Mr. Ganesh, a resident and ordinarily resident aged 61 years, is engaged in the business of manufacturing furniture. He is subject to tax audit…

Computation of total income of Mr. Ganesh for A.Y. 2025-26 Particulars Particulars ₹ I. Income from business or profession Net Profit 53,74,500 Add: Items debited but not allowable/item not credited but taxable while computing business income Undervaluation of stock [(₹ 15,58,000 -14,50,000) x 10/90] 1,20,000 Employer's contribution to NPS in excess of 14% of salary. Employer's contribution to the extent of 14% of salary i.e., basic salary plus dearness allowance forming part of salary would be allowed as deduction. Thus, excess contribution i.e.,16,000 [₹ 1,00,000, being 20% of 5,00,000 less - 84,000 being 14% of 6,00,000 (₹ 5,00,000 + 20% of 5,00,000)] has to be added back. 16,000 VRS expenditure - 1/5th of expenditure on voluntary retirement scheme is allowable over a period of five years u/s 35DDA. Since whole amount of expenditure is debited to Profit and Loss A/c, 4/5th has to be added back [₹ 3,40,000 × 4/5]. 2,72,000 Interest on loan taken for purchase of electric car used for personal purpose not allowable as deduction while computing business income as being expense of personal nature. Thus,1,80,000 [₹ 12,00,000 x 15%] has to be added back, since the same forms part of interest on loan debited to profit and loss account. 1,80,000 Loss on sale of asset of scientific research debited in Profit & Loss account [Not allowed] 2,00,000 Sale proceeds of asset acquired for conducting scientific research taxable as business income under section 41(3) in the year of sale to the extent of lower of amount of sale proceeds i.e.,4,00,000 or the amount of deduction allowed u/s 35 i.e.,6,00,000 4,00,000 Contribution to scientific research association approved u/s 35 [Not allowable under section 35(1)(ii) as per default tax regime] 1,75,000 Depreciation as per books of A/c 6,17,000 19,80,000 73,54,500 Less: Depreciation as per Income-tax Rules 4,50,000 Depreciation on Motor car purchased for supply of finished goods [₹ 3,00,000 x 15%] 45,000 4,95,000 68,59,500 Less: Items of income credited to profit and loss account but not taxable or taxable under any other head of income Bad debt recovered [The excess of amount recovered i.e.,3,00,000 over the amount due after bad debt allowance i.e.,2,00,000 will be taxable as business income u/s 41(4). Since the entire 3lakhs is credited to the profit and loss account,2 lakhs has to be reduced] 2,00,000 Winning from lottery [Taxable under the head "Income from other sources"] 31,500 2,31,500 66,28,000 II. Income from other sources Winning from lottery [₹ 31,500 x 100/70] 45,000 Gross Total Income 66,73,000 Less: Deduction under Chapter VI-A Deduction under section 80EEB [Not allowable under default tax regime] Nil Total Income 66,73,000 Computation of tax liability of Mr. Ganesh for A.Y.2025-26 Particulars Particulars ₹ Tax on winning from lottery @30% of 45,000 13,500 Tax on total income (excluding winning from lottery) of 66,28,000 Upto 3,00,000 Nil 3,00,001 -7,00,000[@5% of 4lakhs] 20,000 7,00,001 - 10,00,000[@10% of 3lakhs] 30,000 10,00,001-12,00,000 [@15% of 2lakhs] 30,000 12,00,001-15,00,000 [@20% of 3lakhs] 60,000 15,00,001-66,28,000 [@30% of 51,28,000] 15,38,400 16,78,400 16,91,900 Add: Surcharge @10% [Since total income exceeds 50lakhs but does not exceed 1crore] 1,69,190 18,61,090 Add: Health and education cess@4% 74,444 Tax liability 19,35,534 Tax liability (rounded off) 19,35,530