Page 1
ANSWERS OF MODEL TEST PAPER 6
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) (c) 3. (a)
(ii) (c) 4. (c)
(iii) (c)
2. (i) (b)
(ii) (c)
(iii) (a)
B – Descriptive Questions
1. Computation of total income of Mr. Ashok for the A.Y.2025-26
Particulars ? ?
Income from house property
Arrears of rent
(Taxable under section 25A even if Mr. Ashok is not
the owner of the house property in the P.Y.2024-25)
1,35,000
Less: Deduction@30%
40,500 94,500
Profits and gains of business or profession
Income from wholesale business
Net profit as per books 6,60,000
Add: Amount debited to P & L A/c, not allowable as
deduction
- Depreciation as per books 34,000
- Disallowance of municipal taxes paid for the second
half-year under section 43B, since the same was
paid after the due date of filing of return of income
( ? 7,000/2)
3,500
- Disallowance under section 40A(3) in respect of
salary paid in cash since the same exceeds
? 10,000
22,000
- 20% of car expenses for personal use 8,000
7,27,500
Less: Depreciation allowable (Note 1) 1,96,800
5,30,700
528
Page 2
ANSWERS OF MODEL TEST PAPER 6
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) (c) 3. (a)
(ii) (c) 4. (c)
(iii) (c)
2. (i) (b)
(ii) (c)
(iii) (a)
B – Descriptive Questions
1. Computation of total income of Mr. Ashok for the A.Y.2025-26
Particulars ? ?
Income from house property
Arrears of rent
(Taxable under section 25A even if Mr. Ashok is not
the owner of the house property in the P.Y.2024-25)
1,35,000
Less: Deduction@30%
40,500 94,500
Profits and gains of business or profession
Income from wholesale business
Net profit as per books 6,60,000
Add: Amount debited to P & L A/c, not allowable as
deduction
- Depreciation as per books 34,000
- Disallowance of municipal taxes paid for the second
half-year under section 43B, since the same was
paid after the due date of filing of return of income
( ? 7,000/2)
3,500
- Disallowance under section 40A(3) in respect of
salary paid in cash since the same exceeds
? 10,000
22,000
- 20% of car expenses for personal use 8,000
7,27,500
Less: Depreciation allowable (Note 1) 1,96,800
5,30,700
528
Income from firm
Share of profit from the firm is exempt
under section 10(2A)
-
Interest on capital from partnership firm
(Note 2)
1,20,000
Salary as working partner fully taxable 1,00,000 2,20,000 7,50,700
Income from other sources
Interest on bank fixed deposit (Gross) [ ? 49,500 x
100/90]
55,000
Interest on saving bank account 13,300
Interest on income-tax refund 1,400 69,700
Gross total income 9,14,900
Less: Deduction under Chapter VIA (Note 3) 2,65,000
Total Income 6,49,900
Computation of tax liability of Mr. Ashok for the A.Y.2025-26
Particulars ?
Upto ? 3,00,000 Nil
? 3,00,001 – ? 5,00,000 [i.e., ? 2,00,000@5%] 10,000
? 5,00,001 – ? 6,49,900 [i.e., ? 1,49,900@20%] 29,980
39,980
Add: Health and Education cess@4% 1,599
Tax liability 41,579
Tax liability (Rounded off) 41,580
Notes:
(1) Depreciation allowable under the Income-tax Rules, 1962
Opening
WDV/
Actual cost
Rate Depreciation
Block 1 Computers 2,40,000 40% 96,000
Computer
printer
1,50,000 40% 60,000
Block 2 Motor Car 6,80,000 15%
51,000
[50% of 15%
is allowable,
since it is put
to use for
less than
180 days]
40,800
Less: 20% disallowance for
personal use
10,200
1,96,800
529
Page 3
ANSWERS OF MODEL TEST PAPER 6
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) (c) 3. (a)
(ii) (c) 4. (c)
(iii) (c)
2. (i) (b)
(ii) (c)
(iii) (a)
B – Descriptive Questions
1. Computation of total income of Mr. Ashok for the A.Y.2025-26
Particulars ? ?
Income from house property
Arrears of rent
(Taxable under section 25A even if Mr. Ashok is not
the owner of the house property in the P.Y.2024-25)
1,35,000
Less: Deduction@30%
40,500 94,500
Profits and gains of business or profession
Income from wholesale business
Net profit as per books 6,60,000
Add: Amount debited to P & L A/c, not allowable as
deduction
- Depreciation as per books 34,000
- Disallowance of municipal taxes paid for the second
half-year under section 43B, since the same was
paid after the due date of filing of return of income
( ? 7,000/2)
3,500
- Disallowance under section 40A(3) in respect of
salary paid in cash since the same exceeds
? 10,000
22,000
- 20% of car expenses for personal use 8,000
7,27,500
Less: Depreciation allowable (Note 1) 1,96,800
5,30,700
528
Income from firm
Share of profit from the firm is exempt
under section 10(2A)
-
Interest on capital from partnership firm
(Note 2)
1,20,000
Salary as working partner fully taxable 1,00,000 2,20,000 7,50,700
Income from other sources
Interest on bank fixed deposit (Gross) [ ? 49,500 x
100/90]
55,000
Interest on saving bank account 13,300
Interest on income-tax refund 1,400 69,700
Gross total income 9,14,900
Less: Deduction under Chapter VIA (Note 3) 2,65,000
Total Income 6,49,900
Computation of tax liability of Mr. Ashok for the A.Y.2025-26
Particulars ?
Upto ? 3,00,000 Nil
? 3,00,001 – ? 5,00,000 [i.e., ? 2,00,000@5%] 10,000
? 5,00,001 – ? 6,49,900 [i.e., ? 1,49,900@20%] 29,980
39,980
Add: Health and Education cess@4% 1,599
Tax liability 41,579
Tax liability (Rounded off) 41,580
Notes:
(1) Depreciation allowable under the Income-tax Rules, 1962
Opening
WDV/
Actual cost
Rate Depreciation
Block 1 Computers 2,40,000 40% 96,000
Computer
printer
1,50,000 40% 60,000
Block 2 Motor Car 6,80,000 15%
51,000
[50% of 15%
is allowable,
since it is put
to use for
less than
180 days]
40,800
Less: 20% disallowance for
personal use
10,200
1,96,800
529
(2) Only to the extent the interest is allowed as deduction in the hands of
the firm, the same is includible as business income in the hands of the
partner. Since interest is paid in accordance with partnership deed,
maximum interest allowable as deduction in the hands of the firm is
12% p.a. Therefore, interest @12% p.a. amounting to ? 1,20,000 would
be treated as the business income of Mr. Ashok.
(3) Deduction under Chapter VI-A
Particulars ? ?
Under section 80C
LIP for independent son 60,000
PPF paid in wife’s name 70,000
1,30,000
Under section 80D
Health insurance premium taken for himself is
fully allowable as deduction, since he is a
senior citizen
35,000
Under section 80G
Contribution towards PM National Relief Fund
eligible for 100% deduction without any
qualifying limit
50,000
Under section 80TTB
Interest on deposits in case of senior citizen,
restricted to
50,000
Total deduction 2,65,000
2. (a) Mr. Sudesh is a non-resident for the A.Y.2025-26, since he was not
present in India at any time during the previous year 2024-25.
As per section 5(2), a non-resident is chargeable to tax in India only in
respect of following incomes:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or income deemed to accrue or arise
in India.
Computation of Total Income of Mr. Sudesh for A.Y. 2025-26
(As per default regime)
Particulars ?
Salaries
Salary from Government of India
(Income chargeable under the head ‘Salaries’ payable by
the Government to a citizen of India for services rendered
outside India is deemed to accrue or arise in India under
section 9(1)(iii). Hence, such income is taxable in the hands
of Mr. Sudesh, a citizen of India, even though he is a non-
resident and rendering services outside India)
9,25,000
530
Page 4
ANSWERS OF MODEL TEST PAPER 6
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) (c) 3. (a)
(ii) (c) 4. (c)
(iii) (c)
2. (i) (b)
(ii) (c)
(iii) (a)
B – Descriptive Questions
1. Computation of total income of Mr. Ashok for the A.Y.2025-26
Particulars ? ?
Income from house property
Arrears of rent
(Taxable under section 25A even if Mr. Ashok is not
the owner of the house property in the P.Y.2024-25)
1,35,000
Less: Deduction@30%
40,500 94,500
Profits and gains of business or profession
Income from wholesale business
Net profit as per books 6,60,000
Add: Amount debited to P & L A/c, not allowable as
deduction
- Depreciation as per books 34,000
- Disallowance of municipal taxes paid for the second
half-year under section 43B, since the same was
paid after the due date of filing of return of income
( ? 7,000/2)
3,500
- Disallowance under section 40A(3) in respect of
salary paid in cash since the same exceeds
? 10,000
22,000
- 20% of car expenses for personal use 8,000
7,27,500
Less: Depreciation allowable (Note 1) 1,96,800
5,30,700
528
Income from firm
Share of profit from the firm is exempt
under section 10(2A)
-
Interest on capital from partnership firm
(Note 2)
1,20,000
Salary as working partner fully taxable 1,00,000 2,20,000 7,50,700
Income from other sources
Interest on bank fixed deposit (Gross) [ ? 49,500 x
100/90]
55,000
Interest on saving bank account 13,300
Interest on income-tax refund 1,400 69,700
Gross total income 9,14,900
Less: Deduction under Chapter VIA (Note 3) 2,65,000
Total Income 6,49,900
Computation of tax liability of Mr. Ashok for the A.Y.2025-26
Particulars ?
Upto ? 3,00,000 Nil
? 3,00,001 – ? 5,00,000 [i.e., ? 2,00,000@5%] 10,000
? 5,00,001 – ? 6,49,900 [i.e., ? 1,49,900@20%] 29,980
39,980
Add: Health and Education cess@4% 1,599
Tax liability 41,579
Tax liability (Rounded off) 41,580
Notes:
(1) Depreciation allowable under the Income-tax Rules, 1962
Opening
WDV/
Actual cost
Rate Depreciation
Block 1 Computers 2,40,000 40% 96,000
Computer
printer
1,50,000 40% 60,000
Block 2 Motor Car 6,80,000 15%
51,000
[50% of 15%
is allowable,
since it is put
to use for
less than
180 days]
40,800
Less: 20% disallowance for
personal use
10,200
1,96,800
529
(2) Only to the extent the interest is allowed as deduction in the hands of
the firm, the same is includible as business income in the hands of the
partner. Since interest is paid in accordance with partnership deed,
maximum interest allowable as deduction in the hands of the firm is
12% p.a. Therefore, interest @12% p.a. amounting to ? 1,20,000 would
be treated as the business income of Mr. Ashok.
(3) Deduction under Chapter VI-A
Particulars ? ?
Under section 80C
LIP for independent son 60,000
PPF paid in wife’s name 70,000
1,30,000
Under section 80D
Health insurance premium taken for himself is
fully allowable as deduction, since he is a
senior citizen
35,000
Under section 80G
Contribution towards PM National Relief Fund
eligible for 100% deduction without any
qualifying limit
50,000
Under section 80TTB
Interest on deposits in case of senior citizen,
restricted to
50,000
Total deduction 2,65,000
2. (a) Mr. Sudesh is a non-resident for the A.Y.2025-26, since he was not
present in India at any time during the previous year 2024-25.
As per section 5(2), a non-resident is chargeable to tax in India only in
respect of following incomes:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or income deemed to accrue or arise
in India.
Computation of Total Income of Mr. Sudesh for A.Y. 2025-26
(As per default regime)
Particulars ?
Salaries
Salary from Government of India
(Income chargeable under the head ‘Salaries’ payable by
the Government to a citizen of India for services rendered
outside India is deemed to accrue or arise in India under
section 9(1)(iii). Hence, such income is taxable in the hands
of Mr. Sudesh, a citizen of India, even though he is a non-
resident and rendering services outside India)
9,25,000
530
Foreign Allowance from Government of India
[Any allowances or perquisites paid or allowed as such
outside India by the Government to a citizen of India for
rendering service outside India is exempt under section
10(7)].
Nil
Gross Salary 9,25,000
Less: Standard Deduction under section 16(ia) of ? 75,000,
being lower of gross salary or ? 75,000
75,000
8,50,000
Income from House Property
Rent from a house situated at UK, received in UK Nil
(Income from property situated outside India would not be
taxable in India in the hands of a non-resident, since it
neither accrues or arises in India nor is it deemed to accrue
or arise in India nor is it received in India)
Gross Total Income/ Total Income 8,50,000
(b) Mr. Sumit has furnished his return of income under default tax regime
for A.Y.2025-26 on 22.10.2025, i.e., after the due date specified under
section 139(1) i.e., 31
st
July 2025. Hence, the return is a belated return
under section 139(4).
As per section 80 read with section 139(3), specified losses, which
have not been determined in pursuance of a return of loss filed within
the time specified in section 139(1), cannot be carried forward to the
subsequent year for set-off against income of that year. The specified
losses include, inter alia, business loss but does not include loss from
house property and unabsorbed depreciation.
Accordingly, business loss of ? 10,80,000 of Mr. Sumit for A.Y. 2025-26,
not determined in pursuance of a return of loss filed within the time
specified in section 139(1), cannot be carried forward to A.Y. 2026-27.
The loss of ? 2,50,000 from let out house property cannot be carried
forward since Mr. Sumit is paying tax under default tax regime.
However, unabsorbed depreciation of ? 2,00,000 pertaining to
A.Y.2025-26, can be carried forward to A.Y.2026-27 for set-off, even
though Mr. Sumit has filed the return of loss for A.Y.2025-26 belatedly.
(c) (i) HFC Bank is not required to deduct tax at source under section
194A, since the aggregate interest on fixed deposit with the two
branches of the bank ? 49,000 does not exceed the threshold limit
of ? 50,000, applicable in case of senior citizen. Since HFC Bank
has adopted core banking solution (CBS), the aggregate interest
paid by both branches has to be considered.
(ii) TDS provisions under section 194C are not attracted in this case,
since Mr. Chetan is a pensioner. However, Mr. Chetan has to
deduct tax at source@2% u/s 194M, since the payment to
contractor, Mr. Gopi, exceeds ? 50 lakhs.
531
Page 5
ANSWERS OF MODEL TEST PAPER 6
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) (c) 3. (a)
(ii) (c) 4. (c)
(iii) (c)
2. (i) (b)
(ii) (c)
(iii) (a)
B – Descriptive Questions
1. Computation of total income of Mr. Ashok for the A.Y.2025-26
Particulars ? ?
Income from house property
Arrears of rent
(Taxable under section 25A even if Mr. Ashok is not
the owner of the house property in the P.Y.2024-25)
1,35,000
Less: Deduction@30%
40,500 94,500
Profits and gains of business or profession
Income from wholesale business
Net profit as per books 6,60,000
Add: Amount debited to P & L A/c, not allowable as
deduction
- Depreciation as per books 34,000
- Disallowance of municipal taxes paid for the second
half-year under section 43B, since the same was
paid after the due date of filing of return of income
( ? 7,000/2)
3,500
- Disallowance under section 40A(3) in respect of
salary paid in cash since the same exceeds
? 10,000
22,000
- 20% of car expenses for personal use 8,000
7,27,500
Less: Depreciation allowable (Note 1) 1,96,800
5,30,700
528
Income from firm
Share of profit from the firm is exempt
under section 10(2A)
-
Interest on capital from partnership firm
(Note 2)
1,20,000
Salary as working partner fully taxable 1,00,000 2,20,000 7,50,700
Income from other sources
Interest on bank fixed deposit (Gross) [ ? 49,500 x
100/90]
55,000
Interest on saving bank account 13,300
Interest on income-tax refund 1,400 69,700
Gross total income 9,14,900
Less: Deduction under Chapter VIA (Note 3) 2,65,000
Total Income 6,49,900
Computation of tax liability of Mr. Ashok for the A.Y.2025-26
Particulars ?
Upto ? 3,00,000 Nil
? 3,00,001 – ? 5,00,000 [i.e., ? 2,00,000@5%] 10,000
? 5,00,001 – ? 6,49,900 [i.e., ? 1,49,900@20%] 29,980
39,980
Add: Health and Education cess@4% 1,599
Tax liability 41,579
Tax liability (Rounded off) 41,580
Notes:
(1) Depreciation allowable under the Income-tax Rules, 1962
Opening
WDV/
Actual cost
Rate Depreciation
Block 1 Computers 2,40,000 40% 96,000
Computer
printer
1,50,000 40% 60,000
Block 2 Motor Car 6,80,000 15%
51,000
[50% of 15%
is allowable,
since it is put
to use for
less than
180 days]
40,800
Less: 20% disallowance for
personal use
10,200
1,96,800
529
(2) Only to the extent the interest is allowed as deduction in the hands of
the firm, the same is includible as business income in the hands of the
partner. Since interest is paid in accordance with partnership deed,
maximum interest allowable as deduction in the hands of the firm is
12% p.a. Therefore, interest @12% p.a. amounting to ? 1,20,000 would
be treated as the business income of Mr. Ashok.
(3) Deduction under Chapter VI-A
Particulars ? ?
Under section 80C
LIP for independent son 60,000
PPF paid in wife’s name 70,000
1,30,000
Under section 80D
Health insurance premium taken for himself is
fully allowable as deduction, since he is a
senior citizen
35,000
Under section 80G
Contribution towards PM National Relief Fund
eligible for 100% deduction without any
qualifying limit
50,000
Under section 80TTB
Interest on deposits in case of senior citizen,
restricted to
50,000
Total deduction 2,65,000
2. (a) Mr. Sudesh is a non-resident for the A.Y.2025-26, since he was not
present in India at any time during the previous year 2024-25.
As per section 5(2), a non-resident is chargeable to tax in India only in
respect of following incomes:
(i) Income received or deemed to be received in India; and
(ii) Income accruing or arising or income deemed to accrue or arise
in India.
Computation of Total Income of Mr. Sudesh for A.Y. 2025-26
(As per default regime)
Particulars ?
Salaries
Salary from Government of India
(Income chargeable under the head ‘Salaries’ payable by
the Government to a citizen of India for services rendered
outside India is deemed to accrue or arise in India under
section 9(1)(iii). Hence, such income is taxable in the hands
of Mr. Sudesh, a citizen of India, even though he is a non-
resident and rendering services outside India)
9,25,000
530
Foreign Allowance from Government of India
[Any allowances or perquisites paid or allowed as such
outside India by the Government to a citizen of India for
rendering service outside India is exempt under section
10(7)].
Nil
Gross Salary 9,25,000
Less: Standard Deduction under section 16(ia) of ? 75,000,
being lower of gross salary or ? 75,000
75,000
8,50,000
Income from House Property
Rent from a house situated at UK, received in UK Nil
(Income from property situated outside India would not be
taxable in India in the hands of a non-resident, since it
neither accrues or arises in India nor is it deemed to accrue
or arise in India nor is it received in India)
Gross Total Income/ Total Income 8,50,000
(b) Mr. Sumit has furnished his return of income under default tax regime
for A.Y.2025-26 on 22.10.2025, i.e., after the due date specified under
section 139(1) i.e., 31
st
July 2025. Hence, the return is a belated return
under section 139(4).
As per section 80 read with section 139(3), specified losses, which
have not been determined in pursuance of a return of loss filed within
the time specified in section 139(1), cannot be carried forward to the
subsequent year for set-off against income of that year. The specified
losses include, inter alia, business loss but does not include loss from
house property and unabsorbed depreciation.
Accordingly, business loss of ? 10,80,000 of Mr. Sumit for A.Y. 2025-26,
not determined in pursuance of a return of loss filed within the time
specified in section 139(1), cannot be carried forward to A.Y. 2026-27.
The loss of ? 2,50,000 from let out house property cannot be carried
forward since Mr. Sumit is paying tax under default tax regime.
However, unabsorbed depreciation of ? 2,00,000 pertaining to
A.Y.2025-26, can be carried forward to A.Y.2026-27 for set-off, even
though Mr. Sumit has filed the return of loss for A.Y.2025-26 belatedly.
(c) (i) HFC Bank is not required to deduct tax at source under section
194A, since the aggregate interest on fixed deposit with the two
branches of the bank ? 49,000 does not exceed the threshold limit
of ? 50,000, applicable in case of senior citizen. Since HFC Bank
has adopted core banking solution (CBS), the aggregate interest
paid by both branches has to be considered.
(ii) TDS provisions under section 194C are not attracted in this case,
since Mr. Chetan is a pensioner. However, Mr. Chetan has to
deduct tax at source@2% u/s 194M, since the payment to
contractor, Mr. Gopi, exceeds ? 50 lakhs.
531
3. (a) Computation of taxable income of Mr. Yogesh for A.Y. 2025-26
Particulars Amount
( ?)
Amount
( ?)
Income from house property (A)
Unit - 1 [50% of floor area - Let out]
Gross Annual Value, higher of
- Expected rent ? 1,39,000 [Higher of
Municipal Value of ? 1,44,000 p.a. and
Fair Rent of ? 1,49,000 p.a., but restricted
to Standard Rent of ? 1,39,000 p.a.]
- Actual rent ? 1,80,000 i.e., [ ? 20,000 x 10]
less unrealized rent of January, 2025
? 20,000
Gross Annual Value 1,80,000
Less: Municipal taxes [50% of ? 30,000] 15,000
Net Annual Value 1,65,000
Less: Deductions from Net Annual Value
(a) 30% of Net Annual Value 49,500
(b) Interest on loan [50% of ? 90,000] 45,000 70,500
Unit – 3 [25% of floor area – Self occupied]
Net Annual Value -
Less: Interest on loan [Not allowed as Mr.
Yogesh is paying tax under section 115BAC.]
- -
70,500
Profits and gains from business or
profession (B)
Business Income [without deducting
expenditure of Unit – 2, 25% floor area used
for business purposes]
2,40,000
Less: Expenditure in respect of Unit -2
- Municipal taxes [25% of
? 30,000]
7,500
- Repairs [25% of ? 7,000] 1,750
- Interest on loan [25% of
? 90,000]
22,500
- Ground rent [25% of ? 6,000] 1,500
- Fire Insurance premium
[25% of ? 60,000]
15,000 48,250 1,91,750
Taxable Income (A+B) 2,62,250
Note: Alternatively, if as per income-tax returns, unrealised rent is
deducted from GAV, then GAV would be ? 2,00,000, being higher of
unexpected rent of ? 1,39,000 and actual rent of ? 2,00,000.
Thereafter, unrealized rent of ? 20,000 and municipal taxes of ? 15,000
532
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