Page 1
ANSWERS OF MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
Division A – Multiple Choice Questions
MCQ
No.
Sub-part Most Appropriate
Answer
MCQ
No.
Most Appropriate
Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (c)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2025-26 under default
tax regime under section 115BAC
Particulars ? ? ?
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received
is taken as GAV, in the absence of
other information]
2,95,000
Less: Municipal taxes paid by him in
the P.Y. 2024-25 pertaining to let
out portion [ ? 25,000/2]
12,500
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ? 2,82,500 84,750
(b) Interest on housing loan
[ ? 1,50,000/2]
75,000 1,59,750
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil
[No deduction is allowable in
respect of municipal taxes paid]
Less: Interest on housing loan [Not
allowable under section 115BAC]
Nil
Nil
Income from house property 1,22,750
489
Page 2
ANSWERS OF MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
Division A – Multiple Choice Questions
MCQ
No.
Sub-part Most Appropriate
Answer
MCQ
No.
Most Appropriate
Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (c)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2025-26 under default
tax regime under section 115BAC
Particulars ? ? ?
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received
is taken as GAV, in the absence of
other information]
2,95,000
Less: Municipal taxes paid by him in
the P.Y. 2024-25 pertaining to let
out portion [ ? 25,000/2]
12,500
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ? 2,82,500 84,750
(b) Interest on housing loan
[ ? 1,50,000/2]
75,000 1,59,750
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil
[No deduction is allowable in
respect of municipal taxes paid]
Less: Interest on housing loan [Not
allowable under section 115BAC]
Nil
Nil
Income from house property 1,22,750
489
II Profits and gains of business or
profession
Income from SEZ unit 40,00,000
III Capital Gains
Long-term capital gains on sale
of land (since held for more than
24 months)
Full Value of Consideration [Actual
consideration of ? 15 lakhs, since
stamp duty value of ? 16 lakhs does
not exceed 110% of actual
consideration of ? 15 lakhs]
15,00,000
Less: Cost of acquisition
[ ? 4,00,000] (As transfer is on or
after 23.07.2024, the indexation
benefit would not be available)
4,00,000
11,00,000
Cost of acquisition
Higher of -
- Actual cost ? 2.80 lakhs + ? 0.12
lakhs = ? 2.92 lakhs and
- Fair Market Value (FMV) as on
1.4.2001 = ? 4.8 lakhs but cannot
exceed stamp duty value of ? 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 52,92,750
Less: Deduction under Chapter
VI-A
Deduction under section 80JJAA 7,12,800
30% of the employee cost of the
new employees employed during
the P.Y. 2024-25 for 240 days or
more during the P.Y. 2024-25
allowable as deduction [30% of
? 23,76,000 (12 x 18,000 x 11)]
As per section 115BAC, no
deduction under section 10AA or
under Chapter VI-A is allowable
except u/s 80JJAA
Total Income 45,79,950
490
Page 3
ANSWERS OF MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
Division A – Multiple Choice Questions
MCQ
No.
Sub-part Most Appropriate
Answer
MCQ
No.
Most Appropriate
Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (c)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2025-26 under default
tax regime under section 115BAC
Particulars ? ? ?
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received
is taken as GAV, in the absence of
other information]
2,95,000
Less: Municipal taxes paid by him in
the P.Y. 2024-25 pertaining to let
out portion [ ? 25,000/2]
12,500
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ? 2,82,500 84,750
(b) Interest on housing loan
[ ? 1,50,000/2]
75,000 1,59,750
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil
[No deduction is allowable in
respect of municipal taxes paid]
Less: Interest on housing loan [Not
allowable under section 115BAC]
Nil
Nil
Income from house property 1,22,750
489
II Profits and gains of business or
profession
Income from SEZ unit 40,00,000
III Capital Gains
Long-term capital gains on sale
of land (since held for more than
24 months)
Full Value of Consideration [Actual
consideration of ? 15 lakhs, since
stamp duty value of ? 16 lakhs does
not exceed 110% of actual
consideration of ? 15 lakhs]
15,00,000
Less: Cost of acquisition
[ ? 4,00,000] (As transfer is on or
after 23.07.2024, the indexation
benefit would not be available)
4,00,000
11,00,000
Cost of acquisition
Higher of -
- Actual cost ? 2.80 lakhs + ? 0.12
lakhs = ? 2.92 lakhs and
- Fair Market Value (FMV) as on
1.4.2001 = ? 4.8 lakhs but cannot
exceed stamp duty value of ? 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 52,92,750
Less: Deduction under Chapter
VI-A
Deduction under section 80JJAA 7,12,800
30% of the employee cost of the
new employees employed during
the P.Y. 2024-25 for 240 days or
more during the P.Y. 2024-25
allowable as deduction [30% of
? 23,76,000 (12 x 18,000 x 11)]
As per section 115BAC, no
deduction under section 10AA or
under Chapter VI-A is allowable
except u/s 80JJAA
Total Income 45,79,950
490
Computation of tax liability of Mr. Sunil under section 115BAC
Particulars ? ?
Tax on total income of ? 45,79,950
Tax on LTCG on sale of vacant land
As the asset is a long term capital asset, being
land acquired before 23.07.2024 and transferred
on or after 23.07.2024 by a resident individual, the
tax shall be computed @20% with indexation
benefit or @12.5% without indexation benefit,
whichever is more beneficial to the assessee.
Tax @20% with indexation
Sale consideration = 15,00,000
Cost of acquisition = 4,00,000 x 363/100 = 14,52,000
Gain = 48,000
Tax @20% = 48,000 x 20% = 9,600
Tax @12.5% without indexation
Tax @12.5% = 11,00,000 x 12.5% = 1,37,500
Tax on LTCG on sale of vacant land @20% with
indexation
9,600
Tax on remaining total income of ? 34,79,950
Upto ? 3,00,000 Nil
? 3,00,001 – ? 7,00,000 [@5% of ? 4 lakhs] 20,000
? 7,00,001 – ? 10,00,000 [@10% of ? 3 lakhs] 30,000
? 10,00,001 – ? 12,00,000 [@15% of ? 2 lakhs] 30,000
? 12,00,001 – ? 15,00,000 [@20% of ? 3 lakhs] 60,000
? 15,00,001 – ? 34,79,950 [@30% of ? 19,79,950] 5,93,985
7,33,985
7,43,585
Add: Health and education cess@4% 29,743
Total tax liability 7,73,328
Tax liability (Rounded off) 7,73,330
Note - An individual paying tax u/s 115BAC is not liable to alternate
minimum tax u/s 115JC.
2. (a) Under section 6(1), an individual is said to be resident in India in any
previous year, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of
182 days or more, or
(ii) He has been in India during the 4 years immediately preceding
the previous year for a total period of 365 days or more and has
been in India for at least 60 days in the previous year.
491
Page 4
ANSWERS OF MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
Division A – Multiple Choice Questions
MCQ
No.
Sub-part Most Appropriate
Answer
MCQ
No.
Most Appropriate
Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (c)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2025-26 under default
tax regime under section 115BAC
Particulars ? ? ?
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received
is taken as GAV, in the absence of
other information]
2,95,000
Less: Municipal taxes paid by him in
the P.Y. 2024-25 pertaining to let
out portion [ ? 25,000/2]
12,500
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ? 2,82,500 84,750
(b) Interest on housing loan
[ ? 1,50,000/2]
75,000 1,59,750
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil
[No deduction is allowable in
respect of municipal taxes paid]
Less: Interest on housing loan [Not
allowable under section 115BAC]
Nil
Nil
Income from house property 1,22,750
489
II Profits and gains of business or
profession
Income from SEZ unit 40,00,000
III Capital Gains
Long-term capital gains on sale
of land (since held for more than
24 months)
Full Value of Consideration [Actual
consideration of ? 15 lakhs, since
stamp duty value of ? 16 lakhs does
not exceed 110% of actual
consideration of ? 15 lakhs]
15,00,000
Less: Cost of acquisition
[ ? 4,00,000] (As transfer is on or
after 23.07.2024, the indexation
benefit would not be available)
4,00,000
11,00,000
Cost of acquisition
Higher of -
- Actual cost ? 2.80 lakhs + ? 0.12
lakhs = ? 2.92 lakhs and
- Fair Market Value (FMV) as on
1.4.2001 = ? 4.8 lakhs but cannot
exceed stamp duty value of ? 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 52,92,750
Less: Deduction under Chapter
VI-A
Deduction under section 80JJAA 7,12,800
30% of the employee cost of the
new employees employed during
the P.Y. 2024-25 for 240 days or
more during the P.Y. 2024-25
allowable as deduction [30% of
? 23,76,000 (12 x 18,000 x 11)]
As per section 115BAC, no
deduction under section 10AA or
under Chapter VI-A is allowable
except u/s 80JJAA
Total Income 45,79,950
490
Computation of tax liability of Mr. Sunil under section 115BAC
Particulars ? ?
Tax on total income of ? 45,79,950
Tax on LTCG on sale of vacant land
As the asset is a long term capital asset, being
land acquired before 23.07.2024 and transferred
on or after 23.07.2024 by a resident individual, the
tax shall be computed @20% with indexation
benefit or @12.5% without indexation benefit,
whichever is more beneficial to the assessee.
Tax @20% with indexation
Sale consideration = 15,00,000
Cost of acquisition = 4,00,000 x 363/100 = 14,52,000
Gain = 48,000
Tax @20% = 48,000 x 20% = 9,600
Tax @12.5% without indexation
Tax @12.5% = 11,00,000 x 12.5% = 1,37,500
Tax on LTCG on sale of vacant land @20% with
indexation
9,600
Tax on remaining total income of ? 34,79,950
Upto ? 3,00,000 Nil
? 3,00,001 – ? 7,00,000 [@5% of ? 4 lakhs] 20,000
? 7,00,001 – ? 10,00,000 [@10% of ? 3 lakhs] 30,000
? 10,00,001 – ? 12,00,000 [@15% of ? 2 lakhs] 30,000
? 12,00,001 – ? 15,00,000 [@20% of ? 3 lakhs] 60,000
? 15,00,001 – ? 34,79,950 [@30% of ? 19,79,950] 5,93,985
7,33,985
7,43,585
Add: Health and education cess@4% 29,743
Total tax liability 7,73,328
Tax liability (Rounded off) 7,73,330
Note - An individual paying tax u/s 115BAC is not liable to alternate
minimum tax u/s 115JC.
2. (a) Under section 6(1), an individual is said to be resident in India in any
previous year, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of
182 days or more, or
(ii) He has been in India during the 4 years immediately preceding
the previous year for a total period of 365 days or more and has
been in India for at least 60 days in the previous year.
491
If an individual satisfies any one of the conditions mentioned above, he
is a resident. If both the above conditions are not satisfied, the
individual is a non-resident.
Therefore, the residential status of Mrs. Sia D’Souza, an American, for
A.Y.2025-26 has to be determined on the basis of her stay in India
during the previous year relevant to A.Y. 2025-26 i.e. P.Y.2024-25 and
in the preceding four assessment years.
Her stay in India during the previous year 2024-25 and in the preceding
four years are as under:
P.Y. 2024-25
01.04.2024 to 16.08.2024 - 138 days
23.03.2025 to 31.03.2025 - 9 days
Total 147 days
Four preceding previous years
P.Y.2023-24 [1.4.2023 to 31.3.2024] - 14 days
P.Y.2022-23 [1.4.2022 to 31.3.2023] - Nil
P.Y.2021-22 [1.4.2021 to 31.3.2022] - Nil
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
Total 14 days
The total stay of Mrs. Sia D’Souza during the previous year in India
was less than 182 days and during the four years preceding this year
was for 14 days. Therefore, due to non-fulfillment of any of the two
conditions for a resident, she would be treated as non-resident for the
Assessment Year 2025-26.
Computation of total income of Mrs. Sia D’Souza for the
A.Y. 2025-26
Particulars ? ?
Income from house property
Flat located in Mumbai let-out from 01.06.2024
to 31.03.2025 @ ? 26,000 p.m.
Gross Annual Value [26,000 x 10]
1
2,60,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,60,000
Less: Deduction under section 24
30% of NAV 78,000
Interest on loan [fully allowable as
deduction, since property is let-out]
2,05,000 2,83,000 (23,000)
1
Actual rent received has been taken as the gross annual the value in absence of other information
(i.e. Municipal value, fair rental value and standard rent) in the question.
492
Page 5
ANSWERS OF MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
SECTION – A: INCOME TAX LAW
Division A – Multiple Choice Questions
MCQ
No.
Sub-part Most Appropriate
Answer
MCQ
No.
Most Appropriate
Answer
1. (i) (b) 2. (b)
(ii) (d) 3. (c)
(iii) (b)
(iv) (a)
(v) (a)
(vi) (a)
Division B – Descriptive Questions
1. Computation of total income of Mr. Sunil for A.Y. 2025-26 under default
tax regime under section 115BAC
Particulars ? ? ?
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received
is taken as GAV, in the absence of
other information]
2,95,000
Less: Municipal taxes paid by him in
the P.Y. 2024-25 pertaining to let
out portion [ ? 25,000/2]
12,500
Net Annual Value (NAV) 2,82,500
Less: Deduction u/s 24
(a) 30% of ? 2,82,500 84,750
(b) Interest on housing loan
[ ? 1,50,000/2]
75,000 1,59,750
1,22,750
Self-occupied portion [Ground
Floor]
Annual Value Nil
[No deduction is allowable in
respect of municipal taxes paid]
Less: Interest on housing loan [Not
allowable under section 115BAC]
Nil
Nil
Income from house property 1,22,750
489
II Profits and gains of business or
profession
Income from SEZ unit 40,00,000
III Capital Gains
Long-term capital gains on sale
of land (since held for more than
24 months)
Full Value of Consideration [Actual
consideration of ? 15 lakhs, since
stamp duty value of ? 16 lakhs does
not exceed 110% of actual
consideration of ? 15 lakhs]
15,00,000
Less: Cost of acquisition
[ ? 4,00,000] (As transfer is on or
after 23.07.2024, the indexation
benefit would not be available)
4,00,000
11,00,000
Cost of acquisition
Higher of -
- Actual cost ? 2.80 lakhs + ? 0.12
lakhs = ? 2.92 lakhs and
- Fair Market Value (FMV) as on
1.4.2001 = ? 4.8 lakhs but cannot
exceed stamp duty value of ? 4
lakhs.
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 52,92,750
Less: Deduction under Chapter
VI-A
Deduction under section 80JJAA 7,12,800
30% of the employee cost of the
new employees employed during
the P.Y. 2024-25 for 240 days or
more during the P.Y. 2024-25
allowable as deduction [30% of
? 23,76,000 (12 x 18,000 x 11)]
As per section 115BAC, no
deduction under section 10AA or
under Chapter VI-A is allowable
except u/s 80JJAA
Total Income 45,79,950
490
Computation of tax liability of Mr. Sunil under section 115BAC
Particulars ? ?
Tax on total income of ? 45,79,950
Tax on LTCG on sale of vacant land
As the asset is a long term capital asset, being
land acquired before 23.07.2024 and transferred
on or after 23.07.2024 by a resident individual, the
tax shall be computed @20% with indexation
benefit or @12.5% without indexation benefit,
whichever is more beneficial to the assessee.
Tax @20% with indexation
Sale consideration = 15,00,000
Cost of acquisition = 4,00,000 x 363/100 = 14,52,000
Gain = 48,000
Tax @20% = 48,000 x 20% = 9,600
Tax @12.5% without indexation
Tax @12.5% = 11,00,000 x 12.5% = 1,37,500
Tax on LTCG on sale of vacant land @20% with
indexation
9,600
Tax on remaining total income of ? 34,79,950
Upto ? 3,00,000 Nil
? 3,00,001 – ? 7,00,000 [@5% of ? 4 lakhs] 20,000
? 7,00,001 – ? 10,00,000 [@10% of ? 3 lakhs] 30,000
? 10,00,001 – ? 12,00,000 [@15% of ? 2 lakhs] 30,000
? 12,00,001 – ? 15,00,000 [@20% of ? 3 lakhs] 60,000
? 15,00,001 – ? 34,79,950 [@30% of ? 19,79,950] 5,93,985
7,33,985
7,43,585
Add: Health and education cess@4% 29,743
Total tax liability 7,73,328
Tax liability (Rounded off) 7,73,330
Note - An individual paying tax u/s 115BAC is not liable to alternate
minimum tax u/s 115JC.
2. (a) Under section 6(1), an individual is said to be resident in India in any
previous year, if he satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of
182 days or more, or
(ii) He has been in India during the 4 years immediately preceding
the previous year for a total period of 365 days or more and has
been in India for at least 60 days in the previous year.
491
If an individual satisfies any one of the conditions mentioned above, he
is a resident. If both the above conditions are not satisfied, the
individual is a non-resident.
Therefore, the residential status of Mrs. Sia D’Souza, an American, for
A.Y.2025-26 has to be determined on the basis of her stay in India
during the previous year relevant to A.Y. 2025-26 i.e. P.Y.2024-25 and
in the preceding four assessment years.
Her stay in India during the previous year 2024-25 and in the preceding
four years are as under:
P.Y. 2024-25
01.04.2024 to 16.08.2024 - 138 days
23.03.2025 to 31.03.2025 - 9 days
Total 147 days
Four preceding previous years
P.Y.2023-24 [1.4.2023 to 31.3.2024] - 14 days
P.Y.2022-23 [1.4.2022 to 31.3.2023] - Nil
P.Y.2021-22 [1.4.2021 to 31.3.2022] - Nil
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
Total 14 days
The total stay of Mrs. Sia D’Souza during the previous year in India
was less than 182 days and during the four years preceding this year
was for 14 days. Therefore, due to non-fulfillment of any of the two
conditions for a resident, she would be treated as non-resident for the
Assessment Year 2025-26.
Computation of total income of Mrs. Sia D’Souza for the
A.Y. 2025-26
Particulars ? ?
Income from house property
Flat located in Mumbai let-out from 01.06.2024
to 31.03.2025 @ ? 26,000 p.m.
Gross Annual Value [26,000 x 10]
1
2,60,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,60,000
Less: Deduction under section 24
30% of NAV 78,000
Interest on loan [fully allowable as
deduction, since property is let-out]
2,05,000 2,83,000 (23,000)
1
Actual rent received has been taken as the gross annual the value in absence of other information
(i.e. Municipal value, fair rental value and standard rent) in the question.
492
Income from other sources
- Gold chain worth ? 1,50,000 received from
parents of husband would be exempt,
since parents of husband fall within the
definition of relatives and gifts from a
relative are not chargeable to tax.
Nil
- Gift received from friends of her husband
aggregating to ? 1,65,000 is taxable under
section 56(2)(x) since the amount of cash
gifts of ? 1,65,000 exceeds ? 50,000.
1,65,000
1,65,000
Gross Total income/ Total Income 1,42,000
(b) TDS implications
(i) Tax @ 5% till ? 7 lakhs and 20% thereafter, is required to be
collected u/s 206C(1G) by the seller of an overseas tour
programme package, from Mr. Harish, being the buyer of an
overseas tour package, even if payment is made by account
payee cheque.
Accordingly, tax has to be collected@5% on ? 7 lakh and 20% on
? 3 lakhs.
TCS = ? 95,000
(ii) Mr. Aditya has to deduct tax at source@5% u/s 194M, although
his turnover for the P.Y. 2023-24 does not exceed ? 1 crore and
he is not liable to deduct tax at source under section 194C, since
the payment to contractor, Mr. Naresh, exceeds ? 50 lakhs.
Accordingly, tax has to be deducted @5% on ? 55 lakhs.
TDS = ? 2,75,000
3. (a) Computation of gross total income of Ms. Priyanka for the
A.Y. 2025-26 under normal provisions of the Act
Particulars ? ?
(a) Income from salaries (See Working
Note below)
5,71,000
(b) Income from Other Sources
(i) Interest on fixed deposit with a
company
7,000
(ii) Income from specified mutual fund 3,000
(iii) Interest on Fixed Deposit received
by minor daughter ( ? 4,000 -
? 1500)
2,500
12,500
Gross total income 5,83,500
493
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