Question 1 OR (b)
Tax under the old regime with agricultural income
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 1 OR (b) · 6 marksMr. Vinod (aged 50 years, an ordinary resident) has, for the tax year 2026-27, a Gross Total Income of Rs. 620000 as computed under the Income-Tax Act. He put Rs. 120000 into a PPF account. If he has agricultural income of Rs. 400000, compute his tax liability under the old tax regime. (6)
Paper note: Set under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 3 years and every date in the question moves forward by the same 3 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Gross Total IncomeHead by head: each income under its head, exempt items marked exempt, then the deductions and the tax.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Total income after the PPF deduction 1 mark 2 min
- 2 Partial integration: steps A and B 3 marks 5 min
- 3 Rebate, cess and tax liability 2 marks 3 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Short on time? Step 2 carries 3 of the 6 marks: guard its minutes.
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
- Mr. Vinod opts out of the default regime (section 202(4)), as the question says; the slabs are those of the Finance Act, 2026, First Schedule, Part I-B, Paragraph A(I) (an individual below 60).
- The agricultural income of ₹4,00,000 is net agricultural income.
Computation of total income for tax year 2026-27
| Particulars | Rs. |
|---|---|
| Gross total income (as given) | 6,20,000 |
| Less: Deposit in PPF (section 123, Schedule XV; within the limit of ₹1,50,000) | 1,20,000 |
| Total income | 5,00,000 |
Agricultural income is not part of total income (Schedule II, Sl. No. 1). As it exceeds ₹5,000 and the total income exceeds the basic exemption limit of ₹2,50,000, it is taken into account for the rate of tax (partial integration).
| Step | Particulars | Rs. |
|---|---|---|
| A | Tax on total income + agricultural income (₹5,00,000 + ₹4,00,000 = ₹9,00,000) | 92,500 |
| B | Tax on agricultural income + ₹2,50,000 (₹4,00,000 + ₹2,50,000 = ₹6,50,000) | 42,500 |
| Income-tax on total income (A − B) | 50,000 | |
| Less: Rebate under section 156(1) (total income does not exceed ₹5,00,000) | 12,500 | |
| Tax after rebate | 37,500 | |
| Add: Health and Education Cess at 4% | 1,500 | |
| Tax liability | 39,000 |
Working for step A: nil on ₹2,50,000; 5% of ₹2,50,000 = ₹12,500; 20% of ₹4,00,000 = ₹80,000; total ₹92,500.
Working for step B: nil on ₹2,50,000; 5% of ₹2,50,000 = ₹12,500; 20% of ₹1,50,000 = ₹30,000; total ₹42,500.
- The rebate is tested on total income, which excludes agricultural income: ₹5,00,000 is within the limit, so the rebate of ₹12,500 (or the tax, if less) is allowed.
- Without the agricultural income, tax on ₹5,00,000 would be ₹12,500, wholly covered by the rebate; the agricultural income raises the rate on the non-agricultural income and so creates the liability.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Total income after the PPF deduction | 1 |
| 2 | Partial integration: steps A and B | 3 |
| 3 | Rebate, cess and tax liability | 2 |
| Total | 6 |
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