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CA Intermediate · Taxation · Basic Concepts

Which of the following receipts of Rohan, a salaried resident individual, is a capital receipt and is therefore not chargeable to tax as income under the normal charging provisions, unless specifically taxed?

Repayment of principal of a loan Rohan had given to a friend is a capital receipt and not income. It only returns his own money. Salary, bank interest and house rent are revenue receipts earning a return, so they are taxable under their respective heads.

  1. ASalary received from his employer for the month of March
  2. BInterest received on a bank fixed deposit
  3. CAmount received from a friend as a loan repayment of principal he had lent earlierCorrect
  4. DRent received from letting out a flat

Explanation

Repayment of principal of a loan is a return of capital, not income. Salary, interest and rent are revenue receipts that arise from employment, money lent and property respectively and are taxable under their heads. Option B is wrong because interest is a revenue return on the deposit.

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