Mr. Sandeep, manager in CTL Pvt. Ltd. at Mumbai, furnishes following information for the year ended 31st March, 2025: Basic salary is 55,000 per…

CA Intermediate · Taxation · PYQS · May 2025
Mr. Sandeep, manager in CTL Pvt. Ltd. at Mumbai, furnishes following information for the year ended 31st March, 2025: Basic salary is 55,000 per month and entitled to a commission of 2,500 per month. A company owned accommodation is provided to him in Mumbai. Furniture costing - 2,40,000 was also provided. He took a personal loan of 3,00,000 on 1st September, 2024 on which the interest @7.75% per annum was charged by the company. The entire loan is still outstanding. SBI rate of interest on 1 st April, 2024 is 12.75%. Mr. Sandeep is the owner of a house property in Kolkata which he constructed during the financial year 2016-17. The property consists of four identical units. He occupied one unit for his residence and three units were let out at a rent of 20,000 per month per unit. The municipal value is 9,00,000 and the municipal tax was paid @ 20% of municipal value. Fair rent and standard rent are - 7,50,000 and - 8,50,000, respectively. One of the let out units was vacant for six months during the year. Interest on loan taken for construction of the house is 2,00,000. Compute total income of Mr. Sandeep for the A.Y. 2025-26 assuming he has opted out default tax regime u/s 115BAC(1A).

Suggested Answer and Working Notes:

Computation of total income of Mr. Sandeep for A.Y. 2025-26 as per the optional tax regime Particulars Particulars ₹ I Income from Salaries Basic Salary [₹ 55,000 × 12] 6,60,000 Commission [₹ 2,500 x 12] 30,000 Value of Rent-free accommodation 10% of salary [₹ 6,60,000 +30,000] 69,000 Add: Value of furniture [₹ 2,40,000 × 10% p.a.] 24,000 93,000 Value of perquisite for interest on personal loan Interest on loan as per SBI rate [₹ 3,00,000 x 12.75% x 7/12] 22,312.50 Less: Interest charged by the company [₹ 3,00,000 x 7.75% x 7/12] 13,562.50 8,750 Gross Salary 7,91,750 Less: Standard deduction u/s 16 [Actual salary or - 50,000, whichever is less] 50,000 Net salary 7,41,750 II Income from house property Let out portion [three units] Municipal value [₹ 9,00,000 x 3/4] 6,75,000 Fair Rent [₹ 7,50,000 x 3/4] 5,62,500 Higher of Municipal value or fair rent 6,75,000 Standard Rent [₹ 8,50,000 x 3/4] 6,37,500 Expected Rent [Higher of Municipal value or fair rent but restricted to standard rent] 6,37,500 Actual rent received/ receivable [₹ 20,000 x 12 x 3 − ₹ 20,000 x 6] 6,00,000 Actual rent of 6,00,000 is lower than the expected rent of 6,37,500 owing to vacancy since, had the property not been vacant the actual rent would have been - 7,20,000. Therefore, the actual rent is Gross Annual Value. Gross Annual Value 6,00,000 Less: Municipal taxes (₹ 6,75,000 x 20%) 1,35,000 Net Annual Value 4,65,000 Less: Deduction under section 24 - 30% of net annual value 1,39,500 - Interest on loan [₹ 2,00,000 x 3/4] 1,50,000 2,89,500 1,75,500 Self-occupied portion [One Unit] Annual Value Nil Less: Deduction u/s 24 Interest on loan for construction [₹ 2,00,000 x 1/4] 50,000 (50,000) 1,25,500 Gross Total Income/ Total Income 8,67,250

Topics: Paper 3A: Income Tax Laws

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