The following four Cases make different assumptions with respect to the amounts of income and deductions...
The following four Cases make different assumptions with respect to the amounts of income and deductions of Mr. John for the current year in India:
Case I Case II Case III Case IV
Employment Income 35,000 33,000 16,000 28,000
Income (Loss) From Business (10,000) (39,000) 22,000 15,000
Income (Loss) From Property 12,000 14,000 (21,000) (36,000)
Taxable Capital Gains 42,000 36,000 32,000 21,000
Allowable Capital Losses (18,000) (42,000) (69,000) (27,000)
Subdivision e Deductions (80C) (4,000) (7,000) (5,000) (11,000)
a. Required For each Case, calculate Mr. John‟s Net Income for tax purposes.
b. Indicate the amount and type of any loss carry overs that would be available at the end of the current year.
Homework Answers
Notes:-
1. Loss from business can be set off against any head of income except income from salary.
2. Long term capital loss can be set off only against long term capital gain. However, short term capital loss can be set off against long term and short term capital gains.
3.Loss from house property can be set off against any head of income.
| Particulars | CASE I |
| Income (loss) from business (a) | (10000.00) |
| Set off of property income from business income (b) | 12000.00 |
| i)
Net property income after set off (b-a) |
2000.00 |
| ii) INCOME FROM SALARY | 35000.00 |
| INCOME FROM CAPITAL GAINS | |
| Taxable capital gains | 42000.00 |
| Allowable capital losses | (18000.00) |
| iii) Net income from capital gains | 24000.00 |
| Gross total income (i+ii+iii) | 61000.00 |
| Deduction u/s 80C | (4000.00) |
| Net total income | 57000.00 |
Notes for case I:- The loss from business has been set off completely from property income
| Particulars | CASE II |
| Income (loss) from business (a) | (39000.00) |
| Set off of property income from business income (b) | 14000.00 |
| i)
Net business income (loss) after set off (a-b) |
(25000.00) |
| ii) Net salary income | 33000.00 |
| Taxable capital gains | 36000.00 |
| Allowable capital losses | (42000.00) |
| iii) Net income (loss) from capital gains | (6000.00) |
| Gross total income (ii) | 33000.00 |
| Deduction u/s 80C | (7000.00) |
| Net total income | 26000.00 |
Notes for case II:- The loss from business has been set off from property income, balance of loss (25000) can be carried forward for next 8 assessment years. Capital loss (6000) can be carried forward for next 8 assessment years.
| Particulars | CASE III |
| Income (loss) from business (a) | 22000.00 |
| Set off of property income from business income (b) | (21000.00) |
| i)
Net business income (loss) after set off (a-b) |
1000.00 |
| ii) Net salary income | 16000.00 |
| Taxable capital gains | 32000.00 |
| Allowable capital losses | (69000.00) |
| iii) Net income (loss) from capital gains | (37000.00) |
| Gross total income (i+ii) | 17000.00 |
| Deduction u/s 80C | (5000.00) |
| Net total income | 12000.00 |
Notes for case III:- The capital loss (37000) can be carries forward for next 8 assessment years. Property loss has been set off completely from business income.
| Particulars | CASE IV |
| Income (loss) from business (a) | 15000.00 |
| Salary income (b) | 28000.00 |
| Set off of property income from business and salary income (c) | (36000.00) |
| i)
Net property income (loss) after set off (a+b+c) |
7000.00 |
| Taxable capital gains | 21000.00 |
| Allowable capital losses | (27000.00) |
| iii) Net income (loss) from capital gains | (6000.00) |
| Gross total income (i) | 7000.00 |
| Deduction u/s 80C | (11000.00) |
| Net total income | NIL |
Notes for case IV:- The property loss has been set off completely from salary and business income. The capital loss of 6000 can be carried forward for next 8 assessment years. Deduction u/s 80C will be limited to the gross total income 7000. Net total income in this case will be NIL.
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