Mr. Ram, a resident individual aged 58 years, is engaged in the manufacturing of textile items. Statement of Profit and Loss shows a net profit…

Computation of total income and tax liability of Mr. Ram for A.Y. 2025-26 under default tax regime under section 115BAC Particulars Particulars ₹ I Profits and gains from business or profession Net profit as per Statement of Profit and Loss 52,00,000 Add: Items of expenditure not allowable while computing business income Additional depreciation [Not allowable under default tax regime] 1,50,000 Interest u/s 234B on short payment of advance tax [Not allowed] 2,10,000 Payment to contractor without deduction of TDS [30% of payment made to contractor is disallowed under section 40(a)(ia) since tax was not deducted at source and contractor did not file his return of income] 1,05,000 Contribution to Prime Minister Relief Fund [Disallowed since it is not wholly and exclusively incurred for business purpose] 3,00,000 Advertising charges in a brochure of a political party [Disallowed under section 37(2B)] 40,000 Interest on term loan to co-operative bank [Disallowed under section 43B, since interest is not paid before due date of filing of return of income] 2,60,000 Contribution towards pension scheme of employees [14% of salary and dearness allowance is allowed as deduction in respect of contribution towards pension scheme. Accordingly, excess contribution of 10,000, being - 1,50,000 - 1,40,000 (14% of 10lakhs) is disallowed] 10,000 10,75,000 62,75,000 Less: Items of income to be treated separately under the respective head of income Industrial power tariff concession received from Central Government [Any assistance in the form of concession received from the Central Government would be treated as income. Since it is already credited to statement of profit and loss, no adjustment is required] - Interest from banks on fixed deposits [Taxable or otherwise under the head "Income from Other Sources"] 1,50,000 Cash gift from father [Taxable or otherwise under the head "Income from Other Sources"] 90,000 2,40,000 60,35,000 Add: Disallowance under section 40A(3A) for aggregate cash payment exceeding - 10,000 in a single day which was allowed in the P.Y. 2023-24 on due basis 35,000 60,70,000 Less: 30% of 75,000, representing audit fees for the P.Y. 2023-24 for which tax was deducted but not deposited would have been disallowed while computing deduction for P.Y.2023-24. Since the tax is deposited in P.Y.2024-25,22,500 would be allowable as deduction in the A.Y.2025-26 22,500 60,47,500 II Income from Other Sources Interest from banks on fixed deposits 1,50,000 Cash gift from father [Cash gift received from father, being a relative is not taxable] - 1,50,000 Gross Total Income 61,97,500 Less: Deduction under section 80G [Not allowable under default tax regime] Nil Total Income 61,97,500 Tax on 61,97,500 Upto 3,00,000 Nil 3,00,000 - 7,00,000 [4 lakhs @5%] 20,000 7,00,000 - 10,00,000 [3 lakhs @10%] 30,000 10,00,000 - 12,00,000 [2 lakhs @15%] 30,000 12,00,000 - 15,00,000 [3 lakhs @20%] 60,000 15,00,000 - 61,97,500 [₹ 46,97,500 @30%] 14,09,250 15,49,250 Add: Surcharge @10% [Since total income exceeds 50lakhs but does not exceed 1crore] 1,54,925 17,04,175 Add: HEC@4% 68,167 Tax liability 17,72,342 Tax liability (Rounded off) 17,72,340 Computation of total income and tax liability of Mr. Ram for A.Y. 2025-26 under the optional tax regime of the Income-tax Act, 1961 Particulars Particulars ₹ Gross Total Income/ Total Income as per default tax regime u/s 115BAC 61,97,500 Less: Additional depreciation 1,50,000 Gross Total Income as per optional tax regime 60,47,500 Less: Deduction under Chapter VI-A Deduction under section 80G Contribution to Prime Minister Relief Fund 3,00,000 Deduction under section 80GGC Expenditure towards advertising charges in a brochure of a political party incurred by an individual not allowed as deduction Nil Total Income 57,47,500 Tax on 57,47,500 Upto 2,50,000 Nil 2,50,000 - 5,00,000 [₹ 2.50 lakhs @5%] 12,500 5,00,000 - 10,00,000 [5lakhs @20%] 1,00,000 10,00,000 - 57,47,500 [₹ 47,47,500 @30%] 14,24,250 15,36,750 Add: Surcharge @10% [Since total income exceeds 50lakhs but does not exceed 1crore] 1,53,675 16,90,425 Add: HEC@4% 67,617 Tax liability 17,58,042 Tax liability (Rounded off) 17,58,040 Since the tax liability of Mr. Ram under optional tax regime is lower than the tax liability computed under section 115BAC, it would be beneficial for him to opt out of the default tax regime under section 115BAC for A.Y. 2025-26.