Question 5 (b)
Total income and tax under the old regime with capital gains at special rates and race winnings
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 5 (b) · 12 marksMr. Aakash (48 years resident individual) is a professional consultant in decoration and interiors, based at Chandigarh. For the tax year 2026-27, he gives this information on his income and expenditure.
| SN | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Profession: income | 1750000 |
| 2 | Capital Gain, short-term (u/s 111A, STT duly paid) | 5000 |
| 3 | Capital gain, long-term, u/s 112 (no indexation) | 150000 |
| 4 | Capital gain, long-term, u/s 112 A | 90000 |
| 5 | Camel Race winnings (net amount, TDS @ 30%) | 35000 |
| 6 | Horse race winnings (gross amount) | 40000 |
| 7 | Lottery loss | (16000) |
| 8 | Interest on deposits, income from other sources (net amount, TDS @ 10%) | 144000 |
| 9 | Payments of medical insurance premium, own life | 29000 |
| 10 | Expenditure on preventive health check up of his parents | 25000 |
| 11 | Public Provident Fund contribution | 158000 |
Assuming he chooses to file the tax return under the old tax regime, calculate the net taxable income and tax liability. (12)
Paper note: Set under the Income-tax Act, 1961 for assessment year 2025-26 (previous year 2024-25); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 2 years and every date in the question moves forward by the same 2 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
- Assuming he chooses to file the…The paper fixes this: use it as given, and say so in your answer.
- calculateHead 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 Grossing up and gross total income 3 marks 5 min
- 2 Lottery loss and deductions under sections 123 and 126 3 marks 5 min
- 3 Tax at slab rates and at special rates 4 marks 7 min
- 4 Cess, liability and TDS 2 marks 3 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. Aakash is a resident individual and has opted out of the default regime (section 202(4)). As he has professional income, the option is to be exercised, in the manner the rules prescribe, by the due date under section 263(1) for furnishing his return of tax year 2026-27; once exercised it applies to later tax years, it may be withdrawn only once, for a tax year other than the one for which it was exercised, and after that he can never opt out again unless he ceases to have income from business or profession, when the option of clause (b) is open (section 202(4)(a)(i)-(iv)). The slabs are those of the Finance Act, 2026, First Schedule, Part I-B, Paragraph A(I).
- The short-term gain is on listed equity shares sold with securities transaction tax (section 196); the long-term gains are long-term under the holding periods in force for the year.
- The medical insurance premium on his own life is a premium for his own health insurance, paid otherwise than in cash.
- Net figures are grossed up: camel race ₹35,000 ÷ 70% = ₹50,000; interest ₹1,44,000 ÷ 90% = ₹1,60,000.
| Particulars | Rs. |
|---|---|
| Profits and gains of profession | 17,50,000 |
| Short-term capital gain on listed shares (section 196) | 5,000 |
| Long-term capital gain (section 197, no indexation) | 1,50,000 |
| Long-term capital gain on listed equity (section 198) | 90,000 |
| Interest on deposits (₹1,44,000 grossed up at 10%) | 1,60,000 |
| Camel race winnings (₹35,000 grossed up at 30%) | 50,000 |
| Horse race winnings (gross) | 40,000 |
| Gross total income | 22,45,000 |
The lottery loss of ₹16,000 is ignored: it is expenditure related to income from winnings, and no deduction for it is allowed under the Act (section 94(4)), so it is set off neither against the winnings nor against other income.
| Particulars | Rs. |
|---|---|
| Section 123 (Schedule XV): PPF ₹1,58,000, limited to | 1,50,000 |
| Section 126(2)(a): health insurance for himself, ₹29,000, limited to | 25,000 |
| Section 126(2)(b) and (3): preventive health check-up of parents, ₹25,000, limited to | 5,000 |
| Total deductions | 1,80,000 |
The deductions are allowed only from income other than the capital gains at special rates and the race winnings (sections 197(5) and 94(4)); that income is ₹19,10,000, so they are allowed in full.
Total income = ₹22,45,000 − ₹1,80,000 = ₹20,65,000.
| Particulars | Rs. |
|---|---|
| Income taxed at slab rates: ₹20,65,000 − ₹3,35,000 (special-rate income) = ₹17,30,000 | 3,31,500 |
| Short-term capital gain ₹5,000 at 20% (section 196) | 1,000 |
| Long-term capital gain ₹1,50,000 at 12.5% (section 197) | 18,750 |
| Long-term capital gain on listed equity ₹90,000: within the ₹1,25,000 exemption (section 198) | 0 |
| Race winnings ₹90,000 at 30% (section 194) | 27,000 |
| Tax before cess | 3,78,250 |
| Add: Health and Education Cess at 4% | 15,130 |
| Tax liability | 3,93,380 |
| Less: Tax deducted at source (camel race ₹15,000; interest ₹16,000) | 31,000 |
| Tax payable | 3,62,380 |
Working for slab tax on ₹17,30,000: nil on ₹2,50,000; 5% of ₹2,50,000 = ₹12,500; 20% of ₹5,00,000 = ₹1,00,000; 30% of ₹7,30,000 = ₹2,19,000; total ₹3,31,500. No surcharge (total income below ₹50,00,000); no rebate.
- No deduction or expense is allowed against race winnings, and no basic exemption is set against them (section 194).
- Tax deducted on the horse race winnings is not given, so no credit is taken for it.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Grossing up and gross total income | 3 |
| 2 | Lottery loss and deductions under sections 123 and 126 | 3 |
| 3 | Tax at slab rates and at special rates | 4 |
| 4 | Cess, liability and TDS | 2 |
| Total | 12 |
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