in PPF A/c 1,10,000
Life Insurance premium [fully deductible, since, in respect of a policy
taken before 1.4.2012, the actual premium paid (` 20,000) or 20% of
the sum assured (` 3,00,000 x 20%= ` 60,000), whichever is lower,
20,000
has to be deducted]
1,30,000
Section 80CCC
Payment to LIC Pension Fund 25,000
1,55,000
Restricted to ` 1,50,000, being the maximum allowable deduction 1,50,000
Section 80D
Medical insurance premium for self and spouse ` 60,000, allowable 50,000
to the extent of ` 50,000, since Mr. Raghav is a senior citizen
Section 80TTB
Deduction in respect of interest on fixed deposits and saving bank
allowable as deduction under section 80TTB, since Mr. Raghav is a
senior citizen, to the extent of` 50,000 50,000
Computation of tax liability of Mr. Raghav for A.Y. 2023-24
Particulars ` `
Tax on total income of ` 45,60,000
Tax on long-term capital gains of ` 6,00,000 arising from transfer of listed 50,000
shares @10% under section 112A after deducting ` 1 lakh.
Tax on other income of ` 39,60,000 [` 45,60,000 –` 6,00,000 capital
gains]
Upto` 3,00,000 Nil
` 3,00,001 – ` 5,00,000 [i.e., ` 3,00,000@5%] 10,000
` 5,00,001 – ` 10,00,000 [i.e., ` 5,00,000@20%] 1,00,000
` 10,00,001 – ` 39,60,000 [i.e., ` 29,60,000@30%] 8,88,000 9,98,000
10,48,000
Tax liability 10,89,920
Question: 12
Mr. Dheeraj, aged 48 years, a resident Indian has furnished the following particulars for the year ended
31.03.2023: [RTP N-21 Q.]
(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 in the year 2015.
(iii) He owns an industrial undertaking established in a SEZ and which had commenced operation
during the financial year 2020-21. 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.
(iv) He employed 20 new employees for the said industrial undertaking during the previous year 2022-
23. Out of 20 employees, 12 were employed on 1st May 2022 on monthly emoluments of ` 18,000
and remaining were employed on 1st August 2022 on monthly emoluments of ` 12,000. All these
employees participate in recognised provident fund and they are paid their emoluments directly to
their bank accounts.
(v) He earned ` 30,000 and ` 45,000 as interest on saving bank deposits and fixed deposits
respectively.
(vi) He also sold his vacant land on 01.12.2022 for ` 13 lakhs. The stamp duty value of land at the
time of transfer was ` 14 lakhs. The FMV of the land as on 1st April, 2001 was ` 4.8 lakhs and
Stamp duty value on the said date was ` 3.8 lakhs. This land was acquired by him on 15.9.1997
for ` 2.80 lakhs. He had incurred registration expenses of ` 12,000 at that time.
The cost of inflation index for the financial year 2022-23 and 2001-02 are 331 and 100
respectively.
(vii) 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. Dheeraj for the Assessment Year
2023-24, in the manner so that he can make maximum tax savings.
Answer:
Computation of total income of Mr. Dheeraj for A.Y. 2023-24
Particulars ` ` `
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received is taken as GAV, in 3,34,000
the absence of other information]
Less: Municipal taxes paid by him in the P.Y. 2022-23
pertaining to let out portion [`30,000/2] 15,000
Less: Deduction u/s 24
(a) 30% of ` 3,19,000 95,700
(b) Interest on housing loan [` 1,80,000/2] 90,000 1,85,700
Self-occupied portion [Ground Floor] 1,33,300
Annual Value Nil
Particulars ` ` `
[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 –` 90,000] 43,300
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 of ` 13,00,000
13 lakhs, since stamp duty value of ` 14 lakhs does not
exceed actual consideration bymore than 10%]
Less: Indexed Cost of acquisition [` 3,80,000 x 331/100] 12,57,800 42,200
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 ` 3.8 lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 45,000 75,000
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.2022-23 being the 3rd year of
operations]
[Profits of the SEZ x Export Turnover/Total Turnover]
x 100%
[` 45 lakhs x ` 120 lakhs/ ` 400 lakhs x 100%]
Repayment of principal amount of housing loan 95,000
Insurance premium paid on life insurance policy of son
allowable, even though not dependent on Mr. Dheeraj 49,000 1,44,000
Particulars ` ` `
Deduction under section 80JJAA 9,43,200
30% of the employee cost of the new employees
employed during the P.Y. 2022-23 allowable as
deduction [30%of` 31,44,000 [` 23,76,000 (12 x 18,000
x11) + ` 7,68,000 (8 x 12,000 x 8)]
Deduction under section 80TTA
Interest on savings bank account, restricted to ` 10,000 10,000
10,97,200

Computation of tax liability of Mr. Dheeraj for A.Y.2023-24 under the normal provisions of the
Act
Particulars ` `
Tax on LTCG of ` 42,200@20% 8,440
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
4,72,270
Computation of tax liability of Mr. Dheeraj for A.Y.2023-24 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 22,13,300
Add: Deduction u/s 10AA 13,50,000
Deduction u/s 80JJAA 9,43,200
45,06,500
[email protected]% 8,33,703
Add: HEC@4% 33,348
AMT liability 8,67,051
AMT liability (rounded off) 8,67,050
Since the regular income tax payable is less than the AMT, the adjusted total income of` 45,06,500
would be deemed to be the total income and tax would be payable @18.5% plus HEC@4%. The total
tax liability would be ` 8,67,050. In this case, AMT credit of` 3,75,890 (` 8,67,050 – ` 4,91,160) can
be carried forward.
Mr. Dheeraj also can opt to pay tax as per the provisions of section 115BAC if tax liability thereunder
is lower. In such case, the AMT provisions would not apply on him. The computation of total income
and tax liability as per the provisions of section 115BAC would be as follows:
Computation of total income of Mr. Dheeraj as per section 115BAC for A.Y. 2023-24
Particulars ` `
Gross Total Income as per regular provisions of the Income-tax Act 46,60,500
Add: Interest on borrowing in respect of self-occupied house property
not allowable as deduction as per section 115BAC 90,000
Gross Total Income as per section 115BAC 47,50,500
Less: Deduction under section 80JJAA
30% of the employee cost of the new employees employed during the
P.Y. 2022-23 allowable as deduction [30% of ` 31,44,000 [` 9,43,200
23,76,000 (12 x18,000 x 11) + ` 7,68,000 (8 x 12,000 x 8)]
No deduction under section 10AA or under Chapter VI-A allowable
except u/s 80JJAA
9,43,200
Computation of tax liability as per section 115BAC
Particulars ` `
Tax on LTCG of ` 42,200@20% 8,440
Tax on remaining total income of ` 37,65,100
Upto` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 [@5% of ` 2.50 lakhs] 12,500
` 5,00,001 – ` 7,50,000 [@10% of ` 2.50 lakhs] 25,000
` 7,50,001 – ` 10,00,000 [@15% of ` 2.5 lakhs] 37,500
` 10,00,001 – ` 12,50,000 [@20% of ` 2.5 lakhs] 50,000
` 12,50,001 – ` 15,00,000 [@25% of ` 2.5 lakhs] 62,500
` 15,00,001 – ` 37,65,100 [@30% of ` 22,65,100] 6,79,530 8,67,030
8,75,470
Since tax liability as per section 115BAC is higher than the tax liability of ` 8,67,050 being higher of
AMT liability and tax liability computed as per normal provisions of the Income- tax Act, 1961, it is
beneficial for Mr. Dheeraj not to exercise option under section 115BAC. In such case, his tax liability,
therefore, would be ` 8,67,050. Moreover, Mr. Dheeraj would also be eligible to claim carry forward
of AMT credit of ` 3,75,890.
Question: 13
Mr. Rakesh, aged 45 years, a resident Indian has provided you the following information for the
previous year ended 31.03.2023
(i) 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 18% of value of books and expenditure made for earning this royalty was
` 40,000. The amount remitted to India till 30th September, 2023 is ` 2,30,000.
(ii) He owns an industrial undertaking established in a SEZ and which had commenced operation
during the financial year 2020-21. Total turnover of the undertaking was ` 200 lakhs, which
includes `140 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 ` 25 lakhs.
(iii) He also sold his vacant land on 10.11.2022 for `13 lakhs. The stamp duty value of land at the
time of transfer was ` 17 lakhs. The FMV of the land as on 1st April, 2001 was ` 5 lakhs. This
land was acquired by him on 05.08.1995 for ` 1.75 lakhs. He had incurred registration expenses
of ` 20,000 at that time. The cost of inflation index for the year 2022-23 and 2001-02 are 331 and
100 respectively.
(iv) Received ` 40,000 as interest on saving bank deposits.
(v) He occupies ground floor of his residential building and has let out first floor for residential use
at an annual rent of ` 2,28,000. He has paid municipal taxes of ` 60,000 for the current financial
year. Both floor are of equal size.
(vi) He paid insurance premium of ` 39,000 on life insurance policy of son, who is not dependent on
him and ` 48,000 on life insurance policy of his dependent father.
(vii) He paid tuition fees of ` 42,000 for his three children to a school. The fees being ` 14,000 p.a.
per child.
You are required to compute the total income and tax liability of Mr. Rakesh under normal provisions
as well as under section 115BAC for the A.Y. 2023-24. Ignore AMT provisions.
Answer:
Computation of total income of Mr. Rakesh for A.Y. 2023-24
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 information]
Less: Municipal taxes paid by him in the P.Y. 2022-23 2,28,000
pertaining to let out portion [` 60,000/2]
30,000
Net Annual Value (NAV)
1,98,000
Less: Deduction u/s 24 (a)
59,400
30% of ` 1,98,000
1,38,600
Particulars ` ` `
Self-occupied portion [Ground Floor]
Annual Value Nil
[No deduction is allowable in respect of municipal taxes 1,38,600
paid]
II Profits and gains of business or profession
Income from SEZ unit 25,00,000
III Capital Gains

Long-term capital gains on sale of land (since held for
more than 24 months)
Full Value of Consideration [Higher of stamp duty value 17,00,000
of ` 17 lakhs and Actual consideration of ` 13 lakhs,
since stamp duty value exceeds actual consideration by
more than 10%]
Less: Indexed Cost of acquisition [` 5,00,000 x 331/100] 16,55,000 45,000

Cost of acquisition
Higher of -
- Actual cost ` 1.75 lakhs + ` 0.20 lakhs = ` 1.95 lakhs
and
- Fair Market Value (FMV) as on 1.4.2001 = ` 5 lakhs
IV Income from Other Sources

Royalty from artistic book 2,88,000
Less: Expenses incurred for earning royalty 40,000
2,48,000
Interest on savings bank deposits 40,000
2,88,000
Less: Deduction u/s 10AA [Since the industrial 17,50,000
undertaking is established in SEZ, it is entitled to
deduction u/s 10AA @100% of export profits, since
P.Y.2022-23, being the 3rd year of operations]
[Profits of the SEZ x Export Turnover/Total Turnover] x
100%[` 25 lakhs x ` 140 lakhs/ ` 200 lakhs x 100%]
Tuition fee paid for maximum of two children is
allowable (` 14,000 x 2) 28,000
Insurance premium paid on life insurance policy of son
allowable, even though not dependent on Mr. Rakesh 39,000
Particulars ` ` `
Insurance premium paid on life insurance policy of

father not allowable, even though father is dependent on - 67,000
Mr. Rakesh
Deduction under section 80QQB
Royalty [` 2,88,000 x 15/18 = ` 2,40,000, restricted to
amount brought into India in convertible foreign
exchange ` 2,30,000 minus ` 40,000 expenses already
allowed as deduction while computing royalty income] 1,90,000
Deduction under section 80TTA
Interest on savings bank account, restricted to` 10,000 10,000
2,67,000
9,54,600
Computation of tax liability of Mr. Rakesh for A.Y.2023-24 under the normal provisions of the Act
Particulars ` `
Tax on LTCG of ` 45,000@20% 9,000
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakh] 12,500
` 5,00,001 – ` 9,09,600[@20% of ` 4,09,600] 81,920 94,420
1,03,420
Computation of tax liability of Mr. Rakesh as per section 115BAC for A.Y.2023-24
Particulars `
Gross total Income as per regular provisions of the Act 29,71,600
Less: Deduction u/s 10AA/ Deduction under Chapter VI-A [No deduction under -
section 10AA or under Chapter VI-A is allowed]
Total Income as per section 115BAC 29,71,600
Tax on LTCG of ` 45,000@20% 9,000
Upto` 2,50,000 Nil
` 2,50,001 – ` 5,00,000 [@5% of ` 2.50 lakh] 12,500
` 5,00,001 – ` 7,50,000 [@10% of ` 2.50 lakh] 25,000
` 7,50,001 – ` 10,00,000 [@15% of ` 2.50 lakh] 37,500
Particulars `
` 10,00,001 – ` 12,50,000 [@20% of ` 2.50 lakh] 50,000
` 12,50,001 – ` 15,00,000 [@25% of ` 2.50 lakh] 62,500
` 15,00,001 – ` 29,26,600 [@30% of ` 14,26,600] 4,27,980 6,15,480
6,24,480
Since tax liability as per section 115BAC is higher than the tax liability under normal
provisions of the Act, it is beneficial for Mr. Rakesh not to exercise option under
section 115BAC.
Question: 14
(a) Mr. Thomas, a citizen of Japan, comes to India for the first time during the P.Y. 2018-19. During
the financial years 2018-19, 2019-20, 2020-21 2021-22 and 2022-23, he was in India for 50 days,
65 days, 95 days, 150 days and 75 days, respectively. Determine his residential status for the A.Y.
2023-24. Examine the tax implications in the hands of Mr. Thomas for the Assessment Year 2023-
24 of the following transactions entered by him.
(1) Interest received from Mr. Michel, a non-resident outside India (The borrowed fund is used by
Mr. Michel for investing in Indian company's debt fund for earning interest).
(2) He is also engaged in the business of running news agency and earned income of ` 5 lakhs
from collection of news and views in India for transmission outside India.
(3) He entered into an agreement with ABC & Co., a partnership firm for transfer of technical
documents and design and for providing services relating thereto, to set up a Steel
manufacturing plant, in India. He charged ` 15 lakhs for these services from ABC & Co.
(b) Mr. Naksh has undertaken certain transactions during the F.Y.2022-23, which are listed below.
You are required to identify the transactions in respect of which quoting of PAN is mandatory in
the related documents –
S.No. Transaction
1. Payment of life insurance premium of ` 40,000 in the F.Y.2022-23 by account payee
cheque to LIC for insuring life of self and spouse
2. Payment of ` 1,10,000 to RBI for acquiring its bonds
3. Applied for issue of credit card to SBI
4. Payment of ` 1,00,000 by account payee cheque to travel agent for travel to Singapore
for 3 days to visit
(c) Ms. Soha (aged 35 years), a resident individual, is a dealer of scooters. During the previous year
2022-23, total turnover of her business was ` 110 lakhs (out of which ` 25 lakhs was received by
way of account payee cheques and balance in cash). Ms. Soha does not opt to pay tax as per the
provisions of section 115BAC.
What would be your advice to Ms. Soha relating to the provisions of advance tax with its due date
along with the amount payable, assuming that she wishes to make maximum tax savings.
Answer:
(a) Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies
any one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total
period of 365 days or more and has been in India for at least 60 days in the previous year.
If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the
above conditions are not satisfied, the individual is a non-resident.
During the previous year 2022-23, Mr. Thomas was in India for 75 days and during the 4 years
preceding the previous year 2022-23, he was in India for 360 days (i.e. 50+ 65+ 95+ 150 days).
The total stay of the Mr. Thomas during the previous year in India was less than 182 days and
during the four years preceding this year was for 360 days. Therefore, due to non-fulfillment of
any of the two conditions for a resident, he would be treated as non-resident for the Assessment
Year 2023-24.
(1) Not taxable, since interest payable by a non-resident to another non-resident would be deemed
to accrue or arise in India only if the borrowed fund is used for the purposes of business or
profession carried on by him in India. In this case, it is used for investing in Indian company’s
debt fund for earning interest and not for the purposes of business or profession. Hence, it is
not taxable in India.
(2) No income shall be deemed to accrue or arise to Mr. Thomas through or from activities which
are confined to the collection of news and views in India for transmission outside India. Hence,
` 10 lakhs is not taxable in India in the hands of Mr. Thomas.
(3) ` 10 lakhs is deemed to accrue or arise in India to Mr. Thomas, a non-resident, since it
represents royalty/fees for technical services paid for services utilized in India, in this case, for
setting up a Steel manufacturing plant in India. Hence, the same would be taxable in India in
the hands of Mr. Thomas.
(b)
Transaction Is quoting of PAN mandatory in related
documents?
1. Payment of life insurance premium of ` No, since the amount paid does not exceed `
40,000 in the F.Y.2022-23 byaccount 50,000 in the F.Y.2022-23.
payee cheque to LIC for insuring life of
self and spouse
2. Payment of ` 1,10,000 to RBI for Yes, since the amount paid
acquiring its bonds exceeds ` 50,000
3. Applied to SBI for issue of credit card. Yes, quoting of PAN is mandatory on making
an application to a banking company for issue
of credit card.
4. Payment of ` 1,00,000 by account payee No, since the amount was paid by account
cheque to travel agent for travel to Dubai payee cheque, quoting of PAN is not
for 3 days to visit mandatory even though the payment exceeds
` 50,000
(c) Computation of advance tax of Ms. Soha under Presumptive Income scheme as per section
44AD
The total turnover of Ms. Soha, a dealer of scooter, is ` 110 lakhs. Since her total turnover from such
business is less than ` 200 lakhs and she does not wish to get his books of account audited, she can opt
for presumptive tax scheme under section 44AD.
Profits and gains from business computed under section 44AD:
Particulars `
6% of ` 25 lakhs, being turnover effected through account payee cheque 1,50,000
8% of ` 85 lakhs, being cash turnover 6,80,000
8,30,000
An eligible assessee opting for computation of profits and gains of business on presumptive basis under
section 44AD in respect of eligible business is required to pay advance tax of the whole amount on or
before 15th March of the financial year.
Computation of tax liability of Ms. Soha as per normal provisions of Income-taxAct, 1961
Particulars Amount in `
Tax on 8,30,000
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000@5% 12,500
` 5,00,001 – ` 8,30,000@20% 66,000 78,500
Tax liability 81,640
Accordingly, she is required to pay advance tax of ` 81,640 on or before 15th March of the financial
year. However, any amount by way of advance tax on or before 31st March of the financial year shall
also be treated as advance tax paid during the financial year ending on that day for all the purposes of
the Act.
Question: 15
(a) Mr. Kashyap, aged 38 years, is entitled to a salary of ` 40,000 per month. He is given an option by
his employer either to take house rent allowance or a rent free accommodation which is owned by
the company. The HRA amount payable was ` 8,000 per month. The rent for the hired
accommodation was ` 6,500 per month at New Delhi. Advice Mr. Kashyap whether it would be
beneficial for him to avail HRA or Rent Free Accommodation. Give your advice on the basis of
“Net Take Home Cash benefits”. Assume Mr. Kashyap does not opt for the provisions of section
115BAC.
(b) Compute the total income of Mr. Veer for the assessment year 2023-24 under proper heads from
the following information furnished by him for the financial year 2021-22:
Particulars `
Income from let out house property (computed) 3,50,000
Interest paid on housing loan for self-occupied property 2,00,000
Income from Textile business 5,75,000
Brought forward business loss of Assessment Year 2019-20 1,05,000
Short-term capital loss 70,000
Brought forward long-term loss from Assessment Year 2021-22 90,000
Long-term capital gain on sale of house 75,000
Interest on enhanced compensation from Government for acquisition of land in 5,00,000
2017
Particulars `
Dividend from ABC Ltd., Andhra Pradesh 15,000
Deposit made on 15.02.2023 in his Public Provident fund account 75,000
Loss from owning and maintaining race horse of Assessment Year 2022-23 20,000
Loss from Gambling 8,000
Also state the loss that can be carried forward to A.Y. 2023-24. Mr. Veer filed the return of income for
assessment year 2019-20 after the expiry of due date for filing the return.
Answer:
(a) Computation of tax liability of Kashyap under both the options
Particulars Option I – Option II –
HRA (`) RFA(`)
Basic Salary (` 40,000 x 12 Months) 4,80,000 4,80,000
Perquisite value of rent-free accommodation (15% of ` 4,80,000) N.A. 72,000
House rent Allowance (` 8,000 x 12 Months) ` 96,000
Less: Exempt u/s 10(13A) – least of the following -
- 50% of Basic Salary ` 2,40,000
- Actual HRA received ` 96,000
- Rent paid less 10% of salary `30,000 ` 30,000 66,000
Gross Salary 5,46,000 5,52,000
Less: Standard deduction u/s 16(ia) 50,000 50,000
Net Salary 4,96,000 5,02,000
Less: Deduction under Chapter VI-A - -
Total Income 4,96,000 5,02,000
Tax on total income 12,300 12,900
Less: Rebate under section 87A - Lower of ` 12,500 or income-tax of ` 12,300 Nil
12,300, since total income does not exceed ` 5,00,000
Nil 12,900
Add: Health and Education cess@4% Nil 516
Total tax payable Nil 13,416
Tax Payable (Rounded off) Nil 13,420
Cash Flow Statement
Particulars Option I – Option II
HRA – RFA
Inflow: Salary 5,76,000 4,80,000
Less: Outflow: Rent paid (78,000) -
Tax on total income Nil (13,420)
Net Inflow 4,98,000 4,66,580
Since the net cash inflow under Option I (HRA) is higher than in Option II (RFA), it is beneficial for
Mr. Kashyap to avail Option I, i.e., House Rent Allowance
(b) Computation of total income of Mr. Veer for A.Y.2023-24.
Particulars ` `
Income from let out house property 3,50,000
Less: Set-off of loss from self-occupied house property by virtue of section (2,00,000) 1,50,000
70(1) [Whole of interest i.e., ` 2,00,000 allowable as deduction, since it is
within the permissible limit applicable to self- occupied property; The said
amount represents loss from self- occupied property]
Income from textile business 5,75,000
[As per section 80, brought forward business loss of ` 1,05,000 of Nil 5,75,000
assessment year 2019-20 cannot be set-off, since return of income for that
year was filed after the expiry of due date specified under section 139(1)]
Capital Gains
Long-term capital gains on sale of house 75,000
Less: Short-term capital loss can be set-off against long-term capital gains
[section 70(2)] 70,000
5,000
Less: Brought forward long- term capital loss of ` 90,000 from A.Y. 2021- 5,000 Nil
22, set-off to the extent of ` 5,000
Interest on enhanced compensation from Government 5,00,000
Less: Deduction @50% 2,50,000
2,50,000
Dividend from ABC Ltd. 15,000 2,65,000
Less: Deduction under section 80C – Deposit in PPF 75,000
Losses to be carried forward to A.Y.2024-25
Long-term capital loss of A.Y. 2021-22 (` 90,000 – ` 5,000) to be set-off 85,000
against long-term capital gains, if any, in that year
Loss from owning and maintaining racehorse of the A.Y. 2022-23 to be 20,000
set-off against income, if any, from owning and maintaining race horses
in that year.
Loss from gambling (it can neither be set-off against any income during
the previous year nor can it be carried forward for set-off against any
income in the subsequent assessment years).
Question: 16
Compute the gross total income of Mr. Farhan and show the items eligible for carry forward and the
assessment years upto which such losses can be carry forward from the following information furnished
by him for the year ended 31-03-2023:
Particulars Amount(`)
Loss from speculative business MNO 12,000
Income from speculative business BPO 25,000
Loss from specified business covered under section 35AD 45,000
Income from salary (computed) 4,18,000
Loss from house property 2,20,000
Income from trading business 2,80,000
Long-term capital gain from sale of urban land 2,05,000
Long-term capital loss on sale of equity shares (STT not paid) 85,000
Long-term capital loss on sale of listed equity shares in recognized stock exchange 1,10,000
(STT paid at the time of acquisition and sale of shares)
Short-term capital loss under section 111A 85,000
Following are the brought forward losses:
(1) Brought forward loss from speculative business MNO ` 18,000 relating to A.Y. 2019-20.
(2) Brought forward loss from trading business of ` 12,000 relating to A.Y. 2017-18
(3) Unabsorbed depreciation ` 1,00,000 relating to A.Y. 2022-23
Assume Mr. Farhan has furnished his return of income on or before the due date specified under section
139(1) in all the above previous years.
Answer:
Computation of Gross total income of Mr. Farhan for the A.Y.2023-24
Particulars ` `
Salaries
Income from Salary 4,18,000
Less: Loss from house property set-off against salary (2,00,000) 2,18,000
[As per section 71(3A), loss from house property to the extent of `
2,00,000 can be set-off against any other head of income.]
Income from trading business 2,80,000
Less: Brought forward loss from trading business of A.Y. 2017-18 can
be set off against current year income from trading business as per
section 72(1), since the eight-year time limit as specified under section
72(3), within which set-off is permitted, has not expired.
(12,000)
Less: Unabsorbed depreciation (1,00,000) 1,68,000
Particulars ` `
Income from speculative business BPO 25,000
Less: Loss from speculative business MNO set-off as per section 73(1) (12,000)
Loss from speculative business MNO brought forward from A.Y.
2019-20 as per section 73(2), can be set off to the extent of ` 13,000. (13,000) -
Balance loss will be lapsed, since four years his expired
Capital Gains
Long term capital gain on sale of urban land 2,05,000
Less: Long term capital loss on sale of shares (STT not paid) set- off as (85,000)
per section 71(3)
Less: Long-term capital loss on sale of listed equity shares on which
STT is paid can also be set-off as per section 71(3), since long-term
capital arising on sale of such shares is taxable under section 112A
(1,10,000)
Less: Short-term capital loss under section 111A as per section 71(2) (10,000) -
Items eligible for carried forward to A.Y.2024-25
Particulars `
Loss from house property 20,000
As per section 71B, balance loss not set-off can be carried forward to the next year for
set-off against income from house property of that year. It can be carried forward for a
maximum of eight assessment years i.e., upto A.Y. 2031-32, in this case.
Loss from specified business under section 35AD 45,000
Loss from specified business under section 35AD can be set-off only against profits of
any other specified business. If loss cannot be so set-off, the same has to be carried
forward to the subsequent year for set off against income from specified business, if
any, in that year. As per section 73A(2), such loss can be carried forward indefinitely
for set-off against profits of any specified business .
Short-term capital loss under section 111A 75,000
Short-term capital loss under section 111A can be set-off against long term or short
term capital gains. If it cannot be so set-off, it has to be carried forward to the next year
for set-off against capital gains, if any, in that year. It can be carried forward for a
maximum of eight assessment years, i.e., upto A.Y.2031-32, in this case, as specified
under section 74(1).
Question: 17
Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1-5-2022. On the same date, his
brother gifted debentures worth ` 10 lakhs to Mrs. Karan. Son of Mr. Karan’s brother invested the
amount in fixed deposit with Canara Bank @ 9% p.a. interest and Mrs. Karan received interest of `
81,000 on these debentures during the previous year 2022-23. Discuss the tax implications under the
provisions of the Income- tax Act, 1961.
Answer:
In the given case, Mr. Karan gifted a sum of ` 9 lakhs to his brother’s minor son on 1.5.2022 and
simultaneously, his brother gifted debentures worth ` 10 lakhs to Mr. Karan’s wife on the same date.
Mr. Karan’s brother’s minor son invested the gifted amount of ` 9 lakhs in fixed deposit with Canara
Bank.
These transfers are in the nature of cross transfers. Accordingly, the income from the assets transferred
would be assessed in the hands of the deemed transferor because the transfers are so intimately
connected to form part of a single transaction and each transfer constitutes consideration for the other
by being mutual or otherwise.
If two transactions are inter-connected and are part of the same transaction in such a way that it can be
said that the circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted.
As per section 64(1A), all income of a minor child is includible in the hands of the parent, whose total
income, before including minor’s income is higher. Accordingly, the interest income arising to Mr.
Karan’s brother’s son from fixed deposits would be included in the total income of Mr. Karan’s brother,
assuming that Mr. Karan’s brother’s total income is higher than his wife’s total income, before
including minor’s income. Mr. Karan’s brother can claim exemption of ` 1,500 under section 10(32).
Interest on debentures arising in the hands of Mrs. Karan would be taxable in the hands of Mr. Karan
as per section 64(1)(iv).
This is because both Mr. Karan and his brother are the indirect transferors of the income to their spouse
and minor son, respectively, with an intention to reduce their burden of taxation.
In the hands of Mr. Karan, interest received by his spouse on debentures of ` 9 lakhs alone would be
included and not the entire interest income on the debentures of `10 lakhs, since the cross transfer is
only to the extent of ` 9 lakhs.
Hence, only proportional interest (i.e., 9/10th of interest on debentures received)` 72,900 would be
includible in the hands of Mr. Karan.
The provisions of section 56(2)(x) are not attracted in respect of sum of money transferred or value of
debentures transferred, since in both the cases, the transfer is from a relative.
Question: 18
Examine the TDS/TCS implications in the cases mentioned hereunder–
(i) On 1.6.2022, Mr. Ganesh made three nine months fixed deposits of ` 3 lakh each, carrying
interest@9% p.a. with Dwarka Branch, Janakpuri Branch and Rohini Branch of XYZ Bank, a
bank which has adopted CBS. The fixed deposits mature on 28.2.2023.
(ii) On 1.10.2022, Mr. Rajesh started a six months recurring deposit of ` 2,00,000 per month@8%
p.a. with PQR Bank. The recurring deposit matures on 31.3.2023
(iii) Mr. X, a resident, is due to receive ` 4.50 lakhs on 31.3.2023, towards maturity proceeds of
LIC policy taken on 1.4.2020, for which the sum assured is ` 4 lakhs and the annual premium
is ` 1,25,000.
(iv) Mr. Y, a resident, is due to receive ` 3.95 lakhs on 31.3.2023 on LIC policy taken on 31.3.2012,
for which the sum assured is ` 3.50 lakhs and the annual premium is ` 30,100.
(v) Mr. Z, a resident, is due to receive ` 95,000 on 1.8.2022 towards maturity proceeds of LIC
policy taken on 1.8.2016 for which the sum assured is ` 90,000 and the annual premium was `
10,000.
(vi) Payment made to Smith, an Australian cricketer non-resident in India, by a newspaper for
contribution of articles ` 25,000.
(vii) Mr. X, a salaried individual, pays rent of ` 55,000 per month to Mr. Y from June, 2022 for
immovable property. Is he required to deduct tax at source? If so, when is he required to deduct
tax? Also, compute the amount of tax to be deducted at source.
Would your answer change if Mr. X vacated the premises on 31st December, 2022? Also, what
would be your answer if Mr. Y does not provide his PAN to Mr. X?
(viii) XYZ Ltd. makes a payment of ` 28,000 to Mr. Ganesh on 2.8.2022 towards fees for
professional services and another payment of ` 25,000 to him on the same date towards fees
for technical services. Discuss whether TDS provisions under section 194J are attracted.
(ix) Payment of ` 2,00,000 to Mr. R by S Ltd., a transporter who owns 8 goods carriages throughout
the previous year and furnishes a declaration to this effect alongwith his PAN.
(x) ABC and Co. Ltd. paid ` 19,000 to one of its directors as sitting fees on 01-01-2023.
(xi) Fee paid on 1.12.2022 to Dr. Srivatsan by Sundar (HUF) ` 35,000 for surgery performed on a
member of the family.
(xii) ` 2,00,000 paid to Mr. A, a resident individual, on 22-02-2023 by the State of Uttar Pradesh
on compulsory acquisition of his urban land.
(xiii) Mr. Rohit transferred a residential house property to Mr. Arun for ` 45 lacs. The stamp duty
value of such property is ` 55 lacs.
(xiv) Rashi Limited is engaged by Jigar Limited for the sole purpose of business of operation of call
centre. On 18-03-2023, the total amount credited by Jigar Limited in the ledger account of
Rashi Limited is ` 70,000 regarding service charges of call centre. The amount is paid through
cheque on 28-03-2023 by Jigar Limited.
(xv) Ms. Mohit won a lucky draw prize of ` 21,000. The lucky draw was organized by M/s.
Maximus Retail Ltd. for its customer.
Answer:
(i) XYZ Bank has to deduct tax at source@10% u/s 194A, since the aggregate interest on fixed
deposit with the three branches of the bank is ` 60,750 [3,00,000 × 3 × 9% × 9/12], which
exceeds the threshold limit of ` 40,000. Since XYZ Bank has adopted CBS, the aggregate interest
credited/paid by all branches has to be considered. Since the aggregate interest of ` 60,750
exceeds the threshold limit of ` 40,000, tax has to be deducted@10% u/s 194A.
(ii) No tax has to be deducted u/s 194A by PQR Bank on the interest of ` 28,000 falling due on
recurring deposit on 31.3.2023 to Mr. Rajesh, since such interest does not exceed the threshold
limit of ` 40,000.
(iii) Since the annual premium exceeds 10% of sum assured in respect of a policy taken after
31.3.2012, the maturity proceeds of ` 4.50 lakhs due on 31.3.2023 are not exempt under section
10(10D) in the hands of Mr. X. Therefore, tax is required to be deducted@5% under section
194DA on the amount of income comprised therein i.e., on ` 75,000 (` 4,50,000, being maturity
proceeds - ` 3,75,000, being the aggregate amount of insurance premium paid).
(iv) Since the annual premium is less than 20% of sum assured in respect of a policy taken before
1.4.2012, the sum of ` 3.95 lakhs due to Mr. Y would be exempt under section 10(10D) in his
hands. Hence, no tax is required to be deducted at source under section 194DA on such sum
payable to Mr. Y.
(v) Even though the annual premium exceeds 10% of sum assured in respect of a policy taken after
31.3.2012, and consequently, the maturity proceeds of ` 95,000 due on 1.8.2022 would not be
exempt under section 10(10D) in the hands of Mr. Z, the tax deduction provisions under section
194DA are not attracted since the maturity proceeds are less than ` 1 lakh.
(vi) Under section 194E, the person responsible for payment of any amount to a non- resident
sportsman for contribution of articles relating to any game or sport in India in a newspaper shall
deduct tax @20%. Further, since Smith is a non-resident, health and education cess @4% on
TDS would also be added. Therefore, tax to be deducted = ` 25,000 x 20.8% = ` 5,200.
(vii) Since Mr. X pays rent exceeding ` 50,000 per month in the F.Y. 2022-23, he is liable to deduct
tax at source @5% of such rent for F.Y. 2022-23 under section 194-IB. Thus, ` 27,500 [` 55,000
x 5% x 10] has to be deducted from rent payable for March, 2023.
If Mr. X vacated the premises in December, 2022, then tax of ` 19,250 [` 55,000 x 5% x 7] has
to be deducted from rent payable for December, 2022.
In case Mr. Y does not provide his PAN to Mr. X, tax would be deductible@20%, instead of
5%.
In case 1 above, this would amount to ` 1,10,000 [` 55,000 x 20% x 10], but the same has to be
restricted to ` 55,000, being rent for March, 2023.
In case 2 above, this would amount to ` 77,000 [` 55,000 x 20% x 7], but the same has to be
restricted to ` 55,000, being rent for December, 2022.
(viii) TDS provisions under section 194J would not get attracted, since the limit of ` 30,000 is
applicable for fees for professional services and fees for technical services, separately. It is
assumed that there is no other payment to Mr. Ganesh towards fees for professional services and
fees for technical services during the P.Y.2022-23
(ix) No tax is required to be deducted at source under section 194C by M/s S Ltd. on payment to
transporter Mr. R, since he satisfies the following conditions:
-He owns ten or less goods carriages at any time during the previous year.
-He is engaged in the business of plying, hiring or leasing goods carriages;
-He has furnished a declaration to this effect along with his PAN.
(x) Section 194J provides for deduction of tax at source @10% from any sum paid by way of any
remuneration or fees or commission, by whatever name called, to a resident director, which is
not in the nature of salary on which tax is deductible under section 192. The threshold limit of `
30,000 upto which the provisions of tax deduction at source are not attracted in respect of every
other payment covered under section 194J is, however, not applicable in respect of sum paid to
a director.
Therefore, tax@10% has to be deducted at source under section 194J in respect of the sum of `
19,000 paid by ABC Ltd. to its director.
Therefore, the amount of tax to be deducted at source: = ` 19,000 x 10% = ` 1,900
(xi) As per the provisions of section 194J, a Hindu Undivided Family is required to deduct tax at
source on fees paid for professional services only if the total sales, gross receipts or turnover
form the business or profession exceed ` 1 crore in case of business or ` 50 lakhs in case of
profession, as the case may be, in the financial year preceding the current financial year and such
payment made for professional services is not exclusively for the personal purpose of any
member of Hindu Undivided Family.
Section 194M, provides for deduction of tax at source by a HUF (which is not required to deduct
tax at source under section 194J) in respect of fees for professional service if such sum or
aggregate of such sum exceeds ` 50 lakhs during the financial year.
In the given case, the fees for professional service to Dr. Srivatsan is paid on 1.12.2022 for a
personal purpose, therefore, section 194J is not attracted. Section 194M would have been
attracted, if the payment or aggregate of payments exceeded ` 50 lakhs in the P.Y.2022-23.
However, since the payment does not exceed ` 50 lakh in this case, there is no liability to deduct
tax at source under section 194M also.
(xii) As per section 194LA, any person responsible for payment to a resident, any sum in the nature
of compensation or consideration on account of compulsory acquisition under any law, of any
immovable property, is required to deduct tax at source, if such payment or the aggregate amount
of such payments to the resident during the financial year exceeds ` 2,50,000.
In the given case, there is no liability to deduct tax at source as the payment made to Mr. A does
not exceed ` 2,50,000.
(xiii) On payment of sale consideration for purchase of residential house property – As per section
194-IA if consideration or SDV is 50 lakhs or more then TDS @1% applicable on consideration
or SDV whichever is higher. Mr. Arun is required to deduct tax at source u/s 194-IA on 55 lakhs
i.e., 55,000.
(xiv) On payment of call centre service charges - Since Rashi Limited is engaged only in the business
of operation of call centre, Jigar Limited is required deduct tax at source@2% on the amount of
` 70,000 u/s 194J on 18.3.2023 i.e., at the time of credit of call centre service charges to the
account of Rashi Limited, since the said date is earlier than the payment date i.e., 28.3.2023.
(xv) On payment of prize winnings of ` 21,000 -Tax is deductible @ 30% under section 194B by
M/s. Maximus Retail Ltd.., from the prize money of ` 21,000 payable to the customer, since the
winnings exceed ` 10,000.
Question: 19
(i) Mr. Sudarshan, due to inadvertent reasons, failed to file his Income-tax return for the assessment
year 2023-24 on or before the due date of filing such return of income.
(a) Can he file the above return after due date of filing return of income? If yes, which is
the last date for filing the above return?
(b) What are the consequences of non-filing the return within the due date under section
139(1)?
(ii) To whom the provisions of section 139AA relating to quoting of Aadhar Number do not apply?
(iii) Mrs. Hetal, an individual engaged in the business of Beauty Parlour, has got her books of account
for the financial year ended on 31st March, 2023 audited under section 44AB. Her total income
for the assessment year 2023-24 is ` 6,35,000. She wants to furnish her return of income for
assessment year 2023-24 through a tax return preparer. Can she do so?
Answer:
(i) If any person fails to furnish a return within the time allowed to him under section 139(1), he may
furnish the belated return for any previous year at any time -
(a) 3 months prior to the end of the relevant assessment year; or
(b) before the completion of the assessment,
whichever is earlier.
The last date for filing return of income for A.Y.2023-24, therefore, is 31st December 2023.
Thereafter, Mr. Sudarshan cannot furnish a belated return after this date.
Consequences for non-filing return of Income within the due date under section 139(1)
Carry forward and set-off of certain losses: Business loss, speculation business loss, loss from
specified business under section 35AD, loss under the head “Capital Gains”; and loss from the
activity of owning and maintaining race horses, would not be allowed to be carried forward for
set-off against income of subsequent years, where a return of income is not furnished within the
time allowed under section 139(1).
Interest under section 234A: Interest under section 234A@1% per month or part of the month
for the period commencing from the date immediately following the due date under section 139(1)
till the date of furnishing of return of income is payable, where the return of income is furnished
after the due date.
Fee under section 234F: Fee of ` 5,000 would be payable under section 234F, if the return of
income is not filed on or before the due date specified in section 139(1). However, such fee cannot
exceed ` 1,000, if the total income does not exceed` 5,00,000.
(ii) Persons to whom provisions of section 139AA relating to quoting of Aadhar Number does not
apply
The provisions of section 139AA relating to quoting of Aadhar Number would not apply to an
individual who does not possess the Aadhar number or Enrolment ID and is:
(i) residing in the States of Assam, Jammu & Kashmir and Meghalaya;
(ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India
(iii) Section 139B provides a scheme for submission of return of income for any assessment year
through a Tax Return Preparer. However, it is not applicable to persons whose books of account
are required to be audited under section 44AB. Therefore, Mrs. Hetal cannot furnish her return of
income for A.Y.2023-24 through a Tax Return Preparer.
Question: 20
Determine the residential status and total income of Mr. Raghu for the assessment year 2023-24 from
the information given below.
Mr. Raghu (age 62 years), an American citizen, is employed with a multinational company in
Gurugram. Mr. Raghu holds a senior level position as researcher in the company, since 2009. To share
his knowledge and finding in research, company gave him an opportunity to travel to other group
companies outside India while continuing to be based at the Gurugram office.
The details of his travel outside India for the financial year 2022-23 are as under:
Country Period of stay
USA 25 August, 2022 to 10 November, 2022
UK 20 November, 2022 to 23 December, 2022
Germany 10 January, 2023 to 24 March, 2023
During the last four years preceding the previous year 2022-23, he was present in India for 380 days.
During the last seven previous years preceding the previous year 2022-23, he was present in India for
700 days. During the P.Y. 2022-23, he earned the following incomes:
(1) Salary ` 15,80,000. The entire salary is paid by the Indian company in his Indian bank account.
(2) Dividend amounting to ` 48,000 received from Treat Ltd., a Singapore based company, which was
transferred to his bank account in Singapore.
(3) Interest on fixed deposit with Punjab National Bank (Delhi) amounting to ` 10,500 was credited to
his saving account.
Answer:
Determination of residential status
Mr. Raghu would be a resident in India in P.Y. 2022-23, if he satisfies any one of the following
conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total period
of 365 days or more and has been in India for at least 60 days in the previous year.
If he satisfies any one of the mentioned above, he is a resident. If both the above conditions are not
satisfied, he would be a non-resident.
During the P.Y. 2022-23 Mr. Raghu stayed in India for 179 days i.e., 365 days – 186 days [78 days +
34 days + 74 days] and 380 days i.e., more than 365 days during the 4 preceding previous years. He
satisfies the second basic condition for being a resident. Hence, he is a resident in India for A.Y.2023-
24.
A person would be “Not ordinarily Resident” in India in any previous year, if such person, inter alia:
(a) has been a non-resident in 9 out of 10 previous years preceding the relevant previous year; or
(b) has during the 7 previous years immediately preceding the relevant previous year been in India for
729 days or less.
For the previous year 2022-23, Mr. Raghu would be “Resident but not ordinarily resident” since he
stayed for less than 729 days during the 7 previous years immediately preceding P.Y. 2022-23.
Computation of total income of Mr. Raghu for A.Y.2023-24
Particulars Amount (`)
(1) Salary from Indian company received in a bank account in India 15,00,000
Less: Standard deduction u/s 16(ia) 50,000 14,50,000
(2) Dividend of ` 48,000 received from Singapore based company transferred to Nil
his bank account in Singapore is not taxable in the hands of the resident but not
ordinarily resident since the income has neither accrued or arisen in India nor
has it been received in India.
(3) Interest on fixed deposit with PNB credited to his savings bank account is 10,500
taxable in the hands of Mr. Raghu as Income from other sources, since it has
accrued and arisen in India and is also received in India.
Less: Deduction u/s 80TTB 10,500
Question: 21
From the following details, find out the salary chargeable to tax for the A.Y.2023-24 assuming he has
not opted for the provisions of section 115BAC-
Mr. X is a regular employee of Rama & Co., in Gurgaon. He was appointed on 1.1.2022 in the scale of
` 20,000 -` 1,000 - ` 30,000. He is paid 10% D.A. & Bonus equivalent to one month pay based on
salary of March every year. He contributes 15% of his pay and D.A. towards his recognized provident
fund and the company contributes the same amount. DA forms part of pay for retirement benefits.
He is provided free housing facility which has been taken on rent by the company at
` 10,000 per month. He is also provided with following facilities:
(i) Facility of laptop costing ` 50,000.
(ii) Company reimbursed the medical treatment bill of his brother of ` 25,000, who is dependent on
him.
(iii) The monthly salary of ` 1,000 of a house keeper is reimbursed by the company.
(iv) A gift voucher of ` 10,000 on the occasion of his marriage anniversary.
(v) Conveyance allowance of ` 1,000 per month is given by the company towards actual
reimbursement of conveyance spent on official duty.
(vi) He is provided personal accident policy for which premium of ` 5,000 is paid by the company.
(vii) He is getting telephone allowance @` 500 per month.
Answer:
Computation of taxable salary of Mr. X for A.Y. 2023-24
Particulars `
Basic pay [(` 20,000×9) + (` 21,000×3)] = ` 1,80,000 + ` 63,000 2,43,000
Dearness allowance [10% of basic pay] 24,300
Bonus 21,000
Employer’s contribution to Recognized Provident Fund in excess
of 12% (15%-12% =3% of ` 2,67,300) [See Note 1 below] 8,019
Taxable allowances
Telephone allowance 6,000
Taxable perquisites
Rent-free accommodation [See Note 1 & 2 below] 44,145
Medical reimbursement 25,000
Reimbursement of salary of housekeeper 12,000
Gift voucher [See Note 5 below] 10,000
Less: Deduction under section 16(ia) – Standard deduction 50,000
Salary income chargeable to tax 3,43,464
Notes:
1. Since dearness allowance forms part of salary for retirement benefits, the perquisite value of rent-
free accommodation and employer’s contribution to recognized provident fund have been
accordingly worked out.
2. Where the accommodation is taken on lease or rent by the employer, the value of rent-free
accommodation provided to employee would be actual amount of lease rental paid or payable by
the employer or 15% of salary, whichever is lower.
For the purposes of valuation of rent free house, salary includes:
(i) Basic salary i.e., ` 2,43,000
(ii) Dearness allowance (assuming that it is included for calculating retirement benefits) i.e.
` 24,300
(iii) Bonus i.e., ` 21,000
(iv) Telephone allowance i.e., ` 6,000
Therefore, salary works out to
` 2,43,000 + ` 24,300 + ` 21,000 + ` 6,000 = ` 2,94,300.
15% of salary = ` 2,94,300 × 15/100 = ` 44,145
Value of rent-free house = Lower of rent paid by the employer (i.e.
` 1,20,000) or 15% of salary (i.e., ` 44,145).
Therefore, the perquisite value is ` 44,145.
3. Facility of use of laptop is not a taxable perquisite.
4. Conveyance allowance is exempt since it is based on actual reimbursement for official purposes.
5. The value of any gift or voucher or token in lieu of gift received by the employee or by member of
his household below ` 5,000 in aggregate during the previous year is exempt. In this case, the gift
voucher was received on the occasion of marriage anniversary and the sum exceeds the limit of `
5,000.
Therefore, the entire amount of ` 10,000 is liable to tax as perquisite.
Note - An alternate view possible is that only the sum in excess of ` 5,000 is taxable. In such a
case, the value of perquisite would be ` 5,000.
6. Premium of ` 5,000 paid by the company for personal accident policy is not liable to tax.
Question: 22
Mr. Samaksh is a Marketing Manager in Smile Ltd. From the following information, you are required
to compute his income chargeable under the head Salary for assessment year 2023-24.
(i) Basic salary is ` 70,000 per month.
(ii) Dearness allowance @ 40% of basic salary
(iii) He is provided health insurance scheme approved by IRDA for which ` 20,000 incurred by Smile
Ltd.
(iv) Received ` 10,000 as gift voucher on the occasion of his marriage anniversary from Smile Ltd.
(v) Smile Ltd. allotted 800 sweat equity shares in August 2022. The shares were allotted at ` 450
per share and the fair market value on the date of exercising the option by Mr. Samaksh was `
700 per share.
(vi) He was provided with furniture during September 2018. The furniture is used at his residence
for personal purpose. The actual cost of the furniture was ` 1,10,000. On 31st March, 2023, the
company offered the furniture to him at free of cost. No amount was recovered from him towards
the furniture till date.
(vii) Received ` 10,000 towards entertainment allowance.
(viii) Housing Loan@ 4.5% p.a. provided by Smile Ltd., amount outstanding as on 01.04.2022 is ` 15
Lakhs. ` 50,000 is paid by Mr. Samaksh every quarter towards principal starting from June 2022.
The lending rate of SBI for similar loan as on 01.04.2022 was 8%.
(ix) Facility of laptop costing ` 50,000 [MTP Q.]
Answer:
Computation of income under the head “Salaries” of Mr. Samaksh for the A.Y.2023-24
Particulars ` `
Basic Salary [`70,000 x 12 months] 8,40,000
Dearness allowance [40% of `8,40,000] 3,36,000
Entertainment allowance 10,000
Interest on housing loan given at concessional rate, would be perquisite, 49,291
since the amount of loan exceeds ` 20,000, For computation, the
lending rate of SBI on 1.4.2022 @8% has to be considered. Thus,
perquisite value would be determined @ 3.5% (8% - 4.5%) [See
Working Note]
Health insurance premium paid by the employer [tax free perquisite] Nil
Gift voucher on the occasion of his marriage anniversary [As per Rule 10,000
3(7)(iv), the value of any gift or voucher or token in lieu of gift received
by the employee or by member of his household exceeding ` 5,000 in
aggregate during the previous year is fully taxable] (See note below)
Particulars ` `
Allotment of sweat equity shares
Fair market value of 800 sweat equity shares @ ` 700 each 5,60,000
Less: Amount recovered @ ` 450 each 3,60,000 2,00,000
Use of furniture by employee
10% p.a. of the actual cost of ` 1,10,000 11,000
Use of Laptop
Facility of use of laptop is not a taxable perquisite Nil
Transfer of asset to employee
Value of furniture transferred to Mr. Samaksh 1,10,000
Less: Normal wear and tear @10% for each completed year of usage
on SLM basis [1,10,000 x 10% x 4 years (from September 2018 to 44,000 66,000
September 2022)]
Less: Standard deduction u/s 16 [Actual salary or ` 50,000, whichever
is less] 50,000
Net Salary 14,72,291
Working Note:
Computation of perquisite value of loan given at concessional rate
For computation, the lending rate of SBI on 1.4.2022 @8% has to be considered. Thus, perquisite value
would be determined @ 3.5% (8% - 4.5%)
Month Maximum outstanding balance as on last date Perquisite value at
of month (`) 3.5% for the month (`)
April, 2022 15,00,000 4,375
May, 2022 15,00,000 4,375
June, 2022 14,50,000 4,229
July, 2022 14,50,000 4,229
August, 2022 14,50,000 4,229
September, 2022 14,00,000 4,083
October, 2022 14,00,000 4,083
November, 2022 14,00,000 4,083
December, 2022 13,50,000 3,937.50
January, 2023 13,50,000 3,937.50
February, 2023 13,50,000 3,937.50
March, 2023 13,00,000 3,792
Total value of this perquisite 49,290.50
Note: An alternate view possible is that only the sum in excess of ` 5,000 is taxable. In such a case,
the value of perquisite would be ` 5,000 and gross salary and net salary would be ` 15,17,291 and `
14,67,291, respectively.
Question: 23
(a) You are required to compute the income from salary of Mr. Raja from the following particulars for
the year ended 31-03-2023:
(i) He retired on 31-12-2022 at the age of 60, after putting in 25 years and 9 months of service,
from a private company at Delhi.
(ii) He was paid a salary of ` 25,000 p.m. and house rent allowance of `6,000 p.m. He paid rent of
` 6,500 p.m., during his tenure of service.
(iii) On retirement, he was paid a gratuity of ` 3,50,000. He was covered by the payment of Gratuity
Act, 1972. He had not received any other gratuity at any point of time earlier, other than this
gratuity.
(iv) He had accumulated leave of 15 days per annum during the period of his service; this was
encashed by him at the time of his retirement. A sum of ` 3,15,000 was received by him in this
regard. Employer allowed 30 days leave per annum.
(v) He is receiving `5,000 as pension. On 1.2.2023, he commuted 60% of his pension and received
` 3,00,000 as commuted pension.
(vi) The company presented him with a gift voucher of ` 5,000 on his retirement. His colleagues
also gifted him a mobile phone worth ` 50,000 from their own contribution.
(b) Mr. Gyaanchand purchased 1200 shares of "A" limited at ` 130 per share on 26.02.1979. "A"
limited issued him 600 bonus shares on 20.02.2002. The fair market value of these shares at
Mumbai Stock Exchange as on 1.04.2001 was ` 900 per share and ` 2,000 per share as on
31.01.2018. On 07.07.2022 Mr. Gyaanchand sold all 1800 shares @ ` 2,400 per share at Mumbai
Stock Exchange and securities transaction tax was paid. Compute capital gain chargeable to tax in
the hands of Mr. Gyaanchand for the A.Y.2023-24.
(c) Aggarwal & Sons, HUF purchased a house property in the year 1950 for ` 50,000. On 31.10.2022,
the HUF was totally partitioned and the aforesaid house property was given to Mr. Subhash
Aggarwal, a member of the family. Fair Market value of the house as on 31.10.2022 was `
21,00,000. FMV of the house as on 1.4.2001 was ` 3,50,000. What will be the tax implications in
the hands of Mr. Subhash Aggarwal and the HUF?
Answer:
(a) Computation of income under the head “Salaries” of Mr. Raja for the A.Y.2023-24
Particulars ` `
Basic Salary = ` 25,000 x 9 months 2,25,000
House Rent Allowance = ` 6,000 x 9 months 54,000
Less: Least of the following exempt under section 10(13A) 36,000 18,000
(i) House rent allowance actually received = ` 6,000 x 9 =` 54,000
(ii) Rent paid (-) 10% of salary for the relevant period [` 58,500 (i.e., `
6,500 x 9) (-) ` 22,500 (10% of salary i.e., 10% of` 2,25,000 (Basic
Salary)] = ` 36,000
(iii) 50% of salary for the relevant period [50% of ` 2,25,000 (Basic
salary)] ` 1,12,500
Gratuity 3,50,000
Less: Least of the following exempt under section 10(10)(ii) 3,50,000 Nil
(i) Actual Gratuity received ` 3,50,000
(ii) 15 days salary for every year of completed service [15/26 x` 25,000 x
26] = ` 3,75,000
(iii) Notified limit = ` 20,00,000
Particulars ` `
Leave encashment 3,15,000
Less: Least of the following exempt under section 10(10AA) 2,50,000 65,000
(i) ` 3,00,000
(ii) Leave salary actually received ` 3,15,000
(iii) ` 2,50,000, being 10 months’ salary x ` 25,000
(iv) Cash equivalent of leave standing at the credit of the employee based
on the average salary of last 10 months’ (max. 30 days per year of
service) for every year of actual service rendered for the employer
from whose service he has retired
375/30 x ` 25,000 = ` 3,12,500
[Leave Due = Leave allowed – Leave taken]
= 750 (30 days per year × 25 years) – 375 days (15 days x 25)
= 375 days]
Uncommuted Pension received [` 5,000 x 1) + (` 5,000 x 2 x 40%) 9,000
Commuted Pension received 3,00,000
Less: Exempt under section 10(10A)
1/3 x ` 3,00,000/60% x 100%) 1,66,667 1,33,333
Gift Voucher [As per Rule 3(7)(iv), the value of any gift or voucher or Exempt
token in lieu of gift received by the employee or by member of his
household not exceeding ` 5,000 in aggregate during the previous year is
exempt]
Mobile Phone received as gift from colleagues (Neither taxable under the Nil
head “Salaries” nor “Income from other sources”, since taxability
provisions under section 56(2)(x) are not attracted in respect of mobile
phone received from colleagues, as mobile phone is not included in the
definition of “property” thereunder)
Less: Standard deduction u/s 16 [Actual salary or ` 50,000, whichever is 50,000
less]
Net Salary 4,00,333
(b) Computation of capital gain of Mr. Gyaanchand for the A.Y.2023-24
Particulars ` `
Capital Gains
In respect of 600 shares (bonus shares)
Full value of consideration [600 shares x ` 2,400 per share] 14,40,000
Less: Cost of acquisition [600 shares x ` 2,000] 12,00,000 2,40,000
Higher of (i) and (ii), below
(i) Nil, being cost of acquisition
Particulars ` `
(ii) ` 2,000 per share, being the lower of
FMV as on 31.1.2018 - ` 2,000 per share
Sale consideration – ` 2,400 per share
In respect of 1,200 original shares
Full value of consideration [1,200 shares x ` 2,400] 28,80,000
Less: Cost of acquisition [1,200 shares x ` 2,000] 24,00,000 4,80,000
Higher of (i) and (ii), below
(i) ` 900, being original cost of acquisition (` 130) or FMV as on
1.4.2001 (` 900), at the option of the assessee
(ii) ` 2,000 per share, being the lower of
FMV as on 31.1.2018 - ` 2,000 per share
Sale consideration – ` 2,400 per share
Long term capital gain 7,20,000
(c) Tax implications in the hands of HUF
As per section 47, any distribution of capital assets on the total or partial partition of a HUF would not
be regarded as transfer for the purpose of capital gains tax.
In this case, Aggarwal & Sons, HUF transferred the asset to Mr. Subhash Aggarwal, a member of HUF
on total partition of the HUF. Hence, the transaction would not be regarded as transfer.
Tax implications in the hands of Mr. Subhash Aggarwal
If an immovable property is received by any person without consideration, the stamp duty value of
such property would be taxed as the income of the recipient under section 56(2)(x), if it exceeds
` 50,000. However, it would not be taxable as income if the transfer is by way of a transfer, inter alia,
on total or partial partition of a HUF.
In the give case, since Mr. Subhash Aggarwal received the house property on total partition of the HUF,
it would not be taxable in his hand.
Question: 24
Mr. Naveen and Mr. Vikas constructed their houses on a piece of land purchased by them at Delhi. The
built up area of each house was 1,800 sq. ft. ground floor and an equal area in the first floor. Naveen
started construction on 1-04-2020 and completed on 1-04-2022. Vikas started the construction on 1-
04-2020 and completed the construction on 30-09-2022. Naveen occupied the entire house on 01-04-
2022. Vikas occupied the ground floor on 01-10-2022 and let out the first floor for a rent of `20,000
per month. However, the tenant vacated the house on 31-12-2022 and Vikas occupied the entire house
during the period 01-01-2023 to 31-03-2023.
Following are the other information
(i) Fair rental value of each unit - ` 1,00,000 per annum (ground floor /first floor)
(ii) Municipal value of each unit (ground floor / first floor) - ` 72,000 per annum
(iii) Municipal taxes paid by
Naveen – ` 8,000
Vikas – ` 8,000
(iv) Repair and maintenance charges paid by
Naveen – ` 28,000
Vikas – ` 30,000
Naveen has availed a housing loan of ` 15 lakhs @ 12% p.a. on 01-04-2020. Vikas has availed a
housing loan of ` 10 lakhs @ 10% p.a. on 01-07-2020. No repayment was made by either of them till
31-03-2023. Compute income from house property for Naveen and Vikas for the previous year 2022-
23.
Answer:
Computation of income from house property of Mr. Naveen for A.Y. 2023-24
Particulars ` `
Annual value is nil (since house is self occupied) Nil
Less: Deduction under section 24(b)
Interest paid on borrowed capital `15,00,000 @ 12% 1,80,000
Pre-construction interest `3,60,000/5 72,000
2,52,000
As per second proviso to section 24(b), interest deduction restricted to 2,00,000
Loss under the head “Income from house property” of Mr. Naveen (2,00,000)
Computation of income from house property of Mr. Vikas for A.Y. 2023-24
Particulars Ground floor First floor
Self occupied)
Gross annual value (See Note below) Nil 60,000
Less: Municipal taxes (for first floor) 4,000
Net annual value(A) Nil 56,000
(a) 30% of net annual value 16,800
(b) interest on borrowed capital
Current year interest
`10,00,000 x 10% = `1,00,000 50,000 50,000
Pre-construction interest
`10,00,000 x 10% x 21/12 = `1,75,000
`1,75,000 allowed in 5 equal installments
`1,75,000/5 = `35,000 per annum 17,500 17,500
Total deduction under section 24 67,500 84,300
Income from house property (A)-(B) (67,500) (28,300)
Loss under the head “Income from house property” of Mr. Vikas (95,800)
(both ground floor and first floor)
Note: Computation of Gross Annual Value (GAV) of first floor of Vikas’s house
If a single unit of property (in this case the first floor of Vikas’s house) is let out for some months and
self-occupied for the other months, then the Expected Rent of the property shall be taken into account
for determining the annual value. The Expected Rent shall be compared with the actual rent and
whichever is higher shall be adopted as the annual value. In this case, the actual rent shall be the rent
for the period for which the property was let out during the previous year.
The Expected Rent is the higher of fair rent and municipal value. This should be considered for 6
months since the construction of property was completed only on 30.9.2022.
Expected rent = `50,000 being higher of -
Fair rent = 1,00,000 x 6 /12 = `50,000 Municipal value = 72,000 x 6/12 = `36,000
Actual rent = `60,000 (`20,000 p.m. for 3 months from October to December, 2022)
Gross Annual Value = `60,000 (being higher of Expected Rent of `50,000 and actual rent of `60,000).
Question: 25
Two brothers Arun and Bimal are co-owners of a house property with equal share. The property was
constructed during the financial year 1998-1999. The property consists of eight identical units and is
situated at Cochin.
During the financial year 2022-23, each co-owner occupied one unit for residence and the balance of
six units were let out at a rent of ` 12,000 per month per unit. The municipal value of the house property
is ` 9,00,000 and the municipal taxes are 20% of municipal value, which were paid during the year.
The other expenses were as follows:
`
(i) Repairs 40,000
(ii) Insurance premium (paid) 15,000
(iii) Interest payable on loan taken for construction of house 3,00,000 One of the let out units remained
vacant for four months during the year.
Arun could not occupy his unit for six months as he was transferred to Chennai. He does not own any
other house.
The other income of Mr. Arun and Mr. Bimal are ` 2,90,000 and ` 1,80,000, respectively, for the
financial year 2022-23.
Compute the income under the head ‘Income from House Property’ and the total income of two brothers
for the assessment year 2023-24.
Answer:
Computation of total income for the A.Y. 2023-24
Particulars Arun (`) Bimal (`)
I. Self-occupied portion (25%)
Annual value Nil Nil
Less: Deduction under section 24(b)
Interest on loan taken for construction ` 37,500 (being 25% of ` 30,000 30,000
1.5 lakh) restricted to maximum of ` 30,000 for each co-owner
since the property was constructed before 1.04.1999. Hence, it is
assumed that loan was taken before 1.4.1999
Loss from self occupied property (30,000) (30,000)
II. Let-out portion (75%) – See Working Note below 1,25,850 1,25,850
95,850 95,850
Other Income 2,90,000 1,80,000
Total Income 3,85,850 2,75,850
Working Note – Computation of Income from Let-Out Portion of House Property
Particulars ` `
Let-out portion (75%)
Gross Annual Value
(a) Municipal value (75% of ` 9 lakh) 6,75,000
(b) Actual rent [(` 12000 x 6 x 12) – (` 12,000 x 1 x 4)] = ` 8,64,000 - 8,16,000
` 48,000
8,16,000
- whichever is higher
Less: Municipal taxes 75% of ` 1,80,000 (20% of ` 9 lakh) 1,35,000
(a) 30% of NAV 2,04,300
(b) Interest on loan taken for the house [75% of ` 3 lakh] 2,25,000 4,29,300
Income from let-out portion of house property 2,51,700
Share of each co-owner (50%) 1,25,850
Question: 26
Mr. Venus., engaged in manufacture of pesticides, furnishes the following particulars relating to its
manufacturing unit at Chennai, for the year ending 31-3-2023:
(` in lacs)
WDV of Plant and Machinery on 31.3.2022 30
Depreciation including additional depreciation for P.Y. 2021-22 4.75
New machinery purchased on 1-9-2022 10
New machinery purchased on 1-12-2022 8
Computer purchased on 3-1-2023 4
Additional information:
 All assets were purchased by A/c payee cheque.
 All assets were put to use immediately.
 New machinery purchased on 1-12-2022 and computer have been installed in the office.
 During the year ended 31-3-2022, a new machinery had been purchased on 31-10-2021, for ` 10
lacs. Additional depreciation, besides normal depreciation, had been claimed thereon.
 Depreciation rate for machinery may be taken as 15%.
Compute the depreciation available to the assessee as per the provisions of the Income-tax Act, 1961
and the WDV of different blocks of assets as on 31-3-2023. Assume that he does not opt for section
115BAC.
Answer:
Computation of written down value of block of assets of Venus Ltd. as on 31.3.2023
Particulars Plant & Computer
Machinery (` in lacs)
(` in lacs)
Written down value (as on 31.3.2022) 30.00 Nil
Less: Depreciation including additional depreciation for P.Y. 4.75 -
2021-22
Opening balance as on 1.4.2022 25.25
Add: Actual cost of new assets acquired during the year
New machinery purchased on 1.9.2022 10.00 -
New machinery purchased on 1.12.2022 8.00 -
Computer purchased on 3.1.2023 - 4.00
43.25 4.00
Less: Assets sold/discarded/destroyed during the year Nil Nil
Written Down Value (as on 31.03.2023) 43.25 4.00
Computation of Depreciation for A.Y. 2023-24
(` in lacs)
I. Assets put to use for more than 180 days, eligible
for 100% depreciation calculated applying the
eligible rate of normal depreciation and additional
depreciation
Normal Depreciation
3.79 -
- WDV of plant and machinery (` 25.25 lacs x
15%)
- New Machinery purchased on 1.9.2022 (` 10 lacs 1.50 -
x 15%)
-
(A) 5.29
Additional Depreciation
-
New Machinery purchased on 1.9.2022 (` 10 lakhs x 2.00
20%)
Balance additional depreciation in respect of new
machinery purchased on 31.10.2021 and put to use
for less than 180 days in the P.Y. 2021-22 (` 10 lakhs 1.00
x 20% x 50%)
(B) 3.00
(` in lacs)
II. Assets put to use for less than 180 days, eligible for
50% depreciation calculated applying the eligible
rate of normal depreciation and additional
depreciation, if any
Normal Depreciation
New machinery purchased on 1.12.2022 [` 8 lacs x
7.5% (i.e., 50% of 15%)] 0.60 -
Computer purchased on 3.1.2023 [` 4 lacs x 20% - 0.80
(50% of 40%)]
(C) 0.60 0.80
Total Depreciation (A+B+C) 8.89 0.80
Notes:
(1) As per section 32(1)(iia), additional depreciation is allowable in the case of any new machinery or
plant acquired and installed after 31.3.2005, by an assessee engaged, inter alia, in the business of
manufacture or production of any article or thing, at the rate of 20% of the actual cost of such
machinery or plant.
However, additional depreciation shall not be allowed in respect of, inter alia,–
(i) any office appliances or road transport vehicles;
(ii) any machinery or plant installed in, inter alia, office premises.
In view of the above provisions, additional depreciation cannot be claimed in respect of -
(i) Machinery purchased on 1.12.2022, installed in office and
(ii) Computer purchased on 3.1.2023, installed in office.
(2) Balance additional depreciation@10% on new plant or machinery acquired and put to use for less
than 180 days in the year of acquisition which has not been allowed in that year, shall be allowed
in the immediately succeeding previous year.
Hence, in this case, the balance additional depreciation@10% (i.e., ` 1 lakhs, being 10% of ` 10
lakhs) in respect of new machinery which had been purchased during the previous year 2021-22
and put to use for less than 180 days in that year can be claimed in P.Y. 2022-23 being immediately
succeeding previous year.
Question: 27
Mrs. Harshita purchased a land at a cost of ` 35 lakhs in the financial year 2004-05 and held the same
as her capital asset till 20th March, 2022.
She started her real estate business on 21st March, 2022 and converted the said land into stock-in-trade
of her business on the said date, when the fair market value of the land was ` 210 lakhs.
She constructed 15 flats of equal size, quality and dimension. Cost of construction of each flat is ` 10
lakhs. Construction was completed in February, 2023. She sold 10 flats at ` 30 lakhs per flat in March,
2023. The remaining 5 flats were held in stock as on 31st March, 2023.
She invested ` 50 lakhs in bonds issued by National Highways Authority of India on 31st March, 2023
and another` 50 lakhs in bonds of Rural Electrification Corporation Ltd. in April, 2023.
Compute the amount of chargeable capital gain and business income in the hands of Mrs. Harshita
arising from the above transactions for Assessment Year 2023-24 indicating clearly the reasons for
treatment for each item.
[Cost Inflation Index: F.Y. 2004-05: 113; F.Y. 2021-22: 317].
Answer:
Computation of capital gains and business income of Harshita for A.Y. 2023-24
Particulars `
Capital Gains
Fair market value of land on the date of conversion deemed as the full value of 2,10,00,000
consideration for the purposes of section 45(2)
Less: Indexed cost of acquisition[`35,00,000×317(2021-22)/113(2004-05)] 98,18,584
1,11,81,416
Proportionate capital gains arising during A.Y. 2023-24 [` 1,11,81,416 x 2/3] 74,54,277
Less: Exemption under section 54EC 50,00,000

Capital gains chargeable to tax for A.Y.2023-24
Business Income 24,54,277
Sale price of flats [10 × ` 30 lakhs]
Less: Cost of flats 3,00,00,000
Fair market value of land on the date of conversion [` 210 lacs × 2/3] 1,40,00,000
Cost of construction of flats [10 × ` 10 lakhs] 1,00,00,000
Business income chargeable to tax for A.Y.2023-24 60,00,000
Notes:
(1) The conversion of a capital asset into stock-in-trade is treated as a transfer under section 2(47). It
would be treated as a transfer in the year in which the capital asset is converted into stock-in-trade
(i.e., P.Y.2021-22, in this case).
(2) However, as per section 45(2), the capital gains arising from the transfer by way of conversion of
capital assets into stock-in-trade will be chargeable to tax only in the year in which the stock-in-
trade is sold.
(3) The indexation benefit for computing indexed cost of acquisition would, however, be available
only up to the year of conversion of capital asset into stock-in-trade (i.e., P.Y.2021-22) and not up
to the year of sale of stock-in- trade (i.e., P.Y.2022-23).
(4) For the purpose of computing capital gains in such cases, the fair market value of the capital asset
on the date on which it was converted into stock- in-trade shall be deemed to be the full value of
consideration received or accruing as a result of the transfer of the capital asset.
In this case, since only 2/3rd of the stock-in-trade (10 flats out of 15 flats) is sold in the P.Y.2022-
23, only proportionate capital gains (i.e., 2/3rd) would be chargeable to tax in the A.Y.2023-24.
(5) On sale of such stock-in-trade, business income would arise. The business income chargeable to
tax would be the difference between the price at which the stock-in-trade is sold and the fair market
value on the date of conversion of the capital asset into stock-in-trade.
(6) In case of conversion of capital asset into stock-in-trade and subsequent sale of stock-in-trade, the
period of 6 months is to be reckoned from the date of sale of stock-in-trade for the purpose of
exemption under section 54EC [CBDT Circular No.791 dated 2.6.2000]. In this case, since the
investment in bonds of NHAI has been made within 6 months of sale of flats, the same qualifies
for exemption under section 54EC. With respect to long-term capital gains arising on land or
building or both in any financial year, the maximum deduction under section 54EC would be ` 50
lakhs, whether the investment in bonds of NHAI or RECL are made in the same financial year or
next financial year or partly in the same financial year and partly in the next financial year.
Therefore, even though investment of ` 50 lakhs has been made in bonds of NHAI during the P.Y.
2022-23 and investment of ` 50 lakhs has been made in bonds of RECL during the P.Y. 2023-24,
both within the stipulated six month period, the maximum deduction allowable for A.Y. 2023-24,
in respect of long- term capital gain arising on sale of long-term capital asset(s) during the P.Y.
2022-23, is only ` 50 lakhs.
Question: 28
Mr. A, a dealer in shares, received the following without consideration during the P.Y. 2022-23 from
his friend Mr. B, -
(1) Cash gift of ` 75,000 on his anniversary, 15th April, 2022.
(2) Bullion, the fair market value of which was ` 60,000, on his birthday, 19th June, 2022.
(3) A plot of land at Faridabad on 1st July, 2022, the stamp value of which is ` 5 lakh on that date. Mr.
B had purchased the land in April, 2009.
Mr. A purchased from his friend Mr. C, who is also a dealer in shares, 1000 shares of X Ltd. @ ` 400
each on 19th June, 2022, the fair market value of which was ` 600 each on that date. Mr. A sold these
shares in the course of his business on 23rd June, 2022.
Further, on 1st November, 2022, Mr. A took possession of property (office building) booked by him
two years back at ` 20 lakh. The stamp duty value of the property as on 1st November, 2022 was ` 32
lakh and on the date of booking was ` 23 lakh. He had paid ` 1 lakh by account payee cheque as down
payment on the date of booking.
On 1st March, 2023, he sold the plot of land at Faridabad for ` 7 lakh.
Compute the income of Mr. A chargeable under the head “Income from other sources” and “Capital
Gains” for A.Y. 2023-24.
Answer:
Computation of “Income from other sources” of Mr. A for the A.Y. 2023-24
Particulars `
(1) Cash gift is taxable under section 56(2)(x), since it exceeds ` 50,000 75,000
(2) Since bullion is included in the definition of property, therefore, when bullion is 60,000
received without consideration, the same is taxable, since the aggregate fair
market value exceeds ` 50,000
(3) Stamp value of plot of land at Faridabad, received without consideration, is 5,00,000
taxable under section 56(2)(x)
(4) Difference of ` 2 lakh in the value of shares of X Ltd. purchased from Mr. C, a -
dealer in shares, is not taxable as it represents the stock-in-trade of Mr. A. Since
Mr. A is a dealer in shares and it has been mentioned that the shares were
subsequently sold in the course of his business, such shares represent the stock-
in-trade of Mr. A.
(5) Difference between the stamp duty value of ` 23 lakh on the date of booking and 3,00,000
the actual consideration of ` 20 lakh paid is taxable under section 56(2)(x) since
the difference exceeds ` 2,00,000, being the higher of ` 50,000 and 10% of
consideration
Income from Other Sources 9,35,000
Computation of “Capital Gains” of Mr. A for the A.Y.2023-24
Particulars `
Sale Consideration 7,00,000
Less: Cost of acquisition [deemed to be the stamp value charged to tax under 5,00,000
section 56(2)(x) as per section 49(4)]
Short-term capital gains 2,00,000
Note – The resultant capital gains will be short-term capital gains since for calculating the period of holding,
the period of holding of previous owner is not to be considered.
Question: 29
Kishore & Sons is a dealer of coal. Its turnover for the F.Y. 2021-22 was ` 12 crores. The State
Government of Hyderabad granted a lease of coal mine to Kishore & Sons on 1.5.2022 and charged `
11 crores for the lease. Kishore & Sons sold coal of ` 95 lakhs to M/s BAC Co. during the P.Y. 2022-
23. M/s XYZ Ltd. purchased coal of ` 55 lakhs from Kishore & Sons for trading purpose in July 2022.
Turnover of M/s XYZ Ltd. during the P.Y. 2021-22 was ` 12 crores. PAN is duly furnished by the
buyer and seller to each other. Details of sale to and payments from M/s BAC Co. by Kishore & Sons
are as follows:
S. No. Date of sale Date of receipt/ Payment Amount (`)
1 29.05.2022 10.05.2022 35,00,000

2 30.06.2022 10.07.2022 25,00,000
3 25.11.2022 25.10.2022 8,00,000
4 20.01.2023 22.01.2023 15,00,000
5 01.03.2023 15.02.2023 12,00,000
Turnover of M/s BAC Co. during the P.Y. 2021-22 was ` 11 crores. The above amounts were credited
to Kishore & Sons account in the books of M/s BAC Co. on the date of sale. M/s BAC Co. furnishes a
declaration to Kishore & Sons that coal is to be utilised for generation of power.
Based on the above facts, choose the most appropriate answer to Q. No. 1 to 5 –
I. Who is required to deduct/ collect tax at source in respect of lease of coal mine by the State
Government of Hyderabad to Kishore & Sons and at what rate?
(a) State Government of Hyderabad is liable to collect tax at source @ 2% on ` 11 crores
(b) State Government of Hyderabad is liable to collect tax at source @0.1% on ` 10.50 crores,
being the amount exceeding ` 50 lakhs
(c) Kishore & Sons is liable to deduct tax at source @0.1% on ` 10.50 crores, being the amount
exceeding ` 50 lakhs
(d) Neither State Government of Hyderabad is liable to collect tax at source nor Kishore & Sons
is liable to deduct tax at source
II. Is Kishore & Sons required to collect tax at source in respect of the sale transactions with M/s
BAC Co. If yes, when and what is the amount of tax to be collected?
(a) Yes; ` 1,000 on 30.6.2022, ` 800 on 25.10.2022, ` 1,500 on 20.1.2023 and ` 1,200 on
15.2.2023
(b) Yes; ` 35,000 on 10.5.2022, ` 25,000 on 30.6.2022, ` 8,000 on 25.10.2022, ` 15,000 on
20.1.2023 and ` 12,000 on 15.2.2023
(c) Yes; ` 1,000 on 10.7.2022, ` 800 on 25.10.2022, ` 1,500 on 22.1.2023 and ` 1,200 on
15.2.2023
(d) No, Kishore & Sons is not liable to collect tax at source
III. Is Kishore & Sons required to collect tax at source in respect of the sale transaction with M/s XYZ
Ltd. If yes, what is the amount of tax to be collected?
(a) Yes; ` 55,000
(b) Yes; ` 5,500
(c) Yes; ` 500
(d) No, Kishore & Sons is not liable to collect tax at source
IV. Is M/s BAC Co. required to deduct tax at source in respect of the purchase transactions with
Kishore & Sons. If yes, when and what is the amount of tax to be deducted?
(a) Yes; ` 1,000 on 30.6.2022, ` 800 on 25.10.2022, ` 1,500 on 20.1.2023 and ` 1,200 on
15.2.2023
(b) Yes; ` 3,500 on 10.5.2022, ` 2,500 on 30.6.2022, ` 800 on 25.10.2022, ` 1,500 on 20.1.2023
and ` 1,200 on 15.2.2023
(c) Yes; ` 1,000 on 10.7.2022, ` 800 on 25.10.2022, ` 1,500 on 22.1.2023 and ` 1,200 on
15.2.2023
(d) No, M/s BAC Co. is not liable to deduct tax at source
V. Assume for the purpose of this MCQ, M/s BAC Co.’s turnover for the F.Y. 2021-22 was ` 9 crore,
who will be required to deduct/ collect tax at source in respect of transactions between Kishore &
Sons and M/s BAC Co. and at what rate?
(a) Kishore & Sons is liable to collect tax at source @1% of ` 95 lakhs
(b) Kishore & Sons is liable to collect tax at source @0.1% of ` 45 lakhs, being the sum
exceeding
` 50 lakhs
(c) M/s BAC Co. is liable to deduct tax at source @0.1% of ` 45 lakhs, being the sum exceeding
` 50 lakhs
(d) Neither Kishore & Sons is liable to collect tax at source nor M/s BAC Co. is liable to deduct
tax at source
Answer Key
Question No. Answer
I (a)
II (d)
III (a)
IV (a)
V (d)
Question: 30
Examine whether the following persons are required to file return of income for A.Y.202324, giving
brief reasons for your answer –
(i) Mr. Albert, aged 31 years, whose turnover from business is ` 70 lakhs for the P.Y.2022-23
and whose total income computed as per books of account is ` 2 lakhs. This is the first year
of his business. He has no other income. He is not claiming any deduction under Chapter
VI-A or section 10AA.
(ii) Mr. Ashish, aged 42 years, has gross receipts of ` 5 lakhs from profession and profits and
gains of ` 2.50 lakhs (computed) from profession for the P.Y. 2022-23. In addition, he has
interest of ` 4 lakhs on fixed deposits and ` 50,000 from savings bank account.
(iii) M/s. ABC & Co., a law firm, whose gross receipts from profession for the P.Y.2022-23 is `
9 lakhs.
(iv) XYZ (P) Ltd. which has incurred expenditure of an amount of ` 95,000 towards consumption
of electricity in the F.Y.2022-23.
(v) Mr. Vallish, aged 58 years, who has deposited ` 50 lakhs in his savings bank account with
SBI on 28th March, 2023. The said sum was received as a gift from his son, Mr. Rishi, aged
30 years, who is employed in a company. Mr. Vallish used the said sum to purchase a flat
for ` 30 lakhs on 25th April, 2023 for self-residence. The balance money was transferred to
a 1-year fixed deposit on 28th April, 2023. Mr. Vallish does not maintain any other bank
account. He is not in receipt of any other source of income other than interest on this fixed
deposit.
VI Mr. Ravi Prakash, a resident Indian aged 52 years, gifted a sum of ` 30 lakhs to his wife
Mrs. Sudha on the occasion of her 50th birthday. Out of the said sum, Mrs. Sudha purchased
a car for ` 29,52,000 inclusive of RTO charges of ` 2,15,000, insurance of ` 51,575,
extended warranty of ` 25,255 and accessories charges of ` 35,460 during the P.Y. 2022-23.
These charges were shown separately in the invoice. Mrs. Sudha’s furnished her Aadhaar
No. to the dealer. She is a housewife and does not have any income except rental income of
` 25,000 p.m. in respect of a house property gifted to her by her father.
Mr. Ravi Prakash is of the opinion that his wife is not required to furnish return of income,
since her total income does not exceed the basic exemption limit. Examine.
Answer:
Requirement of filing return of income
(i) Yes, Mr. Albert is required to file his return of income for A.Y.2023-24.
As per section 139(1)(b), an individual is required to file his return if his total income,
without giving effect to deductions under, inter alia, Chapter VI-A and section 10AA,
exceeds the basic exemption limit. In this case, Mr. Albert’s total income of ` 2,00,000 is
lower than the basic exemption limit of ` 2,50,000. However, such person referred to in
section 139(1)(b) who is not required to file his return on account of his total income being
lower than the basic exemption limit would be required to file return of income if, inter alia,
his turnover in business exceeds ` 60 lakhs. In this case, since Mr. Albert’s turnover from
business for the P.Y.2022-23 is ` 70 lakhs, he has to file return of his income for A.Y.2023-
24.
(ii) Yes, Mr. Ashish is required to file his return of income for A.Y.2023-24.
Mr. Ashish’s total income for A.Y.2023-24 without giving effect to Chapter VI-A
deductions is ` 7 lakhs [` 2.50 lakhs from profession + ` 4 lakhs interest on fixed deposits
+ ` 0.50 lakhs interest on savings bank account], which exceeds the basic exemption limit
of ` 2,50,000. Hence, he is required to file his return of income for A.Y.2023-24 as per
section 139(1)(b).
Note - The threshold limit of ` 10 lakhs for gross receipts in profession has to be looked into
only in a case where an individual referred to in section 139(1)(b) is not required to file his
return of income thereunder i.e., only if Ashish’s total income without giving effect to
Chapter VI-A deductions is lower than the basic exemption limit.
(iii) Yes, M/s. ABC & Co. is required to file its return of income for A.Y.2023-24.
As per section 139(1)(a), a firm is compulsorily required to file its return of income. The
threshold limit of ` 10 lakhs for gross receipts in profession is relevant only for a person
other than a company or a firm.
(iv) Yes, XYZ (P) Ltd. is required to file its return of income for A.Y.2023-24.
As per section 139(1)(a), a company has to mandatorily file its return of income. The
condition of filing of return of income where expenditure towards consumption of electricity
exceeds ` 1 lakh applies to a person other than a company or a firm.
(v) Yes, Mr. Vallish is required to file his return of income for A.Y.2023-24.
Gift of ` 50 lakhs received from son is not taxable under section 56(2)(x) in the hands of
Mr. Vallish, since his son is his relative, and gifts from a relative are excluded from the
applicability of section 56(2)(x). The only income of Mr. Vallish for the P.Y.2022-23 would
be interest on savings account for a period of 4 days from 28th March, 2023 to 31st March,
2023 on ` 50 lakhs, which would be lower than the basic exemption limit. As per section
139(1)(b), an individual is required to file his return if his total income exceeds the basic
exemption limit. In this case, Mr. Vallish’s total income is lower than the basic exemption
limit of ` 2,50,000.
However, such person referred to in section 139(1)(b) who is not required to file his return
on account of his total income being lower than the basic exemption limit would be required
to file return of income if, inter alia, the deposit in his savings account is ` 50 lakhs or more
during the previous year.
Since a deposit of ` 50 lakhs has been made in the savings account of Mr. Vallish in the
P.Y.2022-23, he is required to file his return of income for A.Y.2023-24.
(vi) Mrs. Sudha’s income from house property would be ` 2,10,000 (` 3,00,000 less 30% of net
annual value). Since this is her only source of income, her gross total income/total income for
A.Y.2023-24 would be ` 2,10,000, which is lower than the basic exemption limit. Hence, she
is not required file her return of income for A.Y.2023-24 as per section 139(1)(b), since her
gross total income/total income does not exceed the basic exemption limit of ` 2,50,000.
However, clause (iv) to seventh proviso of section 139(1) provides that a person (other than
a company or a firm) who is not required to furnish a return u/s 139(1) has to furnish return
on or before the due date if he/she fulfills such other conditions as may be prescribed under
Rule 12AB.
Rule 12AB, inter alia, prescribes that any person other than a company or a firm, who is not
required to furnish a return under section 139(1), has to file income-tax return in the
prescribed form and manner on or before the due date if, the aggregate of tax deducted at
source and tax collected at source during the previous year, in case of such person, is ` 25,000
or more.
Accordingly, it has to be examined whether, in Mrs. Sudha’s case, the requirement to file
return for A.Y.2023-24 arises due to TDS/TCS, in her case, exceeding ` 25,000 in the
P.Y.2022-23.
As per section 206C(1F), every person, being a seller, who receives any amount as
consideration for sale of a motor vehicle of the value exceeding ` 10 lakhs, has to collect tax
from the buyer @1% of the sale consideration.
Accordingly, dealer of the car is required to collect tax at source of ` 26,247 @1% on ex-
showroom price i.e., ` 26,24,710 (` 29,52,000 – ` 2,15,000 – ` 51,575 – ` 25,255 – ` 35,460)
from Mrs. Sudha, being the buyer of the car.
Hence, as per the seventh proviso to section 139(1) read with Rule 12AB, Mrs. Sudha is
required to mandatorily file her return of income for A.Y.2023-24, even though her gross total
income/total income does not exceed the basic exemption limit, since tax collected at source
during the P.Y. 2022-23, in her case is ` 26,247 which exceeds the threshold of ` 25,000.

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Super 30 Questions for India Tour CA Inter

Total 90,92,250 Total 90,92,250

40,00,000 16,75,000 23,25,000 40,00,000

Medical insurance premium (for 18,000

Computer acquired on 1.11.2022 30,000

Domestic drawings 2,72,000

Gross Total Income 4,49,390

Gross Total Income 5,00,890

1 Assuming the capital expenditure of ` 65 lakhs is incurred entirely on buildings.

On transfer of 60,000 shares (2,00,000 x 30%)

Total income 22,13,300

III Capital Gains

Less: Indexed Cost of acquisition [` 5,00,000 x 331/100] 16,55,000 45,000

IV Income from Other Sources

Insurance premium paid on life insurance policy of

Share of each co-owner (50%) 1,25,850

Less: Exemption under section 54EC 50,00,000

1 29.05.2022 10.05.2022 35,00,000

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