Q1.

A
Income Tax Act extends to Whole of India.

Income Tax is a tax on income.

The legal status of Ms. Hima Das. Indian sprint runner is an individual.

Personal 24 carat gold mangalsutra is Capital assets.

Deduc on under sec on 80D is respect of medical insurance premium is allowed to an individual,
spouse, children and parents.

total income of a person is determined on the basis of his residen al status.

In case of capital assets acquired on 1-4-1971, fair market value of this capital asset is determined as
on 1-4-2001.

If repair to capital asset is done before 2001, not deduc ble.

Uncommuted pension received by a government employee is Taxable.

The deduc on under sec on 80E is allowed for payment of interest to the extent of any amount.

Every assessee is a person and every person need not be an assessee.

Award received from the government is exempt.

Q1. B

Ground rent is taxable under the head income from house property. - False

Expenses on local fes val navaratri puja is allowable business expenditure. - False

Previous year means year in which income is earned. - True

There is total five heads of income. – True

Gi received by a doctor from his pa ent is taxable under the head income from profession. -True

Interest on Income Tax Refund is taxable under the head income from other sources. - True

Any sum received under key-man insurance policy is taxable. – True

Bonus received from employer is taxable as a salary. - True

When a property is occupied by the owner self that property is called let-out house property. - False

Salary received by a Member of Parliament is taxable under the head Income from salaries. - False

Cost infla on index is applicable for brokerage/transfer expenses. - False

The status of Indian origin individual is always a resident. - False

Q2 A

Solu on:

Name of the Assessee: Ms. Abhijit Legal Status: Individual

Previous Year: 2024-25 Assessment Year: 2025-26

Computa on income from salary

Par culars ₹ ₹
Basic Salary (40,000 p.m. X 12) 4,80,000
Dearness allowance (16,000 p.m. X 12) 1,92,000
House rent allowance (10,000 p.m. X 12) 1,20,000
Less: Exempt u/s 10 (6,000 p.m. X 12) (72,000) 48,000
Tour allowance 50,000
Less: Exempt (38,000) 12,000
Perquisite value: accommoda on 35,000

Gross salary 7,67,000

Less: Deduc on u/s 16
i) Standard deduc on 50,000
ii) Entertainment allowance Nil
iii) Professional tax 2,500 (52,500)

Total income from salary 7,14,500

Note: bonus is declared only, not paid. Hence it’s not taxable.
 Computa on income from other sources

Par culars ₹ ₹
Interest on fixed deposit with Bank of India 44,000
Interest on fixed deposit with post office 10,000
Dividend from co-opera ve credit society 6,500
Gi from sister 51,000
Less: exempt (51,000) Nil
Income from other sources 60,500
Computa on total income

Par culars ₹ ₹
Income from Salary 7, 14,500
Income from other sources 60,500 7,75,000

Less: Deduc on under chapter VI

Sec. 80U Physical disability 75,000
Sec. 80C Provident fund + life Insurance policy (48,000+32,000) 80,000 (1,55,000)

Total taxable income 6,20,000

Won lo ery during the previous year Rs.80,000. Interest on saving account received Rs.50,000.
Expenses incurred for wri ng books is Rs. 10,000. Mr. Vadana is a teacher in TEACH. received paper
correc on fees Rs. 10,000. He paid Rs. 15,000 as Mediclaim premium in cash. Mr. Vadana paid LIC
premium of Rs.2,40,000.

Q2 B

Solu on:

Name of the Assessee: Ms. Vadana Legal Status: Individual

Previous Year: 2024-25 Assessment Year: 2025-26

Computa on income from house property

Par culars LOP (₹) SOP (₹)

Property 1 Property 2
Compare Fair rent vs Municipal Valua on (20,00,000 vs 24,00,000)
Highest value – 24,00,000
Compare Highest value vs standard rent (24,00,000 vs 13,00,000)
Lowest value/RVL – 13,00,000
Compare Lowest value vs Actual rent (13,00,000 vs 18,00,000)
Highest will be GAV – 18,00,000

Gross Annual Value (GAV) (1,50,000 p.m. X 12) 18,00,000 Nil

Less: Municipal taxes paid by owner Nil Nil
Net Annual Value (NAV) 18,00,000 Nil

Less Deduc on u/s 24

Standard Deduc on (30% of NAV) (5,40,000) Nil
Interest on Home loan (2,50,000) (2,00,000)

Income House property 10,10,000 (2,00,000)

Note: Interest on home loan SOP have 2,00,000 limit and LOP don’t have limit

Computa on income from other sources

Par culars ₹ ₹
Lo ery 80,000
Interest on saving account 50,000
Paper correc on fees 10,000

Total 1,40,000
Computa on total income

Par culars ₹ ₹
Income from House property (10,10,000 -2,00,000) 8,10,000
Income from other sources 1,40,000 9,50,000

Less: Deduc on under chapter VI

 Sec. 80TTA Interest on saving bank account (limit: 10,000) 10,000
Sec. 80C LIC premium (limit: 1,50,000) 1,50,000 (1,60,000)
Total Taxable income 7,90,000

Q3 A

Solu on:

Name of the Assessee: Mr. Sanghameetra Legal Status: Individual

Previous Year: 2024-25 Assessment Year: 2025-26

Computa on income of business

Par culars ₹ ₹
Net profit 5,55,999

Add:
Travelling Expenses 8,000
GST penalty (any penalty is not business expanse) 23,000
Income tax 49,000
Deprecia on 30,000
Salaries (not allowed personal medical treatment in salaries) 55,000 1,65,000
Less:
Income tax refund 8,000
Dividend from U.T.I 35,000
Interest on saving bank a/c 20,000
Deprecia on 40,000 (1,03,000)
6,17,999

Computa on income of other sources

Par culars ₹ ₹
Income Tax refund 8,000
Less exempt (8,000) Nil
Dividend from U.T.I 35,000
Less: exempt (35,000) Nil
Interest on Saving bank a/c 20,000
20,000
Computa on total income

Par culars ₹ ₹
Income from business 6,17,999
Income from other sources 20,000 6,37,999
Less: Deduc on under chapter VI
Sec. 80TTA Interest on saving account (limit is 10,000) (10,000)
Sec. 80DD physical disability Family person (81%) (1,25,000) (1,35,000)
Taxable Income 5,02,999
Q3 B

Solu on:

Name of the Assessee: Mr. Arun Legal Status: Individual

Previous Year: 2024-25 Assessment Year: 2025-26

Computa on income of business

Par culars ₹ ₹
Net profit 2,90,000

Add:
Deprecia on 25,000
Rent (residen al house means personal expense) 60,000
Staff welfare expense 10,000
Purchase of NSC (it is investment, not expense) 50,000
1,45,000

Less:
Interest on NSC 6,000
Gi from father 51,000
Lo ery income 1,12,000
Deprecia on 28,000 (1,97,000)
2,38,000

Computa on income of other sources

Par culars ₹ ₹
Interest on NSC 6,000

Gi from father 51,000

Less: exempt (51,000) Nil
Lo ery Income 1,12,000
1,18,000
Computa on total income

Par culars ₹ ₹
Income from business 2,38,000
Income from other sources 1,18,000 3,56,000
Less: Deduc on under chapter VI
 Sec. 80C Purchase of NSC (50,000)
Sec. 80U physical disability (60%) (75,000) (1,25,000)
Taxable Income 2,31,000

Solution:
Name of Assessee: Mr. Dinesh
Assessment Year: 2025-26 Previous Year: F.Y. 2024-25
Legal Status: Individual Residential status: R &OR
Computation of Income from Capital Gain
Par culars Amt. Amt.
Full value of considera on 1,60,00,000
Less: Expenditure incurred (brokerage, transfer charges etc.) 3,00,000

Indexed Cost of acquisi on 87,00,000

25,00,000 x 348 /100
 Indexed Cost of Improvement
F.Y. 1999-2000 Nil
F.Y. 2003-2004
3,27,000 x 348/109 10,44,000
F.Y. 2009-2010
3,70,000 x 348/148 8,70,000
F.Y. 2014-2015
8,40,000 x 348/240 12,18,000
(1,21,32,000)
Long term capital gain 38,68,000
Less: Exemp on u/s 54
1. Purchase of new house 40,00,000
2. Bonds issued by REC 12,00,000 (52,00,000)
Income from Capital (13,32,000)

Solu on:
Name of the Assessee: Mr. Aniket
Assessment Year: 2025-26 Previous Year: 2024-25
Legal Status: Individual
Computa on of Total Income
 Par culars Resident & Resident & Not Non-Resident
Ordinarily Resident Ordinarily Indian
(R&OR) Resident (R&NOR) (NRI)
Income from business in Delhi, controlled 2,00,000 2,00,000 2,00,000
from London
Interest on Debenture of Indian company 2,20,000 2,20,000 2,20,000
received in Japan
Rent from property in France received in 2,40,000 2,40,000 2,40,000
Mumbai
Interest on Bank accounts in Dubai 1,20,000 - -
Income from Agriculture in Sri Lanka 1,40,000 - -
Income from business in Nepal controlled 1,60,000 1,60,000 -
from India
Salary earned and received in Singapore 1,80,000 - -
Past untaxed profits earned in U.K. - - -
brought to India during the previous year
Total taxable income 12,60,000 8,20,000 6,60,000

Q5.A

a) Explain the term Income and 5 heads of income with suitable examples. (10)

Income:
Income refers to the financial gain or revenue earned by a person or en ty during a specific period. It
includes all earnings, whether received in cash, kind, or in any other form, arising from employment,
business, investments, or any other sources. Under the Income Tax Act, 1961, the term is broadly
categorized into five heads.

Five Heads of Income:

1. Income from Salary:

Earnings from employment, including wages, pensions, gratuity, and allowances.

o Example: A monthly salary of ₹50,000 plus house rent allowance (HRA) of ₹10,000.

2. Income from House Property:

Income earned from ren ng out residen al or commercial proper es.

o Example: A person earns ₹15,000 per month by ren ng a house.

3. Profits and Gains of Business or Profession:

Income from business ac vi es or professional services.

o Example: A shop owner earns a profit of ₹2,00,000 annually.

4. Capital Gains:
Earnings from the sale of a capital asset like property, shares, or gold.

o Example: Selling land purchased for ₹5,00,000 for ₹8,00,000 results in a capital gain
of ₹3,00,000.
 5. Income from Other Sources:
Residual income, such as interest, dividends, or lo ery winnings.

o Example: ₹20,000 earned as interest from fixed deposits.

b) Explain the deduc ons under Sec on 80TTA and 80U. (10)

1. Sec on 80TTA:
This sec on provides a deduc on of up to ₹10,000 on the interest earned from savings
accounts held with banks, coopera ve socie es, or post offices.

o Eligibility: Available to individual taxpayers and Hindu Undivided Families (HUFs).

o Example: If the total savings account interest in a year is ₹12,000, the taxpayer can
claim a deduc on of ₹10,000.

2. Sec on 80U:
This sec on offers a deduc on to individuals with disabili es.

o Deduc on Amount:

 ₹75,000 for individuals with 40%-80% disability.

 ₹1,25,000 for individuals with 80% or more disability.

o Eligibility: A cer ficate from a medical authority is required to claim the deduc on.

o Example: A taxpayer suffering from severe disability (cer fied) can claim ₹1,25,000
as a deduc on.

Q5.B

Write a short note on any four of the following: (20)

a) Taxable Perquisites:
Perquisites are benefits provided by an employer to an employee in addi on to salary. Certain
perquisites, such as rent-free accommoda on or car usage for personal purposes, are taxable.

 Example: Free accommoda on provided to an employee by the employer is added to taxable

income.

b) GAV (Gross Annual Value):

GAV refers to the poten al annual rental income a property could earn if rented out during the year.
It is used to calculate income from house property.

 Formula: Higher of expected rent or actual rent received during the year.

 Example: If a house could fetch ₹1,20,000 annually but was rented for ₹1,00,000, the GAV is
₹1,20,000.

c) Types of Person:
Under the Income Tax Act, the term "person" includes:

 Individual
  Hindu Undivided Family (HUF)

 Company

 Firm

 Associa on of Persons (AOP) or Body of Individuals (BOI)

 Local authority

 Ar ficial juridical person

 Example: A salaried employee (individual) and a private limited company are different types
of persons for taxa on.

d) Deduc ons under Income from House Property:

Deduc ons allowed under this head:

 Standard Deduc on: 30% of Net Annual Value.

 Interest on Borrowed Capital: Deduc on for interest paid on home loans (up to ₹2,00,000
for self-occupied property).

 Example: For a rented property with a GAV of ₹3,00,000 and loan interest of ₹1,50,000,
deduc ons would include ₹90,000 (30% of ₹3,00,000) and ₹1,50,000 interest.

e) Deduc on under Sec on 80DD:

This sec on allows deduc ons for expenses incurred on the treatment or maintenance of a disabled
dependent.

 Deduc on Amount:

o ₹75,000 for dependents with 40%-80% disability.

o ₹1,25,000 for dependents with severe disability (80% or more).

 Eligibility: Applicable to individual taxpayers and HUFs. A medical cer ficate is mandatory.

f) Assessment Year and Previous Year:

 Assessment Year (AY): The year in which income earned in the previous year is assessed for
tax.

o Example: AY 2024-25 assesses income earned in the previous year 2023-24.

 Previous Year (PY): The financial year in which income is earned.

o Example: Income earned between April 1, 2023, and March 31, 2024, is for PY 2023-
24.