Mr. Suraj, aged 40 years, submits the following information for the financial year ending 31.3.2025: (i) He is employed in ABC Ltd. and earned…

CA Intermediate · Taxation · RTP · September 2025
Mr. Suraj, aged 40 years, submits the following information for the financial year ending 31.3.2025: (i) He is employed in ABC Ltd. and earned salary income of 10,50,000 (computed). (ii) He is engaged in a speculation and a non-speculation business. He earned profit from speculation business of 60,000 and suffered loss from non-speculation business of 40,000. (iii) He reported short-term capital gain of 80,000. He also received lottery winnings of 20,000 (Gross). (iv) He has a brought forward long-term capital loss of 30,000 from A.Y. 2023-24. (v) Mr. Suraj has two children: one married daughter Riya aged 17 years, and a son Raj aged 16 years. The interest income of Riya and Raj is 1,200 p.a. and - 2,000 p.a., respectively. (vi) He transferred a flat to Riya on 1st April 2024, on account of natural love and affection. This flat was let out from that date and generated rental income of 5,000 per month. (vii) Mr. Suraj paid a medical insurance premium of 22,000 during the financial year to insure his health, his spouse and dependent children. Additionally, he paid - 33,000 to insure the health of his mother, aged 67 years, who is not dependent on him. He also incurred - 20,000 as medical expenditure for his father, aged 71 years, who is not dependent and is not covered under any insurance policy. He contributed - 6,000 during the year to the Central Government Health Scheme (CGHS). Compute the total income of Mr. Suraj assuming that Mr. Suraj's total income is higher than Mrs. Suraj's total income, before including the income of minor children. Mr. Suraj exercises the option of shifting out of the default tax regime provided under section 115BAC(1A).

Suggested Answer and Working Notes:

Computation of total income of Mr. Suraj for the A.Y.2025-26 Particulars Particulars ₹ I Salaries Income from Salary (computed) 10,50,000 II Income from business Income from speculation business 60,000 Less: Loss from non-speculation business (40,000) 20,000 As per section 73(1), loss from speculation business cannot be set off against profit from non-speculation business. However, there is no restriction under section 72 to set off loss from non-speculation business against profit from speculation business. III Capital Gains Short-term capital gain 80,000 As per section 74(1), long term capital loss can be set off only against long term capital gain. Therefore, long term capital loss of 30,000 has to be carried forward to A.Y. 2026-27 IV Income from Other Sources Winnings from lotteries 20,000 Gross Total income before including income of minor children 11,70,000 Income of minor married daughter Riya (i) Interest income 1,200 (ii) GAV [Rental income from house property] [₹ 5,000 x 12] 60,000 [Section 27 is not attracted if the house property is transferred by a parent to a minor married daughter. Hence, Mr. Suraj is not a deemed owner of the house property. However, by virtue of section 64(1A), all income of a minor child is includible in the hands of parent whose income is higher. Less: 30% of GAV 18,000 42,000 43,200 Less: Exempt under section 10(32) 1,500 41,700 Income of Minor Son Raj Interest income 2,000 Less: Exempt under section 10(32) 1,500 500 Gross Total Income 12,12,200 Less: Deduction under section 80D (Refer working note below) 75,000 Total Income 11,37,200 Working Note Deduction allowable under section 80D for the A.Y.2025-26 Particulars Particulars ₹ (i) Medical insurance premium paid for self, spouse and dependent children 22,000 (ii) Contribution to CGHS 6,000 28,000 restricted to 25,000 (iii) Mediclaim premium paid for mother, who is over 60 years of age 33,000 (iv) Medical expenditure incurred for father, who is over 60 years of age and not covered by any insurance 20,000 53,000 restricted to 50,000 75,000

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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