DCM3204 DIRECT TAXES

Description

SESSION	JAN 2026
PROGRAM	BACHELOR OF COMMERCE
SEMESTER	VI
COURSE CODE & NAME	DCM3204 DIRECT TAXES

 

Assignment Set – 1

 

 

Q.1. I. Elaborate on the definition of “Person” under the Income Tax Act, 1961. II. Distinguish between direct and indirect taxes with the help of any five relevant points. (5+5 = 10 Marks)

Ans 1.

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

The word “Person” will be defined under section 2(31) of the Income Tax Act, 1961 and it is given the broadest definition to guarantee that any entity with income gets out of the tax net. The term “person” refers to the following categories: (i) An Individual, meaning a natural human that is male, female, or transgender, either resident or non-resident. (ii) An Hindu Undivided Family (HUF), which is a unique Indian legal entity made up of those who are descended in linear order from one common ancestor as well as their wives and unmarried daughters; (iii) A Company according to the Companies Act, including both Indian companies and foreign companies; (iv) A Firm, including a Limited

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Q.2. Mr Ravi Sharma has the following income during the financial year 2024-25: 1. Income from business in Kolkata managed from the U.S.A., Rs. 25,000 2. Income from pension for services rendered in India received in London, Rs. 15,000 (Computed) 3. Income from assets in Myanmar was received in India at Rs. 10,000. 4. Profit from business in Sri Lanka deposited in a bank there, Rs. 15,000. 5. Income from the profession in Kenya was received there, and it was set up in India for Rs. 15,000. 6. Profit on sale of machinery in India received in Nepal, Rs. 10,000. 7. Interest on the U.K. government securities, half of which was received in India, Rs. 5,000. 8. Untaxed income of the previous year brought in India during the previous year was Rs. 40,000. Calculate the Gross Total Income of Mr Ravi Sharma for the assessment year 2025-26, if he is (i) Ordinarily resident, (ii) Not-ordinarily resident, (iii) Non-resident.

Ans 2.

Rules for Taxability Based on Residential Status

In the Income Tax Act, 1961, the taxability of income depends on the status of residence that the tax payer is in. An Ordinarily Resident (OR) is liable for tax for his worldwide incomewhich includes all income earned, arising, or received anyplace within the world. A Not Ordinarily Resident (NOR) is taxable on the income earned in India, income accruing or arising in India or arising generated by a control or profession set up in India. A Non-Resident (NR) is taxable solely on the amount of income earned or considered to have been taken in India or accruing or accruing in Ind

 

 

Q.3. Mr Yash was an employee of X Ltd. At the time of leaving X Ltd. He was paid Rs. 3,50,000 as a leave salary, out of which Rs. 77,000 were exempted u/s 10 (10AA). After some time, he joined Y Ltd. He received Rs. 4,12,200 as leave salary at the time of his retirement on 31.12.2025. Compute taxable leave salary by considering below  information: 1. Salary from 1.3.2025 to 31.7.2025 Rs.22,600 2. Salary from 1.8.2025 to 31.12.2025 Rs.22,900 3. Duration of service: 14 years 4. Leave entitlement per year is 45 days. 5. Leave availed during service is 90 days. 6. Leave credit at retirement for 18 months.

Ans 3.

Exemption of Leave Salary under Section 10(10AA)

Salary for Leave (Leave Encashment) received at the time of retirement for a non-government employee is exempt from Section 10(10AA)(ii) in the amount of the least of the four limitations listed below. The remaining balance, after deducting the exemption already claimed from X Ltd. is taxable.

Step 1: Calculate Average Monthly Salary (Last 10 months)

Last 10

 

Assignment Set – 2

 

Q.4. Discuss the deductions expressly permitted in the computation of business income under the Indian Income Tax Act, 1961. (10 Marks)

Ans 4.

In the Income Tax Act, 1961 Profits and gains of a profession or business are figured under Section 28 to 44DB. Sections 30 through 37 explicitly permit deductions of specific expenses for business from the gross earnings for the purpose of calculating taxable business income. Only genuinely incurred business expenses are tax-deductible. The Act distinguishes between revenue expenses (fully tax-deductible) as well as capital expenditures (generally not deductible from income).

 

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

Ans 5.

Computation of Capital Gains for AY 2024-25

The house was purchased in 2001-02 and sold on 1st August 2023. Since it was held for more than 24 months, it is a Long-Term Capital Asset. Cost Inflation Index (CII) for 2001-02 = 100; CII for 2023-24 = 348 (as notified). Indexed Cost of Acquisition = Rs. 2,00,000 × (348 / 100) = Rs. 6,96,000.

Step 1: Compute Capital Gains

Particulars	Amount (Rs.)
Sale Price (Full Value of Consideration)	15,00,000
Less: Brokerage on sale @ 2% of Rs. 15,00,000	30,000
Net Sale Consideration	14,70,000

 

Q.6. Compute the Gross Total Income of Mr Rohan for the assessment year 2025-26 based on the given income and loss details. (10 Marks)

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

Compute the Gross Total Income of Mr Rohan for the assessment year 2025-26.

Ans 6.

Rules for Set-Off of Losses

The Income Tax Act, 1961, losses from one head may be set off against income of another head (inter-head set-off) with certain restrictions. Key rules: (1) House property loss is able to be offset against any other tax head that is up to. 2,000,000; the balance is carried forward. (2) Losses from business (non-speculative) can be offset against all income, excluding salaries and income from speculative sources. (3) Speculative business loss can be only set off against the speculative income of a business. (4) Capital loss that is short-term can be set off against both STCG as well as LTCG. Capital loss that is long-term can only be offset against LTCG. (5) loss from gambling games as well as horse race maintenance cannot be set off against any income. (6) Income