1 Basic and Tax Calculation

1. Income Chargeable at Special rate under both schemes

Income Rates
STCG referred to in sec 111A (Securities) 15% / 20% w.e.f. 23/7/24
LTCG referred to in sec 112 20% / 12.5% w.e.f. 23/7/24
LTCG u/s 112A Beyond ₹1.25 Lakh w.e.f. 23/7/24 10% / 12.5% w.e.f. 23/7/24
Question :
Find out the tax liability in the cases given below for the AY 2025-26 [these tax payers do not
want to opt for the alternative tax regime u/s 115BAC]. (Assuming transfer is after 23/07/24)
Taxpayer Dividend ₹ Capital gain under section Other Income ₹ Total ₹
111A 112 112A
Y (26 years) - 8,00,000 2,00,000 14,00,000 1,56,00,000 1,80,00,000
resident

2. Tax rate for Foreign company

Income Tax rate
Upto ₹1cr TI x 35% + 4% HEC
₹ 1cr - 10cr TI x 35% + 2% Surcharge + 4% HEC
Above ₹ 10cr TI x 35% + 5% Surcharge + 4% HEC

3. Sec 115BAC Tax Incentive for Individual & HUF

Total Income Rate (%) Shortcut(₹)
Upto ₹3,00,000 Nil -
₹ 3L to 7L 5% 20,000
₹ 7L to 10L 10% 30,000
₹ 10L to 12L 15% 30,000
₹ 12L to 15L 20% 60,000
Above ₹ 15L 30% -
Question :
Mr. Agarwal, aged 40 years and a resident in India, has a total income of 6,50,00,000, comprising
long term capital gain taxable @20% u/s 112 of 55,00,000, short term capital gain taxable @15%
u/s 111A of 65,00,000 and other income of ₹5,30,00,000. Compute his tax liability for A.Y. 2025-26
under the default tax regime. (Assuming transfer is before 23/07/24)

4. Tax Rate for AOP/BOI under default scheme 115BAC(1A)

Net Income Range Tax rate
Upto ₹ 3,00,000 Nil
From ₹ 3,00,001 to ₹ 7,00,000 5%
From ₹ 7,00,001 to ₹ 10,00,000 10%
From ₹ 10,00,001 to ₹ 12,00,000 15%
From ₹12,00,001 to ₹ 15,00,000 20%
Above ₹ 15,00,000 30%

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 2 Income from House Property
# As Per FA 2024 Income from letting Residential House will be HP not PGBP.

3 Income from salary

Deduction u/s 16
# U/s 115BAC (default tax regime) standard deduction u/s 16(ia) will be :
a) Amount of salary; or
b) ₹ 75,000 whichever is lower. [FA 2024]

4 Income from Other Sources

1. Family Pension
If assessee opts for Sec 115BAC, Deduction of ₹25,000 in respect of family pension is available.
w.e.f 1/4/2025

2. Sec 56(2)(viib) Shares issued at premium

The Provision of this section is not applicable after 1/4/24 [FA 2024]

3. Deemed Dividend
Dividends covered u/s 2(22)(a-f) are not actually dividends as per companies act but Income
Tax Consider such payment as Dividends.

4. Sec 2(22)(F) Amount Received on Buy Back w.e.f. 1/10/2024

# Buy back of shares would be treated as deemed dividend in the hands of shareholder.
[W.e.f. 1/10/2024] [FA 2024]
# No Deduction shall be Allowed from Deemed Income u/s 2(22)(f).

5. Sec 57 Deductions
In the case of dividends or interest on securities, any reasonable sum paid by way of commission
or remuneration to a banker or any other person for the purpose of realising such dividend or
interest on behalf of the assessee. No Deduction shall be allowed from Dividend Income
u/s 2(22)(f). [FA 2024]

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 5 Capital Gains
1. Reclassification of Short term & Long Term capital assets
w.e.f. 23/7/2024
Short Term Long Term
Listed Shares (Listed/Unlisted 12 m or Less Listed Shares (Listed/Unlisted Units Exceeding 12 m
Units UTI or Units of Equity UTI or Units of Equity oriented
oriented Fund or Zero Coupon Bond) Fund or Zero Coupon Bond)
All unlisted financial and non- 24 m or Less All unlisted financial and non- Exceeding 24 m
financial assets (Gold/ Immovable financial assets
Property)

2. Sec 50AA Computation of capital gains in case of market linked

debenture
1. Where a unit of a Specified Mutual Fund acquired on or after 1/4/2023 or a Market Linked
Debenture; or
2. Is an unlisted bond or an unlisted debenture which is transferred or redeemed or matures on or
after 23/7/2024
Computation of Capital gains
Particulars Amount
FVC = Amount received/redemption Value xxx
(-) Expenses on Transfer (xxx)
Net Consideration xxx
(-) COA of Debenture or Unit (xxx)
STCG (Always) xxx

3. Indexed cost of acquisition & indexed Improvement (2nd Proviso

to sec 48)
# W.e.f 23/7/2024 indexation benefit is not applicable [FA 2024]

An assessee has an option to take the benefit of indexation arising on land & building or
both u/s 112, if :
1. Transferor is Resident I/HUF.
2. LTCG arises on transfer of Land, Building or both (may be residential/commercial/property used
for any other purpose).
3. The above asset was acquired prior to 23/7/2024
4. The above asset is transferred on or after 23/7/2024.
If above conditions are satisfied, the assessee has an option to pay tax under old or new regime
(WHICHEVER IS MORE BENEFICIAL TO HIM) as follows :

OPTION 1 : Pay tax @ 12.5% (Without Indexation).

OPTION 2 : Pay Tax @ 20% (With Indexation).

Note : The above benefit to Resident I/HUF is to be given only while computing Tax on LTCG
u/s 112 [Not while computing Capital gain]

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 Simply,
> While calculating Capital Gains solve all problems without giving indexation and write a note
that while paying tax option is available,
> Now While calculating Tax liability on such LTCG assessee has an option to pay tax :
a) @ 20% (with indexation) or;
b) @ 12.5% (without indexation)

4. Cost Inflation Index

Cost inflation for FY 2024-25 is 363.

5. Sec 10(34A) Buyback

Any income arising to shareholder, on account of buy back of shares by the company as per 115QA
w.e.f. 1/10/24 SH shall be liable to Tax.

6. Sec 112A Tax on long-term capital gains in certain cases

1. Sec 112A(1) : Where assessee transfer of a LTCA being :
a) An equity share in a company (Listed)
b) Unit of an equity oriented fund or
c) Unit of a business trust

2. STT has been paid as under :

a) On equity share : Both on acquisition and transfer of such share; or
b) On unit : The time of transfer of such capital asset.

3. If sec 112A is opted then deduction u/c VI-A and rebate u/s 87A is not available further
Indexation is not available. (Sec 112 (4/5/6))

Sec 112A(2) Conditions Given Above

Satisfied Not Satisfied

LTCG shall be taxable beyond ₹1,25,000

LTCG shall be taxable 20% (before 23/7/2024)
10% (before 23/7/2024)/ 12.50%
12.50% (after 23/7/2024) [FA 2024] u/s 112
(after 23/7/2024) u/s 112A [FA 2024]
# For Unlisted Shares : w.r.e.f 1/4/2018.
In a case where the capital asset is an equity share in a company which is :
AA) Not listed on RSE as on 31/1/2018 or which became the property of the assessee in
consideration of share which is not listed on such exchange as on the 31/1/2018 by way of
transaction not regarded as transfer u/s 47, but listed on such exchange subsequent to the
date of transfer (where such transfer is in respect of sale of unlisted equity shares under
an offer for sale to the public included in an IPO). [FA 2024]

7. Sec 47 Transaction not regarded as transfer

Sec 47(iii) : Now w.e.f. 1/4/2025 : Any transfer of a capital asset by an individual or a Hindu
undivided family, under a gift or will or an irrevocable trust. If a capital asset is transfered by a
person other than an I/HUF by gift it will be chargeable to Capital Gain tax. [FA 2024]

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 8. Sec 111A STCG on sale of Securities
Sale of Following Assets :
1. An equity share in a company; or
2. A Unit of Business trust; or
3. A unit of Equity oriented Fund.

Conditions :
1. Securities must be sold after 01.10.2004
2. Such transaction should be chargeable to STT :
> However the STCG arising from transaction undertaken in foreign currency on RSE-IFSC
would be taxable at Concessional rate of 15% (before 23/7/2024)/ 20% (after 23/7/2024)
[FA 2024] even though STT is not paid on such transaction.
> STCG arising on transfer of listed equity shares, units of equity-oriented fund and unit of
business trust - 15% (before 23/7/2024)/ 20% (after 23/7/2024) [FA 2024] if STT has
been paid on such sale.

Tax rate if Conditions are satisfied : If all the above are satisfied then Normal Income-Normal
Slab Rate STCG u/s 111A - 15% (before 23/7/2024)/ 20% (after 23/7/2024) [FA 2024]

9. Sec 112 LTCG on sale of Capital Assets

For I/ HUF (Resident) Transfer before 23/7/2024 20%
Transfer on or after 23/7/2024 12.50%

Question :
Mr. Shiva purchased a house property on February 15, 1979 for ₹ 3,24,000. In addition, he has
also paid SDV @10% on the stamp duty value of ₹ 3,50,000.

In April, 2008, Mr. Shiva entered into an agreement with Mr. Mohan for sale of such property for
₹ 14,35,000 and received an amount of ₹ 1,11,000 as advance. However, the sale consideration did
not materialize and Mr. Shiva forfeited the advance. In May 2015, he again entered into an
agreement for sale of said house for ₹ 20,25,000 to Ms. Deepshikha and received ₹ 1,51,000 as
advance. However, as Ms. Deepshikha did not pay the balance amount, Mr. Shiva forfeited the
advance. In August, 2015, Mr. Shiva constructed the first floor by incurring a cost of ₹ 3,90,000.

On 15.11.2024, Mr. Shiva entered into an agreement with Mr. Manish for sale of such house for
₹ 30,50,000 and received an amount of ₹ 1,50,000 as advance through an account payee cheque.
Mr. Manish paid the balance entire sum and Mr. Shiva transferred the house to Mr. Manish on
20.02.2025. Mr. Shiva has paid the brokerage @1% of sale consideration to the broker.

On 1.04.2001, FMV of the house property was₹ 11,85,000 and SDV was ₹ 10,70,000. Further, the
Valuation as per Stamp duty Authority of such house on 15.11.2024 was ₹ 39,00,000 and on
20.02.2025 was ₹ 41,00,000.

Compute the capital gains in the hands of Mr. Shiva for AY 2025-26. Also compute the tax
liability u/s 112, assuming that the basic exemption limit has been full exhausted against other
income.

CII for FY 2001-02: 100; FY 2008-09: 137; FY 2015-16: 254; FY 2024-25: 363

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 6 Profits & Gains from Business/ Profession

# Income from Letting out of Residential House Property (Not Commercial) or part of the house
shall be taxable in HP not PGBP. [FA 2024]

# Following Expenses are not allowed Deduction :

Settlement of proceedings initiated in relation to contravention under any law as may be
notified by the CG. [FA 2024]

Sec 40(b) Remuneration

Maximum Permissible Remuneration = Lower of Actual Remuneration & Maximum Limit
(Based on Book Profit).

Book Profit Limit

On the First ₹6,00,000 [FA 2024] of the Book ₹3,00,000 [FA 2024] or at the rate of 90%
Profit or in case of a loss. of Book Profits, whichever is higher.
On the balance of book profits At the rate of 60% of book profits.

Question :
Rao & Jain, a partnership firm consisting of two partners, reports a net profit of ₹ 17,00,000
before deduction of the following items :
1) Salary of ₹ 40,000 each per month payable to two working partners of the firm (as authorized
by the deed of partnership).
2) Depreciation on plant and machinery u/s 32 (computed) ₹ 1,50,000.
3) Interest on capital at 15% per annum (as per the deed of partnership). The amount of capital
eligible for interest ₹ 5,00,000.

Compute :
(i) Book-profit of the firm under section 40(b) of the Income-tax Act, 1961.
(ii) Allowable working partner salary for the AY 2025-26 as per section 40(b).

7 Deductions
1. Sec 80CCD Contribution to pension scheme of CG or other employer
Sec 80CCD[2] ER’s Contribution Employer contribution is first taxable under the head salary
& then he [employee] gets deduction u/s 80CCD[2] lower of :
a) Employers contribution;
b) 14% (Central Govt) or (State Govt)/ 10% [FA 2024] of salary (Others)

2. Sec 80G Donations

Donation qualifying for 100% deduction, without any qualifying limit : The National Sports
Development [FA 2024] Fund set up by the Central Government

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 8 Return of Income

1. Sec 139(9) Defective Return

# Where ROI is submitted as per order u/s 119(2) this return shall be deemed to be ROI u/s 139.

2. Sec 139AA Aadhar Number

If Don’t Possesses aadhar : Where the person does not possess the Aadhar Number, the
Enrollment ID of Aadhar application shall be quoted in the application for PAN/filing. However the
requirements of quoting enrolment ID has been removed while making PAN Application or Filing
ROI furnished on or after 1/10/2024. Every person who has been allotted PAN on the basis of
Enrolment ID of Aadhar application form filed prior to the 1/10/2024, shall intimate his Aadhar
number to such authority on or before a date notified by CG [FA 2024]

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 9 Tax Deducted & Collected at Source
1. Sec 197 Certificate for deduction at lower rate
# Certificate for lower deduction can also be issued for sec 194Q w.e.f. 1/10/2024. [FA 2024]

2. Sec 194G TDS on Commission on sale of Lottery Tickets etc

Rate : 5% (before 1/10/2024), 2% (after 1/10/2024) [FA 2024]

3. Sec 194 Dividends

Time of Deduction : If dividend (Including Deemed Dividend u/s 2(22)(f)) paid exceed
₹5,000 p.a.

4. Sec 194C TDS on Payments to Contract/Subcontract/Works Contract

Contract Include subcontract & Works Contract : Work Contract shall include
W.e.f 1/10/2024 : New definition
a) Advertising;
b) Broadcasting and telecasting
c) Carriage of goods or passengers by any mode other than by railways;
d) Catering;
e) Manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from such customer or its associate, being a person
placed similarly in relation to such customer as is the person placed in relation to the assessee
under the provisions contained in clause (b) of sub-sec(2) of sec 40A.

# But does not include :

a) Manufacturing or supplying a product according to the requirement or specification of a
customer by using material purchased from a person, other than such customer or associate
of such customer; or
b) Any sum covered u/s 194J.

5. Sec 194H TDS on Commission or Brokerage

Rate : 5% (before 1/10/2024), 2% (after 1/10/2024)

6. Sec 194IA TDS on Payment on transfer of certain Immovable

property other than agricultural land
# No TDS shall be made if Consideration and SDV is less than 50L.
However where there is more than one transferor or transferee in respect of any immovable
property, then the consideration shall be the aggregate of the amounts paid or payable by all
the transferee to the transferor or all the transferors for transfer of such immovable property.
w.e.f 1/10/2024

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 7. Sec 194IB TDS on Rent by certain Individuals/HUF
Rate : 5% (before 1/10/2024), 2% (after 1/10/2024)
Question :
Mr. X, a salaried individual, pays rent of ₹ 55,000 per month to Mr. Y from June, 2024. Is he
required to deduct tax at source? If so, when is he required to deduct tax? Also, compute the
amount of tax to be deducted at source. Would your answer change if Mr. X vacated the premises
on 31st Dec, 2024? Also, what would be your answer if Mr. Y does not provide his PAN to Mr. X?

8. Sec 194M TDS on Payment by individuals/HUF (Personal Payments)

Rate : 5% (before 1/10/2024), 2% (after 1/10/2024)

9. Sec 193 TDS on Interest on securities

Limit :
w.e.f 1/10/2024 :
Local Authority or : If payment exceeds ₹10,000 on 8% Savings (Taxable) Bonds,
2003/ 7.75% savings (Taxable) Bonds’18 or Floating Rate Savings Bonds, 2020
(Taxable) or any other security of CG or SG may by notification specify [FA 2024]

10. Sec 194DA TDS on Maturity Proceeds of LIP incl Bonus

Rate : 5% (before 1/10/2024), 2% (after 1/10/2024) [Amount received - Premium Paid]

11. Sec 192 TDS on Salary

W.e.f 1/10/2024 :
Where an assessee who receives “Salaries” has, in addition :
i) Any other Head of Income (not being a loss other than HP loss)
ii) Any TDS/TCS tax deducted or collected he may send to Payer the particulars of : Such
other income or TDS/TCS or Loss from HP and thereupon the payer shall take into account
the particulars for the purposes of making TDS. The above adjustment shall not be done if it
has effect of reducing TDS (except HP Loss) below the amount that would be so deductible
had other provisions had not been taken into account. [FA 2024]

12. Sec 206C(1F) TCS on Motor Vehicle

W.e.f 1/1/2025 New meaning :
Every person, being a seller, who receives any amount as consideration for sale of :
i) A motor vehicle; or
ii) Any other goods, as may be specified by CG of the value exceeding 10 lakh rupees, shall, at the
time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale
consideration as income-tax. [FA 2024]

Sec 206C(9) Certificate of Lower collection or no Collection : Lower collection certificate can
be issued by AO to “seller” u/s 206C(1)/(1C)/(IH). [FA 2024]

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