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Answer Paper

Taxation Duration: 75

Details: Test- 1 (Ch- 1) Marks: 40

Instructions:

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Ans-1

Computation of tax liability Mr. Arsh Singh Randhawa for the A.Y.2025-26

Particulars Rs.

(a) Income-tax (including surcharge) computed on total

income of Rs. 55,00,000

Rs. 2,50,000 – Rs. 5,00,000 @5% 12,500

Rs. 5,00,001 – Rs. 10,00,000 @20% 1,00,000

Rs. 10,00,001 – Rs. 55,00,000 @30% 13,50,000

Total 14,62,500

Add: Surcharge @ 10% 146250 16,08,750

(b) Income-tax computed on total income of Rs. 50 lakhs 13,12,500

(Rs. 12,500 plus Rs. 1,00,000 plus Rs. 12,00,000)

(c) Total Income Less Rs. 50 lakhs 5,00,000

(d) Income-tax computed on total income of Rs. 50 lakhs 18,12,500

plus the excess of total income over Rs. 50 lakhs (B +C)

(e) Tax liability: lower of (A) and (D) 18,12,500

Add: Health and education cess @4% 64,350

Tax liability (including cess) 1673100

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(f) Marginal Relief (A – D) ( No need Marginal Relief) -64350

(6 Marks)

Ans-2

Computation of tax liability of Mr. Jaskaran Singh Sidhu for the A.Y. 2025-26 under default
tax regime

Particulars Rs. Rs.

Tax on total income of Rs. 6,50,00,000

Tax @ 12.5% of Rs. 55,00,000 on LTCG 6,87,500

Tax @ 20% of Rs. 65,00,000 on STCG u/s 111A 13,00,000

Tax on other income of Rs. 5,30,00,000

Rs. 3,00,000 – Rs. 7,00,000 @ 5% 20,000

Rs. 5,00,000 – Rs. 10,00,000 @ 20% 30,000

Rs. 10,00,000 – Rs. 12,00,000 @ 15% 30,000

Rs. 12,00,000 – Rs. 15,00,000 @ 20% 60,000

Rs. 15,00,000 – Rs. 5,30,00,000 @ 30% 1,54,50,000 1,55,90,000

1,75,77,500

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Add: Surcharge @ 15% on Rs. 19,87,500 2,98,125

@ 25% on Rs. 1,55,90,000 38,97,500 41,95,625

2,17,73,125

Add: Health and education cess @ 4% 8,70,925

Tax Liability 2,26,44,050

Computation of tax liability of Mr. Jaskaran Singh Sidhu for the A.Y. 2025-26 under normal
provisions of the Act

Particulars Rs. Rs.

Tax on total income of Rs. 6,50,00,000

Tax @ 12.5% of Rs. 55,00,000 on LTCG 6,87,500

Tax @ 20% of Rs. 65,00,000 on STCG u/s 111A 13,00,000

Tax on other income of Rs. 5,30,00,000

Rs. 3,00,000 10,000

Rs. 5,00,000 – Rs. 10,00,000 @ 20% 1,00,000

Rs. 10,00,000 – Rs. 5,10,00,000 @ 30% 1,56,00,000 15710000

17697500

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Add: Surcharge @ 15% on Rs. 19,87,500 2,98,125

@ 37% on Rs. 15710000 5812700 6110825

23808325

Add: Health and education cess @ 4% 952333

Tax Liability 24760658

(8 Marks)

Ans-3

Computation of tax liability of Mr. Ranjodhdeep Singh for the A.Y.2025-26 under default
tax regime

Particulars Rs. Rs.

Tax on total income of Rs. 7,50,00,000

Tax@20% of Rs. 55,00,000 11,00,000

Tax@15% of Rs. 65,00,000 9,75,000

Tax on other income of Rs. 5,10,00,000

Rs. 3,00,000 – Rs. 7,00,000 @5% 20,000

Rs. 7,00,000 – Rs. 10,00,000 @10% 30,000

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Rs. 10,00,000 – Rs. 12,00,000 @15% 30,000

Rs. 12,00,000 – Rs. 15,00,000 @20% 60,000

Rs. 15,00,000 – Rs. 5,10,00,000 @30%

1,48,50,000 1,49,90,000

1,70,65,000

Add: Surcharge @15% on Rs. 20,75,000 3,11,250

@25% on Rs. 1,49,90,000 37,47,500 40,58,750

2,11,23,750

Add: Health and education cess @4% 844950

Tax Liability 21968700

Computation of tax liability of Mr. Ranjodhdeep Singh for the A.Y.2025-26 under normal
provisions of the Act

Particulars Rs. Rs.

Tax on total income of Rs. 7,50,00,000

Tax@20% of Rs. 55,00,000 11,00,000

Tax@15% of Rs. 65,00,000 9,75,000

Tax on other income of Rs. 5,10,00,000

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Rs. 2,50,000 – Rs. 5,00,000 @5%
12,500

Rs. 5,00,000 – Rs. 10,00,000 @20% 1,00,000

Rs. 10,00,000 – Rs. 5,10,00,000 @30%

1,50,00,000 1,51,12,500

1,71,87,500

Add: Surcharge @15% on Rs. 20,75,000 3,11,250

@37% on Rs. 1,51,12,500 55,91,625 5902875

23090375

Add: Health and education cess @4% 923615

Tax Liability 24013990

(8 Marks)

Ans-4

Yes, he has the power to do so. Since the business of Mr. Sukhpal Singh Gill is discontinued
on 1st January, 2025, the income of the period from 1-4-2024 to 1-1-2025 may, at the
discretion of the Assessing Officer, be charged to tax in A.Y. 2025-26 itself.

Following are the other exceptions to the general rule “Income of the previous year is
assessed in the assessment year following the previous year” i.e., the income of the
previous year is assessed in the previous year itself.

(i) Shipping business of non-resident [Section 172]

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Where a ship, belonging to or chartered by a non-resident, carries passengers, livestock,
mail or goods shipped at a port in India, the ship is allowed to leave the port only when the
tax has been paid or satisfactory arrangement has been made for payment thereof. 7.5% of
the freight paid or payable to the owner or the charterer or to any person on his behalf,
whether in India or outside India on account of such carriage is deemed to be his income
which is charged to tax in the same year in which it is earned.

(ii) Persons leaving India [Section 174]

Where it appears to the Assessing Officer that any individual may leave India during the
current assessment year or shortly after its expiry and he has no present intention of
returning to India, the total income of such individual for the period from the expiry of the
respective previous year up to the probable date of his departure from India is chargeable
to tax in that assessment year.

(iii) AOP/BOI/Artificial Juridical Person formed for a particular event or purpose [Section
174A]

If an AOP/BOI etc. is formed or established for a particular event or purpose and the
Assessing Officer apprehends that the AOP/BOI is likely to be dissolved in the same year or
in the next year, he can make assessment of the income up to the date of dissolution as
income of the relevant assessment year.

(iv) Persons likely to transfer property to avoid tax [Section 175]

During the current assessment year, if it appears to the Assessing Officer that a person is
likely to charge, sell, transfer, dispose of or otherwise part with any of his assets to avoid
payment of any liability under this Act, the total income of such person for the period from
the expiry of the previous year to the date, when the Assessing Officer commences
proceedings under this section is chargeable to tax in that assessment year.

(6 Marks)

Ans-5

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Introduction:

The rates for calculating income-tax for deducting tax from income chargeable under the
head “Salaries” and computation of advance tax for F.Y. 2024-25 where the assessee
exercises the option to shift out of the default tax regime provided under section
115BAC(1A).

Compute the tax liability of Mr. Ramanjot Singh Dhillon

Particulars Rs.

Tax on total income of Rs. 5,00,50,000 (including surcharge @ 37%) 20313675

Tax on Rs. 5,00,00,000 (including surcharge @ 25%) 18515625

Marginal Relief 2,03,13,675 – (Rs. 1,85,15,625 + Rs. 50,000) 1748050

Tax liability (Rs. 2,03,13,675 – Rs. 17,48,050) + 4% of Rs. 18565625 19308250

Tax liability 19308250

(4 Marks)

(b)

The computation of tax liability Mr. Balwinder Singh jattana is given below –

Assessee Total Tax Surcharge Tax incl Marginal Balance HEC @ Total tax
income @15% surcharge relief tax 4% (rounded
(Rs.) off)

Mr. 1,01,00,000 27,20,000 4,08,000 31,28,000 69,000 30,59,000 1,22,360 31,81,360

Balwinder
Singh
jattana

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Computation of marginal relief

Particulars Rs.

Income-tax computed on total income of Rs. 1.1 crore including surcharge 31,28,000
@ 15%

Income-tax computed on total income of Rs. 1 crore (Rs. 1,40,000 plus Rs. 29,59,000
25,50,000) plus surcharge @ 10%

Increase in tax liability 1,69,000

Marginal Relief (Rs. 1,69,000 - Rs. 1,00,000, being the amount of income 69,000
in excess of Rs. 1,00,00,000)

(3 Marks)

Ans-6 MCQ Answer

1. a)3,04,200

Reason:

Computation of tax liability of Mr. Bhupinder Singh (aged 45 years)

Tax liability:

First Rs. 2,50,000 Nil

Next Rs. 2,50,001 – Rs. 5,00,000 @5% of Rs. 2,50,000 12,500

Next Rs. 5,00,001 – Rs. 10,00,000 @20% of Rs. 5,00,000 1,00,000

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Balance i.e., Rs. 16,00,000 minus Rs. 10,00,000 @30% of Rs. 6,00,000 1,80,000

2,92,500

Add: Health and Education cess@4% 11,700

Tax liability 3,04,200

2. (b)No, because the butter-making process is a factory operation and not agricultural.

Reason:

Section 10(1) provides tax exemption for income derived from agricultural activities. In this
case, the cream supplied by farmers is an agricultural product, but the butter-making
process is a factory operation distinct from agricultural production. Consequently, the
income from selling the butter is not considered agricultural income and does not qualify for
exemption under Section 10(1).

3. b) ₹7.8 lakhs as agricultural income and ₹4.2 lakhs as business income.

Reason:

Income derived from the sale of latex involves both agricultural and non-agricultural
components. According to tax rules, income from the cultivation of rubber plants is
agricultural, while the processing of latex is treated as business income.

The splitting ratio prescribed for latex is 65% agricultural income and 35% business income.
Thus:

 Agricultural income = 65% of ₹12 lakhs = ₹7.8 lakhs.

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  Business income = 35% of ₹12 lakhs = ₹4.2 lakhs.

This classification reflects the dual nature of the activity.

4. a) Rs. 1469000

Reason:

Tax on total income of Rs. 1,00,50,000 (including surcharge @ 15%) = Rs. 3251625

Tax on Rs. 1,00,00,000 (including surcharge @ 10%) = 3093750

Marginal Relief = Rs. 32,51,625 – (Rs. 30,93,750 + Rs. 50,000) = Rs. 107875

Tax liability = (Rs. 32,51,625 – Rs. 1,07,875) + 4% of Rs. 3143750= Rs. 3269500

5.b) Business income, as it involves a regular commercial activity.

Reason:

The income from the sale of milk is not agricultural income because the activity of producing
and selling milk does not arise directly from agricultural operations.

Key factors include:

[Link] of sales: The consistent and systematic sale of milk indicates a commercial
activity.

[Link] proposition: Producing milk and selling it regularly for profit transforms the
activity into a business operation.

Agricultural income is limited to activities directly related to land cultivation, such as

growing crops or raising plants, and does not extend to secondary or ancillary operations
like milk production for sale. Hence, the income is taxable as business income.
(1×5 = 5 Marks)

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