Question 1 Mrs. S.C. Bose (aged 62 years) is a widow of a public sector employee who died during his service in 2011. She earns income from busines...

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Question 1 Mrs. S.C. Bose (aged 62 years) is a widow of a public sector employee who died during his service in 2011. She earns income from business of running a flower bouquet shop at Kolkata and income from royalty from writing books of science and sells in India and abroad. Profit & Loss account for the year ended 31st March, 2025 furnished by her is given below: Particulars Particulars To Opening stock 1,00,000 By Sales of flower bouquet 36,75,000 To Purchases 15,66,000 By Family pension from PSU through bank 3,60,000 To Salaries and wages 4,90,000 By Royalty form California University for books sold (Foreign exchange brought into India) 4,25,000 To Expenses relating to books authored by her 75,000 By Dividend (Net of TDS) 4,50,000 To Expenses in connection with dividends 12,000 By Interest on FDR (No TDS deducted) 76,000 To Repairs & Maintenance 3,25,000 By Closing stock 1,36,000 To Amount paid to IIT Chennai for scientific research projects 35,000 To Computers and other electronic items (purchased on 01-12-2024) 4,50,000 To Net Profit 20,69,000 Total 51,22,000 Total 51,22,000 Additional Information: (i) Purchases include 2 lakhs relate to flowers and creepers directly purchased from a farmer in cash on 26.09.2024. (ii) Repairs & Maintenance includes one-time deposit of 2,00,000 paid to electricity and water department. (iii) Computers and other electronic items includes 1,00,000 paid for television and washing machine for her household use. (iv) Salary & wages includes salary paid 2,40,000 to her illiterate brother (reasonable salary as per market rate is 1,80,000) (v) She purchased a residential house for 110 lakhs for which loan of 75 lakhs was taken from State Bank of India. Accrued interest was 3,37,500 till 31-03-2025 which was paid on 10-04-2025. No principal amount and interest was paid by Mrs. S.C. Bose till 31-03-2025. Ground floor of the house was used for shop and first floor was occupied for her residence. (vi) She purchased an electric vehicle on 30-09-2024 for 25 lakhs for business purposes. (vii) She sold 10,000 listed shares of SBCL Ltd. for 11,66,000 on 11-12-2024 which were purchased for 2,65,000 on 16.08.2024. STT was paid on purchase and sale both. Compute total income of Mrs. S.C. Bose under default tax regime u/s 115BAC and optional tax regime of the Income-tax Act, 1961 (15 Marks)

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Option descriptive: Correct Option. Solution: Computation of total income of Mrs. S.C. Bose for A.Y. 2025-26 under default tax regime under section 115BAC(1A):
| Head of Income / Particulars | Working | Amount () | Amount () | | --- | --- | --- | --- | | I. Income from House Property | | | | | Self-occupied portion (First Floor) | Annual Value is Nil | Nil | | | Less: Deduction u/s 24 | Interest on housing loan (Not allowed under default tax regime) | Nil | Nil | | II. Profits and Gains from Business or Profession | | | | | Net profit as per Profit & Loss A/c | | | 20,69,000 | | Add: Items of expenditure debited but not allowable: | | | | | Expenses relating to books authored by her | Allowed as deduction (Royalty is business income) | Nil | | | Expenses in connection with dividends | Taxable under Income from Other Sources; not allowed as business deduction | 12,000 | | | Amount paid to IIT Chennai for scientific research | Not allowable under default tax regime u/s 35 | 35,000 | | | Computers and other electronic items | Capital expenditure (disallowed, depreciation allowed instead) | 4,50,000 | | | Payment to farmer in cash for purchases | Not disallowed u/s 40A(3) as it falls under Rule 6DD exclusion | Nil | | | Deposit to electricity & water department | One-time security deposit (capital asset, not an expense) | 2,00,000 | | | Excessive salary paid to brother | Disallowed u/s 40A(2) (brother is relative, excess over market rate: 2,40,000 - 1,80,000) | 60,000 | 7,57,000 | | | | | 28,26,000 | | Less: Items of income credited but taxable under other heads: | | | | | Family pension from PSU | Taxable under "Income from Other Sources" | 3,60,000 | | | Dividend (Net of TDS) | Taxable under "Income from Other Sources" | 4,50,000 | | | Interest on FDR | Taxable under "Income from Other Sources" | 76,000 | 8,86,000 | | | | | 19,40,000 | | Less: Allowable business expenses & depreciation: | | | | | Interest on residential house used for shop | 50% of interest (3,37,500 / 2). Allowed u/s 43B since paid on/before due date | 1,68,750 | | | Depreciation: | | | | | - On computers and electronics (excl. personal) | (4,50,000 - 1,00,000) x 40% x 50% (put to use < 180 days) | 70,000 | | | - On house used for shop (ground floor) | 1,10,00,000 x 10% x 50% | 5,50,000 | | | - On electric vehicle | 25,00,000 x 40% (put to use > 180 days) | 10,00,000 | 17,88,750 | | Net Business Income | | | 1,51,250 | | III. Capital Gains | | | | | Short-term capital gains u/s 111A | Sale consideration: 11,66,000 Less: Cost of acquisition: 2,65,000 (held < 12 months, STT paid) | | 9,01,000 | | IV. Income from Other Sources | | | | | Family pension from PSU | Gross: 3,60,000 Less: Standard deduction u/s 57(iia) (lower of 33-1/3% or 25,000) | 3,35,000 | | | Dividend | Grossed up: 4,50,000 / 0.9 = 5,00,000 Less: Interest expense restricted to 20% of dividend (12,000 is allowed) | 4,88,000 | | | Interest on FDRs | Gross interest | 76,000 | 8,99,000 | | Gross Total Income | | | 19,51,250 | | Less: Deductions under Chapter VI-A | Not allowable under default tax regime | | Nil | | Total Income (Default Regime) | | | 19,51,250 |
Computation of total income of Mrs. S.C. Bose for A.Y. 2025-26 under the optional tax regime:
| Particulars | Working | Amount () | Amount () | | --- | --- | --- | --- | | Gross Total Income under default regime | | | 19,51,250 | | Less: Interest on housing loan for self-occupied portion | 50% of interest u/s 24(b) (3,37,500 / 2) | 1,68,750 | | | Less: Deduction u/s 35(2AA) for IIT Chennai | 100% deduction allowed under optional regime | 35,000 | (2,03,750) | | | | | 17,47,500 | | Add: Excess family pension standard deduction | Difference in deduction (25,000 under default vs 15,000 under optional) | | 10,000 | | Gross Total Income under optional regime | | | 17,57,500 | | Less: Deductions under Chapter VI-A: | | | | | - Section 80QQB (Royalty on books) | 4,25,000 - 75,000 = 3,50,000 restricted to maximum limit | 3,00,000 | | | - Section 80TTB (Interest on FDRs for senior citizen) | Restricted to maximum limit of 50,000 | 50,000 | (3,50,000) | | Total Income (Optional Regime) | | | 14,07,500 |

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