Mr. Vishal, aged 33 years, submits the information of following transaction/income during the P.Y. 2023-24 (i) Mr. Vishal had a house in Delhi.…

CA Intermediate · Taxation · MTP · May 2024
Mr. Vishal, aged 33 years, submits the information of following transaction/income during the P.Y. 2023-24 (i) Mr. Vishal had a house in Delhi. During financial year 2022-23, he had transferred the said house to Ms. Deepika, daughter of his brother without any consideration. House would go back to Mr. Vishal after the life time of Ms. Deepika. The transfer was made with a condition that 10% of rental income from such house shall be paid to Mrs. Vishal. Rent received by Ms. Deepika during the previous year 2023-24 from such house property is 5,50,000. (ii) Mr. Vishal holds preference shares in M/s A Pvt. Ltd. He instructed the company to pay dividends to Ms. Chandni, daughter of his servant. The transfer is irrevocable for the lifetime of Chandni. Dividend received by Ms. Chandni during the previous year 2023-24 is 4,50,000. (iii) Mr. Vishal has a short term capital loss of 16,000 from sale of property and long term capital gain of 15,000 from sale of property. (iv) Other income/loss of Mr. Vishal includes Interest from saving bank account of 1,75,000Cash gift of 75,000 received from daughter of his sister on his birthday.Income from betting of 25,000Income from card games of 46,000Loss on maintenance of race horses of 14,600 Compute the total income of Mr. Vishal for the Assessment Year 2024-25 if he has opted out of the default tax regime and the losses to be carried forward.

Suggested Answer and Working Notes:

Computation of Total Income of Mr. Vishal for A.Y. 2024-25 Particulars Amount (₹) Amount (₹) Income from house property House in Delhi [Since Mr. Vishal receives direct or indirect benefit from income arising to his brother's daughter, Ms. Deepika, from the transfer of house to her without consideration, such income is to be included in the total income of Mr. Vishal, even though the transfer may not be revocable during lifetime of Ms. Deepika] Gross Annual Value 5,50,000 Less: Municipal taxes - Net Annual Value 5,50,000 Less: Deductions from Net Annual Value (a) 30% of Net Annual Value 1,65,000 (b) Interest on loan - 3,85,000 Capital Gains Long term capital gain from sale of property 15,000 Less: Short-term capital loss can be set-off against both short-term capital gains and long-term capital gains. Short term capital loss of 16,000 set off against long-term capital gains to the extent of 15,000. Balance short term capital loss of 1,000 to be carry forward to A.Y.2025-26 15,000 - Income from other sources Dividend on preference shares [Taxable in the hands of Mr. Vishal as per section 60, since he transferred the income, i.e., dividend, without transferring the asset, i.e., preference shares] 4,50,000 Interest from saving bank account 1,75,000 Cash gift [Taxable as per section 56(2)(x), since sum of money exceeding - 50,000 is received from his niece, who is not a relative] 75,000 Income from betting [No loss is allowed to be set off against such income] 25,000 Income from card games [No loss is allowed to be set off against such income] 46,000 7,71,000 Gross Total Income 11,56,000 Less: Deduction under Chapter VI-A Deduction under section 80TTA [Interest from savings bank account] 10,000 10,000 Total Income 11,46,000 Losses to be carried forward to A.Y. 2025-26 Particulars Amount (₹) Short term capital loss [₹ 16,000 - 15,000] 1,000 Loss on maintenance of race horses [Loss incurred on maintenance of race horses cannot be set-off against income from any source other than the activity of owning and maintaining race horses. 14,600

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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