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GNDU Question Paper-2025
B.Com 5
th
Sem
DIRECT TAX LAWS
Time Allowed: Three Hours Max. Marks: 100
Note: Attempt Five questions in all, selecting at least One question from each section. The
Fifth question may be attempted from any section. All questions carry equal marks.
SECTION-A
1. What is Income tax? Discuss the evolution of Income Tax Law in India. Also describe the
basis & procedure of charging Income Tax. !
(98% match with prediction papers)
2. Following are the particulars of incomes of Mr. Darshan for the Previous Year ending on
31st March, 2025:
(a) Income from a business in India Rs. 40.000. This business is controlled from America.
(b) Royalty received in India Rs. 24,000.
(c) Income from a business in Sri Lanka Rs. 25,000 of which Rs. 15,000 were received in
India. The business is controlled from India.
(d) Income from sale of house property in Gwalior Rs. 30,000.
(e) Interest received from a non-resident Rs. 5,000 against a loan given to him to run a
business in India.
(i) Royalty received outside India from A, a resident, for technical services given to run a
business outside India Rs. 20,000.
(g) Income from House Property in America Rs. 10,000 which was deposited in a bank in
America. Out of this Rs. 4,000 were remitted to India.
(h) Income from Investment in Paris Rs. 10,000.
2. Compute the Gross Total Income of Mr. Darshan for the Assessment Year 2025-26, if he
is (a) Ordinarily resident, (b) Not-ordinarily resident and (c) Non-resident in India.
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(100% match with prediction papers)
SECTION-B
3. Write notes on the following:
(a) (Gratuity
(b) Leave Encashment
(c) Amount received from Provident Fund
(d) Commutation of Pension.
(85% match with prediction papers)
4. Mr. Harish Mishra is an Income Tax Officer at Indore. He owns a house at Indore which
was constructed on 1st February, 2024 and was occupied by him for his own residence. He
took a loan of Rs. 70,000 on 1st August, 2022 ( 12% p.a. interest for the construction of
this house. Nothing has been repaid out of this loan.
Other information in respect of the house is as under:
Municipal Valuation Rs. 24,000
Municipal Tax (10% of the above)
Repairs Rs. 7,000
Interest on Loan Rs. 8,400
The municipal tax of the house in Indore is unpaid.
Mr. Harish Mishra was transferred to Pune on Ist October, 2024 where he resides in a
house taken on rent of Rs. 5000 per month and his house at Indore was let out on 1st
December on rent of Rs. 2.000 per month.
Calculate Mr. Harish Mishra's taxable income from House Property for the Assessment
Year 2025-26.
(100% match with prediction papers)
SECTION-C
5. Shri Hari Mohan purchased a house in Bhopal in 1999 for Rs. 1,20,000 and added two
rooms in the house at a cost of Rs. 50,000 in 2000. He added two bathrooms at a cost of
Rs. 54,500 in May 2003. On 01-01-2023 Shri Hari Mohan agreed to sell the house to Mr.
Anil who however failed to honour the promise, as a result. the advance money of Rs.
1,00.000 was forfeited by Shri Hari Mohan. Shri Hari Mohan sells the house on Ist July,
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2024 for Rs. 30.00.000 and had incurred Rs. 25.000 as advertisement expenses: Rs.
4.75.000 as registration fees and selling commission.
Shri Hari Mohan also paid Rs. 5.00.000 to the tenant for vacating the house property.
Compute capital gains. if the fair market value of the house on 1st April, 2001 was Rs.
3.00.000. The cost inflation indices in 2001-02. 2003-04 and 2024-25 were 100. 109 and
363 respectively.
(100% match with prediction papers)
6. State the method of computing Income under the head Income from Other Sources.
(100% match with prediction papers)
SECTION-D
7. An individual (aged 82 years) has the following sources of income for the Assessment
Year 2025-26:
Gross Income from Salaries
(pension) Rs. 1,30,000
Income from House Property
(computed) Rs. 34,000
Income from Business Rs. 5.14,000
Interest on deposit in bank Rs. 48,000
He has paid life insurance premium of Rs. 8.000 and donated a sum of Rs. 5.000 to an
approved charitable institution by cheque. Compute the tax liability of the assessee for
the Assessment Year 2025-26.
(70% match with prediction papers)
8. State the law relating to deduction of Tax at source.
(100% match with prediction papers)
Conclusion : Approx 87-90% Comes From Our (Prediction Paper)
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GNDU Answer Paper-2025
B.Com 5
th
Sem
DIRECT TAX LAWS
Time Allowed: Three Hours Max. Marks: 100
Note: Attempt Five questions in all, selecting at least One question from each section. The
Fifth question may be attempted from any section. All questions carry equal marks.
SECTION-A
1. What is Income tax? Discuss the evolution of Income Tax Law in India. Also describe the
basis & procedure of charging Income Tax. !
Ans: Income Tax is one of the most important sources of revenue for the Government. In
simple words, when a person earns income above the applicable taxable limit, the
Government may require that person to pay a part of that income as tax. The money
collected is used for public purposes such as roads, education, defence, healthcare,
administration and other government activities.
Important current-law note: For your exam question, the historical discussion often refers
to the Income-tax Act, 1961. However, as of 1 April 2026, the Income-tax Act, 2025 has
replaced the 1961 Act for tax years beginning from 1 April 2026. The 1961 Act continues to
govern earlier tax years and related proceedings.
1. What is Income Tax?
Income Tax is a direct tax imposed by the Central Government on the income earned by a
person during a particular period.
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It is called a direct tax because the person on whom the tax is imposed generally bears the
burden himself. For example, if Rahul earns taxable income from his salary, he is responsible
for paying the applicable income tax.
Simple Example
Suppose Rahul earns ₹8 lakh during a year.
His taxable income is calculated after considering applicable deductions, exemptions and
other provisions. The tax is then calculated according to the applicable tax regime and rates.
So, we can understand it as:
Income earned → Calculate taxable income → Apply tax rates → Tax payable
2. Evolution of Income Tax Law in India
The Indian income-tax system did not develop in one day. It gradually evolved through
different laws and reforms.
Important stages
1860 First Income Tax
Income tax was first introduced in India in 1860 by James Wilson. It was introduced mainly
to increase government revenue after the financial difficulties following the Revolt of 1857.
1886 Income Tax Act
A more systematic income-tax law was introduced in 1886. It provided a more organised
framework for taxing income.
1918 Income Tax Act, 1918
The 1918 Act introduced further changes and attempted to improve the taxation system.
1922 Income Tax Act, 1922
The Income Tax Act, 1922 was an important development. It established a more organised
structure for income-tax administration and assessment.
1961 Income Tax Act, 1961
After independence, the Government introduced the Income Tax Act, 1961. It came into
force on 1 April 1962 and became the principal law governing income tax in India for more
than six decades.
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Over the years, the 1961 Act was amended many times to accommodate changes in the
economy and taxation policy.
2025 Income Tax Act, 2025
To simplify and modernise the law, the Income Tax Act, 2025 was enacted. It replaced the
1961 Act from 1 April 2026. The new law reorganises provisions and replaces the older
terminology of "previous year" and "assessment year" with the simpler concept of "tax
year."
Evolution at a glance
1860
↓
First Income Tax introduced
↓
1886
↓
Income Tax Act
↓
1918
↓
Income Tax Act, 1918
↓
1922
↓
Income Tax Act, 1922
↓
1961
↓
Income Tax Act, 1961
↓
2025
↓
Income Tax Act, 2025
↓
1 April 2026
New Act becomes applicable
3. Basis of Charging Income Tax
The basis of charge means the basic rule that tells us on what income, for whom, and for
which period tax is charged.
Under the present Income Tax Act, 2025, income tax is charged on the total income of a
person for the tax year, at the rate or rates provided for that tax year by the relevant
Central legislation and subject to the provisions of the Act.
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To understand this easily, remember four things:
(a) Person
Income tax is charged on a person. The term can cover individuals as well as other taxable
entities recognised by the law.
(b) Income
The person must have taxable income. Income can come from different sources, such as:
Salary
Business or profession
House property
Capital gains
Other sources
(c) Tax Year
Under the Income Tax Act, 2025, tax year is a period of twelve months contained in a
financial year. It replaces the old concept of "previous year" for the new regime.
(d) Applicable Tax Rate
After determining taxable income, the applicable tax rate is applied according to the
relevant provisions.
4. Procedure of Charging Income Tax
Now imagine that the Government has to calculate the tax of a person. It cannot simply look
at the person's total money received and say, "Pay tax on everything." The law provides a
systematic procedure.
Step 1 Determine the Income
First, all relevant income earned by the taxpayer is identified.
For example:
Salary + Business Income + Rent + Capital Gains + Other taxable income
↓
Step 2 Classify the Income
Income is placed under the appropriate categories according to the applicable law.
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Step 3 Calculate Gross Total Income
The relevant incomes are combined after applying the applicable rules.
Step 4 Allow Applicable Deductions
Eligible deductions and exemptions are considered according to the applicable provisions
and regime.
Step 5 Calculate Total/Taxable Income
After making the permitted adjustments:
Gross Total Income Applicable deductions = Taxable/Total Income
Step 6 Apply Tax Rates
The applicable slab/rate is applied to the taxable income.
Step 7 Add Applicable Surcharge/Cess and Adjustments
Where applicable, surcharge, cess, relief, rebate, tax deducted at source (TDS), advance tax
and other relevant adjustments are considered.
Step 8 Find Final Tax Payable or Refund
Finally:
Tax liability TDS/Advance Tax/eligible credits = Tax payable or refund
Complete Diagram
INCOME EARNED
↓
Identify all taxable income
↓
Classify income as required
↓
Calculate Gross Total Income
↓
Less: Eligible deductions etc.
↓
TOTAL/TAXABLE INCOME
↓
Apply applicable tax rates
↓
Add/adjust applicable tax items
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↓
Less: TDS / Advance Tax etc.
↓
┌──────────────────────┐
│ Final Tax Payable │
│ OR │
│ Refund │
└──────────────────────┘
5. Previous Year and Assessment Year Old System
For examinations dealing specifically with the Income Tax Act, 1961, remember the old
terminology.
Previous Year
It was the year in which the income was earned.
Assessment Year
It was the year following the previous year in which the income was assessed and taxed.
For example:
Previous Year: 1 April 2025 31 March 2026
↓
Assessment Year: 2026 27
This terminology applied under the 1961 Act. Under the new 2025 Act, the terminology has
been simplified: the tax year corresponds broadly to the period in which income is earned,
and the separate "assessment year" concept has been discontinued.
6. Why is Income Tax Important?
Income tax is important because it provides revenue to the Government. This revenue helps
the Government finance:
Education
Healthcare
Defence
Roads and infrastructure
Public administration
Welfare schemes
Other public services
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Therefore, income tax is not simply an amount deducted from someone's income; it is an
important instrument for financing government activities and economic development.
󽇐 Easy Exam Revision
Remember the whole answer using this formula:
Income Tax = Direct Tax on Taxable Income
Evolution:
1860 → 1886 → 1918 → 1922 → 1961 → 2025
Basis of Charge:
Person + Income + Tax Year + Applicable Rate
Procedure:
Income → Classification → Gross Total Income → Deductions → Taxable Income → Tax
Rate → Adjustments → Tax Payable/Refund
Conclusion
Thus, Income Tax is a direct tax charged on taxable income according to the provisions of
income-tax law. India's income-tax system has developed gradually from the first tax
introduced in 1860 to the Income Tax Act, 1961 and, from 1 April 2026, the Income Tax Act,
2025. The basic idea remains simple: identify the taxpayer's taxable income, calculate the
income according to legal provisions, apply the applicable rate, adjust eligible
taxes/credits and determine the final tax payable or refund. The new Act aims to make the
system more logical and easier to understand while retaining the basic framework of taxing
income.
2. Following are the particulars of incomes of Mr. Darshan for the Previous Year ending on
31st March, 2025:
(a) Income from a business in India Rs. 40.000. This business is controlled from America.
(b) Royalty received in India Rs. 24,000.
(c) Income from a business in Sri Lanka Rs. 25,000 of which Rs. 15,000 were received in
India. The business is controlled from India.
(d) Income from sale of house property in Gwalior Rs. 30,000.
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(e) Interest received from a non-resident Rs. 5,000 against a loan given to him to run a
business in India.
(i) Royalty received outside India from A, a resident, for technical services given to run a
business outside India Rs. 20,000.
(g) Income from House Property in America Rs. 10,000 which was deposited in a bank in
America. Out of this Rs. 4,000 were remitted to India.
(h) Income from Investment in Paris Rs. 10,000.
2. Compute the Gross Total Income of Mr. Darshan for the Assessment Year 2025-26, if he
is (a) Ordinarily resident, (b) Not-ordinarily resident and (c) Non-resident in India.
Ans: 󷇮󷇭 The Basic Idea
Think of Mr. Darshan as having an income basket containing money earned in India and
outside India.
The Income-tax Act asks:
"Where did the income arise, where was it received, and where is the business
controlled?"
The answer changes depending on whether Darshan is:
1. ROR Resident and Ordinarily Resident
2. RNOR Resident but Not Ordinarily Resident
3. NR Non-Resident
The easiest diagram
MR. DARSHAN
│
┌──────────────┼──────────────┐
↓ ↓ ↓
ROR RNOR NR
Global income Indian income Indian income
taxable taxable taxable
+ certain + income
foreign received in
business India
income
A resident generally has a much wider tax scope than a non-resident. The Income Tax
Department also describes RNOR separately from ordinary residents and non-residents.
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1. What is ROR?
Resident and Ordinarily Resident (ROR) means, broadly:
Income from India + income from outside India = taxable in India.
So, for our question, we can use this shortcut:
ROR → Everything is taxable
Therefore, for ROR, almost every income mentioned in the question will be included.
2. What is RNOR?
Resident but Not Ordinarily Resident (RNOR) gets a middle treatment.
Indian income is taxable.
Foreign income is generally not taxable, except foreign income from:
a business controlled in India or a profession set up in India.
The Income Tax Department confirms the continuing distinction between ordinary resident
and not-ordinarily-resident status.
So remember:
RNOR → Indian income + foreign business income controlled from India
3. What is Non-Resident (NR)?
For a Non-Resident, India normally taxes:
Income received in India
Income accruing/arising in India
Certain income specifically deemed to accrue/arise in India
Foreign income which neither arises in India nor is received in India is generally outside the
Indian tax net.
NR → Mainly Indian income
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Now let's examine each income one by one
This is the most important part of the question.
(a) Business income in India ₹40,000
Business is in India but controlled from America.
The important point is where the business is located / where income arises, not merely
where it is controlled.
The business is in India.
Therefore:
Status
Taxable?
ROR
₹40,000
RNOR
₹40,000
NR
₹40,000
󷄧󼿒 Taxable for everyone.
(b) Royalty received in India ₹24,000
The question clearly says received in India.
Therefore, even if Mr. Darshan is a non-resident, receipt in India makes it taxable in India.
Status
Taxable?
ROR
₹24,000
RNOR
₹24,000
NR
₹24,000
󷄧󼿒 Taxable for everyone.
(c) Business income in Sri Lanka ₹25,000
This is the tricky one.
The business is in Sri Lanka, so normally this is foreign income.
But there is an important additional fact:
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Business is controlled from India.
Also:
₹15,000 was received in India.
For ROR
ROR is taxable on global income.
Therefore:
₹25,000 taxable.
For RNOR
Normally foreign income isn't taxable for RNOR.
But there is an exception:
Foreign income from a business controlled from India is taxable.
Therefore the entire ₹25,000 is taxable.
For NR
For NR, the income is foreign income, but ₹15,000 was received in India.
Therefore only the amount received in India is taxable:
₹15,000
So:
Status
Taxable amount
ROR
₹25,000
RNOR
₹25,000
NR
₹15,000
󽇐 Remember this trick
Sri Lanka Business = Foreign income
ROR → Entire ₹25,000
RNOR → Entire ₹25,000
because business controlled from India
NR → Only ₹15,000
because received in India
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(d) Income from sale of house property in Gwalior ₹30,000
Gwalior is in India.
Therefore, the income arises from property situated in India.
So it is taxable for all three statuses.
Status
Taxable?
ROR
₹30,000
RNOR
₹30,000
NR
₹30,000
󷄧󼿒 Taxable for everyone.
(e) Interest from a Non-Resident ₹5,000
This one looks confusing because the person paying the interest is a non-resident.
But look at the important part:
Loan was given to him to run a business in India.
The interest is connected with business carried on in India and is treated as income
arising/deemed to arise in India under the applicable rules.
Therefore:
Status
Taxable?
ROR
₹5,000
RNOR
₹5,000
NR
₹5,000
󷄧󼿒 Taxable for everyone.
(f) Royalty received outside India from A, a Resident ₹20,000
This is another tricky point.
A is a resident, but the question specifically says the technical services were provided:
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to run a business outside India.
For payments by a resident for technical services, the Act contains an exception where the
services are utilized for a business/profession carried on outside India.
Therefore, in this question, this ₹20,000 is not included in Indian taxable income.
Status
Taxable?
ROR
₹20,000
RNOR
₹0
NR
₹0
Waitthere is an important distinction here.
For ROR, global income is taxable, so the ₹20,000 foreign income is taxable for ROR.
Thus the correct treatment is:
Status
Taxable amount
ROR
₹20,000
RNOR
₹0
NR
₹0
This is a very good example of why ROR and RNOR cannot be treated the same way.
(g) House Property in America ₹10,000
The property is in America.
The income is also deposited in an American bank.
So this is foreign income.
ROR
Global income is taxable.
Therefore:
₹10,000 taxable.
RNOR
Foreign house-property income is not taxable merely because the person is RNOR.
Therefore:
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₹0
NR
Foreign income is normally outside the Indian tax scope.
Therefore:
₹0
But the question gives an extra detail:
₹4,000 was remitted to India.
󽁔󽁕󽁖 Remittance is not the same thing as receipt of income in India.
The income was already received/deposited in America. Later transferring ₹4,000 to India
does not convert the original foreign income into Indian income for an NR.
Therefore:
Status
Taxable amount
ROR
₹10,000
RNOR
₹0
NR
₹0
(h) Income from Investment in Paris ₹10,000
Paris = France = outside India.
Therefore this is foreign income.
ROR
Global income → taxable.
₹10,000
RNOR
Foreign investment income → generally not taxable.
₹0
NR
Foreign income → not taxable in India.
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₹0
󹵍󹵉󹵎󹵏󹵐 Final Computation of Gross Total Income
Now everything becomes easy.
Particulars
ROR (₹)
RNOR (₹)
NR (₹)
(a) Business in India
40,000
40,000
40,000
(b) Royalty received in India
24,000
24,000
24,000
(c) Business in Sri Lanka
25,000
25,000
15,000
(d) House property, Gwalior
30,000
30,000
30,000
(e) Interest from non-resident
5,000
5,000
5,000
(f) Royalty/technical service outside India
20,000
(g) House property, America
10,000
(h) Investment in Paris
10,000
Gross Total Income
₹1,64,000
₹1,24,000
₹1,14,000
󷄧󼿒 Final Answer
(a) If Mr. Darshan is Resident and Ordinarily Resident (ROR)
Gross Total Income = ₹1,64,000
(b) If Mr. Darshan is Resident but Not Ordinarily Resident (RNOR)
Gross Total Income = ₹1,24,000
(c) If Mr. Darshan is Non-Resident (NR)
Gross Total Income = ₹1,14,000
󼩏󼩐󼩑 Super-Easy Memory Trick
Before solving any question like this, make these three boxes
in your notebook:
┌──────────────────────────────────────┐
│ ROR │
│ India + Foreign = TAXABLE │
└──────────────────────────────────────┘
┌──────────────────────────────────────┐
│ RNOR │
│ India + foreign business controlled │
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│ from India = TAXABLE │
└──────────────────────────────────────┘
┌──────────────────────────────────────┐
│ NON-RESIDENT │
│ India income + income received │
│ in India = TAXABLE │
└──────────────────────────────────────┘
One-line formula:
ROR = Global income
RNOR = Indian income + specified foreign business income
NR = Indian income / income received in India
That is the entire concept behind this long-looking question. Once you identify India/foreign
+ receipt location + business control, the calculation becomes almost mechanical. The
Income Tax Department likewise treats foreign-source income as a distinct reporting
concept for residents, while the applicable rules for earlier years remain under the 1961 Act.
SECTION-B
3. Write notes on the following:
(a) (Gratuity
(b) Leave Encashment
(c) Amount received from Provident Fund
(d) Commutation of Pension.
Ans: (a) Gratuity
Gratuity is a lump-sum amount paid by an employer to an employee as a reward for long
and continuous service.
In simple words, when an employee works for an organisation for several years, the
employer may pay a certain amount to thank the employee for their service when they
retire, resign, or in certain other situations.
Example
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Suppose Rahul works in a company for many years. When he becomes eligible for gratuity
and leaves the organisation, the company pays him a lump sum amount. This amount is
called gratuity.
For eligible employees covered by the Payment of Gratuity Act, the commonly used formula
is:
Gratuity = Last drawn salary × 15/26 × Completed years of service
Here, salary generally means basic salary + dearness allowance for this calculation.
Easy way to remember
Long service → Employer gives lump-sum reward → Gratuity
(b) Leave Encashment
Employees are often entitled to different types of leave during their employment.
Sometimes, an employee does not use all the leave available to them.
Leave encashment means converting eligible unused leave into money.
For example, suppose an employee has accumulated eligible earned leave but is unable to
use it before retirement. The employer may pay money for those unused leave days,
depending on the applicable rules.
Example
Suppose Amit has 30 days of eligible unused leave when he retires. Instead of simply losing
those days, the employer calculates their monetary value and pays Amit an amount. This is
called leave encashment.
So remember:
Unused eligible leave → Converted into money → Leave encashment
Leave encashment can have different tax treatment depending on whether it is received
during employment or at retirement, and whether the employee is a government or non-
government employee.
(c) Amount Received from Provident Fund
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A Provident Fund (PF) is a retirement savings arrangement in which contributions are made
during employment. Usually, both the employee and employer contribute according to the
applicable PF rules.
The employee's contribution is deducted from salary and accumulated in the PF account
along with applicable interest.
Example
Suppose an employee contributes money to PF every month for many years. At retirement,
resignation, or another permitted event, the employee becomes entitled to receive the
accumulated amount according to the PF rules.
This amount may include:
Employee's contribution + Employer's contribution + Interest = PF amount received
However, the exact tax treatment depends on the type of PF and the circumstances.
Simple flow
Monthly contribution → PF account → Interest accumulates → Withdrawal/retirement →
Amount received
(d) Commutation of Pension
Commutation of pension means taking a part of the future pension as a lump-sum amount
instead of receiving that portion as monthly pension.
This sounds complicated, but the idea is actually simple.
Suppose a retired employee is entitled to a monthly pension of ₹20,000. Under the
applicable pension rules, the employee may be allowed to give up a certain portion of the
monthly pension and receive its value as a lump sum.
For example:
Original pension: ₹20,000 per month
Part commuted: ₹5,000 per month
Remaining pension: ₹15,000 per month
The employee receives a lump-sum amount calculated according to the applicable
commutation rules.
Easy diagram
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RETIREMENT
│
▼
Monthly Pension
₹20,000
│
┌────────┴────────┐
▼ ▼
Commuted portion Remaining portion
₹5,000 ₹15,000
│ │
▼ ▼
Lump-sum amount Monthly pension
received continues
The important point is that commutation is not an additional pension. It is a conversion of a
portion of the pension into a lump-sum payment.
4. Mr. Harish Mishra is an Income Tax Officer at Indore. He owns a house at Indore which
was constructed on 1st February, 2024 and was occupied by him for his own residence. He
took a loan of Rs. 70,000 on 1st August, 2022 ( 12% p.a. interest for the construction of
this house. Nothing has been repaid out of this loan.
Other information in respect of the house is as under:
Municipal Valuation Rs. 24,000
Municipal Tax (10% of the above)
Repairs Rs. 7,000
Interest on Loan Rs. 8,400
The municipal tax of the house in Indore is unpaid.
Mr. Harish Mishra was transferred to Pune on Ist October, 2024 where he resides in a
house taken on rent of Rs. 5000 per month and his house at Indore was let out on 1st
December on rent of Rs. 2.000 per month.
Calculate Mr. Harish Mishra's taxable income from House Property for the Assessment
Year 2025-26.
Ans: Mr. Harish Mishra owns a house in Indore.
Timeline
Loan taken House constructed Transfer House rented
1 Aug 2022 1 Feb 2024 1 Oct 2024 1 Dec 2024
│ │ │ │
▼ ▼ ▼ ▼
───────────────────────────────────────────────────────────────────────────
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Construction period Self-occupied Let out
(loan interest) FebSep DecMar
For Assessment Year 2025-26, we are considering the Previous Year 2024-25, i.e. 1 April
2024 to 31 March 2025.
The important point is that a house which is self-occupied for part of the year and let out
for another part is treated as let-out for the purpose of calculating income from house
property. However, actual rent is considered only for the period for which it was actually
rented.
So we should not separately calculate FebruarySeptember as self-occupied and December
March as let-out.
Step 1 Find the Gross Annual Value
We are given:
Municipal Value = ₹24,000
The house was rented from 1 December 2024 at:
₹2,000 per month
Therefore, actual rent received/receivable:
₹2,000 × 4 months = ₹8,000
But the important question is: Do we take ₹8,000 or ₹24,000 as annual value?
The house is treated as let-out for the whole year for this calculation. Therefore, we
compare the expected annual rent with actual rent.
Here, the municipal valuation is ₹24,000, and there is no separate fair-rent figure given.
Therefore, for this examination question, the expected rent is taken as:
₹24,000
Since the actual rent of ₹8,000 is lower, the annual value is taken as ₹24,000.
Gross Annual Value = ₹24,000
Step 2 Municipal Tax
Municipal tax is:
10% of ₹24,000
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= ₹24,000 × 10%
= ₹2,400
But the question specifically says:
"The municipal tax of the house in Indore is unpaid."
This is very important.
Municipal taxes are generally deductible only when they are actually paid by the owner.
The Income Tax Department's computation framework also distinguishes municipal-tax
deduction from cases where the relevant gross rent/annual value is zero.
Since Mr. Mishra has not paid the ₹2,400 municipal tax:
Municipal Tax Deduction = ₹0
So, we do not deduct ₹2,400.
Step 3 Standard Deduction for Repairs
The question gives:
Repairs = ₹7,000
A student may immediately think:
₹24,000 − ₹7,000
But that's not how house-property taxation works.
Under Section 24, instead of allowing the actual repair expenses separately, a standard
deduction of 30% of annual value is allowed for a let-out property. The official tax guidance
confirms the 30% standard deduction.
Therefore:
30% of ₹24,000
= ₹7,200
Standard Deduction = ₹7,200
Notice something interesting:
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Actual repairs = ₹7,000
Standard deduction = ₹7,200
We don't separately deduct the ₹7,000. The ₹7,200 standard deduction is used.
Step 4 Calculate Interest on Housing Loan
This is the most important and slightly tricky part.
Loan:
₹70,000
Rate:
12% per annum
Therefore annual interest:
₹70,000 × 12%
= ₹8,400
The question itself gives:
Interest on Loan = ₹8,400
So current-year interest = ₹8,400.
But there is another concept: Pre-construction period interest.
󼩏󼩐󼩑 What is pre-construction interest?
The loan was taken on:
1 August 2022
House was completed on:
1 February 2024
Therefore, interest relating to the period before completion is:
1 August 2022 to 31 January 2024
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That's 18 months.
Annual interest = ₹8,400.
18 months' interest:
₹8,400 × 18/12 = ₹12,600
This ₹12,600 is called pre-construction interest.
It is not deducted all at once. It is allowed in 5 equal annual instalments, beginning from the
year in which construction is completed. The deduction for interest on a qualifying
construction loan is recognized under Section 24(b).
Therefore:
₹12,600 ÷ 5 = ₹2,520
Pre-construction interest deduction = ₹2,520
So total interest deduction for this year becomes:
Current-year interest ₹8,400 + 1/5 pre-construction interest ₹2,520
= ₹10,920
Step 5 What about the ₹5,000 rent paid in Pune?
Mr. Mishra was transferred to Pune and paid:
₹5,000 × 6 months = ₹30,000
But this amount is not deducted from income from house property.
Why?
Because he is paying rent for the house in which he himself is living in Pune. It is not an
expense incurred for earning rent from his Indore property.
So, for this particular question:
Pune house rent = No deduction under House Property
It may become relevant under other provisions such as HRA, depending on his salary details,
but no such information is provided here.
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Step 6 Final Calculation
Now let's put everything together.
Amount (₹)
24,000
Nil
24,000
7,200
8,400
2,520
5,880
Therefore:
󷘹󷘴󷘵󷘶󷘷󷘸 Taxable Income from House Property = ₹5,880
󽇐 Remember these 5 exam tricks
1. Self-occupied + let-out during the same year
Don't calculate them as two separate properties. The property is generally treated as let-out
for the year, with actual rent considered for the actual rental period.
2. Municipal tax unpaid
No deduction.
If it had actually been paid, ₹2,400 could have been deducted.
3. Repairs of ₹7,000
Don't deduct the actual ₹7,000.
Instead:
30% × Annual Value = ₹7,200
4. Pre-construction interest
Loan taken 1 August 2022 and construction completed 1 February 2024.
Pre-construction interest = ₹12,600.
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Divide by 5:
₹12,600 ÷ 5 = ₹2,520
5. Pune rent
₹5,000 per month paid for his rented accommodation in Pune does not reduce the income
from the Indore house property.
󼫹󼫺 One-line formula to remember
Gross Annual Value ₹24,000
↓
Less: Municipal tax actually paid Nil
↓
Net Annual Value ₹24,000
↓
Less: 30% standard deduction ₹7,200
↓
Less: Current interest ₹8,400
↓
Less: 1/5 pre-construction interest ₹2,520
↓
────────────────────────────────────────────────
Taxable Income from House Property ₹5,880
Final Answer: ₹5,880
Exam tip: The three numbers you should remember from this problem are ₹24,000 (Annual
Value), ₹7,200 (30% deduction), and ₹10,920 (total interest deduction). Their final result
gives ₹5,880.
SECTION-C
5. Shri Hari Mohan purchased a house in Bhopal in 1999 for Rs. 1,20,000 and added two
rooms in the house at a cost of Rs. 50,000 in 2000. He added two bathrooms at a cost of
Rs. 54,500 in May 2003. On 01-01-2023 Shri Hari Mohan agreed to sell the house to Mr.
Anil who however failed to honour the promise, as a result. the advance money of Rs.
1,00.000 was forfeited by Shri Hari Mohan. Shri Hari Mohan sells the house on Ist July,
2024 for Rs. 30.00.000 and had incurred Rs. 25.000 as advertisement expenses: Rs.
4.75.000 as registration fees and selling commission.
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Shri Hari Mohan also paid Rs. 5.00.000 to the tenant for vacating the house property.
Compute capital gains. if the fair market value of the house on 1st April, 2001 was Rs.
3.00.000. The cost inflation indices in 2001-02. 2003-04 and 2024-25 were 100. 109 and
363 respectively.
Ans; Shri Hari Mohan bought a house in 1999 for ₹1,20,000.
Then:
Added 2 rooms in 2000 → ₹50,000
Added 2 bathrooms in May 2003 → ₹54,500
Agreed to sell the house in January 2023
Buyer gave ₹1,00,000 advance
Buyer failed to complete the deal → advance was forfeited
Finally, house was sold on 1 July 2024 for ₹30,00,000
Expenses:
o Advertisement = ₹25,000
o Registration fees + selling commission = ₹4,75,000
o Payment to tenant for vacating = ₹5,00,000
FMV of house on 1 April 2001 = ₹3,00,000
󹵙󹵚󹵛󹵜 The complete concept in one diagram
1999 2000 2003
│ │ │
Bought house 2 rooms added 2 bathrooms added
₹1,20,000 ₹50,000 ₹54,500
│ │ │
└─────────────────────┴────────────────────┘
│
1 April 2001
│
FMV = ₹3,00,000
│
▼
1 January 2023
│
Advance ₹1,00,000
│
Forfeited
│
▼
1 July 2024
│
Sale = ₹30,00,000
│
▼
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CAPITAL GAIN
Step 1: Is it Long-Term or Short-Term?
The house was purchased in 1999 and sold in 2024.
So Shri Hari Mohan held it for approximately 25 years.
Therefore:
󷄧󼿒 It is a Long-Term Capital Asset.
Hence, we calculate Long-Term Capital Gain (LTCG).
Step 2: What will be the Cost of Acquisition?
Here comes the first important point.
The actual purchase price was:
₹1,20,000
But the property was acquired before 1 April 2001.
For such an old asset, the cost of acquisition can be taken using the Fair Market Value as on
1 April 2001, subject to the applicable rules.
Given:
FMV on 1 April 2001 = ₹3,00,000
Therefore, we take:
Cost of Acquisition = ₹3,00,000
Not ₹1,20,000.
Step 3: What about the ₹50,000 spent on rooms in 2000?
This is a very common exam trap.
The rooms were constructed in:
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2000
That means the improvement was made before 1 April 2001.
For the indexed computation based on the 1 April 2001 FMV, this pre-1 April 2001
improvement is effectively reflected in the FMV of ₹3,00,000.
Therefore, we do not separately add ₹50,000.
So:
Cost of Acquisition = ₹3,00,000
Step 4: What about the bathrooms costing ₹54,500?
This is different.
The bathrooms were constructed in:
May 2003
This is after 1 April 2001.
Therefore, ₹54,500 is a separate Cost of Improvement and it must be indexed.
The question gives:
Financial Year
CII
2001-02
100
2003-04
109
2024-25
363
For the improvement made in 2003-04:
Therefore:
Indexed Cost of Improvement = ₹1,81,500
Step 5: What happens to the ₹1,00,000 forfeited advance?
This is another very important concept.
In January 2023, Anil agreed to purchase the house and paid ₹1,00,000 as advance.
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But he failed to honour the agreement.
Therefore, Hari Mohan forfeited the ₹1,00,000.
Now, students often remember the old rule:
"Forfeited advance is deducted from cost of acquisition."
But that is not applicable here.
The law was changed for advances forfeited on or after 1 April 2014. Such forfeited advance
is taxable under Income from Other Sources under Section 56(2)(ix) and is not deducted
from the cost of acquisition while calculating capital gains.
Since this advance was forfeited in:
2023
it is not deducted from the cost of the house.
So:
₹1,00,000 → NOT deducted from capital-gain computation.
It is separately taxable as Income from Other Sources.
Step 6: Calculate Indexed Cost of Acquisition
We have:
Cost of Acquisition as on 1 April 2001:
₹3,00,000
CII:
2001-02 = 100
2024-25 = 363
Therefore:
Indexed Cost of Acquisition = ₹10,89,000
Step 7: Calculate Indexed Cost of Improvement
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As calculated above:
= ₹1,81,500
Step 8: Calculate expenses related to transfer
The house was sold for:
₹30,00,000
Now deduct expenses incurred in connection with the sale.
Advertisement:
₹25,000
Registration fees + selling commission:
₹4,75,000
Total:
= ₹5,00,000
Step 9: What about ₹5,00,000 paid to the tenant?
The question says:
Shri Hari Mohan paid ₹5,00,000 to the tenant for vacating the house.
Why is this important?
Because if the tenant has to vacate so that the property can actually be sold, the payment
can be treated as an expenditure connected with the transfer, provided it is genuine and
necessary for the transfer. Courts have allowed such payments as deductions while
computing capital gains.
Therefore, for this problem we deduct:
Tenant vacation payment = ₹5,00,000
Thus total transfer-related expenditure:
= ₹10,00,000
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󼪔󼪕󼪖󼪗󼪘󼪙 Now the final calculation
The easiest way to remember the capital-gain formula is:
FULL VALUE OF CONSIDERATION
↓
Less: Transfer Expenses
↓
NET SALE CONSIDERATION
↓
Less: Indexed COA
↓
Less: Indexed COI
↓
LONG-TERM CAPITAL GAIN
Let's put our numbers in it.
Particulars
Amount
Sale consideration
₹30,00,000
Less: Advertisement
₹25,000
Less: Registration + selling commission
₹4,75,000
Less: Payment to tenant
₹5,00,000
Net Sale Consideration
₹20,00,000
Less: Indexed Cost of Acquisition
₹10,89,000
Less: Indexed Cost of Improvement
₹1,81,500
Long-Term Capital Gain
₹7,29,500
󷘹󷘴󷘵󷘶󷘷󷘸 Final Answer:
󽇐 What happens to the ₹1,00,000 forfeited advance?
Don't forget this separate point.
The ₹1,00,000 was forfeited in 2023.
Therefore:
Income from Other Sources = ₹1,00,000
It is not deducted from the capital-gain calculation because the forfeiture occurred after 1
April 2014.
So there are effectively two tax implications:
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₹1,00,000
Forfeited Advance
│
▼
Income from Other Sources
│
│
└──── NOT deducted
from capital gain
House sold for ₹30,00,000
│
▼
Less transfer expenses ₹10,00,000
│
▼
Net consideration ₹20,00,000
│
▼
Less indexed COA ₹10,89,000
│
▼
Less indexed COI ₹1,81,500
│
▼
LTCG = ₹7,29,500
Remember these 5 points:
1. 1999 purchase → Long-Term Capital Asset.
2. Pre-1 April 2001 asset → use FMV ₹3,00,000 as the base for this problem.
3. 2000 rooms → don't separately index/add them.
4. 2003 bathrooms → ₹54,500 × 363/109 = ₹1,81,500.
5. 2023 forfeited advance → ₹1,00,000 is Income from Other Sources, NOT a
deduction from cost.
󷄧󼿒 Final capital gain: ₹7,29,500
Note: This answer follows the provisions applicable to the 2024 sale stated in the question
and the CII figures supplied in the question. The current tax regime has subsequently
changed from 1 April 2026, so I have not applied today's post-2026 capital-gains rules to this
2024 transaction.
6. State the method of computing Income under the head Income from Other Sources.
Ans: Suppose Rahul has a job and receives salary. His salary will be taxed under Income
from Salary.
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Now suppose Rahul also receives interest from his bank fixed deposit. This interest is not
salary, business income, house-property income, or capital gain. Therefore, it is generally
taxed under Income from Other Sources.
Some common examples are:
Interest on bank deposits and fixed deposits
Dividend income
Family pension
Certain gifts
Interest on securities
Income from letting machinery, plant or furniture in certain situations
Other taxable incomes that cannot be classified under the other four heads
So, the basic idea is:
TOTAL TAXABLE INCOME
│
┌─────────────────┼──────────────────┐
↓ ↓ ↓
Salary House Property Business
│ │ │
└──────────────┬──┴──────────────────┘
↓
Capital Gains
│
↓
Income from Other Sources
│
"If it fits nowhere
else, check here"
2. Method of Computing Income from Other Sources
The question specifically asks for the method of computing income. This means we need to
find out how much taxable income remains after considering the permitted deductions.
The calculation can be understood in a very simple format:
Gross Income from Other Sources
First, we identify all taxable receipts that come under this head.
For example:
Particulars
Amount
Interest on Fixed Deposit
₹30,000
Interest on Savings Account
₹10,000
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Dividend
₹20,000
Family Pension
₹60,000
Gross Income
₹1,20,000
Therefore:
Gross Income from Other Sources = ₹1,20,000
3. Less: Allowable Deductions
After finding the gross income, we deduct the expenses or deductions that are allowed
under the Income Tax Act.
For example, in certain cases, expenses incurred wholly and exclusively for earning such
income may be deductible, subject to the applicable rules.
For family pension, a specified deduction is available subject to the applicable limit.
However, remember an important examination point:
Every expense cannot automatically be deducted. Only deductions specifically permitted
by the Income Tax Act can be claimed.
4. Arriving at Taxable Income
After deducting the allowable deductions from the gross income, we get the income
chargeable under the head Income from Other Sources.
The basic formula is:
Gross Income from Other Sources
↓
Less: Allowable
Deductions
↓
----------------
↓
Income from Other Sources
(Taxable Amount)
Example
Suppose a person receives:
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Bank interest = ₹30,000
FD interest = ₹40,000
Dividend = ₹20,000
Gross income = ₹90,000
Suppose allowable deduction = ₹5,000.
Therefore:
Taxable Income = ₹90,000 − ₹5,000
= ₹85,000
Thus, ₹85,000 will be considered as income under the head Income from Other Sources,
subject to the applicable tax provisions.
5. Important Rules to Remember
There are some special points students should remember.
(a) Interest Income
Interest received from sources such as bank deposits, fixed deposits and certain securities
may be taxable under this head, depending on the circumstances.
(b) Dividend Income
Dividend income is generally taxable in the hands of the recipient and may be included
under this head, subject to the applicable provisions.
(c) Family Pension
Family pension received by the family of a deceased employee is generally taxable under
Income from Other Sources. A deduction is available according to the applicable provisions.
(d) Gifts
Certain gifts received without adequate consideration can become taxable under the
provisions relating to Income from Other Sources, subject to the conditions and exceptions
provided by law.
Easy Way to Remember the Method
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For examination purposes, remember this simple sequence:
Identify → Add → Deduct → Arrive
1. IDENTIFY
↓
Find incomes taxable under Other Sources
2. ADD
↓
Calculate Gross Income
3. DEDUCT
↓
Subtract deductions allowed by law
4. ARRIVE
↓
Taxable Income from Other Sources
In one formula:
Income from Other Sources = Gross Income − Allowable Deductions
Conclusion
In simple words, Income from Other Sources is a residual head of income. When a taxable
receipt does not fall under Salary, House Property, Business/Profession or Capital Gains, we
examine whether it is taxable under this head.
To compute it, we first identify the taxable receipts, add them to calculate the gross
income, subtract only the deductions permitted under the Income Tax Act, and finally
arrive at the taxable income from Other Sources.
SECTION-D
7. An individual (aged 82 years) has the following sources of income for the Assessment
Year 2025-26:
Gross Income from Salaries
(pension) Rs. 1,30,000
Income from House Property
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(computed) Rs. 34,000
Income from Business Rs. 5.14,000
Interest on deposit in bank Rs. 48,000
He has paid life insurance premium of Rs. 8.000 and donated a sum of Rs. 5.000 to an
approved charitable institution by cheque. Compute the tax liability of the assessee for
the Assessment Year 2025-26.
Ans: The person is 82 years old.
So:
Age ≥ 80 years → Super Senior Citizen
His income comes from four heads:
Source of income
Amount
Pension
₹1,30,000
House Property
₹34,000
Business
₹5,14,000
Bank Interest
₹48,000
Gross Total Income before deductions
₹7,26,000
The question also says he paid:
Life Insurance Premium = ₹8,000
Donation to approved charitable institution = ₹5,000
These payments can provide deductions under the old tax regime.
󹖉󹖊󸄒󷻤󷻥󹖂󹖃󹖄󹖅󷻪󷻫󹖋󷻬󷻭󷻮󹖆󹖌󹖇󹖈󹖍󹖎 Step 2: Why does his age matter?
This is one of the most important concepts in the question.
For income-tax purposes:
Individual
│
├── Below 60 years → Normal Citizen
│
├── 60 to below 80 → Senior Citizen
│
└── 80 years or more → SUPER SENIOR CITIZEN
Since our assessee is 82, he falls in the Super Senior Citizen category.
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For AY 2025-26 under the old regime, the slab for a person aged 80 years or more is:
Taxable Income
Rate
Up to ₹5,00,000
Nil
₹5,00,001 ₹10,00,000
20%
₹10,00,001 onwards
30%
This special ₹5 lakh basic exemption limit is available to super senior citizens under the old
regime.
󹳎󹳏 Step 3: Calculate income under different heads
1. Income from Salary Pension
Pension is treated as salary income.
Given pension:
₹1,30,000
A standard deduction of ₹50,000 is available under the old regime for salary/pension
income for AY 2025-26.
Therefore:
₹1,30,000 − ₹50,000 = ₹80,000
So, taxable salary/pension income:
₹80,000
2. Income from House Property
The question has already given the computed income:
₹34,000
Therefore, we don't need to calculate anything further.
3. Income from Business
Given:
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₹5,14,000
Again, the question has already given the business income, so we take it directly.
4. Interest on Bank Deposit
Interest received:
₹48,000
This is normally taxable under Income from Other Sources.
Therefore:
₹48,000
󹵍󹵉󹵎󹵏󹵐 Step 4: Calculate Gross Total Income
Now add all four taxable incomes:
Salary/Pension ₹80,000
House Property ₹34,000
Business Income ₹5,14,000
Bank Interest ₹48,000
──────────
Gross Total Income ₹6,76,000
So:
Gross Total Income = ₹6,76,000
󺬥󺬦󺬧 Step 5: Deduction for Life Insurance Premium Section 80C
The assessee paid:
Life Insurance Premium = ₹8,000
Life insurance premium can qualify for deduction under Section 80C, subject to the
prescribed conditions and overall limit.
Here, we take:
Deduction u/s 80C = ₹8,000
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Therefore:
₹6,76,000 − ₹8,000 = ₹6,68,000
󹱳󹱴󹱵󹱶 Step 6: Deduction for Donation Section 80G
He donated:
₹5,000
to an approved charitable institution by cheque.
The question specifically tells us that the institution is approved and payment was by
cheque. This information is important because it indicates that the donation qualifies for
deduction under Section 80G, subject to the applicable conditions.
Assuming the institution qualifies for 50% deduction, the deduction is:
₹5,000 × 50% = ₹2,500
Therefore:
₹6,68,000 − ₹2,500 = ₹6,65,500
Thus:
󽇐 Total Income = ₹6,65,500
󼫹󼫺 Step 7: Calculate Income Tax
Now the easiest part.
Our assessee is a Super Senior Citizen.
His total taxable income is:
₹6,65,500
The first ₹5,00,000 is tax-free.
So only the amount above ₹5,00,000 is taxable at 20%.
Total Income ₹6,65,500
Less: Basic exemption ₹5,00,000
──────────
Amount taxable @ 20% ₹1,65,500
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Tax:
₹1,65,500 × 20% = ₹33,100
󽆿 Step 8: Add Health & Education Cess
Health and Education Cess is 4% of income tax.
Therefore:
₹33,100 × 4% = ₹1,324
Now add it:
Income Tax ₹33,100
Health & Education Cess ₹1,324
────────
Total Tax Liability ₹34,424
󷄧󼿒 Final Answer
Tax liability of the assessee for AY 2025-26 = ₹34,424
Complete working at a glance
Particulars
Amount
Pension
₹1,30,000
Less: Standard Deduction
₹50,000
Taxable Pension
₹80,000
House Property Income
₹34,000
Business Income
₹5,14,000
Bank Interest
₹48,000
Gross Total Income
₹6,76,000
Less: 80C Life Insurance
₹8,000
Less: 80G Donation (50% of ₹5,000)
₹2,500
Total Taxable Income
₹6,65,500
Tax up to ₹5,00,000
Nil
₹1,65,500 × 20%
₹33,100
Health & Education Cess @ 4%
₹1,324
Total Tax Liability
₹34,424
8. State the law relating to deduction of Tax at source.
Ans: Tax Deducted at Source (TDS) is a system under which tax is collected by the
government at the time when income is paid or credited, instead of waiting until the
taxpayer files the income-tax return.
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In simple words, the person making a payment deducts a certain amount of tax before
paying the remaining amount to the receiver and deposits that deducted tax with the
Government. The Income Tax Department describes TDS as a system for collecting tax at
the point where income is generated.
Easy example:
Suppose a company has to pay ₹50,000 to a professional and TDS applicable is ₹5,000. The
company may pay ₹45,000 to the professional and deposit ₹5,000 as TDS with the
Government. The ₹5,000 is not an extra taxit is tax paid in advance on behalf of the
receiver.
Simple Diagram
PAYMENT / INCOME
│
▼
Person/Company
making payment
│
┌───────┴───────┐
│ │
▼ ▼
TDS deducted Balance paid
│ │
▼ ▼
Government Receiver
│
▼
Tax gets credited
to receiver's account
Main Rules of TDS
1. Who deducts TDS?
The person who is responsible for making a specified payment is generally called the
deductor. The person receiving the income is called the deductee.
2. When is TDS deducted?
The exact timing depends on the nature of payment. For example, in the case of salary, TDS
is deducted at the time of payment of salary. Section 192 of the Income-tax Act, 1961
specifically provides for deduction from salary payments.
For many other specified payments, the relevant TDS provision determines whether
deduction is triggered at payment, credit, or whichever occurs earlier.
3. On which payments can TDS apply?
TDS can apply to various specified payments, such as:
Salary
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Interest
Commission or brokerage
Rent
Professional or technical fees
Payments to contractors
Certain other specified payments
The applicable rate and threshold depend upon the nature of payment and the relevant
provision of tax law.
4. What happens after deduction?
The deductor has to deposit the deducted tax with the Government within the prescribed
time and comply with the applicable TDS-return requirements.
5. TDS certificate
After deduction, the taxpayer receives evidence of the tax deducted. For salary, the
employer provides Form 16; for many non-salary payments, Form 16A is used. Form 16
shows details such as income and TDS deducted, while Form 16A records TDS on income
other than salary.
Why is TDS important?
The main purpose of TDS is to make regular and timely collection of income tax possible.
Instead of the Government waiting until the end of the year to collect the entire tax, tax is
collected gradually whenever certain taxable payments are made.
For the taxpayer, TDS is also useful because the amount deducted can generally be claimed
as tax already paid while calculating the final tax liability. If excess tax has been deducted,
the taxpayer may become eligible for a refund after filing the income-tax return.
Important current-law point
For exams based on the Income-tax Act, 1961, TDS provisions are traditionally discussed
through sections such as Section 192 for salary and Sections 193 onwards for various other
payments. However, India has moved to the Income Tax Act, 2025 for amounts governed
by the new law from 1 April 2026. The new Act consolidates the TDS provisions mainly
under Sections 392 and 393, while retaining the existing TDS rates and monetary thresholds
broadly unchanged.
In one sentence
TDS means deducting tax from certain payments at the source itself, depositing that tax
with the Government, and giving credit for the deducted amount to the person whose
income was subject to TDS.
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