DCM3204 DIRECT TAXES MARCH 2025

Description

SESSION	MARCH 2025
PROGRAM	BACHELOR OF COMMERCE (B.COM)
SEMESTER	VI
COURSE CODE & NAME	DCM3204 DIRECT TAXES

 

 

Set – 1

 

 

Q1.

1961. Elaborate on the definition of a “Person” under the Income Tax Act, 1961.
1962. Write down any five differences between direct taxes and indirect taxes.

Ans 1.

1. Definition of a “Person” under the Income Tax Act, 1961

Meaning and Legal Interpretation

The term “Person” under the Income Tax Act, 1961, is defined in Section 2(31) and is broader than its general usage. In legal terms, a person refers to not just an individual but includes a wide range of entities that are capable of earning income and being taxed. The inclusion of various categories ensures that the tax system is comprehensive and brings all income-generating units under its purview.

Categories Included under “Person”

According to the Act, “Person” includes the following seven categories: (1) an individual, (2) a

 

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Q2. Mr. Vivek Mohan has the following income during the financial year 2023-24:

1. Income from business in Kolkata managed from the U.S.A. Rs. 25,000
2. Income from pension for services rendered in India received in London Rs. 15,000

    (Computed)

3. Income from assets in Myanmar was received in India at Rs. 10,000.
4. Profit from business in Sri Lanka deposited in a bank there, Rs. 15,000.
5. Income from the profession in Kenya was received there, and it was set up in India for Rs. 15,000.
6. Profit on sale of machinery in India received in Nepal Rs. 10,000.
7. Interest on the U.K. government securities, half of which was received in India, Rs. 5,000.
8. Untaxed income of the previous year brought in India during the previous year was Rs. 40,000.

Calculate the Gross Total Income of Mr. Vivek Mohan for the assessment year 2024-25, if he is (i) Ordinarily resident (ii) Not-ordinarily resident (iii) Non-resident.

Ans 2.

Basic Tax Rule for Residential Status:

• Ordinarily Resident (ROR): Taxable on global income (i.e., income earned and received anywhere).
• Not-Ordinarily Resident (RNOR): Taxable on income received or accrued in India or business controlled from India.
• Non-Resident (NR): Taxable only on income received or accrued in India.

 

 

Q3. Mr. A was an employee of X Ltd. At the time of leaving X Ltd. He was paid Rs. 350,000 as a leave salary, out of which Rs. 77,000 were exempted u/s 10 (10AA).

After some time, he joined Y Ltd. He received Rs. 4,12,200 as leave salary at the time of his retirement on 31.12.2024. Compute taxable leave salary by considering the below information:

1. Salary from 1.3.2024 to 31.7.2024 Rs.22,600
2. Salary from 1.8.2024 to 31.12.2024 Rs.22,900
3. Duration of service 14 years
4. Leave entitlement per year is 45 days.
5. Leave availed during service is 90 days.
6. Leave credit at retirement for 18 months.

Ans 3.

Leave Salary Exemption under Section 10(10AA)(ii)

Since Mr. A is a non-government employee, the exemption under Section 10(10AA)(ii) is based on the least of the following four amounts:

1. Actual leave encashment received at retirement = ₹4,12,200
2. Maximum limit of exemption under the Act = ₹3,00,000 (as per Income Tax rules for non-govt. employees)
3. 10 months’ average salary before retirement To calculate average salary:

• • Salary from March to July 2024 = ₹22,600
  • Salary from August to December 2024 = ₹22,900
  • Total salary = (₹22,600 × 5) + (₹22,900 × 5) = ₹1,13,000 + ₹1,14,500 =

 

 

 

Set – 2

 

Q4. Explain the deductions that are “Expressly allowed” in computing the income from business under the Indian Income Tax Act, 1961.

Ans 4.

Introduction to Expressly Allowed Deductions

Under the Indian Income Tax Act, 1961, while computing income from business or profession, certain deductions are specifically permitted. These are known as “expressly allowed deductions” and are listed mainly under Sections 30 to 37 of the Act. These provisions ensure that taxpayers can deduct legitimate business-related expenses from their gross income, resulting in a more accurate measure of net taxable income. These deductions must be real, business-related, and supported by proper documentation.

Deductions Relating to Rent, Rates, and Taxes – Section 30

Section 30 deals with deductions for rent, rates, taxes, and repairs for premises used for business

 

 

Q5. Mr. Ravi Gupta provides the following information:

He built a house in 2001-02 at the cost of Rs. 2 lakhs for self-residence. On 1st August 2023, he sold his house for Rs. 15,00,000 and purchased a new flat on 1st January 2024 for Rs. 5,00,000. Stamp fee paid Rs. 50,000 for registration. He paid 2% brokerage on the sales and purchase of the property. Compute capital gains. If the new flat is of Rs. 10 Lakhs, how much capital gains shall be taxed?

Ans 5.

Basic Information

• Original Purchase Year: 2001–02
• Cost of Acquisition: ₹2,00,000
• Date of Sale: 1st August 2023 (FY 2023–24)
• Sale Price: ₹15,00,000
• New Property Purchased on: 1st January 2024
• New Property Value (Case 1): ₹5,00,000

 

.

Q6. Mr. Rathi provides the following information relevant for the assessment year 2024-25:

	Income	Losses
Taxable income from salary	2,42,000	–
Income and loss from house property:
House A	1,15,000	–
House B	–	3,30,000
Profit and Loss from Business:
Business A	2,28,000	–
Business B	–	10,000
Business C (speculative)	11,000	–
Business D (speculative)	–	23,000
Capital Gains and Losses:
Short–term capital gains	6,000	–
Short–term capital loss	–	28,000
Long–term capital gains	12,500	–
Income and loss from other sources:
Income from card games	13,000	–
Loss from card games	–	7,010
Loss on maintenance of horse race	–	6,000
Interest on securities	4,000	–

 

Compute the gross total income of Mr. Rathi for the assessment year 2024-25.

Ans 6.

To compute the Gross Total Income (GTI) of Mr. Rathi for Assessment Year 2024–25, we must:

1. Group the income and losses under respective heads.
2. Adjust permissible intra-head and inter-head losses as per Income Tax Act, 1961 rules.
3. Exclude losses that cannot be set off against other incomes.
4. Compute the final Gross Total Income after set-off.

Step 1: Classification of Income and Losses

Head of Income	Income (₹)	Loss (₹)
Salary	2,42,000	–