Income tax material for CA INTER

Assessment Year - 2024-25

Volume - 2

Chapter No. Chapter Page No.

12. Depreciation u.s.32 1

13. Set-off and carry forward of losses 11

14. Clubbing provisions 21

15. Chapter VIA Deductions 35

16. Advance tax 59

TDS 64
TCS 100

17. Filing of returns 108

18. Section 10AA – Units in SEZ 126

Alternative Minimum Tax (AMT) 129
Exempted incomes u.s.10 133
Income deemed to accrue or arise in India 135

19. Total Income and tax liability 139

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CHAPTER – 12 DEPRECIATION
Conditions for claiming depreciation:
• Should be the owner of the asset (joint ownership is also recognized)
• The asset must be put to use in business (not active use but passive use)
• The assets should fall within the eligible classification of assets

Important points:
• Depreciation claim is mandatory (not an option)
• Registration is not compulsory to claim depreciation
• Allowed on the system of “block of assets”
• Allowed on the basis of “written down value” method
• No depreciation is allowed on land
• No depreciation for assets purchased by way of cash exceeding Rs.10,000

Block of Assets:
“Block of Assets” means a group of assets falling within a class of assets comprising,
a) tangible assets, being building, machinery, plant or furniture;

b) intangible assets, being know-how, patents, copyrights, trademarks, licences,

franchises or any other business or commercial rights of similar nature, in
respect of which the same percentage of depreciation is prescribed.

note: An assessee may have 9 different blocks of assets as under

Buildings ------ 3 blocks (5%, 10%, and 40%)
Furniture and fittings ------ 1 block 10%
Plant and machinery ------ 4 blocks (15%, 20%, 30%, 40%)
Intangible assets ------ 1 block 25%

Plant includes ships, vehicles, books, scientific apparatus and surgical equipments.
Building includes roads, bridges, culverts, wells and tube wells.
Goodwill does not qualify for depreciation.

How to compute depreciation?

Written down value as on 1.4.2023 xxx
Add: Purchases to the block xxx
xxx
Less: Amount realized through sale, etc. xxx
Less: Depreciation as per section 32 xxx
Written down value as on 31.3.2024 xxx
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If the asset is acquired during the previous year (first year) and put to use for:
a. Less than 180 days: Only 50% of the depreciation is allowed
b. 180 days or more: Full depreciation is allowed

note: The above provision is only for year of purchase and not for subsequent years. For
subsequent years, full depreciation is allowed.

note: No depreciation if WDV is reduced to zero or where the block ceases to exist.

In other words, depreciation is allowed only if the following two conditions are satisfied:
a) Block should exist (i.e. there should be an asset in the block)
b) Written down value of the block should not be zero.

On sale of entire block or part of the block:

A. Where ENTIRE block is sold: The result is either STCG or STCL

If the sale value > the opening w.d.v. plus additions: STCG
If the sale value < the opening w.d.v. plus additions: STCL

B. Where PART of the block is sold:

If sale value is less than w.d.v. of the block: Depreciation is allowed
If sale value is more than w.d.v. of the block: Short-term capital gain

Depreciation on Actual Cost:

Revaluation of assets does not have any impact under the IT Act. Depreciation is allowed only
on the actual cost of the asset and not on the revalued figure.

Is it mandatory to claim depreciation or is it an option?

Yes it is mandatory for the assessee to claim depreciation. Depreciation shall be allowed
whether or not the assessee has claimed depreciation in computing his total income.

note: GST paid on purchase of an asset shall not be included in the cost if ITC is availed.

note: Any subsidy or grant received from the Government in connection with purchase of an
asset shall be reduced from the cost of such asset.

Rates of depreciation:
Computers: 40%; Cars: 15%; Buildings (commercial): 10%;
Furniture: 10%; Ships: 20% Residential quarters: 5%;
Aeroplanes: 40%; Books: 40% Plant and machinery (generally): 15%
Books (annual publication): 40%
Life savings medical equipment: 40%
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note: Motor cars acquired during the period from 23.08.2019 to 31.03.2020 and put to use
before 31.03.2020 shall qualify for 30% depreciation.

note: Motor buses, motor lorries, motor taxis used in the business of running them on hire,
acquired during the period from 23.08.2019 to 31.03.2020 and put to use before
31.03.2020 shall qualify for 45% depreciation.

ADDITIONAL DEPRECIATION on new plant and machinery:

Conditions for claiming additional depreciation – Section 32(1)(iia)

• It should be:
− a manufacturing unit; or
− an assessee engaged in the business of generation or transmission or
distribution of power.

• Rate of additional depreciation is 20% of cost of new plant and machinery acquired
and installed in a previous year

Additional Depreciation is NOT available in the following cases:

• Not available for assets like building or furniture
• Not available for assets like ships or aircrafts
• Should not be a second-hand machinery
• Machinery or plant used in any office premises or any residential premises
• Office appliances or road transport vehicles.
• Machinery or plant where whole of the cost is allowed as deduction in one year.

note: If the new machinery is put to use for less than 180 days: Additional depreciation is
allowed @ 10% (50% of 20%) and balance 10% shall be allowed in the next year.

note: Additional depreciation is allowed every year on the new investment made.

CBDT Circular: Business of printing or printing and publishing amounts to manufacture or

production of any article or thing and is therefore eligible for additional depreciation.
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Problems:
1. The following are the assets owned by X as on 1.4.2023:

Asset Rate of Depreciation

Building A 10%
Building B 10%
Building C 5%
Building D 40%
Machinery A 15%
Machinery B 15%
Machinery C 40%
Machinery D 15%
Car X 15%
Furniture and fixtures 10%
Patent rights 25%
Technical know-how 25%

Classify the assets into different block of assets.

2. The w.d.v. of a block (machinery, rate of depreciation 15%) as on 31.03.2023 is Rs.3,20,000. A

machinery costing Rs.50,000 was acquired on 01.09.2023 but put to use on 01.11.2023. During
January, 2024, part of this block was sold for Rs.2,00,000. The depreciation for A.Y.24-25
would be:-

A. 21,750 B. 25,500 C. 21,125 D. None of these

3. A motor car is the only asset in a block. Cost Rs.2,00,000. Rate of depreciation is 15%. 20% is
disallowed for estimated personal use. WDV of the block is Rs…………………………..

ASSETS MEANT FOR PERSONAL USE AND LATER BROUGHT INTO BUSINESS:

BUILDING used for personal purpose and subsequently brought into business use:
The cost of the building as reduced by notional depreciation calculated up to the year of
bringing the asset to business use will be the cost for the purpose of claiming
depreciation.

However, this provision does not apply to any other asset (for eg. car, computer,
furniture) and therefore the original cost will be the cost for the purpose of depreciation.

4. Ram introduced his building costing Rs.10,00,000 acquired in April, 2019 into business
newly commenced by him from 01.04.2023. The actual cost of building for the purpose of
depreciation for the assessment year 2024-25 would be Rs.

A. 10,00,000 B. 5,90,490 C. 6,56,100 D. None of these

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5. A car purchased by Mr.S on 10.08.2020 for Rs.5,25,000 for personal use is brought into the
business of the assessee on 01.07.2023, when its market value is Rs.2,50,000. Compute the
actual cost of the car and the amount of depreciation for the Assessment Year 2024-25
assuming the rate of depreciation is 15%.

6. Mr.X furnishes the following details pertaining to the financial year 2023-2024:-

Description Plant Building Patents

Rate of depreciation 15% 10% 25%

Opening balance as on 01.04.2023 14,50,000 25,00,000 15,00,000

Acquired before 30.09.2023 12,00,000 nil 5,00,000
Acquired after 01.12.2023 4,00,000 18,00,000 nil
One of 2 patents transferred in March 2024 nil nil 3,00,000

A machinery acquired in July 2023 (original cost Rs.1,50,000) was destroyed by fire and the
assessee received compensation of Rs.50,000 from the insurance company. Newly acquired
building given above includes value of land of Rs.3,00,000. Calculate the eligible
depreciation claim for the assessment year 2024-25.

7. A newly qualified Chartered Accountant Mr.Dhaval, commenced practice and has acquired the
following assets in his office during F.Y. 2023-2024 at the cost shown against each item.
Assume that all the assets were purchased by way of account payee cheque. Calculate
depreciation that can be claimed from his professional income for A.Y. 2024-25:

Sl. Description Date of Date when Amount

No. acquisition put to use
1. Computer including
computer software 27.09.2023 1.10.2023 35,000

2. Computer UPS 02.10.2023 8.10.2023 8,500

3. Computer printer 01.10.2023 1.10.2023 12,500

4. Books (other than

annual publications
are of Rs.12,000) 1.04.2023 1.04.2023 13,000

5. Office furniture
(acquired from a
practising CA) 1.04.2023 1.04.2023 3,00,000

6. Laptop 26.09.2023 8.10.2023 43,000

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SHARING OF DEPRECIATION IN THE CASE OF CONVERSION OR TAKE OVER:

Total depreciation allowable in the year of CONVERSION to the PREDECESSOR and the
SUCCESSOR is to be restricted to depreciation allowable as if conversion had not taken
place, and such depreciation is to be apportioned on the basis of NUMBER OF DAYS
used by each of them.

8. Mr.Gopi carrying on business as proprietor converted the same into a limited company by
name Gopi Pipes (P) Ltd. from 01.07.2023. The details of the assets are given below:

Rs.
Block - I WDV of P&M (rate of depreciation @ 15%) on 01.04.2023 12,00,000
Block - II WDV of building (rate of depreciation @ 10%) on 01.04.2023 25,00,000

The company Gopi Pipes (P) Ltd. acquired P&M in December 2023 for Rs.10,00,000. It has
been doing the business from 01.07.2023. Compute the quantum of depreciation to be claimed
by Mr.Gopi and successor Gopi Pipes (P) Ltd. for the assessment year 2024-2025.

Assume that plant and machinery were purchased by way of account payee cheque. Note:
Ignore additional depreciation.

9. M/s.R & Co., a sole proprietary concern is converted into a company, R Ltd. with effect from
29.11.2023. The written down value of assets as on 01.04.2023 is as follows:

Item Rate of depreciation WDV as on 01.04.2023

Building 10% 3,50,000
Furniture 10% 50,000
Plant and Machinery 15% 2,00,000

Further, on 15.10.2023, M/s.R & Co. purchased a plant for Rs.1,00,000 (rate of depreciation
15%). After conversion, the company added another plant worth Rs.50,000 (rate of
depreciation 15%). Compute the depreciation available to: (i) M/s.R & Co. & (ii) R Ltd. for
A.Y.2024-2025.

Problems on Additional Depreciation:

10. X Ltd, a manufacturing concern, furnishes the following particulars:

Opening WDV of the block of plant and machinery Rs.5,00,000

Purchase of plant and machinery (put to use before October 1, 2023) Rs.2,00,000
Sale proceeds of plant and machinery which became obsolete
(it was purchased on 01.04.2021 for Rs.5,00,000) Rs.5,000

Further, out of purchase of plant and machinery, machinery of Rs.20,000 has been installed in
office and another machinery of Rs.20,000 was used previously for the purpose of business by
the seller. Compute depreciation and additional depreciation for the A.Y. 2024-25.
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11. Mr.A is engaged in the business of generation and distribution of electric power. He always
opts to claim depreciation on written down value for income tax purposes. From the following
details, compute the depreciation allowable for the A.Y.2024-25:

i. Opening WDV of block (15% rate) 42,00,000

ii. New machinery purchased on 12.10.2023 10,00,000
iii. Machinery imported from China on 12.04.2023. This
machine had been used only in China earlier and
the assessee is the first user in India 9,00,000
iv. New computer installed in generation wing of the unit on 15.07.2023 2,00,000

All assets were purchased by A/c payee cheque. Ignore default tax regime.

12. Mr.Venus., engaged in manufacture of pesticides, furnishes the following particulars relating to
its manufacturing unit at Chennai, for the year ending 31.3.2024:

(in lakhs)
Opening WDV of Plant and Machinery 20
New machinery purchased on 1.9.2023 10
New machinery purchased on 1.12.2023 8
Computer purchased on 3.1.2024 4

Additional information:
• All assets were purchased by A/c. payee cheque
• All assets were put to use immediately.
• New machinery purchased on 01.12.2023 and computer has been installed in the office.

During the year ended 31.3.2023, a new machinery had been purchased on 31.10.2022, for
Rs.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 31.3.2024. Ignore Default TR.

13. Mr.Gamma, a proprietor started a business on 01.01.2023 for manufacture of tyres and tubes
for motor vehicles. The manufacturing unit was set up on 01.05.2023. He commenced his
manufacturing operations on 01.06.2023. The total cost of the plant and machinery installed in
the unit is Rs.120 crore. The said plant and machinery included second hand machinery
bought for Rs.20 crore and new machinery for scientific research relating to the business of the
assesse acquired at a cost of Rs.15 crore.

Compute the amount of depreciation allowable under section 32. Assume that all the assets
were purchased by of account payee cheque. Mr.Gamma has exercised the option of shifting
out of the default tax regime provided u.s.115BAC(1A).
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14. Mr.R resides in Delhi. As per new rule in the city, private cars can be plied in the city only on
alternate days. He has purchased a car on 21.09.2023, for the purpose of his business as per
following details:

Cost of car (excluding GST) 12,00,000

Add: Delhi GST at 14% 1,68,000
Add: Central GST at 14% 1,68,000
Total price of car 15,36,000

He estimates the usage of the car for personal purposes will be 25%. He is advised that since
the car has run only on alternate days, half the depreciation, which is otherwise allowable, will
be actually allowed. He has started using the car immediately after purchase. Determine the
depreciation allowable on car for the AY 2024-25, if this is the only asset in the block. Rate of
depreciation may be taken at 15%.

15. Mr.Tenzingh is engaged in composite business of growing and curing (further processing)
coffee in Coorg, Karnataka. The whole of coffee grown in his plantation is cured. Relevant
information pertaining to the year ended 31.3.2024 are given below:
Rs.
WDV of car as on 1.4.2023 3,00,000
WDV of machinery as on 1.4.2023 (15% rate) 15,00,000
Expenses incurred for growing coffee 3,10,000
Expenditure for curing coffee 3,00,000
Sale value of cured coffee 22,00,000

Besides being used for agricultural operations, the car is also used for personal use;
disallowance for personal use may be taken at 20%. The expenses incurred for car running and
maintenance are Rs.50,000. The machines were used in coffee curing business operations.

Compute the income arising from the above activities for the assessment year 2024-2025.
Show the WDV of the assets as on 1.4.2024.

16. A manufacturing company was transporting two of its machines from unit ‘A’ to unit ‘B’ (which
is at a distance of 100 miles) on September 1, 2023 by a truck. The written down value of this
block of assets as on 01.04.2023 is Rs.4,80,000.

On account of a civil disturbance, both the machines were damaged. The insurance company
paid Rs.5,00,000 for the damaged machineries. On these facts, for submitting the return of
income for the previous year ending March 31, 2024, your advise is sought as to:

a. Whether the damage of machines results in any transfer?

b. How the amounts received from the insurance company are to be treated for taxability?
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17. Compute the quantum of depreciation available u/s.32 of the Income-tax Act, 1961 in respect
of the following items of Plant and Machinery purchased by Gupta Textile Ltd., which has set up
a manufacturing unit in Andhra Pradesh to manufacture textile fabrics during the year 2023-
24. Also compute the WDV of the block of assets as at the year end.

Particulars Amount (Rs. in Crore)

New Machinery installed on 01.05.2023 84

Items purchased after 30th November, 2023:

Lorries for transporting goods to sales depots 3
Fork-lift-trucks, used inside factory 4
New imported machinery 12

The new imported machinery arrived at Chennai port on 30.03.2024 and was installed on
03.04.2024. All others items were installed and put to use during the year ended 31.03.2024.

MCQs:
1. Additional depreciation on the factory building constructed during the PY 2023-24 and put to use
for manufacturing of garments on 1st February, 2024 having cost of Rs.100 lakhs shall be allowed
in AY 2024-25 at a rate of:

(a) 20%
(b) 10%
(c) 15%
(d) Nil

2. Madhu Ltd. owns machinery (rate of depreciation is 15%) the written down value of which as on
1st April, 2023 Rs.30,00,000. Due to fire, entire assets in the block were destroyed and the insurer
paid Rs.25,00,000. The eligible depreciation in respect of this machinery is:

(a) Rs.4,50,000
(b) Rs.75,000
(c) Rs.5,00,000
(d) Nil

3. Ramson Industries acquired a factory building for self-use in November, 2023. The value of land
underneath the building was Rs.5 lakh and value of building was Rs.10 lakh. The amount of eligible
depreciation allowable for assessment year 2024-25 is:

(a) Rs.1,50,000
(b) Rs.25,000
(c) Rs.1,00,000
(d) Rs.50,000
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4. The WDV of the block of asset of P & M depreciated @ 15% as on 1st April, 2023 was of
Rs.13,50,000. Out of this block, one machine was sold on 1st July, 2023 for Rs.4,50,000 and a new
machine of Rs.7,50,000 was purchased on 1st August, 2023 which could be put to use from 1st
March, 2024. The amount of depreciation (excluding additional depreciation) to be claimed on the
block of plant & machinery in the computation of income for A.Y. 2024-25 shall be:
(a) Rs.1,35,000
(b) Rs.2,47,500
(c) Rs.1,91,250
(d) Rs.2,53,125

5. Zed Ltd., a domestic company engaged in manufacturing activity acquired a plant for Rs.5 lakhs on
7.1.2024 which is eligible for depreciation @ 15%. It paid Rs.4 lakh through ECS system from bank
and balance Rs.1 lakh in cash on 23.02.2024. The plant was put to use on 12.3.2024. The amount of
depreciation (normal and additional) on this plant for AY 2024-25 shall be:
(a) Rs.40,000
(b) Rs.30,000
(c) Rs.70,000
(d) Rs.60,000

6. Mr.X, a retailer acquired furniture on 10th May 2023 for Rs.10,000 in cash and on 15th May 2023, for
Rs.15,000 and Rs.20,000 by a bearer cheque and account payee cheque, respectively. Depreciation
allowable for A.Y.2024-25 would be:-
(a) Rs.2,000
(b) Rs.3,000
(c) Rs.3,500
(d) Rs.4,500

7. Depreciation whether to be allowed on the purchase and installation of a fire extinguisher by a

practicing CA in his office, even when the same is not put to use or used during the year of
acquisition as stipulated under section 32:
(a) No, failure to use for the profession
(b) Yes, kept stand by, treated as passive use and eligible for deprn @ 15%
(c) Yes, allowable @ 10% of the cost
(d) Yes, allowable @ 50% of the cost

8. Swan Pvt Ltd acquired machinery for Rs.5,75,000 which included GST of Rs.75,000 eligible for input
tax credit. It borrowed Rs.3,00,000 from a bank for purchase of the said machine. Interest on the
bank loan up to the date of usage of machine was ascertained as Rs.25,000. The machine was put to
use from 15th September, 2023. Assume the rate of depreciation at 15%. The eligible amount of
depreciation will be ………………
(a) Rs.75,000
(b) Rs.78,750
(c) Rs.90,000
(d) Rs.50,000
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Loss under the head How to set-off current If carried forward, No. of years cfd Whether return has
year losses? how to set-off? to be filed in time?

House property Inter-source adjustment Only against HP income 8 Can be a belated return
(SOP or LOP) (no limit)

Inter-head adjustment
(max Rs.2 lakhs)

Business Loss:
Non-speculative business Inter-source adjustment Only against Business income 8 Yes
Inter-head adjustment

Speculative business loss Only against speculative Only against speculative

business income business income 4 Yes

Specified business loss Only against specified Only against specified

under section 35 AD business income business income Indefinitely Yes

Capital Loss:
Short-term capital loss Against any capital gains Only against capital gains 8 Yes
Long-term capital loss Against LTCG only Only against LTCG 8 Yes

Other Sources:
Loss from the activity of Income from the activity of Income from the activity of
owning and maintaining owning and maintaining owning and maintaining
race horses race horses race horses 4 Yes
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CHAPTER – 13 SET-OFF AND CARRY-FORWARD OF LOSSES

Step 1: Inter-source Adjustment:
Set-off within the same head of income

Step 2: Inter-head Adjustment:

Set-off against income from any other head of income

Step 3: Carry forward of a loss:

Unabsorbed loss (if any) will be carried forward.

House property loss: Default tax regime Optional tax regime

A. SOP loss deduction not allowed u.s.24, deduction allowed u.s.24
hence no question of set off hence set off permitted

B. LOP loss deduction allowed u.s.24 deduction allowed u.s.24

ISA (allowed; no limit) ISA (allowed; no limit)
IHA (not allowed) IHA (allowed but max 2 lakhs)

Once a particular loss is carried forward, it can be set off only against the income from the same head
in the forthcoming assessment years.

Business loss cannot be set-off against salary income.

Loss of a discontinued business can be carried forward and be set-off against income from any other
business.

Loss from a specified business can be set off against income from any other specified business,
irrespective of whether the later is eligible for deduction u.s.35AD. (under Optional Tax Reg).

Meaning of unabsorbed depreciation: Business profits are insufficient to absorb the entire
amount of depreciation. Unabsorbed depreciation can be carried forward for any number of years
and can be set off against any head of income.

Meaning of Speculative business: Profit or loss made in a business without taking delivery at the
time of purchase (or) giving delivery at the time of sale but the contract is ultimately settled.

Loss from trading in DERIVATIVES in a recognized stock exchange is not a speculative transaction.
The same is treated as non-speculative business loss.

No loss can be set off against casual income. Similarly, loss from gambling, card games, etc. can
neither be set off nor carried forward.

Compulsory filing of loss returns (Section 80): In order to claim the benefit of carry forward of a
loss, the assessee should file his loss return on or before the “due date”. However, loss under the
head “house property” & “unabsorbed depreciation” can be carried forward even if the return is filed
after the “due date”.
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Order of set off if business profits are insufficient:

A. Current year depreciation;
Current year capital expenditure on scientific research;
Current year expenditure on family planning

B. Brought forward business loss

C. Unabsorbed depreciation;
Unabsorbed capital expenditure on scientific research;
Unabsorbed family planning expenditure

1. From the following information, compute total income of Mr.A for the A.Y.2024-25.

Income from salary (after standard deduction) 6,80,000

Income from house property 40,000
Business loss (non-speculative) (-) 1,80,000
Loss from a specified business referred to in section 35AD (-) 60,000
Short-term capital loss (-) 60,000
Long-term capital gains 1,40,000
Loss from gambling (-) 30,000

2. Mr.Brajesh is a partner in a partnership firm named XYZ Associates. He provides the details
regarding his income and losses for the year ending 31.03.2024:

 Salary from XYZ Associates Rs.3,75,000 which was claimed by the firm in its return and
allowed as deduction.
 Brought forward business loss from A.Y.23-24 Rs.6,25,000
 Loss on sale of shares listed in NSE Rs.1,50,000. Shares were held for 15 months and STT
paid on sale and acquisition.
 Long-term capital gain on sale of his house Rs.2,50,000
 Rs.51,000 received in cash from friends in party
 Rs.30,000 (gross) towards dividend on listed equity shares of domestic companies
 Loss from speculative business brought forward from AY 2021-22 Rs.2,50,000
 Life Insurance Premium paid (10% of the capital sum assured) Rs.1,00,000

Compute total income of Mr.Brajesh for the AY 2024-25 and show the items eligible for carry
forward. (Ignore provisions of Default Tax Regime).

3. The following are the details of Mr.S, a resident Indian, relating to the year ended 31.03.2024:
Income from salaries (after standard deduction) Rs.2,30,000
Loss from house property Rs.2,10,000
Loss from cloth business Rs.2,40,000
Income from speculation business Rs.30,000
Loss from specified business covered by section 35AD Rs.20,000
Long-term capital gain from sale of urban land Rs.3,60,000
LTCL from sale of listed shares in stock exchange (STT paid) Rs.1,10,000
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Loss from card games Rs.32,000

Income from betting (gross) Rs.45,000
Life Insurance Premium paid Rs.45,000

Compute the total income and show the items eligible for carry forward both under optional
tax regime and default tax regime.

4. Mr.Sohan submits the following details of his income for the assessment year 2024-25.

Income from salary (after standard deduction) Rs.3,00,000

Loss from let out house property Rs.40,000
Income from sugar business Rs.50,000
Loss from iron ore business b/f (discontinued in 2019-20) Rs.1,20,000
Short term capital loss u.s.111A Rs.70,000
Long term capital gain from shares (STT paid) Rs.50,000
Income received from lottery winning (gross) Rs.50,000
Winnings in card games (gross) Rs.6,000
Bank interest on fixed deposit Rs.5,000
Dividend from domestic companies Rs.5,000
Agricultural income Rs.20,000

Calculate gross total income and losses to be carried forward, assuming that he has exercised
the option of shifting out of the default tax regime provided u.s.115BAC (1A).

5. Mr.X furnishes the following details for the year ending 31.03.2024:

Short term capital gain Rs.1,40,000

Loss from speculative business Rs.60,000
Long term capital gain on sale of land Rs.30,000
Long term capital loss on sale of listed shares (STT not paid) Rs.1,00,000
Income from business of textile (after allowing current year depreciation) Rs.50,000
Income from activity of owning and maintaining race horses Rs.15,000
Income from salary (after standard deduction) Rs.1,00,000
Loss from house property Rs.40,000

Following are the carried forward losses:

a. Losses from activity of owning and maintaining race horses (A.Y.2021-22) Rs.25,000
b. Carried forward loss of textile business of the A.Y.2016-17 Rs.60,000

Compute GTI of Mr.X and the cfd losses for the A.Y. 2024-25. Assume that he has exercised the
option of shifting out of the default tax regime provided u.s.115BAC (1A).
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6. X, a businessman of Delhi, furnishes the following, determine the net income of Mr.X:

Income from house property (computed) Rs.60,000

Business profits (before claiming the following deductions) Rs.34,000

Current depreciation allowance Rs.8,000
Current scientific research expenditure Rs.6,000

Unabsorbed depreciation allowance of the previous year:

20-21 Rs.13,000 and 13-14 Rs.3,500

Unabsorbed business losses of the previous year:

20-21 Rs.9,000 and 13-14 Rs.4,000

7. Mr.R submits the following information for the financial year ending 31.03.2024. He desires
that you should compute the total income and the losses that can be cfd. under Default TR.

He has two houses:

House I: Income after all statutory deductions Rs.72,000
House II: Current year loss (Rs.30,000)

He has three proprietary businesses:

a. Textile business:
Discontinued from 31.12.2023 - Current year loss Rs.40,000
Brought forward business loss of A.Y.2020-21 Rs.95,000

b. Chemical business:
Discontinued from 01.03.2022 - hence no profit or loss Nil
Bad debts allowed in earlier year recovered in this year Rs.35,000
Bfd business loss of the A.Y. 2022-23 Rs.50,000

c. Leather business income: Profit for the current year Rs.1,00,000

d. Share of profit in a firm in which he is a partner since 2009 Rs.16,550

Short-term capital gain Rs.60,000

Long-term capital loss Rs.35,000
Contribution to LIC towards premium Rs.10,000

Late filing of income tax return: Effect on losses:

8. Mr.X filed his return of income for the assessment year 2023-24 after the expiry of due date for filing
the return, showing business loss of Rs.3.35 lakhs, unabsorbed depreciation of Rs.1 lakh, loss from
house property of Rs.75,000 and loss of Rs.1.30 lakhs under the head “capital gains”. What is the
effect of such return of income?
 16

9. Compute GTI of Mr.M for the A.Y. 2024-25 from the following particulars:

House property income as computed under the head “IFHP” Rs.2,70,000

Income from growing and manufacturing coffee (cured, roasted & grounded) Rs.1,00,000

Income from textile business before adjusting the following Rs.90,000

(a) Brought forward business loss Rs.70,000
(b) Current year depreciation Rs.30,000
(c) Brought forward unabsorbed depreciation Rs.1,40,000

Short term capital gain – jewellery Rs.1,60,000

Long term capital loss – listed equity shares (STT paid) Rs.40,000
Long term capital gains – Debentures Rs.2,00,000
Dividend on shares held as stock in trade Rs.10,000
Dividend from a company carrying on agricultural operation Rs.12,000

10. Mr. Aditya furnishes the following details for the year ended 31.03.2024:

Loss from speculative business A 25,000

Income from speculative business B 5,000
Loss from specified business covered under section 35AD 20,000
Income from salary (after standard deduction) 3,00,000
Loss from house property 2,50,000
Income from trading business 45,000
Long-term capital gain from sale of urban land 2,00,000
Long-term capital loss on sale of shares (STT not paid) 75,000
Long-term capital loss on sale of listed shares in recognized stock
exchange (STT paid at the time of acquisition and sale of shares) 1,02,000

Following are the brought forward losses:

(1) Losses from owning and maintaining of race horses pertaining to A.Y. 2022-23: Rs.2,000.
(2) Brought forward loss from trading business Rs.5,000 relating to A.Y. 2019-20.

Compute the total income of Mr.Aditya and show the items eligible for carry forward, assuming that
he has exercised the option of shifting out of the default tax regime provided u.s.115BAC (1A).

11. Ms.Pooja provides the following information for the year ended on 31st March, 2024:

Income from salary (computed) Rs.2,20,000

Income from house property (let out) (net annual value) Rs.1,50,000
Share of loss from firm in which she is a partner Rs.10,000
Loss from specified business covered under section 35AD Rs.20,000

Income from textile business before adjusting the following items: Rs.3,00,000
a) Current year depreciation Rs.60,000
b) Unabsorbed depreciation of earlier year Rs.2,25,000
c) Brought forward loss of textile business of the A.Y.2022-23 Rs.90,000
 17

Long term capital gain on sale of debentures Rs.75,000

Long term capital gain on sale of listed equity shares (STT paid) Rs.1,50,000
Long term capital loss on sale of equity shares (STT not paid) Rs.1,00,000

Dividends from units of UTI Rs.5,000

During the previous year 2023-24, Ms.Pooja has repaid Rs.5,25,000 towards housing loan from a
bank. Out of this Rs.3,16,000 was towards payment of interest and rest towards principal.

Compute the gross total income (optional tax regime) and ascertain the amount of loss that can be
cfd. Ms.Pooja has always filed her return within due date specified u.s.139(1) of the IT Act.

12. Mr.T, a resident individual, furnishes the following particulars of his income and other details for the
previous year 23-24:

Income from salary (computed) Rs.25,00,000

Business loss before providing current year depreciation Rs.1,20,000
(Business discontinued on 31.05.2023)
Current year depreciation Rs.80,000
Interest from fixed deposit Rs.12,14,000
Interest on loan in respect of self-occupied property Rs.2,15,000
Income from specified business (not eligible for deduction u.s.35AD) Rs.20,000

Brought forward losses (pertaining to AY 2023-24)

Unabsorbed depreciation Rs.58,000
Loss from specified business (eligible for deduction u.s.35AD) Rs.24,000

You are required to compute his total income for A.Y.2024-25 in such a way that his tax liability is
minimized. He has opted out of Default Tax Regime.

13. Gopal, a resident aged 50 years furnishes the following information for the year ended 31.03.2024:

Income by way of salary (computed) Rs.2,75,000

Income from house property (computed) (Rs.1,85,000)
Business income – Retail business Rs.1,20,000
Business income – wholesale business (Rs.1,00,000)
Brought forward business loss (AY 2022-23) (Rs.1,35,000)
LTCG from sale of listed equity shares (STT paid) Rs.2,00,000
Lottery winning (gross) Rs.45,000
Contribution to provident fund and NSC Rs.1,50,000
Income of minor daughter from special talent Rs.2,00,000
Interest from bank received by minor daughter made
out of her special talent Rs.15,000

Compute his income tax liability assuming that he has opted out of default tax regime and his wife
does not earn any income.
 18

14. The following information is furnished by Mr.Shankar for the financial year 2023-24:

Particulars Rs.
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 2020-21 1,05,000
Short-term capital loss 1,70,000
Brought forward long-term loss from Assessment Year 2022-23 90,000
Long-term capital gain on sale of house 75,000
Interest on enhanced compensation from Government for acquisition
of land in 2019 5,00,000
Dividend received from ABC Ltd. Andhra Pradesh 15,000
Deposit made on 20.01.2024 in his Public Provident fund account 75,000
Loss from owning and maintaining race horse of A.Y. 2022-23 20,000
Loss from Gambling 8,000

Mr.Shankar filed the return of income for assessment year 2020-21 after the expiry of due date for
filing the return. Compute the total income of Mr.Shankar for the assessment year 2024-25 under
proper heads and also state the loss that can be carried forward. Assume Optional Tax Regime.

15. Mr.Jai, a resident individual furnishes the following particulars of his income and other details for the
previous year 2023-24:

Income from the activity of owning and maintaining race horses Rs.40,000
Income from crossword puzzle solving Rs.30,000
Income from agricultural land in Haryana Rs.25,000
Dividend income from domestic company (gross) Rs.15,000
(expenditure incurred in collecting the aforesaid dividend) Rs.2,500
Income from cycling business Rs.1,50,000
Loss from warehousing facility for storage of edible oils Rs.1,00,000
Share of loss from PR associates, a firm (having 4 equal partners) Rs.23,000

The following items have been bfd. from the AY.2021-22:

Brought forward loss from house property Rs.1,00,000
Loss from the activity of owning and maintaining race horses Rs.37,000
Loss from gambling Rs.10,000
Unabsorbed depreciation Rs.15,000
Speculation loss Rs.20,000

Mrs.Jai (wife of Mr.Jai) got a salary of Rs.1,20,000 from PR associates during the 2023-24. She is not
qualified for the job. Compute the gross total income of Mr.Jai for the AY 2024-25 ignoring the
default tax regime. (7 marks – Nov 2023)
 19

MCQs
1. Mr.A incurred short-term capital loss of Rs.10,000 on sale of shares through the National Stock Exchange.
Such loss:-
(a) can be set-off only against short-term capital gains
(b) can be set-off against both short-term capital gains and long-term capital gains.
(c) can be set-off against any head of income.
(d) not allowed to be set-off.

2. According to section 80, no loss which has not been determined in pursuance of a return filed in
accordance with the provisions of section 139(3), shall be carried forward. The exceptions to this are –
(a) Loss from specified business under section 73A
(b) Loss under the head "Capital Gains" and unabsorbed depreciation
(c) Loss from house property and unabsorbed depreciation
(d) Loss from speculation business under section 73

3. Brought forward loss from house property of Rs.3,10,000 of A.Y. 2022-23 is allowed to be set-off against
IFHP of A.Y. 2024-25 of Rs.5,00,000 to the extent of (under optional tax regime):—
(a) Rs.2,00,000
(b) Rs.3,10,000
(c) Rs.2,50,000
(d) Rs.1,00,000

4. Virat runs a business of manufacturing of shoes since the P.Y. 2021-22. During the P.Y. 2021-22 and P.Y.
2022-23, Virat had incurred business losses. For P.Y. 2023-24, he earned business profit (computed) of
Rs.3 lakhs. Considering he may/may not have sufficient business income to set off his earlier losses,
which of the following order of set off shall be considered: (He does not have any other income).

(a) First adjustment for loss of P.Y. 2021-22, then loss for P.Y. 2022-23 and then unabsorbed
depreciation, if any.
(b) First adjustment for loss of P.Y. 2022-23, then loss for P.Y. 2021-22 and then unabsorbed
depreciation, if any.
(c) First adjustment for unabsorbed depreciation, then loss of P.Y. 2022-23 and then loss for P.Y.
2021-22, if any.
(d) First adjustment for unabsorbed depreciation, then loss of P.Y. 2021-22 and then loss for P.Y.
2022-23, if any.

5. Mr.Ravi incurred loss of Rs.4 lakh in the P.Y. 2023-24 in leather business. Against which of the following
incomes earned during the same year, can he set-off such loss?
(i) Profit of Rs.1 lakh from apparel business
(ii) Long-term capital gains of Rs.2 lakhs on sale of jewellery
(iii) Salary income of Rs.1 lakh

Choose the correct answer:

(a) First from (ii) and thereafter from (i); the remaining loss has to be carried forward.
(b) First from (i) and thereafter from (ii) and (iii)
(c) First from (i) and thereafter from (iii); the remaining loss has to be carried forward
(d) First from (i) and thereafter from (ii); the remaining loss has to be carried forward
 20

6. During the A.Y.2023-24, Mr.A has a loss of Rs.8 lakhs under the head "Income from house property" which
could not be set off against any other head of income as per the provisions of section 71. The due date for
filing return of income u/s 139(1) in case of Mr.A has already expired and Mr.A forgot to file his return of
income within the said due date. However, Mr.A filed his belated return of income for A.Y.2023-24. Now,
while filing return of income for A.Y.2024-25, Mr.A wishes to set off the said loss against income from
house property for the P.Y. 2023-24. Determine whether Mr.A can claim the said set off.

(a) No, Mr.A cannot claim set off of loss of Rs.8 lakhs during A.Y. 2024-25 as he failed to file his return
of income u/s 139(1) for A.Y. 2023-24.
(b) Yes, Mr. A can claim set off of loss of Rs.2 lakhs, out of Rs.8 Iakhs, from its income from house
property during A.Y. 2024-25, if any, and the balance has to be carried forward to A.Y.2025-26.
(c) Yes, Mr. A can claim set off of loss of Rs.2 lakhs, out of Rs.8 Iakhs, from its income from any head
during A.Y 2024-25 and the balance, if any, has to be carried forward to A.Y. 2025-26.
(d) Yes, Mr.A can claim set off of loss of Rs.8 lakhs during A.Y. 2024-25 from its income from house
property, if any, and the balance has to be carried forward to A.Y.2025-26.

7. Mr.Rohan incurred loss of Rs.3 lakh in the P.Y. 2023-24 in derivative trading business. Against which of
the following income during the same year, can he set-off such loss?

(a) profit of Rs.1 lakh from wholesale cloth business

(b) long-term capital gains of Rs.1.50 lakhs on sale of land
(c) speculative business income of Rs.40,000
(d) All of the above

8. If a person is eligible to claim:

(1) Unabsorbed depreciation

(2) Current scientific research expenditure
(3) Current depreciation
(4) Brought forward business loss

The order of priority to set-off would be —

(a) (4), (3), (2) & (1)
(b) (4), (3), (1) & (2)
(c) (3), (2), (4) & (1)
(d) (1), (2), (3) & (4)

9. Mathur Storage (P) Ltd. engaged in chain cold storage has brought forward business loss of Rs.12 lakhs
relating to assessment year 2023-2024. During the previous year 2023-2024, its income from the said
business is Rs.9 lakhs. It also has profit from trade in food grains of Rs.6 lakhs.

The total income of the company for the assessment year 2024-2025 is:
(a) Rs.15 lakhs
(b) Rs.6 lakhs
(c) Rs.9 lakhs
(d) Rs.3 lakhs
 21

CHAPTER – 14 CLUBBING OF INCOME

Transfer of income alone without transfer of asset:
Transfer of income alone without transfer of asset under an agreement, arrangement,
settlement, etc., will be clubbed in the hands of the transferor.

1. Mr.V has transferred through a duly registered document the income arising from a godown, to his
son, without transferring the godown. In whose hands will the rental income from godown be
charged?

2. X has a fixed deposit of Rs.5,00,000 in SBI. He instructs the bank to credit the interest on the
deposit @ 8% p.a. to the savings bank account of Y, son of his brother, to help him in his education.
Discuss the tax treatment of the interest income.

Revocable Transfer Vs. Irrevocable Transfer:

Revocable Transfer: Income will be clubbed in the hands of the transferor
Irrevocable Transfer: Income will NOT be clubbed. Taxed in the hands of transferee

“Revocable” means the transferor has the right to take back the asset during the life time of the
transferee.

SALARY INCOME OF SPOUSE:

Salary received by spouse will be clubbed if the following conditions are satisfied:

− If the assessee has “substantial interest” in a concern where the spouse is employed;
and

− If remuneration is received by the spouse from such concern “without any technical or
professional knowledge or experience”

Where both husband and wife have substantial interest and both are getting remuneration from a
concern without any technical or professional knowledge or experience:
Income shall be clubbed in the hands of that spouse whose other income is greater without
taking in to account the above remuneration.

Meaning of “Substantial Interest”

In the case of a company:

If an individual beneficially holds (individually or along with his relatives) 20% or more of
equity shares in the company at any time during the previous year.

In any other case:

If an individual is entitled to 20% share in the profits of the concern.
 22

3. Mr.A holds 25% shares of X (pvt) Ltd. Mrs.A is working as a computer software programmer in X
(pvt) Ltd. at a salary of Rs.70,000 p.m. She is, however, not qualified for the job. The other income
of Mr.A and Mrs.A are Rs.7,00,000 & Rs.4,00,000, respectively. Compute gross total income of Mr.A
and Mrs.A. Will you answer be different if Mrs.A was qualified for the job?

4. Mr.B along with his father holds shares carrying 30% voting power in Y Ltd. Mrs.B is working as
accountant in Y Ltd. getting income under the head salary (computed) of Rs.3,44,000 without any
qualification in accountancy. Mr.B also receives Rs.30,000 as interest on securities. Mrs.B owns a
house which she has let out. Rent received from tenants is Rs.6,000 p.m. Compute gross total
income of Mr.B and Mrs.B for A.Y. 2024-25.

HOUSE PROPERTY TRANSFERRED TO SPOUSE – DEEMED OWNER:

‘Deemed Owner’ provisions shall apply in the following cases:

a. Where a house is transferred for an inadequate consideration; or
b. Where there is no agreement between them to live apart.

In other words, ‘deemed owner’ provisions shall not apply if the house is transferred for an
adequate consideration or in connection with an agreement between them to live apart.

5. State whether “deemed owner” provisions are applicable or not:

X owns two houses:

House 1: It is transferred for an adequate consideration to Mrs.X on 1.12.2023. This house is

let out at Rs.10,000 p.m. to a tenant.

House 2: X gifts (out of natural love and affection) this house to his wife Mrs.X on 1.10.2023.
There is no agreement between them to live separately.

Briefly state the income-tax consequences showing clearly the person in whose hands the same is
chargeable to tax.

INCOME FROM BUSINESS – CLUBBING PROVISIONS WHEN APPLICABLE?

Amount to be clubbed in the hands of the spouse is determined as follows:

a. In the case of existing business: Ratio that existed as on the 1st day of the previous
year

b. In the case of new business: Ratio that existed as on the 1st day of
commencement of business.
 23

6. Mrs.A started a business in 2021. Her capital in the business as on 1.4.2022 stood at Rs.3,00,000.
Mr.A (her husband) gifted a sum of Rs.2,00,000 to Mrs.A on 10.12.2022, which was also invested in
the aforesaid business on the same date. She earned a profit of Rs.1,50,000 and Rs.3,90,000 during
the previous year 2022-23 and 2023-24 respectively. Compute the amount of the income to be
clubbed in the hands of Mr.A.

7. Mr.A started a proprietary business on 20.04.2022 with a capital of Rs.5,50,000. His wife Smt.P
gifted Rs.2,00,000 on the occasion of his birthday on 28.07.2022, out of which he introduced
Rs.1,00,000 into his proprietary business.

Details of his income from business are given below:

Financial Year (Loss) Income
2022-23 Rs.1,50,000
2023-24 Rs.4,00,000

He did not withdraw any amount from the business for his personal use. Determine the amount
chargeable to tax in the hands of Mr.A and the amount liable for clubbing in the hands of his wife.

8. Mr.Vaibhav started a business on 01.04.2022 with a capital of Rs.5,00,000. He incurred a loss of

Rs.2,00,000 during the year 2022-23. To overcome the financial position, his wife Mrs.Vaishaly, a
software engineer, gave a gift of Rs.5,00,000 on 01.04.2023, which was immediately invested in the
business by Mr.Vaibhav. He earned a profit of Rs.4,00,000 during the year 2023-24.

Compute the amount to be clubbed in the hands of Mrs.Vaishaly for the A.Y. 2024-25. If
Mrs.Vaishaly gave the said amount as loan, what would be the amount to be clubbed?

INCOME FROM ASSETS TRANSFERRED TO SPOUSE WITHOUT ADEQUATE

CONSIDERATION (CAPITAL GAINS AND INCOME FROM OTHER SOURCES):

Any income from asset transferred without adequate consideration shall be clubbed in the
hands of the transferor spouse.

When income is NOT clubbed?

a) if the asset has been transferred for an adequate consideration; or
b) if the transfer is in connection with an agreement to live apart (i.e. agreement to live
separately)

Note: Clubbing provisions are attracted only if husband and wife relationship subsist both at
the time of transfer of asset and at the time of accrual of income.

Note: Natural love and affection does not constitute adequate consideration.
 24

Whether income on income (ACCRETION) be clubbed?:

Clubbing provisions will apply only in respect of income which arises out of assets transferred.
However, income from accretion of the transferred asset will not be clubbed. In other words,
where there is any ACCRETION to the asset transferred, income arising to the transferee from
such accretion will not be clubbed.

Mr.X had transferred Rs.5,00,000; 9% debentures of ABC Ltd to his wife Mrs.X. The interest on such
debentures was received by Mrs.X during the year 2023-24. Later, she invested the same in a fixed
deposit with SBI and earned Rs.4,000 as interest from the deposit. Discuss in whose hands will
interest on debentures and interest on fixed deposit shall be assessed?

9. On 01.05.2023, Mr.Rama transferred the right to receive rental income arising from a factory
godown owned by him, to his major son Mr.Lava, for a period of 10 years. The rental income
derived is Rs.10,000 p.m.

On 12.03.2019, he gifted 2000 shares of face value of Rs.100 each in ITC Ltd., a listed company, to
his wife Mrs.Seetha. Mr.Rama had purchased them on 19.02.2017 at Rs.110 each.

ITC Ltd. allotted bonus shares in the ratio of 1:1 on 12.04.2021. Mrs.Seetha sold all shares of the
above company on 15.01.2024 in the National Stock Exchange for a net consideration of Rs.180 per
share, paying the applicable STT thereon.

Discuss how the above items will be treated in the hands of Mr.Rama and Mrs.Seetha for the
Assessment Year 2024-25. (Computation of income is not required).

Income of spouse - provisions in brief:

a. Salary: If spouse is employed in a concern where the assessee has substantial

interest and the spouse is not qualified for the job to justify the
remuneration drawn. Clubbing provisions shall apply.

b. House property: Deemed owner provisions u.s.27 shall apply

c. Business Income: Ratio as on the first day of the previous year

d. Capital gains: Will be clubbed if the asset has been transferred without adequate
consideration

e. Other sources: Will be clubbed if the asset has been transferred without adequate
consideration

Note: Income includes loss. In other words if income is clubbed then

loss should also be allowed to be set-off.
 25

INCOME FROM ASSETS TRANSFERRED TO SON’S WIFE:

Any income from assets transferred (directly or indirectly) to son’s wife without adequate
consideration will be clubbed in the hands of the transferor. However, the relationship of
father-in-law/mother-in-law and daughter-in-law should exist both at the time of transfer of
asset and at the time of accrual of income.

10. Mr.A has gifted a house property valued at Rs.50 lakhs to his wife, Mrs.B, who in turn has gifted the
same to Mrs.C, their daughter-in-law. The house was let out at Rs.25,000 per month throughout the
year. Compute the total income of Mr.A and Mrs.C. Will your answer be different if the said
property was gifted to his son, husband of Mrs.C?

11. Mr.Shiva gifted a let-out building which fetches rental income of Rs.10,500 per month to his son’s
wife on 01.11.2023. The municipal tax of Rs.6,000 on the property was paid on 10.01.2024. The
total income from all other sources (computed) amounts to Rs.2,60,000 except from above said
property. His total income chargeable to tax is:

a. Rs.3,11,450
b. Rs.3,44,000
c. Rs.3,80,000
d. Rs.3,33,500

CLUBBING OF INCOME OF A MINOR CHILD:

The income of minor will be included in the income of that parent whose total income is
greater. Income of the minor child will be clubbed after providing exemption u/s.10 (32) to the
extent of Rs.1,500 for each child. Section 10(32) exemption is not available under the default
tax regime.

Income of minor child will not be clubbed in the following cases:

a. Income of minor child suffering from any disability specified u/s.80 U
b. Income of minor child on account of any manual work
c. Income of minor child on account of any skill, talent or experience.

12. Mr.G has four minor children consisting of 2 daughters and 2 sons. The annual income of 2
daughters was Rs.7,500 and Rs.5,000 and of sons were Rs.5,500 and Rs.1,250 respectively. The
daughter who was having income of Rs.5,000 was suffering from a disability specified u.s.80 U.
Work out the amount of income earned by minor children to be clubbed in the hands of Mr.G.

13. Compute total income of Mr.A & Mrs.A from the following information:
Salary Income (computed) of Mrs.A Rs.5,30,000
Income from profession of Mr.A Rs.9,90,000
Income of minor son B from company deposit Rs.15,000
Income of minor daughter C from special talent Rs.72,000
Interest from bank received by C on deposit made out of her special talent Rs.6,000
Gift received by C from friend of Mrs.A Rs.20,000
 26

14. Mr.Daniel and his wife Mrs.Helan furnish the following information:
Salary income (computed) of Mrs.Helan Rs.4,60,000
Income of minor son B who suffers from disability specified u.s. 80 U Rs.1,08,000
Income of minor daughter C from singing Rs.86,000
Income from profession of Mr.Daniel Rs.7,50,000
Income of minor married daughter A from company deposit Rs.30,000

Compute the total income of Mr.Daniel and Mrs.Helan for the A.Y. 2024-25.

15. Mr.Mahadev, a noted bhajan singer of Rajasthan and his wife Mrs.Dariya furnish the following
information relating to the Assessment Year 2024-25.
Rs.
Income of Mr.Mahadev – professional bhajan singer (computed) 5,65,000
Salary income of Mrs.Dariya (computed) 3,80,000

Loan received by Mrs.Dariya from Ramu & Jay (Pvt) Ltd.

(Mrs.Dariya holds 35% shares of the Co. The Co. has incurred losses
since its inception 2 years back) 2,50,000

Income of their minor son Golu from winning

singing reality show on T.V. 2,50,000

Cash gift received by Golu from friend of Mr.Mahadev

on winning the show 21,000

Interest income received by minor married daughter Gudia

from deposit with Ramu & Jay Pvt Ltd. 40,000

Compute taxable income of Mr.Mahadev & Mrs.Dariya for the A.Y. 2024-25.

16. Mr.S is a trader. Particulars of his income and those of the members of his family are given below.
These relate to the previous year ended 31.03.2024:

Income from business – Mr.S Rs.4,90,000

Salary derived from an educational institution by Mrs.S (computed) Rs.3,50,000
Interest on company deposits derived by Master Deep (minor son).

These deposits were made in the name of Deep by his father’s father
6 years ago
Rs.12,000
Receipts from sale of paintings and drawings made by minor Deepthi
(minor daughter of Mr. and Mrs.S and a noted child artiste) Rs.60,000

Income by way of lottery earnings by Master Dippu (minor son of Mr.S) Rs.6,000

Discuss whether the above will form part of the assessable income of any individual and also
compute the assessable income of Mr.S.
 27

17. Mr.A has three minor children – twin daughters, aged 12 years, and one son, aged 16 years. Income
of the twin daughters is Rs.2,000 p.a. each and that of the son is Rs.1,200 p.a. Mrs.A has transferred
her flat to her minor son on 01.04.2023 out of natural love and affection. The flat was let out on the
same date and the rental income from flat is Rs.10,000 p.m. Compute the income, in respect of
minor children, to be included in the hands of Mr.A and Mrs.A (assuming that Mr.A’s total income is
higher than Mrs.A’s total income, before including the income of minor children). Both Mr.A and
Mrs.A exercise the option of shifting out of the default tax regime provided u.s.115BAC (1A).

18. During the p. y. 2023-24, the following transactions are noted from the records of X.

a. X has a fixed deposit of Rs.5,00,000 in State Bank of India. He instructs the bank to credit the
interest on the deposit at the rate of 9% from 01.04.2023 to 31.03.2024 to the savings bank
account of Y, son of his brother, to help him in his education.

b. X holds 75% share in a partnership firm. Mrs.X receives a commission of Rs.25,000 from the
firm for promoting the sales of the firm. Mrs.X possesses no technical or professional
qualification.

c. X gifts a flat to Mrs.X on 01.04.2023, during the previous year. The flat generates a net
income (computed) of Rs.52,000 to Mrs.X.

d. X gifts Rs.2,00,000 to his minor son who invested the same in a business and he derived
income of Rs.20,000 from the investment.

e. X’s minor son derives an income of Rs.20,000 through a business activity involving
application of his skill and talent.

During the year X gets a pension of Rs.1,20,000 p.a. He has no other income. Mrs.X receives salary
of Rs.2,40,000 p.a. from a part-time job. Discuss the tax implications of each transaction and
compute the total income of X, Mrs.X and their minor child assuming optional tax regime is opted.

Income of HUF:
Clubbing before partition:
Where a member of HUF has converted or transferred his self-acquired property into joint
family property (i.e. throwing such property into common stock of the family) for an
inadequate consideration, income arising therefrom is taxable (clubbed) as the income of the
transferor-member.

Example: X gifts his self-acquired property yielding an annual income of Rs.60,000 to his HUF,
consisting of X, Mrs.X, his major son Y and minor son Z. Income of Rs.60,000 will be clubbed in the
income of X (and not of the HUF).

Clubbing after partition:

If the converted property is subsequently partitioned among the members of the family, the
income derived from such converted property as is received by the spouse and minor child of
the transferor will be taxable as income of the transferor.
 28

Example: Assume in the above example, that the property is partitioned equally among the family
members, income derived from converted property by Mrs.X (i.e. ¼ of Rs.60,000) and share of minor
son (i.e. ¼ of Rs.60,000) will be included in the income of Mr.X.

19. Mr.S is a member of HUF. It consists of himself, his wife Juhi and his major son Arjun and his minor
daughter Aditi. Mr.S transferred his house property acquired through his personal income to the
HUF without any consideration.

On 01.10.2023, HUF is partitioned and such property being divided equally. Net annual value of the
property for the previous year 2023-24 is Rs.1,00,000. Determine the tax implications.

Additional Problems:
20. Details of Income of Mr.R and his wife Mrs.R for the previous year 2023-24 are as under:

i. Mr.R transferred his self-acquired property without any consideration to the HUF of which
he is a member. During the previous year 2023-24 the HUF earned an income of Rs.50,000
from such property.

ii. Mr.R transferred Rs.4,00,000 to his wife Mrs.R on 01.04.2009 without any consideration
which was given as a loan by her to Mr.Girish. She earned Rs.3,50,000 as interest during the
earlier previous years which was also given as a loan to Mr.Girish. During the previous year
2023-2024 earned interest @ 11% per annum.

iii. Mr.R and Mrs.R both hold equity shares of 27% and 25% respectively in AMC Limited. They
are also working as employees in such Company. During the financial year 2023-24 they
have withdrawn a salary of Rs.3,20,000 and Rs.2,70,000 respectively.

iv. Mrs.R transferred 5,000 equity shares of RSB Ltd. on 17.09.2016 to Mr.R without any
consideration. The Company issued 3,000 bonus shares to Mr.R in 2019. On 04.03.2024,
Mr.R sold entire share holdings and earned Rs.5,20,000 as capital gains.

Apart from above income, Mr.R has income from commission Rs.4,00,000 and Mrs.R has interest
income of Rs.3,30,000. Compute Gross Total income of Mr.R and Mrs.R for the A.Y. 2024-25.

21. S. No. Particulars Amount (Rs.)

(a) Salary income (computed) of Mrs.Anandi 9,60,000

(b) Income of minor son "A" who suffers from disability

specified in section 80U 3,08,000

(c) Income of minor daughter "C" from script writing for Television Serials 1,86,000

(d) Income from garment trading business of Mr.Dharmesh 17,50,000

(e) Cash gift received by minor daughter "C" on 02.10.2023

from friend of Mrs.Anandi, on winning of a story writing competition 45,000
 29

(f) Income of minor son "B" form scholarship received from his school 1,00,000

(g) Income of minor son "B" from fixed deposit with

Punjab National Bank, made out of income earned from scholarship 5,000

Compute total income of Mr.Dharmesh and his wife Mrs.Anandi for Assessment Year 2024-25
assuming that they have opted to be taxed under optional tax regime.

22. Determine the Gross total income of Shri Ram Kumar and Smt. Ram Kumar for the assessment year
2024-25 from the following:

i. Salary received by Shri Ram Kumar from a company Rs.1,80,000 p.a. and Smt. Ram Kumar
also doing job in a company and getting salary of Rs.2,40,000 p.a.

ii. Shri Ram Kumar transferred a flat to his wife Smt. Ram Kumar on 01.09.2023 for adequate
consideration. The rent received from this let-out flat is Rs.9,000 p.m.

iii. Shri Ram Kumar and his wife Smt. Ram Kumar both are partners in a firm. Shri Ram Kumar
received Rs.36,000 and Smt. Ram Kumar received Rs.64,000 as interest from the firm and
also had a share of profit of Rs.12,000 and Rs.26,000 respectively.

iv. Smt. Ram Kumar transferred 10% debentures worth Rs.3,00,000 to Shri Ram Kumar. The
whole amount of Rs.3,30,000 invested by Shri Ram Kumar in the similar investments and
earned income of Rs.39,000.

v. Mother of Shri Ram Kumar transferred a property to Master Rohit (son of Shri Ram Kumar)
in the year 2021 Master Rohit (aged 13 years) received Rs.15,000 as income from this
property on 20th February, 2024.

23. (i) Mr.Raghav owns two house properties in Mumbai. The details of these properties are as under:-

House 1 House 2
Self-occupied Let-out
Rent received per month Not applicable Rs.60,000
Municipal taxes paid Rs.7,500 Nil
Interest on loan
(taken for purchase of property) Rs.3,50,000 Rs.5,00,000

Principal repayment of loan

(taken from HDFC bank) Rs.2,00,000 Rs.3,00,000

(ii) Mr.Raghav had a house in Delhi. During financial year 2014-15, he had transferred the house to
Ms.Vamika, daughter of his sister without any consideration. House would go back to Mr.Raghav
after the life time of Ms.Vamika. The transfer was made with a condition that 10% of rental income
from such house shall be paid to Mrs.Raghav. Rent received by Ms.Vamika during the previous year
2023-24 from such house property is Rs.5,50,000.
 30

(iii) Mr.Raghav receives following income from M/s M Pvt. Ltd. during P.Y. 2023-24:
• Interest on Debentures of Rs.7,50,000; and
• Salary of Rs.3,75,000.

He does not possess the adequate professional qualification commensurate with the salary received
by him.

Shareholding of M/s.M Pvt. Ltd. as on 31.3.2024 is as under –

Equity shares Preference shares
Mr.Raghav Nil Nil
Mrs.Raghav 2% 25%
Mr.Jai Kishan (brother of Mrs.Raghav) 98% 75%

(iv) Mr. and Mrs.Raghav form a partnership firm with equal share in profits. Mr.Raghav transferred
a fixed deposit of Rs.1 crore to such firm. Firm had no income or expense other than the interest of
Rs.9,00,000 received from such fixed deposit. Firm distributed the entire surplus to Mr. and
Mrs.Raghav at the end of the year.

(v) Mr.Raghav holds preference shares in M/s.K Pvt. Ltd. He instructed the company to pay
dividends to Ms.Geeta, daughter of his servant. The transfer is irrevocable for the life time of Geeta.
Dividend received by Ms.Geeta during the previous year 2023-24 is Rs.13,00,000.

(vi) Other income of Mr.Raghav includes:–

Interest from saving bank account of Rs.2,00,000
Cash gift of Rs.75,000 received from daughter of his sister on his birthday

Compute total income of Mr.Raghav for the Assessment Year 2024-25. Ignore DTR.

24. Mr.Gupta and his wife Mrs.Gupta are partners in a partnership firm holding 25% share each. During
the FY 2023-24, the firm paid Rs.2,50,000 to each of them as remuneration. Apart from this, they
provide you the following information in respect of FY 2023-24:

i. Salary received by Mr.Gupta from his employer Rs.12,50,000.

ii. Interest on fixed deposit earned by Mrs.Gupta Rs.14,00,000. (The fixed deposit was opened
by using her "Stridhan")

iii. Income of their three minor children Neeta, Meeta and Seeta was Rs.15,000, Rs.10,000 and
Rs.2,000 respectively.

You are required to compute the gross total income of Mr. and Mrs.Gupta as per the provisions of
Income-tax Act for the AY 2024-25. Ignore provisions of Default tax regime.
 31

25. From the following transactions compute the total income of Mr.Raman and his wife Savita for the
Assessment year 2024-25:

a) Mr.Raman had a fixed deposit of Rs.5,00,000 in the bank. He instructed the bank to credit
the interest on deposit @ 8% from 01.04.2023 to 31.03.2024 to the savings account of his
brother’s son for his education.

b) Savita is a B.com graduate and working in ABC Private Limited as an accountant with a
monthly salary of Rs.25,000. Raman holds 30% equity shares of ABC Private Limited.

c) Raman started proprietary business on 01.04.2004 with a capital of Rs.10,00,000. He

incurred a loss of Rs.2,00,000 during the previous year 2022-23. To overcome the financial
position, Savita gifted a sum of Rs.4,00,000 to him on 01.04.2023 which was immediately
invested in the business by Mr.Raman. He earned a profit of Rs.3,00,000 during the
previous year 2023-24.

d) Sajan, younger son of Raman, aged 17 years won in a debate competition during the annual
competitions held at his school and received a cash award of Rs.10,000 and he also earned
interest of Rs.7,000 on balance maintained in his savings bank account.

26. Mr.Chaman who is 50 years old and his wife Mrs.Chaman who is 48 years old furnish the following
information:

a) Mr.Chaman’s salary income – Rs.11,00,000

b) Mrs.Chaman’s income from Kathak performances – Rs.2,50,000. She is a professional

Kathak dancer and pursue dancing as her profession.

c) Mrs.Chaman earned long-term capital gains of Rs.5,50,000 from sale of shares.

d) Mrs.Chaman gifted Rs.2,00,000 to Mr.Chaman out of her Stridhan on 01.04.2023,

Mr.Chaman invested the entire amount in stock market but suffered a short-term capital
loss of Rs.5,10,000.

e) Miss Naina, their minor daughter, earned Rs.3,56,000 by performing in various quiz
competitions held online during the year 2023-24. She kept that amount in savings bank
account and earned interest of Rs.15,000 during the year 2023-24.

f) Master Neelabh, their minor son earned Rs.35,000 from fixed deposit which was made out
of cash he received on his birthday from his friends and family. Neelabh suffers from
disability as mentioned u.s.80U. The medical certificate shows a disability of up to 75%.

Compute the total income in the hands of Mr. and Mrs.Chaman and their minor children for the
Assessment Year 2024-25. Ignore default tax regime.
 32

CROSS TRANSFERS:
27. Mr.Vasudevan gifted a sum of Rs.6 lakhs to his brother’s wife on 14.6.2023. On 12.7.2023, his
brother gifted a sum of Rs.5 lakhs to Mr.Vasudevan’s wife. The gifted amounts were invested as
fixed deposits in banks by Mrs.Vasudevan and wife of Mr.Vasudevan’s brother on 01.8.2023 at 7%
interest. Discuss the consequences of the above under the provisions of the Income-tax Act, 1961 in
the hands of Mr.Vasudevan and his brother.

Solution:
In the given case, Mr.Vasudevan gifted a sum of Rs.6 lakhs to his brother’s wife on 14.06.2023 and
simultaneously, his brother gifted a sum of Rs.5 lakhs to Mr.Vasudevan’s wife on 12.07.2023. The
gifted amounts were invested as fixed deposits in banks by Mrs.Vasudevan and his brother’s wife.
These transfers are in the nature of cross transfers.

If two transactions are inter-connected and are part of the same transaction, clubbing
provisions would be attracted. Accordingly, the interest income arising to Mrs.Vasudevan would
be included in the total income of Mr.Vasudevan and interest income arising in the hands of his
brother’s wife would be taxable in the hands of Mr.Vasudevan’s brother, to the extent of amount of
cross transfers i.e., Rs.5 lakhs.

This is because both Mr.Vasudevan and his brother are the indirect transferors of the income to
their respective spouses with an intention to reduce their burden of taxation.

Important: However, the interest income earned by his spouse on fixed deposit of Rs.5 lakhs alone
would be included in the hands of Mr.Vasudevan’s brother and not the interest income on the entire
fixed deposit of Rs.6 lakhs, since the cross transfer is only to the extent of Rs.5 lakhs.

MCQs:

1. Choose the correct answer:

Income arising to a minor married daughter is:

a) To be assessed in the hands of the minor married daughter

b) To be clubbed with the income of that parent whose total income is higher
c) Completely exempt from tax
d) To be clubbed with the income of her husband

2. Ram owns 500, 15% debentures of Reliance Industries Ltd. of Rs.500 each. Annual interest of
Rs.37,500 was declared on these debentures for P.Y. 2023-24. He transfers interest income to his
friend Shyam, without transferring the ownership of these debentures. While filing return of
income for A.Y.2024-25, Shyam showed Rs.37,500 as his income from debentures. As tax advisor of
Shyam, do you agree with the tax treatment done by Shyam in his return of income?

(a) Yes, since interest income was transferred to Shyam therefore, after transfer it becomes his
income.
(b) No, since Ram has not transferred debentures to Shyam, interest income on the debentures
is not taxable income of Shyam.
 33

(c) Yes, if debentures are not transferred, interest income on debentures can be declared by
anyone, Ram or Shyam, as taxable income depending upon their discretion.
(d) No, since Shyam should have shown the income as interest income received from Mr. Ram
and not as interest income earned on debentures.

3. On 20.10.2023, Pihu (minor child) gets a gift of Rs.20,00,000 from her father's friend. On the same
day, the amount is deposited as fixed deposit in Pihu's bank account. On the said deposit, interest of
Rs.13,000 was earned during the P.Y. 2023-24. In whose hands the income of Pihu shall be taxable?
Also, compute the amount of income that shall be taxable.

(a) Income of Rs.20,11,500 shall be taxable in the hands of Pihu's father.

(b) Income of Rs.20,13,000 shall be taxable in the hands of Pihu's father.
(c) Income of Rs.20,11,500 shall be taxable in the hands of Pihu's father or mother, whose
income before this clubbing is higher.
(d) Income of Rs.20,13,000 shall be taxable in the hands of Pihu's father or mother, whose
income before this clubbing is higher.

4. Mr.Arvind gifted a house property to his wife, Ms.Meena and a flat to his daughter-in law, Ms.
Seetha. Both the properties were let out. Which of the following statements is correct?

(a) Income from both properties is to be included in the hands of Mr.Arvind by virtue of section
64.
(b) Income from property gifted to wife alone is to be included in Mr.Arvind's hands by virtue
of section 64.
(c) Mr.Arvind is the deemed owner of house property gifted to Ms.Meena and Ms.Seetha.
(d) Mr.Arvind is the deemed owner of property gifted to Ms.Meena. Income from property
gifted to Ms.Seetha would be included in his hands by virtue of section 64.

5. Mrs.Shivani, wife of Mr.Anurag, is a partner in a firm. Her capital contribution of Rs.5 lakhs to the
firm as on 1.4.2022 included Rs.3.5 lakhs contributed out of gift received from Anurag. The firm
paid interest on capital of Rs.50,000 and share of profit of Rs.60,000 during the F.Y.2023-24. The
entire interest has been allowed as deduction in the hands of the firm. Which of the following
statements is correct?

(a) Share of profit is exempt but interest on capital is taxable in the hands of Mrs.Shivani.
(b) Share of profit is exempt but interest of Rs.39,286 is includible in the income of Mr. Anurag
and interest of Rs.10,714 is includible in the income of Mrs.Shivani.
(c) Share of profit is exempt but interest of Rs.35,000 is includible in the income of Mr. Anurag
and interest of Rs.15,000 is includible in the income of Mrs.Shivani.
(d) Share of profit to the extent of Rs.42,000 and interest on capital to the extent of Rs. 35,000
is includible in the hands of Mr.Anurag.
 34

6. Mr.Aarav gifted a house property valued at Rs.50 lakhs to his wife, Geetha, who in turn has gifted
the same to her daughter-in-law Deepa. The house was let out at Rs.25,000 per month throughout
the P.Y.2023-24. Compute income from house property for A.Y.2024-25. In whose hands is the
income from house property chargeable to tax?

(a) Rs.3,00,000 in the hands of Mr.Aarav

(b) Rs.2,10,000 in the hands of Mr.Aarav
(c) Rs.2,10,000 in the hands of Geetha
(d) Rs.2,10,000 in the hands of Deepa

7. If the converted property is subsequently partitioned among the members of the family, the income
derived from such converted property as is received by the spouse of the transferor will be taxable -

(a) as the income of the karta of the HUF

(b) as the income of the spouse of the transferor
(c) as the income of the HUF
(d) as the income of the transferor-member

8. Rohit (a Chartered Accountant) is working as Accounts Officer in Raj (P) Ltd. on a salary of
Rs.50,000 p.m. He got married to Ms.Pooja who holds 25% shares of this company. What will be
the impact of salary paid to Rohit by the company in the hands of Ms.Pooja:

a. 100% salary to be clubbed

b. 50% salary to be clubbed
c. No amount be clubbed
d. 25% salary to be clubbed
 35

CHAPTER – 15 CHAPTER VIA DEDUCTIONS

 Deductions under chapter VIA cannot exceed Gross Total Income

 Deductions are NOT available against incomes that are taxed at SPECIAL RATE

 Deductions can be in respect of certain:

• Expenditure incurred or payment made (eg. 80C, 80D); or
• Incomes (eg. 80IA to 80TTB)

 Deduction in respect of certain incomes such as 80-IA, 80-IAB, 80-IAC, 80-IB, 80IBA, 80-IC,
80-IE, 80JJA, 80JJAA, 80LA, 80M, 80P, 80PA, 80QQB and 80RRB shall be allowed only if the
return of income is filed before ‘due date’.

 Chapter VIA deductions are not available under the default tax regime under section
115BAC(1A) except for Section 80CCD (2); Section 80CCH (2) and Section 80JJAA.

Section 80 C Deduction in respect of certain investments, deposits

To whom available: Individuals and HUF (resident or non-resident)

Amount of deduction: Maximum Rs.1,50,000

Condition: Payment should be made on or before 31st March

Investments which qualify for deduction under section 80 C:

• Life insurance premium paid on the life of individual, spouse, children (minor or major;
dependent or not)

Policy issued: Qualifying amount

Before 01.04.2012 20% of sum assured or actual premium (w.e.l)
On or after 01.04.2012 10% of sum assured or actual premium (w.e.l)

Policy on the life of any person suffering from any disability or disease:
Before 01.04.2012 20% of sum assured or actual premium (w.e.l)
Between 2012-13 10% of sum assured or actual premium (w.e.l)
On or after 01.04.2013 15% of sum assured or actual premium (w.e.l)

• Contribution to SPF or RPF out of salary

• Amount deposited in 15-year PPF (individual, spouse and children)
• Amount invested in NSC certificates (VIII issue) and interest accrued thereon
• Repayment of loan taken from banks for purchase or construction of a house
• Stamp duty (registration charges) paid on purchase or construction of a residential house
• Tuition fees for education of the children in India (max: 2 children) (full time education)
 36

• Investment in units of a tax-saver mutual fund

• Fixed deposit (tax-saver) in a scheduled bank for a period of 5 years
• Amount deposited in five year time deposit scheme in post office
• Contribution towards Unit Linked Insurance Plan (ULIP)
• Contribution to additional account under NPS (Tier II)
• Deposit in Senior Citizen Saving Scheme
• Deposit in Notified Bonds of NABARD
• Contribution to Sukanya Samriddhi Account notified by Central Government

Section 80 CCC: Contribution to the Pension Fund of LIC or any other

Insurance company

To whom available: Individuals only

Amount of deduction: Actual premium paid or Rs.1,50,000 (whichever is less)

Note: The aggregate of section 80C, 80CCC and 80CCD(1) cannot exceed Rs.1,50,000

Section 80 CCD: Contribution to the Notified Pension Scheme (NPS) set-

up by the Central Government

To whom available: Individuals only

U.S. 80CCD(1):
Amount of deduction: a. In case of a salaried employee:
• Amount contributed; or
• 10% of salary (basic + DA (F))
(whichever is less)

b. In case of self-employed:
• Amount contributed; or
• 20% of gross total income; or
(whichever is less)

Important: The aggregate of Section 80C, 80CCC & 80CCD(1) cannot exceed Rs.1,50,000.

Note: There are two types of NPS account i.e., Tier I and Tier II.
Section 80CCD - (Tier I account) under the NPS.
Section 80C - (Tier II account) only for Central Government employees.
 37

A. Additional deduction u.s.80CCD(1B) (apart from Rs.1,50,000):

Section 80CCD(1B) provides for an additional deduction up to Rs.50,000 in respect of amount
contributed under NPS. Hence an assessee can claim Rs.1,50,000 and also additional Rs.50,000
(in total Rs.2,00,000) to reduce his tax liability.

B. Contribution by the EMPLOYER to the pension fund:

Contribution made by the employer is taxable under the head “salary” and such contribution is
separately allowed as deduction under section 80CCD (2) but not exceeding 10% of salary.
(14% shall be allowed as deduction in case of Central or State Government employees).

C. ON CLOSURE OR OPTING OUT OF NPS BY ANY ASSESSEE:-

Section 10(12A) provides that any payment from NPS Trust on account of closure or his opting
out of the pension scheme, 60% of the total amount payable shall be exempt from tax.

D. PARTIAL WITHDRAWAL – EXEMPTION ONLY IN CASE OF EMPLOYEES:

Section 10(12B): In case of partial withdrawal by any employee: 25% of amount contributed
by the employee shall be exempt.

Note: Difference between 10(12A) and 10(12B): Section 10(12A) exemption is for all
individuals (salaried or self-employed) but Section 10(12B) is only for ‘salaried’ individuals.

Important: However, the amount received by the nominee on the death of the assessee shall
NOT be deemed to be the income of the nominee, hence exempt from tax.

Summary: Amount received on closure or opting out of NPS:

 60% shall be exempt in case of total withdrawal for all assesses – Section 10(12A)
 25% of the amount of contribution made by the employee shall be exempt in case of
partial withdrawal – Sec 10(12B)
 Received by nominee on death of the assessee shall be fully exempt

Section 80 CCE – Maximum deduction restricted to Rs.1,50,000:

The aggregate of section 80C, section 80CCC and section 80CCD(1) cannot exceed Rs.1,50,000.
Deduction u.s.80CCD(1B) and 80CCD(2) are separate deductions in addition to Rs.1,50,000.

Important: Section 80CCD(1B) and Section 80CCD(2) are not included in the above limit. They
are separate deductions.
 38

Section 80 CCH: Contribution to Agnipath Scheme

To whom available: Individual contributing to Agniveer Corpus Fund (ACF)

Amount of deduction: Whole of the amount paid or deposited

Central Government contribution to ACF:

The entire ccontribution made by the Central Government to ACF is taxable under the head
“salary” and such contribution is allowed as deduction under section 80CCH (2).

Note: Deduction u.s.80CCH (2) is also available under the default tax regime.

(To induct young and talented individuals into the armed forces, the Central Government launched the Agnipath scheme on
June 14th, 2020. Individuals aged between 17.5 years to 21 years will be eligible to apply for it. It is a tour-of-duty style
scheme where individuals would be commissioned as soldiers into the three segments of the armed forces. After a job
tenure of 4 years, 25% of "Agniveers" will get a chance to get converted to a regular armed forces cadre. Soldiers enrolled
in this scheme will earn Rs.4.76 lakh annually (approx.). In the final year, this income will rise to almost Rs.6.92 lakh. The
entire principal will accumulate interest over 4 years, and applicants will get a maturity corpus of almost Rs.10.04 lakh (plus
applicable interest). To ensure all income under this scheme remains tax-free, the authorities introduced Section 80CCH.)

Section 80 D: Health insurance premium paid to Insurance

Company or to Central Government Health Schemes

To whom available: Individuals and HUF (resident or non-resident)

Deduction on account of: a. Medical insurance premium paid; or

b. Expenditure on preventive health check-up; or
c. Medical expenditure on the health of a senior citizen not
having a mediclaim policy.

I. Amount of deduction:

Category I:
For assessee, spouse and Rs.25,000 (or) actual premium paid (whichever is less)
dependent children (Rs.50,000 if the assessee is a resident senior citizen)

Category II:
For parents Separate deduction of Rs.25,000 if policy is taken on the health
of parents (dependent or not). Higher deduction of Rs.50,000
if parent is a resident senior citizen.

Conditions: a. Premium can be paid by any mode EXCEPT cash.

b. Mediclaim Policy can be taken on the health of the
individual, spouse, dependent children and parents.
 39

Premium paid to cover more than one year:

In case of single premium health insurance policies having cover of more than one year, the
deduction is allowed on proportionate basis for the number of years for which health insurance
cover is provided.

II. Deduction in respect of expenditure on preventive health check-up:

The aggregate deduction on account of preventive health check-up of self, spouse, dependent
children, parents cannot exceed Rs.5,000. This is within the overall limit of Rs.25,000 (or)
Rs.50,000 mentioned above.

Important: Expenditure on preventive health check-up can be paid in cash.

III. Medical expenditure incurred on the health of a SENIOR CITIZEN (WHO IS NOT COVERED
BY ANY HEALTH INSURANCE) (as a welfare measure):
Expenditure on medical treatment of senior citizen (resident) for whom health insurance is not
available: Deduction is Rs.50,000 (or) actual medical expenditure (w.e.l.). Expenditure incurred
should not be in cash.

Provisions in brief: For his family For his parents

a. Medical Insurance premium Rs.25,000 Rs.25,000 (including expenses)
(no senior citizen)

b. Medical Insurance premium Rs.25,000 Rs.50,000 (including expenses)

(if parent is a senior citizen)

c. Medical Insurance premium Rs.50,000 Rs.50,000 (including expenses)

(if assesse is also a senior citizen)

Section 80 DD Deduction in respect of expenditure incurred for

dependent persons with disability

To whom available: Resident individual or resident Huf

Amount of deduction: Rs.75,000 flat with less than 80% disability

Rs.1,25,000 flat with 80% or more disability

note: Actual expenditure is not relevant

note: A Certificate from the medical authority should be produced.

note: ‘Family’ includes: Spouse, dependant children, dependant

parents, dependant brothers and sisters of the individual.
 40

Section 80 DDB: Deduction in respect of expenditure incurred on medical

treatment of specified diseases or ailments

To whom available: Resident individual or resident huf

Amount of deduction: Rs.40,000 or actual expenditure (whichever is less)

Rs.1,00,000 or actual expenditure (w.e.l for res. senior citizen)

Condition: The assessee is required to obtain a PRESCRIPTION from a

specialist doctor.

‘Family’ includes the assessee, spouse, dependent children,

dependent parents, dependent brothers and sisters.

Note: Deduction will be reduced to the extent of amount received from Insurance Company or
towards medical reimbursement from Employer.

Points Section 80DD Section 80DDB

• Assessee should be a: Resident Resident
• Suffering from: Disability Disease
• Actual expenditure: Not relevant Relevant
• Whether assessee is also included: No Yes
• Requirement: Medical certificate Prescription

Section 80 E: Deduction i.r.o. loan taken for higher education

To whom available: Individuals only

Amount of deduction: Actual amount of interest

• The loan can be for the assessee himself or his spouse or his children or a student for whom the
assessee is the legal guardian.
• Loan can be borrowed from any financial institution or approved charitable institution
• Deduction is allowed for a period of 8 years
• Higher education in an educational institution can be in India or outside India

“Higher Education” means any course of study pursued after passing the Senior Secondary
Examination or its equivalent from any school or board recognized by the Government.
 41

Section 80EE: Deduction i.r.o. interest on loan taken for

acquisition of a residential house

To whom available: Individuals only

Amount of deduction: Maximum Rs.50,000 (in addition to Rs.2,00,000 u.s.24)
Period of benefit: Till the repayment of loan

Conditions:
• The value of residential house does not exceed Rs.50,00,000
• The loan amount does not exceed Rs.35,00,000
• The loan is sanctioned during the previous year 2016-17
• The loan is borrowed from a bank or a housing finance company
• The assessee does not own any residential house on the date of sanction of loan

Note: The above deduction is only in respect of a self-occupied property

Section 80EEA: Deduction i.r.o. interest on loan taken for

acquisition of a residential house

To whom available: Individuals only

Amount of deduction: Maximum Rs.1,50,000 (in addition to Rs.2,00,000 u.s.24)

Period of deduction: Till the repayment of loan

Conditions:
• The stamp duty value does not exceed Rs.45,00,000
• The loan should be sanctioned during the period 01.04.2019 to 31.03.2022
• The loan is borrowed from a bank or a housing finance company
• The assessee should not own any residential house on the date of sanction of loan

Note: The above deduction is available for both self-occupied and let-out properties

Points Section 80EE Section 80EEA

• Value of the property Rs.50 lakhs Rs.45 lakhs
• Deals with: Actual purchase price Stamp duty value
• Amount of loan: Rs.35 lacs Not specified
• Loan sanctioned during the period 2016-17 1.4.19 to 31.03.2022
• Amount of deduction: Rs.50,000 Rs.1,50,000
• Deduction available: Only for self-occupied Both self and let out
 42

Section 80 EEB: Deduction i.r.o. interest on loan taken for purchase of

Electric Vehicle:

To whom allowed: Individuals only

Conditions: a. Loan should be sanctioned during the period between 01.04.2019

to 31.03.2023

b. Loan should be sanctioned by a bank or by a Deposit taking NBFC

(non-banking finance company)

Amount of deduction: Maximum deduction Rs.1,50,000 in respect of interest

Period of deduction: Till the repayment of loan

Section 80 G: Deduction in respect of Donations

To whom allowed: All Assessees (individuals, huf, firms, companies)

Conditions: Donation should be made only to approved institutions;

Donation should not be in kind;
Donation up to Rs.2,000 can be in cash. Donations in excess of
Rs.2,000 by cash not eligible for deduction.

Amount of deduction: 100% of donations made to the following funds:

• Prime Minister’s Citizen Assistance and Relief in Emergency
Situations Fund (PM Cares Fund)
• Prime Minister’s National Relief Fund
• National Children’s Fund
• National Defence Fund
• Zila Saksharta Samiti
• National Illness Assistance Fund
• National or State Blood Transfusion Council
• Gujarat Earth Quake Relief Fund
• National Sports Fund
• National Cultural Fund
• National Trust for Welfare of Persons with Mental Retardation,
Autism, Cerebral Palsy and multiple disabilities
• Swachh Bharat Kosh
• Clean Ganga Fund
• National Fund for Control of Drug Abuse
 43

50% of donation made to the following funds:

• Prime Ministers Drought Relief Fund

50% of qualifying amount if donations are made to the following:

• Approved charitable institution for charitable purpose
• Any approved temples, mosque, church, gurudwara or any
other place of national importance for repairs or
renovation

Qualifying amount: Actual donation made (or) 10% of adjusted gross total income
(whichever is less) will qualify for 50% deduction.

Adjusted Gross Total Income means: Gross total income (-) incomes taxed at special rates (-)
all deductions u.s. 80 except 80G.

Note: If donations are made to the Government for the PROMOTION OF FAMILY PLANNING then
100% of qualifying amount is allowed as deduction.

Section 80 GG: Deduction in respect of House Rent paid

To whom allowed: Individuals only

Amount of deduction: 25% of adjusted gross total income;

Rs.5,000 per month;
Rent paid (-) 10% of adjusted gross total income

whichever is less is allowed as deduction

Conditions:
• Deduction under this section is not available for salaried employees who receive HRA
• The assessee or his spouse or his minor child should not own any residential house at the
place where the assessee is employed or where he carries on his business.
• The assessee should not own any self-occupied property in India.

Adjusted Gross Total Income means: Gross total income (-) incomes taxed at special rates (-)
all deductions u.s. 80 except 80 GG.
 44

Section 80 GGB: Deduction in respect of contributions made by companies

to any political party or an electoral trust:

To whom available: Indian Company (not opting for section 115BAA/115BAB)

Amount of deduction: 100% of contribution made

Note: “Contribution” also includes expenditure incurred on

advertisement in a souvenir or a brochure published by a
political party.

Important: No deduction if donations are in cash.

Section 80 GGC: Deduction in respect of contributions made by any person

to political parties or to an electoral trust

To whom available: Any assessee other than an Indian Company

Amount of deduction: 100% of contribution made to a political party or to an

electoral trust

Important: No deduction if donations are in cash.

Section 80 JJAA: Deduction i.r.o new employment

To whom available: All assesses to whom section 44AB applies (Tax Audit)

Amount of deduction: 30% of “additional employee cost”.

Period of deduction: 3 Assessment Years

1. “Additional employee”: An employee who is newly employed during the previous year

Who is not an additional employee:

• an employee whose total emoluments exceed Rs.25,000 per month; or

• an employee employed for a period of less than 240 days during the previous year
(150 days in case of an assessee engaged in the business of manufacturing of apparel or
footwear or leather products)

• an employee who does not participate in the recognized provident fund

 45

2. “Additional Employee Cost”: Total emoluments paid or payable to additional employees

Condition: Emoluments should not be paid in cash. However, in the case

of first year of a new business the emoluments can be in cash.

Important: Deduction is also available under the Default Tax Regime.

Section 80 QQB: Deduction in respect of royalty income of authors:

To whom available: Resident Individual

Conditions: a) Should be a book on literary, artistic or scientific nature

b) Income is derived by way of Royalty or Copyright fee

Amount of deduction: If received by way of lumpsum:

• Royalty income; or
• Rs.3,00,000 (whichever is less)

If not by way of lumpsum:

• Royalty income (not to exceed 15% of the value of books sold)
(before allowing expenses); or
• Rs.3,00,000 (whichever is less)

Note: ‘Books’ here does not include journals, guides, newspapers, textbooks for school students,
pamphlets, dairies and other publications of similar nature.

Note: Royalty earned outside India will qualify for deduction u.s.80QQB only if it is brought to
India in convertible foreign exchange within a period of six months from the end of the previous
year or within the time extended by RBI.

Section 80 RRB: Deduction in respect of royalty income on Patents

To whom available: Resident Individual

Conditions: a) Owner or Co-owner of a Patent

b) Patent should be registered under the Patents Act, 1970

Amount of deduction: 100% of royalty income (or) Rs.3,00,000 (whichever is less)

 46

Section 80 TTA: Deduction i.r.o. interest on SAVINGS account

To whom available: Individual or HUF other than a resident senior citizen

Amount of deduction: Interest income (or) Rs.10,000 (whichever is less)

Income eligible: Interest on savings account with a bank

Interest on savings account with a post office
Interest on savings account with a co-operative bank

Important:
Deduction under this section is not available for senior citizens. Senior citizens can claim
deduction under section 80TTB.

Interest on post office savings account is also exempt u.s.10(15) up to Rs.3,500 in a single account and
Rs.7,000 in a joint account. Deduction u.s.80TTA is in addition to the amount exempt.

Section 80 TTB: Deduction i.r.o. interest on deposits in case of a senior

citizen (both SAVINGS & TIME DEPOSIT):

To whom available: A resident senior citizen

Amount of deduction: Interest income (or) Rs.50,000 (whichever is less)

Income eligible: Interest on ‘time deposit’ or ‘savings account’ with a:

i. Bank; or
ii. Post Office; or
iii. Co-operative banks

Points Section 80 TTA Section 80 TTB

• To whom available Not allowed for Snr Ctzns Only for senior citizens
• Deals with: Interest on savings a/c only Any interest on savings/fixed/recurring
• Amount of deduction: Rs.10,000 (max) Rs.50,000 (max)

Section 80 U: Deduction in case of an assessee with disability

To whom available: Resident Individual

Amount of deduction: Rs.75,000 in case of a person with disability

Rs.1,25,000 in case of a person with severe disability

Conditions: Medical Certificate should be produced

 47

Problems on Gross Total Income

1. Mr.A, resident, aged about 61 years, has earned business income of Rs.1,35,000; lottery income of
Rs.1,20,000 (gross) during the previous year 2023-24. He also has interest on fixed deposit of
Rs.30,000 with banks. He invested an amount of Rs.1,50,000 in Public Provident Fund account. What is
the total income of Mr.A for the A.Y.2024-25. Ignore the provisions of default tax regime.

2. Compute the eligible deduction u.s. 80C for A.Y.2024-25 in respect of life insurance premium paid by
Mr.G during the previous year 2023-24, the details of which are given hereunder, if Mr.Ganesh has
exercised the option of shifting out of the default tax regime provided u.s.115BAC(1A):-

Date of issue Insured in the Actual capital Insurance premium

of policy name of sum assured paid
30.03.2012 Self 8,00,000 48,000
01.05.2018 Spouse 1,50,000 20,000
01.06.2021 Handicapped son 4,00,000 80,000

3. Compute deduction allowed u.s.80 C (optional tax regime) from the following information:

Income from salary (after standard deduction) 10,00,000

Income from other sources 50,000

LIP on his own life (sum assured Rs.1,00,000) (issued on 01.04.2011) 25,000
LIP on the life of his major married son (not dependent on A) 10,000
LIP on the life of daughter suffering from disability (sum assured
Rs.1,00,000; issued on 01.04.2018) 18,000

Contribution to a Recognized Provident Fund 20,000

Amount deposited in 15-year PPF Account 15,000
Contribution to ULIP 10,000
Subscription to units of a Mutual fund notified u/s 10(23D) 25,000
Term deposit for 5 years with a scheduled bank 20,000
Deposit in Sukanya Samriddhi Scheme in the name of his girl child 10,000

Amount incurred on full time education of:

Child X: Rs.14,000; Child Y: Rs.7,000; Child: Z Rs.5,000

Repayment of housing loan taken from LIC (principal amount Rs.20,000

and interest Rs.40,000). He had taken loan from LIC for construction of a
residential house which was completed in 1998 and which is being utilized
by A for his own residence. 60,000
 48

4. Mr.S, aged 67 years, furnishes the following particulars for the year ending 31.03.2024:

a. LIP paid – Rs.50,000, policy assured for Rs.2,00,000. Policy was taken in 2011.
b. Contribution to PPF – Rs.30,000 in the name of mother
c. Tuition fee payment – Rs.10,000 each for 3 daughters pursuing full time graduation course in
Chennai; Tuition fee for son pursuing MBA in a foreign university – Rs.1,00,000
d. Housing loan principal repayment – Rs.84,000 to HDFC Ltd. This property is under construction
at Chennai as on 31.03.2024
e. Principal repayment of housing loan taken from friend – Rs.50,000, property is self-occupied.
f. Deposit under Senior Citizen Savings Scheme – Rs.50,000
g. Deposits under Post Office Time Deposit Scheme (five years) – Rs.30,000
h. Investment in National Savings Certificate – Rs.30,000
i. Subscription to bonds issued by NABARD Rs.25,000
j. Term Deposits of Rs.1,50,000 with a Scheduled bank for a period of 5 years. This deposit was
pledged to avail education loan for his son. Compute deduction eligible u.s.80 C (OTR).

Sec. 80 CCD
5. The basic salary of Mr.A is Rs.1,00,000 p.m. He is entitled to dearness allowance, which is 40% of
basic salary. 50% of dearness allowance forms part of pay for retirement benefits. Both Mr.A and his
employer, ABC Ltd., contribute 15% of basic salary to the pension scheme referred to in section 80
CCD. Explain the tax treatment in respect of such contribution in the hands of Mr.A if he has
exercised the option of shifting out of the default tax regime provided u.s.115BAC(1A).

What would by your answer if Mr.A pays tax under the default tax regime under section 115BAC?

6. Mrs.Sheela, widow of Mr.Satish (who was an employee of M/s. XYZ Ltd.), received Rs.7 lakhs on
1.10.2023, being amount standing to the credit of Mr.Satish in his NPS Account, in respect of which
deduction has been allowed under section 80CCD to Mr.Satish in the earlier previous years. Such
amount received by her as a nominee on closure of the account is deemed to be her income for
A.Y.2024-25. State whether the statement is true or false.

7. Mr.D a salaried employee with HDFC Bank is a subscriber to a National Pension Scheme (NPS). The
accumulated balance in his NPS account as on 31.01.2024 is Rs.50 lakhs. Out of which Rs.30 lakhs
were contributed by his employer and the balance of Rs.20 lakhs is his own contribution. Compute
the taxable amount on withdrawal in the following situations:

a. On 29th February, 2024 he had opted out of the scheme and withdrew the entire amount of
Rs.50 lakhs;

b. On 29th February, 2024 he made a partial withdrawal of Rs.20 lakhs out of contribution made
by him to his NPS account.
 49

Sec 80 D:
8. Mr.A, aged 40 years, paid medical insurance premium of Rs.20,000 during the previous year 2023-24
to insure his health as well as the health of his spouse. He also paid medical insurance premium of
Rs.47,000 during the year to insure the health of his father, aged 63 years, who is not dependent on
him. He contributed Rs.3,600 to Central Government Health Scheme during the year on his health.
He has incurred Rs.3,000 in cash on preventive health check-up of himself and his spouse and
Rs.4,000 by cheque on preventive health check-up of his father. Compute the deduction u.s.80D for
the A.Y.2024-25 if Mr.A has exercised the option of shifting out of the DTR u.s.115BAC(1A).

9. Mr.Y, aged 40 years furnishes the following information relating to premium on mediclaim policy
paid by cheque for the year ending 31.03.2024:

a. For self – Rs.15,000; b. for spouse, aged 37 years – Rs.7,000; c. for dependent father aged 63
years – Rs.52,000; d. for dependent mother-in-law, aged 57 years – Rs.5,000.

b. Cash paid for preventive health check up of self and spouse – Rs.6,000

Compute deduction u.s.80D. What would be your answer, in case the premium was paid in cash.

10. Mr.Y, aged 40 years, paid medical insurance premium of Rs.22,000 during the previous year 2023-24
to insure his health as well as the health of his spouse and dependent children. He also paid medical
insurance premium of Rs.33,000 during the year to insure the health of his mother, aged 67 years,
who is not dependent on him. He incurred medical expenditure of Rs.20,000 on his father, aged 71
years, who is not covered under mediclaim policy. His father is also not dependent upon him. He
contributed Rs.6,000 to Central Government Health Scheme. Compute the deduction u.s.80D for the
A.Y.2024-25 if Mr.Y has exercised the option of shifting out of the DTR u.s.115BAC(1A).

11. Mr.A (aged 63), a resident Indian, paid for himself through account payee cheque, health insurance
premium of Rs.2,10,000 for 5 years in one lump sum on 28.12.2023. The eligible amount of deduction
u.s.80D for A.Y.2024-25 would be Rs………………….
a. Rs.50,000 c. Rs.30,000
b.Rs.35000 d. Rs.42,000

12. Rajiv paid Rs.1,20,000 by cheque on 05.01.2024 towards medical insurance premium for his parents
who are senior citizens and not dependent on him. The premium was to provide health insurance
cover for 3 years. How much is deductible u.s.80D for the A.Y.2024-25?
a. Rs.40,000 c. Rs.25,000
b. Rs.30,000 d. Rs.50,000

13. Mr.Srivastav, aged 72 years, paid medical insurance premium of Rs.52,000 by cheque and Rs.4,000
by cash during May, 2023 under a Medical Insurance Scheme of the General Insurance Corporation.
The above sum was paid for insurance of his own health. He would be entitled to a deduction under
section 80D of a sum of:–
(a) Rs.30,000 (c) Rs.50,000
(b) Rs.52,000 (d) Rs.56,000
 50

Section 80 DD:
14. Mr.X is a RESIDENT individual. He deposits a sum of Rs.50,000 with Life Insurance Corporation
every year for the maintenance of his disabled grandfather who is wholly dependent upon him. The
disability is one which comes under the Persons with Disabilities (Equal Opportunities, Protection of
Rights and Full Participation) Act, 1995. A copy of the certificate from the medical authority is
submitted. Compute the amount of deduction available u.s.80DD for A.Y.2024-25, if Mr.X has
exercised the option of shifting out of the default tax regime provided u.s.115BAC(1A).

What will be the deduction if Mr.X had made this deposit for his dependent father with severe
disability?

15. Examine the allowability of the following if the assesses have opted for optional tax regime:

(i) Rajan, a resident individual, has to pay to a hospital for treatment Rs.62,000 and spent nothing for
life insurance or for maintenance of dependent disabled.

(ii) Varun, a resident Indian, has spent nothing for treatment in the previous year and deposited
Rs.25,000 with LIC for maintenance of dependent disabled.

(iii) Hari, a resident individual, has incurred Rs.20,000 for treatment and Rs.25,000 was deposited
with LIC for maintenance of handicapped dependant.

Section 80 DDB:
16. Find out the amount of deduction under section 80DDB:

Name of the taxpayer X Y Z A B

Residential status Res Res Res Res Non-res

Expenditure incurred on
dependent mother 90,000 26,000 70,000 1,00,000 34,000

Age of mother 89 years 59 yrs 64 yrs 63 yrs 65 yrs

Residential status of mother Res Non-res Res Non-res Res

Section 80 E:
17. Mr.X has taken three education loans from a Bank on April 1, 2023. The details are below:

Loan 1 Loan 2 Loan3

For whose education loan was taken X Son of X Daughter of X
Purpose of loan MBA B. Sc. B.A.

Amount of loan 5,00,000 2,00,000 4,00,000

Annual repayment of loan 1,00,000 40,000 80,000
Annual repayment of interest 20,000 10,000 18,000

Find out the amount deductible u.s. 80 E for the A.Y. 2024-25 under optional tax regime.
 51

Section 80EE:
18. Mr.A purchased a residential house property for self-occupation at a cost of Rs.45 lakh on 1.4.2017,
in respect of which he took a housing loan of Rs.35 lakh from Bank of India @ 11% p.a. on the same
date. The loan was sanctioned on 28th March, 2017. Compute the eligible deduction in respect of
interest on housing loan for A.Y. 2024-25 under the optional tax regime, assuming that the entire
loan was outstanding as on 31.3.2024 and he does not own any other house property.

19. The following are the particulars relating to Mr.A and Mr.B, salaried individuals for A.Y.2024-25:

Particulars Mr.A Mr.B

Stamp duty value of the house Rs.45 lakhs Rs.48 lakhs
Amount of loan taken Rs.43 lakhs Rs.45 lakhs
Loan taken from HFC Deposit taking NBFC
Rate of interest 9% p.a. 9% p.a.

Date of sanction of loan 01.04.2021 01.04.2020

Date of disbursement of loan 01.05.2021 01.05.2020

Purpose of loan Purchase of house Purchase of house

for self-occupation for self-occupation

Compute deduction u.s.80EEA for A.Y.2024-25 assuming no principal repayment is made under OTR.

20. In respect of loan of Rs.40 lakhs sanctioned by SBI in April, 2021 for purchase of residential house
intended for self-occupation, compute the interest deduction allowable for A.Y.2024-25 under
optional tax regime, assuming that the rate of interest is 8% p.a. and the loan sanctioned was 80% of
the stamp duty value of the property. Assume that entire loan is outstanding.

(a) Rs.2,00,000 u.s.24 and Rs.66,667 u.s.80EEA

(b) Rs.1,50,000 u.s.80EEA and Rs.1,16,667 u.s.24
(c) Rs.12,00,000 u.s.24 and Rs.50,000 u.s.80EEA
(d) Rs.2,00,000 u.s.24.

21. Mr.Ritvik has purchased his first house in Gwalior for self-occupation on 5.4.2021 for Rs.45 lakhs
(stamp duty value being the same) with bank loan sanctioned on 30.3.2021 and disbursed on
3.4.2021. He paid interest of Rs.3.8 lakhs during the P.Y.2023-24. What is the tax treatment of
interest paid by him under the optional tax regime?

(a) Interest of Rs.2 lakhs allowable u.s.24

(b) Interest of Rs.2 lakhs allowable u.s.24 and Rs.1.8 lakhs allowable u.s.80EEA
(c) Interest of Rs.2 lakhs allowable u.s.24 and Rs.1.5 lakhs allowable u.s.80EEA
(d) Interest of Rs.1.5 lakhs allowable u.s.24 and Rs.1.5 lakhs allowable u.s.80EEA
 52

Section 80EEB:
22. The following are the particulars relating to Mr.A and Mr.B, salaried individuals, for A.Y.2024-25:

Mr.A Mr.B
Amount of loan taken Rs.20 lakhs Rs.15 lakhs

Loan taken from Deposit Public Sector Bank

taking NBFC

Date of sanction of loan 01.04.2020 30.3.2019

Date of disbursement of loan 01.05.2020 01.05.2019

Purpose of loan Electric vehicle Electric vehicle

for personal use for personal use

Cost of electric vehicle Rs.22 lakhs Rs.18 lakhs

Rate of interest 10% p.a. 10% p.a.

Section 80 G:
23. Compute deduction u.s.80 G of the IT Act in respect of Mr.X for A.Y. 2024-25:

Income from salary (computed) Rs.8,00,000. No other income for the assessee.
Deduction eligible under section 80 C Rs.1,50,000
Interest paid on loan taken on 01.08.2021 from SBI for purchase of Electric vehicle Rs.1,72,000

Donation to PM CARES fund Rs.20,000 by cheque

Donation to Swachh Bharat Rs.20,000 by cheque
Donation to Prime Minister’s Drought Relief Fund Rs.20,000 by cheque
Donation to a registered charitable trust Rs.60,000 by cheque
Donation to a notified temple Rs.5,000 in cash.

24. Mr.Shiva made a donation of Rs.50,000 to PM Cares Fund and Rs.20,000 to PM Drought Relief Fund
by cheque. He made a cash donation of Rs.10,000 to a public charitable trust. The deduction
allowable to him under section 80G for A.Y.2024-25 is:

(a) Rs.80,000
(b) Rs.70,000
(c) Rs.60,000
(d) Rs.35,000

25. X (34 years), a resident individual, submits the following particulars:

Business income Rs.2,55,000;
Interest on debentures Rs.50,000;
Long-term capital gains on transfer of gold Rs.4,10,000;
Short-term capital gain on sale of shares taxable u.s.111A Rs.20,000;
Other short-term capital gain Rs.10,000;
 53

Contribution towards PPF Rs.40,000;

Payment of medical insurance premium on own life Rs.28,000 through net banking
Interest paid on loan taken on 01.10.2022 from deposit taking NBFC for purchase of Electric car
Rs.1,80,000 for personal use.

Donation to PM CARES fund Rs.4,000;

Donation to Swachh Bharat Kosh Rs.3,000;
Donation to Prime Minister’s Drought Relief Fund Rs.6,000;
Donation to a poor boy for higher education Rs.5,000;
Donation to approved public charitable institution Rs.11,000;
Donation of clothes to an approved institution Rs.5,000;
Donation in cash to National Children Fund Rs.5,000
Compute total income. Ignore default tax regime.

26. Mr.Suraj, an Indian citizen, gives the following details of his income and expenses for p. y. 23-24:

Income from profession Rs.11,70,000

Winnings from lottery Rs.70,000
Contribution to ULIP 1971 plan for spouse Rs.70,000
Cheque donation to National Defence Fund Rs.60,000
Cheque donation to Government for promoting family planning Rs.35,000
Cheque donation to approved public charitable institute Rs.1,20,000

Compute the deduction u.s.80G allowable to him for A.Y.2024-25 under optional tax regime.

27. Mr.Shiva aged 58 years, has gross total income of Rs.7,75,000 comprising of income from salary and
house property. He has made the following payments and investments:

a. Premium paid to insure the life of his major daughter (policy taken on 1.4.2018) (assured
value Rs.1,80,000) – Rs.20,000.
b. Deposit in PPF Rs.1,00,000
c. LIC Pension Fund – Rs.60,000
d. Medical Insurance premium for self – Rs.12,000; spouse – Rs.14,000.
e. Donation to PM CARES fund – Rs.25,000 by way of cheque
f. Donation to Prime Minister’s Drought Relief Fund – Rs.25,000 by way of cheque
g. Donation to approved institution for promotion of family planning – Rs.40,000 by cheque.
h. Donation to a public charitable institution registered under 80G Rs.50,000 by cheque.

Compute the total income of Mr.Shiva for A.Y. 2024-25 if he exercises the option of shifting out of the
default tax regime provided under section 115BAC(1A).
 54

Section 80 GG:
28. X, a professional tax consultant, based at New Delhi furnishes the following:

Income from profession Rs.8,30,000

Short-term capital gain (covered by section 111A) Rs.4,000
Long-term capital gain Rs.10,000
Winning from lottery (gross) Rs.50,000
Income from other sources Rs.10,000

Medical insurance premium paid by credit card Rs.8,000

Expenses on preventive health check-up on his health paid in cash Rs.7,500
Interest paid on loan taken from SBI for purchase of Electric vehicle Rs.1,72,000 for personal use
Payment of house rent Rs.80,000
Deposit in PPF Rs.70,000

Determine the amount of deduction under section 80 GG. Ignore default tax regime.

29. Mr.G (age 42), who is working in Delhi as a Manager of X Ltd. furnishes the following:

Income from salary (computed) Rs.5,64,000; Interest on bank fixed deposit Rs.10,000; Winning from
races (gross) Rs.7,000; He has taken on rent a furnished accommodation in Noida (UP) for which he
pays Rs.6,000 p.m. as rent. Mr.G is not in receipt of HRA from his employer.

Neither he, nor his wife, nor any minor child, owns any residential accommodation at Delhi or Noida.
However, his wife owns an accommodation in Bangalore, which she is claiming as self-occupied in
her assessment. Compute total income of Mr.G assuming he donates Rs.6,000 to PM CARES fund and
deposits Rs.20,000 in Suganya Samridhi Scheme. Ignore the provisions of default tax regime.

30. Mr.Anuj is a businessman whose total income (after allowing deduction under Chapter VI-A except
under section 80GG) for A.Y. 2024-25 is Rs.4,60,000. He does not own any house property and is
staying in a rented accommodation in Patna for a monthly rent of Rs.12,000. Deduction under
section 80GG for A.Y. 2024-25 is:

(a) Rs.98,000
(b) Rs.1,48,750
(c) Rs.1,08,000
(d) Rs.60,000

Section 80 GGB:
31. During the previous year 2023-24, ABC Ltd., an Indian company,
Contributed a sum of Rs.2,00,000 to an electoral trust by an account payee cheque; and
Incurred an expenditure of Rs.25,000 on advertisement in a souvenir of a political party

Is the company eligible for deduction in respect of such contribution/expenditure? If so, what is the
quantum of deduction? ABC Ltd. does not opt for section 115BAA/115BAB.
 55

32. Mr.Ray, a resident individual, aged 37 years gives the following information with respect to various
loans taken by him from scheduled banks for various purposes:

1. A housing loan of Rs.36 lakhs taken on 15th March, 2022 for the purchase of a house to be
used for self-residence at a cost of Rs.47 lakhs. The stamp duty value of the house was Rs.42
lakhs at the time of purchase. Amount of repayment of loan during the previous year 2023-24
was:
a) Towards principal – Rs.1,25,000
b) Towards interest – Rs.3,65,000

This the first and only residential house owned by Mr.Ray

2. A vehicle loan of Rs.16 lakhs taken on 31st October, 2022 for the purchase of electric vehicle
for personal use. Amount of repayment of loan during the previous year 2023-24 was:
a) Towards principal – Rs.75,000
b) Towards interest – Rs.1,90,000

3. Besides these loans, he has also paid a sum of Rs.15,000 to a political party as contribution.
The entire amount was paid in cash.

You are required to compute the amount of deduction(s) available to Mr.Ray under various
provisions of the Income-tax Act, of A.Y.2024-25 so that he gets the maximum benefits assuming that
he has opted for optional tax regime.

Section 80 JJAA:
33. X & Co. is a limited liability partnership (date of commencement of business May 1, 2023). It owns and
operates retail outlets in different parts of North India. During the previous year 2023-24, it appoints
the following persons:

Date of appointment No. of employees Designation Salary (per person)

May 1, 2023 8 Storekeeper Rs.18,000 p.m.
June 1, 2023 12 Salesperson Rs.25,000 p.m.
July 1, 2023 4 Supervisor Rs.28,000 p.m.
October 1, 2023 25 Helper Rs.11,000 p.m.

All the above mentioned employees contribute towards recognized provident fund.

Determine the amount of deduction available u.s.80JJAA for the A.Y. 2024-25 under the following two
situations:

1. Turnover of X & Co. for previous year 2023-24 is Rs.6 crores and tax audit is applicable
2. Turnover of X & Co. for previous year 2023-24 is Rs.90 lakhs and tax audit is not applicable.
 56

34. Mr.A has commenced the business of manufacture of computers on 1.4.2023. He employed 350 new
employees during the previous year 2023-24, the details of which are as follows:

No. of employees Date of Regular/Casual Monthly emoluments

employment per employee
75 1.4.2023 Regular Rs.24,000
125 1.5.2023 Regular Rs.26,000
50 1.8.2023 Casual Rs.24,500
100 1.9.2023 Regular Rs.24,000

The regular employees participate in provident fund while the casual employees do not.

Compute the deduction, if any, available to Mr.A for A.Y.2024-25, if the profits and gains derived from
manufacture of computers for that year is Rs.75 lakhs and total turnover is Rs.10.16 crores. What
would be your answer if Mr.A has commenced the business of manufacture of footwear on 1.4.2023?

Section 80QQB:
35. Mr.X, an author, received a lumpsum royalty of Rs.8,00,000 for assignment of interest in copyright to a
publisher. The book is covered by section 80QQB. Expenditure incurred for earning such royalty is
Rs.2,40,000. Compute deduction available u.s.80QQB for Mr.X for A.Y.2024-25.

36. Mr.Y, an author, received royalty of Rs.2,70,000 which is 18% on value of books sold. The book is
covered by section 80QQB. Expenditure incurred for earning such royalty is Rs.10,000. The royalty is
not a lumpsum payment. Compute deduction available u.s.80QQB for Mr.Y for A.Y.2024-25.

37. Mr.A received royalty of Rs.2,88,000 from a foreign country for a book authored by him, being a work of
literary nature. The rate of royalty is 18% of value of books. The expenditure incurred by him for
earning this royalty was Rs.40,000. The amount remitted to India till 30th September, 2024 is
Rs.2,30,000. Compute the amount includible in the gross total income of Mr.A and the amount of
deduction which he will be eligible for under section 80QQB. Ignore default tax regime.

Problem on Section 80 TTA:

38. Mr.R (42 years) furnishes the following information for the previous year 2023-24:
Income from salary (computed) Rs.24,00,000; Dividend from domestic companies Rs.12 lakhs (interest
paid on loan borrowed for investment in shares Rs.2,50,000); Interest on savings account with a bank
Rs.6,000; Interest on post office savings account Rs.8,500. Compute total income. Ignore DTR.

Problem on Section 80 TTB:

39. Mr.B (date of birth 01.04.1964) furnishes the following for the previous year 2023-24:
Loan taken from a closely-held company in which he has 16% equity Rs.5,00,000. The accumulated
profits of the company on the date of loan is Rs.40 lacs. He received Rs.4,00,000 on 01.12.2023 as
interest for delay in payment of compensation by Railways in respect of compulsory acquisition of
his vacant land. The land was acquired by Railways during the previous year 2020-21.
 57

His other income details are:

Interest on fixed deposit with a bank (gross) Rs.62,000
Interest on savings account with a bank Rs.4,500
Interest on post office savings account Rs.9500.

Compute his total income for AY 2024-25. Ignore default tax regime.

40. Mr.Gurnam, aged 42 years, has salary income (computed) of Rs.5,50,000 for the previous year ended
31.03.2024. He has earned interest of Rs.14,500 on the saving bank account with State Bank of India
during the year. Compute the total income of Mr.Gurnam for the assessment year 2024-25 from the
following particulars assuming he has exercised the option of shifting out of the DTR:

(i) Life insurance premium paid to Birla Sun life Insurance in cash amounting to Rs.25,000 for
insurance of life of his dependent parents. The insurance policy was taken on 15.07.2020 and the
sum assured on life of his dependent parents is Rs.2,00,000.

(ii) Life insurance premium of Rs.19,500 paid on the life of his major son who is not dependent on
him. The sum assured on life is Rs.3,50,000 and the life insurance policy was taken on 30.3.2012.

(iii) Life insurance premium paid by cheque of Rs.22,500 for insurance of his life. The insurance
policy was taken on 08.09.2019 and the sum assured is Rs.2,00,000.

(iv) Premium of Rs.26,000 paid by cheque for health insurance of self and his wife. Rs.1,500 paid in
cash for his health check-up and Rs.4,500 paid in cheque for health check-up for his parents, who are
senior citizens.

(vi) Paid interest of Rs.6,500 on loan taken from bank for MBA course pursued by his daughter.

(vii) A sum of Rs.5,000 donated in cash to an institution approved for purpose of section 80G for
promoting family planning.

41. Examine the following statements with regard to the provisions of the Income-tax Act, 1961:

(i) During the financial year 2023-24, Mr.Amit paid interest on loan availed by him for his son’s
higher education. His son is already employed in a firm. Mr.Amit will get deduction u.s.80E.

(ii) Subscription to notified bonds of NABARD would qualify for deduction under section 80C.

(iii) In order to be eligible to claim deduction under section 80C, investment/contribution/

subscription etc. in eligible or approved modes, should be made out of income chargeable to tax.

(iv) Where an individual repays a sum of Rs.30,000 towards principal and Rs.14,000 as interest in
respect of loan taken from a bank for pursuing eligible higher studies, the deduction allowable under
section 80E is Rs.44,000 irrespective of the tax regime.

(v) Mr.Vishal, a Central Government employee, contributed Rs.50,000 towards Tier II account of
NPS. The same would be eligible for deduction u.s.80CCD. Is the statement true or false.
 58

42. For A.Y. 2024-25, the GTI of Mr.Chaturvedi, a resident, was Rs.8,18,240 which includes LTCG of
Rs.2,45,000 taxable u.s.112 and STCG of Rs.58,000. The GTI also includes interest income of
Rs.12,000 from savings account with banks and Rs.40,000 interest on fixed deposits with banks.

Mr.Chaturvedi has invested in PPF Rs.1,20,000 and also paid a medical insurance premium
Rs.51,000. Mr.Chaturvedi also contributed Rs.50,000 to Public Charitable Trust eligible for deduction
u.s.80G by way of an account payee cheque. Compute the total income and tax thereon of
Mr.Chaturvedi, who is 70 years old as on 31.3.2024, in a tax efficient manner.

43. Mr.Rajmohan whose gross total income was Rs.6,40,000 for the financial year 2023-24 furnishes you
the following information:

a. Stamp duty paid on acquisition of residential house (self-occupied) Rs.50,000.

b. Five-year Post-Office Time Deposit Rs.20,000.
c. Donation to a recognized charitable trust Rs.25,000 eligible for deduction u.s. 80G.
d. Interest on loan taken for higher education of spouse paid during the year Rs.10,000.

Compute total income of Mr.Rajmohan for A.Y. 2024-25. Ignore DTR.

44. Discuss with reason the quantum of deduction allowable under Chapter VI-A of the Income-tax Act,
1961 in respect of the following cases, ignore default tax regime.

a. Balu paid Rs.60,000 towards tuition fee for his brother’s son who is dependent on him.
b. Dinakar incurred Rs.70,000 towards cancer treatment of his mother (age 63).
c. Elango repaid Rs.30,000 of education loan and interest of Rs.12,000 taken from SBI for his
son’s engineering course in IIT, Kanpur.
d. Fathima borrowed Rs.25 lakhs for purchase of electric vehicle from SBI and repaid
Rs.2,00,000 towards loan and interest of Rs.1,70,000.

45. Compute the eligible deduction under Chapter VI-A for the A.Y. 2024-25 of Ms.Roma, aged 40 years,
who has a gross total income of Rs.15,00,000 for the A.Y. 2024-25 and has exercised the option of
shifting out of the default tax regime provided u.s.115BAC(1A). She provides the following
information about her investments during the P.Y. 2023-24:

Life Insurance premium paid (policy taken on 31.03.2012 and

sum assured is Rs.4,40,000) Rs.35,000
Public Provident Fund contribution Rs.1,50,000
Repayment of housing loan to SBI, Chennai Rs.20,000
Payment to LIC Pension Fund Rs.1,40,000
Mediclaim Policy taken for self, wife and dependent children, premium
paid by cheque Rs.30,000
Medical Insurance premium paid by cheque for parents (senior citizens) Rs.52,000
 59

CHAPTER – 16A: ADVANCE TAX PROVISIONS

The total income of an assessee for the previous year is taxable in the relevant assessment
year. For example, the total income for the P.Y. 23-24 is taxable in the A.Y. 24-25. However,
income-tax is recovered from the assessee in the previous year itself through:-

a. Tax deduction at source (TDS);

b. Tax collection at source (TCS);
c. Advance tax

Advance tax is payable by every person where the final tax payable after adjusting TDS is
Rs.10,000 or more. Advance payment of tax is also known as “Pay as you Earn” scheme.

The assessee is required to estimate his CURRENT INCOME for the year under various heads
and pay advance tax on due dates. However, in the case of, income by way of CAPITAL GAINS
and CASUAL INCOME, assessee is required to pay advance tax only after such income is earned.

Note: Tax paid before 31st March of the relevant previous year is called “Advance Tax”
e.g. tax paid between 01.04.2023 and 31.03.2024 shall be treated as advance tax paid for the
previous year 2023-24. Any tax paid after 31st March is called as Self-assessment tax.

What is self-assessment tax?

‘Self-Assessment Tax’ means final tax payable by the assessee on the returned income after
adjusting TDS, TCS and Advance tax.

Important: Tds credit can be taken only if it is deducted by the payer. If tax is not
deducted at source then no credit can be taken by the assessee.

Advance tax payable by assesse covered u.s.44AD & 44ADA:

An assessee who has opted Section 44AD or Section 44ADA, shall pay the whole amount of
Advance Tax in one installment on or before 15th March.

NOT APPLICABLE FOR SENIOR CITIZENS:

Advance tax provisions are NOT applicable in the case of a RESIDENT SENIOR CITIZEN not
having income by way of business or profession.

For all assesses:

Advance tax is payable as follows: For all assesses
• On or before June 15 15% (15%) of advance tax
• On or before September 15 30% (45%) of advance tax
• On or before December 15 30% (75%) of advance tax
• On or before March 15 25% (100%) of advance tax
 60

1. Under DTR, whether the following assesses are liable to pay advance tax for AY 2024-25.

• Where the total income of Mr.X (a non-resident) is Rs.4,00,000 (tds: nil).

• Where the total income of Mr.Y (a resident) is Rs.8,00,000 (tds: Rs.26,400)

• Turnover of Mr.A Rs.2,50,00,000 (cash receipts are < 5% of total receipts). He has opted
for section 44 AD. When he is required to pay advance tax?

• Gross receipts of a Doctor Rs.74,00,000 (cash receipts are < 5% of total receipts). He has
opted for section 44ADA. When he is required to pay advance tax?

• Mr.A owns 7 heavy commercial vehicles and he has opted for section 44AE. When he is
required to pay advance tax?

• A senior citizen (resident) having pension income of Rs.3 lakhs and property income of
Rs.5 lakhs.

2. Mr.A, whose total sales is Rs.301 lakhs, declares profit of Rs.10 lakhs for the F.Y. 2023-24. He is
liable to pay advance tax:–
(a) in one installment
(b) in two installments
(c) in three installments
(d) in four installments

3. Mr.Raj (a non-resident and aged 65 years) is a retired person, earning rental income of Rs.50,000
per month from a property located in Delhi. He is residing in Canada. Apart from rental income,
he does not have any other source of income. Is he liable to pay advance tax (DTR) in India?

(a) Yes, he is liable to pay advance tax in India as he is a non-resident and his tax liability in
India exceeds Rs.10,000.
(b) No, he is not liable to pay advance tax in India as his tax liability in India is less than
Rs.10,000.
(c) No, he is not liable to pay advance tax in India as he has no income chargeable under the
head "Profits and gains of business or profession" and he is of the age of 65 years.
(d) Both (b) and (c)

4. The benefit of payment of advance tax in one installment on or before 15th March is available to
assessees computing profits on presumptive basis:—
(a) only under section 44AD
(b) under section 44AD and 44ADA
(c) under section 44AD and 44AE
(d) under section 44AD, 44ADA and 44AE
 61

5. Mr.Jha, an employee of FX Ltd, attained 60 years of age on 15.05.2023. He is resident in India

during F.Y. 2023-24 and earned salary income of Rs.5 lakhs (computed). During the year, he
earned Rs.7 Iakhs from winning lotteries. What shall be his advance tax liability for A.Y. 2024-25?
Assume he has opted for optional tax regime.

(a) Rs.2,20,000 + cess Rs.8,800 = Rs.2,28,800, being the tax payable on total Rs.12 Iakhs
(b) Rs.2,10,000 + cess Rs.8,400 = Rs.2,18,400, being the tax payable on lottery income of
Rs.7 Iakhs
(c) Rs.10,000 + cess Rs.400 = Rs.10,400, being the net tax payable on salary income, since
tax would have been deducted at source from lottery income.
(d) Nil

6. The following details are provided by Mr.P, an individual, for the assessment year 2024-25.
Total estimated tax payable Rs.2,00,000
TDS (estimated but not deducted) Rs.55,000
Determine the advance tax payable with their due dates for the assessment year 2024-2025.

7. The estimated Total Income of Mr.R is Rs.9,00,000 which includes Rs.1,00,000 on account of LTCG
on sale of jewellery earned on 26.09.2023. Compute the advance tax payable by R, assuming
Rs.11,000 has been deducted at source on other income. Ignore DTR.

8. Mr.K furnished the following information for the year ended 31.03.2024:
Income from business Rs.40,000
Lottery winnings (gross) Rs.6,00,000
Income by way of salary (computed) Rs.90,000
Loss from house property Rs.20,000

Compute his total income, tax liability and advance tax obligations under DTR.

INTEREST UNDER SECTION 234 A, B & C:

Interest u.s.234 A:
a. When interest is charged: If return is not filed before due date and tax is still due
b. Rate of Interest: 1% p.m. or part of a month on the tax due
c. Period of interest: From 1st day immediately following the due date till
taxes are paid

note: Self-assessment tax paid before the due date and return submitted after due date:
If the entire amounts of taxes are paid before the due date of filing return, no interest
shall be charged for mere delay in filing the tax return.
 62

note: Interest is to be calculated on the amount of tax due rounded off in multiples of
Rs.100 ignoring fraction. For eg. Tax due Rs.35730 or Rs.35,780; Interest will be
computed on Rs.35,700.

9. Taxable income of Mr.A for the year ending 31.03.2024 is Rs.15,00,000. Tax deducted at
source is Rs.46,000. Advance tax paid is Rs.50,000. Due date of filing return of income is 31st
July, 2024. Self-assessment tax including interest was paid on 25th September 2024 and
return was filed by Mr.A on the same day. Compute the interest payable u.s.234 A. Mr.A pays
tax as per the default tax regime.

Would your answer differ if he had paid the self-assessment tax on 25.07.2024 but filed his
return of income on 31.12.2024.

Interest u.s.234 B:
a. When interest is charged: Failure to pay advance tax (or) advance tax paid is less than
90% of the “assessed tax”.

b. Rate of Interest: 1% p.m. or part of a month of the tax due commencing from 1st
April of the relevant assessment year and ending till the entire
tax is paid.

Note: For A.Y.2024-25, interest will be charged from 01.04.2024, if

advance tax is not paid before 31.03.2024.

Note: “Assessed tax” means Original tax (-) TDS

10. Tax on total income of Mr.X for the previous year 2023-24 is Rs.4,80,000. Tax deducted at
source Rs.80,000. Compute interest under section 234B in the following situations if:

a. No advance tax is paid by Mr.X and self-assessment tax is paid on 10.09.2024; or

b. Advance tax paid on 31.03.2024 is Rs.3,75,000

Interest u.s.234 C:
a. When interest is charged: If the installments paid are not proper (i.e. amount paid is less
than the installment due)

b. Rate of Interest: 1% p.m. or part of a month

note: Interest u.s.234 C will be charged only up to 31st March of the relevant previous year.
Interest u.s.234 B will be charged from 1st of April of the relevant assessment year.
 63

Note: An assessee is required to pay first two installments of 15% and 45% of the
“assessed tax” in advance on the due dates. However, interest u.s.234C shall not be
charged if the assessee had paid atleast 12% and 36% of the “assessed tax”.

11. Original tax due Rs.1,00,000; Tax deducted at source Rs.40,000; Compute interest payable
under section 234C in the following situations if:

a. No advance tax is paid by the assesse; or

b. Advance tax paid on:

15.06.2023 Rs.5,000
15.09.2023 Rs.10,000
15.12.2023 Rs.15,000
15.03.2024 Rs.20,000

c. Advance tax paid on:

15.06.2023 Rs.8,000
15.09.2023 Rs.14,000
15.12.2023 Rs.18,000
15.03.2024 Rs.14,000

12. Mr.Jay having total income of Rs.8,70,000, did not pay any advance tax during the previous
year 23-24. He wishes to pay the whole of the tax, along with interest if any, on filing the
return in the month of July, 2024. What is the total tax which Mr.Jay has to deposit as self-
assessment tax along with interest, if he files the return on 29.07.2024? Assume he has
shifted out of default tax regime u.s.115BAC(1A).

13. Ms.Priya, aged 61 years, has total income of Rs.7,50,000 including income from profession, for
A.Y.24-25, and has paid advance tax of Rs.10,000 on 13.12.2023. She paid her taxes due and
has filed her return of income on 15.06.2024. Calculate the self-assessment tax payable and
the interest thereon u.s.234A, 234B and 234C, if any by Ms.Priya.

14. Mr.Mani, a resident individual, sold a plot of land on 20th March, 2024. Long term capital gain on
such sale amounted to Rs.7,00,000. Since he had no other income during the previous year 2023-
24, he did not pay any advance tax instalment. You are required to calculate the amount of
advance tax payable (under DTR) by Mr.Mani, if any.

Base your answer on the relevant provisions relating to the payment of advance tax on income
from capital gain and advise Mr.Mani suitably, so that the liability on late payment does not arise.
 64

Section Item Limit Tds rate Remarks

192 Salary basic exemption Slab rate At the time of payment
192A P.F. amount Rs.50,000 or more 10% Premature withdrawal

193 Int on securities Rs.5,000 10% ***

194 Dividend Rs.5,000 10% ***
194A Interest Rs.5,000/Rs.40,000 10% Ontime deposits (50k for senrcit)

194B Casual Income >Rs.10,000 30% At the time of payment

194BA Online gaming no limit 30% Amount in the users account
194BB Horse races >Rs.10,000 30% At the time of payment

194C Contract payment >Rs.30,000 or Rs.1 lakh 1% or 2% Nil for transport operators

194D Insurance commission >Rs.15,000 5% Payment or credit (w.e.earlier)

194DA Life Insc maturity Rs.1 lac or more 5% No tds if exempt u.s.10(10D)

194G Commn on sale of lottery >Rs.15,000 5% Payment or credit (w.e.earlier)

194H Commission/Brokerage >Rs.15,000 5% Payment or credit (w.e.earlier)

194I Rent >Rs.2,40,000p.a. 10% 2%for plant and machinery

194IA Purchase of land or bldg Rs.50 lakhs or more 1% purchase consdn (or) SDV (weh)
194IB Payment of rent > Rs.50,000 p.m. 5% Applicable for non-audit cases

194J Professional services >Rs.30,000 10% or 2%

Director fee no limit specified Payment or credit (w.e.earlier)

194K Income from mutual funds > Rs.5,000 10% ****

194LA Compensation from Govt > Rs.2,50,000 10% ****

194M Contract/Prof fee/Commn > Rs.50 lakhs 5% Applicable for non-audit cases

194N Cash withdrawal > 1 crore; > 20 lacs 2% or 5% By Banks, Post office or Co-op banks

194P Exemption from filing as applicable as applicable Specified senior citizen (75 years)

194Q On purchases > Rs.50 lakhs 0.1% Turnover of p.y.22-23> Rs.10

194R Onbenefit or perk > Rs.20,000 10% *****

 65

CHAPTER – 16B: TAX DEDUCTED AT SOURCE

1. When tax is required to be deducted at source?
Tax is required to be deducted at source either at the time of payment (or) at the time of credit,
whichever is earlier. However, in few cases, tax shall be deducted only at the time of payment.

2. State whether an “individual” is required to comply with tds provisions.

Companies & Firms have to compulsorily comply with TDS provisions. Individuals are required to
deduct tax at source only if Turnover/Sales/Gross receipts during the immediately preceding
financial year has exceeded Rs.1 crore in case of business or Rs.50 lakhs in case of profession.

3. When tds is required to be remitted to the Government?

The TDS amount has to be remitted within ONE WEEK FROM THE END OF THE MONTH during
which such tax was liable to be deducted. However, tds relating to the month of MARCH, can be
remitted before 30th of April.

4. Failure to furnish PAN will attract higher rate of tds – Section 206AA.
Every person shall furnish his PAN to the person responsible for deducting such tax. In case there
is a failure to do so, tax shall be deducted at the HIGHER of the following rates:

• at the rate prescribed in the Act; or

• at the rate of 20% (5% in case of section 194Q)

5. Higher rate of tds for non-filers of income-tax return – Section 206AB.

TDS on amount payable to a specified person shall be at HIGHER of the following rates:

• at twice the rate prescribed in the relevant provisions of the Act; or

• at 5%

Important:
If both sections are applicable (section 206AA and 206AB); the higher of the two rates shall apply.
Section 206AB is not applicable for section 192, 192A, 194B, 194BA, 194BB or 194N

Specified person:-
A person who has not filed his income-tax returns for last two previous years
and
the aggregate of tds and tcs is Rs.50,000 or more in each of these two previous years.

6. What are the due dates for filing e-tds returns.

Quarter ending Due date
30th June On or before 31st July
30th September On or before 31st October
31 December
st On or before 31st January
31st March On or before 31st May of the following financial year
 66

OTHER POINTS:
a. Tax shall be deducted only on business payments and not on personal payments
b. No TDS shall be made on payments made to Government, Banks
c. TDS is only on the INCOME portion excluding GST

Problems:
1. Mr.Y, an individual whose total sales in business during the year ending 31.03.2023 was Rs.7.20
crores, pays Rs.9 lakhs by cheque on 1.1.2024 to a contractor for construction of his business
premises in full and final settlement. Whether Y has to deduct tds?

2. SBI pays Rs.1,00,000 p.m. as rent to the Central Government for a building in which one of its
branches is situated. Whether SBI has to deduct tax at source?

3. Mrs.Rakshita, a Chartered Accountant has raised a fee bill on LMN Pvt. Ltd., for Rs.3,00,000 and in
addition, has charged separately GST of 18% i.e. Rs.54,000, the total amount of the bill being
Rs.3,54,000. The amount of tax to be deducted at source by LMN Pvt. Ltd. is:

a) Rs.30,000 @ 10% c) Rs.6,000 @ 2%

b) Rs.31,200 @ 10.4% d) Rs.6,240 @ 2.08%

Section 192: TDS ON SALARIES:

Time of deduction: At the time of payment
Rate of TDS: Slab rates
Limit: If salary exceeds basic exemption

Note: The employee can also declare his other incomes, if any, to the
employer for the purpose of tax deduction.

Note: No loss can be declared to the employer except loss from house
property.

4. Mr.A, the employer, pays gross salary including allowances and monetary perquisites amounting
to Rs.7,30,000 to his General Manager. Besides, the employer provides non-monetary perquisites
to him whose value is estimated at Rs.1,20,000. The General Manager is exercising the option to
shift out of the default tax regime and pay tax under the optional tax regime as per the normal
provisions of the Act. What is the tax implication in the hands of Mr.A, the employer and General
Manager, the employee?
 67

Section 192A: PREMATURE WITHDRAWAL FROM PROVIDENT FUND:

Time of deduction: At the time of payment

Rate of TDS: 10%
Limit: Rs.50,000 or more

Note: Tax shall be deducted on the amount withdrawn only in case

where the employee has not completed five years of continuous
service (No TDS in cases of termination due to ill health,
contraction or discontinuance of business, cessation of
employment).

5. Mr.Sharma, an employee of M/s.ABC Ltd. since 10.04.2020 resigned on 31.03.2024 and withdrew
Rs.60,000 being the balance in his EPF account. State with reasons whether the provisions of
Chapter XVII-B are attracted and if so, what is the net amount receivable by Mr.Sharma? Would
your answer differ if the termination of employment was due to his ill health?

Section 193: INTEREST ON SECURITIES

Time of deduction: Payment or credit (whichever is earlier)
Rate of TDS: 10%
Limit: If income exceeds Rs.5,000

Section 194: DIVIDEND TO RESIDENT SHAREHOLDERS

Rate of TDS: 10%
Limit: If income exceeds Rs.5,000

Section 194A: TDS ON INTEREST OTHER THAN INT ON SECURITIES

Time of deduction: Payment or credit (whichever is earlier)

Rate of TDS: 10%
Limit: If the amount of interest exceeds Rs.5,000

Note: “Time” deposits with (banks, post office or co-operative banks) are
required to deduct tax only if the interest exceeds Rs.40,000
(Rs.50,000 for senior citizen). “Time” deposits include “fixed”
deposits and “recurring” deposits.

Note: TDS is not attracted in the following cases:

a. Interest on savings account;
b. Interest paid by a firm to its partner;
c. Interest on the compensation amount awarded by the Motor Accidents Claims
Tribunal where interest payment does not exceed Rs.50,000.
 68

6. Examine the TDS implications under section 194A in the cases mentioned hereunder:
On 1.10.2023, Mr.H made a six-month fixed deposit of Rs.10 lakhs @ 9% p.a. with ABC Co-
operative Bank. The fixed deposit matures on 31.03.2024.

On 1.6.2023, Mr.G made three nine month fixed deposit of Rs.3 lakh each carrying interest @ 9%
p.a. with ‘A’ Branch, ‘B’ Branch and ‘C’ Branch of SBI, a bank which has adopted CBS. The fixed
deposits mature on 29.02.2024.

On 1.10.2023, Mr.R started a 6 months recurring deposit of Rs.2,00,000 per month @ 8% p.a. with
PQR Bank. The recurring deposit matures on 31.03.2024 and interest amount is Rs.28,000.

7. Nathan Gramin Bank, which does not have core banking facility, has paid the following amounts as
interest to Mrs.H, a resident individual on 31.03.2024:

Particulars Branch I Branch II

Interest on fixed deposit Rs.24,000 Rs.28,000
Interest on recurring deposit Rs.14,000 Rs.9,200
Total Rs.38,000 Rs.37,200

What is the amount of tax to be deducted at source? Will the answer differ, if the bank has core
banking facility?

8. A firm pays salary and interest on capital to its resident partners. The salary and interest paid fall
within the limits specified in section 40(b). Which of the following statements is true?

(a) Tax has to be deducted u.s.192 on salary and u/s.194A on interest

(b) Tax has to be deducted u.s.192 on salary but no tax needs to be deducted on interest
(c) No tax has to be deducted on salary but tax has to be deducted u.s.194A on interest
(d) No tax has to be deducted at source on either salary or interest

Section 194B: TDS ON CASUAL INCOME

Time of deduction: At the time of payment
Rate of TDS: 30% with or without PAN
Limit: If income exceeds Rs.10,000

Note: In a case where the winnings are in kind, the person responsible for paying shall, before
releasing the winnings, ensure that tax has been paid in respect of the winnings.

9. X won the first prize in a lottery ticket on 15.01.2024 and the prize was a Car worth Rs.5 lakhs.
What is the procedure to be adopted before handing over the car to X?

10. A TV channel pays Rs.15,00,000 on 1.11.2023 as prize money to the winner of a quiz programme,
“who will become a millionaire”?
 69

Section 194BA: TDS ON WINNINGS FROM ONLINE GAMES

Time of deduction: At the end of the F.Y. or at the time of withdrawal (earlier).
Rate of TDS: 30% with or without PAN
Limit: On the net winnings in a person’s user account

Section 194BB: TDS ON WINNINGS FROM HORSE RACE

Time of deduction: At the time of payment
Rate of TDS: 30% with or without PAN
Limit: If income exceeds Rs.10,000

Section 194C: PAYMENT TO CONTRACTORS & SUB-CONTRACTORS

1. Contract of WORK: Payment to a contractor or to a sub-contractor for carrying out

any WORK (including supply of labour for carrying out any
work), in connection with a contract or a sub-contract.

2. Rate of TDS: 1% in case payment is made to an individual or huf

2% in case payment is made to others (eg. firm or company)

No tds if payment is made to a truck operator, if he furnishes PAN

and also gives a declaration that he does not own more than ten
trucks.

3. Limit for deduction: Single contract exceeding Rs.30,000 or the aggregate of all the
contracts exceeds Rs.1,00,000 in a year

4. Time of deduction: Payment or credit (whichever is earlier)

Note: “Work” includes:

• advertising;
• broadcasting and telecasting including production of programmes;
• catering;
• carriage of goods or passengers by any mode of transport other than by railways;
• manufacturing or supplying a product according to the requirement or specification of
the customer by using material purchased from such customer or its associate, being a
person related to the customer.

Explanation:
However, “WORK” does not include manufacturing or supplying a product according to the
requirement or specification of a customer by using material purchased from a person other than
such customer or associate of such customer. Such a contract is a contract for ‘sale’.

Note: Where any sum paid to the contractor by an individual and such sum is incurred
exclusively for PERSONAL PURPOSES, tax shall not be deducted at source.
 70

11. Godrej Ltd. gives cloth to Mr.X and asks Mr.X to stitch shirts as per the specifications given by
Godrej Ltd. Mr.X charges in his invoice Rs.200 per shirt for stitching 3,000 shirts and raises a bill
for Rs.6,00,000. Discuss whether Godrej Ltd. has to deduct tax at source.

12. By virtue of an agreement with a nationalized bank, a catering organization (a sole proprietary
concern) receives a sum of Rs.50,000 p.m. towards supply of food, water, snacks, etc, during office
hours to the employees of the bank.

13. ABC Ltd. makes the following payments to Mr.X, a contractor, for contract work during the
previous year 2023-24:

Rs.20,000 on 1.05.2023
Rs.25,000 on 1.08.2023
Rs.28,000 on 1.12.2023

On 1.3.2024, a payment of Rs.30,000 is due to Mr.X on account of a contract work. Discuss whether
ABC Ltd. is liable to deduct tax at source u.s.194 C from payments made to Mr.X.

14. State the concessions granted to transport operators in the context of cash payments u/s.40A(3)
and deduction of tax at source u/s.194C.

Section 194D: TDS ON INSURANCE COMMISSION

Time of deduction: Payment or credit (whichever is earlier)
Rate of TDS: 5%
Limit: If payment exceeds Rs.15,000

Section 194DA: MATURITY AMOUNT FROM INSURANCE COMPANY

Time of deduction: At the time of payment
Rate of TDS: 5% on the amount of “INCOME”
Limit: Maturity amount is Rs.1,00,000 or more

Note: Maturity amount received from Insurance company is exempt

u.s.10(10D) if certain conditions are satisfied. No tax shall be
deducted if the maturity amount is exempt.

Note: ‘INCOME’ means: Amount received on maturity (-) total premium paid
 71

15. Examine the applicability of Section 194DA in the following cases:

a. Mr.X, a resident, is due to receive Rs.4,50,000 on 31.3.2024, towards maturity proceeds of LIC
policy taken on 1.4.2021, for which the sum assured is Rs.4,00,000 and the annual premium is
Rs.1,25,000.

b. Mr.Y, a resident, is due to receive Rs.3,95,000 on 31.3.2024 on LIC policy taken on 31.03.2012,
for which the sum assured is Rs.3,50,000 and annual premium is Rs.26,100.

c. Mr.Z, a resident, is due to receive Rs.95,000 on 1.8.2023 towards maturity proceeds of LIC
policy taken on 1.8.2017 for which the sum assured is Rs.90,000. The annual premium was
Rs.10,000.

16. Mr.X, a resident, is due to receive Rs.4.50 lakhs on 31.3.2024, towards maturity proceeds of LIC
policy taken on 1.4.2021, for which the sum assured is Rs.4 lakhs and the annual premium is
Rs.1,25,000. Mr.Z, a resident, is due to receive Rs.95,000 on 1.8.2023 towards maturity proceeds
of LIC policy taken on 1.8.2017 for which the sum assured is Rs.90,000 and the annual premium is
Rs.10,000.

(a) Tax is required to be deducted on income comprised in maturity proceeds payable to

Mr.X and Mr.Z.
(b) Tax is required to be deducted on income comprised in maturity proceeds payable to
Mr.X.
(c) Tax is required to be deducted on income comprised in maturity proceeds payable to
Mr.Z.
(d) No tax is required to be deducted on income comprised in maturity proceeds payable to
either Mr.X or Mr.Z.

Section 194G: COMMISSION ON THE SALE OF LOTTERY TICKETS

Time of deduction: Payment or credit (whichever is earlier)
Limit for deduction: Commission exceeding Rs.15,000
Rate of TDS: 5%

Section 194H: TDS ON COMMISSION OR BROKERAGE

Time of deduction: Payment or credit (whichever is earlier)
Limit for deduction: Commission exceeding Rs.15,000
Rate of TDS: 5%
 72

Section 194I: TDS ON RENT

Time of deduction: Payment or credit (whichever is earlier)

Limit for deduction: Rent exceeding Rs.2,40,000 p.a. for each co-owner

Rate of TDS: 10% in case land and building or furniture

2% in case of plant and machinery

Note: Rent means any payment under any lease or sub-lease

CBDT Circular: Payments made by the customers on account of cooling charges

to the Cold Storage owners cannot be treated as rent. In such
cases, tds is required to be deducted u.s.194C and not u.s..194I.

CBDT Circular: No tds on remittance of ‘Passenger Service Fees’ by an Airline to

an Airport Operator.

CBDT Circular: No tds on ‘lumpsum lease premium’ or ‘one-time upfront lease

charges’ paid for acquisition of long term lease, which are not in
the nature of rent.

Note: No tds if the house owner furnishes declaration in Form 15G/15H

to the tenant.

SECTION 194-IA: TDS ON TRANSFER OF IMMOVABLE PROPERTY

Time of deduction: Payment or credit (whichever is earlier)
Limit for deduction: Rs.50 lakhs or more payment to a resident
Rate of TDS: 1% of consideration or stamp duty value (whichever is higher)

Note: This section is not applicable if immovable property is an

agricultural land situated in a rural area.

Note: Consideration includes all charges of the nature of club

membership fee, car parking fee, electricity or water facility fee,
maintenance fee, etc.

Note: TAN not required.

17. Mr.R sells his house property in Chennai as well as his agricultural land in rural area for a
consideration of Rs.60 lakhs and Rs.15 lakhs respectively to Mr.S on 1.8.2023. He purchased the
house property and land in 2022 for Rs.40 lakhs and Rs.10 lakhs respectively. The Stamp Duty
Value on the date of transfer was Rs.85 lakhs and Rs.20 lakhs. Determine the tax implications in
the hands of Mr.R and Mr.S and the TDS implications, assuming both are resident Indians.
 73

18. Param Construction Ltd. sells a flat to Mr.Mani for Rs.48 lakhs on 15.01.2024. The agreement to
sell provides that in addition, Mr.Mani has to pay maintenance charges (Rs.5,000 per month) for
24 months in advance, Rs.2,00,000 for car parking to be used exclusively by him and Rs.1,00,000
for club membership fees to Param Construction Ltd. before the flat is registered in the name of
Mr.Mani. The flat is registered on 30.03.2024. Is Mr.Mani required to deduct tax at source?

19. Mr.Ram acquired a house property at Chennai from Mr.Satyam, a resident, for a consideration of
Rs.85 lakhs, on 23.8.2023. On the same day, Mr. Ram made two separate transactions, thereby
acquiring an urban plot in Gwalior from Mr.Vipun, a resident, for a sum of Rs.50 lakhs and rural
agricultural land from Mr.Danish, a resident, for a consideration of Rs.75 lakhs. Which of the
following statements are correct assuming that in the consideration amounts as aforementioned
all the charges incidental to transfer of the immovable property are included?

(a) No tax deduction at source is required in respect of any of the three payments.
(b) TDS @ 1% is attracted on all the three payments.
(c) TDS @ 1% on Rs.85 lacs and Rs.50 lacs are attracted. No tds on payment of Rs.75 lacs
for acquisition of rural agricultural land
(d) TDS @ 1% on Rs.85 lacs is attracted. No tds on payments of Rs.50 lacs and Rs.75 lacs

SECTION 194IB: TDS ON RENT PAID ON IMMOVABLE PROPERTY

Applicable for: Individuals & HUF (other than those whose turnover or sales or
gross receipts during the immediately preceding financial year has
exceeded Rs.1 crore in case of business or Rs.50 lacs in case of
profession. Such assesses are required to deduct tds u.s.194I)

Rate of tds: 5%

Limit: Rent should exceed Rs.50,000 per month or part of the month

Time of deduction: Last month of the previous year or the last month of tenancy, if
the property is vacated (whichever is earlier)

Important: The amount of tds shall not exceed last month rent.

Deposit of tds: Within 30 days from the end of the month. TAN not required.

20. Mr.A, a Chartered Accountant employed as CFO with Google India Ltd draws a salary of
Rs.5,00,000 p.m. He has taken on rent an independent house from Mr.B. Determine the amount of
TDS u.s.194-IB for the financial year 2023-24 under the following situations:

a. If the amount of rent is Rs.55,000 p.m.

b. If the amount of rent is Rs.55,000 p.m. and Mr.B does not furnish PAN;
 74

c. If the amount of rent is Rs.55,000 p.m. and Mr.A vacates the property by 31st July, 2023 and
Mr.B does not furnish PAN;

d. In case Mr.A is carrying on the profession of Chartered Accountancy (instead of

employment) and his gross receipts from the practice for the year ended 31st March, 2023 is
Rs.60,00,000 and the rent paid for his residence to Mr.B is Rs.55,000 p.m.

21. Mr.P is a professional who is responsible for paying Rs.2,00,000 as rent for use of building to
Mr.Harshit, a resident, for the month of February, 2024. The gross receipts of Mr.P are as under:

From 01.04.2022 to 31.03.2023: Rs.55,00,000

From 01.04.2023 to 29.02.2024: Rs.45,00,000

Whether Mr.P is responsible for deducting any tax at source from the rent of Rs.2,00,000 payable
to Mr.Harshit?

(a) Tax at source is required to deducted u.s.194I @ 10%

(b) Tax at source is required to deducted u.s.194IB @ 5%
(c) Tax at source is required to deducted u.s.194IB @ 7.5%
(d) No tax is required to be deducted at source

22. Mr.R, Mr.M and Mr.S, jointly owned a flat in Mathura, which was let out to Dr.Rajesh from
01.04.2023. The annual rent paid by Dr.Rajesh for the flat was Rs.5,40,000, credited equally to
each of their account. Mr.Rajesh approached his tax consultant to seek clarity in relation to
deduction of tax on payment of the rent. He informed his consultant that he occupied such flat for
his personal use and his receipts from his profession during the previous year 2022-23 was Rs.58
lakhs. As tax consultant, choose the correct answer:—

(a) No tax at source is required to be deducted since the rental payments are towards flat
occupied for personal purpose.
(b) Tax is required to be deducted at source since the rent payment exceeds Rs.2,40,000 and
Dr.Rajesh is an individual having gross receipts from profession exceeding Rs.50 lakh in the
preceding financial year.
(c) No tax is required to be deducted at source since the rent credited to each co-owner is less
than Rs.2,40,000.
(d) No tax is required to be deducted at source since Dr.Rajesh's gross receipts during the
preceding financial year were less than Rs.1 crore.
 75

Section 194J: TDS ON PROFESSIONAL OR TECHNICAL SERVICES

1. Payments covered: a. Fees for professional services; or
b. Fees for technical services; or
c. Royalty; or
d. Non-compete fees; or
e. Remuneration to director; or
f. Call centre services

2. Limit for deduction: Amount exceeding Rs.30,000 in aggregate in a year. The limit of
Rs.30,000 is applicable separately for each of the payments
mentioned above.

However, there is no such exemption limit for deduction of tax on

any remuneration payable to a director.

3. Rate of TDS: 10% in case of:

a) Fees for professional services;
b) Other royalty;
c) Non-compete fees;
d) Remuneration to director;
e) engaged in multiple businesses including call centre services

2% in case of:
a) fees for technical services; or
b) royalty in the nature of consideration for sale, distribution or
exhibition of cinematographic films; or
c) an assessee engaged ONLY in the business of call centre
services.

Important: Individuals and huf are required to deduct tax at source only if
Turnover or Sales or Gross receipts during the immediately
preceding financial year has exceeded Rs.1 crore in case of
business or Rs.50 lakhs in case of profession respectively.

Important: Where any sum paid by an individual and such sum is incurred
exclusively for PERSONAL PURPOSES of such individual, tax
shall not be deducted at source.

23. X Ltd credited Rs.28,000 towards fees for professional services and Rs.22,000 towards fees for
technical services to the account of ABC Ltd in its books of account on 6.9.2023. The total sum of
Rs.50,000 was paid by cheque to ABC Ltd on 18.12.2023. Examine whether tds is applicable.
 76

24. XYZ Ltd is a back office engaged as a call centre for ICICI with effect from 01.06.2023. During the
financial year 2023-24, ICICI has paid a sum of Rs.2 crores towards call centre services provided
by XYZ Ltd. Determine the amount of TDS u.s.194J. Would your answer differ if XYZ Ltd is also
engaged in the business of providing cab services to HDFC Ltd.

25. a) Mr.X paid fees of Rs.40,000 to Mr.Y, who is engaged only in the business of operation of call
centre on 15.12.2023. Tax is to be deducted by Mr.X @ of:—
(a) 10% (b) 1%
(b) 5% (d) 2%

b) XYZ Ltd paid non-compete fee to DEF Ltd for not marketing their products in North-Eastern
States Rs.10 lakhs. The non-compete agreement bars DEF Ltd for a period of 5 years ending
31.03.2029. State whether tds has to be deducted by XYZ Ltd on payment made to DEF Ltd.

Section 194LA: PAYMENT OF COMPENSATION BY GOVERNMENT

ON ACQUISITION OF IMMOVABLE PROPERTY
When to deduct tax: At the time of payment
Limit for deduction: Should exceed Rs.2,50,000
Rate of TDS: 10%

Section 194M: Contract payments, Professional payments or

Commission payments:
Who will deduct tax: Individuals or HUF (if not subject to tds u.s.194C or 194J or 194H)
Limit: Should exceed Rs.50 lakhs
Rate of Tds: 5%

Note: If the turnover of the assessee in his business exceeds Rs.1 crore
or gross receipts in his profession exceeds Rs.50 lacs during the
immediately preceding previous year 22-23 and such expenditure
is not a personal payment then Section 194C or Section 194J or
Section 194H shall be applicable.

Note: TAN is not required.

26. Examine whether tds provisions would be attracted in the following cases, and if so, under which
section. Also specify the rate of tds applicable in each case.

Mr.GANESH, an individual carrying on retail business with turnover of Rs.2.5 crores in the
previous year 2022-23 made the following payments:
A. Contract payment for repair of residential house Rs.5 lakhs.
B. Payment of commission to Mr.Vinodh for business purpose Rs.80,000
 77

Mr.RAJESH, a wholesale trader whose turnover was 95 lakhs in P.Y.2022-23 made contract
payment for reconstruction of residential house Rs.20 lakhs in January, 2024; Rs.15 lakhs in
February, 2024 and Rs.20 lakhs in March, 2024.

Mr.SATISH, a salaried individual paid brokerage for buying a residential house in March, 2024
amounting to Rs.51 lakhs.

Mr.DHEERAJ, a pensioner made contract payment during October-November, 2023 for

reconstruction of residential house amounting to Rs.48 lakhs.

Section 194N: TDS on CASH withdrawal:

Who will deduct tax: Banks, Post Office or a Co-operative banks

Limit: Cash withdrawal exceeds Rs.1 crore in aggregate from one or

more accounts maintained with a bank by any person

Rate of TDS: 2% on the amount exceeding Rs.1crore.

Important: For recipients who have not filed returns of income for last 3
years, the tds rate is 2% for cash withdrawal exceeding Rs.20
lakhs and 5% for cash withdrawals exceeding Rs.1 crore.

Note: In case withdrawal is made by a co-operative society, tds

provisions shall apply only if amount exceeds Rs.3 crore.

27. Mr.A has two bank accounts maintained with ICICI Bank and HDFC Bank. From 01.04.2023 till
31.03.2024, Mr.A withdrew the following amounts as cash from both the said accounts:

HDFC Bank: Rs.50 lakhs

ICICI Bank: Rs.120 lakhs

Compute the amount of tax to be deducted at source u.s.194N by HDFC Bank and ICICI Bank,
respectively, while making payment in cash to Mr.A.

a) Rs.1,00,000 and Rs.2,40,000

b) Nil and Rs.40,000
c) Nil and Rs.2,40,000
d) Rs.50,000 and Rs.1,20,000
 78

28. Mr.Nihar maintains a Savings a/c and a Current a/c with Axis Bank Ltd. The details of
withdrawals on various dates during the previous year 2023-24 are as follows:

Date of cash Savings account Current account

05.04.2023 15 lacs
10.05.2023 22 lacs
25.06.2023 20 lacs
17.07.2023 5 lacs
28.10.2023 35 lacs
10.11.2023 38 lacs
12.12.2023 25 lacs

Mr.Nihar regularly files his return of income. Is Axis Bank Limited required to deduct tax at
source on the withdrawals made by Mr.Nihar during the p.y.23-24? If yes, what would the amount
of tax deducted at source?

(a) Tds of Rs.4,60,000 is required to be deducted

(b) No, tds is not required to be deducted as the cash withdrawal does not exceed Rs.1
crore neither in savings account nor in current account
(c) Tds of Rs.3,00,000 is required to be deducted
(d) Tds of Rs.1,20,000 is required to be deducted

Section 194P: In case of a specified senior citizen and exemption

from filing of IT return:

Who should deduct: Specified Bank (pension and interest income received with the
same bank).

Limit and tds rates: Basic exemption limit and applicable slab rates (after chapter VIA
deductions and rebate u.s.87A)

Specified Senior Citizen: - Should have completed 75 years of age

- Having income by way of Pension; and
- Income by way of Interest on any account maintained with the
specified bank in which he is receiving pension
- Should have no other income except pension and interest
- Has furnished declaration to the Specified Bank

29. Mr.Sharma, a resident Indian aged 77 years, gets pension of Rs.52,000 p.m. from the UP-State
Government. The same is credited to his savings account in SBI, Lucknow Branch. In addition, he
gets interest @ 8% on fixed deposit of Rs.20 lakh with the said bank. Out of the deposit of Rs.20
lakh, Rs.2 lakh represents five-year term deposit made by him on 1.4.2023. Interest on savings
bank credited to his SBI savings account for the P. Y.2023-24 is Rs.9,500.
 79

1) From the above facts, compute the total income and tax liability of Mr.Sharma for the A.Y.
2024-25, assuming that he has exercised the option of shifting out of DTR.

2) What would be the amount of tax deductible at source by SBI, assuming that the same is a
specified bank? Is Mr.Sharma required to file his return of income for A.Y.2024-25, if tax
deductible at source has been fully deducted? Examine.

3) Is Mr.Sharma required to file his return of income for A.Y. 2024-25, if the fixed deposit of
Rs.20 lakh was with Canara Bank instead of SBI, other facts remaining the same?

Section 194Q: Tds on PURCHASE of GOODS

Who should deduct: “Buyer” of goods whose total sales, gross receipts or turnover
from business exceed Rs.10 crore during the F.Y. immediately
preceding the F.Y. in which the purchases are made.

Limit: Aggregate value of purchases should exceed Rs.50 lakhs

Rate of tds: 0.1% of sum exceeding Rs.50 lakhs (5% if PAN not furnished)

Time of deduction: Payment or credit, whichever is earlier

Non-applicability of tds: a) if tds is deductible under any other provisions of this Act; or
b) if tcs is collectible u.s.206C, other than section 206C(1H)
c) if seller is a person whose income is exempt (e.g. u.s.10)

Important: In case of a transaction to which both section 194Q and section

206C(1H) applies, tax is required to be deducted u.s.194Q.

30. Mr.Gupta, a resident Indian, is in retail business and his turnover for f.y. 2022-23 was Rs.12 crores.
He regularly purchases goods from another resident, Mr.Agarwal, a wholesaler, and the aggregate
payments during the F.Y.2023-24 was Rs.95 lakhs (Rs.20 lakhs on 01.06.2023, Rs.25 lakhs on
12.08.2023, Rs.22 lakhs on 23.11.2023 and Rs.28 lakhs on 25.03.2024). Assume that the said
amounts were credited to Mr.Agarwal’s account in the books of Mr.Gupta on the same date.
Mr.Agarwal’s turnover for F.Y. 2022-23 was Rs.15 crores.

(1) Based on the above facts, examine the TDS/TCS implications, if any, under the IT Act, 1961

(2) Would your answer be different if Mr.Gupta’s turnover for F.Y. 2022-23 was 8 crores, all other
facts remaining the same?

(3) Would your answer to (1) and (2) change, if PAN has not been furnished by the buyer or seller,
as required?
 80

Section 194R: Tds on benefit or perquisite in respect of PGBP

Who should deduct: Any person who provides any benefit or perquisite whether
convertible into money or not, arising from business or the
exercise of a profession.

Rate of tds: 10% of value or aggregate of value of such benefit

Note: Before providing such benefit or perquisite, ensure that tax has
been deducted in respect of such benefit or perquisite

Non-applicability of tds: a) Value or aggregate of value does not exceed Rs.20,000

b) In case of individuals/huf where turnover < Rs.100 lacs from

business or gross receipts < Rs.50 lacs from profession during the
immediately preceding previous year.

Not tds on:

Sales discount, cash discount and rebate to customers
Issue of bonus shares and right shares by a public company

Tds shall apply on:

Incentives in the form of car, TV, computers, gold chain, mobile phone, etc
Sponsors a trip for the recipient upon achieving certain targets
Provides free ticket for an event (e.g. tickets for IPL match)
Gives medical samples free to medical practitioners

31. Miss Tara, a resident individual aged 32 years, is a social media influencer. She makes videos
reviewing various electronic items and posts those video on social media. On 1st December 2023,
XYZ Ltd., an Indian company manufacturer of electronic cars gave her a brand new car having fair
market value of Rs.6 lakhs to promote on her social media page. She used that car for 7 months for
her personal purposes, recorded a video reviewing the car and then returned the car to the
company. You are required to discuss the applicable provisions in the Income-tax Act regarding the
deduction of tax at source in respect of such transaction.

32. A Ltd. is a pharmaceutical company in which public are substantially interested. It issued bonus
shares to all its shareholders. The company gives free samples of medicines to medical
practitioners.

B Ltd., trading in electronic goods, offers sales discount to its customers from the listed retail price.
B Ltd. also provides free air tickets to Bangkok to its dealers on achieving sales targets.

Are A Ltd. and B Ltd. required to deduct tax at source u.s.194R? If so, in respect of which
transactions? Assume that all transactions took place during the p. y. 2023-24 and the value of such
transaction(s) with each resident exceeds the prescribed threshold limit u.s.194R.
 81

a) A Ltd. is required to deduct tax at source on issue of bonus shares and distribution of free
samples of medicine. B Ltd. is required to deduct tax at source on sales discount to
customers and provision of free air tickets to dealers.

b) A Ltd. is required to deduct tax on distribution of free samples of medicine but not on issue
of bonus shares. B Ltd. is required to deduct tax at source on sales discount to customers
and provision of free air tickets to dealers.

c) A Ltd. is required to deduct tax on distribution of free samples of medicine but not on issue
of bonus shares. B Ltd. is required to deduct tax at source on provision of free air tickets to
dealers but not on sales discount to customers.

d) A Ltd. is required to deduct tax on distribution of free samples of medicine but not on issue
of bonus shares. B Ltd. is not required to deduct tax at source on sales discount to
customers and provision of free air tickets to dealers.

Additional Problems:
33. State with reasons, whether tax deduction at source provisions are applicable to the following
transactions and if so, the rate of tax deduction:

a. An Insurance Company paid Rs.50,000 as Insurance Commission to its agent Mr.Hari

b. Interest on compensation amount awarded by the Motor Accidents Claims Tribunal to Mr.R:
Rs.70,000
c. AB Ltd. allowed a discount of Rs.50,000 to XY & Co. (a firm) on prompt payments of its dues
towards supply of automobile parts.

34. Ashwin doing textiles business furnishes you the following information:

Turnover for the financial year:

2022-23 Rs.4,05,00,000
2023-24 Rs.4,45,00,000

State whether the provisions of tax deduction at source are attracted for the following expenses
incurred during the financial year 2023-24:

a. Interest paid to Indian Bank on term loan Rs.92,800

b. Advertisement expenses to R (two individual payments of
Rs.24,000 and Rs.34,000) Rs.58,000
c. Shop rent paid to (one payee) Rs.2,50,000
d. Brokerage paid to B, a sub-broker Rs.16,000
 82

35. State the applicability of TDS provisions and TDS amount in the following cases:

a. Rent paid for hire of machinery by B Ltd. to Mr.Raman Rs.2,80,000

b. Fee paid to Dr.R by Sundar (HUF) Rs.1,00,000 for surgery performed to a member of the family.
c. ABC Ltd paid Rs.19,000 to one of its Directors as sitting fees on 01.01.2024
d. Mr.X sold his house to Mr.Y on 01.02.2024 for Rs.60 lakhs (SDV on the date of sale Rs.72 lakhs)

36. State in brief the applicability of tax deduction at source provisions, the rate and the amount
of tax deduction in the following cases for the financial year 2023-24:

1. Payment made by a company to sub-contractor Rs.3,00,000 with outstanding balance of

Rs.1,20,000 shown in the books as on 31.03.2024

2. Winning from horse race Rs.1,50,000

3. Winning from online gaming Rs.12,00,000 in the user account. Amount withdrawn from the
user account is Rs.7,00,000 on 31.12.2023 and balance Rs.5,00,000 available in the user
account as on 31.03.2024.

4. Rs.2,00,000 paid to Mr.A, resident Individual on 22.02.2024 by the State of Uttar Pradesh on
compulsory acquisition of his urban land.

37. Compute the amount of tds on the following payments made by M/s.S Ltd during the financial year
2023-24 as per the provisions of the Income-tax Act, 1961.

S. No. Date Nate of Payment

1. 01.10.2023 Paid Rs.2 lacs to Mr.R a transporter who owns 6 trucks and having
PAN. Declaration is also given by Mr.R.

2. 01.11.2023 Payment of fee for technical services of Rs.25,000 and Royalty of

Rs.20,000 to Mr.Shyam who is having PAN

3. 30.06.2023 Payment of Rs.25,000 to X Ltd for repair of building

4. 01.01.2024 Payment of Rs.2,00,000 made to Mr.A for purchase of diaries made

according to specifications of S Ltd. However, no material was supplied
for such diaries to Mr.A by S Ltd.

5. 01.01.2024 Payment of commission of Rs.16,000 to Mr.Y

6. 01.01.2024 Fees paid to Mr.K Rs.25,000 who is a Director of S Ltd. Mr.K is not an
employee of S Ltd.
 83

38. Examine whether tax is required to be deducted at source from the following payments made by P
Ltd. if so, state the amount of tax to be deducted.

a. Commission of Rs.18,000 paid to Mr.V, an agent;

b. Payment of Rs.3 lacs to M/s.Graphic Printers for purchase of calendars according to

specifications of P Ltd. No materials were supplied by P Ltd. to M/s.Graphic Printers.

c. Royalty from writing books of Rs.32,000 paid to Mr.R, a resident of India.

39. State in brief the applicability of tax deduction at source provisions, the rate and amount of tax
deduction in the following cases for the financial year 2023-24 under the Income-tax Act, 1961.
Assume that all payments are made to residents:

i. Sanjay, a resident individual, not deriving any income from business or profession makes
payments of Rs.12 lakh in January, 2024, Rs.20 lakh in February, 2024 and Rs.20 lakh in
March, 2024 to Mohan, a contractor for reconstruction of his residential house.

ii. ABC Ltd. makes the payment of Rs.1,50,000 to Ramlal, an individual transporter who owned
6 goods carriages throughout the previous year. He does not furnish his PAN.

40. State in brief the applicability of provisions of tax deduction at source, the rate and amount of tax
deduction in the following cases for the financial year 2023-24 under Income Tax Act, 1961.
Assume that all payments are made to residents:

i. Mr.Mahesh has paid Rs.6,00,000 on 05.10.2023 to M/s.Fresh Cold Storage Pvt. Ltd, for
preservation of fruits and vegetables. He is engaged in the wholesale business of fruits &
vegetable in India having turnover of Rs.3 Crores during the previous year 2022-23.

ii. Mr.Ramu, a salaried individual, has paid rent of Rs.60,000 per month to Mr.Shiva from 1st
July, 2023 to 31st March, 2024. Mr.Shiva has not furnished his PAN.

41. Compute the amount of TDS under the following situations:

i. Rs.51,000 paid to Mr.R, a resident individual as interest income on compensation awarded

by Motor Accidents Claims Tribunal by a transport company.

ii. Mr.K, deposited Rs.30 lakhs @ 10% p.a. with Dagru Co-operative Bank Ltd for one Year.

iii. Mr.Lakhpati got Rs.20,000 at 10th level of crossword after using life-line of phone a friend in
online crossword gaming.

iv. Mr.R, deposited Rs.1,00,000 @ 12% p.a. for half year in Growth Investment LLP.
 84

42. Briefly discuss the provisions of tax deducted at source in respect of the following payments:

i. Mr.Raju (a resident aged 54 years) has maintained two fixed deposits in two different
branches of BFG Bank of India (working on core banking solution). During the year 2023-
24, the bank paid Rs.32,000 and Rs.17,000 as interest on these fixed deposits.

ii. Mr.Avinash pays Rs.55,00,000 during F.Y. 2023-24 to Mr.Harsh, for supply of labour for
carrying out the construction work of his factory. During the PY 2022-23, Mr.Avinash was
not liable for tax audit under section 44AB.

43. Examine the TDS implications in the following cases, assuming that the deductees are residents and
having PAN which they have duly furnished to the respective deductors.

i. Mr.Tandon received a sum of Rs.1,75,000 as pre-mature withdrawal from Employees

Provident Fund Scheme before continuous service of 5 years on account of termination of
employment due to ill-health.

ii. A sum of Rs.42,000 has been credited as interest on recurring deposit by a banking company
to the account of Mr.Hasan (aged 63 years).

iii. Ms.Kaul won a lucky draw prize of Rs.21,000. The lucky draw was organized by M/s.
Maximus Retail Ltd. for its customer.

iv. Finance Bank Ltd. sanctioned and disbursed a loan of Rs.10 crores to Borrower Ltd. on
31.8.2023. Borrower Ltd. paid a sum of Rs.1,00,000 as service fee to Finance Bank Ltd. for
processing the loan application.

v. Mr.Ashok, working in a private company, is on deputation for 3 months (from December

2023 to February, 2024) at Hyderabad where he pays a monthly house rent of Rs.52,000 for
those three months, totalling to Rs.1,56,000. Rent is paid by him on the first day of the
relevant month.

44. Examine TDS/TCS implications in case of following transactions, state the rate and amount to be
deducted, in case TDS/TCS is required to be deducted/collected.

i. M/s AG Pvt. Ltd. took a loan of Rs.50,00,000 from Mr.Haridas. It credited interest of
Rs.79,000 payable to Mr.Haridas during the previous year 2023-24. M/s AG Pvt. Ltd. is not
liable for tax audit during previous years 2022-23 and 2023-24.

ii. Mr.Prabhakar is due to receive Rs.6 lakh on 31.3.2024 towards maturity proceeds of LIC
policy taken on 1.4.2020, for which the sum assured is Rs.5 lakhs and the annual premium is
Rs.1,40,000.
 85

45. Examine the applicability of tax deduction at source provisions, the rate and amount of tax
deduction in the following cases for the financial year 2023-24:

(a) Gupta & Co. (firm) engaged in wholesale business, assigned a contract for construction of its
godown building to Mr.Ravi. The firm paid an aggregate of Rs.10,00,000 to Mr.Ravi during
the year.

(b) Y and Co. engaged in real estate business, conducted a lucky dip and gave a Maruti Car worth
Rs.5,00,000 to the prize winner

46. Examine whether TDS provisions would be attracted in the following cases, and if so, under which
section. Also specify the rate of TDS and amount required to be deducted at source as applicable in
each case. Assume that all payments are made to residents.

S. Particulars of the payer Nature of payment Aggregate of

No. payments made in
the F.Y. 2023-24
(Amt in Rs.)
(A) Mr.Kale, receiving Contractual payment made during April
pension from Central 2023 for reconstruction of his 52,50,000
Government residential house in AP
(B) Mr.Rahul, a wholesale Contract payment for construction of 50,00,000
trader of spices whose office godown during January to March
turnover was Rs.5 crores 2024 to Mr.Akhilesh, an individual
F.Y. 2022-23
(C) Mr.Golu, an individual Payment of commission to Mr.Vinay for
carrying garment trading securing a contract from a big business 1,20,000
business with turnover of house in November 2023
Rs.95 lakhs in F.Y. 2022-
2023
(D) XYZ Urban Co-operative Payment by way of cash withdrawal, by 1,20,00,000
bank ABC & Co. a partnership firm,
amounting Rs.1.2 crores during FY
2023-24. ABC & Co. has filed its tax
returns for the last 3 financial years
within time.

47. Mr.X, a salaried individual, pays rent of Rs.55,000 p.m. to Mr.Y from June, 2023. 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,
2023? Also, what would be your answer if Mr.Y does not provide his PAN to Mr.X?
 86

48. Discuss the liability of tax deduction at source under the Income-tax Act, 1961 in respect of the
following cases with reference to AY 2024-25:

a) ABC Ltd is a producer of natural gas. During the year it sold natural gas worth Rs.26,50,000 to
M/s.Deep Co. a partnership firm. It also incurred Rs.1,70,000 as freight for the transportation of
gas. It raised the invoice and clearly segregated the value as well as the transportation charges.

b) ABC LLP paid job charges to XYZ, a partnership firm for doing embroidery work on the fabric
supplied by the ABC LLP during the previous year 2023-24 as under:

Bill No. Date Amount (Rs.)

1 30.04.2023 27,000
57 30.06.2023 25,000
105 30.09.2023 28,000
151 30.12.2023 32,000

49. Examine the applicability and the amount of TDS in the following cases for F.Y.2023-24:

a) S and Co. Ltd. paid Rs.25,000 to one of its Directors as sitting fees on 02.02.2024.

b) Rs.2,20,000 paid to Mr.Mohan, a resident individual, on 28.02.2024 by the State of Haryana on

compulsory acquisition of his urban land.

c) Mr.P, a resident Indian, dealing in hardware goods has a turnover of Rs.12 crores in the previous
year 2022-23. He purchased goods from Mr.Agarwal a resident seller, regularly in the course of his
business. The aggregate purchase made during the previous year 2023-24 on various dates is Rs.80
lakhs which are as under:

10.06.2023 Rs.25,00,000
20.08.2023 Rs.27,00,000
12.10.2023 Rs.28,00,000

He credited Mr.Agarwal’s account in the books of accounts on the same date and made the payment
on the 28.02.2024 Rs.80 lakhs. Mr.Agarwal’s turnover for the financial year 2022-23 is Rs.20
crores.

50. Discuss the liability of tax deduction at source under the Income-tax Act, 1961 in respect of the
following cases with reference to A.Y.2024-25 (State applicable provision and give brief reasons for
your answer, wherever applicable)

a. XYZ, a resident partnership firm is in retail business buying fabric material regularly from ABC,
a resident proprietorship firm. Details of transactions during P.Y.2023-24 are as given:
 87

Particulars Date of payment Amount (Rs.)

Advance payment 01.04.2023 Rs.40,00,000
Payment for supplies 02.07.2023 Rs.20,00,000
Advance payment 04.08.2023 Rs.12,00,000

XYZ achieved gross turnover of Rs.12 crore from the business during the financial year 2022-23
and gross business turnover for financial year 2023-24 turns out to be Rs.9 crore. Gross
business turnover of ABC for the financial year 2022-23 was Rs.6 crore.

b. MJ, a part-time director of ABC Pvt Ltd. was paid an amount of Rs.2,49,000 as commission on
sales (which was not in the nature of Salary) for the period 01.04.2023 to 31.03.2024.

c. Mr.Kumar, a resident senior citizen, aged 86 years, is a retired State Government employee. He
gets pension of Rs.72,000 p.m. He has his saving account with Bank of Baroda, a bank notified
by the Central Government u.s.194P, has received the interest on saving account Rs.15,000
during the P.Y. 2023-24. His pension is also credited in this account. In the same bank he has
deposited Rs.10 lakh in a Term Deposit @ 7% p.a. simple interest on 01.07.2023. He has no
other income. He has opted for optional tax regime. Discuss requirement of filing of income tax
return also. Nov. 2023

51. Ms.Aruna is a Chief Executive Officer of a multi-national company. She hires Mr.Suresh for supply
of her housing staff (like gardener, chefs and drivers, etc.) and makes the following payments to
him:

Rs.25,00,000/- on 10th August, 2023 and Rs.30,00,000 on 22nd November, 2023. Determine the
amount of tax to be deducted/collected at source, if any.

Would your answer be different, if Ms.Aruna is a business woman and her books are not audited in
immediately preceding financial year and payment to Mr.Suresh is for business purposes.

52. Determine the liability of deduction of tax at source u.s.194N by the bank/co-operative bank
in the following cases:

Person making Bank/Co-op Date of Amount of Default in

the withdrawal Bank withdrawal withdrawal filing ITR

Mr.Hari SBI 01.07.2023 Rs.1,10,00,000 No

Mr.Pranav SBI 01.08.2023 Rs.90,00,000 No
ABC Co-op society SBI 01.09.2023 Rs.2,70,00,000 No
XYZ Co-op society MNO Co-op bank 01.09.2023 Rs.3,10,00,000 No
Mr.Vaibhav MNO Co-op bank 01.09.2023 Rs.2,10,00,000 No
A Ltd MNO Co-op bank 01.10.2023 Rs.1,05,00,000 No
DEF & Co. (firm) MNO Co-op bank 01.02.2024 Rs.90,00,000 Yes
Mr.Varun BOI 01.02.2024 Rs.1,20,00,000 Yes
Mr.Rakesh BOI 01.02.2024 Rs.45,00,000 Yes
PQR Co-op society BOI 01.02.2024 Rs.3,30,00,000 Yes
 88

LATE FILING OF TDS RETURN:

Late fee of Rs.200 per day subject to a maximum of tds amount u.s.234E

53. Mr.M is regular in deducting tax at source and depositing the same. In respect of the quarter ended
31st December, 2023 a sum of Rs.80,000 was deducted at source from the contractors. The
statement of tax deducted at source under section 200 was filed on 23rd March, 2024 for the
quarter ended 31.12.2023.

a. Is there any delay on the part of Mr.M in filing the statement of TDS?
b. How much amount can be levied on Mr.M for such default under section 234E?

Answer:
TDS return for quarter ending 31.12.2023 should be filed on or before 31.01.2024. The same was
filed on 23rd March, 2024. There is a delay of 51 days.

Late fee u.s.234E @ Rs.200 per day is Rs.10,400 (52 x 200)

FAILURE TO DEDUCT TDS (OR) FAILURE TO DEPOSIT TDS AMOUNT ON TIME:

Failure to deduct tds:

Shall attract simple interest @ 1% p.m. or part of a month commencing from the date on which the
liability to deduct tds arises to the date on which such tax was actually deducted.

Failure to deposit tds on time:

Shall attract simple interest @ 1.5% p.m. or part of a month from the date on which tax was
deducted to the date on which such tax is actually paid.

54. An amount of Rs.40,000 was paid to Mr.X on 01.07.2023 towards fees for professional services
without deduction of tax at source. Subsequently, another payment of Rs.50,000 was due to Mr.X
on 28.02.2024, from which tax @ 10% (amounting to Rs.9,000) on the entire amount of Rs.90,000
was deducted. However, this tax of Rs.9,000 was deposited only on 22.06.2024. Compute the
interest chargeable under section 201(1A).

Answer:
Interest on failure to deduct tds: 40,000 x 10% x 1% x 8 months = Rs.320
(01.07.2023 to 28.02.2024)
Interest on delay in depositing tds amount: 90,000 x 10% x 1.5% x 4 months = Rs.540
(28.02.2024 to 22.06.2024)
Total Interest payable = Rs.860
 89

Answers to problems in TDS:

1. Total turnover of Mr.Yin his business during the previous year 22-23 exceeded Rs.1 crore.
Hence,tds provisions are attracted for P.Y.2023-24. Mr.Yis required to deduct tax at source on the
payment made to the contractor u.s.194C.

2. Payments made to Government or Banks are not subject to tax deduction. Hence, SBI is not
required to deduct tax at source on payments made to Central Government.

3. Option A: (10% on fees amount excluding GST) (3,00,000 x 10%) u.s.194J

4. Gross salary including non-monetary perks 8,50,000

Less: Std deduction 50,000
Income from salary and Total Income 8,00,000

Tax on the above (OTR) 8,00,000

On 5,00,000 12,500
On balance 3,00,000 x 20% 60,000
72,500
Add: 4% cess 2,900
Tax due 75,400
Less: Tax on NMP
paid by employer 11,310 (120000 x 9.425%)
TDS to be made 64,090

Average rate of tax: Tax x 100 75,400x 100 is 9.425%

TI 8,00,000

Tax treatment:
In the hands of the employee: Tax on non-monetary perquisites paid by employer is a tax free perk
In the hands of the employer: Rs.64,090 paid by employer shall be disallowed while computing
PGBP u.s.40(a)(v).

5. Mr.Sharma has not completed continuous service of 5 years. Tdsu.s.192A @ 10%. Limit Rs.50,000
or more; Amount received by Mr.Sharma is Rs.54,000 (60,000 – 6,000). If the termination of
employment was due to ill health then amount received by Mr.Sharma is not subject to tds. He will
receive the entire amount of Rs.60,000.

6. a. Tax is required to be deducted u.s.194A @ 10% by the co-operative bank on the interest payment
if the amount of interest exceeds Rs.40,000. Interest amount Rs.45,000 (10 lakhs x 9% x 6/12).
Tds amount Rs.4,500.

b. Since the bank adopts core banking solutions, the aggregate amount of interest on fixed deposits
from all the branches of SBI should be considered for the limit. Total interest Rs.60,750
 90

(>Rs.40,000) from all the branches of SBI. Tax has to be deducted @ 10% on Rs.60,750; Rs.6,075
has to be deducted at source. (300000 x 9% x 9/12) x 3

c.‘Time Deposits’ also include ‘Recurring Deposits’.Limit Rs.40,000.No tax has to be deducted on
interest of Rs.28,000.

7. Case A: No core banking facility (Rs.40,000 limit applies branch-wise):

Branch I: Total interest (Rs.38,000) does not exceed Rs.40,000, hence tds u.s.194A is nil
Branch II: Total interest (Rs.37,200) does not exceed Rs.40,000, hence tds u.s.194A is nil

Case B: If core banking facility is adopted (aggregate should be seen):

The aggregate of interest income from all the branches of the bank should be considered for tds.
The aggregate interest of both the branches is Rs.75,200 which is more than the limit of Rs.40,000.
Hence tds u.s.194A @ 10% is Rs.7,520.Note: “Time deposit” includes both fixed deposit and
recurring deposit.

8. Option D.

9. Tax on casual income u.s.194B @ 30% if the amount of winnings exceed Rs.10,000. However, in
case where the winnings are in kind, the person responsible for paying shall, before releasing the
winnings, ensure that tax has been paid in respect of the winnings.Amount of tds Rs.1,50,000.

10. Section 194B; Limit Rs.10,000; Tds rate 30% with or without pan; Tds amount Rs.4,50,000

11. Godrej Ltd has to deduct tax u.s.194C. The material (cloth) is supplied by Godrej Ltd. Mr.X has to
do only the stitching job. Hence it is a ‘contract of work’. Tax will be deducted @ 1% on the
payment made, as the contractor is an individual. Tds amount Rs.6,000.

12. “Work” includes catering also. Hence tax is required to be deducted at source @ 1% on the
payment made u.s.194C. Tds Rs.500 p.m. (Rs.50,000 x 1%).

13. Date Amount TDS Payment made

1.05.2023 20,000 nil 20,000
1.08.2023 25,000 nil 25,000
1.12.2023 28,000 nil 28,000
1.03.2024 30,000 1030 28,970
Total 1,03,000

Liability to deduct tds u.s.194C arises at the time of payment or at the time of credit (whichever is
earlier).

14. Cash payment can be made upto Rs.35,000 without attracting disallowance u.s.40A(3). Payment
can be made without tds if the transport operator furnishes pan and gives a declaration that he
does not own more than 10 trucks. Section194C.
 91

15. A. Policy issued after 01.04.2012. (i.e. on 01.04.2021)

Premium paid is Rs.1,25,000 which is more than 10% of sum assured (Rs.40,000)
Therefore, maturity amount is not exempt u.s.10(10D).
Tds @ 5% on income of Rs.75,000 as the maturity amount exceeds Rs.1,00,000.
Income = Rs.4,50,000(-) Rs.3,75,000 (1,25,000 x 3) = Rs.75,000
TDS amount u.s.194DA is Rs.3,750. (75,000 x 5%)

B. Policy issued before 01.04.2012. (i.e. on 31.03.2012)

Premium paid is Rs.26,100 which is less than 20% of sum assured (Rs.70,000)
Therefore, maturity amount is exempt u.s.10(10D). No Tds.

C. Policy issued after 01.04.2012. (i.e. on 01.8.2017)

Premium paid is Rs.10,000 which is more than 10% of sum assured (Rs.9,000)
Therefore, maturity amount is not exempt u.s.10(10D).
Maturity amount does not exceed Rs.1,00,000.
TDS amount u.s.194DA is Nil.

16. Option B

17. In the hands of Mr.R:

A. Capital Gains on sale of house at Chennai:

Sale consideration (as per section 50C) 85 lakhs (85/60 x 100 > 110%)
Less: Cost of acquisition 40 lakhs
Short term capital gain (<24 months) 45 lakhs

B. On sale of agricultural land in rural area:

Not a capital asset. No capital gain tax

In the hands of Mr.S:

A. Income from other sources:

The house is purchased for an inadequate consideration. Hencethe difference between
stamp duty value and purchase price is taxable.
Taxable amount Rs.25 lakhs(85 – 60) (difference is >10% and also > Rs.50,000)

B. Agricultural land in rural area is not a capital asset. Gift provisions are not applicable.

C. TDS provisions:
U/s.194IA tax has to be deducted at source @ 1% of purchase consideration or SDV
(whichever is higher). Tds @ 1% on Rs.85 lacs is Rs.85,000.

18. Section 194IA; Limit Rs.50 lacs or more; Tds rate is 1% on the entire consideration paid including
maintenance charges, car parking fees and club membership fees. Total consideration paid is
Rs.52,20,000 and tds @ 1% is Rs.52,200.
 92

19. Option C

20. Tds Rs.33,000 (55,000 x 12 x 5%) shall be deducted in the month of March, 2024
being the lastmonth of the previous year.

Tds Rs.55,000 (55,000 x 12 x 20% = Rs.1,32,000; but cannot exceed rent payable for the last
month)

Tds Rs.44,000 (55,000 x 4 x 20%) to be deducted at the time of vacating the property being July
2023.

Gross receipts of Mr.A from profession exceeds Rs.50 lakhs for the year ended 31.03.2023. Hence,
tax has to be deducted at source undersection 194I. TDS 10%.Tds amount (55,000 x 12 x 10%)
Rs.66,000. Exceeds limit of Rs.2,40,000.Tds to be deducted every month.

21. Option D; Section 194I is applicable. Does not exceed Rs.2,40,000; hence no tds

22. Option C; Section 194I is applicable. Does not exceed Rs.2,40,000 for each co-owner; hence no tds

23. Section 194J; Limit Rs.30,000 should be considered separately for each item. Fees for professional
services does not exceed Rs.30,000 and fees for technical services does not exceed Rs.30,000; tds
nil.

24. Only call centre services:

Tds @ 2% u.s.194J on Rs.2 crores is Rs.4,00,000

If XYZ Ltd is also engaged in providing CAB services (multiple businesses):

Tds shall be deducted @ 10% u.s.194J on Rs.2 crores which is Rs.20,00,000

25. A. Option D – 2% B. under section 194J @ 10% on Rs.10 lacs Rs.1 lacs

26. Mr.Ganesh: The turnover in his business exceeded Rs.1 crore during the p.y.22-23. Hence,
Tds provisions are attracted for P.Y.23-24.

Contract payment for residential house:

Section 194C is not attracted as it is personal payment
No tds under section 194M as the amount does not exceed Rs.50 lakhs. Hence tds: nil

Payment of commission to Mr.Vinodh for business purpose

Section 194H: Tds is required to be deducted @ 5% on Rs.80,000. Tds amount Rs.4,000

Mr.Rajesh: Contract payment for reconstruction of residential house:

Section 194C is not applicable as turnover of Mr.Rajeshin his business during the p.y.22-23 has not
exceeded Rs.1 crore. It is also a personal payment.
 93

Section 194M: The aggregate amount exceeds Rs.50 lacs. Tds @ 5% on Rs.55 lacs: Rs.2,75,000

Satish: Payment of brokerage for buying a residential house:

Section 194H is not applicable as Mr.Satish is a salaried employee.
Section 194M: Amount exceeds Rs.50 lacs. Tds @ 5% on Rs.51 lacs: Rs.2,55,000

Dheeraj: Contract payment made during Oct-Nov. 2023 for reconstruction of res house:
Section 194C is not applicable as Mr.Dheeraj is a pensioner.
Section 194M: Amount does not exceed Rs.50 lacs. Hence no tds

27. Case A: Nil and Rs.40,000 (HDFC – nil and ICICI Rs.20 lacs x 2%)

Note: In case the assesse has not filed his income-tax returns for the last three years and the time
allowed for filing belated return has expired then tds u.s.194N will be as follows:

HDFC Bank (50 lacs – 20 lacs) x 2% =60,000

ICICI Bank (100 lacs – 20 lacs) x 2% = 1,60,000 + (120 lacs – 100 lacs) x 5% = 1 lac = Rs.2.6 lacs

28. Option D tdsu.s. 194N (160 lakhs – 100 lakhs) x 2% = Rs.1,20,000

Note: In case the assesse has not filed his income-tax returns for the last three years and the time
allowed for filing belated return has expired then tds u.s.194N will be as follows:

Tds (100 lacs – 20 lacs) x 2% = Rs.1,60,000 + (60 lacs x 5%) = Rs.3 lacs Total tds: Rs.4,60,000

29. 1. Income from salary 574000 (after std deduction)

Income from other sources
a) Interest on fixed deposit 160000
b) Interest on savings account 9500
Gross total income 743500
Less: Section 80C 150000
Less: Section 80TTB 50000
Total Income 543500

Tax on the above Rs.19,450 (rounded off)

2. SBI, being a specified bank, is required to deduct tax at source u.s.194P and remit the same to
the Central Government. In such case, Mr.Sharma would not be required to file his return of income
u.s.139.

3. If the fixed deposit of Rs.20 lakhs is with a bank other than SBI, then, Mr.Sharma would not
qualify as a “specified senior citizen”, consequent to which SBI would not be liable to deduct tax
u.s.194P. In this case, Mr.Sharma would have to file his return of income u.s.139, since his total
income (without giving effect to deduction under Chapter VIA) exceeds the basic exemption limit.
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30. 1. Since Mr.Gupta’s turnover for F.Y.2022-23 exceeds Rs.10 crores and payments made by him to
Mr.Agarwal, a resident seller exceeds Rs.50 lakhs in the P.Y.2023-24, he is liable to deduct tax @
0.1% of Rs.45 lakhs (being the sum exceeding Rs.50 lakhs) in the following manner:-

No tax is to be deducted u.s.194Q on the payments made on 01.06.2023 and 12.08.2023, since the
aggregate payments till that date i.e. Rs.45 lakhs, has not exceeded the threshold of Rs.50 lakhs.

Tax of Rs.1,700 (i.e. 0.1% of Rs.17 lakhs) has to be deducted u.s.194Q from the payment/credit of
Rs.22 lakhs on 23.11.2023 (22 lakhs – 5 lakhs, being the balance unexhausted threshold limit).

Tax of Rs.2,800 (i.e. 0.1% of Rs.28 lakhs) has to be deducted u.s.194Q from the payment/credit of
Rs.28 lakhs on 25.03.2024.

NOTE: In this case, since both section 194Q and 206C(1H) applies, tax has to be deducted u.s.194Q.

2. If Mr.Gupta’s turnover for the F.Y.2022-23 was only Rs.8 crores, TDS provisions u.s.194Q would
not be attracted. However, TCS provisions u.s.206C(1H) would be attracted in the hands of
Mr.Agarwal, since his turnover exceeds Rs.10 crores in the F.Y. 2022-23 and his receipts from
Mr.Gupta exceed Rs.50 lakhs. (‘receipt’ basis)

No tax is to be collected u.s.206C(1H) on 01.06.2023 and 12.08.2023, since the aggregate receipts
till that date i.e. Rs.45 lakhs, has not exceeded the threshold of Rs.50 lakhs.

Tax of Rs.1,700 (i.e. 0.1% of Rs.17 lakhs) has to be collected u.s.206C(1H) on 23.11.2022 (22 lakhs –
5 lakhs, being the balance unexhausted threshold limit).

Tax of Rs.2,800 (i.e. 0.1% of Rs.28 lakhs) has to be collected u.s.206C(1H) on 25.03.2024.

3.In case (1), if PAN is not furnished by Mr.Agarwal to Mr.Gupta, then, Mr.Gupta has to deduct tax @
5%, instead of 0.1%. Accordingly, tax of Rs.85,000 (i.e. 5% of Rs.17 lakhs) and Rs.1,40,000 (5% of
Rs.28 lakhs) has to be deducted by Mr.Gupta u.s.194Q on 23.11.2023 and 25.03.2024 respectively.

In case (2), if PAN is not furnished by Mr.Gupta to Mr.Agarwal, the Mr.Agarwal has to collect tax @
1% instead of 0.1%. Accordingly, tax of Rs.17,000 (i.e. 1% of Rs.17 lakhs) and Rs.28,000 (1% of
Rs.28 lakhs) has to be collected by Mr.Agarwal u.s.206C(1H) on 23.11.2023 and on 25.03.2024,
respectively.

31. Since the car is returned to the company: No tds (not a benefit)
If the car is not returned but retained: Attracts tds (it is a benefit)

32. Option C

33. Section 194D; Limit Rs.15,000; Tds rate 5%; Tds amount Rs.2,500
Section 194A; Limit Rs.50,000; Tds rate 10%; Tds amount Rs.7,000
Discount to customers not subject to tds.
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34. Turnover during the immediately preceding previous year 22-23 exceeds Rs.1 crore. Hence, Tds
provisions are applicable for P.Y.2023-24; A.Y.2024-25.

a. Payment to banks are not subject to tds.

b. Section 194C; Limit Rs.30,000 in case of a single contract or Rs.1,00,000 in case of all the
contracts during the year; Tds rate 1%; Tds amount Rs.340

c. Section 194I; Limit Rs.2,40,000; Tds rate 10%.Tds amount Rs.25,000

d. Section 194H; Limit Rs.15,000; Tds rate 5%; Tds amount Rs.800

35. Section 194I; Limit Rs.2,40,000; Tds rate 2%; Tds amount Rs.5,600

TDS u.s.194J is not attracted since the payment is for personal purpose and tds u.s.194M is not
attracted as aggregate amount does not exceed Rs.50 lakhs.

Section 194J; Limit not specified; Tds rate 10%; Tds Rs.1,900
Section 194IA; Limit Rs.50 lakhs or more; Tds rate 1% on SDV; TdsRs.72,000

36. Section 194C; Limit Rs.30,000 or Rs.1,00,000; Tds rate 1%; Tds Rs.4,200 (420000 x 1%); Payment
or credit (whichever is earlier)

Section 194BB; Limit Rs.10,000; Tds rate 30%; Tds amount Rs.45,000

Section 194BA: Tds at the time of withdrawal on 31.12.2023 is Rs.2,10,000 and tds on the balance
Rs.5,00,000 in the user account at the end of the previous year on 31.03.2024 which is Rs.1,50,000.
Tds 30%.

Section 194LA; Limit Rs.2,50,000; Tds rate 10%; Tds amount nil

37. a. No tds (PAN and declaration is furnished) – Section 194C

b. No tds (limit Rs.30,000 should be applied for each and every item separately) – Section 194J

c. Amount does not exceed Rs.30,000. No tdsu.s.194C

d. Contract of sale. No tds (not a contract of work). No material was supplied by the customer

e. Tds u.s.194H @ 5% Rs.800; limit is Rs.15,000

f. Tds u.s.194J @ 10% Rs.2,500 (limit not specified)

38. a. Tds u.s.194H @ 5% Rs.900 (limit is Rs.15,000)

b. Contract of sale. No tds (not a contract of work). No material was supplied by the customer
c. Tds u.s.194J @ 10% Rs.3,200 (2% in case of royalty in relation to cinematographic films)
 96

39. i) Section 194C is not applicable as it is a personal payment

Section 194M is applicable. Limit > Rs.50 lacs; Tds rate @ 5% on 52 lacs is Rs.2,60,000

ii) Section 194C; PAN not furnished. Tds @ 20% on Rs.1,50,000 is Rs.30,000

40. i. Tds u.s.194I is not attracted as payment made to Fresh Cold Storage Pvt Ltd is not in the nature of
rent. It is cooling charges paid for preservation of fruits and vegetables. However,tds is required to
be deducted u.s.194C @ 2%. CBDT Circular.Tds amount (6 lacs x 2%) is Rs.12,000.

ii.Tds u.s.194IB; Limit should exceed Rs.50,000 p.m.; tds (60000 x 9 x 20%) Rs.1,08,000; but cannot
exceed Rs.60,000 being last month rent; PAN not furnished.Tds u.s.194IB is Rs.60,000

41. Section 194A; Limit Rs.50,000; Tds rate 10%; Tds amount Rs.5,100
Section 194A; Limit Rs.40,000 (co-operative bank); Tds rate 10%; Tds Rs.30,000 (3 lacs x 10%)
Section 194B; limit Rs.10,000; tds rate 30%; tds amount Rs.6,000
Section 194A; Limit Rs.5,000; Tds rate 10%; Tds amount Rs.600 (100000 x 12% x 6/12) x 10%

42. a) U.s.194A; Limit all the branches in aggregate Rs.40,000; tds rate 10%; tds amount Rs.4,900 (Total
interest Rs.49,000).

b) Section 194C is not applicable as turnover of Mr.Aduring the p.y.22-23 has not exceeded Rs.100
lakhs. Tds is attracted u.s.194M as payment > Rs.50 lacs. Tds @ 5% on Rs.55 lacs is Rs.2,75,000.

43. i. Section 192A; not taxable as termination was due to ill-health of Mr.Tandon
ii. Section 194A; Limit Rs.50,000 (senior citizen); tds rate 10% and tds amount Rs.0
iii. Section 194B; Limit Rs.10,000; tds rate 30% and tds amount Rs.6,300
iv. No tds on payment made to banks (Finance Bank Ltd).
v. Section 194IB; limit should exceed Rs.50,000 p.m. tds rate 5%; tds amount 156000 x 5% Rs.7800

44. i) Section 194A; Limit Rs.5,000; tds rate 10%; tds amount Rs.7,900. AG Pvt Ltd, being a company is
compulsorily required to comply with tds provisions whether or not subject to tax audit.

ii) Policy issued after 01.04.2012; 10% of sum assured is Rs.50,000 and premium paid is
Rs.1,40,000. Since premium paid > 10% of sum assured, tds is attracted. It is not exempt
u.s.10(10D). Tds @ 5% of income.Income is Rs.40,000 (6 lacs – 560000). Tds amount Rs.2000.
Maturity amount also exceeds Rs.1 lakh. Section 194DA.

45. i.Section 194C; Limit Rs.30000; tds rate is 1% and tds amount Rs.10,000. Tds provisions are
compulsory in the case of a firm whether or not turnover of P.Y.22-23 exceeded Rs.100 lakhs.

ii. Winnings in kind; Section 194B; Limit Rs.10,000 and tds rate is 30%; tds amount Rs.1,50,000.
Tax should be deposited with the Government and then the prize is to be released to the winner.
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46. Mr.Kale: Section 194C is not applicable. Reason: being a personal payment. Section 194M is
therefore applicable. Exceeds Rs.50 lacs. Tds @ 5% on Rs.52,50,000 is Rs.2,62,500.

Mr.Rahul: Turnover of P.Y.22-23> Rs.100 lacs. Business payment (office godown).Tds u.s.194C @
1% on Rs.50 lacs is Rs.50,000.

Mr.Golu: Turnover of P.Y.22-23< Rs.100 lacs.. Section 194H is not applicable. Section 194M is not
applicable as the payment does not exceed Rs.50 lacs. Tds is nil

XYZ Urban Co-op Bank: Section 194N; (120 lacs – 100 lacs) x 2% is Rs.40,000

47. Rent paid by Mr.X exceeds Rs.50,000 p.m. Hence, he is required to deduct tax at source u.s.194IB.
Mr.X is required to deduct tds from the amount of rent payable in March, 2024. Amount of tds
Rs.27,500 (55,000 x 10 x 5%).

If Mr.X vacated the premises on 31.12.2023 then he is required to deduct tax from the amount of
rent payable in December, 2023. Tds Rs.19,250 (55,000 x 7 x 5%).

If Mr.Y does not provide his PAN to Mr.X, tax would be deductible @ 20% instead of 5%.Tax would
be Rs.1,10,000 (55,000 x 10 x 20%) but the same has to be restricted to Rs.55,000 being the rent for
March, 2024.Tds cannot exceed the amount of rent.

48. a) The seller of gas sells as well as transports the gas to the purchaser till the point of delivery,
where the ownership of gas to the purchaser is simultaneously transferred, the manner of raising
the sale bill, does not alter the basic nature of such contract which remains essentially a ‘contract of
sale’ and not a ‘works contract’. Hence no tds. CBDT Circular

Since the question is silent on the timing of the transfer of ownership of the gas to the purchaser, an
assumption that the ownership of the gas to the purchaser is transferred before its transportation
is possible. In such case, the transportation of gas after transfer of ownership may be considered as
a separate contract for transportation of gas i.e. ‘works contract’ u.s.194C, hence tds @ 2% has to be
deducted on Rs.1,70,000 i.e. Rs.3,400.

b)Job charges – contract of work. Section 194C – Single contract > Rs.30,000 or aggregate should >
Rs.1,00,000.

Bill No. Amount Tds

1 27000 0
57 25000 0
105 28000 0
151 32000 2240
112000
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49. a)Section 194J; no exemption limit; tds rate 10%; tds amount Rs.2,500

b)Section 194LA; Limit Rs.2,50,000; tds rate 10%; tds amount Nil (does not exceed the limit)

c)Section 194Q is applicable as the turnover of Mr.P during the p.y.22-23> Rs.10 crores. Tds has to
be deducted @ 0.1% on the amount exceeding Rs.50 lakhs. Liability to deduct tax arises at the time
of credit or at the time of payment whichever is earlier. Tds Rs.3,000 (80 lacs – 50 lacs) x 0.1%
which shall be deducted as follows:

Date Purchases tds

10.06.2023 25,00,000 nil
20.08.2023 27,00,000 Rs.200 (52 lacs – 50 lacs) x 0.1%
12.10.2023 28,00,000 Rs.2,800 (28 lacs x 0.1%)

Note: Turnover of Mr.Agarwal during the p.y.22-23> Rs.10 crores. TCS u.s.206C(1H) is attracted @
0.1%. However, if both Section 194Q and Section 206C(1H) are attracted, tds shall be deducted
u.s.194Q.

50. a)XYZ is required to deduct tax at source since gross turnover of the financial year 22-23 had
exceeded Rs.10 crores. Tax has to be deducted u.s.194Q @ 0.1% on the amount of purchases
exceeding the limit of Rs.50 lakhs. Liability to deduct tds arises at the time of payment or at the
time of credit (whichever is earlier).

Particulars Date of payment Amount Tds

Advance payment 01.04.2023 Rs.40 lacs Nil (< Rs.50 lacs)
Payment for supplies 02.07.2023 Rs.20 lacs Rs.1000 (60 lacs – 50 lacs) x 0.1%
Advance payment 04.08.2023 Rs.12 lacs Rs.1200 (12 lacs x 0.1%)

b) Director’s remuneration; tds u.s.194J; tds rate 10%; no exemption limit. Tds @ 10% on
Rs.2,49,000 is Rs.24,900.

c) Pension (72000 x 12) 864000

Less: std deduction 50000
Income from salary 814000

Income from other sources:

i) Int on savings account 15000
ii) Int on fixed deposit 52500 (10 lacs x 7% x 9/12)

Gross Total Income 881500

Less: Section 80TTB (OTR) 50000
Total Income 831500
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Tax on the above:

831500
500000 nil
331500 x 20% 66300
66300
Add: 4% cess 2652
Total tax 68950

Mr.Kumar is a specified senior citizen. He has no other income other than pension and interest
income. His pension income and interest income is credited in the same bank (Bank of Baroda).
BOB will act as specified bank and deduct tax from his income. As a result, filing of income tax
return is not required by Mr.Kumar.

51. Being a salaried employee, Section 194C is not attracted. She is however, required to deduct tax at
source u.s.194M in case the total payment exceeds the limit of Rs.50 lakhs. Tds rate is 5%. Tds
amount is Rs.2,75,000 (Rs.55 lakhs x 5%).

If Ms.Aruna is a business women:

The answer shall be the same. Books are not audited in the immediately preceding financial year
(i.e. turnover should be < Rs.100 lakhs). Hence Section 194C is not applicable. However, tds is
required to be deducted u.s.194M. Tds amount is Rs.2,75,000.

52. Tds amount u.s.194N:

Mr.Hari – Rs.20,000 (Rs.10 lacs x 2%)

Mr.Pranav – Nil

ABC Co-operative society – Nil

XYZ Co-operative society – Rs.20,000 (Rs.10 lacs x 2%)

Mr.Vaibhav – Rs.2,20,000 (Rs.1,10,00,000 x 2%)

A Ltd – Rs.10,000 (Rs.5 lacs x 2%)

DEF (firm) – Rs.1,40,000 (Rs.70 lacs x 2%)

Mr.Varun – Rs.2,60,000 (Rs.80 lacs x 2%) + (Rs.20 lacs x 5%)

Mr.Rakesh – Rs.50,000 (Rs.25 lacs x 2%)

PQR Co-operative society – Rs.7,10,000 (Rs.2,80,00,000 x 2%) + (30,00,000 x 5%)

 100

CHAPTER – 16C: TAX COLLECTION AT SOURCE

WHAT IS TCS?
Tax Collection at Source (TCS) means collection of tax at source at prescribed rates by the seller
from the buyer of certain specified

i. Goods u.s.206C(1); or
ii. Services u.s.206C(1C); or
iii. a motor vehicle u.s.206C(1F); or
iv. Overseas remittance for education and other purposes u.s.206C(1G); or
v. Overseas remittance for tour package u.s.206C(1G); or
vi. Sale of goods above Rs.50 lacs u.s.206C(1H)

Goods specified under section 206C(1):

Nature of Goods specified Rates with PAN

(a) Alcoholic liquor for human consumption 1%

(b) Scrap 1%
(c) Minerals, being coal or lignite or iron ore 1%
(d) Timber or any other forest produce 2.5%
(e) Tendu leaves 5%

TCS liability: At the time of debit or at the time of receipt, whichever is earlier

Higher rate of TCS if PAN is not furnished:

Applicable rate is: Twice the normal rate or 5% (whichever is higher)

Non-applicability of TCS [Section 206C(1A)]

No TCS if the goods referred to in section 206C(1) are to be utilised for the purpose of
manufacturing, processing or producing articles or things or for the purposes of generation of
power and NOT for trading purposes.The buyer is required to furnish a declaration that the
goods are to be utilised for the purpose of manufacturing and not for trading.

Problem:
M/s.PMPC, a Partnership firm, is engaged in the manufacture of cardboard carton boxes used in
packaging industry. During the year, it has sold cutting waste generated amounting to Rs.30
lakhs to XYZ Ltd, a paper manufacturing company. XYZ Ltd uses such cutting waste purchased
as raw material for its production. Discuss the implication with respect to tcs.

Answer: A seller is required to collect tax @ 1% from the buyer on sale of scrap. However, tax
is not required to be collected at source if the resident buyer furnishes a declaration in the
prescribed form that such scrap is to be utilised for the purpose of manufacturing of any article
or thing. Hence no tcs.
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Section 206C (1C) provides for collection of tax by every person who grants a lease or a licence
or otherwise transfers any right or interest in any:

- parking lot or
- toll plaza or
- a mine or a quarry

to another person for the use of such parking lot or toll plaza or mine or quarry for the
purposes of business. The applicable TCS rate is 2%.(5% without PAN).

Problem:
State Government of TamilNadu grants a lease of coal mine to ABC Ltd., an Indian company, on
01.10.2023 and charged Rs.8 crores for the lease.

Answer:
Lease of Mine:State Government is required to collect tcs @ 2%. TCS is Rs.16 lakhs.

Problem:
KLS Ltd. gives a multilevel parking building in front of a shopping mall in Delhi to PQR Ltd. on a
lease of 90 years. PQR Ltd. is liable to pay Rs.3 crores as one time lease premium.

Answer:
Every person who grants a leasein respect of a “parking lot” to another person for the use of
such parking lot shall collect tax at source @ 2%. (5% if PAN not furnished). KLS Ltd shall
collect 2% of Rs.3 crores as tax from PQR Ltd.

MOTOR CAR - Section 206C(1F) provides that every person, being a seller, who receives
any amount as consideration for sale of a MOTOR VEHICLE of the value exceeding Rs.10 lakhs,
shall collect tax from the buyer @ 1% of the sale consideration.(5% without PAN).

OTHER PROVISIONS IN RESPECT OF TCS ON SALE OF MOTOR VEHICLE:

a. TCS is applicable only at retail level and not on sale of motor vehicles by manufacturers
to dealers or distributors.

b. It is applicable on sale of any motor vehicle (luxury or non-luxury) of the value

exceeding Rs.10 lakhs.

c. It is applicable on each sale of a Motor Vehicle and not on aggregate value of sale
during the year.

d. Provisions are applicable whether the payment is made in cash or by any other mode.

e. An individual,if his turnover in business exceeds Rs.1 croreor gross receipts exceeds
Rs.50 lakhs in profession in the immediately preceding financial year, is also liable to
collect tax at source @ 1% on sale of motor car by him.
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1. When a motor car is sold for Rs.12 lakhs by a dealer to a buyer holding PAN, the amount of tax
collectible at source shall be:
(a) Rs.12,000 (1%) (c) Rs.24,000 (2%)
(b) Rs.1,20,000 (10%) (d) Nil

2. What are clarifications made by CBDT with respect to Section 206C (1F) relating to the
following issues:

i. Whether TCS on sale of motor vehicle is applicable only to luxury car?

ii. Whether TCS is applicable on each sale or aggregate value of sale of motor vehicle,
exceeding Rs.10 lakhs?
iii. Whether TCS is applicable in case of an individual?
iv. Whether TCS on sale of motor vehicle is at retail level also or only by manufacturer to
distributor or dealer?

Answer:
i. It is applicable on sale of any motor vehicle (luxury or non-luxury)

ii. It is applicable on each sale and not on aggregate value of sale.

iii. An individual, if his turnover in business exceeds Rs.1 crore or gross receipts in
profession exceeds Rs.50 lakhs in the immediately preceding financial year, is also liable
to collect tax at source @ 1% on sale of motor car by him.

iv. TCS is applicable only at retail level and not on sale of motor vehicles by manufacturers
to dealers or distributors.

OVERSEAS REMITTANCES- UNDER SECTION 206C (1G):

Purpose of Remittance Rate of TCS Rate of TCS
Up to 30.09.2023 From 01.10.2023

I.Purchase of Overseas tour 5% (without threshold) 5% till Rs.7 lakhs

program package 20% thereafter

II.Medical treatment or education Nil up to Rs.7 lakhs Nil up to Rs.7 lakhs

5% above Rs.7 lakhs 5% above Rs.7 lakhs

III.Education financed by loan Nil up to Rs.7 lakhs Nil up to Rs.7 lakhs

from financial institution 0.5% above Rs.7 lakhs 0.5% above Rs.7 lakhs

IV.Other purposes (gift, investment Nil up to Rs.7 lakhs Nil up to Rs.7 lakhs
in shares, immovable property) 5% above Rs.7 lakhs 20% above Rs.7 lakhs

Note: TCS shall not be applicable if the buyer is liable to deduct tax at source.
 103

3. Explain the provisions of Tax Collection at source for overseas remittance by an authorized
dealer. Also enumerate the rate of tax to be collected and the amount on which no tax is to be
collected. Nov. 2023

Section 206C (1H): TCS on sale of goods:

Who will collect TCS: Seller from buyer provided the turnover of the seller
exceeded Rs.10 crores during the immediately preceding
previous year.

Limit: Amount received in excess of Rs.50 lakhs

TCS rate: 0.1% on consideration received in excess of Rs.50 lakhs

If PAN not furnished tcs rate is 1%

Section 206C(1H) not applicable: If TCS is collected u.s.206C(1); 206C(1F) and 206C(1G)

If buyer has deductedtds u.s.194Q

On goods exported out of India

If buyer is a person whose income is exempt (e.g. u.s.10)

Provisions of Section 194Q and Section 206C(1H) in brief:

Particulars Section 194Q Section 206C(1H)
When tds/tcs? On purchase On sale

Liability on: Buyer Seller

Turnover of PY 22-23: >Rs.10 crores > Rs.10 crores

Tds / tcs rate: 0.1% 0.1%

Without PAN: 5% 1%

Liability to deduct or collect: payment or credit (wel) At the time of “receipt”

Limit: >Rs.50 lakhs > Rs.50 lakhs

a) If both Sec.194Q and Sec.206C(1H) are attracted; tds will be u.s.194Q

b) TCS u.s.206C(1H) not be applicable if tcs is collected under any other section [(e.g. section
206C(1) or 206(1F)].
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4. Examine the following transactions with reference to applicability of the provision of tax
collected at source and the rate and amount of the TCS for the Assessment year 2024-25.

i. Mr.Kalpit bought an overseas tour programme package for Singapore for himself and
his family of Rs.5 lakhs on 01.11.2023 from an agent who is engaged in organizing
foreign tours in course of his business. He made the payment by an account payee
cheque and provided PAN to the seller. Assume Kalpit is not liable to deduct tax at
source under any other provisions of the Act.

ii. Mr.Anu doing business of textile as a proprietor. His turnover in the business is 11
crores in the previous year 2022-23. He received payment against sale of textile goods
from Mr.Ram Rs.75 lakhs against the sales made to him in the previous year and
preceding previous years. (Assuming all the sales are domestic sales and Mr.Ram is not
liable to deduct tax on the purchase from Mr.Anu).

Answer:
i)Under section206C(1G); tcs @ 5% on the amount collected by the seller. Amount of tcs (5
lacs x 5%) Rs.25,000. Up to 30.09.2023, tcs shall be 5% without any limit and from 01.10.2023
tcs rate shall be 5% till Rs.7 lakhs and 20% thereafter.

ii)Under section206C(1H); Turnover of Mr.Anu exceeded Rs.10 crores during the p.y.2022-23.
He is required to collect tax @ 0.1% on the amount received in excess of Rs.50 lacs from
Mr.Ram. Amount of tcs (75 lacs – 50 lacs) x 0.1% is Rs.2,500.

5. State Government of Madhya Pradesh grants a lease of coal mine to ABC Co. Ltd., an Indian
company, on 01.10.2023 and charged Rs.8 crores for the lease. ABC Co. Ltd. sold coal for Rs.2
crores to Mahapower Ltd., another Indian company, during the previous year 2023-24.
Mahapower Ltd furnishes a declaration to ABC Co. Ltd. that the coal is to be utilized for the
purpose of generation of power. The turnover of ABC Co. Ltd. and Mahapower Ltd. for the F.Y.
2022-23 amounted to Rs.11 crores and Rs.12 crores, respectively. What is the amount of tax
required to be deducted or collected at source in respect of the above transactions, if any?

Answer:
State Government of MP is required to collect tcs @ 2% on granting of lease of coal mine to ABC Co.
Ltd. TCS @ 2% on Rs.8 crores is Rs.16 lacs.

U/s.206C(1), tcs is required to be collected by ABC Co. Ltd. on sale of coal @ 1% on Rs.2 crores.
However, Mahapower Ltd has furnished a declaration to ABC Co. Ltd that the coal is to be utilized
for the purpose of generation of power. Hence, ABC Co. Ltd. shall not collect tax u.s.206C(1).

However, Mahapower Ltd (buyer turnover > Rs.10 crores during p.y. 22-23) is required to deduct
tds u.s.194Q @ 0.1% on the amount exceeding Rs.50 lacs. Amount of tds u.s.194Q is Rs.15,000

Since declaration is furnished by Mahapower Ltd, tcs is not required to be collected u.s.206C(1H).
 105

6. ABC Ltd., an Indian company, purchases coal from XYZ Ltd., another Indian company, for Rs.60
lakhs during the P.Y.2022-23, to manufacture steel. ABC Ltd. furnishes a declaration that such
coal is used to manufacture steel and not for trading. What are the TCS/TDS implications on
such transaction, if the purchases were spread evenly throughout the year and ABC Ltd.’s
annual turnover was ranging between Rs.12 crores and Rs.15 crores; and XYZ Ltd.’s annual
turnover was ranging between Rs.15 crores and Rs.20 crores in the last few years?

a) Tax @ 1% has to be collected by XYZ Ltd. on Rs.60 lakhs u.s.206C(1).

b) Tax @ 0.1% has to be collected by XYZ Ltd. on Rs.10 lakhs u.s. 206C(1H)
c) No tax has to be collected at source by XYZ Ltd.; however, tax @ 0.1% has to be
deducted u.s.194Q by ABC Ltd. on Rs.10 lakhs.
d) No tax has to be collected at source by XYZ Ltd.; ABC Ltd. also does not have to deduct
tax at source.

Answer: XYZ Ltd is required to collect 1% tax from ABC Ltd on sale of coal u.s.206C(1).
However, ABC Ltd furnishes a declaration that such is used for manufacturing purposes. Hence
XYZ Ltd is not required to collect tax from ABC Ltd u.s.206C(1).

Alternatively, ABC Ltd (buyer) is required to deduct tax at source u.s.194Q on purchases made
> Rs.50 lacs @ 0.1% (turnover of p.y. 2022-23 has > Rs.10 crores). Option C.

Since declaration is furnished by ABC Ltd, no tax shall be collected by XYZ Ltd u.s.206C(1H).
Hence, no tax shall be collected by XYZ Ltd both u.s.206C(1) and u.s.206C(1H).

7. Examine the applicability of provisions relating to deduction/collection of tax at source and

compute the liability, if any, for deduction/collection of tax at source in the following cases for
financial year ended 31st March, 2024 as per provisions contained under the IT Act, 1961:

a) Mr.Devansh, an Indian Citizen, residing in New York, came to India on a visit on

15.2.2024. He paid Rs.6 lakhs to a tour operator, M/s Journey Trip, based in Mumbai for
a tour package to Malaysia for 1 week. He left for Malaysia on 1.3.2024 and returned to
India on 8.3.2024. Thereafter, he was in India up to 5.4.2024 on which date he took his
return flight to New York. He does not have any source of income in India.

b) XYZ Ltd. was incorporated on 1.4.2023 for trading goods. Its turnover for the P.Y. 2023-
24 is Rs.12 crores. During the P.Y.2023-24, it purchased goods from M/s. White Ride,
the details of which are as follows:

On 1.8.2023 for Rs.25,00,000;

On 15.9.2023 for Rs.30,00,000 and
On 15.12.2023 for Rs.15,00,000.

The above dates represent the date of credit to the account of M/s. White Ride.
Payment is made after one month (i.e., on the same date in the immediately following
month). M/s White Ride’s turnover for the F.Y. 2022-23 and F.Y. 2023-24 was Rs.11
crores and Rs.9.7 crores, respectively.
 106

Answer:
a) U/s.206C(1G), the tour operator is required to collect tax from the purchaser of
overseas tour package. Up to 30.09.2023, tcs shall be 5% without any limit and from
01.10.2023 tcs rate shall be 5% till Rs.7 lakhs and 20% thereafter.

CBDT Circular:Mr.Devansh, an Indian Citizen came to India and has stayed for 40 days
during the p.y.23-24. He is a non-resident for A.Y.2024-25. He has no income in India
for the p.y.2023-24. Hence, the tour operator is not required to collect tax from
Mr.Devansh.

b) Section 194Q is applicable only if turnover of XYZ Ltd (buyer) has exceeded Rs.10
crores during the immediately preceding f.y. 2022-23. Since XYZ Ltd was incorporated
on 01.04.2023, it is not required to deduct tax at source u.s.194Q. CBDT Circular.

TCS u.s.206C(1H) shall be applicable if the turnover of M/s.White Ride’s (seller) during
the immediately preceding f.y. 2022-23 has exceeded Rs.10 crores. Turnover was Rs.11
crores during the p.y. 2022-23 and therefore, tcs is attracted @ 0.1% on the amount
received (“receipt” basis) exceeding Rs.50 lakhs.

Amount received Date of receipt TCS

Rs.25 lakhs 01.09.2023 nil (does not exceed Rs.50 lakhs)
Rs.30 lakhs 15.10.2023 Rs.500 (Rs.55 lacs – Rs.50 lacs) x 0.1%
Rs.15 lakhs 15.01.2024 Rs.1500 (Rs.15 lacs x 0.1%)

Higher rates of TCS for non-filers of income-tax return and non-furnishers of PAN
(Section 206CC and 206CCA)

Section 206CC: If PAN is not furnished: TCS will be twice the normal rates or 5% (1%
u.s.206C(1H) (whichever is higher). (maximumtcs rate shall not exceed
20%).

Section 206CCA: (non-filers of ITR): TCS from a “specified person” will be twice the normal
rates or 5% (whichever is higher). (maximumtcs rate shall not exceed
20%).

In case both the above sections are applicable, tcs will be the higher of the two rates provided
in section 206CC and section 206CCA.

Specified person:-
A person who has not filed his income-tax returns for last two previous years
and
the aggregate of tds and tcs is Rs.50,000 or more in each of these two previous years.
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Examples:

Section Normal rates PAN not furnished Non-filer of ITR

206C(1) 5% (tendu leaves) 10% or 5% (weh) 10% or 5% (weh)

206C(1F) 1% (motor car) 2% or 5% (weh) 2% or 5% (weh)

206C(1G) 20% 40% or 5% (weh) 40% or 5% (weh)

(max exceed 20%) (max exceed 20%)

206C(1H) 0.1% 0.2% or 1% (weh) 0.2% or 5% (weh)

Important: In the above section 206C(1H), if a person has not furnished PAN and
also has not filed income-tax returns; highest of the two rates shall apply
(i.e. 1% or 5%) 5%.

8. Amin Co. (p) Ltd is a dealer of motor cars manufactured by Zeet Ltd. Amin Co. (P) Ltd paid
through banking channel Rs.110 lakhs to Zeet Ltd. for purchase of cars in January 2024. Of the
total motor cars so purchased, 4 motor cars cost Rs.11 lakhs each and 7 motor cars are for the
balance amount. Decide whether any TDS/TCS provisions will apply. Will your answer be
different if Amin Co. (P) Ltd. is not a dealer of motor cars and had acquired the same for the
purpose of plying cars on hire?

Answer:

A. If Amin Co (P) Ltd is a dealer of motor cars: No TCS u.s.206C1(F)

If section 206C(1F) is not applicable then tds shall be deducted u.s.194Q by the buyer.

If section 194Q is not applicable then tcs shall be collected u.s.206C(1H) by the seller

B. If Amin Co (P) Ltd is not a dealer of motor cars but uses for plying cars on hire:
TCS u.s.206C(1F): cost of each car > Rs.10 lacs; tcs(11 lakhs x 4 x 1%) Rs.44,000

For the remaining 7 cars: TCS is nil (cost is < 10 lakhs each)u.s.206C(1F).

If section 206C(1F) is not applicable then tds shall be deducted u.s.194Q @ 0.1% on
Rs.16 lacs (i.e. 66 lacs – 50 lacs) by the buyer.

If section 194Q is not applicable then tcsu.s.206C(1H) @ 0.1% on the amount received
in excess of Rs.50 lakhsshall be collected by the seller.
 108

CHAPTER – 17 FILING OF RETURNS

Due date of filing return of income – Section 139(1):

a) An assessee who is required to furnish

Transfer Pricing Report 30th November

b) Any Company (other than ‘a’ above) 31st October

c) A person whose accounts are required to be

audited under the IT Act or under any other law 31st October

d) A partner of a firm (working or sleeping)

where the firm is subject to audit under
the IT Act or under any other law 31st October

e) In the case of any other assessee 31st July

Who are required to furnish return of income?

1. Every COMPANY or a FIRM is compulsorily required to file return of income irrespective of
income or loss.

2. Every other person (individual or huf) is required to furnish return of income if his total
income without giving effect to:

a. Chapter VI-A deductions; or

b. Section 54, 54B, 54D, 54EC, 54F; exceeds the basic exemption.

3. Mandatory filing of IT returns in certain cases:

An individual who is not required to furnish a return u.s.139(1), is required to file income-tax
return before the due date, if such person:

a. has deposited an amount or aggregate of the amounts exceeding Rs.1 crore in one or
more current accounts maintained with a banking company or a co-operative bank; or

b. has incurred expenditure of an amount or aggregate of the amounts exceeding Rs.2 lakhs
for himself or any other person for travel to a foreign country; or

c. has incurred expenditure of an amount or aggregate of the amount exceeding Rs.1 lakh
towards consumption of electricity; or

d. if his total sales, turnover or gross receipts in business > Rs.60 lakhs during the previous
year or total gross receipts in profession > Rs.10 lakhs during the previous year; or
 109

e. if the aggregate of TDS and TCS during the previous year is Rs.25,000 or more (Rs.50,000
or more for senior citizen); or

f. Amount deposited in savings bank account is Rs.50 lakhs or more during the previous
year.

4. Mandatory filing of return by resident person in certain cases:

An individual, being a resident and ordinary resident in India, who is not required to furnish a
return under section 139(1) and who at any time during the previous year:

a) holds, as a BENEFICIAL OWNER, any asset (including financial interest in any entity)
located outside India or has signing authority in any account located outside India; or

b) is a BENEFICIARY of any asset (including financial interest in any entity) located outside
India,

shall furnish, on or before the due date, a return in respect of his income or loss for the
previous year.

a) ‘Beneficial owner’ means an individual who has provided, directly or indirectly,

consideration for the asset for the immediate or future benefit, direct or indirect, of
himself or any other person.

b) ‘Beneficiary’ means an individual who derives benefit from the asset during the
previous year and the consideration for such asset has been provided by any person
other than such beneficiary.

Late fee for delay in filing return of income – Section 234F:

Total income exceeds Rs.5 lakhs : Rs.5,000
Total income of a person does not exceed Rs.5 lakhs : Rs.1,000

Problems:
1. Mr.R furnishes the following particulars for the year ending 31.03.2024:
Income from other sources Rs.2,20,000; LTCG on sale of residential house Rs.72 lakhs
Exemption available u.s.54 Rs.72 lakhs
Examine whether Mr.R should file return of income for A.Y.2024-25.

2. Mr.A furnishes the following particulars for the year ending 31.03.2024:
Income from business Rs.3,30,000; Income from other sources Rs.10,000;
LTCG on sale of urban land Rs.24 lakhs. Amount invested in NHAI bonds Rs.23 lakhs
Deductions under Chapter VI A Rs.2,00,000.
Examine whether Mr.A should file return of income for A.Y.2024-25.
 110

3. Mr.R has taxable income of Rs.1,75,000 during the p. y. 2023-24. He is required to file his IT
return only if:

a. He has deposited an amount exceeding Rs………..in his current account in a bank; or

b. His electricity bill exceeds Rs………….; or
c. His expenditure on foreign travel exceeds Rs………..; or
d. Total turnover in his business has > …………. during the previous year; or
e. Gross receipts in his profession has > ………… during the previous year; or
f. Aggregate of tds and tcs is Rs……….. or more during the previous year
g. Amount deposited in savings bank account is Rs…………or more during the p. y.

4. Mr.Dinesh, a resident in India, has gross total income of Rs.2,30,000 comprising of interest on
saving A/c and rental income during the previous year 2023-24. He incurred expenditure of
Rs.2,00,000 for his son for a study tour to Europe. Whether he is required to file return of income
for the assessment year 2024-25? If yes, what is the due date?

(a) Yes, 31st July of A.Y.

(b) Yes, 30th September of A.Y.
(c) Yes, 31st October of A.Y.
(d) No, he is not required to file return of income.

5. In the following cases relating to P.Y.2023-24, the total income of the assessee or the total income
of any other person in respect of which he/she is assessable under Income-tax Act does not exceed
the basic exemption limit.

You are required to state with reasons, whether the assessee is still required to file the return of
income or loss for A.Y.2024-25 in each of the following independent situations:

i. Manish & Sons (HUF) sold a residential house on which there arose a long term
capital gain of Rs.12 lakhs which was invested in Capital Gain Bonds u/s.54EC so that
no long term capital gain was taxable.

ii. Mrs.Archana was born in Germany and married in India. Her residential status under
section 6(6) of the Income-tax Act. 1961 is 'resident and ordinarily resident'. She owns
a car in Germany which she uses for her personal purposes during her visit to her
parents' place in that country.

iii. Sudhakar has incurred an expenditure of Rs.1,20,000 towards consumption of

electricity, the entire payment of which was made through banking channels.

6. Mr.Y has a total income of Rs.4,50,000 for A.Y.2024-25. He furnishes his return of income for A.Y.
2024-25 on 2nd December, 2024. He is liable to pay fee of:– (a) Rs.1,000 u.s.234F (b) Rs.5,000 u.s.
234F (c) Rs.10,000 u.s. 234F (d) Not liable to pay any fee
 111

7. Mr. Z, a salaried individual, has a total income of Rs.8 lakhs for A.Y. 2024-25. He furnishes his
return of income for A.Y. 2024-25 on 28th August, 2024. He is liable to pay fee of:– (a) Rs.1,000
u.s.234F (b) Rs.5,000 u.s.234F (c) Rs.10,000 u.s.234F (d) Not liable to pay any fee.

8. Discuss, with reasons, whether the following statement is correct:

Mahesh, a resident and ordinary resident in India and having a house property and a bank
account outside India, is not required to file return of income for Assessment Year 2024-25, if his
total income is below the maximum amount not liable to tax.

Solution:
The statement is not correct. Mahesh is a resident and ordinary resident for A.Y.2024-25. He has
a house property and a bank account outside India. Hence, he is required to file return of income
for A.Y.2024-25 even if his total income is below the basic exemption (Rs.2,50,000/Rs.3,00,000).

9. Mr.Vikas, a resident in India aged 80 years, is having a house property in Mumbai. He has let out
the house property to ABC Ltd for a rent of Rs.50,000 per month from 01.04.2023. He does not
have any other source of income. Is Mr.Vikas required to file his return of income for A.Y.2024-25.
If yes, why?

10. Mr.Ravi, a resident Indian aged 52 years, gifted a sum of Rs.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 Rs.29,52,000
inclusive of RTO charges of Rs.2,15,000, insurance of Rs.51,575, extended warranty of Rs.25,255
and accessories charges of Rs.35,460 during the P.Y. 2023-24. 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 Rs.25,000 p.m. in respect
of a house property gifted to her by her father. Mr.Ravi 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.

11. A person other than a company or a firm who is otherwise not required to furnish the return of
income, needs to furnish return of income provided they fulfill certain conditions prescribed.
Enumerate.

BELATED RETURN u.s.139 (4)

A belated return can be filed at any time:
a. before three months prior to the end of the relevant assessment year (i.e. 31.12.2024);
or
b. before the completion of the assessment (whichever is earlier).
 112

Mr.A, who has only salary income for the p. y. 2023-24 (AY 2024-25) ought to have filed return of
income on or before 31.07.2024, being the time limit allowed u.s.139(1). In case if he has not
filed the return on or before 31.07.2024, he may file a belated return on or before 31.12.2024,
which is before three months prior to the end of the relevant assessment year. In case
assessment is completed by the A.O., say by 10.12.2024, the corresponding time limit for
furnishing belated return u.s.139(4) also concludes by 10.12.2024.

Note: a. A belated return can attract interest u.s.234A if there is any tax due
b. A belated return shall attract late fee
c. Losses cannot be carried forward

REVISED RETURN u.s.139 (5)

If an assesse, after furnishing the return of income, discovers ANY OMISSION OR ANY WRONG
STATEMENT in the return filed, he may furnish a revised return.

A revised return can be filed at any time:

a. before three months prior to the end of the relevant assessment year (i.e. 31.12.2024);
or
b. before completion of assessment (whichever is earlier).

Revised return filed shall replace the original return for all purposes.

Note:
a. A revised return can be revised again.
b. A belated return can also be revised.

Problems:
12. Mr.Y filed a return of income on 28.11.2024 (belated return) for A.Y.24-25 returning a taxable income
of Rs.10,00,000. Later, on 01.12.2024 he filed a revised return declaring a reduced taxable income of
Rs.6,00,000. As on 01.12.2024 assessment order was not passed. Advise on the validity of the return?

Solution:
A belated return can also be revised. A revised return can be filed before three months prior to the end
of the relevant assessment year (i.e. before 31st December, 2024). A revised return was filed by the
assessee on 01.12.2024 reducing the taxable income to Rs.6,00,000. A revised return filed shall replace
the original return for all purposes. The return filed is a valid return in law.

13. Mr.V submits his return of income on 12.09.2024 for A.Y.2024-25 consisting of income under the head
house property and other sources. On 21.12.2024, he realized that he had not claimed deduction
u.s.80TTA in respect of his interest on savings bank account. He wants to revise his return of income.
Can he do so? Discuss. Would your answer be different if he discovered this omission on 21.01.2025?
 113

Solution:
Mr.V is not subject to Tax Audit. Due date for filing return of income for A.Y.2024-25 is 31st July, 2024.

A return furnished u.s.139(1) or a belated return u.s.139(4) can be revised. Therefore, Mr.V can revise
the return of income filed by him in November 2024, to claim deduction u.s.80TTA, since the time limit
for filing a revised return is before three months prior to the end of the relevant assessment year,
which is 31.12.2024.

However, he cannot revise his return of income had he discovered this omission only on 21.01.2025,
since it is beyond 31.12.2024.

14. Explain with brief reasons whether the return of income can be revised u.s.139(5) of the Income-
tax Act, 1961 in the following cases:
a. Belated return filed under section 139(4).
b. Return already revised once under section 139(5).
c. Return of loss filed under section 139(3). Sum no.2; page 8.13

Solution:
Any person who has furnished a return u.s.139(1) or 139(4) can file a revised return at any time
before three months prior to the end of the relevant assessment year or before completion of
assessment, whichever is earlier, if he discovers any omission or any wrong statement in the
return filed earlier. Accordingly,

(i) A belated return filed u.s.139(4) can be revised.

(ii) A return revised earlier can be revised again as the first revised return replaces the original
return. Therefore, if the assessee discovers any omission or wrong statement in such a
revised return, he can furnish a second revised return within the prescribed time i.e. before
three months prior to the end of the relevant assessment year or before the completion of
assessment, whichever is earlier.

(iii) A return of loss filed u.s.139(3) is deemed to be return filed u.s.139(1), and therefore, can be
revised u.s.139(5).

15. Which of the following returns can be revised under section 139(5)?
(i) A return of income filed u/s 139(1)
(ii) A belated return of income filed u/s 139(4)
(iii) A return of loss filed u/s 139(3)

Choose the correct answer:

(a) Only (i) (c) Only (i) and (ii)
(b) Only (i) and (iii) (d) (i), (ii) and (iii)
 114

Updated Return u.s.139(8A):

Updated return of income can be filed by the assesse within 24 months from the end of the
relevant assessment year.

Updated return can be filed irrespective of whether the assesee has filed his return or not for
that Assessment Year. For e.g. For A.Y. 2021-22, an assessee can file an updated return before
31st March, 2024 voluntarily irrespective of whether he has filed his income tax return or not for
A.Y. 2021-22.

Updated return cannot be filed if such a return:

a) is a loss return; or
b) has the effect of decreasing the total tax liability; or
c) results in refund or increases the refund due.

Additional income-tax payable at the time of updated return:

a) 25% of aggregate of tax and interest payable, if such return is furnished after the expiry of
time available under section 139(4) or 139(5) and before completion of the period of 12
months from the end of the relevant assessment year; or

b) 50% of aggregate of tax and interest payable, if such return is furnished after the expiry of
12 months from the end of the relevant assessment year but before completion of the period of
24 months from the end of the relevant assessment year.

16. State whether the following statements are true or false:

a) Updated return can be filed within 24 months from the end of the relevant assessment year.
b) Updated return for A.Y.2022-23 can be filed before 31st March, 2025.
c) An updated return for A.Y.2022-23 can be filed by the assesse only if he has filed his ITR earlier.
d) An updated return cannot result in refund or increase in refund.

17. What is the time limit within which an updated return can be filed? Also enumerate the
circumstances in which updated return cannot be furnished? Nov. 2023

18. Mr.Sunil has filed his return of loss for A.Y.2023-24 on 31.7.2023 and received a total refund of
Rs.44,500. On 15.9.2024, he would like to furnish his updated return of income for additional
income. In case he furnished his updated return of income for additional income, he would be
liable to pay Rs.57,000 towards tax and Rs.6,700 towards interest for additional income to be
reported in updated return. Compute the additional income-tax payable by Mr.Sunil at the time of
filing his updated return.

(a) Rs.27,050
(b) Rs.15,925
(c) Rs.14,250
(d) Rs.31,850
 115

DEFECTIVE RETURN:
The A.O. may intimate the defect in the return of income to the assesse. The assesse may be
called upon to rectify the defect within 15 days from the date of intimation. The Assessing
Officer has the discretion to extend the time period beyond 15 days, on an application made by
the assessee.

If the return is not so rectified within 15 days or within the extended time, the AO shall treat
the return of income as an invalid return.

Where, however, the assessee rectifies the defect after the expiry of the period of 15 days or
within the extended period, but before assessment is made, the Assessing Officer can condone
the delay and treat the return as a valid return.

19. Due to some inconsistent information provided in the return of income furnished under section
139(1), the Assessing Officer considers it defective u.s.139(9) of the Income-tax Act, 1961.

(ii) How, the Assessing Officer would deal with the issue?
(iii) What are the consequences if defect is not rectified within the time allowed?
(iv) Specify the remedies available if not rectified within time allowed by the Assessing Officer?

Solution:

(i) Where the Assessing Officer considers that the return of income furnished by the assesse is
defective,

- he may intimate the defect to the assesse and

- give him an opportunity to rectify the defect within a period of 15 days from the date of
such intimation.

The Assessing Officer has the discretion to extend the time period beyond 15 days, on an
application made by the assesse.

(ii) If the defect is not rectified within the period of 15 days or such further extended period,
then, the return would be treated as an invalid return. The consequential effect would be
the same as if the assesse had failed to furnish the return.

(iii) The Assessing Officer has the power to condone the delay and treat the return as a valid
return, if the assesse has rectified the return after the expiry of 15 days or the further
extended period, but before the assessment is made.
 116

PERMANENT ACCOUNT NUMBER (PAN).

The following persons are required to apply and obtain PAN

a. Every person whose total income or the total income of any other person in respect of which
he is assessable under this Act during any previous year exceeded basic exemption limit; or

b. Any person carrying business or profession whose turnover or gross receipts is likely to
exceed Rs.5,00,000 in any previous year; or

c. Every person, being a resident, other than an individual, which enters into a financial
transaction of an amount aggregating to Rs.2,50,000 or more in a financial year; or

d. Every person who is the managing director, director, partner, trustee, author, founder, karta,
chief executive officer, principal officer or office bearer of the person mentioned in (c) above
or any person competent to act on behalf of such person.

Rule 114BA: Should apply for PAN atleast 7 days before the date he intends to
deposit, withdraw, etc:

e. Every person, who intends to deposit cash in his one or more accounts with a bank or co-
operative bank or post office (Rs.20 lakhs or more during a financial year).

f. Every person, who intends to withdraw cash in his one or more accounts with a bank or co-
operative bank or post office (Rs.20 lakhs or more during a financial year).

g. Any person, who intends to open a current account or cash credit account with a bank or
a co-operative bank or a post office.

20. An individual client has consulted you on the matter of PAN. He is carrying on the business of sale
& purchase of electronic appliances. His turnover is Rs.3,00,000 and the profit is Rs.75,000 for the
P.Y. 2023-24. He has asked you to provide him threshold of turnover, if any, exceeding which he
has to apply for PAN.

(a) More than Rs.2,00,000

(b) More than Rs.2,50,000
(c) More than Rs.3,00,000
(d) More than Rs.5,00,000
 117

PAN is required for the following purposes:

a. Purchase of UNITS OF MUTUAL FUND exceeding Rs.50,000
b. Purchase of DEBENTURES of a company exceeding Rs.50,000
c. Purchase of RBI BONDS exceeding Rs.50,000
d. Purchase of SHARES in a company exceeding Rs.2,00,000
e. Sale or purchase of SHARES NOT LISTED exceeding Rs.1,00,000 per transaction.

f. Sale or purchase of any IMMOVABLE PROPERTY; Value or SDV exceeding Rs.10 lakhs
g. Sale or purchase of MOTOR VEHICLE other than a two wheeler (no minimum amount)

h. Making an application for issue of a CREDIT CARD or a DEBIT CARD

i. Opening a DEMAT account
j. To open a savings a/c. with a bank or a co-operative bank (other than a Basic Savings A/c)
k. CASH DEPOSIT exceeding Rs.50,000 with a bank/post office during any one day

l. TIME DEPOSIT WITH a Bank or a Post Office or a Nidhi or a NBFC exceeding Rs.50,000 or
aggregate exceeding Rs.5 lakhs during a financial year

m. Payment of LIFE INSURANCE PREMIUM aggregating to more than Rs.50,000 in a year

n. Payment in CASH exceeding Rs.50,000 to a HOTEL or RESTAURANT against a bill or bills at

any one time.

o. Payment in CASH exceeding Rs.50,000 in connection with TRAVEL TO ANY FOREIGN

COUNTRY or payment for purchase of any FOREIGN CURRENCY at any one time.

p. Sale or purchase of goods or services of any nature other than those specified above for an
amount exceeding Rs 2 lakhs per transaction.

21. Pertaining to the following transactions, what is the, minimum amount above which quoting of
Permanent Account Number is mandatory?

a. Sale or purchase of Car

b. Payment in cash to a hotel or restaurant against a bill or bills at any one time.
c. Payment in cash in connection with travel to any foreign country.
d. Payment to the Reserve Bank of India for acquiring bonds issued by it.
e. A Time Deposit with a Post Office.
f. Payment as Life Insurance Premium to an insurer.
g. Sale or purchase of shares of a company not listed in a recognized stock exchange.
h. Sale or purchase of any immovable property.

Solution:
a. Quoting of PAN is compulsory (no minimum amount specified)
b. Payment in CASH to hotels or restaurant if bill amount exceeds Rs.50,000 at one time
c. Payment in CASH exceeding Rs.50,000 in connection with travel to any foreign country.
d. Exceeding Rs.50,000
 118

e. Time deposit with a bank or a post office exceeding Rs.50,000 or aggregate exceeding Rs.5
lakhs during a financial year
f. Payment of life insurance premium exceeding Rs.50,000 in a year to an insurer
g. Applying for purchase of shares in an unlisted company exceeding Rs.1,00,000
h. Sale or purchase of any immovable property value exceeding Rs.10 lakhs

22. Mr.Aakash has undertaken certain transactions during the F.Y. 2023-24, 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 Rs.45,000 in the F.Y. 2023-24 by account payee
cheque to LIC for insuring life of self and spouse
2. Payment of Rs.1,00,000 to a five-star hotel for stay for 5 days with family, out of which
Rs.60,000 was paid in cash
3. Payment of Rs.80,000 by ECS through bank account for acquiring the debentures of A
Ltd., an Indian company
4. Payment of Rs.95,000 by account payee cheque to Thomas Cook for travel to Dubai for 3
days to visit relatives
5. Applied to SBI for issue of credit card.

Answer:
a) PAN is not mandatory as life insurance premium paid does not exceed Rs.50,000
b) PAN is mandatory as payment in cash exceeds Rs.50,000
c) PAN is mandatory as payment exceeds Rs.50,000
d) PAN is not mandatory as payment is not paid by cash
e) PAN is mandatory for issue of credit card.

23. In which of the following transactions, quoting of PAN is mandatory by the person entering into
the said transaction?

i. Opening a basic savings bank deposit account with a bank

ii. Applying to a bank for issue of a credit card.
iii. Payment of Rs.40,000 to mutual fund for purchase of its units
iv. Cash deposit with a post office of Rs.1,00,000 during a day.
v. A fixed deposit of Rs.30,000 with a NBFC registered with RBI aggregating the total
deposits to Rs.3,50,000 for the F.Y up to the date of this deposit made.
vi. Sale of shares of an unlisted company for an amount of Rs.60,000

Choose the correct answer:

(a) II, IV
(b) II, III, IV
(c) I, II, III, V, VI
(d) II, IV, VI
 119

SUBMISSION OF RETURNS THROUGH TAX RETURN PREPARERS (TRPs):

“Tax Return Preparer” can be any individual, who has been authorized by the CBDT to assist
the “specified class of persons” in preparing and filing their return of income and affix his
signature on such return.

“Specified class or classes of persons” shall mean any person, other than
a) a company or
b) a person whose accounts are required to be audited u.s.44 AB or
c) whose accounts are required to be audited under any other law for the time being in
force

Educational Qualification for TRPs

“Tax Return Preparer” shall be an individual who holds a bachelor degree from a recognized
Indian University or has passed the intermediate examination conducted by the Institute of
Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost
Accountants of India.

However, TRPs do not include:

• a Chartered Accountant;
• a Legal Practitioner who is entitled to practice in any civil court in India and
• any officer of a Scheduled Bank with which the assessee maintains a current account or
has other regular dealings.

24. Mrs.H, an individual, engaged in the business of Beauty Parlour, has got her books of account for
the financial year ended on 31st March, 2024, audited u.s.44AB. Her total income for the A.Y.2024-
25 is Rs.6,35,000. She wants to furnish her return of income for A.Y. 2024-25 through a tax return
preparer. Can she do so? Sum no.3; page no.8.40

Solution:
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.H cannot furnish her return of
income for A.Y.2024-25 through a tax return preparer.

25. In the context of Tax Return Preparer scheme, 2006, explain the following:

a) Eligible Persons 1 mark

b) Educational qualifications of Tax Return Preparers 1 mark
c) Persons not entitled to act as tax return preparer 2 marks (nov. 2023)
 120

Section 140 – Who shall verify the return of income:

Assessee Verified by
a. Individual the individual himself

When absent from India: the individual himself; or any person duly
authorized by him holding a valid power of
attorney from the individual

Where he is mentally incapacitated: his guardian; or any other person

competent to act on his behalf

Where for any other reason he is not able to any person duly authorized by him holding
verify the return valid power of attorney from the individual

b. HUF Karta
Where Karta is absent from India or is Any other adult member (male or
mentally incapacitated female) of the family

c. Company Managing Director

Where MD is unable to verify Any director or any other person as may be

prescribed for this purpose

Where company is not resident in India MD or any person who holds a valid POA

When the company is in liquidation The liquidator

Where the management of the company

has been taken over by Central Govt or any
State Government under any law The principal officer of the company

Where an application for corporate insolvency Insolvency Professional appointed by

resolution process has been admitted by the such Adjudicating Authority
Adjudicating Authority under the Insolvency
and Bankruptcy Code, 2016

d. Partnership firm Managing Partner

When the managing partner is unable to verify Any other partner (not being a minor)

Limited Liability Partnership Designated Partner

When the designated partner is unable to verify Any Partner or any other person as may be
prescribed for this purpose

e. Local Authority Principal Officer

f. Political party Chief Executive Officer
g. Association of Persons Any Member or Principal Officer
 121

Problems:
26. Specify the persons who are authorized to sign the return of income.
a. Political Party c. Local Authority
b. AOP d. LLP

Solution: Political Party: Chief Executive Officer of such party

AOP: Any Member or Principal Officer
Local authority: Principal Officer
LLP: Designated partner

27. Where the Karta of an HUF is absent from India, the return of income can be signed by any male
member of the family. Give reasoning for the statement to be true or false.

Solution: Any other adult member of HUF, can sign the return of income. Thus a male member who is
not an adult cannot sign the return of income. An adult member, whether male or female, can sign the
return of income.

28. Mr.Kamal filed his Return of Income for the AY 2024-25 on 30.11.2024. Can he revise such return
of income?

Solution: Yes. A belated return can be revised. A revised return can be filed before three months
prior to the end of the relevant assessment year or before completion of assessment whichever is
earlier. In this case, he can file a revised return on or before 31.12.2024 assuming assessment is
not completed.

29. Explain the term “return of loss” under the Income-tax Act, 1961. Can any loss be carried forward
even if return of loss has not been filed as required?

Solution:
A return of loss is a return which shows certain losses. Section 80 provides that the losses
specified therein cannot be carried forward, unless such losses are determined in pursuance of
return filed under the provisions of section 139(3).

Section 139(3) states that to carry forward the losses specified therein, the return should be filed
within the time specified in section 139(1).

Following losses cannot be carried forward in the case of a belated filing:

Business loss; Speculative business loss; Specified business loss u.s.35AD; Loss under the head
“capital gains” and loss from the activity of owning and maintaining race horses. However, loss
from house property and unabsorbed depreciation can be carried forward even if return of loss
has not been filed in time.
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QUOTING OF AADHAR NUMBER [SECTION 139AA]

1. Mandatory quoting of Aadhar Number:

Every person is required to mandatorily quote Aadhar Number:

(a) in the application form for allotment of PAN

(b) in the return of income

2. Mandatory quoting of Enrolment Id, where person does not have Aadhar Number:
If a person does not have Aadhar Number, he is required to quote Enrolment ID of Aadhar
application form in the application form for allotment of PAN or in the return of income
furnished by him. Enrolment ID means a 28 digit Enrolment Identification Number issued to a
resident at the time of enrolment.

3. Intimation of Aadhar Number to prescribed Authority:

Every person who has been allotted PAN and who is eligible to obtain Aadhar Number, shall
intimate his Aadhar Number to prescribed authority on or before a date as may be notified by
the Central Government (on or before 31st March, 2022).

4. Consequences of failure to intimate Aadhar Number:

If a person fails to intimate the Aadhar Number, the PAN allotted to such person shall be
deemed to be invalid and the other provisions of the Act shall apply, as if the person had not
applied for PAN. Late fee if not intimated before 31st March, 2022 shall be Rs.1000 u.s.234H.

5. The provisions of quoting Aadhar shall not apply in the following cases:
a. Individuals residing in the States of Assam, Jammu and Kashmir and Meghalaya;
b. Non-resident;
c. Very senior citizen;
d. Not a citizen of India.

30. Mr.A employed with B Pvt. Ltd. residing in Chennai, filed his return of income on 30th July. He has
no other income other than salary. He however has failed to link his aadhar with PAN as on
return filing date.

1. What is the last date for linking aadhar with PAN?

2. What is the consequences if he has linked aadhar with PAN on 31st August, 2022?
3. Are there any exceptions provided u.s.139AA from quoting of Aadhar number?

Solution:
a) On or before 31st March, 2022.

b) PAN will become inoperative if not linked before 31.03.2022. If aadhar is linked with PAN
on 31st August, 2022, Mr.A is required to pay a late fee of Rs.1,000 u.s.234H and PAN will
become operative within 30 days from the date aadhar was linked with PAN.

c) Refer para 5 above

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SELF-ASSESSMENT – SECTION 140A

Where any tax is payable on the basis of any return required to be furnished under section 139,
after taking into account:–

(i) the advance tax paid,

(ii) the tax deducted or collected at source

the assessee shall be liable to pay such tax together with interest and fees before furnishing the
return.

Order of adjustment of amount paid by the assessee:

Where the amount paid by the assessee u.s.140A falls short of the aggregate of the tax, interest
and fees, the amount so paid shall first be adjusted towards the fees payable and thereafter
towards interest and the balance shall be adjusted towards the tax payable.

Additional problems:

31. Paras aged 55 years is resident of India. During the F.Y. 2023-24, interest of Rs.2,88,000 was credited
to his Non-resident (External) Account with SBI. Rs.30,000, being interest on fixed deposit with SBI,
was credited to his saving bank account during this period. He also earned Rs.3,000 as interest on this
saving account. Is Paras required to file return of income? What will be your answer, if he had
incurred Rs.3 lakhs as travel expenditure of self and spouse to US to stay with his married daughter for
some time? Sum no.1; page 8.8

Computation of total income of Mr.Paras for A.Y.2024-25

Income from other sources:

Interest earned from Non-resident (External) Account exempt u.s.10(4)
Interest on fixed deposit with SBI 30,000
Interest on savings bank account 3,000
Gross Total Income 33,000
Less: Section 80TTA 3,000
Total Income 30,000

Interest from NRE A/c is exempt u.s.10(4), assuming that Mr.Paras has been permitted by RBI to
maintain the aforesaid account.

Since the total income before giving effect to Chapter VI-A deductions is less than the basic
exemption limit of Rs.2,50,000, he is not required to file return of income for A.Y.2024-25.

If he has incurred expenditure of Rs.3 lakhs on foreign travel of self and spouse, he has to
mandatorily file his return of income on or before the due date u.s.139(1).
 124

32. Mr.Mukesh born on 1.4.1964 furnished his original return for Assessment Year 2024-25 on
30.07.2024. He has shown salary income of Rs.7.30 lakhs (computed) and interest from his
savings bank of Rs.12,700 and from his fixed deposits of Rs.43,000. He also claimed deduction
under section 80C of Rs.1.50 lakhs. He had claimed deduction u/s 80D of Rs.25,000. He also
claimed deduction u/s 8OTTA of Rs.10,000. His employer had deducted TDS of Rs.33,950 from his
salary, which he adjusted fully against tax payable. Ignore Default tax regime.

He paid health insurance premium of Rs.38,000 by account payee cheque for self and wife. He
paid Rs.1,500 in cash for his health check-up and Rs.4,000 by cheque for preventive health check-
up of his parents. He also paid medical insurance premium of Rs.33,000 during the year to insure
the health of his mother, aged 80 years, staying with his younger brother. He further incurred
medical expenditure of Rs.25,000 on his father, aged 81 years, who is staying with him. His father
is not covered under any Mediclaim policy.

He seeks your advice about possibility of revising his return and if possible file his revised return.
Analyze the above narrated facts as per applicable provisions of the Income-tax Act. 1961. Does
he need to revise his return and for what reasons? Please advise him suitably and if needed, re-
compute his income and tax payable or refund due for the Assessment Year 2024-25.

33. Mr.Hari aged 57 years is a resident of India. He provides you the following details of his incomes
pertaining to F.Y. 2023-24.

Interest on Non-Resident (External) Account maintained with

State Bank of India as per RBI stipulations Rs.5,35,000
Interest on savings bank account maintained with SBI Rs.8,000
Interest on Fixed Deposits with Punjab National Bank Rs.40,000

He seeks your advice on his liability to file return of income as per Income-tax Act, 1961 for the
Assessment Year 2024-25.

What will be your answer, if he has incurred Rs.4 lakhs on travel expenses of his newly married
son and daughter in law's honeymoon in Canada?

Computation of total income of Mr.Hari for A.Y.2024-25

Income from other sources:

Interest earned from Non-resident (External) Account exempt u.s.10(4)
Interest on fixed deposit with SBI 40,000
Interest on savings bank account 8,000
Gross Total Income 48,000
Less: Section 80TTA 8,000
Total Income 40,000

Interest from NRE A/c is exempt u.s.10(4), assuming that Mr.Hari has been permitted by RBI to
maintain the aforesaid account.
 125

Since the total income before giving effect to Chapter VI-A deductions is less than the basic
exemption limit of Rs.2,50,000, he is not required to file return of income for A.Y.2024-25.

If he has incurred expenditure of Rs.4 lakhs on foreign travel of his son and daughter in law, he has
to mandatorily file his return of income on or before the due date u.s.139(1).

34. Mrs.S is a US Citizen. She got married to Mr.R, an Indian citizen and resident of India, in the year
2017. Since then, she has been staying in India. She has a Bank account in US. She sold a
residential house in US and earned a long term capital gain of Rs.2 lakhs. She invested the whole
sale consideration in Capital Gain bonds u.s.54EC so that no long term capital gain is taxable. She
does not have any source of income in India during the P.Y.2023-24. Is she required to furnish her
return of income? If yes, can she furnish a belated return?

Solution:
Mrs.S is a resident and ordinary resident for A.Y.2024-25. Her taxable income without giving
effect to Section 54EC is Rs.2 lakhs (less than basic exemption limit). However, she has a bank
account in US. Hence, she is required to file her income tax return for A.Y.2024-25.

A belated return can be filed at any time:

a. before three months prior to the end of the relevant assessment year (i.e. 31.12.2024); or
b. before the completion of the assessment (whichever is earlier).

Therefore, Mrs.S can file a belated return before 31.12.2024.

 126

CHAPTER 18A: SPECIAL ECONOMIC ZONE – 10AA

Deduction u/s.10AA: Units located in SEZ and deriving profits from export:

To whom available: Any assesse engaged in manufacture or production of any article

or thing or any service in a SEZ on or after 01.04.2005 but before
01.04.2021.

This deduction is not available for an assessee who pays tax

under the default tax regime.

Amount of deduction: 100% of export profits for first five commencing from the year of
manufacture

50% of export profits for next five years

50% of export profits (or) amount transferred to “SEZ Re-

investment Reserve Account” whichever is less shall be allowed
as deduction for another five years.

Computation of deduction u.s.10AA:

Profits of SEZ unit (x) Export turnover of SEZ unit

Total turnover of SEZ unit

Return of Income: To be filed before due date u.s.139(1).

“Export Turnover” means amount brought into India in convertible foreign exchange within
six months from the end of the previous year or within the time permitted by the RBI.

“Export Turnover” does not include:

Freight, telecommunication charges and insurance charges for delivery of goods outside India.

1. Mrs.V, a resident individual, is running a SEZ unit, as well as a unit in Domestic Tariff Area
(DTA). She furnishes the following details relating to the year ended 31.03.2024, pertaining to
these two units
(Rs. in lakhs)
DTA unit SEZ unit
Export turnover 100 1000
Total turnover 400 1100
Net profit 50 220

Compute the deduction available u/s.10AA assuming Mrs.V has opted for optional tax regime:
(i) When the SEZ unit had been set up on 12.03.2016; and
(ii) When the SEZ unit had been set up on 12.08.2020.
 127

2. Mr.Rudra has one unit at Special Economic Zone (SEZ) and other unit at Domestic Traffic Area
(DTA). The company provides the following details for the previous year 2023-24.

Particulars Mr.Rudra (Rs.) Unit in DTA (Rs.)

Total Sales 6,00,00,000 2,00,00,000
Export Sales 5,60,00,000 1,60,00,000
Net Profit 80,00,000 20,00,000

Proceeds from export sales in SEZ received in convertible foreign exchange by 30.09.2024 is
Rs.3,00,00,000. He has exercised the option of shifting out of the default tax regime. Calculate
the eligible deduction under section 10AA of the Income-tax Act, 1961, for the Assessment Year
2024-25, in the following situations:

i. If both the units were set up and start manufacturing from 22.05.2015
ii. If both the units were set up and start manufacturing from 14.05.2019

3. XYZ Ltd. has two units, one unit at Special Economic Zone (SEZ) and other unit at Domestic
Tariff Area (DTA). The unit in SEZ was set up and started manufacturing from 12.3.2015 and
unit in DTA from 15.6.2018. Total turnover of XYZ Ltd. and Unit in DTA is Rs.8,50,00,000 and
Rs.3,25,00,000, respectively. Export sales of unit in SEZ and DTA is Rs.2,50,00,000 and
Rs.1,25,00,000, respectively and net profit of Unit in SEZ and DTA is Rs.80,00,000 and
Rs.45,00,000, respectively.

XYZ Ltd. would be eligible for deduction under section 10AA for P.Y. 2023-24 for:-
(a) Rs.38,09,524
(b) Rs.19,04,762
(c) Rs.23,52,941
(d) Rs.11,76,471

4. Mr.Suraj (aged 48 years) furnishes the following particulars for the previous year 2023-24 in
respect of an industrial undertaking established in "Special Economic Zone" in March 2018. It
began manufacturing in April 2018.

Particulars (Rs.)
Total sales 85,00,000
Export sales [proceeds received in India] 45,00,000
Domestic sales; 40,00,000
Profit from the above undertaking 20,00,000

Export Sales of F.Y. of 2023-24 include freight and insurance of Rs.5 lacs for delivery of goods
outside India.

Based on the facts of the case scenario given above, choose the most appropriate answer to the
following questions:
 128

i. Compute the amount of deduction available u.s.10AA to Mr.Suraj for A.Y. 2024-25.
(a) Rs.10,00,000
(b) Rs.4,70,577
(c) Rs.5,62,500
(d) Rs.5,00,000

ii. Compute the amount of export turnover and total turnover for purpose of computing
deduction under section 10AA for A.Y. 2024-25.
(a) Rs.45,00,000 and Rs.85,00,000, respectively
(b) Rs.40,00,000 and Rs.80,00,000, respectively
(c) Rs.45,00,000 and Rs.80,00,000, respectively
(d) Rs.40,00,000 and Rs.85,00,000, respectively

5. A company has two units developing and exporting computer software. Unit A is in a special
economic zone and qualifies for exemption u.s.10AA. It furnishes the following information of
its 3rd year of operation ending on 31.03.2024:

Profit and Loss Account for the year ended 31.03.2024 (in lacs)

Unit A Unit B Unit A Unit B

Salaries 270 160 Exports 600 780
Admin exps 210 260 Domestic sales 100 220
Net profit 265 675

Unit A: Foreign exchange received into India by 30.09.2024 amounts to Rs.520 lakhs. Export
of Rs.600 lakhs includes insurance and freight of Rs.100 lakhs. Export realization of Rs.520
lakhs includes insurance and freight of Rs.70 lakhs. Compute for Unit A the amount of export
turnover and the total turnover for arriving at the deduction u.s.10AA.

Solution:

Total turnover:
Export turnover including insurance and freight: Rs.600 lacs
Less: Insurance and freight for delivery of goods outside India Rs.100 lacs
Rs.500 lacs
Domestic turnover: Rs.100 lacs
Total turnover Rs.600 lacs

Export turnover:
Amount of foreign exchanged received up to 30.09.2024 Rs.520 lacs
Less: Insurance and freight included in the above Rs.70 lacs
Export turnover Rs.450 lacs
 129

CHAPTER 18B: ALTERNATIVE MINIMUM TAX

1. AMT provisions are not applicable under the Default Tax Regime.

2. AMT provisions shall apply to any person who has claimed deduction under:
a. Section 10AA; or
b. Section 35AD; or
c. Section 80JJAA, Section 80QQB & Section 80RRB

3. AMT provisions are applicable for all assesses (individuals, huf, firms) except companies.

4. NO AMT: AMT provisions shall NOT apply to an Individual or HUF if the Adjusted Total
Income of such person does not exceed Rs.20 lakhs.

5. AMT rate is calculated @ 18.5% plus surcharge and education cess

6. Adjusted Total Income u.s.115JC is computed as follows:

Step 1: “Taxable Income” as per the normal provisions xxx

Step 2: Add: Deduction claimed (3 items):

u.s.10AA xxx
u.s.35AD (net of depreciation allowed) xxx
u.s.80JJAA, 80QQB & 80RRB xxx
Step 3: Adjusted Total Income xxx

7. AMT CREDIT: Excess tax paid on account of AMT shall be carried forward as “AMT Credit” for
a period of 15 years and can be set off against future tax liability.

8. STEPS TO SOLVE PROBLEMS:

A. Under Optional tax regime:

Step 1: Compute total income and tax as per normal provisions
Step 2: Compute adjusted total income and AMT
Step 3: Tax liability is the higher of Step 1 and Step 2

B. Under Default tax regime

Step 1: Compute total income and tax as per Section 115BAC(1A) (new slab rates)
Step 2: AMT is not applicable under DTR

C. Tax liability shall be A (OTR) or B (DTR) whichever is more beneficial to the assessee
 130

PROBLEMS:
1. Compute the tax payable by Mr.A & by Mr.B for A.Y.2024-25:

Particulars Mr.A Mr.B

Total Income (after deduction u.s.10AA) 40,00,000 10,00,000
Deduction claimed u/s.10AA 25,00,000 8,50,000

Also compute the amount of AMT credit to be carried forward. Ignore DTA.

2. Mr.R (age 62 years) furnishes the following information for the year ending 31.03.2024:

Income from business Rs.20,00,000 (set up in SEZ)

Deduction u.s.10AA Rs.10,00,000
Income from royalty (lump-sum) from books Rs.5,00,000 (qualifies for deduction u.s.80QQB)
Income from other sources Rs.1,00,000 (including interest on fixed deposit with SBI Rs.72,000)
Deduction u.s.80C Rs.1,50,000

Compute:
(i) Total income and tax liability for AY 24-25 under the optional tax regime.
(ii) Total income and tax liability for AY 24-25 under the default tax regime.
(iii) Advice which is more beneficial.

3. Mr.X, an individual set up an unit in SEZ in the financial year 2019-20 for production of
washing machines. The unit fulfills all the conditions of Section 10AA.

During the financial year 2022-23, he has also set up a warehousing facility in a district of
Tamil Nadu for storage of agricultural produce. He fulfills all the conditions of Section 35AD.
Capital expenditure in respect of warehouse amounted to Rs.75 lakhs (including cost of land
Rs.10 lakhs), the payment of which has been made by an account payee bank draft. The
warehouse became operational with effect from 1st April, 2023 and the expenditure of Rs.75
lakhs was capitalized in the books on that date.

Relevant details for the financial year 2023-24 are as follows:

Profit of unit located in SEZ Rs.40,00,000

Export sales of above unit Rs.80,00,000
Domestic sales of above unit Rs.20,00,000

Profit from operation of warehousing facility (before

considering deduction u.s.35AD) Rs.1,05,00,000

Compute:
(i) Total income and tax liability for AY 24-25 under the optional tax regime.
(ii) Total income and tax liability for AY 24-25 under the default tax regime.
(iii) Advice which is more beneficial.
 131

4. Mr.Uttam presents you following data related to his tax liability for A.Y. 2024-25:

Particulars Rs. in lakhs

Tax Liability as per regular provisions of Income-tax Act. 1961 15
Tax Liability as per section 115JC 12
AMT credit brought forward from A.Y. 2023-24 5

What shall be the tax liability of Mr.Uttam for A.Y. 2024-25?

1. Rs.12 lakhs
2. Rs.15 lakhs
3. Rs.10 lakhs
4. Rs.7 lakhs

5. Mr.Bhagat, an individual aged 50 years, set up a unit in Special Economic Zone (SEZ) in
F.Y.2018-19 for the production of computers. The unit fulfills all the conditions of section 10AA
of the Income-tax Act, 1961.

During F.Y.2022-23, he set up a hospital in a district of Maharashtra with 110 beds for patients.
It fulfills all the conditions of section 35AD. Capital expenditure in respect of the said hospital
amounted to Rs.65 lakhs (comprising of cost of land Rs.15 lakhs and the balance was the cost of
construction of building). The hospital became operational with effect from 1st April, 2023 and
the expenditure of Rs.65 lakhs was capitalized in the books of accounts on that date.

Relevant details of F.Y.2023-24 are as follows:

Profit of unit located in SEZ Rs.36 lakhs

Export sales of SEZ unit Rs.75 lakhs
Domestic sales of SEZ unit Rs.25 lakhs

Profit from operation of hospital facility (before

considering deduction under section 35AD) Rs.90 lakhs

Compute:
(i) Total income and tax liability for AY 24-25 under the optional tax regime.
(ii) Total income and tax liability for AY 24-25 under the default tax regime.
(iii) Advice which is more beneficial. May 2023 – 7 marks

6. From the following particulars furnished by Mr.Suresh, aged 53 years, a resident Indian for the
previous year ended March 31, 2024, you are requested to compute his total income and tax
payable for the Assessment Year 2024-25 (Assuming optional tax regime).

a. He sold his vacant land on 09.12.2023 for Rs.15 lakhs. The Stamp Duty Value (SDV) of land
at the time of transfer was Rs.20.55 lakhs. The fmv. of the land as on 1st April, 2001 was Rs.6
lakhs (SDV is Rs.5 lakhs). This land was acquired by him on 05.08.1996 for Rs.3.40 lakhs. He
had incurred registration expenses of Rs.15,000 at that time. CII: 01-02 is 100 & 23-24 is 348.
 132

b. He owns an industrial undertaking established in a Special Economic Zone (SEZ) and which
had commenced operation during the financial year 2020-21. Total turnover of the
undertaking was Rs.300 lakhs, which includes Rs.120 lakhs from export turnover. This
industrial undertaking fulfills all the conditions of section 10AA of the Income-tax Act, 1961.
Profit from this industrial undertaking is Rs.30 lakhs.

c. He has income of Rs.10,000 from crossword puzzles and Rs.15,000 gross interest from bank
fixed deposit.

d. Tuition fees of Rs.36,000 for his three children to a school. The fees being Rs.12,000 p.a. per
child.

Compute:
(i) Total income and tax liability for AY 24-25 under the optional tax regime.
(ii) Total income and tax liability for AY 24-25 under the default tax regime.
(iii) Advice which is more beneficial.
 133

CHAPTER 18C: INCOMES EXEMPT U.S.10

1. State with reasons in brief whether the following statements are true or false:

a. Mr. A, a member of a HUF, received ₹ 1,00,000 as his share from the income of the HUF. The
same is to be included in his chargeable income.

b. Share of profit received by a partner from his firm is exempt u.s.10(2A)

c. Interest on moneys standing to the credit of individual in his Non-resident (External) Account
(NRE A/c) is exempt from tax.

d. Interest on post office savings account is exempt u.s.10(15).

e. Compensation on account of disaster received from a local authority by an individual or his/her

legal heir is taxable

f. Maturity amount received from LIC is exempt but maturity amount received from keyman
insurance policy is taxable.

g. Amount withdrawn from Public Provident Fund is exempt from tax.

h. Scholarship granted to meet the cost of education shall be fully exempt.

i. Daily allowance received by MP / MLA is fully exempt.

j. Pension received by a recipient of gallantry award is exempt from income-tax.

k. Pension received by the widow of the member of the armed forces, who died during the course
of operational duties is exempt from tax.

l. Exemption is available to a Sikkimese individual, only in respect of income from any source in
the State of Sikkim.

m. Income earned by a minor child is exempt up to Rs.1,500 u.s.10(32) under optional tax regime.

n. Agricultural land in urban area used for agricultural purposes by the assessee for 4 years was
compulsorily acquired by Government of India and compensation fixed by it Rs.25 lacs.

o. Lumpsum amount received by a senior citizen from a bank under Reverse Mortgage Scheme is
exempt from tax under section 10(43)

p. Amount received by a shareholder on buy-back of shares by a company is exempt from tax.

q. Allowances or perks paid by Government of India to an Indian citizen for rendering services
outside India is fully exempt.
 134

Answer:

False: Share received by member out of the income of the HUF is exempt u.s.10(2)

True: Share of profit received by a partner is exempt in his hands u.s.10(2A)

True: Interest earned by a non-resident Indian in his NRE a/c with a bank is fully exempt
u.s.10(4)

True: Rs.3,500 in a single account and Rs.7,000 in a joint account is exempt u.s.10(15)

False: As per section 10(10BC), any amount received as compensation by an individual or

his/her legal heir on account of any disaster from the Central Government, State
Government or a local authority is exempt from tax.

True: Maturity amount received from LIC shall be exempt from tax u.s.10(10D) provided the
premium paid does not exceed the prescribed %. Amount received from maturity of
keyman insurance policy is taxable either under the head ‘salaries’ or ‘PGBP’ or ‘IFOS’.

True: Any amount withdrawn from PPF shall be exempt from tax u.s.10(11)

True: The value of scholarship granted to meet the cost of education would be exempt from
tax. Section 10(16)

True: Daily allowance received by MP or MLA shall be fully exempt u.s.10(17). This exemption
is not available under the default tax regime.

True: Exempt from tax u.s.10(18). It includes pension received by an individual who has been
awarded ‘ParamVir Chakra’ or ‘MahaVir Chakra’ or ‘Vir Chakra’ (gallantry award).

True: Exempt from tax under section 10(19)

False: Income from any source in the State of Sikkim, dividend income and interest on
securities is exempt in the hands of a Sikkimese individual. This exemption is not
available to a Sikkimese woman who, on or after 1st April, 2008, marries a non-
Sikkimese individual.Section 10(26AAA).

False: True. Such exemption is not available under the default tax regime.

True: Exempt u.s.10(37) – Refer capital gains (section 54B)

True: Exempt u.s.10(43) – Refer capital gains (reverse mortgage scheme)

True: Exempt u.s.10(34A) – Refer capital gains (buy-back)

True: Fully exempt u.s.10(7) – Refer salaries.

 135

CHAPTER – 18D: INCOME DEEMED TO ACCRUE OR ARISE IN INDIA

Income deemed to accrue or arise in India
Any income accruing or arising to an assessee in any place outside India whether directly or
indirectly through any “business connection” in India would be deemed to accrue or arise in
India.Hence, taxable in India.

What is Business Connection?

‘Business Connection’ shall include any business activity carried out through a person acting on
behalf of the non-resident.

However, in the case of a non-resident, the following shall NOT be treated as business
connection in India:

1. Purchase of goods in India for export:

In the case of a non-resident, no income shall be deemed to accrue or arise in India to
him through or from operations which are confined to the purchase of goods in India for
the purpose of export.

2. Collection of news and views in India for transmission out of India:

In the case of a non-resident, being a person engaged in business of running a news
agency or of publishing newspapers, magazines or journals, no income shall be deemed
to accrue or arise in India to him through or from activities which are confined to the
collection of news and views in India for transmission out of India.

3. Shooting of cinematograph films in India:

In the case of a non-resident, no income shall be deemed to accrue or arise in India
through or from operations which are confined to the shooting of any cinematograph
film in India, if such non-resident is:

a) an individual, who is not a citizen of India; or

b) a firm which does not have any partner who is a citizen of India or who is
resident in India; or
c) a company which does not have any shareholder who is a citizen of India or who
is a resident in India.

4. Activities confined to display of rough diamonds in SNZs:

In the case of a foreign company engaged in the business of mining of diamonds, no
income shall be deemed to accrue or arise in India to it through or from the activities
which are confined to display of uncut and unassorted diamonds in any special zone
notified by the Central Government.
 136

Problems:
1. Examine the tax implications of the following transactions for the A.Y.2024-25:

Government of India has appointed Mr.Rahul as an ambassador in Japan. He received salary of

Rs.7,50,000 and allowances of Rs.2,40,000 during the previous year 2023-24 for rendering his
services in Japan. He is an Indian Citizen having status of non-resident in India for the previous
year 2023-24.

Ms.Juhi, a non-resident in India is engaged in operations which are confined to purchase of goods
in India for the purpose of export. She has earned Rs.2,50,000 during the previous year 2023-24.
Examine the tax implication.

Mr.James, a NRI, borrowed Rs.10,00,000 on 01.04.2023 from Mr.Akash who is also a non-resident
and invested such money in the debentures of an Indian Company. Mr.Akash has received interest
@ 12% per annum.

Mr.Naveen, a non-resident in India, has earned Rs.3,00,000 as royalty for a patent right made
available to Mr.Rakesh who is also a non-resident. Mr.Rakesh has utilized patent rights for
development of a product in India and 50% royalty is received in Indian and 50% outside India.

Answer:
Salary paid by GOI to an Mr.Rahul, an Indian citizen (non-resident),for rendering services
outside India is deemed to accrue or arise in India. Hence, taxable in the hands of Mr.Rahul.
However, allowances and perquisites paid/provided by the GOI is fully exempt from tax
u.s.10(7).

Not taxable:In case of a non-resident, NO income shall be deemed to accrue or arise in India to
her through or from operations which are confined to the purchase of goods in India for the
purpose of export. Hence, Rs.2,50,000 earned during the previous year 2023-24 shall not be
taxable in the hands of Ms.Juhi as it is NOT deemed to accrue or arise in India.

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 debentures of
Indian company for earning interest and not for the purposes of business or profession. Hence,
it is not taxable in India.

Taxable: Royalty received by a non-resident from a non-resident is deemed to accrue or arise

in India if the patents are utilized for the purpose of carrying on business in India. Mr.Rakesh
has utilized patent rights for development of a product in India, hence, it is deemed to accrue or
arise in India, hence taxable in the hands of Mr.Naveen (a non-resident).

2. Discuss the taxability of the following items in the hands of different persons briefly explaining the
applicable provisions of the Income-tax Act:

Mr.J, a non-resident is having a plot of land in Chennai. He sells this plot to another non-resident
outside India. The consideration is received outside India in foreign currency.

Mr.A is having a house property in India. The property is let out by him to a foreign company. The
rent agreement is entered outside India. Monthly rent is also received outside India.
 137

Government of Rajasthan has borrowed money from ABC Express Bank, a foreign bank. The
interest payable to ABC Express bank is remitted outside India.

Mr.B, a citizen of India, is appointed by Reliable Industries Ltd. in their Dubai Branch. Mr.B is a
non-resident and receives salary outside India.

Answer:
Capital asset is located in India. Income is deemed to accrue or arise in India. Hence, taxable in
the hands of Mr.J.

House property is located in India. Hence, income is deemed to accrue or arise in India. Hence
taxable in the hands of Mr.A.

Interest paid by Government of Rajasthan on money borrowed from ABC Express Bank, is
deemed to accrue or arise from India. Hence, it is taxable in the hands of ABC Express Bank.

Services are rendered outside India and salary is also received outside India. Not deemed to
accrue or arise in India, hence not taxable in the hands of a non-resident.

3. Mr.Thomas, a non-resident and citizen of Japan entered into following transactions during the
previous year ended 31.03.2024. Examine the tax implications in the hands of Mr.Thomas for the
AY 2024-25 as per Income-tax Act, 1961. (Give brief reasoning)

(a) Interest received from Mr.Marshal, a non-resident outside India (the borrowed fund is used
by Mr.Marshal for investing in Indian company's debt fund for earning interest).

(b) Received Rs.10 lakhs in Japan from a business enterprise in India for granting license for
computer software (not hardware specific).

(c) He is also engaged in the business of running news agency and earned income of Rs.10
lakhs from collection of news and views in India for transmission outside India.

(d) He entered into an agreement with SKK & Co., a partnership firm for transfer of technical
documents and design and for providing services relating thereto, to set up a Denim Jeans
manufacturing plant, in Surat (India). He charged Rs.10 lakhs for these services from SKK
& Co.

Answer:

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.

Taxable:Consideration received for grant of license for computer software is Royalty. Hence,
the amount of Rs.10 lakhs payable by a resident (business enterprise in India) for grant of
license for computer software would be royalty which is deemed to accrue or arise in India in
the hands of Mr.Thomas, a non-resident, since it is for the purpose of business in India. Hence,
the royalty received is taxable in India in the hands of Mr.Thomas.
 138

Not taxable:No income shall be deemed to accrue or arise in India to Mr.Thomas through or
from activities which are confined to the collection of news and views in India for transmission
out of India. Hence, Rs.10 lakhs is not taxable in India in the hands of Mr.Thomas.

Taxable:Fees for technical services paid for services utilized in India. Deemed to accrue or
arise in India. Hence, it is taxable in the hands of Mr.Thomas.

4. Discuss whether the following incomes are taxable or not in India:—

1. A non-resident purchases goods from India and sells these goods abroad.

2. A non-resident is engaged in the business of publication of a magazine from Canada. Some

of the news published in the magazine are collected from India.

3. X Ltd., a non-resident foreign company, is engaged in the business of shooting a

cinematograph film in India. The film after its completion is sold to another non-resident
outside India. None of shareholders of X Ltd. is an Indian citizen or resident in India.

4. A non-resident owns a commercial building in Bombay which is transferred to another

non-resident outside India. The consideration is payable in a foreign currency outside
India.

5. A non-resident owns a residential house in Delhi which is given on rent to a foreign

embassy. Rent is, however, payable outside India in a foreign currency.

6. Interest on loan is paid by the Government of India to a non-resident outside India.

7. Y Ltd., a non-resident, gets royalty from Z Ltd., a non-resident, outside India. Royalty is,
however, payable by Z Ltd. in relation to a business of manufacturing carried on by it in
India.

8. A Ltd., a non-resident, gets interest from B Ltd., an Indian company, outside India. The
capital was borrowed by B Ltd. for the purpose of a business carried on by it outside India.

9. C, a non-resident Indian, is presently appointed by the Government of India in its embassy

at Saudi Arabia. Salary for rendering service is paid to him in a foreign currency outside
India.

10. D, a non-resident Indian, is presently appointed by an Indian company in its foreign branch
at Sudan. Salary is paid to him outside India in a foreign currency.

Answers:
1. Not taxable Not deemed to accrue or arise in India
2. Not taxable Not deemed to accrue or arise in India
3. Not taxable Not deemed to accrue or arise in India
4. Taxable Deemed to accrue or arise in India
5. Taxable Deemed to accrue or arise in India
6. Taxable Deemed to accrue or arise in India
7. Taxable Deemed to accrue or arise in India
8. Not taxable Not deemed to accrue or arise in India
9. Taxable Deemed to accrue or arise in India
10. Not taxable Not deemed to accrue or arise in India
 139

CHAPTER – 19: TOTAL INCOME & TAX LIABILITY

Problems on computation of total income and tax liability under both tax regimes:

1. From the following particulars furnished by Mr.Ganesh, aged 58 years, a resident Indian for the
previous year ended 31.03.2024, you are requested to compute his total income and tax liability
under normal as well as special provisions (AMT), if any, applicable to him for A.Y. 2024-25.

i. He occupies ground floor of his residential building and has let out first floor for residential
use at Rs.2,28,000 p.a.Municipal taxes paid Rs.60,000 for the current financial year.

ii. He owns an industrial undertaking established in a SEZ which had commenced operations
during the financial year 2020-21. Total turnover of the undertaking was Rs.200 lakhs, which
includes Rs.140 lakhs from export turnover. This industrial undertaking fulfills all the
conditions of section 10AA of the IT Act, 1961. Profit from this industry is Rs.25 lakhs.

iii. He received royalty of Rs.2,88,000 from abroad for a book authored by him on the nature of
artistic. The rate of royalty is 18% of value of books and expenditure for earning this royalty
was Rs.40,000. The amount remitted to India till 30thSeptember, 2024 is Rs.2,30,000.

iv. Received, 40,000 as interest on saving bank deposits.

v. He also sold his vacant land on 10.11.2023 for Rs.12 lakhs. The stamp duty value of land at
the time of transfer was Rs.16.44 lakhs. The fmv of the land as on 01.04.2001 was Rs.4 lakhs.
This land was acquired by him on 05.08.1995 for Rs.1.80 lakhs. He had incurred registration
expenses of Rs.10,000 at that time. CII 2001-02 is 100 and 2023-24 is 348.

vi. He paid the following amounts, out of his taxable income:

(a) Life insurance premium of Rs.39,000 paid on life insurance policy of son, who is not
dependent on him.
(b) Life insurance premium of Rs.48,000 on policy of his dependent father,
(c) Tuition fees of Rs.42,000 for his three children to a school. The fees being Rs.14,000 p.a.
per child.

Compute:
(i) Total income and tax liability (including AMT) for AY 24-25 under optional tax regime.
(ii) Total income and tax liability for AY 24-25 under the default tax regime.
(iii) Advice which is more beneficial.

2. Mr.Arun is working as a Senior Manager in ABCD Bank, a listed commercial bank, in Delhi since
January 2008. Following are the details of his income for the previous year 2023-24:

House rent allowance Rs.15,000 p.m.

Basic Salary Rs.20,000 p.m.
Dearness Allowance Rs.5,000 p.m.
(50% forms part of retirement benefits)
 140

Bank paid Rs.5,000 p.a. as premium on personal accident insurance policy taken for Mr. Arun.

The bank also allotted 2000 sweat equity shares to Mr.Arun in May 2023 @ Rs.1,300 per share. The
fmv of the share was Rs.1,500 on the date of exercise of option by Mr.Arun. He sold all the shares
for Rs.2,100 on 31.03.2024 on registered stock exchange. Assume stt.has been paid.

He transferred Rs.50,000 p.m. as rent, to the bank account of his mother, Mrs.Nirmal, who owned
the house (municipal valuation Rs.2 lakh) in which he stayed at Delhi.

He also owns a house property at Kanpur, whose municipal valuation is Rs.2,60,000 p.a. The fair
rent is Rs.2,20,000 p.a. and the standard rent fixed by the Rent Control Act is Rs.2,40,000 p.a. The
property was let out for a rent of Rs.22,000 p.m. throughout the previous year. He also paid
municipal taxes @ 10% of MV. of the house at Kanpur during the previous year.

He has a son Aditya, aged 12 years having PAN, who is earning interest on a fixed deposit created by
his late grandfather (Mr.Arun's father) in his name. Gross interest credited by the bank during the
year amounted to Rs.43,750.

He received the following gifts from his friends and relatives during the P.Y. 2023-24:
2. Gold chain from friend worth Rs.70,000
3. LED TV set from colleagues on completing 15 years in Bank Rs.1,00,000
4. Rs.51,000 in cash from married sister of wife.

Compute Mr.Arun's total income and the gross tax liability for the A.Y. 2024-25 in a manner
most beneficial to him.

3. Ms.Aanchal aged 40 years is an advocate (Taxation). She keeps her books of accounts on cash basis.
Her profit & loss account for the year ended on March 31, 2024 is as follows:

Profit and Loss Account for the year ending March 31, 2024

Staff Salary 20,10,000 Fees earned from:

Rent 9,00,000 Taxation services 20,00,000
Administrative expenses 6,50,000 Appeals 15,00,000
Incentive to office staff 2,00,000 Consultancy 15,00,000 50,00,000
Meetings, Seminars
and conferences 1,70,000 Dividend from an Indian
Purchase of car (for company (gross) on 01.07.2023 11,00,000
official use) on 01.07.2023 3,00,000 Interest on deposit certificates
Repairs, maintenance and issued under gold monetization
petrol of car 35,000 scheme, 2015 25,000
Travelling expenses 5,00,000 Gifts 1,00,000
Municipal tax paid in Honorarium received for
respect of HP 9,000 valuation of answer papers 50,000
Net Profit 15,91,000 Rent received (HP) 90,000
 141

Other information:
Gifts represent fair market value of an ‘iPhone 14 pro', which was given by one of her clients for
successful presentation of case in the Income Tax Appellate Tribunal.

Administrative expenses include Rs.50,000 paid to a tax consultant in cash for assisting Ms.Aanchal
in one of the professional assignments.

The travelling expenses include expenditure incurred on foreign professional tour of Rs.50,000
which was within the RBI norms.

Ms.Aanchal paid medical insurance premium for her parents (senior citizens and not dependent on
her) online amounting Rs.47,000. She also paid Rs.8,500 by cash towards preventive health check-
up for herself and her spouse.

Repairs and maintenance of car include Rs.25,000 for the period from 1.10.2023 to 30.09.2024.

She has paid Rs.1,00,000 towards advance tax during the P.Y. 2023-24.

Compute Total Income and Net Tax Payable as per the most beneficial taxation scheme for
Ms.Aanchal for the A.Y. 2024-25.

4. Mr.Kamal, having business of manufacturing of consumer items and other products, gives the
following Trading and Profit & Loss Account for the year ended 31.03.2024:

Trading and Profit & Loss Account

Particulars Rs. Particulars Rs.
Opening Stock 5,62,500 Sales 2,33,25,000
Purchases 1,88,62,500 Closing Stock 6,75,000
Freight & Cartage 1,89,000
Gross profit 43,86,000__ ______________
2,40,00,000 2,40,00,000

Bonus to staff 71,250 Gross profit 43,86,000

Rent of premises 80,250 Income-tax refund 30,000
Advertisement 7,500 Warehousing charges 22,50,000
Bad Debts 1,12,500
Interest on loans 2,51,250
Depreciation 1,07,250
Goods and Services tax 1,62,525
demand paid
Miscellaneous expenses 7,88,475
Net profit of the year 50,85,000 ____________
66,66,000 66,66,000

Income-tax refund includes amount of Rs.4,570 of interest allowed thereon.

Bonus to staff includes an amount of Rs.7,500 relating to P.Y. 2022-23, paid in the month of
December 2023.
 142

Advertisement expenses include an amount of Rs.2,500 paid for advertisement published in the
souvenir issued by a political party. The payment is made by way of an account payee cheque.

Miscellaneous expenses include:

(a) amount of Rs.15,000 paid towards penalty for non-fulfillment of delivery conditions of a
contract of sale for the reasons beyond control;
(b) amount of Rs.1,00,000 paid to Political Party by cheque.

Goods and Services Tax demand paid includes an amount of Rs.5,300 charged as penalty for
delayed filing of returns and Rs.12,750 towards interest for delay in deposit of tax.

Mr.Kamal had purchased a warehouse building of Rs.20 lakhs in rural area for the purpose of
storage of agricultural produce. This was made available for use from 15.07.2023 and the income
from this activity is credited in the Profit and Loss account under the head "Warehousing charges".

Depreciation under the Income-tax Act, 1961 works out at Rs.65,000.

Interest on loans includes an amount of Rs.80,000 paid to Mr.X, a resident, on which tax was not
deducted.Compute the total income and tax liability of Mr.Kamal for the A.Y. 2024-25 in a most
beneficial manner.

Solution: PGBP Rs.29,79,050; Income from specified business Rs.2,50,000; Section 35AD Rs.20
lacs; PGBP (total) Rs.32,29,050; Sum no.9; Page no.141 in our material – volume 1.

5. Dr.Rohan, 82 years old resident surgeon, having his Nursing Home in Mumbai, gives the following
particulars for the year ended on 31.03.2024.

Receipts Payments
Opening balance 1,25,000 Salary to Staff 3,50,000
Fees from visits to other Taxes & Insurance 26,000
hospitals (net) 5,85,000 Entertainment expenses 1,10,000
Fees for March, 2023recd Purchase of television 48,000
in April, 2023 Gift to daughter in law 60,000
IPD 40,000 Interest on loan for
OPD 45,000 85,000 repairs to property 65,000
Gift received from relatives Personal medical exps 70,000
of patients 45,000 Deposits in PPF 55,000
Dividend from shares (net) 18,900 Nursing home expenses 3,75,000
Fees received during the year 10,25,000 Prof. fees paid for
Honorarium for painting consulting services 1,20,000
in Jai Hind Art School (net) 22,500 Purchase of furniture
Income tax refund (including at home 1,35,000
interest of Rs.1,500) 12,100 Personal expenses 3,00,000
Balance c/f 2,04,500
 143

a) He keeps his books of accounts on cash basis and has not opted for the provisions of section 44ADA.

b) Salary includes Rs.60,000 paid to his sister who is a qualified nurse paid in cash.

c) Entertainment expenses include Rs.25,000 for dinner to doctors in a five star hotel.

d) Interest on loan for repairs to property includes Rs.40,000 for his residential property.

e) His daughter in law earned income of Rs.10,000 from the amount received as gift.

f) Fixed Assets values as on 01.04.2023 are as under:-

Nursing Home Equipment Rs.2,20,000; Medical books (including annual publications Rs.10,000)
Rs.35,000; Laptop Rs.40,000.

g) Television purchased for nursing home purpose on 21.09.2023 is put to use on 03.10.2023.

h) He has donated Rs.10,000 towards PM CARES Fund on 15.08.2023.

You are required to:

1. Compute the total income and tax payable by him for AY 2024-25 as per the regular
provisions of the Income-tax Act, 1961. Assume that he has opted for optional tax regime.

2. What will be his total income and tax payable, if he opts for the provisions of section
44ADA? Will it be more beneficial for him to adopt 44ADA?

Solution 5: PGBP Rs.7,88,800; Sum no.8; Page no.140 in our material – volume 1.
PGBP as per section 44ADA is Rs.9,02,500.

6. Mrs.Nisha, a resident individual aged 54 years, is carrying on business of manufacturing of textile

fabrics, as a proprietor. The turnover in the previous year 2022-23 was Rs.250 lakhs and in the
current previous year 2023-24, it is Rs.600 lakhs. The net profit as per profit and loss account as on
31.03.2024 is Rs.5,61,000.

She provides the following additional information those were not considered while making the
profit and loss account for the previous year 2023-24.

Depreciation has not been debited to profit and loss account. The details of the plant & machinery
employed in the business are given as under:

Date PARTICULARS AMOUNT

01.04.2023 Opening written down value of machinery used 4,75,000
for manufacturing purpose

03.07.2023 New machinery purchased during the year 7,25,000

payment made by an account payee cheque

10.03.2024 Sold one of the old machine 75,000

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She does not have any other fixed asset employed in the business.

Received subsidy of 20% on new machine purchased on 03.07.2023 during the previous year under
technology upgradation fund scheme from the Central Government.

She paid a job charges for the value addition on the fabrics Rs.90,000 without deduction of tax to
job worker by an account payee cheque.

Commission paid to one agent allowed as deduction in earlier assessment year amounting Rs.
50,000 has now been received back during previous year 2023-24, from the agent due to
settlement with commission agent.

Rs.25,000 paid to creditor for goods in cash.

Incurred loss of Rs.1,17,500 from an eligible transaction carried out in respect of trading in
derivatives in a recognised stock exchange.

Interest received amounting Rs.2,00,000, duly authorised by partnership deed of M/s.Ramji textiles
@ 15% p.a. on the capital employed. She is sleeping partner in the Ramji textiles.

She received Rs.60,000 by pre-mature withdrawals from deposit including interest Rs.5,000, in post
office time deposit, eligible for deduction under Section 80C.

She sold her gold bracelet (jewellery), used by her for personal purposes, on 01.05.2023 for
Rs.6,18,400, which was acquired for Rs.45,200 on 01.03.2005. A diamond was embedded onto
bracelet on 01.05.2007 of Rs.51,600. (CII: 2004-05:113; 2007-08:129 and 2023-24: 348)

She received a gold coin (bullion) worth Rs.55,000 (FMV) from her cousin (daughter of uncle)
during the previous year 2023-24.

She incurred long term loss from sale of shares of an Indian company. (STT is paid on the sale and
purchase of the shares) Rs.75,000.

She deposited a sum of Rs.50,000 with LIC of India every year for the maintenance of her mother
aged 70 years dependent upon him and suffering from severe disability.

She purchased the new residential house during the previous year and paid stamp duty and
registration fee Rs.1,55,000 to get transfer the property in her name.

You are required to compute the total income and tax payable by Mrs.Nisha for A.Y. 2024-25.
(Ignore the provisions of Default Tax Regime). Give brief note wherever necessary.

Solution 6: PGBP Rs.3,27,500; Sum no.11; Page no.143 in our material – volume 1.
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7. Mr.Krishna (aged 65 years), a furniture manufacturer, reported a profit of Rs.5,64,44,700 for the
previous year 2023-24 after debiting/crediting the following items:

Debits:
• Rs.20,000 paid to a Gurudwara registered u/s.80 G of the Income-tax Act, in cash where no
cheques are accepted.

• Rs.48,000 contributed to a university approved and notified u/s.35(1)(ii) to be used for

scientific research.

• Interest paid Rs.1,67,000 on loan taken for purchase of E-vehicle on 15.05.2023 from a
bank. The E-vehicle was purchased for the personal use of his wife.

• His firm has purchased timber under a forest lease of Rs.20,00,000 for the purpose of
business.

Credits:
• Income of Rs.4,00,000 from royalty on patent registered under the Patent Act received from
different resident clients. No TDS was needed to be deducted by any of the clients.

• He received Rs.3,00,000 from a debtor which was written off as bad in the year 2019-20.
Amount due from the debtor (which was written off as bad) was Rs.5,00,000, out of which
tax officer had only allowed Rs.3,00,000 as deduction in computing the total income for
assessment year 2020-21.

• He sold some furniture to his brother for Rs.7,00,000. The fair market value of such
furniture was Rs.9,00,000.

Other information:
 Mr.Krishna purchased a new car of Rs.12,00,000 on 1stSeptember, 2023 and the same was
put to use in the business on the same day. No depreciation for the same has been taken on
car in the books of account.

 Mr.Krishna had sold a house on 30thMarch, 2021 and deposited the long term capital gains
of Rs.25,00,000 in capital gain account scheme by the due date of filing return of income for
that year. On 1stMarch, 2024, he sold another house property in which he resided for Rs.1
crore. He earned a long term capital gain of Rs.50,00,000 on sale of this property. On
25thMarch,2024, he withdrew money out of his capital gain account and invested Rs.1crore
on construction of one house.

 Mr.Krishna also made the following payments during the previous year 2023-24: Lump-
sum premium of Rs.30,000 paid on 30thMarch, 2024, for the medical policy taken for self
and spouse. The policy shall be effective for five years i.e. from 30thMarch, 2024 to 29th
March, 2029.Rs.8,000 paid in cash for preventive health check-up of self and spouse.

Compute total income and tax payable by Mr.Krishnaunder optional tax regime for
assessment year 2024-25. Ignore provisions of Alternative Minimum Tax.

Solution 7: PGBP Rs.5,58,51,700; Sum no.13; Page no.145 in our material – volume 1.
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8. Mr.Pramod, a resident aged 55 years, is a retail trader; furnishes the following for AY 2024-25:

Trading and Profit and Loss Account for the year ended on 31.03.2024:

To Opening stock 1,15,000 By Sales 70,80,000

To Purchases 55,40,000 By Closing stock 2,10,000
To Transport charges 1,20,000
To Gross Profit c/f 15,15,000

To Salaries 3,40,000 By Gross Profit b/f 15,15,000

To Rates and taxes 24,000 By Rent from H. Property 1,80,000
To Administrative expenses 3,25,000 By Rent from furniture 1,20,000
To Depreciation 80,000
To Net Profit 10,46,000

All the sales are by account payee cheque or through bank transfers

The opening and closing stocks have been over valued by Rs.15,000 and Rs.20,000 respectively

Rates and taxes include GST liability of Rs.5,000 paid on 01.05.2024 and municipal taxes for let out
property Rs.7,000

Administrative expenses include Rs.25,000 paid as donation to National Childrens Fund and a
payment for laptop purchased on 15.05.2023 for Rs.60,000 through bank transfer.

Transport charges include Rs.30,000 paid in cash on 01.09.2023.

He incurred a loss of Rs.8,000 on sale of equity shares on 10.02.2024, which were purchased on
10.06.2023.

Depreciation includes Rs.1,200 as depreciation on Trade Marks wrongly charged at 15%.

He deposited Rs.50,000 in PPF a/c and has paid life insurance premium of Rs.60,000

He paid interest of Rs.70,000 on loan availed in FY 2018-19 for higher education of his wife.

Compute the total income and the income tax payable by Mr.Pramod for AY 2024-25 if,

(i) The business profit is computed as per normal provisions under DTR
(ii) He opts to compute business profit under presumptive taxation u.s.44AD and opts for
optional tax regime.
(iii) The business profit is computed as per normal provisions of Income-tax Act and he opts
for optional tax regime.

Which option is advantageous to Mr.Pramod?