Mr. Vivek is an advocate and furnishes you the receipts and payments account for the financial year 2024-25. Receipts and Payments Account Receipts…

Computation of total income and tax liability of Mr. Vivek for A.Y. 2025-26 Particulars Particulars ₹ Income from house property Gross annual value 1 (₹ 35,000 x 12) 4,20,000 Less: Municipal taxes paid by Mr. Vivek 8,200 Net annual value 4,11,800 Less: Deductions under section 24 (a) 30% of Net Annual Value 1,23,540 (b) Interest on house borrowing (allowed in full in case of let out property) 2,01,500 86,760 Profits and gains of business or profession Income from profession Fees from legal services 49,60,000 Less: Expenses allowable as deduction - Staff salary and bonus 17,50,000 - Other general and administrative expenses 22,00,000 - Office rent 1,48,000 - Motor car maintenance (₹ 72,000 x 2/3) 48,000 - Car loan interest – not allowable, since Mr. Vivek follows cash system of accounting and no interest is paid during the previous year) 41,46,000 8,14,000 Less: Depreciation u/s 32 - Motor car - 9,50,000 x 15% x 50% x 2/3, being put to use for less than 180 days 47,500 - Books being annual publications [₹ 80,000 x 40%] 32,000 - Computer @40% of 52,000 x 50%, since the same is put to use for less than 180 days 10,400 89,900 7,24,100 For the P.Y. 2024-25, the gross receipts of Mr. Vivek is 49,60,000. Since, it does not exceed - 50,00,000, he is eligible to pay tax under presumptive tax scheme under section 44ADA. In such case, his professional income would be - 24,80,000, being 50% of 49,60,000. It is more beneficial for Mr. Vivek to declare profit of 7,24,100 as per books of accounts which is lower than the profits computed on presumptive basis under section 44ADA. However, for declaring lower profits, he has to maintain books of account under section 44AA and get the same audited under section 44AB. Income from share speculation business 1,20,000 Less: Loss from commodity speculation business set off against income from share speculation business. Balance loss of 60,000 from commodity speculation business to be carried forward to A.Y. 2026-27 1,20,000 Nil Capital Gains Long-term capital gains on sale of 5,275 listed shares Sale consideration 5,95,000 Less: Cost of acquisition is higher of 4,22,000 1,73,000 - Cost of acquisition 1,21,800 - Lower of 4,22,000 (80x 5,275), being fair market value as on 31.1.2018 and - 5,95,000, being full value of consideration on transfer 4,22,000 Income from other sources Cash Gift of 84,000 i.e.,21,000 x 4, received from his four friends is taxable u/s 56(2)(x), since aggregate amount of cash gifts exceeds - 50,000 84,000 Gross Total Income 10,67,860 Less: Deductions under Chapter VI-A Section 80C Life insurance premium 49,000 Repayment of housing loan 1,80,000 PPF subscription 1,50,000 3,79,000 Restricted to 1,50,000 1,50,000 Section 80G Contribution to PM Cares Fund (100% of 1,21,000) by way of bank draft 1,21,000 Section 80GGC Donation to registered political party made by way of cheque 3,50,000 6,21,000 Total Income 4,46,860 Tax liability Particulars Tax @12.5% under section 112A on long-term capital gains exceeding - 1,25,000 i.e. on 48,000 6,000 Tax @5% on 23,860 [₹ 2,73,860 (total income excluding LTCG u/s 112A) -2,50,000, being basic exemption limit] 1,193 7,193 Less: Rebate u/s 87A [Since the total income does not exceed 5 lakhs, rebate u/s 87A would be available. Rebate u/s 87A is not available on tax on LTCG taxable u/s 112A] 1,193 6,000 Add: Health and Education cess@4% 240 Tax liability 6,240