Mr. Sumit engaged in the business of manufacturing of furniture. He also set up and commenced warehousing facility for storage of agricultural…

Computation of total income of Mr. Sumit as per section 115BAC for A.Y. 2026-27 Particulars ₹ Net profit as per profit and loss account 50,85,000 Less: Income-tax refund credited in the profit and loss account, out of which interest on such refund is only taxable, which is to be considered separately under the head “Income from other sources" 30,000 50,55,000 Add: Expenses either not allowable or to be considered separately but charged in the profit & loss account - Salary paid to brother disallowed to the extent considered unreasonable [Section 40A(2)] 5,000 - Advertisement in the souvenir of political party not allowable as per section 37(2B) 2,500 - Payment made to political party by cheque not an expenditure incurred wholly and exclusively for business purpose and hence not allowable under section 37(1). 1,00,000 - Penalty levied by the Goods and Services tax department for delayed filing of returns not allowable as being paid for infraction of law. However, interest of ₹ 12,750 paid on the delayed deposit of goods and services tax is for breach of contract and hence, is allowable as deduction. 5,300 - Depreciation as per books 1,07,250 - 30% of interest paid on loan paid to Mr. Mohit, a resident, without deduction of tax at source not allowable as per section 40(a)(ia) 24,000 52,99,050 Less: Depreciation allowable as per Income-tax Act, 1961 65,000 Depreciation on building [₹ 20 lakhs x 10%] is allowable. However, deduction under section 35AD is not allowable under default tax regime. 2,00,000 2,65,000 Profits and gains from business or profession 50,34,050 Income from Other Sources Interest on income-tax refund 4,570 Gross Total Income 50,38,620 Less: Deduction under section 80GGC [Contribution to Political Party not allowable under default tax regime] Nil Total Income 50,38,620 Computation of tax liability as per section 115BAC Particulars ₹ ₹ Tax on total income of ₹ 50,38,620 Upto ₹ 4,00,000 Nil ₹4,00,001 – ₹ 8,00,000 [@5% of ₹ 4 lakhs] 20,000 ₹ 8,00,001 – ₹ 12,00,000 [@10% of ₹ 4 lakhs] 40,000 ₹ 12,00,001 – ₹ 16,00,000 [@15% of ₹ 4 lakhs] 60,000 ₹ 16,00,001 – ₹ 20,00,000 [@20% of ₹ 4 lakhs] 80,000 ₹ 20,00,001 – ₹ 24,00,000 [@25% of ₹ 4 lakhs] 1,00,000 ₹ 24,00,001 – ₹ 50,38,620 [@30% of ₹ 26,38,620] 7,91,586 10,91,586 Add: Surcharge @10% [Since, the total income exceeds ₹50 lakhs but does not exceed ₹ 1 crore] 1,09,159 12,00,745 Less: Marginal relief (See computation below) 82,125 11,18,620 Add: Health and education cess@4% 44,745 Total tax liability 11,63,365 Total tax liability (Rounded off) 11,63,370 Computation of marginal relief Particulars ₹ (A) Tax payable including surcharge on total income of ₹50,38,620 as per section 115BAC 12,00,745 (B) Tax payable on total income of ₹ 50 lakhs as per section 115BAC 10,80,000 (C) Excess tax payable (A-B) 1,20,745 (D) Marginal relief (₹ 1,20,745 – ₹ 38,620, being the amount of income in excess of ₹ 50 lakhs) 82,125 Note - An individual paying tax u/s 115BAC is not liable to alternate minimum tax u/s 115JC. Computation of total income of Mr. Sumit for A.Y. 2026-27 under optional tax regime Particulars ₹ ₹ Gross Total Income as per default tax regime under section 115BAC 50,38,620 Add: Depreciation on building [₹20 lakhs x 10%] 2,00,000 52,38,620 Less: Depreciation under section 32 on building [₹20 lakhs x 10%] (2,00,000) 18,00,000 Less: Warehousing charges 22,50,000 Gross Total Income excluding profits and gains from specified business under section 35AD 29,88,620 Profits and gains from specified business u/s 35AD 22,50,000 Less: Deduction @100% of the capital expenditure is available under section 35AD in respect of specified business of setting up and operating a warehouse facility for storage of agricultural produce 20,00,000 2,50,000 Gross Total Income as per normal provisions of the Act 32,38,620 Less: Deduction under section 80GGC for contribution to Political Party is allowable since the payment is made by way of a cheque. 1,00,000 Total Income as per regular provisions of the Act 31,38,620 Computation of tax liability of Mr. Sumit for A.Y. 2026-27 under optional tax regime Particulars ₹ ₹ Tax on total income of ₹ 31,38,620 Upto ₹ 2,50,000 Nil ₹2,50,001 – ₹ 5,00,000 [@5% of ₹ 2.50 lakh] 12,500 ₹ 5,00,001 – ₹ 10,00,000 [@20% of ₹ 5,00,000] 1,00,000 ₹10,00,001-₹ 31,38,620 [@30% of ₹ 21,38,620] 6,41,586 7,54,086 Add: Health and education cess@4% 30,163 Total tax liability 7,84,249 Total tax liability (rounded off) 7,84,250 Computation of adjusted total income and AMT of Mr. Sumit for A.Y. 2026-27 Particulars ₹ ₹ Total Income (computed above as per regular provisions of income tax) 31,38,620 Add: Deduction under section 35AD 20,00,000 Less: Depreciation under section 32 on building [₹20 lakhs x 10%] (2,00,000) 18,00,000 Adjusted Total Income 49,38,620 Alternative Minimum [email protected]% 9,13,645 Add: Health and education cess@4% 36,546 Total tax liability 9,50,191 Total tax liability (rounded off) 9,50,190 Since the regular income-tax payable is less than the alternate minimum tax payable, the adjusted total income shall be deemed to be the total income and tax is leviable @18.5% thereof plus cess@4%. Therefore, liability as per section 115JC is Rs. 9,50,190. Since the tax liability of Mr. Sumit under section 115JC is lower than the tax liability as computed u/s 115BAC, it would be beneficial for him to opt out of the default tax regime under section 115BAC for A.Y. 2026-27 and pays tax under optional tax regime. Moreover, benefit of alternate minimum tax credit is also available to the extent of tax paid in excess of regular tax. AMT credit to be carried forward under section 115JEE Particulars ₹ Tax liability under section 115JC 9,50,190 Less: Tax liability under the regular provisions of the Income-tax Act, 1961 7,84,250 1,65,940