(a) Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12 years), provide the following details of their income/losses for the…

CA Intermediate · Taxation · PYQS · September 2024
(a) Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12 years), provide the following details of their income/losses for the previous year 2023-24: Mr. Suraj (i) Salary received as a partner from a partnership firm -6,15,000 He is a working partner in the firm and the salary is as per the limits prescribed under section 40(b). (ii) Income (loss) from house property: Brought forward loss from House -A (let out) -96,000 Current year loss from House B (let out) -2,30,000 (iii) Interest received on enhanced compensation -2,00,000 It relates to transfer of a piece of land in the financial year 2018-19. Out of the above - 35,000 relates to previous year 2023-24 and the balance relate to preceding previous year. (iv) Gift from grandfather's younger sister by cheque -1,25,000 (v) Dividend on listed equity shares of domestic companies (Gross) -50,000 (vi) On 1 st December 2023, Mr. Suraj received 75 lakhs as maturity proceeds from his life insurance policy which was taken on 1 st May 2012. He paid - 6,00,000 as annual premium and the sum assured was 65 lakhs. Mrs. Megha (i) Current year loss from business. (She carried on this business with funds which Mr. Suraj gifted to her) -8,10,000. (ii) Mrs. Megha purchased a house property from her "Stridhan" and gifted the same to her minor son, Dev on 1 st April, 2023 out of love and affection. The FMV of the house on the date of transfer was 51 lakhs. Master Dev Rent received from house property received from Mrs. Megha -35,000 p.m. Compute total income of Mr. Suraj, Mrs. Megha and Dev for the assessment year 2024-25 assuming Mr. Suraj has decided to pay tax under default tax regime provided under section 115BAC, whereas Mrs. Megha and Dev have opted out of the default tax regime. Briefly explain the reasons for the treatment of each item.

Suggested Answer and Working Notes:

Computation of total income of Mr. Suraj, Mrs. Megha and minor son Dev for A.Y. 2024-25 Particulars Mr. Suraj [Under default tax regime] Mrs. Megha [Under normal provisions] Dev [Under normal provisions] Particulars Particulars ₹ Income from house property Annual Value [As per section 27, Mrs. Megha is the deemed owner of the house property transferred to minor son, Dev without consideration though such property is acquired from her "Stridhan"] [₹ 35,000 x12] 4,20,000 Less: Deduction @30% of NAV 1,26,000 2,94,000 Brought forward loss from House A [Not allowed to be set-off against income from other heads] - Current year loss of Mr. Suraj from House - B [Not allowed to be set-off against income from other heads since Mr. Suraj is paying tax under default tax regime] - Profits and gains of business or profession Salary from partnership firm 6,15,000 Less: As per section 70, set off of current year loss from business of 8,10,000 to the extent of [Current year loss from business of his wife is allowed to be set off in the hands of Mr. Suraj since funds for business is gifted by him] 6,15,000 Income from Other Sources Interest on enhanced compensation [Taxable in the year it is received] 2,00,000 Less: Deduction @50% 1,00,000 1,00,000 Gift from grandfather's sister [Taxable under section 56(2)(x), since grandfather's sister is not a relative and the amount of gift exceeds - 50,000] 1,25,000 Dividend on shares (gross) 50,000 Maturity proceeds from LIC [Exempt under section 10(10D) since the annual premium payable does not exceed 10% of sum assured] - Total Income 2,75,000 Less: Set off of remaining business loss of 1,95,000 1,95,000 80,000 Gift of house property from Mrs. Megha to Dev [Exempt since the gift is from a relative i.e., from his mother] Nil Taxable Income 80,000 2,94,000 -

Topics: Paper 3A: Income Tax Laws

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