Mrs. Natasha, a resident individual aged 54 years, is carrying on business of manufacturing of textile fabrics, as a proprietor. The turnover in the…

Computation of total income of Mrs. Natasha for A.Y. 2026-27 under default tax regime Particulars Particulars ₹ I Income from business or profession Net Profit as per profit and loss account 15,61,000 Add: Disallowances not considered while computing business income Job charges without deduction of tax [30% of 90,000] [Mrs. Natasha's turnover for the P.Y. 2024-25 exceeds 1crore, hence, she is liable to deduct tax at source u/s 194C on job charges of 90,000. Since Mrs. Natasha has not deducted tax at source on 90,000, 30% would be disallowed u/s 40(a)(ia). 27,000 Payment to creditor in cash [Payment to creditor in cash is not allowable as business expenditure as per section 40A(3), since such amount exceeds - 10,000 and paid in cash] 25,000 52,000 16,13,000 Less: Items credited but not taxable while computing business income Subsidy on new machinery [20% x 7,25,000] [Subsidy received from Central Government on new machinery is to be reduced from actual cost.] 1,45,000 Interest on capital from partnership firm [₹ 2,00,000/15% x 3%] [Since interest on capital from M/s Ramji textiles is authorized by partnership deed, interest@12% p.a. would be allowed as deduction in the hands of firm u/s 40(b) even for sleeping partner. Consequently, interest @ 12% p.a. would be the business income of Mrs. Natasha u/s 28. Hence, 3% would not be taxable as business income of Mrs. Natasha] 40,000 1,85,000 14,28,000 Add: Items not credited but taxable while computing business income Commission from agent on settlement [Since deduction was allowed in respect of commission in earlier year and during the P.Y. 2025-26, Mrs. Natasha received back such amount due to settlement, the same would be deemed as her income u/s 41(1)] 50,000 14,78,000 Less: Depreciation as per Income-tax Rules Opening WDV of machinery 4,75,000 Add: Purchase of machinery for 7,25,000 during the P.Y. 2025-26 by A/c payee cheque. Subsidy of 1,45,000, being 20% of cost, received from Central Government on new machinery is to be reduced from actual cost (₹ 7,25,000 -1,45,000). 5,80,000 10,55,000 Less: Sale proceeds 75,000 WDV as on 31.3.2026 before depreciation for P.Y. 2025-26 9,80,000 Depreciation @15% on 9,80,000 1,47,000 Additional Depreciation [Not allowable under default tax regime] - 1,47,000 13,31,000 Less: Loss from eligible transaction carried out in respect of trading in derivatives in a recognized stock exchange is not a speculative business and hence, the same is allowed to be set off from textile business income 1,17,500 12,13,500 II Capital Gains Long term capital gain on sale of vacant land since it is held for more than 24 months Sales consideration 15,25,000 Less: Cost of acquisition 4,80,000 10,45,000 III Income from Other Sources Fair market value of gold coin received from cousin [Taxable u/s 56(2)(x), since cousin is not a relative and the fair market value exceeds - 50,000] 55,000 Gross Total Income 23,13,500 Less: Deduction under Chapter VI-A Deduction under section 80DD [Not allowable under default tax regime] - Total Income 23,13,500 Computation of tax liability of Mrs. Natasha for A.Y.2026-27 under default tax regime Particulars ₹ Tax on total income of 23,13,500 Tax on LTCG on sale of vacant land As the asset is a long-term capital asset, being land acquired before 23.07.2024 and transferred on or after 23.07.2024 by a resident individual, the tax shall be computed @20% with indexation benefit or @12.5% without indexation benefit, whichever is more beneficial to the assessee. Tax @20% with indexation Sale consideration = 15,25,000 Cost of acquisition = 4,80,000 x 376/220 = 8,20,364 Gain = 7,04,636 Tax @20% = 7,04,636 x 20% = 1,40,927 Tax @12.5% without indexation Tax @12.5% = 10,45,000 x 12.5% = 1,30,625 Tax on LTCG on sale of vacant land @12.5% without indexation 1,30,625 Tax on other income of 12,68,500 at slab rates 70,275 2,00,900 Add: Health and education cess@4% 8,036 Tax liability 2,08,936 Tax liability (rounded off) 2,08,940 Computation of total income of Mrs. Natasha for A.Y. 2026-27 under optional tax regime Particulars ₹ Gross Total Income as per default tax regime 23,13,500 Less: Additional depreciation on new machinery @20% on 5,80,000 1,16,000 Gross Total Income as per optional tax regime 21,97,500 Less: Deduction under Chapter VI-A Deduction under section 80DD [Sum deposited with LIC for the maintenance of her dependent mother and suffering from severe disability [Eligible for higher deduction - 1,25,000 in case of severe disability irrespective of amount deposited with LIC] 1,25,000 Total Income as per optional tax regime 20,72,500 Computation of tax liability of Mrs. Natasha for A.Y.2026-27 under optional tax regime Particulars ₹ Tax on total income of 20,72,500 Tax on LTCG on sale of vacant land @12.5% without indexation (as computed above) 1,30,625 Tax on other income of 10,27,500 at slab rates 1,20,750 2,51,375 Add: Health and education cess@4% 10,055 Tax liability 2,61,430