Mr. K is a 48-year-old resident individual. The details of income earned for the P.Y. 2024-25 from diversified businesses and investment portfolio…

CA Intermediate · Taxation · RTP · January 2026
Mr. K is a 48-year-old resident individual. The details of income earned for the P.Y. 2024-25 from diversified businesses and investment portfolio are as under: (i) He runs two businesses: A manufacturing business with profit of 10,00,000.A speculative business with loss of 7,00,000. (ii) He incurred a loss of 2,15,000 from a let-out property and also earned an income of 50,000 from the activity of owning and maintaining race horses. For earning this income, he incurred an expense of 5,000. (iii) He has earned short-term capital gains of 50,000 from equity shares sold on 10.05.2024 on which STT was paid, and long-term capital loss of 75,000 from other assets sold on 15.10.2024. (iv) Mr. K took divorce from his wife in April 2024 and the custody of their minor son is given to Mrs. K. Following the divorce, he transferred ownership of house property to his wife. During the financial year, the property generated rental income of 5,00,000. (v) Mr. K deposits cash of 50,000 every month into the bank account of his minor son. During the P.Y. 2024-25, interest income of 25,000 is generated in his son's bank account. (vi) He has also contributed a sum of 2 lakh to an electoral trust and incurred expenditure of 30,000 on advertisement in a brochure of a political party. (vii) He authored an investment portfolio book and received royalty income of 4,10,000 during the P.Y. 2024-25 from a publisher in Germany. The royalty is calculated at 16% of book sales value. He incurred - 60,000 as expenditure for earning this income. Out of the total royalty, 2,90,000 was remitted to India by 31st August 2025, and the balance remained in abroad till 30.9.2025. Compute the total income of Mr. K assuming that he exercises the option of shifting out of the default tax regime. Assume Mr. K's total income, excluding the minor's income, is higher than that of his wife.

Suggested Answer and Working Notes:

Computation of total income of Mr. K for the A.Y.2025-26 under normal provision of the Act Particulars ₹ ₹ I House Property Rental Income of 5lakhs shall be taxable in the hands of Mrs. K since it is a case of transfer of house property to his spouse in connection with an agreement to live apart. In such case, the transferee shall be the owner of the house property and rental income will be taxed in the hands of transferee. - Set off of loss from house property to be restricted to 2 lakhs by virtue of section 71(3A). Balance loss of 15,000 has to be carried forward to A.Y. 2026-27 II Income from business Income from manufacturing business 10,00,000 Loss from speculation business - As per section 73(1), loss from speculation business can be set off only against profit from any other speculation business. Therefore, loss from speculation business of 7,00,000 has to be carried forward to A.Y. 2026-27 Less: Set off of loss from house property to the extent of 2lakhs 2,00,000 8,00,000 III Capital Gains Short-term capital gain u/s 111A 50,000 Long term capital loss - 50,000 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 75,000 has to be carried forward to A.Y. 2026-27 IV Income from Other Sources Royalty Income [₹ 4,10,000 -60,000] 3,50,000 Interest income from son's bank account [Income of the minor will be included in the income of Mrs. K as Mrs. K is maintaining the child.] - Income from the activity of owning and maintaining race horses 50,000 Less: Expenses incurred to earn this income 5,000 3,95,000 Gross Total Income 12,45,000 Less: Deduction under section 80GGC Contribution to an electoral trust is allowed as deduction assuming it is paid otherwise than in cash. Expenditure of 30,000 incurred on advertisement in a brochure of political party is not eligible for deduction under section 80GGC 2,00,000 Deduction under section 80QQB (Refer working note below) 2,30,000 4,30,000 Total Income 8,15,000 Working Note Deduction allowable under section 80QQB for the A.Y.2025-26 Particulars ₹ Royalty - 4,10,000 x 15/16 = 3,84,375 Restricted to Amount brought into India in convertible foreign exchange within the prescribed time 2,90,000 Less: Expenses already allowed as deduction while computing royalty income 60,000 Deduction u/s 80QQB 2,30,000

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

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