MODEL TEST PAPER 1

INTERMEDIATE COURSE: GROUP - I

PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2025-26.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Kamal, aged 45 years, commenced operations of the business of a new
three-star hotel in Delhi on 1.4.2024. He incurred capital expenditure of ₹ 50
lakhs on land in March, 2024 exclusively for the above business, and
capitalized the same in his books of account as on 1 st April, 2024. Further,
during the P.Y. 2024-25, he incurred capital expenditure of ₹ 2 crores (out of
which ₹ 50 lakhs was for acquisition of land and ₹ 1.50 crore was for
acquisition of building) exclusively for the above business. The payments in
respect of the above expenditure were made by account payee cheque. The
profits from the business of running this hotel (before claiming deduction
under section 35AD) for the A.Y.2025-26 is ₹ 85 lakhs.
He has employed 220 new employees during the P.Y.2024-25, the details of
whom are as follows –

No. of Date of Regular/ Total monthly

employees employment Casual emoluments per
employee (₹)

(i) 40 1.6.2024 Regular 24,000

(ii) 80 1.7.2024 Regular 24,500

(iii) 50 1.7.2024 Casual 25,500

(iv) 30 1.9.2024 Regular 25,000

(v) 20 1.12.2024 Casual 24,000

All regular employees participate in recognized provident fund and their

emoluments are paid by account payee cheque. His gross revenue from the
hotel is ₹ 11 crores. Mr. Kamal has opted out of the default tax regime under
section 115BAC.

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 Mr. Kamal also has another existing business of running a four-star hotel in
Ahmedabad, which commenced operations twenty years back, the profits
from which are ₹ 140 lakhs for the A.Y.2025-26.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) Assuming that Mr. Kamal has fulfilled all the conditions specified for
claim of deduction under section 35AD and has not claimed any
deduction under Chapter VI-A under the heading “C. – Deductions in
respect of certain incomes”, what would be the quantum of deduction
under section 35AD, which he is eligible to claim as deduction for
A.Y.2025-26?
(a) ₹ 250 lakhs
(b) ₹ 200 lakhs
(c) ₹ 100 lakhs
(d) ₹ 150 lakhs
(ii) What would be the income chargeable/loss under the head “Profits and
gains of business or profession” for the A.Y.2025-26 in the hands of
Mr. Kamal?
(a) ₹ 75 lakhs
(b) ₹ 140 lakhs
(c) ₹ 25 lakhs
(d) (₹ 10 lakhs)
(iii) Would Mr. Kamal be eligible for deduction under section 80JJAA in the
A.Y.2025-26? If so, what is the quantum of deduction?
(a) No, he would not be eligible for deduction u/s 80JJAA
(b) Yes; ₹ 75,00,000
(c) Yes; ₹ 81,72,000
(d) Yes; ₹ 99,72,000 (3 x 2 = 6 Marks)
2. Mr. Arvind, an Indian citizen, wants to file his return of income for the
previous year 2024-25. He required assistance for which he has approached
you. He has shared the following details relevant to the P.Y. 2024-25.
Mr. Arvind owned a house property in Bangalore and the same was rented
out for ₹ 65,000 p.m. to Mr. Arjun, a salaried employee. He claims that this
was the only income which he earned during the P.Y. 2024-25. However,
when you had sought for his bank statement, you observed the following
information additionally.
There is a credit for ₹ 23,975 towards income-tax refund which includes
₹ 5,775 towards interest on income-tax refund. On 15th August, 2024, the
bank statement showed a credit of ₹ 55,000 which he claimed to have
received as a gift from his grandchildren on his 60th birthday. On further
assessment you were able to understand that Mr. Arvind and his wife had
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 travelled to Mauritius during the P.Y. 2024-25 to spend some time with their
son, who is staying in Mauritius. On scrutiny of their passport and relevant
documents you conclude that they had left India on 27th September, 2024
and retuned on 31st March, 2025. During the 4 years preceding previous
year 2024-25, both had stayed in India for 320 days. Prior to that, they had
been staying only in India.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What is the residential status of Mr. Arvind for the P.Y. 2024-25?
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident
(d) Deemed resident but not ordinarily resident
(ii) Is there any requirement to deduct tax at source under section 194-IB
on such rent by Mr. Arjun? If yes, what would be the amount of TDS to
be deducted?
(a) No, there is no requirement to deduct tax at source under section
194-IB, since Mr. Arjun is a salaried employee
(b) Yes, Mr. Arjun is required to deduct tax at source of ₹ 39,000
under section 194-IB
(c) Yes, Mr. Arjun is required to deduct tax at source of ₹ 15,600
under section 194-IB
(d) No, there is no requirement to deduct tax at source under section
194-IB, since Mr. Arvind is a non-resident
(iii) Which of the following statements is correct with respect to advance
tax liability of Mr. Arvind for P.Y. 2024-25?
(a) Advance tax liability shall not arise to Mr. Arvind since he is a
non-resident
(b) Advance tax liability shall not arise, since Mr. Arvind is a resident
senior citizen and he has no income chargeable under the head
“Profits and gains of business or profession
(c) Advance tax liability shall arise, since he is a non-resident
(d) Advance tax liability shall arise, since his tax liability is not less
than ₹ 10,000 (3 x 2 = 6 Marks)
3. Roshini Ltd. has two units, one unit at Special Economic Zone (SEZ) and
other unit at Domestic Tariff Area (DTA). The unit in SEZ was set up and
started manufacturing from 12.5.2015 and unit in DTA from 15.6.2018. Total
turnover of Roshini Ltd. and Unit in DTA is ₹ 12,50,00,000 and 4,50,00,000,
respectively. Export sales of units in SEZ and DTA is ₹ 3,50,00,000 and
₹ 2,25,00,000, respectively and net profit of Unit in SEZ and DTA is
₹ 95,00,000 and ₹ 80,00,000, respectively. Out of the export sales of
₹ 3,50,00,000, ₹ 2,00,00,000 have been received in convertible foreign
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 exchange by 30.9.2025. Roshini Ltd. would be eligible for deduction under
section 10AA for -
(a) ₹ 20,78,125
(b) ₹ 41,56,250
(c) ₹ 11,87,500
(d) ₹ 23,75,000 (2 Marks)
4. What would be the tax liability of Ms. Savita, a resident, who attained the
age of 60 years on 01.04.2025 on the total income of ₹ 7,25,000, comprising
of salary income and interest on fixed deposits under default tax regime
under section 115BAC?
(a) ₹ 28,600
(b) ₹ 26,000
(c) ₹ 23,400
(d) ₹ 2,600 (1 Mark)

Division B – Descriptive Questions

Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Amit, having business of manufacturing of furniture, gives the following
Trading and Profit & Loss Account for the year ended 31.03.2025:
Trading and Profit & Loss Account
Particulars ₹ Particulars ₹
Opening Stock 5,62,500 Sales 2,33,25,000
Purchases 1,88,62,500 Closing Stock 6,75,000
Freight & Cartage 1,89,000
Gross profit 43,86,000
2,40,00,000 2,40,00,000
Bonus to staff 71,250 Gross profit 43,86,000
Rent of premises 80,250 Income-tax refund 30,000
Advertisement 7,500 Warehousing 22,50,000
charges
Bad Debts 1,12,500
Interest on loans 2,51,250
Depreciation 1,07,250
Goods and Services tax 1,62,525
demand paid

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 Salary 5,50,000
Miscellaneous 2,38,475
expenses
Net profit 50,85,000
66,66,000 66,66,000

Following are the further information relating to the financial year 2024-25:
(i) Income-tax refund includes amount of ₹ 4,570 of interest allowed
thereon.
(ii) Salary includes ₹ 30,000 paid to his brother which is unreasonable to
the extent of ₹ 5,000.
(iii) Advertisement expenses include an amount of ₹ 2,500 paid for
advertisement published in the souvenir issued by a political party. The
payment is made by way of an account payee cheque.
(iv) Miscellaneous expenses include an amount of ₹ 1,00,000 paid to
Political Party by cheque.
(v) Goods and Services Tax demand paid includes an amount of ₹ 5,300
charged as penalty for delayed filing of returns and ₹ 12,750 towards
interest for delay in deposit of tax.
(vi) Mr. Amiit had purchased a warehouse building of ₹ 20 lakhs in rural
area for the purpose of storage of agricultural produce. This was made
available for use from 15.07.2024 and the income from this activity is
credited in the Profit and Loss account under the head “Warehousing
charges”.
(vii) Depreciation under the Income-tax Act, 1961 works out at ₹ 65,000
excluding depreciation on warehouse building.
(viii) Interest on loans includes an amount of ₹ 80,000 paid to Mr. Mohit, a
resident, on which tax was not deducted.
Compute the total income and tax liability of Mr. Amit for the A.Y. 2025-26 in
a most beneficial manner. (15 Marks)
2. (a) Mr. Akash, an Indian citizen aged 45 years, worked in XYZ Ltd. in
Delhi. He got a job offer from ABC Inc., California on 01.06.2023. He
left India for the first time on 31.07.2023 and joined ABC Inc. on
08.08.2023. During the P.Y. 2024-25, Mr. Akash visited India from
25.05.2024 to 22.09.2024. He has received the following income for the
previous year 2024-25:
Particulars ₹
Salary from ABC Inc., California received in California 7,00,000
(Computed)
Dividend from Indian companies 5,00,000
Agricultural income from land situated in Nepal, received 4,00,000
in Nepal
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 Rent received/receivable from house property in Delhi 5,50,000
Profits from a profession in California, which was set up in 6,00,000
India, received there

Determine the residential status of Mr. Akash and compute his total
income for the A.Y. 2025-26 under default tax regime. (6 Marks)
(b) Examine and compute the liability for deduction of tax at source, if any,
in the cases stated hereunder, for the financial year ended 31 st March,
2025.
(i) State Bank of India pays ₹ 70,000 per month and ₹ 60,000 per
month as rent to the Central Government and Mr. Kunal,
respectively for building in which its branches are situated.
(ii) Payment of ₹ 2,50,000 to Mr. Deepak, a transporter who owns 8
goods carriages throughout the previous year. He does not
furnish his PAN. (4 Marks)
3. (a) Mr. Sahil, a resident individual, aged 40 years, is an assistant manager
of Fox Ltd. He is getting a salary of ₹ 55,000 per month. During the
previous year 2024-25, he received the following amounts from his
employer.
(i) Dearness allowance (10% of basic pay which forms part of salary
for retirement benefits).
(ii) Bonus of ₹ 60,000.
(iii) Fixed Medical allowance of ₹ 50,000 for meeting medical
expenditure.
(iv) He was also reimbursed the medical bill of his mother dependent
on him amounting to ₹ 6,500.
(v) Mr. Sahil was provided;
• a laptop both for official and personal use. Laptop was
acquired by the company on 1 st June, 2022 at ₹ 35,000.
• a domestic servant at a monthly salary of ₹ 8,000 which was
reimbursed by his employer.
(vi) Fox Ltd. allotted 700 equity shares in the month of October 2024
@ ₹ 170 per share against the fair market value of ₹ 280 per
share on the date of exercise of option by Mr. Sahil. The fair
market value was computed in accordance with the method
prescribed under the Act.
(vii) Professional tax ₹ 2,200 (out of which ₹ 1,400 was paid by the
employer).
Compute the Income under the head “Salaries” of Mr. Sahil for the
assessment year 2025-26 if he is paying tax under default tax regime
under section 115BAC. (5 Marks)

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 (b) Mr. Kushal is a resident but not ordinarily resident in India during the
Assessment Year 2025-26. He furnishes the following information
regarding his income/expenditure pertaining to his house properties for
the previous year 2024-25:
• He owns two houses, one in New York and the other in
Ahmedabad.
• The house in New York is let out there at a rent of $ 5,000 p.m.
The entire rent is received in India. He paid Property tax of
$ 1,250 and Sewerage Tax $ 750 there. ($ 1 = INR 81)
• The house in Ahmedabad is self-occupied. He had taken a loan of
₹ 30,00,000 to construct the house on 1 st September, 2019
@10%. The construction was completed on 31 st May, 2021 and
he occupied the house on 1 st June, 2021.
The entire loan is outstanding as on 31 st March, 2025. Property tax
paid in respect of the second house is ₹ 2,800.
Compute the income chargeable under the head "Income from House
property" in the hands of Mr. Kushal for the Assessment Year 2025-26
if he has opted out of the default tax regime under section 115BAC.
(5 Marks)
4. (a) Mr. Vishal, aged 33 years, submits the information of following
transaction/income during the P.Y. 2024-25
(i) Mr. Vishal had a house in Delhi. During financial year 2023-24, he
had transferred the said house to Ms. Deepika, daughter of his
brother without any consideration. House would go back to Mr.
Vishal after the life time of Ms. Deepika. The transfer was made
with a condition that 10% of rental income from such house shall
be paid to Mrs. Vishal. Rent received by Ms. Deepika during the
previous year 2024-25 from such house property is ₹ 5,50,000.
(ii) Mr. Vishal holds preference shares in M/s A Pvt. Ltd. He
instructed the company to pay dividend to Ms. Chandni, daughter
of his servant. The transfer is irrevocable for the lifetime of
Chandni. Dividend receivable by Ms. Chandni during the previous
year 2024-25 is ₹ 4,50,000.
(iii) Mr. Vishal has a short term capital loss of ₹ 16,000 from sale of
property and long term capital gain of ₹ 15,000 from sale of property.
(iv) Other income/loss of Mr. Vishal includes
- Interest from saving bank account of ₹ 1,75,000
- Cash gift of ₹ 75,000 received from daughter of his sister on
his birthday.
- Income from betting of ₹ 25,000
- Income from card games of ₹ 46,000
- Loss on maintenance of race horses of ₹ 14,600
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 Compute the total income of Mr. Vishal for the Assessment Year
2025-26 if he has opted out of the default tax regime and the losses to
be carried forward. (6 Marks)
(b) Enumerate the cases where a return of loss has to be filed on or before
the due date specified u/s 139(1) for carry forward of the losses. Also
enumerate the cases where losses can be carried forward even though
the return of loss has not been filed on or before the due date.
(4 Marks)
OR
(b) Mr. Vishnu has undertaken certain transactions during the F.Y.204-25,
which are listed below. You are required to identify the transactions in
respect of which quoting of PAN is mandatory in the related
documents–
S. No. Transaction
1. Sale of scooter for ₹ 70,000
2. Payment of life insurance premium of ₹ 67,000 to
insurance company
3. Purchase of plot for ₹ 9 lakhs while the stamp duty of the
same is ₹ 11 lakhs
4. Applied to PNB for issue of credit card.
(4 Marks)

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 MODEL TEST PAPER 2
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2025-26.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Pankaj, an Indian resident, purchased a residential house property at
Kanpur on 20.08.1998 for ₹ 20.5 lakhs. The fair market value and the stamp
duty value of such house property as on 1.4.2001 was ₹ 28.5 lakhs and ₹ 25
lakhs, respectively. On 05.02.2016, Mr. Pankaj entered into an agreement
with Mr. Gyan for the sale of such property for ₹ 61 lakhs and received an
amount of ₹ 2.5 lakhs as advance. However, as Mr. Gyan did not pay the
balance amount, Mr. Pankaj forfeited the advance.
On 10.05.2024, Mr. Pankaj sold the house property to Mr. Rohan for ₹ 1.50
crores, when the stamp duty value of the property was ₹ 2 crores. Further,
he purchased two residential house properties at Delhi and Mumbai for ₹ 57
lakhs each on 28.09.2025. Mr. Pankaj has no other income during the
P.Y. 2024-25. The due date for filing return of income for Mr. Pankaj is
31st July, 2025.
On 31.01.2026, Mr. Pankaj decided to sell the house property at Mumbai to
his brother, Mr. Gaurav, for ₹ 58 lakhs, from whom ₹ 25,000 was received in
cash on 15.01.2026 as advance for signing the agreement to sale. Sale
deed was registered on 30.03.2026 on receipt of the balance amount
through account payee cheque from Mr. Gaurav. The stamp duty value of
house property at Mumbai on 31.01.2026 and 30.03.2026 was ₹ 61 lakhs
and ₹ 64 lakhs, respectively.
Cost inflation index –
P.Y. 2024-25: 363; P.Y. 2015-16: 254; P.Y. 2001-02: 100
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What shall be the indexed cost of acquisition of residential house
property at Kanpur for computation of capital gains in the hands of
Mr. Pankaj?
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 (a) ₹ 81,67,500
(b) ₹ 90,75,000
(c) ₹ 94,38,000
(d) ₹ 1,03,45,500
(ii) The amount of capital gains taxable for A.Y. 2025-26 in the hands of
Mr. Pankaj for sale of residential house property at Kanpur is -
(a) Nil
(b) ₹ 81,67,500
(c) ₹ 52,25,000
(d) ₹ 1,09,25,000
(iii) The amount of capital gains taxable for A.Y. 2026-27 in the hands of
Mr. Pankaj for sale of residential house property at Mumbai is -
(a) ₹ 8 lakhs
(b) ₹ 7 lakhs
(c) ₹ 64 lakhs
(d) ₹ 1 lakh
(iv) The amount taxable under section 56(2)(x) in the hands of Mr. Gaurav,
if any, is -
(a) Nil
(b) ₹ 1 lakh
(c) ₹ 3 lakhs
(d) ₹ 6 lakhs
(v) What shall be the tax credit available with Mr. Pankaj with respect to
sale of property at Kanpur during P.Y. 2024-25 assuming the tax was
fully deducted by Mr. Rohan?
(a) ₹ 2,00,000
(b) ₹ 1,50,000
(c) ₹ 1,00,000
(d) ₹ 87,000
(vi) Is Mr. Pankaj required to file his return of income for A.Y. 2025-26?
(a) Yes, since his total income exceeds the basic exemption limit
(b) No, since his total income does not exceed the basic exemption
limit
(c) Yes, since tax deducted in his case exceeds ₹ 25,000
(d) Yes, since his total income before exemption under section 54
exceeds the basic exemption limit (6 x 2 = 12 Marks)
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2. Mrs. Deepika, wife of Mr. Santosh, started a business of trading in beauty
products on 15.7.2024. She invested ₹ 5 lakhs in the business on 15.7.2024
out of gift received from her husband, Mr. Santosh. She invested ₹ 4 lakhs
from her own savings on the same date. She earned profits of ₹ 9,00,000
from her business for the financial year 2024-25. Which of the following
statements is correct?
(a) Share of profit of ₹ 9,00,000 is includible in the hands of Mrs. Deepika
(b) Share of profit of ₹ 5,00,00 is includible in the hands of Mr. Santosh
and share of profit of ₹ 4,00,000 is includible in the hands of
Mrs. Deepika
(c) Share of profit of ₹ 4,00,000 is includible in the hands of Mr. Santosh
and share of profit of ₹ 5,00,000 is includible in the hands of
Mrs. Deepika
(d) Share of profit of ₹ 9,00,000 is includible in the hands of Mr. Santosh
(2 Marks)
3. Mr. X, a resident 47 years, has salary income (computed) of ₹ 7,25,000 and
agricultural income of ₹ 1,00,000 for the P.Y. 2024-25. Compute his tax
liability for A.Y. 2025-26 if he has opted out of the default tax regime under
section 115BAC.
(a) ₹ 59,800
(b) ₹ 72,500
(c) ₹ 75,400
(d) ₹ 80,600 (1 Mark)

Division B – Descriptive Questions

Question No. 1 is compulsory.
Attempt any two questions from the remaining three questions.
1. Mr. Sunil, aged 48 years, a resident Indian has furnished the following
particulars for the year ended 31.03.2025:
(i) He occupies ground floor of his residential building and has let out first
floor for residential use at an annual rent of ₹ 2,95,000. He has paid
municipal taxes of ₹ 25,000 for the current financial year. Both these
floors are of equal size.
(ii) As per interest certificate from HDFC bank, he paid ₹ 1,50,000 as
interest and ₹ 80,000 towards principal repayment of housing loan
borrowed for the above residential building in the year 2018.
(iii) He owns an industrial undertaking established in a SEZ and which had
commenced operation during the financial year 2019-20. Total turnover
of the undertaking was ₹ 400 lakhs, which includes ₹ 150 lakhs from
export turnover. Out of ₹ 150 lakhs, only ₹ 120 lakhs have been
received in India in convertible foreign exchange on or before
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 30.9.2025. This industrial undertaking fulfills all the conditions of
section 10AA of the Income-tax Act, 1961. Profit from this industry is
₹ 40 lakhs.
(iv) He employed 20 new employees for the said industrial undertaking
during the previous year 2024-25. Out of 20 employees, 12 were
employed on 1st May 2024 for monthly emoluments of ₹ 18,000 and
remaining were employed on 1 st September 2024 on monthly
emoluments of ₹ 12,000. All these employees participate in recognised
provident fund and they are paid their emoluments directly to their bank
accounts.
(v) He earned ₹ 30,000 and ₹ 40,000 as interest on saving bank deposits
and fixed deposits, respectively.
(vi) He also sold his vacant land on 01.12.2024 for ₹ 15 lakhs. The stamp
duty value of land at the time of transfer was ₹ 16 lakhs. This land was
acquired by him on 15.10.1998 for ₹ 2.80 lakhs. The FMV of the land
as on 1st April, 2001 was ₹ 4.8 lakhs and Stamp duty value on the said
date was ₹ 4 lakhs. He had incurred registration expenses of
₹ 12,000 at that time.
The cost of inflation index for the financial year 2024-25 and 2001-02
are 363 and 100, respectively.
(vii) He paid insurance premium of ₹ 40,000 towards life insurance policy of
his son, who is not dependent on him.
You are requested to compute total income and tax liability of
Mr. Sunil for the Assessment Year 2025-26 under default tax regime.
(15 Marks)
2. (a) Mrs. Sia D’Souza is an American, got married to Mr. Kabir of India in
New York on 14.02.2024 and came to India for the first time on
18.03.2024. She left for Australia on 16.08.2024. She returned to India
again on 23.03.2025.
On 01.04.2024, she had purchased a Flat in Mumbai, which was let out
to Mr. Sameer on a rent of ₹ 26,000 p.m. from 1.6.2024. She had taken
loan from an Indian bank for purchase of this flat on which bank had
charged interest of ₹ 2,05,000 upto 31.03.2025.
While in India, during the previous year 2024-25, she had received a
gold chain from her in laws worth ₹ 1,50,000 and ₹ 1,65,000 from very
close friends of her husband.
From the information given above, you are required to determine her
the residential status and compute her total income chargeable to tax
for the Assessment Year 2025-26 assuming she has shifted out of the
default tax regime under section 115BAC. (6 Marks)
(b) Briefly discuss the provisions of tax deduction/collection at source
under the Income-tax Act, 1961 and determine the amount, if any, of
TDS and TCS in respect of the following payments:

189
 (i) Mr. Harish bought an overseas tour programme package for
Switzerland for himself and his family of ₹ 10 lakhs on 01-11-2024
from an agent who is engaged in organising foreign tours in
course of his business. He made the payment by an account
payee cheque and provided the permanent account number to the
seller.
(ii) Mr. Aditya pays ₹ 55,00,000 during April 2024 to Mr. Naresh, for
supply of labour, for carrying out the construction work of his
factory. During the P.Y. 2023-24, Mr. Aditya’s turnover was ₹ 95
lakhs. (4 Marks)
3. (a) Ms. Priyanka, General Manager of ABC Ltd., Mumbai, furnishes the
following particulars for the financial year 2024-25:
(i) Salary ₹ 40,000 per month
(ii) Value of medical facility in a hospital maintained by the company
₹ 10,000
(iii) Rent free accommodation owned by the company during
P.Y. 2024-25
(iv) Housing loan of ₹ 7,00,000 given on 01.04.2024 at the interest
rate of 6% p.a. (No repayment made during the year). The rate of
interest charged by State Bank of India (SBI) as on 01.04.2024 in
respect of housing loan is 9.5%.
(v) A dining table was provided to Ms. Priyanka at her residence. This
was purchased on 1.6.2021 for ₹ 60,000 and sold to Ms. Priyanka
on 1.5.2024 for ₹ 30,000.
(vi) Personal purchases through credit card provided by the company
amounting to ₹ 10,000 was paid by the company. No part of the
amount was recovered from Ms. Priyanka.
(vii) A Maruti Suzuki car which was purchased by the company on
16.7.2022 for ₹ 2,50,000 was sold to the assessee on 14.7.2024
for ₹ 1,60,000.
Other income received by the assessee during the previous year
2024-25:
Particulars ₹
(a) Interest on Fixed Deposits with a company 7,000
(b) Income from specified mutual fund 3,000
(c) Interest on bank fixed deposits of a minor married 4,000
daughter
(viii) Deposit in PPF Account made during the year 2024-25 ₹40,000

190
 Compute the gross total income of Ms. Priyanka for the Assessment
year 2025-26 if she exercised the option to shift out of the default tax
regime under section 115BAC. (6 Marks)
(b) M/s. Ravi & sons, a partnership firm consisting of two partners, reports
a net profit of ₹ 7,50,000 before deduction of the following items:
➢ Salary of ₹ 25,000 each per month payable to two working
partners of the firm (as authorized by the deed of partnership)
➢ Depreciation on plant and machinery under section 32 is
₹ 2,50,000
➢ Interest on capital 15% per annum (as per the deed of
partnership).
The amount of capital eligible for interest is ₹ 6,00,000 for both
partners
➢ Carry forward loss of P.Y. 2023-24 - ₹ 50,000
Compute for A.Y. 2025-26:
(i) Book-profit of the firm under section 40(b) of the Income-tax Act,
1961.
(ii) Amount of salary that can be paid to working partners as per
section 40(b). (4 Marks)
4. (a) The following are the details relating to Mr. Roshan, a resident Indian,
relating to the year ended 31.03.2025
Particulars Amount
(₹)
Short term capital gain 1,50,000
Loss from house property [let out property] 2,50,000
Loss from speculative business 50,000
Loss from card games 20,000
Brought forward long term capital loss of A.Y. 2022-23 86,000
Dividend from ABC Ltd. 11,00,000
Loss from tea business 1,06,000
Mr. Roshan’s wife, Shamita is employed with Ray Ltd., at a monthly
salary of ₹ 25,000, where Mr. Roshan holds 21% of the shares of the
company. Shamita is not adequately qualified for the post held by her
in Ray Ltd.
You are required to compute taxable income of Mr. Roshan for the
A.Y. 2025-26 if he has exercised the option to shift out of the default
tax regime under section 115BAC. Ascertain the amount of losses
which can be carried forward. (6 Marks)
(b) In the following cases relating to P.Y.2024-25, the total income of the
assessee or the total income of any other person in respect of which
he/she is assessable under Income-tax Act does not exceed the basic
191
 exemption limit. You are required to state with reasons, whether the
assessee is still required to file the return of income or loss for
A.Y.2025-26 in each of the following independent situations:
(i) Manish & Sons (HUF) sold a residential house on which there
arose a long term capital gain of ₹ 12 lakhs which was invested in
Capital Gain Bonds u/s 54EC so that no long term capital gain
was taxable.
(ii) Samarth has incurred an expenditure of ₹ 1,20,000 towards
consumption of electricity, the entire payment of which was made
through banking channels. (4 Marks)
OR
(b) Briefly mention the provisions of Income-tax Act, 1961 with regard to
quoting Aadhaar Number under section 139AA of the Act. (4 Marks)

192
 MODEL TEST PAPER 3
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2025-26.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Rudra is engaged in the business of trading since 2018. His turnover for
the P.Y. 2023-24 was ₹ 6 crores. His minor daughter’s marriage is fixed in
December, 2024. He planned destination wedding in Goa for his minor
daughter. For the wedding, he withdrew ₹ 40,00,000 cash in the month of
September, 2024 and ₹ 65,00,000 cash in the month of October, 2024 from
Hamara Paisa Bank.
He booked 30 rooms for 5 days for the accommodation of his relatives in
Raho Hotel and paid ₹ 40,000 in cash as advance and balance by account
payee cheque. He took the catering services of Tasty Caterers, a sole
Proprietor, for the wedding for which he paid ₹ 10,20,000 on 15.10.2024. For
her wedding, he gifted his daughter a house property, purchased from SK
Builders on 10.10.2024 by account payee cheque for ₹ 15,00,000. The
stamp duty value of the property on 10.10.2024 is ₹ 16,00,000 and on the
date of transfer to minor daughter is ₹ 20,00,000.
Mr. Rudra paid ₹ 45,000 in cash and balance in cheque to travel agent for
the return ticket of some of his relatives to US. He regularly files his return of
income.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) The amount of tax to be deducted by Hamara Paisa Bank on cash
withdrawals by Mr. Rudra is -
(a) ₹ 10,000
(b) ₹ 25,000
(c) ₹ 1,70,000
(d) ₹ 1,85,000

193
 (ii) The amount of tax to be deducted by Mr. Rudra on payment made to
Tasty Caterers is -
(a) ₹ 10,200
(b) ₹ 20,400
(c) ₹ 51,000
(d) Nil
(iii) What shall be the amount taxable and in whose hands with respect to
purchase of immovable property by Mr. Rudra from SK Builders and
gift of the same to his daughter?
(a) ₹ 1,00,000 in the hands of Mr. Rudra and ₹ 20,00,000 in the
hands of minor daughter
(b) Nothing is taxable in the hands of Mr. Rudra and Minor daughter
(c) ₹ 1,00,000 in the hands of Mr. Rudra and nothing is taxable in the
hands of minor daughter
(d) Nothing is taxable in the hands of Mr. Rudra but ₹ 20,00,000 is
taxable in the hands of minor daughter (3 x 2 = 6 Marks)
2. Mr. Mayank had bought a residential house worth ₹ 2.5 crores at South
Extension, Delhi in 2018 and let out the house on rent to Mr. Rihaan. The
property was funded through loan from PNB. The interest due for
F.Y. 2024-25 to PNB is ₹ 25 lakhs, out of which he paid only ₹ 20 lakhs
during the year. Mr. Mayank then took a loan of ₹ 1.5 crores from SBI on
1.7.2024 for construction of first floor in that house for self-occupation. The
construction is in progress as on 31.3.2025. Mr. Mayank started repaying
EMIs due to SBI. During the P.Y. 2024-25, he repaid principal amount of
₹ 25 lakhs and ₹ 5 lakhs to PNB and SBI, respectively. He also paid interest
of ₹ 8 lakhs to SBI out of ₹ 10 lakhs, being interest due for the period from
1.7.2024 to 31.3.2025.
Mr. Mayank owns another house in Haryana. He transferred that house to
his minor daughter Miss Sia on her birthday as her birthday gift. Miss Sia
gave the said house to the local Panchayat from September, 2024 at a rent
of ₹ 5,000 per month. Mrs. Mayank’s total income for A.Y.2025-26 is higher
than that of Mr. Mayank. This is the first year when Miss Sia has any source
of income.
Mr. Mayank bought electric vehicle worth ₹ 50 lakhs on loan from BSM Bank
which it sanctioned on 1.4.2022. BSM Bank charged interest of ₹ 7 lakhs on
electric vehicle for the P.Y.2024-25. Mr. Mayank has also taken loan from
ABC Bank for his daughter’s higher education. He paid ₹ 50,000 as interest
to ABC Bank. He also paid mediclaim of ₹ 20,000 to New India Assurance
Scheme for insuring his health.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What is the amount of interest allowable as deduction u/s 24 to
Mr. Mayank for A.Y.2025-26?
194
 (a) ₹ 2 lakhs
(b) ₹ 25 lakhs
(c) ₹ 28 lakhs
(d) ₹ 35 lakhs
(ii) What is the amount of deduction permissible to Mr. Mayank under
Chapter VI-A of Income-tax Act, 1961 for A.Y. 2025-26 if he has opted
out of the default tax regime?
(a) ₹ 1,70,000
(b) ₹ 2,20,000
(c) ₹ 3,70,000
(d) ₹ 9,20,000
(iii) In whose hands would Sia’s rental income from house property at
Haryana be taxable and how much income would be taxable?
(a) In Sia’s hands; ₹ 24,500
(b) In Mr. Mayank’s hands; ₹ 24,500
(c) In Mrs. Mayank’s hands; ₹ 23,000
(d) It would change every year depending on the parent whose
income is higher in that year. (3 x 2 = 6 Marks)
3. Mr. Arpan (aged 35 years) submits the following particulars for the purpose
of computing his total income:
Particulars ₹
Income from salary (computed) 4,00,000
Loss from let-out house property (-) 2,20,000
Brought forward loss from let-out house property for the (-)2,30,000
A.Y. 2024-25
Business loss (-)1,00,000
Bank interest (FD) 80,000
Compute the total income of Mr. Arpan for the A.Y.2025-26 and the amount
of loss that can be carried forward for the subsequent assessment year
under normal provisions of the Act?
(a) Total income ₹ 2,00,000 and loss from house property of ₹ 2,50,000
and business loss of ₹ 20,000 to be carried forward to subsequent
assessment year.
(b) Total income ₹ 1,60,000 and loss from house property of ₹ 2,30,000 to
be carried forward to subsequent assessment year.
(c) Total income ₹ 4,00,000 and business loss of ₹ 20,000 to be carried
forward to subsequent assessment year.
(d) Total income is Nil and loss from house property of ₹ 70,000 to be
carried forward to subsequent assessment year. (2 Marks)
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4. Mr. Raja, aged 64 years, was not able to provide satisfactory explanation to
the Assessing Officer for the investments of ₹ 7 lakhs not recorded in the
books of accounts. What shall be the tax payable by him on the value of
such investments considered to be deemed income as per section 69?
(a) ₹ 2,18,400
(b) ₹ 55,000
(c) ₹ 5,46,000
(d) ₹ 54,600 (1 Mark)

Division B – Descriptive Questions

Question No. 1 is compulsory.
Attempt any two questions from the remaining three questions.
1. Mr. Ayush, a resident individual, aged 54 years, is engaged in the business
of manufacturing textiles. He earned profit of ₹ 82,45,000 as per profit and
loss account after debiting and crediting the following items:
(i) Depreciation ₹ 15,40,000
(ii) Short term capital gains on 01.05.2024 on transfer of listed equity
shares in a company on which STT is paid ₹ 10,00,000
(iii) He received income-tax refund of ₹ 15,550 which includes interest on
refund of ₹ 4,550.
(iv) Dividend income from Indian companies ₹ 15,00,000. Dividend
received from each company is less than ₹ 5,000.
Additional information –
(i) Mr. Ayush installed new plant and machinery for ₹ 65 lakhs on
1.10.2024 which was put to use on 1.1.2025. Depreciation (including
additional depreciation) on this amount of ₹ 65 lakhs is included in the
depreciation debited to profit and loss account which has been
computed as per Income-tax Rules, 1962.
(ii) Mr. Ayush took a loan from SBI of ₹ 50 lakhs on 1.9.2024 @10.5% p.a.
to purchase such plant and machinery. Total interest upto 31.3.2025
has been paid on 31.3.2025 and the same has been debited to profit
and loss account.
(iii) Advance tax paid during the year is ₹17,50,000
(iv) Ayush purchased goods for ₹ 40 lakhs from Mr. Ram, his brother. The
market value of the goods is ₹ 35 lakhs.
(v) He paid ₹ 40,000 as life insurance premium taken on the life of his
married daughter who is not dependent on him. The sum assured is
₹ 5,00,000 and the policy was taken on 1.4.2017.
(vi) He paid ₹ 45,000 by cheque towards health insurance policy covering
himself, his spouse and his children.

196
 (vii) On 1.7.2024, Mr. Ayush withdrew ₹ 1.5 crores in cash from three
current accounts maintained by him with SBI. There are no other
withdrawals during the year. He regularly files his return of income.
You are required to compute the total income and tax payable by Mr. Ayush
for the A.Y. 2025-26 assuming that he has shifted out of the default tax
regime under section 115BAC. (15 Marks)
2. (a) Miss Geeta, a citizen of India, got married to Mr. Peter of Australia and
left India for the first time on 20.8.2024. She has not visited India again
during the P.Y. 2024-25. She has derived the following income for the
year ended 31-3-2025:
Particulars ₹
(i) Income from sale of centrifuged latex processed 1,50,000
from rubber plants grown in kanyakumari.
(ii) Income from sale of coffee grown, cured, roasted 5,00,000
and grounded in Colombo. Sale consideration was
received in Chennai.
(iii) Income from sale of tea grown and manufactured in 12,00,000
West Bengal.
(iv) Income from sapling and seedling grown in a 2,00,000
nursery at Cochin. Basic operations were not
carried out by her on land.
You are required to determine the residential status of Miss Geeta and
compute the business income and agricultural income of Miss. Geeta
for the Assessment Year 2025-26. (6 Marks)
(b) Briefly discuss the provisions of tax deduction at source under the
Income-tax Act, 1961 and determine the amount, if any, of TDS in
respect of the following payments:
(i) Mr. Vikas received a sum of ₹ 10,20,000 on 28.02.2025 as pre-
mature withdrawal from Employees Provident Fund Scheme
before continuous service of 5 years on account of termination of
employment due to ill-health.
(ii) Indian Bank sanctioned and disbursed a loan of ₹ 12 crores to B
Ltd. on 31-12-2024. B Ltd. paid a sum of ₹ 1,20,000 as service fee
to Indian Bank for processing the loan application. (4 Marks)
3. (a) Mr. Jain and his wife Mrs. Jain are partners in a partnership firm
holding 25% share each. During the F.Y. 2024-25, the firm paid
₹ 2,50,000 to each of them as remuneration. Apart from this, they
provide you the following information in respect of F.Y. 2024-25:
(i) Salary received by Mr. Jain from his employer ₹ 12,50,000.
(ii) Interest on fixed deposit earned by Mrs. Jain ₹ 14,00,000. (The
fixed deposit was opened by using her "Stridhan")
(iii) Income of their three minor children Neeta, Meeta and Seeta was
₹ 15,000; ₹ 10,000 and ₹ 2,000 respectively.
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 You are required to compute the gross total income of Mr. and
Mrs. Jain as per the provisions of Income-tax Act for the A.Y. 2025-26
assuming that they have shifted out of the default tax regime.
(4 Marks)
(b) Mr. Ram, an employee of the Central Government is posted at New
Delhi. He joined the service on 1 st February, 2021. Details of his
income for the previous year 2024-25, are as follows:
(i) Basic salary: ₹ 3,80,000
(ii) Dearness allowance: ₹ 1,20,000 (40% forms part of pay for
retirement benefits)
(iii) Both Mr. Ram and Government contribute 20% of basic salary to
the pension scheme referred to in section 80CCD.
(iv) Gift received by Ram’s minor son on his birthday from friend:
₹ 70,000. (No other gift is received by him during the previous
year 2024-25)
(v) On 25.03.2024, Mr. Ram gifted a sum of ₹ 6,00,000 to Mrs. Ram
to start a business by introducing such amount as her capital. On
1st April, 2024, her total investments in business was ₹ 10,00,000
which includes ₹ 6,00,000 gifted by Mr. Ram. During the previous
year 2024-25, she has loss from such business ₹ 1,30,000.
(vi) Mr. Ram deposited ₹ 70,000 in Sukanya Samridhi account on
23.01.2025. He also contributed ₹ 40,000 in an approved annuity
plan of LIC to claim deduction u/s 80CCC.
(vii) He has taken an educational loan from SBI for his major son who
is pursuing MBA course from Gujarat University. He has paid
₹ 15,000 as interest on such loan.
Determine the total income of Mr. Ram for the assessment year
2025-26. Ignore provisions under section 115BAC. (6 Marks)
4. (a) Determine the capital gains/loss on transfer of listed equity shares (STT
paid both at the time of acquisition and transfer of shares) and units of
equity oriented mutual fund (STT paid at the time of transfer of units) for
the A.Y.2025-26 and tax, if any, payable thereon, in the following cases,
assuming that these are the only transactions covered under section
112A during the P.Y.2024-25 in respect of these assessees:
(i) Mr. Shagun purchased 300 shares in A Ltd. on 20.5.2017 at a
cost of ₹ 400 per share. He sold all the shares of A Ltd. on
31.5.2024 for ₹ 1200. The price at which these shares were
traded in National Stock Exchange on 31.1.2018 is as follows –
Particulars Amount in ₹
Highest Trading Price 700
Average Trading Price 680
Lowest Trading Price 660

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 (ii) Mr. Raj purchased 200 units of equity oriented fund, Fund A on
1.2.2017 at a cost of ₹ 550 per unit. The units were not listed at
the time of purchase. Subsequently, units of Fund A were listed
on 1.1.2018 on the National Stock Exchange. Mr. Raj sold all the
units on 3.4.2024 for ₹ 900 each. The details relating to quoted
price on National Stock Exchange and net asset value of the units
are given hereunder:
Particulars Fund A
Amount in ₹
Highest Trading Price 750 (on 31.1.2018)
Average Trading Price 700 (on 31.1.2018)
Lowest Trading Price 650 (on 31.1.2018)
Net Asset Value on 31.1.2018 800
(4 Marks)
OR
(a) Mr. Aman has furnished the following particulars relating to payments
made and expenditure incurred towards scientific research for the year
ended 31.3.2025:
Sl. Particulars ₹ (in lakhs)
No.
(i) Payment made to AB University, an approved 15
University
(ii) Payment made to Siya College 17
(iii) Payment made to IIT, Bangalore (under an 12
approved programme for scientific research)
(iv) Machinery purchased for in-house scientific 25
research
Compute the deduction available under section 35 of the Income-tax
Act, 1961 for A.Y. 2025-26, while computing his income under the head
“Profits and gains of business or profession” under default tax regime
under section 115BAC. (4 Marks)
(b) Mr. Sailesh is a Marketing Manager in Smile Ltd. From the following
information, you are required to compute his income chargeable under
the head Salary for assessment year 2025-26. He has opted out of the
section 115BAC.
(i) Basic salary is ₹ 70,000 per month.
(ii) Dearness allowance @ 40% of basic salary
(iii) He is provided health insurance scheme approved by IRDA for
which ₹ 20,000 incurred by Smile Ltd.
(iv) Received ₹ 10,000 as gift voucher on the occasion of his marriage
anniversary from Smile Ltd.
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(v) Smile Ltd. allotted 800 sweat equity shares in August 2024. The
shares were allotted at ₹ 450 per share and the fair market value
on the date of exercising the option by Mr. Sailesh was ₹ 700 per
share.
(vi) He was provided with furniture during September 2020. The
furniture is used at his residence for personal purpose. The actual
cost of the furniture was ₹ 1,10,000. On 31st March, 2025, the
company offered the furniture to him at free of cost. No amount
was recovered from him towards the furniture till date.
(vii) Received ₹ 10,000 towards entertainment allowance.
(viii) Housing Loan@ 4.5% p.a. provided by Smile Ltd., amount
outstanding as on 01.04.2024 is ₹ 15 Lakhs. ₹ 50,000 is paid by
Mr. Sailesh every quarter towards principal starting from June
2024. The lending rate of SBI for similar loan as on 01.04.2024
was 8%.
(ix) Facility of laptop costing ₹ 50,000 (6 Marks)

200
 MODEL TEST PAPER 4
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2025-26.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Sambhav (aged 48 years) furnishes the following particulars for the
previous year 2024-25 in respect of an industrial undertaking established in
"Special Economic Zone" in March 2018. It began manufacturing in April
2018.
Particulars (₹)
Total sales 85,00,000
Export sales [proceeds received in India by 30.9.2025] 45,00,000
Domestic sales 40,00,000
Profit from the above undertaking 20,00,000
Export Sales of F.Y. of 2024-25 include freight and insurance of ₹ 5 lakhs for
delivery of goods outside India.
He received rent of ₹ 30,000 per month for a commercial property let out to
Mr. Akash, a salaried individual. He earned interest on savings bank A/c of
₹ 15,000 and interest on Post Office savings A/c of ₹ 7,000 during the
P.Y. 2024-25.
Mr. Sambhav has shifted out of the default tax regime under section
115BAC.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) Compute the amount of export turnover and total turnover for purpose
of computing deduction under section 10AA for A.Y. 2025-26.
(a) ₹ 45,00,000 and ₹ 85,00,000, respectively
(b) ₹ 40,00,000 and ₹ 80,00,000, respectively
(c) ₹ 45,00,000 and ₹ 80,00,000, respectively
(d) ₹ 40,00,000 and ₹ 85,00,000, respectively

201
 (ii) Compute the amount of deduction available to Mr. Sambhav under
section 10AA for A.Y. 2025-26.
(a) ₹ 10,00,000
(b) ₹ 4,70,577
(c) ₹ 5,62,500
(d) ₹ 5,00,000
(iii) Compute the total income of Mr. Sambhav for A.Y. 2025-26.
(a) ₹ 17,60,500
(b) ₹ 12,60,500
(c) ₹ 18,72,000
(d) ₹ 17,64,000 (3 x 2 = 6 Marks)
2. Mr. Anshul, aged 54 years, an Indian citizen, is working as Assistant
Manager in ABC India Ltd. He is getting basic salary of
₹ 58,000 per month. He used to travel frequently out of India for his office
work. He left India from Delhi Airport on 5 th October, 2024 and returned to
India on 2 nd April, 2025.
For previous year 2024-25, following information are relevant;
(a) Dearness Allowance - 10% of Basic Pay (considered for retirement
purposes)
(b) Bonus - ₹ 98,000
(c) Medical allowance paid during P.Y. 2024-25 amounting to ₹ 60,000
(d) He was also reimbursed medical bill of his mother amounting to
₹ 15,000.
(e) He was also reimbursed salary of house servant of ₹ 4,000 per month.
(f) Professional tax paid by employer amounting to ₹ 2,400.
(g) 400 equity shares allotted by ABC India Ltd. at the rate of
₹ 250 per share against fair market value of share of ₹ 350 on the date
of exercise of option.
(h) Mr. Anshul has exercised the option to shift out of the default tax
regime under section 115BAC.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What is Mr. Anshul’s residential status for the A.Y. 2025-26?
(a) Resident but can’t determine resident and ordinarily resident or
resident but not ordinarily resident from the given information
(b) Non-Resident
(c) Resident but not ordinarily resident
(d) Resident and ordinarily resident

202
 (ii) What are his taxable perquisites for A.Y. 2025-26?
(a) ₹ 55,000
(b) ₹ 90,400
(c) ₹ 1,05,400
(d) ₹ 1,03,000
(iii) What is the income chargeable under the head “Salaries” in the hands
of Mr. Anshul for A.Y. 2025-26?
(a) ₹ 9,76,600
(b) ₹ 9,86,600
(c) ₹ 9,71,600
(d) ₹ 9,61,600 (3 x 2 = 6 Marks)
3. Mr. Ross, an Australian citizen, is employed in the Indian embassy in
Australia. He is a non-resident in India for A.Y. 2025-26. He received salary
and allowances in Australia from the Government of India for the year ended
31.03.2025 for services rendered by him in Australia. In addition, he was
allowed perquisites by the Government. Which of the following statements
are correct?
(a) Salary, allowances and perquisites received outside India are not
taxable in the hands of Mr. Ross, since he is non-resident
(b) Salary, allowances and perquisites received outside India by
Mr. Ross are taxable in India since they are deemed to accrue or arise
in India
(c) Salary received by Mr. Ross is taxable in India but allowances and
perquisites are exempt
(d) Salary received by Mr. Ross is exempt in India but allowances and
perquisites are taxable (2 Marks)
4. Which of the following returns can be revised under section 139(5)?
(i) A return of income filed u/s 139(1)
(ii) A belated return of income filed u/s 139(4)
(iii) A return of loss filed u/s 139(3)
Choose the correct answer:
(a) Only (i)
(b) Only (i) and (ii)
(c) Only (i) and (iii)
(d) (i), (ii) and (iii) (1 Mark)

203
 Division B – Descriptive Questions
Question No. 1 is compulsory.
Attempt any two questions from the remaining three questions.
1. Ms. Farah, aged 40 years, is an advocate (Taxation). She keeps her books
of accounts on accrual basis. Her profit & loss account for the year ended on
March 31, 2025 is as follows:
Profit & Loss Account for the year ending March 31, 2025
Amount Amount
(₹) (₹)
Staff salary 40,10,000 Fees Earned from:
Rent 9,00,000 Taxation services 50,00,000
Administrative 6,50,000 Appeals 16,00,000
expenses
Incentives to office 2,00,000 Consultancy 15,00,000 81,00,000
staff
Meetings, 1,70,000 Dividend from an Indian 11,00,000
Seminars and company (gross)
conferences
Purchase of car 3,00,000 Interest on deposit 25,000
(for official use) on certificates issued under gold
01.07.2024 monetization scheme, 2015
Repairs and 35,000 Honorarium received for 50,000
Maintenance of car valuation of answer papers
Travelling 5,00,000 Rent received in respect of 90,000
Expenses house property
Municipal tax paid 9,000
in respect of house
property
Net profit 25,91,000
93,65,000 93,65,000
Other information:
(i) Administrative expenses include ₹ 50,000 paid to a tax consultant in
cash for assisting Ms. Farah in one of the professional assignments.
(ii) The traveling expenses include expenditure incurred on foreign
professional tour of ₹ 50,000 which was within the RBI norms.
(iii) Ms. Farah paid medical insurance premium for her parents (senior
citizens and not dependent on her) online amounting ₹ 47,000. She
also paid ₹ 8,500 by cash towards preventive health check-up for
herself and her spouse.
(iv) Repairs and maintenance of car is for the period from 1-10-2024 to
30-09-2025.

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 (v) She has paid ₹ 1,00,000 towards advance tax during the P.Y. 2024-25.
Compute Total Income and Net tax payable as per the most beneficial
taxation scheme for Ms. Farah for the A.Y. 2025-26. (15 Marks)
2. (a) Sagar, a Chartered Accountant, is presently working in a firm in India.
He has received an offer for the post of Chief Financial Officer from a
company at New York. As per the offer letter, he should join the
company at any time between 1st September, 2024 and 31st October,
2024. He approaches you for your advice on the following issues to
mitigate his tax liability in India:
(i) Date by which he should leave India to join the company;
(ii) Direct credit of part of his salary to his bank account in Delhi
maintained jointly with his mother to meet requirement of his
family. (6 Marks)
(b) Briefly discuss the provisions of tax deduction/collection at source
under the Income-tax Act, 1961 and determine the amount, if any, of
TDS and TCS in respect of the following payments:
(i) Mr. Deepak wishes to purchase a residential house costing ₹ 60
lakhs from Ms. Priya. The house is situated at Chennai and its
stamp duty value is ₹ 65 lakhs. He also wants to purchase
agricultural lands in a rural area for ₹ 65 lakhs. Both the buyer as
well as the sellers are residents in India.
(ii) ABC & Co., a partnership firm is having a car dealership show-
room – 2. They have purchased cars for ₹ 2 crores from XYZ Ltd.,
car manufacturers, the cost of each car being more than ₹12
lakhs. They sell the cars to individual buyers at a price yielding
10% margin on cost. Turnover of ABC & Co. and XYZ Ltd. was
less than ₹ 10 crores during the P.Y. 2023-24. (4 Marks)
3. (a) Mr. Kamal, a resident but not ordinarily resident in India during the
Assessment Year 2025-26. He owns two houses, one in Dubai and the
other in Mumbai. The house in Dubai is let out there at a rent of DHS
20,000 p.m. (1DHS=INR 22). The entire rent is received in India. He
paid property tax of DHS 2,500 and Sewerage Tax DHS 1,500 there,
for the Financial Year 2024-25. The house in Mumbai is self-occupied.
He had taken a loan of ₹ 10,00,000 to construct the house on 1 st June,
2021 @12%. The construction was completed on 31 st May, 2023 and
he occupied the house on 1 st June, 2023. The entire loan is
outstanding as on 31 st March, 2025. Property tax paid in respect of the
second house is ₹ 2,400 for the Financial Year 2024-25. Compute the
income chargeable under the head "Income from House property" in
the hands of Mr. Kamal for the Assessment Year 2025-26 under
regular provisions of the Act. (5 Marks)
(b) Mr. Ashish entered into an agreement with Mr. Dhaval to sell his
residential house located at Navi Mumbai on 16.08.2024 for
₹ 80,00,000.

205
 The sale proceeds was to be paid in the following manner;
(i) 20% through account payee bank draft on the date of agreement.
(ii) 60% on the date of the possession of the property.
(iii) Balance after the completion of the registration of the title of the
property.
Mr. Dhaval was handed over the possession of the property on
15.12.2024 and the registration process was completed on 14.01.2025.
He paid the sale proceeds as per the sale agreement.
The value determined by the Stamp Duty Authority on 16.08.2024 was
₹ 90,00,000 whereas on 14.01.2025 it was ₹ 91,50,000.
Mr. Ashish had acquired the property on 01.04.2001 for ₹ 20,00,000.
After recovering the sale proceeds from Dhaval, he purchased another
residential house property in Kanpur for ₹ 15,00,000 during April, 2025.
Compute the income under the head "Capital Gains" for the
Assessment Year 2025-26.
Cost Inflation Index for Financial Year(s)
2001-02 - 100
2024-25 - 363 (5 Marks)
4. (a) Mr. Mohit submits the following information for the previous year
2024-25:
(Amount in ₹)
(i) Income from salary 6,50,000
(ii) Income from House-I 55,000
(iii) Loss from House-II (self-occupied property) 1,25,000
(iv) Loss from House-III 190,000
(v) Loss from leather business 68,000
(vi) Profit from cloth business 1,70,000
(vii) Short term capital loss in equity-oriented 35,000
funds on which STT was paid
(viii) Income from crossword puzzles 12,000
(ix) Dividend from foreign company (Gross) 8,500
(x) Loss on owning and maintenance of race 7,500
horses
(xi) Income from owning and maintenance of race 9,000
bulls

Compute the gross total income and losses to be carried forward of

Mr. Mohit for assessment year 2025-26 under regular provisions of the
Act. Mr. Mohit has filed his return of income on 25.07.2025. (6 Marks)

206
(b) What are the consequences of failure to intimate Aadhar Number. Is
there any fee for such default? (4 Marks)
OR
(b) (i) What is the fee for default in furnishing return of income u/s
234F?
(ii) To whom the provisions of section 139AA relating to quoting of
Aadhar Number do not apply? (4 Marks)

207
 MODEL TEST PAPER 5
INTERMEDIATE COURSE: GROUP - I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2025-26.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Raja, an Indian citizen, aged 61 years, has set-up his business in
Canada and is residing in Canada since 2009. He owns a house property in
Canada, half of which is used by him for his residence and half is given on
rent (converted into INR is ₹ 12,00,000 p.a.).
He purchased a flat in Delhi on 13.10.2019. He has taken a loan from
Canara Bank in India of ₹ 34,00,000 for purchase of this flat. The interest on
such loan for the F.Y. 2024-25 was ₹ 3,14,000 and principal repayment was
₹ 80,000. Mr. Raja has given this flat on monthly rent of ₹ 32,500 since April,
2024. The annual property tax of Delhi flat is ₹ 40,000 which is paid by
Mr. Raja, whenever he comes to India to meet his parents. Mr. Raja visited
India for 124 days during the previous year 2024-25. Before that he visited
India in total for 366 days during the period 1.4.2020 to 31.3.2024.
He had a house in Ranchi which was sold in May 2021. In respect of this
house, he received arrears of rent of ₹ 2,96,000 in February 2025 (not taxed
earlier).
Mr. Raja has sold 10,000 listed shares @ ₹ 480 per share of A Ltd., an
Indian company, on 15.9.2024, which he acquired on 05-04-2017 @ ₹ 100
per share. STT was paid both at the time of acquisition as well as at the time
of transfer of such shares.
On 31-01-2018, the shares of A Ltd. were traded on a recognized stock
exchange as under:
Highest price - ₹ 300 per share
Average price - ₹ 290 per share
Lowest price - ₹ 280 per share
Mr. Raja wants to pay tax under default tax regime under section 115BAC.

208
 Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) What would be the residential status of Mr. Raja for the A.Y. 2025-26?
(a) Resident and ordinarily resident in India
(b) Resident but not ordinarily resident in India
(c) Non-resident
(d) Deemed resident
(ii) What would be amount of income taxable under the head “Income from
house property” in the hands of Mr. Raja for the A.Y. 2025-26?
(a) ₹ 2,52,200
(b) ₹ 1,38,200
(c) ₹ 9,78,200
(d) ₹ 10,92,200
(iii) What amount of capital gain would arise in the hands of Mr. Raja on
transfer of shares of A Ltd?
(a) ₹ 18,00,000
(b) ₹ 19,00,000
(c) ₹ 20,00,000
(d) ₹ 38,00,000 (3 x 2 = 6 Marks)
2. Mr. Anay (aged 52 years), is a CEO of XYZ Enterprise Limited. During the
previous year 2024-25, he earned salary of ₹ 1,65,00,000 and long-term
capital gain on sale of listed equity shares (STT paid) amounting to
₹ 1,06,500. He earned interest of ₹ 4,82,778 on saving bank account.
Further, he has provided the following other information for filing his return of
income:
He does not receive house rent allowance from his employer. Mr. Anay took
a loan from State Bank of India on 27 th October 2021 for repairing his house
(self-occupied) at Delhi and paid interest on such borrowings of ₹ 80,000
and ₹ 1,50,000 towards principal amount during the previous year 2024-25.
Mr. Anay has made the following payments towards medical insurance
premium for health policies taken for his family members:
Medical premium for his brother: ₹ 13,500 (by cheque)
Medical premium for his parents: ₹ 17,670 (by cheque)
Medical premium for self and his wife: ₹ 21,000 (by cheque).
He also incurred ₹ 6,400 towards preventive health check-up of his wife in
cash. He deposited ₹ 1,00,000 towards PPF. He also deposited ₹ 50,000
and ₹ 2,50,000 towards Tier I and Tier II NPS A/c, respectively.

209
 He has paid ₹ 5,30,000 as advance tax. His employer has deducted tax at
source of ₹ 51,89,000. He is of the opinion that the balance amount of tax, if
any, he will pay on 27 th July 2025.
Mr. Anay shift out of the default tax regime under section 115BAC.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) What would be the amount of deduction available to Mr. Anay under
Chapter VI-A for the assessment year 2025-26?
(a) ₹ 2,04,070
(b) ₹ 2,42,670
(c) ₹ 2,52,670
(d) ₹ 2,02,670
(ii) Assume that, for the purpose of answering this question alone, that
Mr. Anay pays rent of ₹ 65,000 per month for his rented house at
Mumbai to Mr. C, a resident individual. Is Mr. Anay liable to deduct
TDS on such rent? If so, what would be the rate and amount of TDS?
(a) Yes, Mr. Anay is liable to deduct TDS @ 3.75% amounting to
₹ 2,438 every month i.e., at the time of payment of such rent
(b) Yes, Mr. Anay is liable to deduct TDS @2% amounting to
₹ 15,600 in the month of March 2025
(c) Yes, Mr. Anay is liable to deduct TDS @5% amounting to
₹ 39,000 in the month of March 2025
(d) No, Mr. Anay is not liable to deduct TDS, since he is a salaried
person
(iii) What would be the amount of interest chargeable under section 234B
on account of short payment of advance tax?
(a) ₹ 1,980
(b) Nil
(c) ₹ 3,130
(d) ₹ 2,410 (3 x 2 = 6 Marks)
3. On 20.10.2024, Piya (minor child) gets a gift of ₹ 20,00,000 from her father’s
friend. On the same day, the amount is deposited as fixed deposit in Piya’s
bank account. On the said deposit, interest of ₹ 13,000 was earned during
the P.Y. 2024-25. In whose hands the income of Piya shall be taxable? Also,
compute the amount of income that shall be taxable if both parents pay tax
under default tax regime.
(a) Income of ₹ 20,11,500 shall be taxable in the hands of Piya’s father.
(b) Income of ₹ 20,13,000 shall be taxable in the hands of Piya’s father.
(c) Income of ₹ 20,11,500 shall be taxable in the hands of Piya’s father or
mother, whose income before this clubbing is higher.
210
 (d) Income of ₹ 20,13,000 shall be taxable in the hands of Piya’s father or
mother, whose income before this clubbing is higher. (2 Marks)
4. Rohit, a resident Indian, has incurred ₹ 15,000 for medical treatment of his
dependent brother, who is a person with severe disability and has deposited
₹ 20,000 with LIC for his maintenance. Rohit shifts out of the default tax
regime for A.Y. 2025-26. Rohit would be eligible for deduction under section
80DD of an amount equal to –
(a) ₹ 15,000
(b) ₹ 35,000
(c) ₹ 75,000
(d) ₹ 1,25,000 (1 Mark)

Division B – Descriptive Questions

Question No. 1 is compulsory.
Attempt any two questions from the remaining three questions.
1. Mr. Amit, aged 45 years, a resident Indian has provided you the following
information for the previous year ended 31.03.2025
(i) He received royalty of ₹ 2,88,000 from abroad for a book authored by
him in the nature of artistic. The rate of royalty as 18% of value of
books and expenditure made for earning this royalty was ₹ 40,000. The
amount remitted to India till 30th September, 2025 is ₹ 2,30,000.
(ii) He owns an industrial undertaking established in a SEZ and which had
commenced operation during the financial year 2021-22. Total turnover
of the undertaking was ₹ 200 lakhs, which includes ₹140 lakhs from
export turnover which have been received in India in convertible foreign
exchange on or before 30.9.2025. Profit from this industry is ₹ 20 lakhs.
(iii) He was holding 30% equity shares in TSP (P) Ltd., an Indian company.
Company allotted shares to shareholders on 1st October, 2020. The
paid up share capital of company is ₹ 20 lakh divided into 2 lakh shares
of ₹ 10 each which were issued at a premium of ₹ 30 each.
He sold all these shares on 30th April, 2024 for ₹ 60 per share. Equity
shares of TSP (P) Ltd. are listed on National Stock Exchange and
Mr. Amit has paid STT both at the time of acquisition and transfer of
such shares. FMV on 31.1.2018 was ₹ 50 per share.
(iv) Received ₹ 30,000 as savings bank deposits.
(v) He occupies ground floor of his residential building and has let out first
floor for residential use at an annual rent of ₹ 2,28,000. He has paid
municipal taxes of ₹ 60,000 for the current financial year. Both floor are
of equal size.

211
 (vi) He paid insurance premium of ₹ 39,000 on life insurance policy of son,
who is not dependent on him and ₹ 48,000 on life insurance policy of
his dependent father.
(vii) He paid tuition fees of ₹ 42,000 for his three children to a school. The
fees being ₹ 14,000 p.a. per child.
You are required to compute the total income and tax liability of Mr. Amit
under normal provisions for the A.Y. 2025-26. (15 Marks)
2. (a) Mrs. Riya, aged 62 years, was born and brought up in New Delhi. She
got married in Russia in 1996 and settled there since then. Since her
marriage, she visits India for 60 days each year during her summer
break. The following are the details of her income for the previous year
ended 31.03.2025:
S. Particulars Amount
No. (in ₹)
1. Pension received from Russian Government 65,000
2. Long-term capital gain on sale of land at New Delhi 3,00,000
(computed)
3. Short-term capital gain on sale of shares of Indian 60,000
listed companies in respect of which STT was paid
both at the time of acquisition as well as at the
time of sale (computed)
4. Premium paid for self to Russian Life Insurance 75,000
Corporation at Russia
5. Rent received (equivalent to Annual Value) in 90,000
respect of house property in New Delhi
You are required to ascertain the residential status of Mrs. Riya and
compute her total income in India for Assessment Year 2025-26 under
default tax regime. (6 Marks)
(b) Mr. Sameer, aged 52 years, provides you the following information and
requests you to determine his advance tax liability with due dates for
the financial year 2024-25.
Estimated tax liability for the financial year 2024-25 ₹ 80,000
Tax deducted at source for this year ₹ 12,000
(4 Marks)
3. (a) Mr. Piyush runs a sole proprietorship firm and owns four machines
which was put in use for business in March, 2023. The depreciation on
these machines is charged @ 15%. The written down value of these
machines as on 1 st April, 2024 was ₹ 7,70,000. Two of the old
machines were sold on 15th July, 2024 for ₹ 10,00,000. A second hand
plant was bought for ₹ 6,10,000 on 30th December, 2024.
Further, Mr. Piyush has furnished the following particulars relating to
payments made and expenditure incurred towards scientific research
for the year ended 31.3.2025:
212
 Sl. No. Particulars ₹ (in lakhs)
(i) Payment made to UV University, an 15
approved University
(ii) Payment made to Satywati College 17
Compute the following for Assessment Year 2025-26
(i) Claim of depreciation
(ii) Capital gains liable to tax
(iii) Deduction available under section 35 if he has shifted out of the
default tax regime (6 Marks)
(b) Mr. Asif bought a vacant land for ₹ 80 lakhs in March 2005.
Registration and other expenses were 10% of the cost of land. He
constructed a residential building on the said land for ₹ 100 lakhs
during the financial year 2006-07.
He entered into an agreement for sale of the above said residential
house with Mr. Hari (not a relative) in July 2024. The sale consideration
was fixed at ₹ 600 lakhs and on the date of agreement, Mr. Asif
received ₹ 20 lakhs as advance in cash. The stamp duty value on that
date was ₹ 620 lakhs.
The sale deed was executed and registered on 10-2-2025 for the
agreed consideration. However, the State stamp valuation authority
had revised the values, hence, the value of property for stamp duty
purposes was ₹ 670 lakhs. Mr. Asif paid 1% as brokerage on sale
consideration received.
Subsequent to sale, Mr. Asif made investments in NHAI bond: ₹ 45
lakhs on 29-5-2025 and ₹ 15 lakhs on 12-7-2025.
Compute the Capital Gain chargeable to tax for A.Y. 2025-26.
Cost Inflation Index: F.Y. 2004-05 113
F.Y. 2006-07 122
F.Y. 2024-25 363 (4 Marks)
4. (a) Vijay Prasad, a non resident aged 50 years furnishes the following
information of the income from India for the year ended on 31-03-2025:
Income by way of salary (computed) 2,75,000
Short term capital loss (1,85,000)
Business income - Retail business 1,20,000
Business income - whole sale business (1,00,000)
Brought forward business loss (A.Y. 2022-23) (1,35,000)
Long term capital gain from sale of building
in April 2024 2,00,000
Lottery winnings (gross) 45,000

213
 Contribution to provident fund and NSC 1,50,000
Income of minor daughter Manisha from special talent 2,00,000
Compute his income tax liability assuming that he opts out of the
default tax regime under section 115BAC. (6 Marks)
(b) Mr. Kailash, a resident and ordinarily resident in India, could not file his
return of Income for the assessment year 2025-26 before due date
prescribed under section 139(1). Advise Mr. Kailash as a tax
consultant.
What are the consequences for non-filing of return of Income within the
due date under section 139(1)?
OR
(b) Mr. Naksh has undertaken certain transactions during the F.Y.2024-25,
which are listed below. You are required to identify the transactions in
respect of which quoting of PAN is mandatory in the related
documents–
S. Transaction
No.
1. Payment of life insurance premium of ₹ 40,000 in the
F.Y.2024-25 by account payee cheque to LIC for insuring life
of self and spouse
2. Payment of ₹ 1,10,000 to RBI for acquiring its bonds
3. Applied for issue of credit card to SBI
4. Payment of ₹ 1,00,000 by account payee cheque to travel
agent for travel to Singapore for 3 days to visit
(4 Marks)

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 MODEL TEST PAPER 6
INTERMEDIATE COURSE: GROUP-I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100
SECTION – A: INCOME TAX LAW (50 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.
The relevant assessment year is A.Y.2025-26.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Ashish born on 1.4.1964 furnished his return of income for Assessment
Year 2025-26 on 10.07.2025. He has paid tax under default tax regime. He
had shown the following income in his original return of income -
- Salary of ₹ 10.50 lakhs from PQR (P) Ltd (Computed)
- Interest from savings bank account of ₹ 15,700
- Interest from fixed deposits with SBI of ₹ 50,000.
During the P.Y. 2024-25, he paid interest on loan of ₹ 2,50,000 for purchase
of self-occupied property. He contributed ₹ 1,50,000 towards the PPF. He
paid health insurance premium of ₹ 40,000 by account payee cheque for self
and wife. He paid ₹ 2,200 in cash for his health check-up and ₹ 4,000 by
cheque for preventive health check-up of his parents. He also paid medical
insurance premium of ₹ 29,000 during the year to insure the health of his
mother, aged 80 years. He further incurred medical expenditure of ₹ 18,000
on his father, aged 81 years, who is staying with him. His father is not
covered under any mediclaim policy.
He met one of his friends, CA. Ashwin on 01.02.2026. While discussing with
his friend, his friend told him that the default tax regime under section
115BAC is not beneficial to him. He advised him to revise his return of
income and shift out of the default tax regime. However, Mr. Ashish’s son,
who is employed in the accounts department of TQM (P) Ltd., is of the view
that once tax is paid under section 115BAC in original return, it cannot be
changed in revised return.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) What is the total deduction under Chapter VI-A allowable to Mr. Ashish
if he shifts out of the default tax regime under section 115BAC?
(a) ₹ 2,34,800
(b) ₹ 2,35,000
215
 (c) ₹ 2,92,000
(d) ₹ 2,92,200
(ii) What is total income of Mr. Ashish under normal provisions of the Act
for A.Y. 2025-26?
(a) ₹ 5,73,700
(b) ₹ 6,23,700
(c) ₹ 6,48,700
(d) ₹ 6,30,700
(iii) Can Mr. Ashish file his revise return of income for A.Y. 2025-26 and
declare income under the regular provisions of the Act?
(a) Yes, Mr. Ashish can revise his return of income and declare
income under the regular provisions of the Act
(b) No, though he can file a revised return of income, option to shift
out from section 115BAC once not opted in original return of
income cannot be opted in revised return of income if he is filing
revised return after due date.
(c) No, Mr. Ashish cannot revise his return of income for
A.Y. 2025-26
(d) No, he cannot do so since he is a salaried employee. He would
have made a declaration to pay tax under section 115BAC to his
employer, which cannot be changed subsequently at the time of
fling of return of income (3 x 2 = 6 Marks)
2. Mr. Rajiv, an Indian resident, purchased a residential house property at
Gwalior on 28.05.1999 for ₹ 28.5 lakhs. The fair market value and the stamp
duty value of such house property as on 1.4.2001 was ₹ 33.5 lakhs and
₹ 32.4 lakhs, respectively. On 25.03.2014, Mr. Rajiv entered into an
agreement with Mr. Virat for sale of such property for ₹ 74 lakhs and
received an amount of ₹ 3.9 lakhs as advance. However, as Mr. Virat did not
pay the balance amount, Mr. Rajiv forfeited the advance.
On 15.04.2024, Mr. Rajiv sold the house property to Mr. Suraj for ₹ 2.10
crores, when the stamp duty value of the property was ₹ 2.33 crores.
Cost inflation index –
P.Y. 2024-25: 363; P.Y. 2013-14: 220; P.Y. 2001-02: 100
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) What shall be the indexed cost of acquisition of residential house
property at Gwalior for computation of capital gains in the hands of Mr.
Rajiv?
(a) ₹ 1,17,61,200
(b) ₹ 1,03,45,500
(c) ₹ 1,07,44,800
216
 (d) ₹ 1,05,27,200
(ii) The amount of capital gains for A.Y. 2025-26 in the hands of Mr. Rajiv
for sale of residential house property at Gwalior is -
(a) ₹ 1,13,38,800
(b ₹ 1,15,38,800
(c) ₹ 1,29,54,500
(d) ₹ 1,25,55,200
(iii) The amount required to be deducted as TDS by Mr. Suraj under
section 194-IA, is -
(a) ₹ 2,33,000
(b) Nil
(c) ₹ 2,10,000
(d) ₹ 23,000 (3 x 2 = 6 Marks)
3. Mr. Sushil is a person of Indian origin, residing in Canada. During
P.Y. 2024-25, he visited India on several occasions and his period of stay, in
total, amounted to 129 days during P.Y. 2024-25 and his period of stay in
India during P.Y. 2023-24, P.Y. 2022-23, P.Y.2021-22, P.Y. 2020-21 was
135 days, 115 days, 95 days and 125 days, respectively. He earned the
following incomes during the P.Y. 2024-25:
Source of Income Amount (₹)
Income received or deemed to be received in India 2,50,000
Income accruing or arising or which is deemed to accrue or 3,75,000
arise in India
Income accruing or arising and received outside India from 5,50,000
business controlled from India
Income accruing or arising and received outside India from 6,50,000
business controlled outside India
What is the residential status of Mr. Sushil for A.Y. 2025-26 and his income
liable to tax in India during A.Y. 2025-26?
(a) Non-Resident; ₹ 6,25,000 is liable to tax in India
(b) Resident and ordinary resident; ₹ 18,25,000 is liable to tax in India
(c) Resident but not ordinarily resident; ₹ 11,75,000 is liable to tax in India
(d) Non-Resident; ₹ 11,75,000 is liable to tax in India (2 Marks)
4. Mr. Arora made the following cash withdrawals during the P.Y.2024-25 -
Date Amount From
1.6.2024 ₹ 70 lakhs Canara Bank
1.8.2024 ₹ 50 lakhs Canara Bank
1.10.2024 ₹ 60 lakhs Repco Bank (Co-operative Bank)

217
 1.11.2024 ₹ 10 lakhs SBI
1.12.2024 ₹ 10 lakhs Repco Bank (Co-operative Bank)
20.1.2025 ₹ 20 lakhs Repco Bank (Co-operative Bank)
1.2.2025 ₹ 15 lakhs Repco Bank (Co-operative Bank)
10.2.2025 ₹ 75 lakhs SBI
1.3.2025 ₹ 15 lakhs SBI
Which of the above banks are required to deduct tax at source on cash
withdrawals made by Mr. Arora in the P.Y.2024-25 if he regularly files his
return of income?
(a) Canara Bank
(b) SBI & Repco
(c) Repco & Canara Bank
(d) Repco (1 Mark)
Division B – Descriptive Questions
Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Ashok, aged 61 years, a resident individual, engaged in a wholesale
business of stationary products provides you the following information for the
year ended 31.3.2025. He is also a partner in UVW & Co., a partnership
firm.
Sl. Particulars ₹ ₹
No.
(i) Interest on capital received from UVW & Co., at 1,40,000
14% [in accordance with the partnership deed]
(ii) Share of profit from the firm 44,000
(iii) Salary as working partner (fully allowed in the 1,00,000
hands of the firm)
(iv) Interest from bank on fixed deposit (Net of 49,500
TDS)
(v) Interest on saving bank account 13,300
(vi) Income-tax refund received relating to 34,500
assessment year 2024-25 including interest of
₹ 1,400
(vii) Net profit from wholesale business 6,60,000
Amounts debited include the following:
- Depreciation as per books 34,000
- Motor car expenses 40,000
- Municipal taxes for the shop 7,000

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 (For two half years; payment for one half year
made on 12.7.2024 and for the other on
31.12.2025)
- Salary to manager by way of a single cash 22,000
payment
(viii) The WDV of the assets (as on 1.4.2024) used
in above wholesale business is as under:
- Computers 2,40,000
- Computer printer 1,50,000
(ix) Motor car acquired on 31.12.2024 (20% used 6,80,000
for personal use)
(x) He owned a house property in Mumbai which 1,35,000
was sold in January, 2021. He received arrears
of rent in respect of the said property in
October, 2024.
(x) LIP paid for independent son 60,000
(xi) PPF of his wife 70,000
(xii) Health insurance premium paid by way of A/c 35,000
payee cheque for self
(xiii) Contribution toward Prime Minister National 50,000
Relief Fund
You are required to compute the total income and tax liability of Mr. Ashok
for the A.Y. 2025-26 assuming he opts out from the provisions of section
115BAC. (15 Marks)
2. (a) Mr. Sudesh (aged 58 years), a citizen of India, serving in the Ministry of
Finance in India, was transferred to Indian Embassy in UK on 15 th
March 2024. His income during the financial year 2024-25 is given
hereunder:
Particulars ₹
Rent from a house situated at UK, received in UK. 5,25,000
Thereafter, remitted to Indian bank account.
Salary from Government of India 9,25,000
Foreign Allowances from Government of India 8,00,000
Mr. Sudesh did not come to India during the financial year 2024-25.
Compute his total income for the Assessment year 2025-26. (3 Marks)
(b) Mr. Sumit has submitted his income-tax return containing certain
losses/deductions in respect of the P.Y. 2024-25 on 22.10.2025. The
due date for filing the return for Mr. Sumit was 31st July, 2025 under
section 139(1). You are required to examine with reference to the
relevant provisions of Income-tax Act, 1961 whether the following
losses/deductions can be carried forward/claimed in subsequent years
by Mr. Sumit if he pays tax under default tax provisions of the Act.
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 (i) Loss from the business carried on by him as a proprietor:
₹ 10,80,000 (computed)
(ii) Unabsorbed Depreciation: ₹ 2,00,000 (computed)
(iii) Loss from let out house property: ₹ 2,50,000 (computed)
(3 Marks)
(c) Briefly discuss the provisions of tax deducted at source under the
Income-tax Act, 1961 in respect of the following payments:
(i) Mr. Shamsher (a resident individual aged 65 years) has
maintained two fixed deposits in two different branches of HFC
Bank of India (working on core banking solution). During the year
2024-25, the bank paid ₹ 32,000 and ₹ 17,000 as interest on
these fixed deposits.
(ii) Mr. Chetan, a pensioner, pays ₹ 55,00,000 in November 2024 to
Mr. Gopi, for contract payment for reconstruction of his residential
house. (4 Marks)
3. (a) Mr. Yogesh constructed a house in P.Y. 2017-18 with 3 independent
units. During the P.Y. 2024-25, Unit - 1 (50% of floor area) is let out for
residential purpose at monthly rent of ₹ 20,000. Rent of January, 2025
could not be collected from the tenant and a notice to vacate the unit
was given to the tenant. No other property of Mr. Yogesh is occupied
by the tenant. Unit - 1 remains vacant for February and March 2025
when it is not put to any use. Unit - 2 (25% of the floor area) is used by
Mr. Yogesh for the purpose of his business, while Unit - 3 (the
remaining 25%) is utilized for the purpose of his residence. Other
particulars of the house are as follows:
Municipal valuation - ₹ 2,88,000
Fair rent - ₹ 2,98,000
Standard rent under the Rent Control Act - ₹ 2,78,000
Municipal taxes - ₹ 30,000 paid by Mr. Yogesh
Repairs - ₹ 7,000
Interest on capital borrowed for the construction of the property -
₹ 90,000,
Ground rent - ₹ 6,000 and
Fire insurance premium paid - ₹ 60,000.
Income of Yogesh from the business is ₹ 2,40,000 (without debiting
house rent and other incidental expenditure).
Determine the taxable income of Mr. Yogesh for the assessment year
2025-26 if he pays tax under section 115BAC. (5 Marks)
(b) Mr. Soham, a builder, entered into an agreement on 1.4.2024 with
Mr. Aman to transfer 4 th Floor in Tower A of a new project for
₹ 1,50,00,000. He received ₹ 25 lakhs as advance in cash on 1.4.2024.
The stamp duty value of such floor on that date was ₹ 1,70,00,000. The
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 sale deed was executed and registered on 15.6.2024 for the agreed
consideration. However, the stamp duty value on that date was
₹ 1,75,00,000.
Discuss the tax consequences of above, in the hands of Mr. Soham
and Mr. Aman. (5 Marks)
4. (a) Mr. Mohan, aged 30 years, submits the information of following
transaction/income during the P.Y. 2024-25
(i) Mr. Mohan had a house in Delhi. During financial year 2020-21,
he had transferred the said house to Ms. Veena, daughter of his
brother without any consideration. House would go back to
Mr. Mohan after the life time of Ms. Veena. The transfer was
made with a condition that 15% of rental income from such house
shall be paid to Mrs. Mohan. Rent received by Ms. Veena during
the previous year 2024-25 from such house property is
₹ 6,50,000.
(iii) Mr. and Mrs. Mohan forms a partnership firm with equal share in
profits. Mr. Mohan transferred a fixed deposit of ₹ 50 lakhs to
such firm. Firm had no income or expense other than the interest
of ₹ 6,00,000 received from such fixed deposit. Firm distributed
the entire surplus to Mr. and Mrs. Mohan at the end of the year.
(iv) Mr. Mohan holds preference shares in M/s X Pvt. Ltd. He
instructed the company to pay dividends to Ms. Roshni, daughter
of his servant. The transfer is irrevocable for the life time of
Roshni. Dividend received by Ms. Roshni during the previous year
2024-25 is ₹ 10,00,000.
(v) Mr. Mohan has a short term capital loss of ₹ 16,000 from sale of
property and long term capital gain of ₹ 15,000 from sale of
property.
(vi) Other income of Mr. Mohan includes
- Interest from saving bank account of ₹ 2,00,000
- Cash gift of ₹ 75,000 received from daughter of his sister on
his birthday.
- Income from betting of ₹ 34,000
- Income from card games of ₹ 46,000
- Loss on maintenance of race horses of ₹ 14,600
Compute the total income of Mr. Mohan for the Assessment Year
2025-26 and the losses to be carried forward if he pays tax under
default tax regime. (7 Marks)
(b) Mr. Prince, a senior citizen, has reported a Total Income ₹ 1,90,000.
He has claimed exemption of ₹ 50,000 under section 54EC in respect
of long term capital gain on sale of house property and deductions
under Chapter VI-A amounting to ₹ 1,50,000 for the previous year

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 2024-25. Is he liable to file his return of income under section 139(1)
for the Assessment year 2025-26? If so why? (3 Marks)
OR
(b) Examine with reasons, whether the following statements are true or
false, with regard to the provisions of the Income-tax Act, 1961:
(i) The Assessing Officer has the power, inter alia, to allot PAN to
any person by whom no tax is payable.
(ii) Where the Karta of a HUF is absent from India, the return of
income can be verified by any male member of the family.
(3 Marks)

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 MODEL TEST PAPER 7
INTERMEDIATE COURSE: GROUP-I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100

SECTION – A: INCOME TAX LAW (50 MARKS)

Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.

The relevant assessment year is A.Y.2025-26.

Division A – Multiple Choice Questions

Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Mr. Amit, an Indian citizen, aged 61 years, has set-up his business in France
and is residing in France since 2010. He owns a house property in France,
half of which is used by him for his residence and half is given on rent
(converted into INR is ` 12,00,000 p.a.).
Mr. Amit visited India for 65 days during the previous year 2024-25. Before
that he visited India in total for 366 days during the period 1.4.2020 to
31.3.2024.
He derived some other incomes during the F.Y. 2024-25 which are as follows:
(i) Profit from business in France ` 2,75,000
(ii) Interest on bonds of a Co. in France ` 6,20,000 out of which 50% was
received in India.
(iii) Income from Apple Orchid in Nepal given on contract and the yearly
contract fee of ` 5,00,000 for F.Y. 2024-25, was received by Amit in
Nepal.
Mr. Amit has sold 10,000 listed shares @ ` 480 per share of ABC Ltd., an
Indian company, on 15.9.2024, which he acquired on 05-04-2021 @ ` 100 per
share. STT was paid both at the time of acquisition as well as at the time of
transfer of such shares.
On 31-01-2018, the shares of ABC Ltd. were traded on a recognized stock
exchange as under:
Highest price - ` 300 per share
Average price - ` 290 per share
Lowest price - ` 280 per share

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 Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) What would be the residential status of Mr. Amit for the A.Y. 2025-26?
(a) Resident and ordinarily resident in India
(b) Resident but not ordinarily resident in India
(c) Non-resident
(d) Deemed resident
(ii) What amount of capital gain would arise in the hands of
Mr. Amit on transfer of shares of ABC Ltd?
(a) ` 18,00,000
(b) ` 19,00,000
(c) ` 20,00,000
(d) ` 38,00,000
(iii) What would be the total income of Mr. Amit for the A.Y. 2025-26?
(a) ` 41,10,000
(b) ` 38,00,000
(c) ` 21,10,000
(d) ` 49,50,000 (3 x 2 = 6 Marks)
2. Miss Himani transferred to his husband, Mr. Hemant, a residential property
worth ` 45 lakhs located in Nagpur without any consideration. The expected
rent of such property is ` 5 lakhs. Municipal tax of ` 5,000 paid by Miss Himani
for this property during the previous year 2024-25. Miss Himani has three
residential properties in Mumbai. The expected rent from the 3 properties
situated in Mumbai is ` 10 lakhs, ` 11 lakhs and ` 12 lakhs respectively. She
purchased the properties out of her own funds. Municipal taxes due are
` 15,000, ` 20,000 and ` 25,000. The same have, however, not been paid this
year in respect of the three properties. The expected rent is lesser than the
standard rent in case of all the aforementioned properties. Miss Himani does
not have any income from any other source.
Miss Himani’s father, aged 58 years had capital gains of ` 5 crores from sale
of house property. He reinvested the proceeds from sale in another residential
house of ` 4.98 crores and the remaining sale proceeds were deposited in his
savings bank account. He has paid ` 1,50,000 towards LIC premium. He has
no other source of income.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:
(i) What is the amount of income liable to be taxed in the hands of Miss
Himani under the head “Income from House Property” for A.Y.2025-26?
(a) ` 7,00,000
(b) ` 10,46,500
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 (c) ` 10,50,000
(d) ` 13,76,500
(ii) What would be tax liability of Miss Himanil for the A.Y. 2025-26?
Compute in a manner so that her tax liability is minimum.
(a) ` 66,300
(b) ` 59,250
(c) ` 69,650
(d) ` 1,31,510
(iii) Is Himani’s father required to furnish his return of income in India for the
A.Y.2025-26?
(a) No, he is not required, since his income does not exceed basic
exemption limit
(b) Yes, he is required to furnish return of income on or before 31 st
July, 2025
(c) Yes, he is required to furnish return of income on or before 30 th
September, 2025
(d) Yes, he is required to furnish return of income on or before 31 st
October, 2025
(3 x 2 = 6 Marks)
3. During the P.Y.2024-25, Mr. Ranjit has short-term capital gains of ` 95 lakhs
taxable under section 111A, long-term capital gains of ` 110 lakhs taxable
under section 112A and business income of ` 90 lakhs. Which of the following
statements is correct if Mr. Ranjit is paying tax under default tax regime?
(a) Surcharge @15% is leviable on income-tax computed on total income of
` 2.95 crore.
(b) Surcharge @25% is leviable on income-tax computed on total income of
` 2.95 crore, since total income exceeds ` 2 crore.
(c) Surcharge @15% is leviable in respect of income-tax computed on
capital gains of ` 2.05 crore; in respect of business income, surcharge
is leviable @25% on income-tax, since total income exceeds ` 2 crore.
(d) Surcharge @15% is leviable in respect of income-tax computed on
capital gains of ` 2.05 crore; surcharge @10% is leviable on income-tax
computed on business income, since the same exceeds ` 50 lakhs but
is less than ` 1 crore. (2 Marks)
4. Mr. Raj incurred short-term capital loss of ` 10,000 on sale of shares through
the National Stock Exchange. Such loss -
(a) can be set-off only against short-term capital gains
(b) can be set-off against both short-term capital gains and long-term capital
gains.

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 (c) can be set-off against any head of income.
(d) not allowed to be set-off.
(1 Mark)
Division B – Descriptive Questions
Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. (a) Mr. Sahil, resident Indian aged 40 years, a Manufacturer at Chennai,
gives the following Manufacturing, Trading and Profit & Loss Account for
the year ended 31.03.2025.
Manufacturing, Trading and Profit & Loss Account
for the year ended 31.03.2025
Particulars ` Particulars `
To Opening Stock 4,97,000 By Sales 3,04,50,000
To Purchase of Raw By Closing Stock 14,00,000
Materials 1,20,43,500
To Manufacturing
Wages & Expenses 40,63,500
To Gross Profit 1,52,46,000
Total 3,18,50,000 Total 3,18,50,000
To Administrative By Gross Profit 1,52,46,000
Charges 20,30,000 By Dividend From
To SGST Penalty Domestic 1,05,000
Paid Companies
(It is not 49,000 By Winning from
compensatory nature)
To GST Paid 7,70,000 Lotteries (Net of 73,500
TDS) (TDS 31,500)
To General Expenses 3,85,000 By Profit on Sale of
To Miscellaneous Shares 3,15,000
Expenses 10,53,500
To Loss on Sale of 1,40,000
Shares
To Interest to Bank for 4,20,000
term loan
To Depreciation 14,00,000
To Net Profit 94,92,000
Total 1,57,39,500 Total 1,57,39,500

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 Following are the further information relating to Financial Year 2024-
2025:
(i) Administrative Charges include ` 46,000 paid as commission to
brother of the assessee. The Commission amount at the market
rate in ` 36,000.
(ii) The assessee paid ` 33,000 in cash to a Transport Carrier on
26.12.2024. This amount is included in Manufacturing Expenses.
(Assume that the provisions relating to TDS are not applicable on
this payment.)
(iii) Bank Term Loan Interest actually paid upto 31.03.2025 was
` 1,40,000 and the balance was paid in October 2025.
(iv) Miscellaneous Expenses include ` 10,000 contributed to Prime
Minister's Relief Fund by account payee cheque.
(v) Loss on Sale of Shares represents shares sold within a period of 6
months from the date of purchase.
(vi) Profit on Sale of Shares represents shares sold in December 2024
and held for 2 years & Securities Transaction Tax was paid on it.
(vii) Housing Loan Principal repaid during the year was ` 50,000 and it
relates to residential property occupied by him. Interest on Housing
Loan was ` 2,60,000. Housing Loan was taken from Canara Bank.
(Value of house property is ` 45 lakhs, loan value ` 25 lakhs and
sanction date 31.03.2020). These amounts were not dealt with in
the Profit and Loss Account given above.
(ix) Deprecation allowable under the Act to be computed on the basis
of following information:
Plant & Machinery (Depreciation Rate @15%) `
Opening WDV (as on 01.04.2024) 84,00,000
Additions During the year (Used for more than 180 14,00,000
Days)
Total Additions during the year 28,00,000
Note: Ignore Additional Depreciation u/s 32(1)(iia)
Compute the total income and tax liability of Mr. Sahil for the
A.Y. 2025-26 if he has exercised the option of shifting out of the default
tax regime provided under section 115BAC(1A). (15 Marks)
2. (a) Mr. Tilak aged 35 years, furnishes the following information regarding
his income for the assessment year 2025-26. Compute the total income
if he is:
(1) Resident and Ordinarily Resident.
(2) Resident but Not Ordinarily Resident
(Ignore the provisions of Section 115BAC).

227
 (i) FTS of ` 50,000 for service rendered in Malaysia to a non-resident
for business in Malaysia, credited to his bank account in Malaysia
and immediately remitted to his bank account in India.
(ii) Profits from a business in England controlled from Bombay
` 3,00,000 (out of which ` 25,000 is received in India).
(iii) Amount brought to India out of past untaxed profits earned in
Singapore ` 1,00,000.
(iv) Capital gain on sale of land in India but received in Malaysia
` 2,00,000.
(v) Income from agriculture land at Nepal of ` 18,000, received there
and then brought to India.
(vi) He paid ` 50,000 towards principal payment of loan taken for
construction of his self-occupied house in India.
(vii) Interest on saving bank deposit in State Bank of India of
` 12,000. (6 Marks)
(b) Examine the applicability of Tax Deduction at Sources (TDS) or Tax
Collection at Source (TCS) as per the Income Act, 1961 for the
assessment year 2025-26 in the following independent situations.
(i) ABC Limited paid rent of ` 75,000+18% GST per month to Mr. Ram
for the office premises from 01.04.2024 to 31.03.2025. Mr. Ram
has furnished his PAN and also filed his return of income before
due date regularly.
(ii) XYZ Pvt. Ltd sells two cars to Mrs. Anju costing ` 4,00,000 and
` 12,00,000 respectively on 01.05.2024 and 25.12 2024. Mrs. Anju
has furnished her PAN and filed her return of income regularly
before the due date. (4 Marks)
3. (a) (i) Mr. Ravi received an advance of ` 2,00,000 on 10.5.2024 from a
closely held manufacturing company (private company in which the
public are not substantially interested) in which he holds 22%
shareholding. The company had an accumulated profit of
` 1,00,000 at the time of giving the advance. Compute the amount
of income to be included in the hands of Mr. Ravi for the
assessment year 2024-25 and also state the head under which it is
to be included. (2 Marks)
(ii) Mr. Rajo has commenced business on 1.4.2024. He finished the
following information regarding the payments made towards
Scientific Research during the financial year 2024-25:
(i) Revenue expenditure on Scientific Research incurred during
the year ` 1,00,000.
(ii) Capital Expenditure for Scientific Research ` 3,00,000.
(iii) Contribution to Notified approved research association
` 1,50,000.

228
 (iv) Amount paid to H Limited an Indian company which has as its
main object scientific research and approved by the
prescribed authority ` 2,50,000.
(v) Expenditure of ` 2,50,000 towards purchase of Land for
scientific research.
(vi) He also incurred revenue expenditure of ` 2,00,000 towards
salary of research staff in the F.Y.2023-24 and certified by the
prescribed authority.
Compute the deduction allowable u/s 35 for the assessment year
2025-26 assuming that he has opted out of default tax regime u/s
115BAC. (4 Marks)
(b) Mr. Surinder furnishes the following particulars for the previous year
ending 31.03.2025. He had a Residential House, inherited from his father
in December 2009, the Fair Market Value of which on 01.04.2001 is ` 13
lakhs. In the year 2013-2014, further construction and improvements
costing of ` 10 lakhs. The House was originally purchased by his father
on 01.03.2000 for ` 10 Lakhs. On 10.05.2024, the House was sold for
` 85 Lakhs. Expenditure in connection with transfer is ` 50,000. On
20.12.2024, he purchased a Residential House for ` 12 lakhs and he
does not own any other house.
Compute the taxable Capital Gain for the assessment year 2025-26.
(Cost Inflation Index: F.Y. 2013-14:220, F.Y.2024-25:363, F.Y. 2009-
10:148 and F.Y. 2001-02:100) (4 Marks)
4. (a) Mr. Joshi, resident Indian, aged about 58 years, furnished the following
details of his income for the previous year 2024-25:
(i) Income from House property (computed) ` 2,00,000.
(ii) Income from Proprietary Business ` 3,00,000.
(iii) Short Term Capital Gain on sale of Land ` 2,00,000.
(iv) Short Term Capital loss on sale of equity shares listed in
recognized stock exchange (STT paid) ` 75,000.
(v) Interest on Bank fixed deposit ` 50,000 received by his son, aged
21 years, out of money gifted by Mr. Joshi in 2023.
(vi) Loss from Speculation Business ` 40,000.
(vii) Loss from Owning and Maintenance of Race Horses ` 50,000.
Following are the losses:
(a) Brought forward House property loss of assessment year 2022-23
` 2,50,000.
(b) Business loss of Proprietary business from assessment year 2014-
15 ` 50,000.
(c) Unabsorbed Depreciation relating to assessment year 2015-16
` 1,00,000.
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 (d) Brought forward Long Term Capital Loss from assessment year
2019-20 ` 90,000.
Return of income for all the years were filed before the due date except
for A.Y. 2019-20.
Compute the total income of Mr. Joshi for the assessment year 2025-26
and show the items eligible for carry forward, assuming that he exercises
the option of shifting out of the default tax regime provided under Section
115BAC(1A). (6 Marks)
(b) State with reason whether the following persons are required to file their
return of income as per the provisions of the Income Tax Act, 1961 for
the assessment year 2025-26:
(i) Mr. Aneesh aged 31 years, who pays tax under default tax regime
u/s 115BAC(1A) had a total income of ` 2,90,000 for the previous
year 2024-25.
(ii) Smt. Patel, aged 65 years, has a TDS credit of ` 55,000 during the
previous year 2024-25.
(iii) The gross receipts of Mr. Ajit, aged 45 years, an architect for the
previous year 2024-25 was ` 12,00,000, but his profit from
profession was only ` 2,25,000 and he has no other income.
(4 Marks)
OR
(b) State the persons who are required to file their return of income in
pursuance of the notification issued by the CBDT has vide Notification
No. 37/2022 dated 21.04.2022. (4 Marks)

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 MODEL TEST PAPER 8
INTERMEDIATE COURSE: GROUP-I
PAPER – 3: TAXATION
Time Allowed – 3 Hours Maximum Marks – 100

SECTION – A: INCOME TAX LAW (50 MARKS)

Working Notes should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of a note.
However, in answers to Questions in Division A, working notes are not
required.

The relevant assessment year is A.Y.2025-26.

Division A – Multiple Choice Questions

Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are
compulsory.
1. Ms. Prerna is having a residential house property in Nagpur, of which 1/3 rd is
self- occupied and 2/3d is let out for commercial purposes at a monthly rent
of ` 12,000. Fair rent (for let out portion only) was ` 30,000 p.m., Municipal
value for the property was ` 2,40,000 and standard rent under the Rent
Control Act was ` 3,00,000 for the entire property. Municipal taxes are 10%
of municipal valuation and are paid by her on 30 th July, 2024. She took a loan
of ` 45,00,000 for the construction of this house from a scheduled bank on
1.4.2022. She repaid the entire loan along with interest on 30.6.2024. The
interest rate for this loan was 10% p.a. The construction was completed on
30th June, 2023. She earns other income of ` 2,00,000 during the previous
year 2024-25. She wishes to pay tax under default tax regime.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) The Net Annual Value (NAV) of the house property for the A.Y. 2025-26
is:
(a) ` 1,28,000
(b) ` 1,44,000
(c) ` 1,84,000
(d) ` 2,00,000
(ii) Deduction in respect of interest on loan for the P.Y. 2024-25 shall be:
(a) ` 2,02,500
(b) ` 1,35,000
(c) ` 5,62,500
(d) ` 1,12,500

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 (iii) Compute her total income for the assessment year 2025-26
(a) ` 1,93,800
(b) ` 2,00,000
(c) Nil
(d) ` 2,05,000 (3 x 2 = 6 Marks)
2. Mr. Desai (aged 52 years) is an Indian resident. He gives the following
information to you relating to the P.Y. 2024-25:
(i) Profit from the business carried out in Dubai controlled from Dubai
` 13,10,000 (received in a bank account in Dubai).
(ii) Loss from a business in Delhi - ` 4,50,000
(iii) During the F.Y. 2024-25, he also played some online games on a
particular Indian website Game.com. Game.com is a manufacturer of
men's shirts. During the year, Mr. Desai won 6 such shirts. The cost to
manufacture such shirts by Game.com is ` 3,000 per piece and it sells
these shirts at ` 10,000 per piece (excluding GST @18%). However, to
play such games, Mr. Desai had to deposit a sum of ` 50,000 with the
website as a refundable deposit.
(iv) On 23rd May 2024, he gifted listed equity shares in an Indian company
to his son's daughter, Ms. Shanaya. These shares were purchased by
him on 1.4.2020 for ` 65,000. The market value as on the date of transfer
was ` 1,00,000. Shanaya sold these shares for a consideration of
` 50,000 on 31.3.2025.
(v) He had taken a loan of ` 25,00,000 for the purchase of an electric vehicle
(for his personal purposes) on 1.4.2022 from a scheduled bank. He paid
` 5,00,000 as interest on such loan during the P.Y. 2024-25.
(vi) He wants to pay tax under default tax regime.
Based on the facts of the case scenario given above, choose the most
appropriate answer to the following questions:-
(i) What shall be the total income of Mr. Desai for the A.Y. 2025-26?
(a) ` 8,78,000
(b) ` 8,63,000
(c) ` 9,20,000
(d) ` 7,70,000
(ii) Which of the following statement is correct in respect of deductions
available to him under Chapter VI-A?
(a) He shall be eligible for a deduction of ` 1,50,000 in respect of
interest on loan irrespective of the tax regime opted by him.
(b) He shall not be eligible for any deduction under Chapter VI-A
irrespective of the tax regime opted by him.

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 (c) He shall be eligible for a deduction of ` 1,50,000 in respect of
interest on loan only if he opts out of the default tax regime.
(d) He shall be eligible for a deduction of ` 50,000 in respect of interest
on loan only if he opts out of the default tax regime.
(iii) What is the requirement of deduction of tax at source by Game.com in
respect of such winning by Mr. Desai?
(a) Game.com has to ensure, before releasing the winnings, that the
tax amounting to ` 18,000 has been paid.
(b) Game.com has to ensure, before releasing the winnings, that the
tax amounting to ` 5,400 has been paid.
(c) There is no requirement for deduction of tax at source. However,
Mr. Desai need to collect tax at source from the security deposit.
(d) Game.com needs to deduct tax at source amounting to ` 18,000.
(3 x 2 = 6 Marks)
3. Mr. Sundaram owns two residential house properties in Chennai, one of which
is used by him and his family for their residential purposes. Both the houses
are exactly identical and their expected rent/municipal value etc. are also the
same. He let out the other house for a rent of ` 1,15,000 p.m. He took two
similar loans for the purchase of these two houses on 1.4.2023. The stamp
duty value of these houses is ` 30 lakhs each. During the F.Y. 2024-25, he
paid ` 4,00,000 as interest for each of the houses. He does not have any other
income or investments during the year. He did not file his return of income
within the due date under section 139(1). What shall be his total income
chargeable to tax?
(a) ` 2,16,000
(b) ` 3,66,000
(c) ` 5,66,000
(d) ` 1,66,000 (2 Marks)
4. During the year 2024-25, Mrs. Kalis (aged 65 years), received ` 10,50,000 a
family pension. She had to spend ` 26,000 to get such income towards
documentation and processing charges. She does not have any other income.
Assuming she pays tax under default tax regime, what shall be her total
income chargeable to tax?
(a) ` 10,35,000
(b) ` 10,24,000
(c) ` 10,50,000
(d) ` 10,25,000 (1 Mark)

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 Division B – Descriptive Questions
Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Raman, a resident individual aged 62 years, is engaged in the business
of manufacturing and sales of spare parts for motor bikes, as a proprietor. He
prepares his accounts on mercantile basis. This business is carried out on the
ground floor of a two storied commercial building owned by him, the written
down value of which is ` 8 lakhs as on April 1, 2024. The Statement of Profit
and Loss for the previous year ended on March 31, 2025 shows a net profit of
` 9.25 lakhs (before taxation and depreciation) after debiting/crediting the
following items:
(i) Administrative expenses include ` 9,525 paid towards interest on delay
in deposit of GST.
(ii) General expenses include a sum of ` 3,88,000 paid to a non-resident as
fee for technical services without deduction of tax at source.
(iii) Fire insurance premium of ` 66,000 for the entire building remained
unpaid till 31st March, 2025.
(iv) Expenditure of ` 75,000, was paid to a scientific research association
approved under section 35. Out of ` 75,000, ` 50,000 was utilised
towards the purchase of land by the research association.
(v) He let out first floor of his commercial building to Mr. Aman on April 1,
2024 and received rent of ` 35,000 per month. Municipal taxes ` 20,000
relating to the building were paid equally by both Mr. Raman and Mr.
Aman. Rent received was credited and municipal taxes of ` 10,000
(relating to ground floor) was debited to the statement of profit and loss.
(vi) He sold a piece of land for ` 44 lakhs on 12 th April, 2024. He had acquired
the land for 40 lakhs on 1 st January, 2023. The gain of 4,00,000 is
credited to the statement of profit and loss.
(CII for F.Y. 2021-22:317; F.Y. 2024-25:363)
Additional Information:
(i) Mr. Raman purchased raw material from M/s. Paul Industries, a micro
enterprise, for ` 49,000 on March 10, 2025. However, the payment to
M/s. Paul Industries was made on April 5, 2025 by cheque. No written
agreement for payment existed between M/s. Paul Industries and Mr.
Raman. Another supplier M/s. Kal Industries, a small enterprise, with
whom also no written agreement existed for payment, was paid
` 1,34,000 in cash on April 5, 2025 for purchase of raw material on March
31, 2025. Both M/s. Paul Industries and M/s. Kal Industries follow
mercantile system of accounting.
(ii) Mr. Raman acquired a registered trademark on July 15, 2024 for
` 2,00,000. Mr. Raman started using this trademark for his business from
January 15, 2025. Mr. Raman omitted to enter any transaction relating
to this trademark in his books of accounts.
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 (iii) Mr. Raman bought a car for personal use on 12 th April, 2021 for
` 5,40,000. He started using this car for business purposes from
01.04.2024. As on that day, the market value of the car was ` 2,10,000.
Assume the rate of depreciation to be 15%.
(iv) He incurred ` 2,50,000 on the purchase of a new machinery to be used
in the production of spare parts for motor bikes on May 15, 2024.
(v) He has paid tuition fees of ` 25,000 for the education of his daughter to
a college.
(vi) During the year, Mr. Raman has incurred ` 9,500 in cash for preventive
health check-up where ` 5,000 was for himself and ` 4,500 was for his
parents who are super senior citizens.
(vii) Donation paid to a registered political party by way of cheque ` 20,000.
Compute the total income and tax liability of assessment year 2025-26 of
Mr. Raman under both the regimes. (15 Marks)
2. (a) Mr. Madan, a citizen of India and the Karta of an HUF, is employed in
M/s. PCS Pvt. Ltd. He is drawing monthly salary of ` 65,500 in India. On
June 1, 2024, he purchased one residential house property in Mumbai
for ` 18,00,000 in his individual capacity. The market value of the
property is ` 32,00,000 and value for the purpose of charging stamp duty
is ` 23,00,000. On August 31 st, 2024 he was transferred to the branch
office of M/s. PCS Pvt. Ltd. in U.S.A. and he left India on September 1 st,
2024. The overseas branch paid him a salary of $ 2,500 per month in
USA. He managed business of HUF from USA when he was not in India.
He had also gone out of India for 99 days and 201 days in previous years
2023-24 and 2022-23, respectively. He had never gone out of India prior
to that.
He visited India from January 1, 2025 to January 15, 2025 for training on
a project and received 15 days salary in India as per his Indian monthly
salary before being transferred.
Mr. Rajeev, one of his friends, gifted him a sculpture in India on August
10, 2024. The market value is ` 45,100.
Determine the residential status of Mr. Madan and his HUF and compute
gross total income of Mr. Madan for the assessment year 2025-26
assuming he opted out of the default tax regime. The value of one USD
($) may be taken as ` 70. (4 Marks)
(b) Answer the following:
(i) M/s. PQR & Co., a proprietary firm of Mr. Yogesh, paid an amount
of ` 30,500 to Mr. Amit, a resident individual aged 45 years, on
June 1, 2024 towards fees for professional services. Subsequently,
another payment of ` 60,000 was due to Mr. Amit on January 30,
2025. Tax was not deducted from both the transactions. Mr. Amit
has filed his return of income for assessment year 2025-26 on May
2, 2025, taking into account professional fees from M/s. PQR & Co.
and paid the taxes due on the income declared in the return of
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 income. Firm’s turnover for the P.Y. 2023-24 is ` 5 crores.
What are the TDS and interest obligations in the hands of M/s. PQR
& Co.?
(ii) M/s. Fastest Ltd. is an Indian car manufacturer. During the
F.Y. 2024- 25, it sold cars for ` 150 lakhs to M/s. Race LLP, a
distributor of cars where the sale price of each car was ` 7.5 lakhs.
The turnover for the F.Y. 2023-24 of M/s. Fastest Ltd. was ` 15
crores and M/s. Race LLP was 8 crores. What shall be the
TCS/TDS implications on M/s. Fastest Ltd. and M/s. Race LLP?
(6 Marks)
3. (a) The particulars given below are of Mr. Radhey's income (age 47 years)
posted in a private company in Delhi, for the previous year 2024-25:
(i) Basic Pay ` 35,000 per month till January 31, 2025, ` 40,000 p.m.
from February 2025.
(ii) Dearness allowance 30% of basic salary (54% of DA forms part of
retirement benefits)
(iii) His employer gave him a rent-free accommodation (fully furnished)
in Delhi from 01.04.2024. This house is owned by his employer.
The furniture and appliances provided with the house were bought
by the employer at an aggregate cost of ` 1,50,000 on 01.04.2024.
Electricity and water bills of ` 4,000 p.m. for the said house were
paid by the employer.
(iv) The employer also spent ` 50,000 on a refresher course for
upgrading Mr. Radhey's skills.
(v) During the previous year his wife had been admitted in a notified
hospital for treatment of her kidney disease, the hospital bills
amounting to ` 3,50,000 were paid by the employer.
You are required to compute the taxable salary income of Mr. Radhey
for the Assessment Year 2025-26 under default tax regime under section
115BAC. (6 Marks)
(b) Mr. Raj a resident individual, aged 69 years sold an urban agricultural
land for ` 75,00,000 to Mr. Vipul on December 15, 2024 when the stamp
duty value of agricultural land was ` 95 lakhs. However, the “agreement
to sell” the agricultural land was entered on July 15, 2024 and Mr. Vipul
gave ` 4 lakhs as advance through IMPS. The stamp duty value at the
time of agreement was ` 85 lakhs. Mr. Raj paid 1% of sale consideration
as commission to a broker. The land was purchased by him on May 15,
2002 for ` 10.85 lakhs and it was being used for agricultural purposes
by him since its purchase.
Mr. Raj purchased another rural land in rural area on January 1, 2025
for ` 40 lakhs and this land was sold by him on March 12, 2026 for ` 45
lakhs.

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 Compute capital gain for assessment year 2025-26 if Mr. Raj exercises
the option of shifting out of the default tax regime provided under section
115BAC(1A).
Cost Inflation Index for: F.Y. 2002-03:105; F.Y. 2024-25:363.
(4 Marks)
4. (a) Mr. Suraj, (39 years), his wife Megha (35 years) and minor son Dev (12
years), provide the following details of their income/losses for the
previous year 2024-25:
Mr. Suraj
(i) Salary received as a partner from a partnership firm - ` 6,15,000
He is a working partner in the firm and the salary is as per the limits
prescribed under section 40(b).
(ii) Income (loss) from house property:
Brought forward loss from House -A (let out) - ` 96,000
Current year loss from House B (let out) - ` 2,30,000
(iii) Interest received on enhanced compensation - ` 2,00,000
It relates to transfer of a piece of land in the financial year 2018-19.
Out of the above ` 35,000 relates to previous year 2024-25 and the
balance relate to preceding previous year.
(iv) Gift from grandfather's younger sister by cheque - ` 1,25,000
(v) Dividend on listed equity shares of domestic companies (Gross) -
` 50,000
(vi) On 1st December 2024, Mr. Suraj received ` 75 lakhs as maturity
proceeds from his life insurance policy which was taken on 1st May
2013. He paid ` 6,00,000 as annual premium and the sum assured
was ` 65 lakhs.
Mrs. Megha
(i) Current year loss from business. (She carried on this business with
funds which Mr. Suraj gifted to her) - ` 8,10,000.
(ii) Mrs. Megha purchased a house property from her "Stridhan" and
gifted the same to her minor son, Dev on 1 stApril, 2024 out of love
and affection. The FMV of the house on the date of transfer was
` 51 lakhs.
Master Dev
Rent received from house property received from Mrs. Megha - ` 35,000
p.m.
Compute gross total income of Mr. Suraj, Mrs. Megha and Dev for the
assessment year 2025-26 assuming Mr. Suraj has decided to pay tax
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 under default tax regime provided under section 115BAC, whereas
Mrs. Megha and Dev have opted out of the default tax regime. Briefly
explain the reasons for the treatment of each item. (6 Marks)
(b) Answer the following:
(i) Vegetable Ltd. filed its return of income for the A.Y. 2024-25, on
15th December 2024. On 2nd January 2025, the accountant of
Vegetable Ltd. realised that he had forgotten to claim a genuine
business expenditure amounting to ` 15 lakhs. He wants to file
revised return to claim such expenditure as the assessment is not
yet completed. Whether the action of the accountant of Vegetable
Ltd. is valid?
(ii) Mahendra, a resident individual aged 45 years earned a salary
income of ` 2 crores during the F.Y. 2024-25. He also earned
dividend from unlisted shares amounting to ` 4 lakhs. He wants to
file his return of income for the A.Y. 2025-26 through a Tax Return
Preparer. Can he do so? (4 Marks)
OR
(b) Rani, an Indian resident aged 34 years did not file her return of income
for the A.Y. 2022-23, 2023-24 and 2024-25. She gives the following
information regarding each of the A.Y.-
A.Y. 2022-23
(i) Tax liability on the total income of Rani - ` 14,50,000
(ii) TDS deducted - ` 5,00,000
A.Y. 2023-24
(i) Tax liability on the total income of Rani - ` 5,60,000
(ii) TDS deducted - ` 10,00,000
A.Y. 2024-25
(i) Tax liability on the total income of Rani - ` 6,30,000
(ii) TDS deducted - ` 2,00,000
(iii) Interest payable under section 234A, 234B and 234C - ` 90,000
(calculated till 31 st May 2025)
(iv) Self-assessment tax paid - ` 1,00,000
She approaches you to file updated return under section 139(8A) on
16.5.2025. You are required to advise her for which years she can file
an updated return and also the amount of tax to be paid. (4 Marks)

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