Income Tax Law (Group I) Model Test Paper - 8 (Questions) | Model Test Papers for CA Intermediate PDF Download

 Page 1


MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP-I 
PAPER – 3: TAXATION 
Time Allowed – 3 Hours Maximum Marks – 100 
SECTION – A: INCOME TAX LAW (50 MARKS) 
Working Notes should form part of the answer. Wherever necessary, suitable 
assumptions may be made by the candidates and disclosed by way of a note. 
However, in answers to Questions in Division A, working notes are not 
required. 
The relevant assessment year is A.Y.2025-26. 
Division A – Multiple Choice Questions 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
1. Ms. Prerna is having a residential house property in Nagpur, of which 1/3
rd 
is 
self- occupied and 2/3d is let out for commercial purposes at a monthly rent 
of ` 12,000. Fair rent (for let out portion only) was ` 30,000 p.m., Municipal 
value for the property was ` 2,40,000 and standard rent under the Rent 
Control Act was ` 3,00,000 for the entire property. Municipal taxes are 10% 
of municipal valuation and are paid by her on 30
th
 July, 2024. She took a loan 
of ` 45,00,000 for the construction of this house from a scheduled bank on 
1.4.2022. She repaid the entire loan along with interest on 30.6.2024. The 
interest rate for this loan was 10% p.a. The construction was completed on 
30
th
 June, 2023. She earns other income of ` 2,00,000 during the previous 
year 2024-25. She wishes to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  The Net Annual Value (NAV) of the house property for the A.Y. 2025-26 
is: 
(a)  ` 1,28,000 
(b)  ` 1,44,000 
(c)  ` 1,84,000 
(d)  ` 2,00,000  
(ii)  Deduction in respect of interest on loan for the P.Y. 2024-25 shall be: 
(a)  ` 2,02,500 
(b)  ` 1,35,000 
(c)  ` 5,62,500 
(d)  ` 1,12,500  
231
Page 2


MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP-I 
PAPER – 3: TAXATION 
Time Allowed – 3 Hours Maximum Marks – 100 
SECTION – A: INCOME TAX LAW (50 MARKS) 
Working Notes should form part of the answer. Wherever necessary, suitable 
assumptions may be made by the candidates and disclosed by way of a note. 
However, in answers to Questions in Division A, working notes are not 
required. 
The relevant assessment year is A.Y.2025-26. 
Division A – Multiple Choice Questions 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
1. Ms. Prerna is having a residential house property in Nagpur, of which 1/3
rd 
is 
self- occupied and 2/3d is let out for commercial purposes at a monthly rent 
of ` 12,000. Fair rent (for let out portion only) was ` 30,000 p.m., Municipal 
value for the property was ` 2,40,000 and standard rent under the Rent 
Control Act was ` 3,00,000 for the entire property. Municipal taxes are 10% 
of municipal valuation and are paid by her on 30
th
 July, 2024. She took a loan 
of ` 45,00,000 for the construction of this house from a scheduled bank on 
1.4.2022. She repaid the entire loan along with interest on 30.6.2024. The 
interest rate for this loan was 10% p.a. The construction was completed on 
30
th
 June, 2023. She earns other income of ` 2,00,000 during the previous 
year 2024-25. She wishes to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  The Net Annual Value (NAV) of the house property for the A.Y. 2025-26 
is: 
(a)  ` 1,28,000 
(b)  ` 1,44,000 
(c)  ` 1,84,000 
(d)  ` 2,00,000  
(ii)  Deduction in respect of interest on loan for the P.Y. 2024-25 shall be: 
(a)  ` 2,02,500 
(b)  ` 1,35,000 
(c)  ` 5,62,500 
(d)  ` 1,12,500  
231
(iii)  Compute her total income for the assessment year 2025-26 
(a)  ` 1,93,800 
(b)  ` 2,00,000 
(c)  Nil 
(d)  ` 2,05,000 (3 x 2 = 6 Marks) 
2.  Mr. Desai (aged 52 years) is an Indian resident. He gives the following 
information to you relating to the P.Y. 2024-25: 
(i) Profit from the business carried out in Dubai controlled from Dubai  
` 13,10,000 (received in a bank account in Dubai). 
(ii) Loss from a business in Delhi - ` 4,50,000 
(iii) During the F.Y. 2024-25, he also played some online games on a 
particular Indian website Game.com. Game.com is a manufacturer of 
men's shirts. During the year, Mr. Desai won 6 such shirts. The cost to 
manufacture such shirts by Game.com is ` 3,000 per piece and it sells 
these shirts at ` 10,000 per piece (excluding GST @18%). However, to 
play such games, Mr. Desai had to deposit a sum of ` 50,000 with the 
website as a refundable deposit. 
(iv) On 23
rd
 May 2024, he gifted listed equity shares in an Indian company 
to his son's daughter, Ms. Shanaya. These shares were purchased by 
him on 1.4.2020 for ` 65,000. The market value as on the date of transfer 
was ` 1,00,000. Shanaya sold these shares for a consideration of  
` 50,000 on 31.3.2025. 
(v) He had taken a loan of ` 25,00,000 for the purchase of an electric vehicle 
(for his personal purposes) on 1.4.2022 from a scheduled bank. He paid 
` 5,00,000 as interest on such loan during the P.Y. 2024-25. 
(vi) He wants to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  What shall be the total income of Mr. Desai for the A.Y. 2025-26? 
(a)  ` 8,78,000 
(b)  ` 8,63,000 
(c)  ` 9,20,000 
(d)  ` 7,70,000  
(ii)  Which of the following statement is correct in respect of deductions 
available to him under Chapter VI-A? 
(a)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan irrespective of the tax regime opted by him. 
(b)  He shall not be eligible for any deduction under Chapter VI-A 
irrespective of the tax regime opted by him. 
 
232
Page 3


MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP-I 
PAPER – 3: TAXATION 
Time Allowed – 3 Hours Maximum Marks – 100 
SECTION – A: INCOME TAX LAW (50 MARKS) 
Working Notes should form part of the answer. Wherever necessary, suitable 
assumptions may be made by the candidates and disclosed by way of a note. 
However, in answers to Questions in Division A, working notes are not 
required. 
The relevant assessment year is A.Y.2025-26. 
Division A – Multiple Choice Questions 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
1. Ms. Prerna is having a residential house property in Nagpur, of which 1/3
rd 
is 
self- occupied and 2/3d is let out for commercial purposes at a monthly rent 
of ` 12,000. Fair rent (for let out portion only) was ` 30,000 p.m., Municipal 
value for the property was ` 2,40,000 and standard rent under the Rent 
Control Act was ` 3,00,000 for the entire property. Municipal taxes are 10% 
of municipal valuation and are paid by her on 30
th
 July, 2024. She took a loan 
of ` 45,00,000 for the construction of this house from a scheduled bank on 
1.4.2022. She repaid the entire loan along with interest on 30.6.2024. The 
interest rate for this loan was 10% p.a. The construction was completed on 
30
th
 June, 2023. She earns other income of ` 2,00,000 during the previous 
year 2024-25. She wishes to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  The Net Annual Value (NAV) of the house property for the A.Y. 2025-26 
is: 
(a)  ` 1,28,000 
(b)  ` 1,44,000 
(c)  ` 1,84,000 
(d)  ` 2,00,000  
(ii)  Deduction in respect of interest on loan for the P.Y. 2024-25 shall be: 
(a)  ` 2,02,500 
(b)  ` 1,35,000 
(c)  ` 5,62,500 
(d)  ` 1,12,500  
231
(iii)  Compute her total income for the assessment year 2025-26 
(a)  ` 1,93,800 
(b)  ` 2,00,000 
(c)  Nil 
(d)  ` 2,05,000 (3 x 2 = 6 Marks) 
2.  Mr. Desai (aged 52 years) is an Indian resident. He gives the following 
information to you relating to the P.Y. 2024-25: 
(i) Profit from the business carried out in Dubai controlled from Dubai  
` 13,10,000 (received in a bank account in Dubai). 
(ii) Loss from a business in Delhi - ` 4,50,000 
(iii) During the F.Y. 2024-25, he also played some online games on a 
particular Indian website Game.com. Game.com is a manufacturer of 
men's shirts. During the year, Mr. Desai won 6 such shirts. The cost to 
manufacture such shirts by Game.com is ` 3,000 per piece and it sells 
these shirts at ` 10,000 per piece (excluding GST @18%). However, to 
play such games, Mr. Desai had to deposit a sum of ` 50,000 with the 
website as a refundable deposit. 
(iv) On 23
rd
 May 2024, he gifted listed equity shares in an Indian company 
to his son's daughter, Ms. Shanaya. These shares were purchased by 
him on 1.4.2020 for ` 65,000. The market value as on the date of transfer 
was ` 1,00,000. Shanaya sold these shares for a consideration of  
` 50,000 on 31.3.2025. 
(v) He had taken a loan of ` 25,00,000 for the purchase of an electric vehicle 
(for his personal purposes) on 1.4.2022 from a scheduled bank. He paid 
` 5,00,000 as interest on such loan during the P.Y. 2024-25. 
(vi) He wants to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  What shall be the total income of Mr. Desai for the A.Y. 2025-26? 
(a)  ` 8,78,000 
(b)  ` 8,63,000 
(c)  ` 9,20,000 
(d)  ` 7,70,000  
(ii)  Which of the following statement is correct in respect of deductions 
available to him under Chapter VI-A? 
(a)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan irrespective of the tax regime opted by him. 
(b)  He shall not be eligible for any deduction under Chapter VI-A 
irrespective of the tax regime opted by him. 
 
232
(c)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan only if he opts out of the default tax regime. 
(d)  He shall be eligible for a deduction of ` 50,000 in respect of interest 
on loan only if he opts out of the default tax regime.  
(iii)  What is the requirement of deduction of tax at source by Game.com in 
respect of such winning by Mr. Desai? 
(a)  Game.com has to ensure, before releasing the winnings, that the 
tax amounting to ` 18,000 has been paid. 
(b)  Game.com has to ensure, before releasing the winnings, that the 
tax amounting to ` 5,400 has been paid. 
(c)  There is no requirement for deduction of tax at source. However,  
Mr. Desai need to collect tax at source from the security deposit. 
(d)  Game.com needs to deduct tax at source amounting to ` 18,000. 
(3 x 2 = 6 Marks) 
3.  Mr. Sundaram owns two residential house properties in Chennai, one of which 
is used by him and his family for their residential purposes. Both the houses 
are exactly identical and their expected rent/municipal value etc. are also the 
same. He let out the other house for a rent of ` 1,15,000 p.m. He took two 
similar loans for the purchase of these two houses on 1.4.2023. The stamp 
duty value of these houses is ` 30 lakhs each. During the F.Y. 2024-25, he 
paid ` 4,00,000 as interest for each of the houses. He does not have any other 
income or investments during the year. He did not file his return of income 
within the due date under section 139(1). What shall be his total income 
chargeable to tax? 
(a)  ` 2,16,000 
(b)  ` 3,66,000 
(c)  ` 5,66,000 
(d)  ` 1,66,000 (2 Marks) 
4.  During the year 2024-25, Mrs. Kalis (aged 65 years), received ` 10,50,000 a 
family pension. She had to spend ` 26,000 to get such income towards 
documentation and processing charges. She does not have any other income. 
Assuming she pays tax under default tax regime, what shall be her total 
income chargeable to tax? 
(a)  ` 10,35,000 
(b)  ` 10,24,000 
(c)  ` 10,50,000 
(d)  ` 10,25,000 (1 Mark) 
  
233
Page 4


MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP-I 
PAPER – 3: TAXATION 
Time Allowed – 3 Hours Maximum Marks – 100 
SECTION – A: INCOME TAX LAW (50 MARKS) 
Working Notes should form part of the answer. Wherever necessary, suitable 
assumptions may be made by the candidates and disclosed by way of a note. 
However, in answers to Questions in Division A, working notes are not 
required. 
The relevant assessment year is A.Y.2025-26. 
Division A – Multiple Choice Questions 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
1. Ms. Prerna is having a residential house property in Nagpur, of which 1/3
rd 
is 
self- occupied and 2/3d is let out for commercial purposes at a monthly rent 
of ` 12,000. Fair rent (for let out portion only) was ` 30,000 p.m., Municipal 
value for the property was ` 2,40,000 and standard rent under the Rent 
Control Act was ` 3,00,000 for the entire property. Municipal taxes are 10% 
of municipal valuation and are paid by her on 30
th
 July, 2024. She took a loan 
of ` 45,00,000 for the construction of this house from a scheduled bank on 
1.4.2022. She repaid the entire loan along with interest on 30.6.2024. The 
interest rate for this loan was 10% p.a. The construction was completed on 
30
th
 June, 2023. She earns other income of ` 2,00,000 during the previous 
year 2024-25. She wishes to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  The Net Annual Value (NAV) of the house property for the A.Y. 2025-26 
is: 
(a)  ` 1,28,000 
(b)  ` 1,44,000 
(c)  ` 1,84,000 
(d)  ` 2,00,000  
(ii)  Deduction in respect of interest on loan for the P.Y. 2024-25 shall be: 
(a)  ` 2,02,500 
(b)  ` 1,35,000 
(c)  ` 5,62,500 
(d)  ` 1,12,500  
231
(iii)  Compute her total income for the assessment year 2025-26 
(a)  ` 1,93,800 
(b)  ` 2,00,000 
(c)  Nil 
(d)  ` 2,05,000 (3 x 2 = 6 Marks) 
2.  Mr. Desai (aged 52 years) is an Indian resident. He gives the following 
information to you relating to the P.Y. 2024-25: 
(i) Profit from the business carried out in Dubai controlled from Dubai  
` 13,10,000 (received in a bank account in Dubai). 
(ii) Loss from a business in Delhi - ` 4,50,000 
(iii) During the F.Y. 2024-25, he also played some online games on a 
particular Indian website Game.com. Game.com is a manufacturer of 
men's shirts. During the year, Mr. Desai won 6 such shirts. The cost to 
manufacture such shirts by Game.com is ` 3,000 per piece and it sells 
these shirts at ` 10,000 per piece (excluding GST @18%). However, to 
play such games, Mr. Desai had to deposit a sum of ` 50,000 with the 
website as a refundable deposit. 
(iv) On 23
rd
 May 2024, he gifted listed equity shares in an Indian company 
to his son's daughter, Ms. Shanaya. These shares were purchased by 
him on 1.4.2020 for ` 65,000. The market value as on the date of transfer 
was ` 1,00,000. Shanaya sold these shares for a consideration of  
` 50,000 on 31.3.2025. 
(v) He had taken a loan of ` 25,00,000 for the purchase of an electric vehicle 
(for his personal purposes) on 1.4.2022 from a scheduled bank. He paid 
` 5,00,000 as interest on such loan during the P.Y. 2024-25. 
(vi) He wants to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  What shall be the total income of Mr. Desai for the A.Y. 2025-26? 
(a)  ` 8,78,000 
(b)  ` 8,63,000 
(c)  ` 9,20,000 
(d)  ` 7,70,000  
(ii)  Which of the following statement is correct in respect of deductions 
available to him under Chapter VI-A? 
(a)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan irrespective of the tax regime opted by him. 
(b)  He shall not be eligible for any deduction under Chapter VI-A 
irrespective of the tax regime opted by him. 
 
232
(c)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan only if he opts out of the default tax regime. 
(d)  He shall be eligible for a deduction of ` 50,000 in respect of interest 
on loan only if he opts out of the default tax regime.  
(iii)  What is the requirement of deduction of tax at source by Game.com in 
respect of such winning by Mr. Desai? 
(a)  Game.com has to ensure, before releasing the winnings, that the 
tax amounting to ` 18,000 has been paid. 
(b)  Game.com has to ensure, before releasing the winnings, that the 
tax amounting to ` 5,400 has been paid. 
(c)  There is no requirement for deduction of tax at source. However,  
Mr. Desai need to collect tax at source from the security deposit. 
(d)  Game.com needs to deduct tax at source amounting to ` 18,000. 
(3 x 2 = 6 Marks) 
3.  Mr. Sundaram owns two residential house properties in Chennai, one of which 
is used by him and his family for their residential purposes. Both the houses 
are exactly identical and their expected rent/municipal value etc. are also the 
same. He let out the other house for a rent of ` 1,15,000 p.m. He took two 
similar loans for the purchase of these two houses on 1.4.2023. The stamp 
duty value of these houses is ` 30 lakhs each. During the F.Y. 2024-25, he 
paid ` 4,00,000 as interest for each of the houses. He does not have any other 
income or investments during the year. He did not file his return of income 
within the due date under section 139(1). What shall be his total income 
chargeable to tax? 
(a)  ` 2,16,000 
(b)  ` 3,66,000 
(c)  ` 5,66,000 
(d)  ` 1,66,000 (2 Marks) 
4.  During the year 2024-25, Mrs. Kalis (aged 65 years), received ` 10,50,000 a 
family pension. She had to spend ` 26,000 to get such income towards 
documentation and processing charges. She does not have any other income. 
Assuming she pays tax under default tax regime, what shall be her total 
income chargeable to tax? 
(a)  ` 10,35,000 
(b)  ` 10,24,000 
(c)  ` 10,50,000 
(d)  ` 10,25,000 (1 Mark) 
  
233
Division B – Descriptive Questions 
Question No. 1 is compulsory 
Attempt any two questions from the remaining three questions 
1. Mr. Raman, a resident individual aged 62 years, is engaged in the business 
of manufacturing and sales of spare parts for motor bikes, as a proprietor. He 
prepares his accounts on mercantile basis. This business is carried out on the 
ground floor of a two storied commercial building owned by him, the written 
down value of which is ` 8 lakhs as on April 1, 2024. The Statement of Profit 
and Loss for the previous year ended on March 31, 2025 shows a net profit of 
` 9.25 lakhs (before taxation and depreciation) after debiting/crediting the 
following items: 
(i)  Administrative expenses include ` 9,525 paid towards interest on delay 
in deposit of GST. 
(ii)  General expenses include a sum of ` 3,88,000 paid to a non-resident as 
fee for technical services without deduction of tax at source. 
(iii)  Fire insurance premium of ` 66,000 for the entire building remained 
unpaid till 31
st 
March, 2025. 
(iv)  Expenditure of ` 75,000, was paid to a scientific research association 
approved under section 35. Out of ` 75,000, ` 50,000 was utilised 
towards the purchase of land by the research association. 
(v)  He let out first floor of his commercial building to Mr. Aman on April 1, 
2024 and received rent of ` 35,000 per month. Municipal taxes ` 20,000 
relating to the building were paid equally by both Mr. Raman and Mr. 
Aman. Rent received was credited and municipal taxes of ` 10,000 
(relating to ground floor) was debited to the statement of profit and loss. 
(vi) He sold a piece of land for ` 44 lakhs on 12
th 
April, 2024. He had acquired 
the land for 40 lakhs on 1
st 
January, 2023. The gain of 4,00,000 is 
credited to the statement of profit and loss. 
(CII for F.Y. 2021-22:317; F.Y. 2024-25:363) 
Additional Information: 
(i)  Mr. Raman purchased raw material from M/s. Paul Industries, a micro 
enterprise, for `  49,000 on March 10, 2025. However, the payment to 
M/s. Paul Industries was made on April 5, 2025 by cheque. No written 
agreement for payment existed between M/s. Paul Industries and Mr. 
Raman. Another supplier M/s. Kal Industries, a small enterprise, with 
whom also no written agreement existed for payment, was paid  
` 1,34,000 in cash on April 5, 2025 for purchase of raw material on March 
31, 2025. Both M/s. Paul Industries and M/s. Kal Industries follow 
mercantile system of accounting. 
(ii)  Mr. Raman acquired a registered trademark on July 15, 2024 for  
` 2,00,000. Mr. Raman started using this trademark for his business from 
January 15, 2025. Mr. Raman omitted to enter any transaction relating 
to this trademark in his books of accounts. 
234
Page 5


MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP-I 
PAPER – 3: TAXATION 
Time Allowed – 3 Hours Maximum Marks – 100 
SECTION – A: INCOME TAX LAW (50 MARKS) 
Working Notes should form part of the answer. Wherever necessary, suitable 
assumptions may be made by the candidates and disclosed by way of a note. 
However, in answers to Questions in Division A, working notes are not 
required. 
The relevant assessment year is A.Y.2025-26. 
Division A – Multiple Choice Questions 
Write the most appropriate answer to each of the following multiple choice 
questions by choosing one of the four options given. All questions are 
compulsory. 
1. Ms. Prerna is having a residential house property in Nagpur, of which 1/3
rd 
is 
self- occupied and 2/3d is let out for commercial purposes at a monthly rent 
of ` 12,000. Fair rent (for let out portion only) was ` 30,000 p.m., Municipal 
value for the property was ` 2,40,000 and standard rent under the Rent 
Control Act was ` 3,00,000 for the entire property. Municipal taxes are 10% 
of municipal valuation and are paid by her on 30
th
 July, 2024. She took a loan 
of ` 45,00,000 for the construction of this house from a scheduled bank on 
1.4.2022. She repaid the entire loan along with interest on 30.6.2024. The 
interest rate for this loan was 10% p.a. The construction was completed on 
30
th
 June, 2023. She earns other income of ` 2,00,000 during the previous 
year 2024-25. She wishes to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  The Net Annual Value (NAV) of the house property for the A.Y. 2025-26 
is: 
(a)  ` 1,28,000 
(b)  ` 1,44,000 
(c)  ` 1,84,000 
(d)  ` 2,00,000  
(ii)  Deduction in respect of interest on loan for the P.Y. 2024-25 shall be: 
(a)  ` 2,02,500 
(b)  ` 1,35,000 
(c)  ` 5,62,500 
(d)  ` 1,12,500  
231
(iii)  Compute her total income for the assessment year 2025-26 
(a)  ` 1,93,800 
(b)  ` 2,00,000 
(c)  Nil 
(d)  ` 2,05,000 (3 x 2 = 6 Marks) 
2.  Mr. Desai (aged 52 years) is an Indian resident. He gives the following 
information to you relating to the P.Y. 2024-25: 
(i) Profit from the business carried out in Dubai controlled from Dubai  
` 13,10,000 (received in a bank account in Dubai). 
(ii) Loss from a business in Delhi - ` 4,50,000 
(iii) During the F.Y. 2024-25, he also played some online games on a 
particular Indian website Game.com. Game.com is a manufacturer of 
men's shirts. During the year, Mr. Desai won 6 such shirts. The cost to 
manufacture such shirts by Game.com is ` 3,000 per piece and it sells 
these shirts at ` 10,000 per piece (excluding GST @18%). However, to 
play such games, Mr. Desai had to deposit a sum of ` 50,000 with the 
website as a refundable deposit. 
(iv) On 23
rd
 May 2024, he gifted listed equity shares in an Indian company 
to his son's daughter, Ms. Shanaya. These shares were purchased by 
him on 1.4.2020 for ` 65,000. The market value as on the date of transfer 
was ` 1,00,000. Shanaya sold these shares for a consideration of  
` 50,000 on 31.3.2025. 
(v) He had taken a loan of ` 25,00,000 for the purchase of an electric vehicle 
(for his personal purposes) on 1.4.2022 from a scheduled bank. He paid 
` 5,00,000 as interest on such loan during the P.Y. 2024-25. 
(vi) He wants to pay tax under default tax regime. 
Based on the facts of the case scenario given above, choose the most 
appropriate answer to the following questions:- 
(i)  What shall be the total income of Mr. Desai for the A.Y. 2025-26? 
(a)  ` 8,78,000 
(b)  ` 8,63,000 
(c)  ` 9,20,000 
(d)  ` 7,70,000  
(ii)  Which of the following statement is correct in respect of deductions 
available to him under Chapter VI-A? 
(a)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan irrespective of the tax regime opted by him. 
(b)  He shall not be eligible for any deduction under Chapter VI-A 
irrespective of the tax regime opted by him. 
 
232
(c)  He shall be eligible for a deduction of ` 1,50,000 in respect of 
interest on loan only if he opts out of the default tax regime. 
(d)  He shall be eligible for a deduction of ` 50,000 in respect of interest 
on loan only if he opts out of the default tax regime.  
(iii)  What is the requirement of deduction of tax at source by Game.com in 
respect of such winning by Mr. Desai? 
(a)  Game.com has to ensure, before releasing the winnings, that the 
tax amounting to ` 18,000 has been paid. 
(b)  Game.com has to ensure, before releasing the winnings, that the 
tax amounting to ` 5,400 has been paid. 
(c)  There is no requirement for deduction of tax at source. However,  
Mr. Desai need to collect tax at source from the security deposit. 
(d)  Game.com needs to deduct tax at source amounting to ` 18,000. 
(3 x 2 = 6 Marks) 
3.  Mr. Sundaram owns two residential house properties in Chennai, one of which 
is used by him and his family for their residential purposes. Both the houses 
are exactly identical and their expected rent/municipal value etc. are also the 
same. He let out the other house for a rent of ` 1,15,000 p.m. He took two 
similar loans for the purchase of these two houses on 1.4.2023. The stamp 
duty value of these houses is ` 30 lakhs each. During the F.Y. 2024-25, he 
paid ` 4,00,000 as interest for each of the houses. He does not have any other 
income or investments during the year. He did not file his return of income 
within the due date under section 139(1). What shall be his total income 
chargeable to tax? 
(a)  ` 2,16,000 
(b)  ` 3,66,000 
(c)  ` 5,66,000 
(d)  ` 1,66,000 (2 Marks) 
4.  During the year 2024-25, Mrs. Kalis (aged 65 years), received ` 10,50,000 a 
family pension. She had to spend ` 26,000 to get such income towards 
documentation and processing charges. She does not have any other income. 
Assuming she pays tax under default tax regime, what shall be her total 
income chargeable to tax? 
(a)  ` 10,35,000 
(b)  ` 10,24,000 
(c)  ` 10,50,000 
(d)  ` 10,25,000 (1 Mark) 
  
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Division B – Descriptive Questions 
Question No. 1 is compulsory 
Attempt any two questions from the remaining three questions 
1. Mr. Raman, a resident individual aged 62 years, is engaged in the business 
of manufacturing and sales of spare parts for motor bikes, as a proprietor. He 
prepares his accounts on mercantile basis. This business is carried out on the 
ground floor of a two storied commercial building owned by him, the written 
down value of which is ` 8 lakhs as on April 1, 2024. The Statement of Profit 
and Loss for the previous year ended on March 31, 2025 shows a net profit of 
` 9.25 lakhs (before taxation and depreciation) after debiting/crediting the 
following items: 
(i)  Administrative expenses include ` 9,525 paid towards interest on delay 
in deposit of GST. 
(ii)  General expenses include a sum of ` 3,88,000 paid to a non-resident as 
fee for technical services without deduction of tax at source. 
(iii)  Fire insurance premium of ` 66,000 for the entire building remained 
unpaid till 31
st 
March, 2025. 
(iv)  Expenditure of ` 75,000, was paid to a scientific research association 
approved under section 35. Out of ` 75,000, ` 50,000 was utilised 
towards the purchase of land by the research association. 
(v)  He let out first floor of his commercial building to Mr. Aman on April 1, 
2024 and received rent of ` 35,000 per month. Municipal taxes ` 20,000 
relating to the building were paid equally by both Mr. Raman and Mr. 
Aman. Rent received was credited and municipal taxes of ` 10,000 
(relating to ground floor) was debited to the statement of profit and loss. 
(vi) He sold a piece of land for ` 44 lakhs on 12
th 
April, 2024. He had acquired 
the land for 40 lakhs on 1
st 
January, 2023. The gain of 4,00,000 is 
credited to the statement of profit and loss. 
(CII for F.Y. 2021-22:317; F.Y. 2024-25:363) 
Additional Information: 
(i)  Mr. Raman purchased raw material from M/s. Paul Industries, a micro 
enterprise, for `  49,000 on March 10, 2025. However, the payment to 
M/s. Paul Industries was made on April 5, 2025 by cheque. No written 
agreement for payment existed between M/s. Paul Industries and Mr. 
Raman. Another supplier M/s. Kal Industries, a small enterprise, with 
whom also no written agreement existed for payment, was paid  
` 1,34,000 in cash on April 5, 2025 for purchase of raw material on March 
31, 2025. Both M/s. Paul Industries and M/s. Kal Industries follow 
mercantile system of accounting. 
(ii)  Mr. Raman acquired a registered trademark on July 15, 2024 for  
` 2,00,000. Mr. Raman started using this trademark for his business from 
January 15, 2025. Mr. Raman omitted to enter any transaction relating 
to this trademark in his books of accounts. 
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(iii)  Mr. Raman bought a car for personal use on 12
th 
April, 2021 for  
` 5,40,000. He started using this car for business purposes from 
01.04.2024. As on that day, the market value of the car was ` 2,10,000. 
Assume the rate of depreciation to be 15%. 
(iv)  He incurred ` 2,50,000 on the purchase of a new machinery to be used 
in the production of spare parts for motor bikes on May 15, 2024. 
(v)  He has paid tuition fees of ` 25,000 for the education of his daughter to 
a college. 
(vi)  During the year, Mr. Raman has incurred ` 9,500 in cash for preventive 
health check-up where ` 5,000 was for himself and ` 4,500 was for his 
parents who are super senior citizens. 
(vii) Donation paid to a registered political party by way of cheque ` 20,000. 
Compute the total income and tax liability of assessment year 2025-26 of   
Mr. Raman under both the regimes. (15 Marks) 
2. (a) Mr. Madan, a citizen of India and the Karta of an HUF, is employed in  
M/s. PCS Pvt. Ltd. He is drawing monthly salary of ` 65,500 in India. On  
June 1, 2024, he purchased one residential house property in Mumbai 
for ` 18,00,000 in his individual capacity. The market value of the 
property is ` 32,00,000 and value for the purpose of charging stamp duty 
is ` 23,00,000. On August 31
st
, 2024 he was transferred to the branch 
office of M/s. PCS Pvt. Ltd. in U.S.A. and he left India on September 1
st
, 
2024. The overseas branch paid him a salary of $ 2,500 per month in 
USA. He managed business of HUF from USA when he was not in India. 
 He had also gone out of India for 99 days and 201 days in previous years 
2023-24 and 2022-23, respectively. He had never gone out of India prior 
to that. 
 He visited India from January 1, 2025 to January 15, 2025 for training on 
a project and received 15 days salary in India as per his Indian monthly 
salary before being transferred. 
 Mr. Rajeev, one of his friends, gifted him a sculpture in India on August 
10, 2024. The market value is ` 45,100. 
 Determine the residential status of Mr. Madan and his HUF and compute 
gross total income of Mr. Madan for the assessment year 2025-26 
assuming he opted out of the default tax regime. The value of one USD 
($) may be taken as ` 70.     (4 Marks) 
(b) Answer the following: 
(i)  M/s. PQR & Co., a proprietary firm of Mr. Yogesh, paid an amount 
of ` 30,500 to Mr. Amit, a resident individual aged 45 years, on 
June 1, 2024 towards fees for professional services. Subsequently, 
another payment of ` 60,000 was due to Mr. Amit on January 30, 
2025. Tax was not deducted from both the transactions. Mr. Amit 
has filed his return of income for assessment year 2025-26 on May 
2, 2025, taking into account professional fees from M/s. PQR & Co. 
and paid the taxes due on the income declared in the return of 
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