Taxation - Income TaxQuestion 5592 of 146
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Question 4 (a) Mr. Rakesh furnishes the following details for year ended 31.03.2024: Particulars ` Short Term Capital Gain 2,80,000 Loss from Speculative Business 1,20,000 Long Term Capital Gain on Sale of Land 60,000 Long Term Capital Loss on Sale of shares (STT not paid) 2,00,000 Income From Business of Textile (after allowing current year Depreciation) 1,00,000 Income From Salary (Computed) 2,00,000 Loss from Let - Out House Property 80,000 Share of Loss from Firm 1,60,000 Investment in PPF 21,000 Medical Insurance Premium for self paid by Cheque 24,000 Preventive Health Check-up fees for wife paid by Cheque 5,000 Following are the Carry Forward Losses: • Carry Forward Loss from Business of Textile ` 1,20,000 - this being the 8th year from the year of Loss. Gross Total Income 6,95,000 Less: Deduction under section 80TTB 50,000 Total Income 6,45,000 Tax liability Up to ` 5,00,000 Nil ` 5,00,001 – ` 6,45,000 [@20% of ` 1,45,000] 29,000 29,000 Add: Health and education cess @4% 1,160 Tax liability 30,160 TAXATION Compute Total Income of Mr. Rakesh for the A.Y. 2024-2025 if he has exercised the option of shifting out of default tax regime provided under section 115BAC(1A). Also state the eligible Carry Forward losses. (b) (i) Which are all persons required to mandatorily file the Return of Loss as per section 80 of Income Tax Act, 1961. (ii) Consequences of Non-filing of Return of Loss in time OR (b) (i) What is Belated Return u/s 139(4) of Income tax Act, 1961 and when it should be filed? (ii) Explain Non-Applicability of Updated Return u/s 139(8A)

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Detailed Solution & Explanation

### Part (a) Computation of Total Income and Carry Forward Losses of Mr. Rakesh for A.Y. 2024-25 *(Assessee has opted out of Default Tax Regime)* | Head of Income & Particulars | Amount (₹) | Amount (₹) | | :--- | :--- | :--- | | **Income from Salaries (Computed)** | 2,00,000\displaystyle 2,00,000 | | | - Less: Loss from let-out house property set-off (allowed u/s 71) | (80,000)\displaystyle (80,000) | 1,20,000\displaystyle 1,20,000 | | **Profits and Gains of Business or Profession** | | | | - Income from Textile Business | 1,00,000\displaystyle 1,00,000 | | | - Less: Brought forward loss from Textile Business (restricted to business income) | (1,00,000)\displaystyle (1,00,000) | 0\displaystyle 0 | | - Share of loss from partnership firm (exempt u/s 10(2A), cannot be set-off) | 0\displaystyle 0 | 0\displaystyle 0 | | **Capital Gains** | | | | - Short-term Capital Gain | 2,80,000\displaystyle 2,80,000 | | | - Long-term Capital Gain on sale of land | 60,000\displaystyle 60,000 | | | - Less: Long-term Capital Loss on sale of shares set-off (restricted to LTCG u/s 74) | (60,000)\displaystyle (60,000) | 2,80,000\displaystyle 2,80,000 | | **Gross Total Income** | | **4,00,000\displaystyle 4,00,000** | | Less: Deductions under Chapter VI-A: | | | | - Section 80C (PPF investment) | (21,000)\displaystyle (21,000) | | | - Section 80D (Medical insurance premium ₹24,000\displaystyle ₹24,000 + preventive checkup ₹5,000\displaystyle ₹5,000 restricted to ₹25,000\displaystyle ₹25,000) | (25,000)\displaystyle (25,000) | (46,000)\displaystyle (46,000) | | **Total Income** | | **3,54,000\displaystyle 3,54,000** | #### **Eligible Carry Forward Losses to A.Y. 2025-26:** 1. **Loss from Speculative Business (₹1,20,000\displaystyle ₹1,20,000):** Can be carried forward for up to 4 years to be set-off only against speculative business profits u/s 73. 2. **Long-term Capital Loss on sale of shares (₹1,40,000\displaystyle ₹1,40,000):** Balance loss (₹2,00,000−₹60,000\displaystyle ₹2,00,000 - ₹60,000 set-off) to be carried forward for up to 8 years to be set-off only against LTCG u/s 74. 3. **Brought forward loss of Textile Business (₹20,000\displaystyle ₹20,000):** Cannot be carried forward further because A.Y. 2024-25 is the 8th and final year for carry forward of this loss. --- ### Part (b) (First Alternative) #### **(i) Mandatory Filing of Return of Loss (Section 80)** As per Section 80, for the purpose of carrying forward the following losses, the return of loss must be filed mandatorily under Section 139(3) on or before the due date specified under Section 139(1): - Business Loss under Section 72(1) - Speculative Business Loss under Section 73(2) - Loss from Specified Business under Section 73A(2) - Capital Loss under Section 74(1) - Loss from the activity of owning and maintaining racehorses under Section 74A(3) #### **(ii) Consequences of Non-filing of Return of Loss in Time** If the return of loss is not filed within the due date of Section 139(1), the aforementioned losses cannot be carried forward to subsequent years. However, loss from house property under Section 71B and unabsorbed depreciation under Section 32(2) can still be carried forward even if the return is filed late. --- ### Part (b) (Second Alternative) #### **(i) Belated Return under Section 139(4)** A belated return is a return filed after the due date specified under Section 139(1). It can be filed at any time: - Before three months prior to the end of the relevant assessment year (i.e., on or before 31st December of the Assessment Year; for P.Y. 2023-24, the limit is 31.12.2024); or - Before the completion of the assessment, whichever is earlier. #### **(ii) Non-Applicability of Updated Return under Section 139(8A)** The option to file an updated return is not available if the updated return: - Is a loss return; - Has the effect of decreasing the total tax liability determined on the basis of return filed earlier; - Results in or increases a refund.

Key Concepts to Understand

Depreciation

Allocation of the cost of a tangible fixed asset over its useful life due to wear and tear, efflux of time, or obsolescence.

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