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CA Intermediate · Taxation · Basic Concepts

Meera Textiles, a proprietorship owned by Meera Nair, a resident individual, commenced its business on 1 October 2026. For the purposes of the Income-tax Act, 2025, what is the tax year in which the income of this business for the period from 1 October 2026 to 31 March 2027 will be taxed?

The income is taxed in tax year 2026-27, which runs from 1 April 2026 to 31 March 2027. The income is taxed in the year it is earned, and a business started mid-year is taxed from its commencement date to 31 March of that tax year.

  1. AThe tax year beginning on 1 October 2026 and ending on 30 September 2027
  2. BThe tax year beginning on 1 April 2026 and ending on 31 March 2027, with the business income counted only from 1 October 2026Correct
  3. CThe tax year beginning on 1 April 2027 and ending on 31 March 2028
  4. DTwo separate tax years, one for each half of the period

Explanation

Under the 2025 Act the tax year is the 12-month period starting on 1 April. Income is taxed in the same tax year in which it is earned. For a business set up during the year, the tax year covers the period from the date of commencement to 31 March, so the tax year is 2026-27. A deferred tax year or a tax year starting on the commencement date is wrong.

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