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GNDU QUESTION PAPERS 2024
BBA 6
th
SEMESTER
Paper-BBA-603: INCOME TAX
Time Allowed: 3 Hours Maximum Marks: 50
Note: Aempt Five quesons in all, selecng at least One queson from each secon. The
Fih queson may be aempted from any secon. All quesons carry equal marks.
SECTION-A
1. 'All assesses are persons, but all persons are not assessees'. Explain with suitable
examples.
2. Illustrate the ve categories of incomes which are totally exempt from Income Tax.
SECTION-B
3. MRV of the residenal house is Rs. 24,000 and actual rent received is Rs. 2,500 per
month. During the previous year, house was vacant for 2 months. Municipal Taxes are @
10% of MRV. Interest on loan taken for construcon of house is Rs. 16,000. Calculate
income from house property.
4. Discuss the admissibility of the following items under the head Prot and Gains from
Business/Profession:
(a) Mr. Y received a noce from GST authories and he created a reserve for Rs. 6,000 on
31-3-2023. He paid Rs. 3,000 on 14-7-2023 and Rs. 3,000 on 1-10-2023. He led his return
on 31-7-2023.
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(b) Mr. P declared a bonus of Rs. 1,00,000 for employees but due to paucity of funds he
could not pay Rs. 40,000 on 31-3-2023, Rs. 30,000 on 30-7-2023 and balance on 21-11-
2023. Due date for ling his return is 31-7-2023.
(c) A payment of Rs. 42,000 by cheque as employer's contribuon to P.F. made on 30-11-
2022 due date being 15-12-2022. The cheque was realized on 31-12-2022.
SECTION – C
5.Discuss the various categories of transactions which are not regarded as Transfer under
Section 47 of the Income Tax Act, 1961.
6.Ms. Simran submits the following particulars about sale of assets during the year 2022–
23:
Particulars of Assets
Particulars
Jewellery (Rs.)
Plot (Rs.)
Gold (Rs.)
Sale Price
5,00,000
20,24,000
2,40,000
Expenses on sale
NIL
24,000
NIL
Cost of Acquisition
1,50,000
7,00,000
80,000
Year of Acquisition
2007–08
2004–05
2009–10
C.I.I.
129
113
148
Additional Information:
She has purchased a house for Rs. 12,00,000 on 1-3-2023.
Requirement:
Calculate the amount of Taxable Capital Gains if C.I.I. for 2022–23 is 331.
SECTION – D
7.Explain the various provisions relating to carry forwarding the losses under the Income
Tax Act, 1961.
8.Discuss the various deductions available under Sections 80C, 80D and 80TTA for
individual assessees.
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GNDU Answer PAPERS 2024
BBA 6
th
SEMESTER
Paper-BBA-603: INCOME TAX
Time Allowed: 3 Hours Maximum Marks: 50
Note: Aempt Five quesons in all, selecng at least One queson from each secon. The
Fih queson may be aempted from any secon. All quesons carry equal marks.
SECTION-A
1. 'All assesses are persons, but all persons are not assessees'. Explain with suitable
examples.
Ans: 1. What is a “Person” in Income Tax?
In everyday language, a person means a human being. But in income tax law, the meaning is
much wider.
According to income tax rules, a person includes:
• An individual (like you or me)
• A Hindu Undivided Family (HUF)
• A company
• A firm or partnership
• An association of persons (AOP)
• A body of individuals (BOI)
• Local authorities
• Artificial juridical persons (like trusts, institutions, etc.)
So basically, any entity that can earn income is considered a “person.”
2. What is an “Assessee”?
Now comes the important term — assessee.
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An assessee is a person who is:
• Liable to pay tax, OR
• Required to file a return, OR
• Being assessed by the Income Tax Department
In simple words:
An assessee is a person who is involved in the tax system.
3. Understanding the Statement
Now let’s decode the statement:
“All assessees are persons”
This means:
• Anyone who pays tax or is assessed must be a “person” as per tax law.
• You cannot be an assessee unless you fall under the definition of a person.
So, every assessee is definitely a person.
“But all persons are not assessees”
This means:
• Not every person is required to pay tax or file returns.
• Some persons may not have taxable income or any tax liability.
So, even though they are “persons,” they are not assessees.
4. Simple Real-Life Analogy
Think of it like this:
• All students in a class are humans
• But not all humans are students
Similarly:
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• All assessees are persons
• But not all persons are assessees
5. Examples to Make It Crystal Clear
Let’s take some easy examples:
Example 1: Person who is an Assessee
Rahul is a software engineer earning ₹8 lakh per year.
• He has taxable income
• He files his income tax return
• He pays income tax
Rahul is:
• A person
• An assessee
Example 2: Person who is NOT an Assessee
Riya is a student and has no income.
• She does not earn anything
• She is not required to file tax returns
Riya is:
• A person
• NOT an assessee
Example 3: Senior Citizen with No Taxable Income
Mr. Sharma is 70 years old and earns ₹2 lakh annually (below taxable limit).
• No tax liability
• No need to file return (in some cases)
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He is:
• A person
• NOT an assessee
Example 4: Company with Income
ABC Pvt Ltd earns profits of ₹50 lakh.
• Must pay corporate tax
• Must file returns
The company is:
• A person
• An assessee
Example 5: Loss Case (Still an Assessee!)
A business has a loss this year but files a return to carry forward losses.
Even though no tax is payable:
• It is still an assessee
Important point:
Even a person with zero tax liability can be an assessee if they are required to file a return.
6. Types of Assessees (Bonus Understanding)
To deepen your concept, here are types of assessees:
1. Normal Assessee – pays tax on own income
2. Representative Assessee – pays tax on behalf of someone else
3. Deemed Assessee – treated as assessee by law
4. Assessee in Default – fails to fulfill tax duties
All of them are still “persons.”
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7. Why This Concept is Important
This statement is very important because:
• It helps you understand who comes under tax law
• It avoids confusion between general people and taxable entities
• It is frequently asked in exams (theory + practical cases)
8. Quick Summary (Revision Ready)
Concept
Meaning
Person
Any individual or entity capable of earning income
Assessee
A person who is liable to pay tax or file returns
Relation
All assessees are persons, but not all persons are assessees
Final Understanding in One Line
Every assessee must be a person, but a person becomes an assessee only when they
enter the tax system (by earning taxable income, filing returns, or having tax liability).
2. Illustrate the ve categories of incomes which are totally exempt from Income Tax.
Ans: Setting the Stage: Why Some Incomes Are Exempt
Income tax is meant to collect revenue for the government, but not all incomes are taxed.
Some are exempt because they serve social purposes, encourage savings, or support
vulnerable groups. Think of it like this: the government says, “We won’t tax this income
because it’s either too small, too special, or too important for social welfare.”
Five Categories of Totally Exempt Incomes
1. Agricultural Income
Agriculture is the backbone of India’s economy, and farmers often face uncertainties like
weather, pests, and fluctuating prices. To support them, agricultural income is completely
exempt from income tax.
This includes:
• Income from cultivation of crops
• Rent received from agricultural land
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• Income from farm produce
Example: If a farmer earns ₹5 lakh from selling wheat grown on his land, that income is
exempt.
Why exempt? To encourage agriculture and protect farmers from financial burdens.
2. Income from Hindu Undivided Family (HUF)
In India, families often pool resources together under a system called Hindu Undivided
Family (HUF). The income earned by the HUF as a separate entity is exempt from tax in the
hands of individual members.
Example: If an HUF earns rental income from ancestral property, that income is treated
separately and not taxed in the hands of individual family members.
Why exempt? To respect traditional family structures and avoid double taxation.
3. Income of Charitable Trusts and Institutions
Charitable organizations working for education, healthcare, poverty relief, or other social
causes enjoy tax exemptions. Their income is exempt as long as it is used for charitable
purposes.
Example: A trust running free schools receives donations worth ₹10 lakh. If the money is
used for education, it is exempt from tax.
Why exempt? To encourage philanthropy and social welfare activities.
4. Income of Political Parties
Political parties in India are exempt from tax on their income, provided they maintain
proper accounts and file returns. This includes income from voluntary contributions,
membership fees, and other sources.
Example: If a political party receives ₹50 lakh in donations, that income is exempt.
Why exempt? To support democratic processes and ensure political parties can function
without financial strain.
5. Income of Local Authorities
Local authorities like municipalities, panchayats, and district boards often earn income from
property, markets, or services. This income is exempt from tax because it is used for public
welfare.
Example: A municipal corporation earning revenue from property tax or market fees does
not pay income tax on it.
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Why exempt? To ensure local bodies can use their funds entirely for development and
welfare projects.
Why These Exemptions Matter
These exemptions are not random—they serve important purposes:
• Agriculture exemption supports farmers.
• HUF exemption respects traditional family systems.
• Charitable trust exemption promotes social welfare.
• Political party exemption strengthens democracy.
• Local authority exemption supports grassroots governance.
Together, they reflect India’s social, cultural, and economic priorities.
Final Takeaway
The five categories of totally exempt incomes are:
1. Agricultural income
2. Income of Hindu Undivided Family (HUF)
3. Income of charitable trusts and institutions
4. Income of political parties
5. Income of local authorities
These exemptions show how taxation is not just about collecting money—it’s also about
supporting farmers, families, charities, democracy, and local governance.
SECTION-B
3. MRV of the residenal house is Rs. 24,000 and actual rent received is Rs. 2,500 per
month. During the previous year, house was vacant for 2 months. Municipal Taxes are @
10% of MRV. Interest on loan taken for construcon of house is Rs. 16,000. Calculate
income from house property.
Ans: Imagine you own a house that you rent out. The government wants to tax the income
you earn from this house. But instead of directly taxing your rent, they follow a systematic
calculation method under Income from House Property.
We are given:
• MRV (Municipal Rental Value) = ₹24,000 per year
• Actual Rent = ₹2,500 per month
• Vacancy = 2 months
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• Municipal Taxes = 10% of MRV
• Interest on Loan = ₹16,000
We need to calculate:
Income from House Property
Step 1: Understand Key Concepts
Before jumping into numbers, let’s understand a few terms in simple language:
1. Municipal Rental Value (MRV)
This is the rent value estimated by the municipality.
Think of it as a standard value of rent, even if you earn more or less.
Given: ₹24,000 per year
2. Actual Rent
This is the rent you actually receive from the tenant.
₹2,500 per month
But the house was vacant for 2 months
So rent received =
10 months × ₹2,500 = ₹25,000
3. Vacancy
If your house remains empty for some time, your income reduces.
The law allows relief for this.
4. Municipal Taxes
These are taxes paid to the municipality.
10% of ₹24,000 = ₹2,400
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5. Interest on Loan
If you took a loan to build or buy the house, the interest is fully deductible.
₹16,000
Step 2: Calculate Expected Rent
Now comes an important concept: Expected Rent
Normally, Expected Rent = Higher of:
• Municipal Value
• Fair Rent (not given here)
So Expected Rent = ₹24,000
Step 3: Compare Expected Rent with Actual Rent
Now we compare:
• Expected Rent = ₹24,000
• Actual Rent (after vacancy) = ₹25,000
Since Actual Rent is higher, we take:
Gross Annual Value (GAV) = ₹25,000
Step 4: Deduct Municipal Taxes
Now subtract taxes actually paid:
• Municipal Taxes = ₹2,400
Net Annual Value (NAV) =
₹25,000 – ₹2,400 = ₹22,600
Step 5: Standard Deduction (30%)
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The government allows a flat 30% deduction for maintenance, repairs, etc.
30% of ₹22,600 = ₹6,780
Step 6: Deduct Interest on Loan
Interest = ₹16,000
Step 7: Final Calculation
Let’s put everything together:
Net Annual Value (NAV)
₹22,600
Less:
• Standard Deduction = ₹6,780
• Interest = ₹16,000
Total Deductions = ₹22,780
Final Income:
₹22,600 – ₹22,780 = –₹180
Final Answer
Income from House Property = (–₹180)
This means LOSS of ₹180
What Does This Loss Mean?
This is very important to understand:
• You didn’t actually lose money in real life
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• But under tax rules, your deductions are more than your income
• So it becomes a loss under house property
This loss can be:
• Adjusted against other income (like salary/business)
• Or carried forward for future years
4. Discuss the admissibility of the following items under the head Prot and Gains from
Business/Profession:
(a) Mr. Y received a noce from GST authories and he created a reserve for Rs. 6,000 on
31-3-2023. He paid Rs. 3,000 on 14-7-2023 and Rs. 3,000 on 1-10-2023. He led his return
on 31-7-2023.
(b) Mr. P declared a bonus of Rs. 1,00,000 for employees but due to paucity of funds he
could not pay Rs. 40,000 on 31-3-2023, Rs. 30,000 on 30-7-2023 and balance on 21-11-
2023. Due date for ling his return is 31-7-2023.
(c) A payment of Rs. 42,000 by cheque as employer's contribuon to P.F. made on 30-11-
2022 due date being 15-12-2022. The cheque was realized on 31-12-2022.
Ans: Think of it like this: if you run a shop, you earn money from sales. But you also spend
money—on rent, salaries, electricity, etc. The government doesn’t tax you on your total
sales; it taxes you on your profit. So, you’re allowed to subtract certain expenses from your
income. But here’s the catch: not every expense you write down is automatically accepted.
The tax law has rules about what counts and what doesn’t.
Now, let’s walk through the three scenarios one by one, like little stories, and see whether
the expenses are admissible.
(a) Mr. Y and the GST Notice
Mr. Y received a notice from GST authorities. He thought, “Hmm, I might have to pay
something here,” so he created a reserve of Rs. 6,000 on 31-3-2023. Later, he actually paid
Rs. 3,000 in July and Rs. 3,000 in October. He filed his return in July.
Here’s the key idea: creating a reserve is not the same as paying an expense. A reserve is
like saying, “I might have to spend this money, so let me set it aside.” But tax law doesn’t
allow you to deduct “maybe” expenses. Only actual, real payments or liabilities are
admissible.
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So, when Mr. Y created the reserve of Rs. 6,000, that amount is not deductible. But when he
actually paid Rs. 3,000 in July (before filing his return) and Rs. 3,000 in October (after filing
his return), the treatment changes:
• The Rs. 3,000 paid in July is deductible, because it was paid before the due date of
filing the return.
• The Rs. 3,000 paid in October is not deductible in that year, because it was paid after
the return was filed. It can only be claimed in the year of actual payment.
So the lesson here: reserves don’t count, actual payments do.
(b) Mr. P and the Employee Bonus
Mr. P declared a bonus of Rs. 1,00,000 for his employees. But he couldn’t pay it all at once.
He paid Rs. 40,000 by 31-3-2023, Rs. 30,000 in July, and the remaining Rs. 30,000 in
November. His due date for filing the return was 31-7-2023.
Now, bonuses are a common business expense. But the law says: if you declare a bonus, you
must pay it before the due date of filing the return to claim it as a deduction. Otherwise, it
won’t be allowed.
Let’s check Mr. P’s timeline:
• Rs. 40,000 paid by 31-3-2023 → deductible.
• Rs. 30,000 paid in July (before 31-7-2023) → deductible.
• Rs. 30,000 paid in November (after 31-7-2023) → not deductible in that year.
So, out of Rs. 1,00,000, only Rs. 70,000 is admissible as a deduction in that year. The last Rs.
30,000 will be deductible in the year it was actually paid.
Lesson: declaring a bonus isn’t enough—you must pay it before the return due date.
(c) Employer’s Contribution to PF
This one is about Provident Fund (PF), which is a retirement savings scheme. Employers
contribute to PF for their employees, and this contribution is deductible—but only if paid on
time.
Here’s the situation: Mr. X made a payment of Rs. 42,000 by cheque on 30-11-2022. The due
date was 15-12-2022. But the cheque was realized (actually cleared) on 31-12-2022.
Now, the tricky part: does the date of giving the cheque count, or the date of clearance? Tax
law generally considers the date of actual payment. A cheque is only considered payment
when it is cleared. Since the cheque was cleared after the due date (31-12 instead of 15-12),
this payment is not deductible in that year. It will only be allowed in the year of actual
clearance.
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Lesson: timing matters—a cheque isn’t payment until it clears.
Pulling It All Together
So, what do these three stories teach us? They highlight the golden rule of tax deductions
under business income: only real, actual, and timely payments count.
• Reserves or provisions (like Mr. Y’s reserve for GST) don’t count because they’re just
estimates.
• Declared bonuses (like Mr. P’s) count only if paid before the due date of filing the
return.
• PF contributions (like Mr. X’s) must be paid and cleared before the statutory due
date.
Making It Relatable
Imagine you’re running a café. You tell your staff, “I’ll give you a bonus at year-end.” That’s
nice, but for tax purposes, the government says: “Show me the money. Did you actually pay
it before filing your return?” If yes, you can deduct it. If not, sorry, you’ll have to wait.
Or think of reserves like putting money in a piggy bank for “possible fines.” The government
doesn’t care about your piggy bank—it only cares when you actually pay the fine.
And with PF, it’s like paying your electricity bill with a cheque. If the cheque bounces or
clears late, the electricity company doesn’t count it as paid until the money is in their
account. Same with the tax department.
Why Does the Law Work This Way?
The government wants to prevent businesses from reducing their taxable income by writing
down expenses they haven’t really paid. Otherwise, everyone could just declare huge
reserves or unpaid bonuses and show zero profit. By insisting on actual payment, the law
ensures fairness and accountability.
Final Takeaway
When studying taxation, always remember:
• Provision ≠ Payment.
• Declared ≠ Deductible (unless paid on time).
• Cheque ≠ Payment (until cleared).
These three principles will help you crack many exam questions and also understand how
businesses really work under tax law.
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SECTION – C
5.Discuss the various categories of transactions which are not regarded as Transfer under
Section 47 of the Income Tax Act, 1961.
Ans: Introduction: What is “Transfer” and Why Section 47 Matters?
In the Income Tax Act, 1961, whenever you sell, exchange, or transfer a capital asset, you
may have to pay Capital Gains Tax.
For example:
• You sell land → Profit = Tax
• You sell shares → Profit = Tax
But here’s the interesting part
Not every transfer is treated as a “transfer” for tax purposes.
This is where Section 47 comes in. It lists certain situations where even though a transfer
happens, the law says: “Don’t treat it as a transfer for capital gains tax.”
So basically:
✔ Transfer happened
But no capital gains tax (because law ignores it)
Why Does the Government Give These Exceptions?
The idea is simple:
• Some transactions are not real income
• Some are just rearrangements within family or business
• Some are done for legal or economic convenience
So taxing them would be unfair.
Main Categories of Transactions NOT Regarded as Transfer (Section 47)
Let’s go step by step in a very easy and practical way:
1. Transfer under Gift, Will, or Inheritance
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If you transfer an asset:
• As a gift
• Through a will
• By inheritance
It is NOT treated as transfer.
Example:
A father gifts a house to his son.
➡ No capital gains tax.
✔ Reason: No money involved, just family transfer.
2. Transfer Between Holding Company and Wholly-Owned Subsidiary
If a company transfers assets to its 100% subsidiary, or vice versa:
Not treated as transfer (subject to conditions).
Example:
Company A owns 100% of Company B.
If A transfers land to B → No tax.
✔ Reason: Same economic ownership.
3. Transfer in Amalgamation (Mergers)
When two companies merge, and assets are transferred:
It is NOT treated as transfer if:
• The amalgamated company is an Indian company
Example:
Company X merges into Company Y.
Assets shift automatically.
✔ No capital gains tax.
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✔ Reason: Business restructuring, not real sale.
4. Transfer in Demerger (Company Split)
When a company splits into two:
Transfer of assets is NOT treated as transfer if conditions are satisfied.
Example:
Company A splits into A + B.
Assets move to new company.
✔ No tax.
✔ Reason: Just reorganization.
5. Transfer Between Firm and Partners
(a) Firm → Partner
(b) Partner → Firm (as capital contribution)
These are not treated as transfer (subject to conditions).
Example:
A partner brings land into the firm as capital.
✔ No immediate capital gains tax.
✔ Reason: Business contribution, not sale.
6. Transfer of Capital Asset by a Company to Its Shareholders on Liquidation
Actually, this one is generally taxable, but Section 47 provides exceptions in specific
restructuring cases.
However, certain reorganizations avoid tax.
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7. Transfer in Case of Conversion of Company into LLP
When a private company converts into an LLP (Limited Liability Partnership):
Not treated as transfer IF conditions are met.
Conditions include:
• All assets and liabilities transfer
• Shareholders become partners
• Same profit-sharing ratio
✔ Reason: Continuation of same business.
8. Transfer of Bonds/Debentures into Shares
When you convert:
• Bonds → Shares
• Debentures → Shares
Not treated as transfer.
Example:
You convert debentures of a company into equity shares.
✔ No tax at that time.
✔ Reason: Investment form changes, ownership continues.
9. Transfer of Capital Assets Between Banking Companies (Reorganization)
When banks merge or restructure:
Asset transfer is NOT treated as transfer.
✔ Helps in smooth banking reforms.
10. Transfer in Case of Agricultural Land Consolidation
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When agricultural land is reallocated during government consolidation schemes:
Not treated as transfer.
✔ Reason: Farmers are just getting different land, not selling.
11. Transfer of Stock-in-Trade into Capital Asset (Special Cases)
Certain conversions are excluded under specific conditions.
12. Transfer in Reverse Mortgage Scheme
When a senior citizen mortgages house property to receive money:
Not treated as transfer.
✔ Reason: It’s a financial arrangement, not sale.
13. Transfer of Capital Asset in Business Reorganization (Various Cases)
Includes:
• Conversion of firm → company
• Conversion of sole proprietorship → company
Not treated as transfer if conditions are satisfied.
✔ Reason: Same business continues in new form.
Important Concept to Remember
In all these cases:
• Ownership may change legally
• But economic ownership remains same
That’s why:
➡ No capital gains tax
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Conditions Matter!
Most Section 47 exemptions come with strict conditions.
If conditions are violated later:
The exemption can be withdrawn
Tax becomes applicable
Simple Trick to Remember
Think like this:
If transfer is:
• Within family ✔
• Within same business ✔
• Due to restructuring ✔
➡ Then it is usually NOT treated as transfer
Conclusion
Section 47 of the Income Tax Act, 1961 is very important because it ensures that not every
transfer is taxed blindly.
It recognizes that:
• Some transfers are genuine sales → taxable
• Others are technical or internal adjustments → not taxable
This section mainly covers:
• Family transfers (gift, inheritance)
• Business restructuring (merger, demerger)
• Internal company transfers
• Conversion of business forms
• Financial instrument conversions
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6.Ms. Simran submits the following particulars about sale of assets during the year 2022–
23:
Particulars of Assets
Particulars
Jewellery (Rs.)
Plot (Rs.)
Gold (Rs.)
Sale Price
5,00,000
20,24,000
2,40,000
Expenses on sale
NIL
24,000
NIL
Cost of Acquisition
1,50,000
7,00,000
80,000
Year of Acquisition
2007–08
2004–05
2009–10
C.I.I.
129
113
148
Additional Information:
She has purchased a house for Rs. 12,00,000 on 1-3-2023.
Requirement:
Calculate the amount of Taxable Capital Gains if C.I.I. for 2022–23 is 331.
Ans: Step 1: Understanding the Basics
When you sell a capital asset (like jewellery, land, or gold), you may earn a capital gain. The
formula is:
• Sale Price: What you sold it for.
• Expenses on Sale: Brokerage, legal fees, etc.
• Indexed Cost of Acquisition: The original cost adjusted for inflation using the Cost
Inflation Index (CII).
Why indexation? Because Rs. 1,00,000 in 2004 is not the same as Rs. 1,00,000 in 2023.
Indexation adjusts the cost to reflect inflation, so you’re taxed only on the real gain.
Step 2: Jewellery
• Sale Price = Rs. 5,00,000
• Expenses = Nil
• Cost of Acquisition = Rs. 1,50,000
• Year of Acquisition = 2007–08
• CII for 2007–08 = 129
• CII for 2022–23 = 331
Indexed Cost =
= 2.565 × 1,50,000 = Rs. 3,84,615 (approx.)
Capital Gain = 5,00,000 – 3,84,615 = Rs. 1,15,385
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Step 3: Plot
• Sale Price = Rs. 20,24,000
• Expenses = Rs. 24,000
• Net Sale Price = 20,24,000 – 24,000 = Rs. 20,00,000
• Cost of Acquisition = Rs. 7,00,000
• Year of Acquisition = 2004–05
• CII for 2004–05 = 113
• CII for 2022–23 = 331
Indexed Cost =
= 2.929 × 7,00,000 = Rs. 20,50,442 (approx.)
Capital Gain = 20,00,000 – 20,50,442 = Negative (Loss) So, this is a long-term capital loss of
Rs. 50,442.
Step 4: Gold
• Sale Price = Rs. 2,40,000
• Expenses = Nil
• Cost of Acquisition = Rs. 80,000
• Year of Acquisition = 2009–10
• CII for 2009–10 = 148
• CII for 2022–23 = 331
Indexed Cost =
= 2.236 × 80,000 = Rs. 1,78,378 (approx.)
Capital Gain = 2,40,000 – 1,78,378 = Rs. 61,622
Step 5: Total Capital Gains Before Exemption
• Jewellery Gain = Rs. 1,15,385
• Plot = (Loss) Rs. 50,442
• Gold Gain = Rs. 61,622
Net Long-Term Capital Gain = 1,15,385 – 50,442 + 61,622 = Rs. 1,26,565
Step 6: Exemption under Section 54F
Now comes the interesting part. Ms. Simran bought a house for Rs. 12,00,000 on 1-3-2023.
Under Section 54F, if you sell assets other than a house and invest the net sale
consideration in a residential house, you can claim exemption.
Formula for exemption:
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Net Sale Consideration = Jewellery (5,00,000) + Plot (20,24,000) + Gold (2,40,000) = Rs.
27,64,000
Amount Invested = Rs. 12,00,000
So, Exemption = 1,26,565 × (12,00,000 ÷ 27,64,000) = 1,26,565 × 0.434 = Rs. 54,927
(approx.)
Step 7: Taxable Capital Gain
Taxable Capital Gain = Net Capital Gain – Exemption = 1,26,565 – 54,927 = Rs. 71,638
Step 8: Making It Relatable
Imagine you’re Simran. You sold your jewellery, plot, and gold, and made some gains. But
then you bought a house. The government says: “Great, we encourage you to buy a house.
So we’ll give you a tax break.” But the break isn’t unlimited—it’s proportional. Since you
invested Rs. 12 lakh out of Rs. 27.64 lakh, you get exemption for about 43% of your gains.
The rest is taxable.
Step 9: Lessons Learned
1. Indexation matters: It can turn a gain into a loss (like the plot).
2. Exemptions are proportional: You don’t get full exemption unless you invest the
entire sale consideration.
3. Capital losses can offset gains: The plot’s loss reduced Simran’s overall taxable gain.
4. Timing is key: Buying the house before the due date allowed her to claim the
exemption.
Final Answer
The taxable capital gain for Ms. Simran in 2022–23 is Rs. 71,638.
SECTION – D
7.Explain the various provisions relating to carry forwarding the losses under the Income
Tax Act, 1961.
Ans: Imagine This First…
Suppose you run a small business. In the first year, you suffer a loss of ₹1,00,000. In the next
year, you earn a profit of ₹1,50,000.
Now the question is:
Should you pay tax on ₹1,50,000 or only on ₹50,000 (after adjusting last year’s loss)?
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The Income Tax Act says:
You can carry forward your losses and adjust them against future profits.
This reduces your tax burden and gives relief to taxpayers.
What is “Carry Forward of Losses”?
Carry forward of losses means:
If your losses cannot be fully adjusted (set off) in the same year, you can take them to
future years and adjust them against future income.
Two Important Concepts
Before going deeper, understand these:
1. Set-off of Losses
Adjusting losses against income in the same year.
2. Carry Forward of Losses
Taking remaining losses to future years for adjustment.
Types of Losses and Their Provisions
The Income Tax Act classifies losses into different categories, and each has its own rules.
1. Loss from House Property
Set-off Rule:
• Can be adjusted against any other head of income (like salary, business, etc.)
• Maximum set-off allowed in one year = ₹2,00,000
Carry Forward:
• Remaining loss can be carried forward for 8 years
• Can be adjusted only against income from house property
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Example:
Loss from house property = ₹3,00,000
You can adjust ₹2,00,000 this year
Remaining ₹1,00,000 → carry forward
2. Business Loss (Non-Speculative)
Set-off Rule:
• Can be adjusted against any income except salary
Carry Forward:
• Can be carried forward for 8 assessment years
• Can be adjusted only against business income
Condition:
• Must file return on time
Important:
Late filing = No carry forward allowed
3. Speculative Business Loss
(Speculation means trading like intraday shares, betting, etc.)
Set-off Rule:
• Can be adjusted only against speculative income
Carry Forward:
• Allowed for 4 years only
• Adjusted only with speculative profits
4. Capital Loss
Divided into two types:
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(A) Short-Term Capital Loss (STCL)
Set-off:
• Can be adjusted against both STCG and LTCG
Carry Forward:
• Allowed for 8 years
(B) Long-Term Capital Loss (LTCL)
Set-off:
• Can be adjusted only against LTCG
Carry Forward:
• Allowed for 8 years
Example:
• STCL = ₹50,000 → can adjust against any capital gain
• LTCL = ₹50,000 → only against long-term gain
5. Loss from Specified Business (Section 35AD)
Set-off:
• Only against specified business income
Carry Forward:
• Can be carried forward indefinitely (no time limit)
6. Loss from Gambling, Lottery, etc.
Important Rule:
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• Cannot be carried forward
• Cannot be adjusted with any income
Example:
Loss in lottery = ₹10,000
→ No benefit at all
7. Unabsorbed Depreciation
This is a special type of loss.
Set-off:
• Can be adjusted against any income except salary
Carry Forward:
• Unlimited years
This is very beneficial for businesses.
Important Conditions for Carry Forward
To enjoy this benefit, certain rules must be followed:
1. Filing Return on Time
• For most losses (like business, capital loss),
Return must be filed before due date
Otherwise:
Loss cannot be carried forward
2. Same Business (in some cases)
• For business loss, the same business should continue
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3. Ownership Rule
• Loss can be carried forward only by the same taxpayer
4. Special Case: Companies
• In companies, change in ownership (more than 51%)
→ Loss cannot be carried forward
Quick Summary Table
Type of Loss
Set-off Allowed Against
Carry Forward Years
House Property
Any income (max ₹2L)
8 years
Business Loss
All except salary
8 years
Speculative Loss
Speculative income only
4 years
ST Capital Loss
STCG + LTCG
8 years
LT Capital Loss
LTCG only
8 years
Specified Business
Same business
Unlimited
Gambling Loss
Not allowed
Not allowed
Unabsorbed Depreciation
Any income (except salary)
Unlimited
Why is Carry Forward Important?
Think of it as a tax relief system:
Helps businesses recover from losses
Encourages investment
Reduces tax burden in future years
Supports long-term financial stability
Simple Story to Remember
Imagine life as a game:
• In one level (year), you lose points (loss)
• Instead of starting from zero,
You carry those negative points to the next level
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When you win later, your previous loss is adjusted
→ and you only pay tax on the real gain
Final Conclusion
The provisions relating to carry forward of losses under the Income Tax Act, 1961 are
designed to make taxation fair and practical. Instead of taxing a person heavily in profitable
years while ignoring past losses, the law allows adjustment over time.
8.Discuss the various deductions available under Sections 80C, 80D and 80TTA for
individual assessees.
Ans: Section 80C – The Big Saver’s Room
This is the most popular section. Almost every taxpayer knows about 80C because it covers
a wide range of investments and expenses. The maximum deduction you can claim here is
Rs. 1,50,000 in a financial year.
What qualifies?
• Life Insurance Premiums: If you pay premiums for yourself, your spouse, or children,
it counts.
• Employee Provident Fund (EPF) and Public Provident Fund (PPF): Contributions to
these retirement savings schemes are deductible.
• National Savings Certificates (NSC): A safe government-backed investment.
• 5-Year Fixed Deposit with Banks/Post Office: But only if it’s a special tax-saving FD.
• Equity Linked Savings Scheme (ELSS): A mutual fund option with a lock-in of 3 years.
• Principal repayment of Home Loan: Yes, the EMI’s principal portion qualifies.
• Tuition Fees for Children: Up to two children’s fees can be claimed.
• Sukanya Samriddhi Account: For girl child savings.
• Senior Citizen Savings Scheme: For older investors.
How to imagine it?
Think of 80C as a buffet. You can pick from many dishes—insurance, PPF, ELSS, tuition
fees—but the plate size is fixed at Rs. 1,50,000. No matter how much you load, that’s the
maximum deduction.
Section 80D – The Health Protector’s Room
This section is all about medical insurance premiums. The government wants you to protect
yourself and your family with health insurance, so it gives you tax benefits.
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Limits:
• For self, spouse, and children: Up to Rs. 25,000.
• For parents: Another Rs. 25,000 (if they’re below 60).
• If parents are senior citizens: Limit increases to Rs. 50,000.
• If you yourself are a senior citizen: Your own limit also becomes Rs. 50,000.
• Preventive health check-up: Up to Rs. 5,000 (but within the overall limit).
Example:
Suppose you pay Rs. 20,000 for your family’s health insurance and Rs. 40,000 for your senior
citizen parents. You can claim Rs. 20,000 + Rs. 40,000 = Rs. 60,000 as deduction.
How to imagine it?
Think of 80D as a shield. The bigger your shield (insurance coverage), the more protection
you get—and the government rewards you for carrying that shield.
Section 80TTA – The Interest Saver’s Room
This one is smaller but handy. It deals with interest earned on savings accounts in banks,
post offices, or cooperative societies.
Limit:
• Deduction up to Rs. 10,000 on savings account interest.
• Applies only to individuals and Hindu Undivided Families (HUFs).
• Doesn’t apply to fixed deposits or recurring deposits—only savings accounts.
Example:
If you earned Rs. 12,000 as savings account interest, you can claim Rs. 10,000 deduction.
The remaining Rs. 2,000 will be taxable.
Special Note:
For senior citizens, there’s a separate section—80TTB—which allows up to Rs. 50,000
deduction on interest income. But for non-senior individuals, 80TTA is the one to use.
Pulling It All Together
Let’s imagine a simple story. You’re an individual taxpayer named Rohan.
• You invested Rs. 1,20,000 in PPF and paid Rs. 40,000 as life insurance premium.
That’s Rs. 1,60,000, but under 80C you can only claim Rs. 1,50,000.
• You paid Rs. 20,000 for your family’s health insurance and Rs. 45,000 for your senior
citizen parents. Under 80D, you can claim Rs. 20,000 + Rs. 45,000 = Rs. 65,000.
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• You earned Rs. 8,000 as savings account interest. Under 80TTA, you can claim the full
Rs. 8,000.
So, total deductions = 1,50,000 + 65,000 + 8,000 = Rs. 2,23,000. That’s how much your
taxable income reduces, just by using these three sections wisely.
Why Does the Government Offer These?
It’s not just generosity. The government wants to encourage:
• Savings and investments (80C).
• Health security (80D).
• Small savers’ relief (80TTA).
By giving tax breaks, they nudge people toward financial discipline and social security.
“This paper has been carefully prepared for educaonal purposes. If you noce any
mistakes or have suggesons, feel free to share your feedback.”
