Question 5 OR (b)
Tax liability of a senior citizen under the old regime, with losses to set off
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 5 OR (b) · 12 marksMr. Y (63 years) gave these details of his income/investments for the tax year 2026-27. Under the old tax regime, compute his tax liability for the tax year 2026-27.
| SN | Particulars | Amount (Rs.) |
|---|---|---|
| 1. | Income: salary (computed) | 980000 |
| 2. | House property loss (computed) | -180000 |
| 3. | Deposits: interest (gross) | 60000 |
| 4. | Debentures: interest (gross) | 120000 |
| 5. | Lottery winnings (net, after TDS @30%) | 70000 |
| 6. | Loss from winnings lottery | -10000 |
| 7. | Land sale: long-term capital gains | 120000 |
| 8. | Loss on long-term capital gains on the sale of gold | -45000 |
| 9. | Premium for medical insurance | 60000 |
| 10. | Public Provident Fund contribution | 140000 |
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. "Loss from winnings lottery" and "Loss on long-term capital gains on sale of gold" are as printed; the deposits are read as bank deposits, and the medical insurance premium as paid for himself, otherwise than in cash.
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
- computeHead 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 2 min
- 1 Set off of house property and capital losses; the lottery loss 3 marks 5 min
- 2 Grossing up and gross total income 2 marks 3 min
- 3 Deductions under sections 123, 126 and 153 3 marks 5 min
- 4 Tax at slab and special rates, cess and liability 4 marks 7 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Try it first. About 24 minutes for 12 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. Y (63) is a resident individual, so he is a senior citizen; he has opted out of the default regime (section 202(4)). His slabs are those for a resident aged 60 to 80 (Finance Act, 2026, First Schedule, Part I-B, Paragraph A(II)).
- The interest on deposits is interest on bank deposits; the medical insurance premium is for his own health and was paid otherwise than in cash.
- The long-term capital gain on land is as computed and is taxed at 12.5% (section 197); the indexed figure needed for the comparison in section 197(3) is not given.
| Item | Treatment |
|---|---|
| House property loss ₹1,80,000 | Set off against salary, within the ₹2,00,000 limit (section 109); fully absorbed |
| Long-term capital loss on gold ₹45,000 | Set off against the long-term gain on land (section 108(2)(b)): net gain ₹75,000 |
| Lottery winnings ₹70,000 (net of 30%) | Grossed up: ₹1,00,000; taxed at 30% (section 194(1), Table: Sl. No. 1), with no deduction (section 94(4)) |
| Loss from lottery ₹10,000 | Expenditure related to the winnings: no deduction for it is allowed under the Act (section 94(4)), against the winnings or any other income; ignored |
Computation of total income for tax year 2026-27
| Particulars | Rs. |
|---|---|
| Income from salaries (computed) | 9,80,000 |
| Less: Loss from house property set off | 1,80,000 |
| Salaries after set off | 8,00,000 |
| Long-term capital gain: land ₹1,20,000 less loss on gold ₹45,000 | 75,000 |
| Interest on deposits (gross) | 60,000 |
| Interest on debentures (gross) | 1,20,000 |
| Lottery winnings (gross) | 1,00,000 |
| Gross total income | 11,55,000 |
| Less: Section 123 (Schedule XV): PPF | 1,40,000 |
| Less: Section 126(8)(a): health insurance, ₹60,000, limited to ₹50,000 (senior citizen) | 50,000 |
| Less: Section 153(2)(b): interest on deposits of a senior citizen, ₹60,000, limited to ₹50,000 | 50,000 |
| Total income | 9,15,000 |
| Particulars | Rs. |
|---|---|
| Tax on ₹7,40,000 (total income less the gain and the winnings) at slab rates | 58,000 |
| Tax on long-term capital gain: ₹75,000 at 12.5% | 9,375 |
| Tax on lottery winnings: ₹1,00,000 at 30% | 30,000 |
| Tax before cess | 97,375 |
| Add: Health and Education Cess at 4% | 3,895 |
| Tax liability | 1,01,270 |
| Less: Tax deducted on the lottery winnings | 30,000 |
| Tax payable (before credit for any tax deducted on interest) | 71,270 |
Working for slab tax on ₹7,40,000: nil on ₹3,00,000; 5% of ₹2,00,000 = ₹10,000; 20% of ₹2,40,000 = ₹48,000; total ₹58,000. No rebate (total income above ₹5,00,000) and no surcharge.
- The Chapter VIII deductions (₹2,40,000) are taken only from income other than the capital gain and the winnings (₹9,80,000), so they are allowed in full.
- Under the Income-tax Act, 1961 for assessment year 2024-25 (the land sold before 23 July 2024), the gain would be taxed at 20%: see the as-set version.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Set off of house property and capital losses; the lottery loss | 3 |
| 2 | Grossing up and gross total income | 2 |
| 3 | Deductions under sections 123, 126 and 153 | 3 |
| 4 | Tax at slab and special rates, cess and liability | 4 |
| Total | 12 |
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