CA Final
Paper 4
Direct Tax Laws
& International Taxation
May’24
SAMPLE MATERIAL
1.1
Chapter 1
Basic Concepts
Question 1
Vikas (28 years) and Vansh (29 years) are two individuals, resident in India, and they earned salary of
₹ 13 lakhs each during the previous year 2023-24. Vansh had paid interest of ₹ 2,20,000 on loan taken
in respect of a self-occupied house property. Vikas had paid ₹ 24,000 towards medical insurance of
himself and his spouse. Payment was made through net banking.
You, as a consultant, are required to advise them whether they should opt for concessional rate of tax
under section 115BAC or otherwise, showing the tax liability of both individuals.
(MTP 4 Marks Oct ’23 & Mar’22)
Answer 1
Computation of Tax Liability of Mr. Vikas & Mr. Vansh for the A.Y. 2024-25 as per regular provisions
of Income-tax Act
Particulars Mr. Vikas Mr. Vansh
Income under the head “Salaries”
Salary 13,00,000 13,00,000
Less: Standard deduction u/s 16(ia) 50,000 50,000
12,50,000 12,50,000
Less: Set-off of loss from house property of ₹ 2,00,000, being
deduction for interest on loan borrowed for self-occupied
property u/s 24(b) allowable to the extent of ₹ 2,00,000 - 2,00,000
Gross Total Income/Total Income 12,50,000 10,50,000
Less: Deduction u/s VI-A
Section 80D – Medical insurance premium 24,000 -
Tax Liability 12,26,000 10,50,000
Upto ₹ 2,50,000 Nil Nil
₹ 2,50,001 to ₹ 5,00,000 @ 5% 12,500 12,500
₹ 5,00,001 to ₹ 10,00,000 @ 20% 1,00,000 1,00,000
Above ₹ 10,00,000 @30% 67,800 15,000
1,80,300 1,27,500
Add: Health and Education cess @4% 7,212 5,100
Tax liability 1,87,512 1,32,600
Tax liability (rounded off) 1,87,510 1,32,600
Computation of Tax Liability of Mr. Vikas & Mr. Vansh for the A.Y. 2024-25 as per
section 115BAC
Particulars Mr. Vikas Mr. Vansh
Total Income (computed as per regular provisions) 12,26,000 10,50,000
Add: Standard deduction u/s 16(ia) [Not allowable as
deduction u/s 115BAC] (As per amendment standard 50,000 50,000
deduction of upto Rs. 50,000 is available to an Assessee
irrespective of the regime under which it pays tax)
12,26,000 10,50,000
Add: Set-off loss from house property in respect interest on
loan for self-occupied property [not allowable as deduction
u/s 115BAC] - 2,00,000
12,26,000 12,50,000
Add: Deduction under section 80D[Not allowable as
deduction u/s 115BAC] 24,000 -
Chapter 1 Basic Concepts
1.2
Total income as per section 115BAC 12,50,000 12,50,000
Tax Liability
Upto ₹ 2,50,000 ₹ 3,00,000 Nil Nil Nil
₹ ₹ 3,00,000 – ₹ 6,00,000 [₹ 3,00,000 @ 5%] 15,000 15,000
₹ 6,00,001 – ₹ 9,00,000 [₹ 3,00,000 @ 10%] 30,000 30,000
₹ 9,00,001 – ₹ 12,00,000 [₹3,00,000 @ 15%] 45,000 45,000
₹ 12,00,001 – ₹ 12,50,000 [₹50,000 @ 20%] 10,000 10,000
1,00,000 1,00,000
Add: Health and education cess @4% 4,000 4,000
Tax Liability 1,04,000 1,04,000
Since tax liability of Mr. Vikas as per section 115BAC of ₹ 1,04,000 is lower than the tax liability
of ₹ 1,32,600 computed as per the regular provisions of the Act, it is advisable for him to opt
for section 115BAC.
However, in case of Mr. Vansh, since his tax liability as the normal provisions of
₹ 1,32,600 is lower than the tax liability of ₹ 1,43,000 as per section 115BAC, it is advisable for
him not to opt for section 115BAC and pay tax as per regular provisions
In the case of Mr. Vansh per section 115BAC of ₹ 1,04,000 is lower than the tax liability of ₹
1,87,510 computed as per the regular provisions of the Act, it is advisable for him to opt for
section 115BAC.
Question 2
M/s. Alpha & Co. is a partnership firm with five partners sharing profits and losses equally. Its return for
the A.Y.2024-25 was selected for scrutiny u/s 143(3). The controversy was in relation to the loan of ₹ 50
lakhs from one partner, Mr. Raghav, credited in the books of the firm. The firm’s explanation that Mr.
Raghav has given a loan for ₹ 50 lakhs carrying interest@12%, as approved by the partnership deed, was
not accepted since Mr. Raghav’s explanation for the source of income in his hands was not found
satisfactory by the Assessing Officer. Accordingly, the Assessing Officer treated the said amount as cash
credits in the hands of the firm, M/s. Alpha & Co., and subjected the same to tax@78%. Discuss the
correctness of the action of the Assessing Officer. (RTP May’23)
Answer 2
As per section 68, where any sum is found credited in the books of an assessee maintained for any previous
year and the assessee offers no explanation about the nature and source or the explanation offered is not
satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged as income of the
assessee of that previous year.
The first proviso to section 68 provides that where the sum so credited consists of loan or borrowing or any
such amount, by whatever name called, any explanation offered by the assessee in whose books such sum
is credited would not be deemed to be satisfactory, unless
- the person in whose name such credit is recorded in the books of such assessee also offers an
explanation about the nature and source of such sum so credited and
- in the opinion of the Assessing Officer, such explanation has been found to be satisfactory.
Such cash credits would be taxable@78% [tax@60% under section 115BBE plus surcharge@25% plus
cess@4%].
Since Mr. Raghav was unable to explain the source of the sum of ₹ 50 lakhs in his hands to the satisfaction
of the Assessing Officer, such sum credited in the books of Alpha & Co. as loan from Mr. Raghav would be
treated as cash credit in the hands of the firm and subject to tax@78%. Accordingly, the action of the
Assessing Officer, in this case, is correct.
Chapter 1 Basic Concepts
1.3
Question 3
(i) Mr. A, aged 34 years, is a salaried employee with TKM Limited. He has furnished the following details
for the previous year 2023-24:
Sr. No. Particulars Amount in ₹
1. Gross Salary 23,00,000
2. Business Loss from a new part time business of trading in Mobiles (4,50,000)
3. Short Term Capital Loss on sale of Property (computed) (3,60,000)
4. Mr. A purchased 1000 Bibcoins, a virtual digital currency on
01.04.2022 for ₹ 1,000 per coin, which he sold on 15.02.2023 for
₹ 1,300 per coin. Commission for transfer of Bibcoins is 2% of the
sale value.
You are required to compute the total income of Mr. A, assuming that he has not opted for
section 115BAC for the Assessment year 2024-25 as per the provisions of the Income-tax Act,
1961. (PYP 4 Marks May’23)
Answer 3
Computation of total income of Mr. A for A.Y.2024-25
(under the regular provisions of the Income-tax Act, 1961)
Particulars Amount Amount
(in ₹) (in ₹)
I Salaries
Gross Salary 23,00,000
Less: Standard deduction under section 16(ia) 50,000 2,50,000
II Profit and gains from business or profession
Business loss from part time business (4,50,000)
Loss from business cannot be set off against
salary income.
No set off of business loss is allowed against any
capital gain from virtual digital assets.
Business loss of ₹ 4,50,000 has to be carried
forward to A.Y. 2025-26.
III Capital Gains (3,60,000)
Short term capital loss on sale of property
[Short term capital loss cannot be set off against
any income other than Capital gains. Short term
capital loss of ₹ 3,60,000 has to be carried
forward to A.Y. 2025-26].
It is not eligible for set off against capital gain
arising from transfer of virtual digital asset.
IV Capital Gains 3,00,000
Income from transfer of virtual digital assets
[(₹ 1,300 - ₹ 1,000) x 1,000 bib coins)
[No deduction in respect of any expenditure
other than cost of acquisition is allowed] Total
Income
25,50,000
Chapter 1 Basic Concepts
1.4
MULTIPLE CHOICE QUESTIONS (MCQS)
1. Mr. Ganesh, a resident Indian aged 42 years, is a salaried employee whose salary computed under the
normal provisions of the Income-tax Act, 1961 for A.Y.2024-25 is Rs.14,50,000. In addition, he has interest
on savings bank account to the tune of Rs.12,000. He has deposited Rs.1,50,000 in PPF and has paid medical
insurance premium of Rs.25,000 by way of account payee cheque for insuring his health and Rs.30,000 by
way of crossed cheque for insuring the health of his mother, aged 75 years. He incurred medical expenditure
of Rs.35,000 by account payee cheque for his father, aged 78 years, who does not have an insurance policy.
Ganesh’s brother Rajesh, a resident Indian aged 40 years, earns rental income of Rs.40,000 per month and
Rs.45,000 from his two le t out flats. He also has interest on savings bank account to the tune of Rs.15,000.
He deposits Rs.50,000 in NPS Tier I account. Should Mr. Ganesh and Mr. Rajesh opt for the provisions of
section 115BAC for A.Y.2024 -25 to minimise their tax liability?
(a) Both Ganesh and Rajesh should opt for the provisions of section 115BAC
(b) Neither Ganesh nor Rajesh should opt for the provisions of section 115BAC
(c) Mr. Ganesh should opt for the provisions of section 115BAC but not Mr. Rajesh
(d) Mr. Rajesh should opt for the provisions of section 115BAC but not Mr. Ganesh
(MTP 2 Marks April ‘21)
Ans: (d)
2. Which of the following deduction/exemption/set-off of losses are allowable while computing income under
respective head of income and total income of an individual as per section 115BAC?
(i) Deduction for interest on housing loan in respect of self-occupied property
(ii) Deduction for Interest on housing loan in respect of let-out property
(iii) Exemption in respect of agricultural income
(iv) Exemption in respect of perquisite value of free food provided by employer through paid voucher
(v) Set-off of loss under the head house property against income under other heads
(vi) Deduction under section 80JJAA The correct answer is –
(a) (ii), (iii) & (vi)
(b) (i), (ii), (iii), (iv) & (vi)
(c) (i), (ii), (iv) & (vi)
(d) (i), (ii), (iv), (v) & (vi) (MTP 2 Marks April 22)
Ans: (a)
(Includes concepts from Deductions from Gross Total Income)
3. Mr. Rajkumar, a resident Indian aged 61 years, has income of ₹ 45 lakhs under the head “Profits and gains
of business or profession”. One of his businesses is eligible for deduction @100% of profits under section 80-
IB for A.Y. 2024-25. The profit from such business included in the business income is ₹ 20 lakhs. What would
be the tax liability of Mr. Rajkumar, assuming that he has no other income during the P.Y. 2023-24 and he
does not opt to pay tax as per section 115BAC.
(a) ₹ 5,85,000
(b) ₹ 5,82,400
(c) ₹ 7,02,000
(d) ₹ 8,65,800 (MTP 2 Marks April 22)
Ans: (d)
4. Mr. Anish, a resident individual aged 45 years, sold a house property on 16.01.2024. On the said transaction,
he earned a long-term capital gain of ₹ 1,25,50,000. He invested a sum of ₹ 50,00,000 in capital gains bonds
specified in section 54EC on 15.03.2024. He further invested a sum of ₹ 50,00,000 in the same bonds on
14.06.2024. His total income (excluding LTCG on such house property) comprising of income from other
sources only for the financial year 2023-24 was ₹ 1,50,00,000. He does not opt for section 115BAC. Compute
the tax payable by him for the A.Y. 2024-25.
(a) ₹ 75,69,250
(b) ₹ 69,63,710
Chapter 1 Basic Concepts
1.5
(c) ₹ 74,12,210
(d) ₹ 57,67,710 (MTP 2 Marks Oct 21)
Ans: (a)
5. XYZ Ltd., a domestic company not opting for the provisions of section 115BAA, has a total income of ₹
10,01,00,000 for A.Y.2024-25. The gross receipts of XYZ Ltd. for P.Y.2023-24 is ₹ 260 crore. The tax liability of
X Ltd. for A.Y.2024-25 is -
(a) ₹ 2,76,55,500
(b) ₹ 2,79,24,000
(c) ₹ 3,46,42,610
(d) ₹ 3,49,78,940 (MTP 2 Marks Oct 21)
Ans: (b)
6. Mr. Anish’s, aged 40 years, total income comprises of long -term capital gains on sale of land Rs.5 lakhs;
short-term capital gains on sale of STT paid listed equity shares Rs.3 lakhs; income from lottery Rs.2
lakh and savings bank interest Rs.50,000. He invests Rs.1.50 lakhs in PPF. His tax liability for A.Y.2024-
25 is –
(a) Rs.2,13,200
(b) Rs.2,11,150
(c ) Rs.1,61,200
(d) Rs.1,59,650 (MTP 2 Marks April ‘19)
Ans: (c)
7. Mrs. Ram, born on 1.4.1964, has a gross total income of Rs.2,90,000 for A.Y.2024 -25 comprising of his salary
income and interest on savings bank account. He does not claim any deduction under Chapter VI-A. He pays
electricity bills of Rs.10,000 per month. He made a visit to Melbourne along with his wife for a month for
which he incurred to and fro flight charges of Rs.1.20 lakhs. The remaining expenditure for his visa, stay and
sightseeing amounting to Rs.80,000 was met by his son residing in Melbourne. Is Mr. Ram required to file
return of income, and if so, why? (MTP 1 Mark May ’20)
(a) No, Ram is not required to file his return of income.
(b) Yes, Ram is required to file his return of income, since his gross total income/total income exceeds the
basic exemption limit.
(c) Yes, Ram is required to file his return of income since he pays electricity bills of Rs.10,000 per month.
(d) Yes, Ram is required to file his return of income since he has incurred foreign travel expenditure
exceeding Rs.1 lakh.
Ans: (c)
8. Mr. Mahesh is found to be the owner of two gold chains of 50 gms each (market value of which is ₹ 1,45,000
each) during the financial year ending 31.3.2024 but he could offer satisfactory explanation for ₹ 50,000
spent on acquiring these gold chains. As per section 115BBE, Mr. Mahesh would be liable to pay tax of –
(a) ₹ 1,87,200
(b) ₹ 2,26,200
(c) ₹ 1,49,760
(d) ₹ 1,80,960 (MTP 2 Marks Oct ‘20)
Ans: (a)
9. Mr. Ravi Prakash, a resident Indian aged 79 years, gets pension of ₹ 58,000 per month from the Rajasthan
State Government. The same is credited to his savings account in SBI, Kota Branch. In addition, he gets
interest@8% p.a. on fixed deposit of ₹ 28 lakh with the said bank. On 1.1.2024, he deposited ₹ 3 lakhs as
five year term deposit in same account at interest rate of 8.5%. Interest on savings bank credited to his SBI
savings account for the P.Y.2023-24 is ₹ 8,600.
What would be the tax liability of Mr. Ravi Prakash for the A.Y. 2024-25? Is Mr. Ravi Prakash required to
file his return of income for A.Y.2024-25, if tax deductible at source has been fully deducted? Assume that
Mr. Ravi Prakash has not opted for section 115BAC.
Chapter 1 Basic Concepts
1.6
(a) ₹ 48,880; No, Mr. Ravi Prakash is not required to file his return of income
(b) ₹ 59,280; Mr. Ravi Prakash is required to file his return of income, since his total income exceeds ₹
5,00,000
(c) ₹ 61,880; No, Mr. Ravi Prakash is not required to file his return of income
(d) ₹ 61,880; Mr. Ravi Prakash is required to file his return of income, since his total income exceeds ₹
5,00,000 (MTP 2 Mark March 22)
Ans: (a)
10.Mr. Parth, a resident aged 63 years, and his brother Mr. Veer, a non-resident aged 65 years, earned dividend
of ₹ 6.5 lakhs and ₹ 4.8 lakhs, respectively, from Atharv Ltd., an Indian company in December 2023. The interest
expenditure incurred by them in the P.Y. 2023-24 on loan taken for investing in shares of Atharv Ltd. is ₹ 1.50
lakh and ₹ 80,000, respectively. What is the tax liability on such income, assuming it is the only source of
income of Mr. Parth and Mr. Veer and they wish to make maximum tax savings?
(a) ₹ 15,080 and ₹ 9,360, respectively
(b) ₹ 14,560 and ₹ 9,360, respectively
(c) ₹ 14,560 and ₹ 99,840, respectively
(d) ₹ 15,080 and ₹ 99,840, respectively (MTP 2 Marks Sep ‘22)
Ans: (c)
11. Mr. Arjun’s total income comprises of long-term capital gains on sale of land ₹ 5 lakhs; short-term capital
gains on sale of STT paid listed equity shares ₹ 2 lakhs; income from lottery ₹ 1 lakh and savings bank interest
₹ 30,000. He invests ₹ 1.50 lakhs in PPF. His tax liability for A.Y.2024-25, assuming that he is a resident
Indian of the age of 40 years and does not opt for the provisions of section 115BAC, is –
(a) ₹ 1,64,800
(b) ₹ 1,66,400
(c) ₹ 1,14,400
(d) ₹ 1,13,300 (MTP 2 Marks March ‘23)
Ans: (c)
12. Mr. Suresh, a resident Indian aged 61 years, has income of ₹ 45 lakhs under the head “Profits and gains of
business or profession”. One of his businesses is eligible for deduction @100% of profits under section 80-IB
for A.Y. 2024-25. The profit from such business included in the business income is ₹ 20 lakhs. What would
be the tax liability of Mr. Suresh, assuming that he has no other income during the P.Y. 2023-24 and he does
not opt to pay tax as per section 115BAC.
(a) ₹ 5,85,000
(b) ₹ 5,82,400
(c) ₹ 7,02,000
(d)₹ 8,65,800 (MTP 2 Marks Oct ‘23)
Ans: (d)
13. During the P.Y.2023-24, Mr. Aakash has ₹ 80 lakhs of short-term capital gains taxable u/s 111A, ₹ 70 lakhs
of long-term capital gains taxable u/s 112A and business income of ₹ 90 lakhs. Which of the following
statements is correct? (RTP May ’20)
(a) Surcharge@25% is leviable on income-tax computed on total income of ₹ 2.40 crore, since the total
income exceeds ₹ 2 crore.
(b) Surcharge@15% is leviable on income-tax computed on total income of ₹ 2.40 crore
(c) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 1.50 crore, since
such income exceeds ₹ 1 crore but is less than ₹ 2 crore; in respect of business income of ₹ 90 lakhs,
surcharge is leviable@25% on income-tax, since the total income exceeds ₹ 2 crore.
(d) Surcharge@15% is leviable in respect of income-tax computed on capital gains of ₹ 1.50 crore, since
such income exceeds ₹ 1 crore but is less than ₹ 2 crore; in respect of business income of ₹ 90 lakhs,
surcharge is leviable@10% on income-tax, since such income exceeds ₹ 50 lakhs but is less than ₹ 1
crore.
Ans: (b)
Chapter 1 Basic Concepts
1.7
14.Mr. Gagan, aged 67 years and resident, is a retired person earning a monthly pension of ₹ 12,000 from his
employer. He purchased a piece of land in Delhi in December, 2015 and sold the same in April, 2023. Taxable
LTCG amounted to ₹ 2,80,000. Apart from pension income and gain on sale of land, he is not having any other
income. What will be his tax liability (rounded off) for the year 2023-24? (RTP May ’19)
(a) ₹ 25,790
(b) ₹ 6,450
(c) ₹ 4,370
(d) ₹ 17,470
Ans: (d)
(As per amendment the rebate u/s 87A is increased to tax amounting to Rs 12500 hence after deduction it
comes to Rs 4970)
15. Mr. Ram, a resident individual aged 40 years, has total income of ₹ 4,15,00,000 for A.Y.2024 -25 which
comprises of salary (computed) of ₹ 1,80,00,000, long-term capital gains of ₹ 60,00,000 u/s 112, long-term
capital gains of ₹ 45,00,000 u/s 112A, short-term capital gains of ₹ 1,00,00,000 u/s 111A, dividend of ₹
10,00,000 and interest income of ₹ 20,00,000. What would be his tax liability for A.Y.2024-25, assuming that
he does not opt for section 115BAC? (RTP May ‘23)
(a) ₹ 1,17,01,690
(b) ₹ 1,17,13,650
(c) ₹ 1,10,65,990
(d) ₹ 1,10,77,950
Ans: (c)
Chapter 1 Basic Concepts
