Question 3 (a) Mr. Sandeep, manager in CTL Pvt. Ltd. at Mumbai, furnishes following information for the year ended 31st March, 2025: Basic salary i...

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Question 3 (a) Mr. Sandeep, manager in CTL Pvt. Ltd. at Mumbai, furnishes following information for the year ended 31st March, 2025: Basic salary is 55,000 per month and entitled to a commission of 2,500 per month. A company owned accommodation is provided to him in Mumbai. Furniture costing 2,40,000 was also provided. He took a personal loan of 3,00,000 on 1st September, 2024 on which the interest @7.75% per annum was charged by the company. The entire loan is still outstanding. SBI rate of interest on 1" April, 2024 is 12.75%. Mr. Sandeep is the owner of a house property in Kolkata which he constructed during the financial year 2016-17. The property consists of four identical units. He occupied one unit for his residence and three units were let out at a rent of 20,000 per month per unit. The municipal value is 9,00,000 and the municipal tax was paid @ 20% of municipal value. Fair rent and standard rent are 7,50,000 and 8,50,000, respectively. One of the let out units was vacant for six months during the year. Interest on loan taken for construction of the house is 2,00,000. Compute total income of Mr. Sandeep for the A.Y. 2025-26 assuming he has opted out default tax regime u/s 115BAC(1A). (6 Marks) (b) Discuss the taxability with reason in the hands of recipient for the assessment year 2025-26 in respect of following receipts or income: (i) Mr. Ram received a sum of 5,00,000 from his father on Ram's wedding anniversary. (ii) Mr. Govind sold his house property to Mrs. Radha for 1,25,00,000, whereas value determined by stamp valuation authority was 1,75,00,000. (iii) Ms. Agastha got a gift of car worth 7,00,000 from her friend on her wedding anniversary. (4 Marks)

Accepted Answer

Answer Solution: (a) Computation of total income of Mr. Sandeep for A.Y. 2025-26 under the optional tax regime: | Particulars | Working | Amount () | Amount () | | --- | --- | --- | --- | | I. Income from Salaries | | | | | Basic Salary | 55,000 × 12 | 6,60,000 | | | Commission | 2,500 × 12 | 30,000 | | | Value of Rent-free accommodation | 10% of salary (6,60,000 + 30,000) = 69,000 + Value of furniture (2,40,000 × 10% p.a.) = 24,000 | 93,000 | | | Perquisite for interest on personal loan | SBI rate: 3,00,000 × 12.75% × 7/12 = 22,312.50 Less: Charged by company: 3,00,000 × 7.75% × 7/12 = 13,562.50 | 8,750 | | | Gross Salary | | | 7,91,750 | | Less: Standard deduction u/s 16(ia) | Lower of 50,000 or Gross Salary | | (50,000) | | Net Salary | | | 7,41,750 | | | | | | | II. Income from House Property | | | | | Let-out portion (3 Units): | | | | | Expected Rent | Higher of Municipal Value (9,00,000 × 3/4 = 6,75,000) and Fair Rent (7,50,000 × 3/4 = 5,62,500), restricted to Standard Rent (8,50,000 × 3/4 = 6,37,500) | 6,37,500 | | | Actual Rent received/receivable | (20,000 × 12 × 3) - (20,000 × 6) (vacancy of one unit for 6 months) | 6,00,000 | | | Gross Annual Value (GAV) | Actual rent is lower than Expected Rent solely due to vacancy, so GAV is Actual Rent | 6,00,000 | | | Less: Municipal taxes paid | 6,75,000 × 20% | (1,35,000) | | | Net Annual Value (NAV) | | 4,65,000 | | | Less: Deductions u/s 24 | - Standard deduction @ 30% of NAV: 1,39,500 - Interest on loan: 2,00,000 × 3/4 = 1,50,000 | (2,89,500) | 1,75,500 | | Self-occupied portion (1 Unit): | | | | | Net Annual Value (NAV) | Nil | Nil | | | Less: Deduction u/s 24(b) | Interest on loan: 2,00,000 × 1/4 = 50,000 | (50,000) | (50,000) | | Income from House Property | | | 1,25,500 | | Gross Total Income / Total Income | | | 8,67,250 | (b) Taxability of Receipts in the hands of recipients for A.Y. 2025-26: (i) Mr. Ram received 5,00,000 from his father on wedding anniversary: Any sum of money received without consideration from a "relative" is exempt from tax under Section 56(2)(x) of the Income-tax Act, 1961. Since father is defined as a relative under the Act, the gift of 5,00,000 is non-taxable. (ii) Mr. Govind sold house to Mrs. Radha for 1,25,00,000 (Stamp Duty Value 1,75,00,000): Under Section 56(2)(x), if an immovable property is purchased for inadequate consideration and the difference between the Stamp Duty Value (SDV) and the consideration exceeds the higher of 50,000 and 10% of the consideration (i.e. 12,50,000), the difference is taxable as income from other sources in the hands of the buyer. Difference = 1,75,00,000 - 1,25,00,000 = 50,00,000, which exceeds 12,50,000. Thus, 50,00,000 is taxable in the hands of Mrs. Radha under Section 56(2)(x). (Note: For the seller Mr. Govind, Section 50C will deem 1,75,00,000 as the full value of consideration for computing capital gains). (iii) Ms. Agastha got a gift of car worth 7,00,000 from her friend: Section 56(2)(x) applies to gifts of "property" as defined in the explanation to that section. The definition of property includes immovable property, shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, and bullion. Since a car is not included in this definition, it is non-taxable under Section 56(2)(x).

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