Taxation - Income TaxQuestion 5589 of 146
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Question 1 Mr. Rohit, a resident individual, aged 65 years, is a qualified medical practitioner. He runs his own clinic. Income & Expenditure A/c of Mr. Rohit for the year ending March 31st 2024 is as under : Expenditure ` Income ` To Salary to Staff 8,20,000 By Consultation Fees 22,00,000 To Administrative Expenses 5,90,000 By Salary received from Care Hospital Pvt. Ltd. 1,80,000 To Conveyance Expenses 24,000 By Rental Income from House Property 78,000 To Power & Fuel 24,000 By Dividend from Foreign Companies 10,000 To Interest on Housing Loan 1,00,000 To interest on Education Loan for son 26,000 To Amount paid to scientific research association approved & notified u/s 35 25,000 To Net Profit 8,59,000 Total 24,68,000 Total 24,68,000 Following is the further information relating to Financial Year 2023-2024: (i) He is working part-time with Care Hospital Pvt. Ltd. His Salary details are as under : Basic Pay Transport Allowance ` 13,000 p.m. ` 2,000 p.m. Total ` 15,000 p.m. Further, during P.Y. 2023-24 his son had undergone a medical treatment in Care Hospital Pvt. Ltd. free of cost. The hospital would have charged a sum of ` 1,00,000 for a similar treatment to unrelated patients. (ii) He owns a residential house. The ground floor of the house (50% portion) is self-occupied by him while first floor of the house (50% portion) has been rented out since 01/10/2023. The reconstruction of the entire house was started on 01.04.2023 and was completed on 30.09.2023. The monthly rent is ` 10,000. The tenant also pays ` 3,000 p.m. as power back-up charges. He took a housing loan of ` 12 lakhs on 01.04.2023. Interest on housing loan for the period 01.04.2023 to 30.09.2023 was ` 60,000 and for the period 01.10.2023 to 31.03.2024 was ` 40,000. During the year, he also paid municipal taxes for the F.Y. 2022-23 ` 4,000 and F.Y. 2023-24 ` 6,000. (iii) Other Information: (a) Payment of salary of ` 25,000 per month to sister-in-law of Mr. Rohit, who was in-charge of the Accounts & Receivables department. However, in comparison to similar work profile, the reasonable salary at market rate is ` 20,000 per month. (b) Conveyance expenses include a sum of ` 12,000 incurred for conveyance from house to Care Hospital Pvt. Ltd. and vice-versa in relation to his employment. (c) Power and fuel expenses include a sum of ` 6,000 incurred for generator fuel for providing power back up to the tenant. (d) Administrative expenses include a sum of ` 10,000 paid as Municipal Taxes for his house. TAXATION (e) Clinic Equipment details are : Opening W.D.V. of Clinic Equipment as on 01.04.2023 was ` 1,00,000 and fresh purchase made on 28.08.2023 for ` 25,000 which was paid in cash. (f) He also paid tuition fees of ` 40,000 for his Grand Daughter, which is debited to his capital a/c. (g) He availed a loan of ` 8,00,000 from bank for higher education of his son. He repaid principal of ` 50,000 and interest of ` 26,000 during P.Y. 2023-2024. You are required to compute his net taxable income and net tax liability for the A.Y. 2024-25 if he has exercised the option of shifting out of the default tax regime provided under section 115BAC(1A).

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Detailed Solution & Explanation

### Computation of Total Income and Tax Liability of Mr. Rohit for A.Y. 2024-25 *(Assessee has opted out of Default Tax Regime, aged 65 years - Senior Citizen)* | S. No. | Particulars | Amount (₹) | Amount (₹) | | :--- | :--- | :--- | :--- | | **I** | **Income from Salaries** | | | | | Basic Pay (₹13,000×12\displaystyle ₹13,000 \times 12) | 1,56,000\displaystyle 1,56,000 | | | | Transport Allowance (₹2,000×12\displaystyle ₹2,000 \times 12) | 24,000\displaystyle 24,000 | | | | Free medical treatment for son in Care Hospitals Pvt. Ltd. (Exempt) | 0\displaystyle 0 | | | | **Gross Salary** | **1,80,000\displaystyle 1,80,000** | | | | Less: Standard deduction under Section 16(ia) (Maximum) | (50,000)\displaystyle (50,000) | | | | **Net Salary** | **1,30,000\displaystyle 1,30,000** | | | | Less: Set off of loss from house property (restricted to salary income) | (41,500)\displaystyle (41,500) | **88,500\displaystyle 88,500** | | **II** | **Income from House Property** | | | | | **First Floor (Let-out Portion - 50%)** | | | | | Gross Annual Value (Rent of ₹10,000×6\displaystyle ₹10,000 \times 6 months) | 60,000\displaystyle 60,000 | | | | Less: Municipal taxes paid (₹10,000\displaystyle ₹10,000 total ×50%\displaystyle \times 50\%) | (5,000)\displaystyle (5,000) | | | | **Net Annual Value (NAV)** | **55,000\displaystyle 55,000** | | | | Less: Standard deduction under Section 24(a) @ 30% of NAV | (16,500)\displaystyle (16,500) | | | | Less: Interest on housing loan under Section 24(b) (₹1,00,000×50%\displaystyle ₹1,00,000 \times 50\%) | (50,000)\displaystyle (50,000) | | | | **Income from Let-out Portion** | **(11,500)\displaystyle (11,500)** | | | | **Ground Floor (Self-occupied Portion - 50%)** | | | | | Annual Value | 0\displaystyle 0 | | | | Less: Interest on housing loan under Section 24(b) (restricted to ₹30,000\displaystyle ₹30,000 for reconstruction) | (30,000)\displaystyle (30,000) | | | | **Loss from House Property** | **(41,500)\displaystyle (41,500)** | **(41,500)\displaystyle (41,500)** | | **III** | **Profits and Gains of Business or Profession** | | | | | Net Profit as per Income and Expenditure Account | 8,59,000\displaystyle 8,59,000 | | | | *Add: Inadmissible expenses / items separately treated:* | | | | | (a) Conveyance expenses for commuting to Care Hospital | 12,000\displaystyle 12,000 | | | | (b) Power and fuel expenses for providing backup to tenant | 6,000\displaystyle 6,000 | | | | (c) Municipal tax on residential house included in admin expenses | 10,000\displaystyle 10,000 | | | | (d) Interest on housing loan for reconstruction | 1,00,000\displaystyle 1,00,000 | | | | (e) Interest on education loan for son | 26,000\displaystyle 26,000 | | | | *Less: Clinic Equipment Depreciation (Opening WDV ₹1,00,000\displaystyle ₹1,00,000 @ 15%)* | (15,000)\displaystyle (15,000) | | | | *Note: Cash addition of ₹25,000\displaystyle ₹25,000 is not eligible for depreciation u/s 43(1)* | 0\displaystyle 0 | | | | *Less: Income to be treated under other heads:* | | | | | (i) Salary received from Care Hospital Pvt. Ltd. | (1,80,000)\displaystyle (1,80,000) | | | | (ii) Rental income from House Property | (78,000)\displaystyle (78,000) | | | | (iii) Dividend from Foreign Companies | (10,000)\displaystyle (10,000) | | | | **Net Professional Income** | **7,30,000\displaystyle 7,30,000** | **7,30,000\displaystyle 7,30,000** | | **IV** | **Income from Other Sources** | | | | | Power back-up charges from tenant (₹3,000×6\displaystyle ₹3,000 \times 6 months) | 18,000\displaystyle 18,000 | | | | Less: Actual expenses incurred | (6,000)\displaystyle (6,000) | | | | Net power backup charges | 12,000\displaystyle 12,000 | | | | Dividend from foreign companies | 10,000\displaystyle 10,000 | **22,000\displaystyle 22,000** | | | **Gross Total Income** | | **8,40,500\displaystyle 8,40,500** | | | Less: Deductions under Section 80E (Interest on education loan) | | (26,000)\displaystyle (26,000) | | | Less: Deductions under Section 80C (Tuition fee for grandchild - not eligible) | | 0\displaystyle 0 | | | **Total Income** | | **8,14,500\displaystyle 8,14,500** | ### Computation of Tax Liability | Particulars | Computation | Amount (₹) | | :--- | :--- | :--- | | Tax on Total Income (₹8,14,500\displaystyle ₹8,14,500) | | | | - Up to ₹3,00,000\displaystyle ₹3,00,000 | Nil | 0\displaystyle 0 | | - ₹3,00,001\displaystyle ₹3,00,001 to ₹5,00,000\displaystyle ₹5,00,000 (Senior Citizen Exemption) | 5%×₹2,00,000\displaystyle 5\% \times ₹2,00,000 | 10,000\displaystyle 10,000 | | - ₹5,00,001\displaystyle ₹5,00,001 to ₹8,14,500\displaystyle ₹8,14,500 | 20%×₹3,14,500\displaystyle 20\% \times ₹3,14,500 | 62,900\displaystyle 62,900 | | **Basic Tax** | | **72,900\displaystyle 72,900** | | Add: Health and Education Cess @ 4% | 4%×₹72,900\displaystyle 4\% \times ₹72,900 | 2,916\displaystyle 2,916 | | **Net Tax Liability** | | **75,816\displaystyle 75,816** | | **Net Tax Liability (Rounded off u/s 288B)** | | **75,820\displaystyle 75,820** |

Key Concepts to Understand

Net Profit

The final profit of a business after deducting all indirect operating expenses, non-operating expenses, and taxes from Gross Profit. It represents the actual earnings available to the owners.

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