Mr. Suresh, aged 55 years, is a resident individual employed in a Government company. During the financial year 2024-25, he received a monthly basic…
CA Intermediate · Taxation · PYQS · January 2026
Mr. Suresh, aged 55 years, is a resident individual employed in a Government company. During the financial year 2024-25, he received a monthly basic salary of 1 lakh along with a dearness allowance (DA) of 25% of the basic pay. In addition, as per the company's policy, he was provided with the following allowances and perquisites during the year: (i) On account of a natural calamity caused by a cloudburst in Himachal Pradesh, he instructed his employer to directly deposit his basic pay and dearness allowance for the month of September 2024 into the PM CARES Fund. (ii) He received - 62,500 as leave encashment during the year, equivalent to 15 days' basic pay and dearness allowance. (iii) He received entertainment allowance of 95,000. (iv) His employer incurred 5 lakh towards the medical treatment of his married daughter outside India, including 1 lakh for travel expenses of the patient and one attendant, as permitted under RBI guidelines. (v) Upon his appointment as Director (Finance) during the year, the company provided free education to his child in a school maintained by it. The cost of similar education in a comparable institution is 900 per month. Calculate the total income of Mr. Suresh, if he opted for the optional tax regime for the assessment year 2025-26.
Suggested Answer and Working Notes:
(a) Computation of total income of Mr. Suresh for the A.Y. 2025-26 as per the optional tax regime Particulars ₹ Basic Salary [1lakh x 12] 12,00,000 Dearness Allowance [25% of Basic Salary] 3,00,000 [Salary and Dearness Allowance for the month of September 2024 would be taxable in the hands of Mr. Suresh, even if he forgone the same and instructed to directly deposit into PM CARES Fund] Leave encashment [Taxable, since it is received during the employment] 62,500 Entertainment allowance 95,000 Perquisite Valuation Medical expenditure of 4lakhs incurred by employer outside India for married daughter [Exempt, since it is permitted under RBI guidelines] - Travel expense of 1lakh incurred by employer on patient and one attendant [Travel expenses would not be exempt, since Mr. Suresh's Gross total income before including travel expenditure exceed 2lakhs] 1,00,000 Provision of free educational facility to child [Exempt, since it is in a school maintained by the employer company and the cost does not exceed - 1,000 per month] - Gross Salary 17,57,500 Less: Entertainment allowance [Allowed in case of government employee only] - Less: Standard deduction 50,000 Net Salary/ Gross Total Income 17,07,500 Less: Deduction under section 80G [Contribution to PM CARES Fund of Basic pay and DA of September month] 1,25,000 Total Income 15,82,500
Topics: Paper 3A: Income Tax Laws
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