Question 1 OR (b)

Tax liability under the old regime with agricultural income

6 marks

Time to write: About 12 minutes
Topic: Total income, tax liability and rebates
Notes: Crux notes

Question

Question 1 OR (b) · 6 marks

Ms. Adya Gupta (age 35 years ordinary resident) has a Gross Total Income, as computed under Income-Tax Act, for the tax year 2026-27 of Rs. 1000000. She paid medical insurance premium Rs. 30000, and in Atal Pension Yojana she deposited Rs. 40000. If she has agricultural income of Rs. 600000, compute her tax liability under 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 three years. Every figure is as printed. "Ordinary resident" is read as resident and ordinarily resident. "Old tax regime" is read as the optional regime with the deductions, as against the default regime with lower slab rates.

Reworded from the university paper; 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

12 minfor 6 marks

Write it in this order

Read; underline the asks; jot your points 1 min
1 Deductions for health insurance and Atal Pension Yojana, and total income 2 marks 3 min
2 Treatment of agricultural income partial integration 2½ marks 4 min
3 Rebate, cess and tax liability 1½ marks 3 min
Check: every ask answered, key terms underlined 1 min

123

Short on time? Trim steps 1–3 evenly rather than skip one: each is capped at its own marks.

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.

Assumptions

Ms. Gupta opts out of the default regime of section 202(1) by exercising the option under section 202(4)(b) with her return; she has no business income, so the option is made year by year. The slab rates are then those of the Finance Act, 2026, First Schedule, Part I-B, Paragraph A(I) (an individual below 60).
The medical insurance premium is for her own health insurance and is paid otherwise than in cash, as section 126(9) requires.
Atal Pension Yojana was notified as a pension scheme under section 80CCD of the 1961 Act; section 536(2)(j) of the 2025 Act keeps that notification in force for the corresponding provisions.

Computation of total income for tax year 2026-27

Particulars	Rs.
Gross total income (as given)	10,00,000
Less: Health insurance premium, section 126(2)(a): paid 30,000, limit 25,000 (age below 60)	25,000
Less: Contribution to Atal Pension Yojana, section 124(3): paid 40,000, limit 50,000	40,000
Total income	9,35,000

The APY deposit would be allowed in full under section 123 instead (Schedule XV, paragraph 1(y): up to 20% of gross total income, that is 2,00,000, within the overall 1,50,000, as she is taken not to be an employee; for an employee the limit is 10% of salary), so the deduction is 40,000 either way; if she were an employee whose 10% of salary is below 40,000, section 124(3) still allows the 40,000 in full. It cannot be claimed twice (section 124(5)).

Agricultural income of 6,00,000 is not included in total income (section 11 read with Schedule II, Sl. No. 1). But it exceeds 5,000 and the total income exceeds the basic exemption limit of 2,50,000, so it is taken into account for the rate of tax (Finance Act, 2026, section 3(2)).

Computation of tax (partial integration of agricultural income)

Step	Particulars	Rs.
A	Tax on total income + net agricultural income (9,35,000 + 6,00,000 = 15,35,000)	2,73,000
B	Tax on net agricultural income + 2,50,000 (6,00,000 + 2,50,000 = 8,50,000)	82,500
	Income-tax on total income (A − B)	1,90,500
	Less: Rebate under section 156(1) (total income exceeds 5,00,000)	0
	Add: Health and Education Cess at 4%	7,620
	Tax liability	1,98,120

Working for step A (slabs of Paragraph A(I)): nil on the first 2,50,000; 5% of 2,50,000 = 12,500; 20% of 5,00,000 = 1,00,000; 30% of 5,35,000 = 1,60,500; total 2,73,000.

Working for step B: nil on the first 2,50,000; 5% of 2,50,000 = 12,500; 20% of 3,50,000 = 70,000; total 82,500.

No surcharge is payable, as the total income is below 50,00,000.

What changed from the Income-tax Act, 1961

Item	Income-tax Act, 1961 (AY 2024-25)	Income-tax Act, 2025 (tax year 2026-27)
Health insurance premium	Section 80D, limit 25,000	Section 126(2)(a), limit 25,000
Atal Pension Yojana	Section 80CCD(1) or 80CCD(1B)	Section 123 with Schedule XV, para 1(y), or section 124(3)
Agricultural income	Exempt, section 10(1)	Not included, section 11 with Schedule II, Sl. No. 1
Rebate	Section 87A	Section 156
Old-regime slabs (below 60)	2,50,000 / 5,00,000 / 10,00,000 at 5%, 20%, 30%	The same, Finance Act, 2026, Part I-B, Paragraph A(I)

Because the limits, the slabs and the partial-integration method are unchanged, the 1961 Act gives the same tax liability of 1,98,120 for AY 2024-25.

Where the 6 marks sit

#	Component	Marks
1	Deductions for health insurance and Atal Pension Yojana, and total income	2
2	Treatment of agricultural income (partial integration)	2.5
3	Rebate, cess and tax liability	1.5
	Total	6

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