Mr. Amit, having business of manufacturing of furniture, gives the following Trading and Profit & Loss Account for the year ended 31.03.2024:…

Computation of total income of Mr. Amit as per section 115BAC for A.Y. 2024-25 Particulars ₹ Net profit as per profit and loss account 50,85,000 Less: Income-tax refund credited in the profit and loss account, out of which interest on such refund is only taxable, which is to be considered separately under the head "Income from other sources" 30,000 50,55,000 Add: Expenses either not allowable or to be considered separately but charged in the profit & loss account - Salary paid to brother disallowed to the extent considered unreasonable [Section 40A(2)] 5,000 - Advertisement in the souvenir of political party not allowable as per section 37(2B) (See Note 1) 2,500 - Payment made to political party by cheque (See Note 2) 1,00,000 - Penalty levied by the Goods and Services tax department for delayed filing of returns not allowable as being paid for infraction of law (See Note 3) 5,300 - Depreciation as per books 1,07,250 - 30% of interest paid on loan paid to Mr. Mohit, a resident, without deduction of tax at source not allowable as per section 40(a)(ia) 24,000 52,99,050 Less: Depreciation allowable as per Income-tax Act, 1961 65,000 Depreciation on building [20lakhs x 10%] 2,00,000 2,65,000 Profits and gains from business or profession 50,34,050 Income from Other Sources Interest on income-tax refund 4,570 Gross Total Income 50,38,620 Less: Deduction under section 80GGC [Contribution to Political Party] [Not allowable] Nil Total Income 50,38,620 Notes (1) The amount of 2,500 paid for advertisement in the souvenir issued by a political party attracts disallowance under section 37(2B). (2) Payment to political party is not an expenditure incurred wholly and exclusively for business purpose and hence not allowance under section 37(1). Since the amount has been debited to profit and loss account, the same has to be added back for computing business income. (3) The interest of 12,750 paid on the delayed deposit of goods and services tax is for breach of contract and hence, is allowable as deduction. However, penalty of 5,300 for delay in filing of returns is not allowable since it is for breach of law. (4) Deduction under section 35AD is not allowable as per section 115BAC(2). However, normal depreciation u/s 32 is allowable. Computation of tax liability as per section 115BAC Particulars Particulars ₹ Tax on total income of 50,38,620 Upto 3,00,000 Nil 3,00,001 - 6,00,000 [@5% of 3lakhs] 15,000 6,00,001 - 9,00,000 [@10% of 3lakhs] 30,000 9,00,001 - 12,00,000 [@15% of 3lakhs] 45,000 12,00,001 - 15,00,000 [@20% of 3lakhs] 60,000 15,00,001 - 50,38,620 [@30% of 35,38,620] 10,61,586 12,11,586 Add: Surcharge @10% [Since, the total income exceeds 50 lakhs but does not exceed 1 crore] 1,21,159 13,32,745 Less: Marginal relief (See computation below) 94,125 12,38,620 Add: Health and education cess@4% 49,545 Total tax liability 12,88,165 Total tax liability (Rounded off) 12,88,170 Computation of marginal relief Particulars ₹ (A) Tax payable including surcharge on total income of 50,38,620 as per section 115BAC 13,32,745 (B) Tax payable on total income of 50lakhs as per section 115BAC 12,00,000 (C) Excess tax payable (A-B) 1,32,745 (D) Marginal relief (₹ 1,32,745 - 38,620, being the amount of income in excess of 50lakhs) 94,125 Note - An individual paying tax u/s 115BAC is not liable to alternate minimum tax u/s 115JC. Computation of total income of Mr. Amit for A.Y. 2024-25 under normal provisions of the Act Particulars Particulars ₹ Gross Total Income as per default tax regime under section 115BAC 50,38,620 Add: Depreciation on building [20lakhs x 10%] 2,00,000 52,38,620 Less: Warehousing charges 22,50,000 29,88,620 Gross Total Income excluding profits and gains from specified business under section 35AD Profits and gains from specified business under section 35AD Warehousing charges 22,50,000 Less: Deduction under section 35AD (See Note 1) 20,00,000 2,50,000 Gross Total Income as per normal provisions of the Act 32,38,620 Less: Deduction under section 80GGC for contribution to Political Party (See Note 2) 1,00,000 Total Income as per regular provisions of the Act 31,38,620 Notes - (1) Deduction @100% of the capital expenditure is available under section 35AD in respect of specified business of setting up and operating a warehouse facility for storage of agricultural produce which commences operation on or after 1.04.2009. (2) Payment to political party qualifies for deduction under section 80GGC since the payment is made by way of a cheque. Computation of tax liability of Mr. Amit for A.Y. 2024-25 under the regular provisions of the Act Particulars Particulars ₹ Tax on total income of 31,38,620 Upto 2,50,000 Nil 2,50,001 - 5,00,000 [@5% of 2.50 lakh] 12,500 5,00,001 - 10,00,000 [@20% of 5,00,000] 1,00,000 10,00,001-31,38,620 [@30% of 21,38,620] 6,41,586 7,54,086 Add: Health and education cess@4% 30,163 Total tax liability 7,84,249 Total tax liability (rounded off) 7,84,250 Computation of adjusted total income and AMT of Mr. Amit for A.Y. 2024-25 Particulars Particulars ₹ Total Income (computed above as per regular provisions of Income tax) 31,38,620 Add: Deduction under section 35AD 20,00,000 Less: Depreciation under section 32 on building [20 lakhs x 10%] (2,00,000) 18,00,000 Adjusted Total Income 49,38,620 Alternative Minimum [email protected]% 9,13,645 Add: Health and education cess@4% 36,546 Total tax liability 9,50,191 Total tax liability (rounded off) 9,50,190 Since the regular income-tax payable is less than the alternate minimum tax payable, the adjusted total income shall be deemed to be the total income and tax is leviable @18.5% thereof plus cess@4%. Therefore, liability as per section 115JC is 9,50,190. Since the tax liability of Mr. Amit under section 115JC is lower than the tax liability as computed u/s 115BAC, it would be beneficial for him to opt out of the default tax regime under section 115BAC for A.Y. 2024-25 and pays tax under regular provisions of the Act. Moreover, benefit of alternate minimum tax credit is also available to the extent of tax paid in excess of regular tax. AMT credit to be carried forward under section 115JEE Particulars ₹ Tax liability under section 115JC 9,50,190 Less: Tax liability under the regular provisions of the Income-tax Act, 1961 7,84,250 1,65,940