Taxation - Income TaxQuestion 5647 of 146
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Question 4 (a) Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12 years), provide the following details of their income/losses for the previous year 2023-24: Mr. Suraj (i) Salary received as a partner from a partnership firm - ` 6,15,000 He is a working partner in the firm and the salary is as per the limits prescribed under section 40(b). (ii) Income (loss) from house property: Brought forward loss from House -A (let out) - ` 96,000 Current year loss from House B (let out) - ` 2,30,000 (iii) Interest received on enhanced compensation - ` 2,00,000 It relates to transfer of a piece of land in the financial year 2018-19. Out of the above ` 35,000 relates to previous year 2023-24 and the balance relate to preceding previous year. (iv) Gift from grandfather's younger sister by cheque - ` 1,25,000 (v) Dividend on listed equity shares of domestic companies (Gross) - ` 50,000 (vi) On 1stDecember 2023, Mr. Suraj received ` 75 lakhs as maturity proceeds from his life insurance policy which was taken on 1stMay 2012. He paid ` 6,00,000 as annual premium and the sum assured was ` 65 lakhs. Mrs. Megha (i) Current year loss from business. (She carried on this business with funds which Mr. Suraj gifted to her) - ` 8,10,000. (ii) Mrs. Megha purchased a house property from her "Stridhan" and gifted the same to her minor son, Dev on 1stApril, 2023 out of love and affection. The FMV of the house on the date of transfer was ` 51 lakhs. Master Dev Rent received from house property received from Mrs. Megha - ` 35,000 p.m. Compute total income of Mr. Suraj, Mrs. Megha and Dev for the assessment year 2024-25 assuming Mr. Suraj has decided to pay tax under default tax regime provided under section 115BAC, whereas Mrs. Megha and Dev have opted out of the default tax regime. Briefly explain the reasons for the treatment of each item. (6 Marks) (b) Answer the following: (i) Vegetable Ltd. filed its return of income for the A.Y. 2023-24, on 15thDecember 2023. On 2nd January 2024, the accountant of Vegetable Ltd. realised that he had forgotten to claim a genuine business expenditure amounting to ` 15 lakhs. He wants to file revised return to claim such expenditure as the assessment is not yet completed. Whether the action of the accountant of Vegetable Ltd. is valid? (ii) Mahendra, a resident individual aged 45 years earned a salary income of ` 2 crores during the F.Y. 2023-24. He also earned dividend from unlisted shares amounting to ` 4 lakhs. He wants to file his return of income for the A.Y. 2024-25 through a Tax Return Preparer. Can he do so? (4 Marks) OR (b) Rani, an Indian resident aged 34 years did not file her return of income for the A.Y. 2021-22, 2022-23 and 2023-24. She gives the following information regarding each of the A.Y.- A.Y. 2021-22 (i) Tax payable on the total income of Rani - ` 14,50,000 (ii) TDS deducted - ` 5,00,000 A.Y. 2022-23 (i) Tax payable on the total income of Rani - ` 5,60,000 (ii) TDS deducted - ` 10,00,000 A.Y. 2023-24 (i) Tax payable on the total income of Rani - ` 6,30,000 (ii) TDS deducted - ` 2,00,000 (iii) Interest payable under section 234A, 234B and 234C - ` 90,000 (calculated till 31st May 2024) (iv) Self-assessment tax paid - ` 1,00,000 She approaches you to file updated return under section 139(8A) on 16.5.2024. You are required to prepare a suggestion to be given to her in this respect. Your suggestion should include the financial aspect also (like payment of tax) briefly outlining the relevant provisions of the Income-tax Act. (4 Marks)

Options

A
B
C
D
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Correct Answer

✅ Option descriptive — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

(a) Computation of Total Income of Mr. Suraj, Mrs. Megha and Master Dev for A.Y. 2024-25

MR. SURAJ [Under Default Tax Regime u/s 115BAC]

Income from House Property:
Brought forward loss from House A: Under default tax regime, set-off and carry forward of house property loss is not allowed. = Not considered
Current year loss from House B: Under default tax regime, current year house property loss cannot be set off against other heads. = Not considered

Profits & Gains of Business or Profession (Salary from Partnership Firm):
Salary from firm (within 40(b) limits) = \u20b96,15,000
Less: Set-off of business loss of Mrs. Megha \u2013 Since funds were gifted by Mr. Suraj to Mrs. Megha, income/loss from business shall be clubbed with Mr. Suraj u/s 64(1)(iv). The loss of \u20b98,10,000 is set off against Mr. Suraj\u2019s salary income from firm to the extent of \u20b96,15,000.
Business Income after set-off = \u20b96,15,000 \u2212 \u20b96,15,000 = Nil
Remaining unabsorbed loss of Mrs. Megha = \u20b98,10,000 \u2212 \u20b96,15,000 = \u20b91,95,000

Income from Other Sources:
(i) Interest on enhanced compensation u/s 56(2)(viii): Entire \u20b92,00,000 is taxable in the year of receipt (even if relating to earlier years). Less: 50% deduction u/s 57(iv) = \u20b91,00,000. Net = \u20b91,00,000
(ii) Gift from grandfather\u2019s younger sister: Not a relative as defined u/s 56(2)(x). Amount \u20b91,25,000 > \u20b950,000. Taxable = \u20b91,25,000
(iii) Dividend on listed equity shares = \u20b950,000 \u2192 Taxable = \u20b950,000
(iv) Maturity proceeds from LIC policy: Policy taken 1.5.2012; annual premium = \u20b96,00,000; sum assured = \u20b965 lakhs. Premium/sum assured ratio = 6/65 \u2248 9.23% < 10%. Since premium paid does not exceed 10% of sum assured, proceeds are exempt u/s 10(10D) = Nil
Total Other Sources = \u20b91,00,000 + \u20b91,25,000 + \u20b950,000 = \u20b92,75,000
Less: Set-off of remaining business loss of Mrs. Megha (\u20b91,95,000) against other sources income = \u20b91,95,000
Income from Other Sources (after set-off) = \u20b980,000

Total Income of Mr. Suraj = \u20b980,000
(No deductions under Chapter VI-A allowed under default tax regime)


MRS. MEGHA [Under Normal Provisions]

Business loss of \u20b98,10,000 has been fully set off in Mr. Suraj\u2019s hands (clubbing).
House property gifted to minor son Dev \u2013 Mrs. Megha is the deemed owner u/s 27 (asset transferred without consideration to minor child; acquisition from Stridhan is irrelevant). Income from this property is clubbed with Mrs. Megha u/s 64(1A).

Income from House Property (let out) of property gifted to Dev:
Annual Value = \u20b935,000 \u00d7 12 = \u20b94,20,000
Less: Standard deduction @30% = \u20b91,26,000
Income from House Property = \u20b92,94,000

Total Income of Mrs. Megha = \u20b92,94,000


MASTER DEV [Under Normal Provisions]

House property transferred by Mrs. Megha \u2013 as the income is clubbed with Mrs. Megha (deemed owner), income from this house is not taxable separately in Dev\u2019s hands.
Gift of house property from mother \u2013 Exempt since received from relative (mother). = Nil
Total Income of Master Dev = Nil


(b) FIRST ALTERNATIVE:

(i) Vegetable Ltd. \u2013 Revised Return:
Due date for Vegetable Ltd. (company) for A.Y. 2023-24 = 31st October 2023.
It filed a belated return on 15.12.2023.
A belated return can be revised up to 3 months before the end of the relevant A.Y. (or completion of assessment, whichever is earlier) = 31.12.2023 for A.Y. 2023-24.
Since the accountant wants to file revised return on 2.1.2024, which is after 31.12.2023, this is not valid. The accountant cannot file a revised return on 2.1.2024.

(ii) Mahendra \u2013 Filing via Tax Return Preparer (TRP):
The Tax Return Preparer Scheme is applicable to resident individuals and HUFs. Since Mahendra is a resident individual and his accounts are NOT required to be audited u/s 44AB (his income is from salary and dividends, not business/profession requiring audit), he can file his return through a Tax Return Preparer for A.Y. 2024-25.


(b) SECOND ALTERNATIVE (Updated Return u/s 139(8A)):

An updated return can be filed within 24 months from the end of the relevant A.Y. Rani approaches on 16.5.2024.

A.Y. 2021-22: 24 months from end of A.Y. 2021-22 (31.3.2022) expired on 31.3.2024. Since 16.5.2024 > 31.3.2024, updated return cannot be filed for A.Y. 2021-22.

A.Y. 2022-23: 24-month window expires 31.3.2025. Updated return can be filed on 16.5.2024. Since it is filed after 12 months but within 24 months from end of A.Y. 2022-23, additional income-tax = 50% of (tax + interest payable). Tax payable after TDS = \u20b95,60,000 \u2212 \u20b910,00,000 = (\u20b94,40,000) \u2192 Refund situation. Updated return cannot be filed where it results in a refund. Hence updated return for A.Y. 2022-23 also cannot be filed.

A.Y. 2023-24: 24-month window expires 31.3.2026. Updated return can be filed on 16.5.2024. Since filed within 12 months from end of A.Y. 2023-24 (31.3.2024), additional income-tax = 25% of aggregate of (tax after TDS and self-assessment tax + interest payable).
Net tax payable = \u20b96,30,000 \u2212 \u20b92,00,000 (TDS) \u2212 \u20b91,00,000 (SAT) = \u20b93,30,000
Aggregate = \u20b93,30,000 + \u20b990,000 (interest) = \u20b94,20,000
Additional income-tax @25% = \u20b91,05,000
Rani must also pay late fee of \u20b95,000.
Total payment = \u20b93,30,000 (balance tax) + \u20b990,000 (interest) + \u20b91,05,000 (additional tax) + \u20b95,000 (late fee) = \u20b95,30,000

Key Concepts to Understand

Minor

A person who has not completed the age of 18 years. An agreement with a minor is 'Void Ab Initio' (void from the beginning).

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