BBA (ATA) - Fourth Semester | Module – 2 | Unit – 5

Computation of Gross Total Income

 Aggregation of Income:
In certain cases as specified between Section 68 to Section 69D of the Act, some amounts are
deemed as income in the hands of the assesse even though they are actually not in the nature
of income. The assessing officer may require the assesse to furnish an explanation w.r.t. such
cases and if the assesse fails to offer an explanation or if the explanation offered are not
satisfactory, the amount referred to in these sections would be deemed to be the income of
the assesse and have to be aggregated with the assesse’s income.

 Income of other persons includible in assesse’s total income:

Generally, an assesse is liable to pay tax on the income earned or deemed to be earned by
him, however the following income are to be clubbed in the income of the assesse even if
he/she has not earned it:
 Transfer of income without transfer of asset – Eg: Transfer of right to receive rent
without actually transferring the ownership of the property.
 Income arising from revocable transfer of asset.

 Clubbing of Income:
 Income arising to a spouse of an individual:
a) Remuneration received from a concern in which the individual is substantially
interested i.e holds 20% or more of voting power (in case of company) either
individually or jointly with relatives or if such person is entitled to 20% or more
of the profits of such concern during anytime of the PY.

Note:
o The clubbing will not take place if such remuneration is solely received on
account of any technical or professional qualification of the spouse.
o In case both the partners have substantial interest in a concern, income will
be clubbed in the hands of that spouse whose total income excluding such
remuneration is higher.

b) Income from an asset transferred without adequate consideration:

o Asset being other than house property – Income received from such asset to
be taxed in the hands of the transferor spouse.
o Asset being house property – Annual Value of such property to be taxed in
the hands of the transferor spouse.

Note:
o Only income arising from the transferred asset is to be clubbed. In case the
transferee spouse earns any income by investing the income from the
transferred asset will not be clubbed.

 Income arising to a son’s wife:

Income from an asset transferred without adequate consideration or for the benefits
of son’s wife will be clubbed in the hands of the transferor.
  Income of Minor Child:
All income of a minor child including a minor married daughter is to be clubbed in the
income of his or her parent whose income excluding such income is higher. The
parent in which such income is clubbed will be eligible for exemption from taxation
up to Rs.1,500/- per minor child.

Note:
o In case any income is solely earned by the minor on account of manual work
or from any activity involving his skill, talent or knowledge or experience will
not be clubbed.
o In case of a transfer of house property to a minor child (not being a minor
married daughter) by the parents, the income from such house property shall
be clubbed in the hands of the transferor parent (being a deemed owner) and
not in the hands of the parent whose income excluding such income is higher.

 Set-off of Losses:
 Intra Head or Inter Source Adjustment:
As per the provisions of the Act, the losses incurred by the assesse in respect of one
source shall be adjusted from the income earned by him from any other source under
the same head during the previous year.

Eg: Loss from one House Property can be set off against the income from another
house property or Loss from one business say Textile can be set off against the
income from another business say Printing.

Exceptions:
o Long Term Capital Loss can only be adjusted against long term capital gains.
o Speculation loss can be adjusted from of any other speculation profits.
o Loss from activity of owning and maintaining race horses can only be adjusted
from profits from such activity only.
o Losses from specified business can only be adjusted from profits from such
specified business only.

 Inter Head Adjustment:

As per the provisions of the Act, the losses under one head can be adjusted against
income earned from any other head in the same previous year.
Eg: Loss from one House Property can be set off against the income from business
say Textile.

Note:
o Loss under any head (except capital gains) can be set off against income under
any head including capital gains.
o Loss under the head PGBP cannot be set off against income under the head
Salaries.
o Loss under the head – Capital Gains can be set off against income under Capital
Gains only.
o Loss under the head – House Property up to Rs. 2 Lac can be set off against income
under any other head.
 Carry Forward of Losses:
 Loss under the Head – House Property: The unabsorbed loss i.e loss under the head
House Property after intra head as well as inter head adjustments shall be carried
forward and allowed to be adjusted with the income under the head House Property
only for a period up to 8 assessment years immediately after the previous year in
which the loss was first computed.

 Loss under the Head – PGBP: The unabsorbed loss i.e loss under the head PGBP after
intra head as well as inter head adjustments shall be carried forward and allowed to
be adjusted with the income under the PGBP only for a period up to 8 assessment
years immediately after the previous year in which the loss was first computed.
However, loss computed under speculative business cannot be carried forward.

 Loss under PGBP from Speculative Business: The unabsorbed loss i.e. loss under the
head PGBP exclusively from speculative business after adjustments with income from
any other speculative business shall be carried forward and allowed to be adjusted
with the income under the PGBP from speculative business only for a period up to 4
assessment years immediately after the previous year in which the loss was first
computed.

 Loss under PGBP from Specified Business: The unabsorbed loss i.e loss under the head
PGBP exclusively from specified business after adjustments with income from any
other specified business shall be carried forward and allowed to be adjusted with the
income under the PGBP from specified business only for an indefinite period
immediately after the previous year in which the loss was first computed.

 Loss under Capital Gains: The unabsorbed loss i.e. loss under the head Capital Gains
after adjustments with income from any other Capital Gains shall be carried forward
and allowed to be adjusted with the income under the head Capital Gains only for a
period up to 8 assessment years immediately after the previous year in which the loss
was first computed.

However, where the carried forward loss under capital gains is Short Term, it can be
adjusted with any capital gains viz Short Term or Long Term where as if it is a long
term capital loss, it can only be adjusted with long term capital gains.

 Loss from the activity of owning and maintaining of race horses: The unabsorbed loss
i.e. loss from these activities after adjustments with income from same activity shall
be carried forward and allowed to be adjusted with the income from same activity
only for a period up to 4 assessment years immediately after the previous year in
which the loss was first computed.

 Order of Set-off of Losses:

a) Current year depreciation
b) Current year capital expenditure on scientific research & family planning.
c) Brought forward loss from PGBP.
d) Unabsorbed Depreciation
e) Unabsorbed capital expenditure on scientific research & family planning.
Illustration:
1. Mr. A, aged 35 years submits the following particulars pertaining to AY 2023-24:
Particulars Amounts (Rs.)
Income from Salary (Computed) 4,00,000/-
Loss from Self Occupied Property -70,000/-
Loss from Let Out Property -1,50,000/-
Business Loss -1,00,000/-
Interest from Fixed Deposit 80,000/-

Compute the total income for Mr. A for the AY 2023-24.

Solution: Rs. 2,00,000/-

2. Mr. A, aged 35 years submits the following particulars pertaining to AY 2023-24:

Particulars Amounts (Rs.)
Income from Salary (Computed) 45,000/-
Loss from Self Occupied Property -24,000/-
Loss from Non Speculative Business -22,000/-
Loss from Speculative Business -4,000/-
Short Term Capital Loss -25,000/-
Long Term Capital Gains 19,000/-

Compute the total income for Mr. A for the AY 2023-24.

Solution: Rs. 21,000/-

3. Compute the Gross Total Income of Mr. F for the AY 2023-24 from the information given
below:
Particulars Amounts (Rs.)
Income from House Property 1,25,000/-
Income from Business before Depreciation 1,35,000/-
Short Term Capital Gains on unlisted shares 56,000/-
Long Term Capital Loss from Sale of Property 90,000/-
Current Year Depreciation 26,000/-
Dividend from Indian Companies 80,000/-
Brought Forward Business Loss (computed 6 years ago) 45,000/-

Solution: Rs. 3,25,000/-

4. Compute the taxable income of Mr. E with the following details:

Particulars Amounts (Rs.)
Income from Salaries 150,000/-
Income from Speculative Business 60,000/-
Loss from Non-Speculative Business 40,000/-
Short Term Capital Gains 80,000/-
Long Term Capital Loss of AY 21-22 30,000/-
Winning from Lotteries 20,000/-

Solution: Rs. 2,70,000/-

5. Compute the Gross Total Income of Mr. Sohan for the AY 2023-24 from the information
given below:
Particulars Amounts (Rs.)
Loss from Let Out House Property -40,000/-
Income from Salaries 3,00,000/-
Income from Sugar Business 50,000/-
Brought Forward Loss from Iron Ore Business -1,20,000/-
Short Term Capital Loss -60,000/-
Long Term Capital Gain 40,000/-
Dividend 5,000/-
Income from Lottery 50,000/-
Winning from Card Games 6,000/-
Short Term Capital Loss 10,000/-
Interest from Fixed Deposit 5,000/-
Interest from Post Office Savings Bank A/c 5,000/-

Solution: Rs. 3,27,500/-