Mr. Pratham is employed with a private sector company as Manager (Production) stationed in the city of Dhanbad, Jharkhand. His monthly basic salary…

CA Intermediate · Taxation · PYQS · May 2026
Mr. Pratham is employed with a private sector company as Manager (Production) stationed in the city of Dhanbad, Jharkhand. His monthly basic salary is 80,000. The company also maintains and runs an engineering college in Ranchi, Jharkhand where his son is admitted to study mining engineering. He gives you the following additional details regarding his other receipts/ perquisites from his employer or from others during the financial year 2025-26: (i) On 02/09/2025, he was transferred from Dhanbad to Jamshedpur, Jharkhand where he was provided with a room in a prominent hotel as a residence for his stay in Jamshedpur from 02/09/2025 to 12/09/2025. The rent of hotel room was - 4,500 per day. (ii) His employer sold a car to him on 01/08/2025 for 2,50,000. The company had purchased this car on 01/07/2023 for 5 lakhs. The car fell under the 15% block of assets in the books of the company. (iii) His employer entered into a staff group insurance scheme with a Government Insurance Agency. During the FY 2025-26, his employer paid - 2.50 lakhs as the premium on the life of Mr. Pratham. (iv) The annual fee for other students in the same college in which his son studies is 2,00,000. However, his company provides education to his son for free of cost. (v) He went on a holiday within India with his 3 children (one major son and 2 twin minor daughters) and his brother who is dependent on him. The total air and train cost incurred by him on the travel was - 3,00,000 (₹ 60,000 per person). He travelled in economy class flights or 3-AC train compartments. The entire amount was reimbursed by his employer since it was his first trip in the last 20 years. (vi) His wife expired in May 2024 on duty. She was employed with Government School as a school teacher. The family pension received by Mr. Pratham during F.Y. 2025-26 is 2,50,000. (vii) Pratham received a sum of 10 lakh from a trust registered under section 12AB of the Income-tax Act. Compute the total income of Mr. Pratham assuming he has opted out of default tax regime for the A.Y. 2026-27. Provide brief reasons for the treatment of items wherever necessary.

Suggested Answer and Working Notes:

Computation of Total Income of Mr. Pratham for A.Y. 2026-27 as per the normal tax regime Income from Salaries Basic Salary [₹ 80,000 × 12] 9,60,000 Perquisite Value of Rent-free accommodation Mr. Pratham has been provided with hotel accommodation for a period not exceeding in aggregate 15 days on his transfer from Dhanbad to Jamshedpur, hence, there would be no perquisite. Nil Perquisite Value on sale of car Original cost of car 5,00,000 Less: Depreciation from 01.7.2023 to 30.6.2024 @ 20% 1,00,000 4,00,000 Less: Depreciation from 01.7.2024 to 30.6.2025 @ 20% 80,000 3,20,000 Value as on 01.08.2025 - being the date of sale to Mr. Pratham Less: Amount received from Mr. Pratham on 01.08.2025 2,50,000 70,000 Premium paid by the employer in a staff group insurance scheme would not be considered as perquisite. Nil Education facility provided by the employer free of cost – Cost of such education in similar institution in or near the locality would be taxable as perquisite. 2,00,000 Leave Travel Concession – Entire amount of expenditure reimbursed by the employer would be exempt, since the same was availed for himself, his dependent brother and three children and the journey was undertaken by economy class airfare. The restriction imposed for two children is not applicable in case of multiple births which take place after the first child. Nil Note: Alternatively, if it is assumed that the travel assistance provided to Mr. Pratham does not qualify as Leave Travel Concession (LTC), since the term "LTC" has not been specifically mentioned in the question, then the reimbursement shall be treated as a taxable perquisite for holiday expenses under Rule 3(7)(ii) of the Income-tax Rules, 1962. Consequently, the entire reimbursement of 3,00,000 would be taxable. In such a case, Net Salary and Gross Total Income / Total Income would be - 14,80,000 and - 17,15,000, respectively. Gross Salary 12,30,000 Less: Standard deduction u/s 16 [Actual salary or - 50,000, whichever is less] 50,000 Net salary 11,80,000 Income from other sources Family Pension 2,50,000 Less: Deduction [Lower of 15,000 or - 83,333 being 1/3rd of 2,50,000] 15,000 2,35,000 Amount received from a trust registered u/s 12AB would not be taxable under section 56(2)(x) NIL Gross Total Income/Total Income 14,15,000

Topics: Paper 3A: Income Tax Laws

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