Mr. Vishwas, a resident individual aged 43 years, provides professional services in the field of interior decoration. His Income & Expenditure…

Computation of total income of Mr. Vishwas for A.Y. 2025-26 Particulars Particulars ₹ I Income from business or profession Excess of income over expenditure 51,43,000 Add: Items debited but not allowable while computing business income - Family planning expenditure incurred for employees [Not allowable as deduction since expenditure on family planning for employees is allowed only to a company assessee / not allowed in case of individuals.] 20,000 - Salary payment to sister-in-law in excess of market rate [Any expenditure incurred for which payment is made to a relative, to the extent it is considered unreasonable is disallowed. However, sister-in-law is not included in the definition of “relative” for the purpose of section 40A(2). Therefore, no adjustment is required for excess salary paid to Mr. Vishwas's sister-in-law] Nil - Medical expenses for the treatment of father [Not allowed as deduction since it is a personal expenditure/ not an expenditure incurred for the purpose of business of Mr. Vishwas.] 80,000 - Commission to Ms. Anjaleen without deduction of tax at source [Mr. Vishwas would be liable to deduct tax at source on commission since his gross receipts from profession exceeded 50lakhs during F.Y.2023-24. Since commission has been paid without deduction of tax at source, 30% of 25,000, being commission paid without deducting tax at source, would be disallowed under section 40(a)(ia) while computing the business income of A.Y.2025-26] 7,500 - Depreciation as per books of account 90,000 - Purchase of Furniture [not allowable, since it is a capital expenditure] 48,000 2,45,500 Add: Employees' Contribution to EPF [Sum received by the assessee from his employees as contribution to EPF is income of the employer. Since the amount is not credited to Income and Expenditure Account, the same has to be added for computing business income. Deduction in respect of such sum is allowed only if such amount is credited to the employee's account on or before due date under the relevant Act. Since, the employees' contribution to EPF for February 2025 is deposited after the due date under the relevant Act, no deduction would be available] 10,000 53,98,500 Less: Depreciation as per Income-tax Rules, 1962 - On Professional Books [₹ 90,000 x 40%] 36,000 - On Computers [₹ 35,000 x 40%] 14,000 - On Furniture [₹ 19,000 x 10%, since it has been put to use for more than 180 days during the year] [Any expenditure for acquisition of any asset in respect of which payment or aggregate of payment made to a person, otherwise than by an A/c payee cheque/ bank draft or use of ECS or through prescribed electronic mode, exceeds - 10,000 in a day, such expenditure would not form part of actual cost of such asset. Hence,29,000 paid on 31.8.2024 in cash would not be included in the actual cost of furniture] 1,900 - On Car [₹ 3,35,000 x 15%] [Actual cost of car would be the purchase price of the car to Mr. Vishwas, i.e.,3,35,000] 50,250 1,02,150 52,96,350 Less: Items of income credited but not taxable or taxable under any other head of income - Interest on Public Provident Fund [Exempt] 60,000 - Interest on savings bank account [Taxable under the head “Income from other sources"] 20,000 - Interest on National Savings Certificates VIII Issue (3rd Year) [Taxable under the head "Income from other sources"] 21,000 1,01,000 51,95,350 II Income from Other Sources Interest on savings bank account 20,000 Interest on National Savings Certificates VIII Issue (3rd Year) 21,000 41,000 Gross Total Income 52,36,350 Less: Deduction under Chapter VI-A Deduction under section 80C Contribution to PPF 1,00,000 Interest on NSC (3rd Year) (Reinvested) 21,000 1,21,000 Deduction under section 80D Medical expenses for the treatment of father [Since Mr. Vishwas's father is a senior citizen and not covered by any health insurance policy, payment for medical expenditure by a mode other than cash would be allowed as deduction to the extent of 50,000] 50,000 Deduction under section 80TTA Interest on savings bank account to the extent of 10,000 10,000 1,81,000 Total Income 50,55,350 Computation of tax liability of Mr. Vishwas for A.Y.2025-26 Particulars Particulars ₹ Tax on total income of 50,55,350 Upto 2,50,000 Nil 2,50,001 - 5,00,000[@5% of 2.50 lakh] 12,500 5,00,001 - 10,00,000[@20% of 5lakh] 1,00,000 10,00,001-50,55,350 [@30% of 40,55,350] 12,16,605 13,29,105 Add: Surcharge @10% [Since total income exceeds 50lakhs but does not exceed 1crore] 1,32,911 14,62,016 Less: Marginal relief (Refer Note below) 94,166 13,67,850 Add: Health and education cess@4% 54,714 Tax liability 14,22,564 Tax liability (rounded off) 14,22,560 Note: Computation of Marginal Relief Particulars ₹ Tax on total income of 50,55,350 (A) 14,62,016 Tax on total income of 50lakhs (B) 13,12,500 Total income less 50lakhs (C) 55,350 Tax on total income of 50lakhs plus the excess of total income over 50lakhs (D = B + C) 13,67,850 Marginal Relief (A – D) 94,166