CMA Inter Suggested Answers | Jun 25 Paper 07 Direct and Indirect Taxation (DITX)
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CMA Inter Jun 25 Suggested Answer Other Subjects Blogs :
(i) For Assessment Year 2025-26, as per the Income Tax Act, 1961, liability to deduct tax at source u/s 193 in case on interest on securities arises at the time of
(A) accrual of interest.
(B) payment of interest.
(C) credit of interest to the account of the payee/interest payable account or payment thereof, whichever is earlier.
(D) None of the above
Explanation:
As per Section 193 of the Income Tax Act, 1961, the liability to deduct tax at source (TDS) on interest on securities arises at the time of credit of such interest to the account of the payee or at the time of payment thereof, whichever is earlier. This includes credit to any account, whether called suspense account or by any other name.
(ii) For Assessment Year 2025-26, deduction u/s 80JJAA of the Income Tax Act, 1961, in respect of employment of new workers shall be allowed to
(A) any assessee to whom Section 44AB applies.
(B) all assessee.
(C) an Indian company.
(D) None of the above
(iii) PRT Ltd., a domestic Indian company, bought back its 10,000 shares from 10 shareholders on 15th November, 2024. The original issue price was ₹ 110 per share and the buy-back price is ₹ 300 per share. What is the tax treatment of this transaction under the Income Tax Act, 1961?
(A) PRT Ltd. needs to pay additional income tax on such buy-back.
(B) It will be treated as capital gains in the hands of the shareholder.
(C) It will be treated as deemed dividend and taxable under income from other sources in the hands of the shareholder.
(D) It will be treated as dividend and PRT Ltd. needs to pay dividend distribution tax on the same.
Explanation:
Under Section 115QA, any domestic company buying back its shares (not listed on a stock exchange) must pay additional income tax on the distributed income. The amount received by shareholders is exempt under Section 10(34A).
(iv) Nakul won ₹ 6,000 as a lottery prize on 12.04.2024. What is the amount of TDS on such winning under the Income Tax Act, 1961?
(A) Nil
(B) ₹ 600
(C) ₹ 1,800
(D) ₹ 1,200
(v) Who from the followings will be considered as a specified employee of ABC Pvt. Ltd. as defined u/s 17(2)(iii) of the Income Tax Act, 1961 for the assessment year 2025-2026?
(A) Mr. D, a part-time director employee but resigned on 02-05-2024
(B) Mr. E, who holds 15% of its equity shares and his wife holds 6% of its equity shares
(C) Mr. F, who joined it on 01-02-2025 and his taxable monetary salary for the year from ABC Pvt. Ltd. is ₹ 50,000 p.m.
(D) None of the above
Explanation :
Under Section 17(2)(iii), any director of a company is a specified employee regardless of shareholding or salary. Even if he resigned early in the financial year, any perquisite received during his employment will be taxed as perquisites of a specified employee.
(vi) For the previous year 2024-2025, standard deduction from family pension under default new tax regime and under old tax regime is ₹ ______ and ₹ ______ respectively.
(A) ₹ 15,000 and ₹ 25,000
(B) ₹ 15,000 and ₹ 15,000
(C) ₹ 25,000 and ₹ 25,000
(D) ₹ 25,000 and ₹ 15,000
(vii) Which of the following is not a supply under the CGST Act, 2017?
(A) Importation of accounting services (for business purposes) free of cost from a dependent father residing in USA.
(B) A machinery disposed-off free of cost on which input tax credit has been availed.
(C) Goods supplied free of cost by X & Sons to its agent for further supply to customer at ₹ 5,000 for which invoice will be issued by the agent in his own name.
(D) An expensive watch of ₹ 50,000 gifted to an employee. No other gifts provided to such employee during the entire financial year.
Explanation:
A gift of ₹50,000 or less from employer to employee is not treated as supply under GST. Since the watch is exactly ₹50,000 and no other gifts were given, it's not taxable.
(viii) As per the GST law, if the goods are received in instalments, then Input Tax Credit (ITC) _______.Explanation:
As per Section 16(2) of the CGST Act, when goods are received in instalments, Input Tax Credit (ITC) can be claimed only upon receipt of the last instalment of goods.
(ix) As per the provisions of GST law, what will be the place of supply when food (supplier is registered in Pune) is taken on board at Mumbai for an aircraft departing from Pune to Chennai via Mumbai and Kolkata?Explanation:
As per the Customs Valuation (Determination of Value of Imported Goods) Rules, when goods are imported in a set and individual values are not available, the entire set is taxed at the highest applicable rate among the items. Here, product I attracts 20% duty, so the entire set will be taxed at 20%.
(xi) Every registered person who is required to furnish a return u/s 39(1) of the CGST Act, 2017 and whose registration has been cancelled shall furnish a Final return within _______.
(A) 3 months of the date of cancellation.
(B) 3 months of the date of order of cancellation.
(C) 3 months of the date of cancellation or the date of order of cancellation whichever is earlier.
(D) 3 months of the date of cancellation or the date of order of cancellation whichever is later.
Explanation:
As per Section 45 of the CGST Act, 2017, a registered person whose registration is cancelled must file a Final Return in Form GSTR-10 within 3 months from the later of:
(xii) If a composition dealer wants to withdraw voluntarily from composition scheme then he shall file Form:
(A) CMP-01
(B) CMP-02
(C) CMP-03
(D) CMP-04
(xiii) Mr. Tushar, an air travel agent, who wants to discharge his tax liability at special rates as per rule 32(3) of CGST Rules, 2017. How his value of service of booking of tickets for air travel be determined?
(A) 5% of basic fare on both domestic and international air travel
(B) 10% of basic fare on both domestic and international air travel
(C) 5% of basic fare on domestic air travel and 10% of basic fare on international air travel
(D) 10% of basic fare on domestic air travel and 5% of basic fare on international air travel
Explanation:
As per Rule 32(3) of the CGST Rules, 2017, an air travel agent may opt to pay GST on a special valuation basis, where:
Basic fare means the part of the air fare on which commission is normally paid to the agent.
(xiv) The last date for declaring the details of credit note issued on 27.03.2025 for a supply made on 12.12.2024 is
(A) 31.12.2025 being actual date of filing annual return for F.Y. 2024-25.
(B) 30.04.2025 being actual date of the filing return of the month in which such credit note has been issued.
(C) 11.04.2025 being due date of the filing return of the month in which such credit note has been issued.
(D) 30.11.2025.
Explanation:
As per Section 34(2) of the CGST Act, 2017, the details of a credit note must be declared:
Since the supply was made on 12.12.2024 (FY 2024–25), the credit note dated 27.03.2025 must be reported by 30.11.2025.
(xv) As per the Customs Valuation (Determination of price of imported goods) Rules, 1988, the term “similar goods” means imported goodsExplanation:
Under the Customs Valuation Rules, 1988, “similar goods” are those:
Hence, all options apply, making (D) the correct answer.
Ms. Meena, a British citizen of Indian origin, came to India on 01.10.2024 and left India on 31.03.2025. She was also in India from 03.09.2019 to 15.02.2023. She provided the following details of her income for the Assessment Year 2025-26:
| Sl. No. | Particulars | Amount (₹) |
| (i) | Salary received in India (Computed) | 8,00,000 |
| (ii) | Income of preceding previous year from a property in London received in London and remitted to India in current year | 38,500 |
| (iii) | Income from house property in London received in India | 4,23,500 |
| (iv) | Profit from a business in Nepal controlled from India | 3,25,000 |
| (v) | Income from property in USA received in London | 2,50,000 |
| (vi) | Income from a house property in India received in London | 3,00,000 |
| (vii) | Income on company deposit in London (1/3rd received in India) | 60,000 |
Incomes given above are computed after considering eligible deductions. You are required to determine residential status of Ms. Meena for the Assessment Year 2025-26 with proper reason and compute her total income which is taxable in India. (Ignore section 115BAC of the Income Tax Act 1961.)
Mr. Padam, a resident individual aged 35 years is employed with M/s Nath Ltd., an Indian company based in Chennai as Senior Finance Manager since 1st April 2024.
The details of his emoluments are as follows:
You are required to compute Mr. Padam’s income chargeable under the head “Salary” for the Assessment Year 2025-26 assuming he opted out of new default tax regime under section 115BAC of the Income Tax Act, 1961.
Mr. Sonu, a resident individual aged 34 years, gives the following information to you relating to his house properties (he owns 2 identical house properties):
Property A – Let out (Since 01.04.2023)
(i) Municipal Annual Value: ₹ 6,00,000
(ii) Fair rent: ₹ 3,50,000
(iii) Standard Rent under the Rent Control Act: ₹ 8,00,000
(iv) Actual rent: ₹ 55,000 p.m.
(v) Unrealised rent: 2 months
(vi) Interest on loan taken for the purchase of this property: ₹ 2,50,000
Property B – Self Occupied
(i) Municipal Annual Value: ₹ 6,00,000
(ii) Fair rent: ₹ 3,50,000
(iii) Standard Rent under the Rent Control Act: ₹ 8,00,000
(iv) Actual rent: Nil
(v) Interest on loan taken for the purchase of this property: ₹ 2,50,000
Instruction:
Calculate the income from “House property” chargeable in the hands of Mr. Sonu for the Assessment Year 2025-26.
Assume Mr. Sonu opted the new default tax regime provided under section 115BAC of the Income Tax Act, 1961.
Indicate clearly the reasons for treatment of each item.
Mr. Aayush aged 50 years, a retail trader of Patna (Bihar), furnished his profit and loss account for the year ended on 31st March, 2025 as follows:
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Rent and rates | 2,52,700 | By Gross profit | 8,20,000 |
| To Salary to staff | 72,000 | By Dividend from domestic companies | 15,000 |
| To Interest paid | 60,000 | By Agriculture Income (net) | 1,85,000 |
| To Administrative Charges | 68,000 | By winning from lotteries (net of TDS ₹ 4,500) | 10,500 |
| To General expenses | 20,200 | ||
| To Depreciation | 1,12,500 | ||
| To Net profit | 4,45,100 | ||
| Total | 10,30,500 | Total | 10,30,500 |
Following additional information is furnished:
(i) Rent and rates include GST liability of ₹ 5,600 paid on 5th April, 2025.
(ii) Salary includes ₹ 12,000 paid as commission to brother of Mr. Aayush. The commission amount at the market rate is ₹ 10,000.
(iii) Administrative charges include ₹ 30,000 towards medical expenditure for employees due to fire accident in business premises.
(iv) General expenses include ₹ 1,500, being penalty paid to GST Department for non-compliance of GST provisions and also include ₹ 2,500, being donation paid to a public charitable trust.
(v) The depreciation provided in the Profit and Loss Account ₹ 1,12,500 was based on the following information:
You are required to calculate the income chargeable to tax under the head “Profits and gains from business or profession” in the hands of Mr. Aayush for the Assessment Year 2025-26.
Assuming Mr. Aayush exercises the option of shifting out of the new default tax regime provided under section 115BAC of the Income Tax Act, 1961, indicate clearly the reasons for treatment of each item.
Mr. Devendra, a resident Indian aged 55 years, held 10,000 shares of Pulse Ltd., an Indian listed company since 1st February, 2021, bought for ₹ 1,500 per share.On 1st May, 2024, the company announced right shares issue in the ratio of 1:1 for ₹ 1,200 per share.On this date, the market price of its shares was ₹ 1,900 per share.Mr. Devendra sold 5,000 right entitlements to Mr. Prakash Singh for ₹ 500 per right entitlement on 12th May, 2024.Mr. Devendra himself exercised his right for the remaining shares on 31st May, 2024.On the date of exercising this option, the market price of the shares was ₹ 2,000 per share.
On 12th December, 2024, Mr. Devendra sold all the 15,000 shares for ₹ 2,500 per share. He invested ₹ 4,00,000 in the acquisition of a new residential house on 24th January, 2025, by utilising the sale proceeds from the sale of shares as well as the right entitlement. Mr. Devendra does not own any other residential house on the date of purchase of this house.
You are required to compute income taxable under the head “Capital Gains” for Assessment Year 2025-26 in the hands of Mr. Devendra assuming he opted for new default tax regime under section 115BAC of the Income Tax Act, 1961.
Short-Term and Long-Term Capital gain should be calculated separately.
Cost Inflation Index (CII) for the various financial years are as under:
Mr. Sharad, a resident individual, aged 51 years provides the details of following transaction/income related to the previous year 2024-25.
| Sl. No. | Particulars | Amount (₹) |
| (i) | Interest earned on Central government securities | 50,000 |
| (ii) | Token money received for sale of house property (it was forfeited as negotiations cancelled) | 1,00,000 |
| (iii) | Dividend from Co-operative society (Gross) | 15,000 |
| (iv) | Lump sum amount withdrawn from unrecognized provident fund whose breakup is as below:
|
2,10,000 |
| (v) | Lottery income received (Net) | 16,000 |
| (vi) | Purchased from Mr. Sona (his friend) jewellery for ₹ 5,000 (Fair market value ₹ 8,500) and a diamond for ₹ 20,000 (Fair market value ₹ 36,000) | — |
He has taken loan to invest in shares of co-operative society from which dividend income is earned. On this loan an interest of ₹ 2,500 was paid during the year. You are required to compute Mr. Sharad chargeable under the head “Income from other sources” for the Assessment Year 2025-26 assuming he opted for new default tax regime under section 115BAC of the Income Tax Act, 1961.
Mr. Sadanand, a resident individual, aged 54 years, gives you the following particulars about his income for the previous year 2024-25:
He has the following losses brought forward:
Instructions:
Compute the Gross Total Income of Mr. Sadanand for the Assessment Year 2025-26 assuming he has opted for new default tax regime provided under section 115BAC of the Income Tax Act, 1961.
Also list out the losses to be carried forward to further Assessment Years specifying the Assessment Year up to which such losses can be carried forward.
Mr. Rajesh, a resident individual, aged 45 years, furnishes the following particulars of his income for the previous year 2024-25:
| Sl. No. | Particulars | Amount (₹) |
| (i) | Income from garments business as per Profit & Loss Account | 10,80,000 |
| (ii) | Short-term capital gain on transfer of shares on which STT is paid as on 1st December, 2024 | 1,40,000 |
| (iii) | In the year 2023-24, he had gifted ₹ 1,00,000 to his son who was aged 10 years. In the same year the gifted amount was deposited in PQR Company Pvt. Ltd. The company was paying Interest @ 12% per annum. | 12,000 |
He made the following payments by cheque:
(i) Life insurance premium paid for his life: ₹ 24,000 (10% of sum assured).
(ii) Contribution towards Prime Minister National Relief Fund: ₹ 50,000.
You are required to calculate total taxable income and tax liability of Mr. Rajesh for the Assessment Year 2025-26 under the new default tax regime under section 115BAC of the Income Tax Act, 1961 and optional tax regime as per the Regular provisions (old regime) of the Income Tax Act, 1961.
Also advise Mr. Rajesh which scheme is beneficial for him.
“Direct taxes & Indirect taxes are different from each other.”
In the context of the above statement, discuss any seven differences between Direct taxes & Indirect taxes.
| Basis | Direct Tax | Indirect Tax |
| Meaning | Direct tax is referred to as the tax, levied on person’s income and wealth and is paid directly to the government | Indirect Tax is referred to as the tax, levied on a person who consumes the goods and services and is paid indirectly to the government |
| Nature | Progressive in nature i.e., higher tax is levied on a person earning higher income and vice versa. | Regressive in nature i.e., all persons will bear equal wrath of tax on goods or service consumed by them irrespective of their ability. |
| Incidence and Impact | Falls on the same person. Assessee, himself bears such taxes. Thus, it pinches the taxpayer. | Falls on different person. Tax is recovered from the assessee, who passes such burden to another person. Thus, it does not pinch the taxpayer. |
| Example | Income Tax | GST, Custom Duty |
| Evasion | Tax evasion is possible | Tax evasion is hardly possible because it is included in the price of the goods and services. |
| Inflation | Direct tax helps in reducing the inflation. | Cost of goods and services increases due to levy of indirect tax thus indirect taxes promote inflation. However, sometimes it is useful tool to promote social welfare by checking the consumption of harmful goods or sin goods through higher rate of tax. |
| Imposition and collection | Imposed on and collected from the same person | Imposed on and collected from consumers of goods and services but paid and deposited by the assessee. |
| Burden | Cannot be shifted | Can be shifted |
| Event | Taxable income of the assessee | Supply of goods and services |
List out any seven points on which the Goods and Service Tax Council (GST Council) can make recommendation to the Union and the States, as per the Constitution (101st) Amendment Act, 2017.
(a) Examine, with brief reason, which person is liable to pay GST in the following independent cases related to the month of November, 2024, where the supplier and recipient both are located in the taxable territory. Ignore the aggregate turnover and exemption available:
(i) Raman, a casual taxable person, received services in respect of transportation of taxable goods by road from Dhara Transport, an unregistered Goods Transport Agency (GTA), for which he paid ₹ 55,000.
(ii) Ministry of Railways, registered under GST has let out a building to Mr. Sanjay, registered under GST for a monthly rent of ₹ 25,000.
(iii) Abhay Traders, a proprietorship firm registered under GST, hired a security guard from ABC Private Limited for ₹ 20,000 per month.
Note: All the amounts given are exclusive of any tax.
Sambhav Shoppy, registered under GST in the State of Punjab, enters into a contract for supply of televisions worth ₹ 5,00,000 with Prayas Trader on 10th October, 2024. On 15th October, 2024, such goods are removed from the godown of Sambhav Shoppy for delivery to Prayas Trader. Invoice issued on dated 16th October, 2024.
As per the terms of the contract the payment against such supply to be made within one month from the date of invoice, beyond which a late fee of ₹ 5,000 will have to be paid by Prayas Trader.
Prayas Trader makes the payment of ₹ 5,00,000 along with the late fee on 30th November, 2024.
Determine the time of supply for the purpose of payment of tax in respect of the entire amount, as per the provisions of GST law.
Brief notes for treatment given for each item should form part of your answer.
List out the details required to be given in GSTR-1/1A [under Rule 59(4)/(4A) of the CGST Rules, 2017] and details to be given in Invoice Furnishing Facility (IFF).
Binni Ltd., an importer, has imported a car by ship from Germany at FOB cost of EURO 14,000.
Other details are as follows:
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