Mr. Paul, an Indian citizen and karta of V P HUF, stays out of India during the various previous years as follows: Previous year Stay outside India…

CA Intermediate · Taxation · PYQS · January 2026
Mr. Paul, an Indian citizen and karta of V P HUF, stays out of India during the various previous years as follows: Previous year Stay outside India 2019-20 112 days 2020-21 221 days 2024-25 90 days Apart from above, he never went out of India in the past 15 years. The VP HUF owns two agricultural lands in India, one in Mysore and the other in Saharanpur. The Mysore land is used for coffee cultivation. The cost of cultivation of coffee produce is 4 lakh and is sold directly in the Indian market for 15 lakh. The Saharanpur land is used for sugarcane cultivation which is further used for manufacturing of sugar in the factory owned by Mr. Paul. The sugarcane (worth 8 lakh) were processed into sugar with a job work cost of 3 lakh and is sold in the Indian market for 28 lakh. The cost of cultivation of sugarcane is 2 lakh. Based on the above information, determine: (i) Residential status of V P HUF for the assessment year 2025-26, and (ii) Compute the total income under proper heads of income and net tax liability of V P HUF under the default tax regime.

Suggested Answer and Working Notes:

(a) (i) Determination of residential status of V P HUF for the A.Y. 2025-26 Since Mr. Paul, Karta of V P HUF, stayed outside India for only 90 days, the control and management of the affairs of the V P HUF can be said to be situated partly in India. Thus, V P HUF would be resident in India for the P.Y. 2024-25. Since Mr. Paul was resident in at least 2 previous years out of 10 previous years immediately preceding P.Y. 2024-25 and he stayed for 730 days or more during 7 previous years immediately preceding P.Y. 2024-25, the V P HUF would be resident and ordinarily resident in India for the P.Y. 2024-25. Note: Alternatively, the answer can be presented as follows: Since Mr. Paul was neither a non-resident in 9 out of 10 previous years immediately preceding P.Y. 2024-25 nor stayed for less than 729 days during the 7 previous years preceding P.Y. 2024-25, the VP HUF would be resident and ordinarily resident in India for the P.Y. 2024-25. (ii) Computation of total income of VP HUF Particulars ₹ ₹ Profits from Business or Profession Sale of Sugar Sale Proceeds of sugar 28,00,000 Less: Manufacturing exp. 3,00,000 25,00,000 Less: Market value of sugarcane 8,00,000 17,00,000 Income from Other Sources Sale of Sugarcane Market value of sugarcane 8,00,000 Less: Cost of cultivation 2,00,000 Agricultural income would be exempt under section 10(1) 6,00,000 Sale of coffee produce Sale proceeds 15,00,000 Cost of cultivation 4,00,000 Agriculture income [Since coffee produce are directly sold in the Indian market without further processing, the income derived therefrom would be agriculture income and exempt under section 10(1)] 11,00,000 Gross total income/Total income 17,00,000 Computation of net tax liability of VP HUF under default tax regime Particulars ₹ Step I: Tax on agricultural income and non-agricultural income = 34,00,000 (₹ 17,00,000 +17,00,000) (i.e.,1,40,000 upto 15,00,000 plus 30% of 19,00,000) 7,10,000 Step II: Tax on agricultural income plus basic exemption limit = 20,00,000 [₹ 17,00,000 +3,00,000] (i.e.,1,40,000 upto 15,00,000 plus 30% of 5,00,000) 2,90,000 Step I - Step II 4,20,000 Add: Health and Education cess @4% 16,800 Net tax liability 4,36,800

Topics: Paper 3A: Income Tax Laws

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