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CA Intermediate · Taxation · Basic Concepts

Arjun, a resident individual, has the following for tax year 2026-27: salary income Rs 6,00,000, business income Rs 2,00,000 and a long-term capital gain on listed shares Rs 1,00,000. Which sequence correctly describes the computation of his total income?

Income is first computed head-wise, then clubbing and set-off of losses give gross total income, and finally the permitted deductions are subtracted to arrive at total income. Deductions come after gross total income, not before it, and exempt income is never added.

  1. ACompute income under each head, apply clubbing and set-off to get gross total income, then deduct Chapter VIII-type deductions to get total incomeCorrect
  2. BAdd all receipts, then deduct deductions, then apply set-off of losses
  3. CDeduct deductions from each head first, then club incomes to get gross total income
  4. DCompute total income, then add exempt incomes to get gross total income

Explanation

The scheme is: classify income under heads, compute each head, club income of others and set off/carry forward losses to reach gross total income, then allow deductions to reach total income. The second option ignores heads, and the third reverses the order of deductions. The last confuses gross total income and total income.

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