Question 5 (b)
Net taxable income and tax under the old regime with gifts, a jewellery purchase and lottery winnings
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 5 (b) · 12 marksMr. Z (45 years) gave these details of his income/investments for tax year 2026-27:
Salaries: income (computed), Rs. 760000
House properties: income (computed), Rs. 350000
Bank deposits: interest (net of TDS @ 10%), Rs. 270000
Saving banks account: interest, Rs. 5000
Gift from his father on marriage anniversary, Rs. 51000
Birthday gift from his five friends, Rs. 60000
A silver chain bought from his friends for Rs. 350000; its fair market value is Rs. 370000.
Lotteries: winning (net of TDS @ 30%), Rs. 14000
Own life insurance premium (sum assured Rs. 500000), Rs. 30000
Under the old tax regime, compute his net taxable income and tax liability for the tax year 2026-27. (12)
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
- 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 Gifts from father and friends; the silver chain 3 marks 5 min
- 2 Grossing up interest and lottery winnings 2 marks 3 min
- 3 Gross total income and deductions 3 marks 5 min
- 4 Tax at slab and special rates, cess and TDS 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. Z is a resident individual and has opted out of the default regime (section 202(4)).
- The life insurance policy was issued after 1 April 2012, and the premium is paid otherwise than in cash.
| Item | Treatment |
|---|---|
| (iii) Interest on bank deposits, net ₹2,70,000 | Grossed up: ₹2,70,000 ÷ 90% = ₹3,00,000 (TDS ₹30,000) |
| (v) Gift of ₹51,000 from his father | From a relative: not income (section 92(2)(m), relative exception) |
| (vi) Birthday gifts from five friends, ₹60,000 | Sums received without consideration from non-relatives exceed ₹50,000 in total, so the whole ₹60,000 is income |
| (vii) Silver chain bought for ₹3,50,000; fair market value ₹3,70,000 | Jewellery bought for less than its value: the difference (₹20,000) is not more than ₹50,000, so nothing is taxed |
| (viii) Lottery winnings, net ₹14,000 | Grossed up: ₹14,000 ÷ 70% = ₹20,000 (TDS ₹6,000); taxed at 30% (section 194) |
| (ix) Life insurance premium ₹30,000 (sum assured ₹5,00,000) | Within 10% of the sum assured (₹50,000), so wholly deductible under section 123 |
Computation of total income for tax year 2026-27
| Particulars | Rs. |
|---|---|
| Income from salaries (computed) | 7,60,000 |
| Income from house properties (computed) | 3,50,000 |
| Income from other sources: | |
| Interest on bank deposits (gross) | 3,00,000 |
| Interest on savings bank account | 5,000 |
| Gifts from friends | 60,000 |
| Lottery winnings (gross) | 20,000 |
| Gross total income | 14,95,000 |
| Less: Section 123 (Schedule XV): life insurance premium | 30,000 |
| Less: Section 153(2)(a): interest on savings account (up to ₹10,000) | 5,000 |
| Total income | 14,60,000 |
| Particulars | Rs. |
|---|---|
| Tax on ₹14,40,000 (total income less lottery winnings) at slab rates | 2,44,500 |
| Tax on lottery winnings: ₹20,000 at 30% | 6,000 |
| Tax before cess | 2,50,500 |
| Add: Health and Education Cess at 4% | 10,020 |
| Tax liability | 2,60,520 |
| Less: Tax deducted at source (₹30,000 + ₹6,000) | 36,000 |
| Tax payable | 2,24,520 |
Working for slab tax on ₹14,40,000: nil on ₹2,50,000; 5% of ₹2,50,000 = ₹12,500; 20% of ₹5,00,000 = ₹1,00,000; 30% of ₹4,40,000 = ₹1,32,000; total ₹2,44,500. No surcharge (total income below ₹50,00,000) and no rebate.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Gifts from father and friends; the silver chain | 3 |
| 2 | Grossing up interest and lottery winnings | 2 |
| 3 | Gross total income and deductions | 3 |
| 4 | Tax at slab and special rates, cess and TDS | 4 |
| Total | 12 |
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