This chapter-wise practice test covers Taxation - DT Ch 01: Basic Concepts - Test 1 for CA Intermediate Group 1 students preparing for the May 2027 examination attempt. It carries 30 marks across 15 questions in case scenarios and standalone practical MCQs with a time limit of 35 minutes and no negative marking.
15 questions across 1 chapter, 30 marks and 35 minutes in the timed paper. Every answer below is shown with the working behind it and the authority it rests on.
Law and standards used: Income-tax Act, 2025 (as incorporated in ICAI Study Material for May 2027); Income-tax Act, 1961 as amended by Finance Act applicable for May 2027; ICAI CA Intermediate Study Material (May 2027 Examination).
Questions
15
Marks
30
Time limit
35 minutes
Attempt
May 2027
Group
Group 1
Law basis
Income-tax Act, 2025 (as incorporated in ICAI Study Material for May 2027); Income-tax Act, 1961 as amended by Finance Act applicable for May 2027; ICAI CA Intermediate Study Material (May 2027 Examination)
Content as of
2026-10-31
Chapters covered
Taxation - DT Ch 01: Basic Concepts (15 Q)
Questions, answers and explanations
Question 1 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
Scenario. Smt. Anuradha Sen, a resident individual aged 45 years, is a senior consultant with Nandini Real Estates Pvt Ltd. For the previous year 2026-27, her total income comprises: salary income (computed) ₹44,00,000; income from let-out house property (computed after municipal taxes and interest on housing loan) ₹4,00,000; and interest on fixed deposits with scheduled banks ₹3,20,000. She has no capital gains and no brought-forward losses. She has not claimed any deduction under Chapter VI-A except the standard deduction in computing salary income. She opts to pay tax under the default tax regime under Section 115BAC. Her total income is therefore ₹51,20,000. You are required to answer the following questions relating to her tax liability for AY 2027-28. Ignore any surcharge cap on dividend or capital gains as her income does not include such special-rate income.
What is the income-tax (including surcharge, before marginal relief and health and education cess) on Smt. Anuradha Sen's total income of ₹51,20,000 for AY 2027-28 under the default tax regime?
₹12,27,600 (correct answer)
₹11,16,000
₹12,00,000
₹12,48,000
Answer: A — ₹12,27,600
Explanation. Slab tax under Section 115BAC: up to ₹4,00,000 nil; ₹4,00,001–₹8,00,000 @5% = ₹20,000; ₹8,00,001–₹12,00,000 @10% = ₹40,000; ₹12,00,001–₹16,00,000 @15% = ₹60,000; ₹16,00,001–₹20,00,000 @20% = ₹80,000; ₹20,00,001–₹24,00,000 @25% = ₹1,00,000; above ₹24,00,000 on ₹27,20,000 @30% = ₹8,16,000. Total slab tax = ₹11,16,000. Surcharge @10% (income exceeds ₹50 lakh but does not exceed ₹1 crore) = ₹1,11,600. Tax including surcharge = ₹12,27,600.
Where it goes wrong. Applying 15% surcharge by treating income as exceeding ₹1 crore, or omitting surcharge altogether.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 2 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
What is the amount of marginal relief available to Smt. Anuradha Sen on her total income of ₹51,20,000?
₹1,11,600
₹27,600 (correct answer)
₹1,20,000
₹48,000
Answer: B — ₹27,600
Explanation. Tax on ₹50,00,000 under Section 115BAC = ₹3,00,000 (up to ₹24 lakh) + 30% of ₹26,00,000 = ₹7,80,000, total ₹10,80,000. At ₹50,00,000 no surcharge is levied. Income exceeding ₹50,00,000 = ₹1,20,000. Threshold amount = ₹10,80,000 + ₹1,20,000 = ₹12,00,000. Tax with surcharge on ₹51,20,000 = ₹12,27,600. Marginal relief = ₹12,27,600 − ₹12,00,000 = ₹27,600.
Where it goes wrong. Computing tax on ₹50,00,000 by adding surcharge, which is not applicable at exactly ₹50,00,000.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 3 · 2 marks · Taxation - DT Ch 01: Basic Concepts · medium
What is Smt. Anuradha Sen's final tax liability for AY 2027-28 after marginal relief and health and education cess?
₹12,27,600
₹12,00,000
₹12,48,000 (correct answer)
₹11,16,000
Answer: C — ₹12,48,000
Explanation. Tax including surcharge on ₹51,20,000 = ₹12,27,600. Marginal relief = ₹27,600, so tax after marginal relief = ₹12,00,000. Health and education cess @4% = ₹48,000. Final tax liability = ₹12,00,000 + ₹48,000 = ₹12,48,000. Cess is computed on income-tax plus surcharge after marginal relief, not on total income.
Where it goes wrong. Adding cess to the pre-marginal-relief figure of ₹12,27,600 or applying cess before marginal relief.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 4 · 2 marks · Taxation - DT Ch 01: Basic Concepts · medium
If Smt. Anuradha Sen's total income were ₹49,80,000 instead of ₹51,20,000, what would be her tax liability including health and education cess?
₹11,28,400
₹10,74,000
₹11,00,000
₹11,16,960 (correct answer)
Answer: D — ₹11,16,960
Explanation. For total income ₹49,80,000, slab tax = ₹3,00,000 up to ₹24,00,000 + 30% of ₹25,80,000 = ₹7,74,000, total ₹10,74,000. Surcharge is nil because total income does not exceed ₹50,00,000. Health and education cess @4% = ₹42,960. Tax liability = ₹10,74,000 + ₹42,960 = ₹11,16,960.
Where it goes wrong. Levying 10% surcharge even though total income is below the ₹50,00,000 threshold.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 5 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
Scenario. Mr. Aryan Mehta, a resident individual aged 58 years, runs a proprietary business of steel fabrication under the name Aryan Steels. For the previous year 2026-27, his total income is ₹2,05,00,000, comprising business income ₹1,60,00,000 and interest on fixed deposits ₹45,00,000. He has no capital gains and no brought-forward losses. He has not opted out of the default tax regime under Section 115BAC. He has no income chargeable at special rates. Compute his tax liability for AY 2027-28 and answer the following questions. Assume that he has not claimed any deduction under Chapter VI-A.
What is Mr. Aryan Mehta's income-tax before surcharge on his total income of ₹2,05,00,000 for AY 2027-28 under the default tax regime?
₹57,30,000 (correct answer)
₹55,80,000
₹58,42,500
₹54,30,000
Answer: A — ₹57,30,000
Explanation. Slab tax up to ₹24,00,000 = ₹3,00,000. Income above ₹24,00,000 = ₹1,81,00,000. Tax @30% on ₹1,81,00,000 = ₹54,30,000. Total income-tax before surcharge = ₹3,00,000 + ₹54,30,000 = ₹57,30,000. No special-rate income is included, so the entire tax is computed at slab rates.
Where it goes wrong. Computing tax on the entire ₹2.05 crore at 30% without giving the benefit of lower slabs up to ₹24,00,000.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 6 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
What is the amount of surcharge payable by Mr. Aryan Mehta before marginal relief?
₹8,37,000
₹14,32,500 (correct answer)
₹11,46,000
₹14,60,625
Answer: B — ₹14,32,500
Explanation. Income-tax before surcharge = ₹57,30,000. Total income exceeds ₹2 crore, so surcharge rate is 25%. Surcharge = 25% of ₹57,30,000 = ₹14,32,500. The 15% rate applies where total income exceeds ₹1 crore but does not exceed ₹2 crore; the 10% rate applies where total income exceeds ₹50 lakh but does not exceed ₹1 crore.
Where it goes wrong. Applying 15% surcharge by overlooking that total income exceeds ₹2 crore, or applying 25% on tax after cess.
Authority. Finance Act 2026; Section 115BAC of the Income-tax Act, 1961
Question 7 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
What is the marginal relief available to Mr. Aryan Mehta on his total income of ₹2,05,00,000?
₹3,45,500
₹5,00,000
₹2,45,500 (correct answer)
₹1,45,500
Answer: C — ₹2,45,500
Explanation. Tax on ₹2,00,00,000 = ₹3,00,000 up to ₹24,00,000 + 30% of ₹1,76,00,000 = ₹52,80,000, total ₹55,80,000. Surcharge @15% = ₹8,37,000. Tax with surcharge at ₹2 crore = ₹64,17,000. Income above ₹2 crore = ₹5,00,000. Threshold = ₹64,17,000 + ₹5,00,000 = ₹69,17,000. Tax with surcharge on ₹2,05,00,000 = ₹71,62,500. Marginal relief = ₹71,62,500 − ₹69,17,000 = ₹2,45,500.
Where it goes wrong. Computing tax on ₹2 crore with 25% surcharge instead of the applicable 15% rate at that threshold.
Authority. Finance Act 2026; Section 115BAC of the Income-tax Act, 1961
Question 8 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
What is Mr. Aryan Mehta's final tax liability for AY 2027-28 after marginal relief and health and education cess?
₹74,49,000
₹71,62,500
₹69,17,000
₹71,93,680 (correct answer)
Answer: D — ₹71,93,680
Explanation. Tax including surcharge before marginal relief = ₹71,62,500. Marginal relief = ₹2,45,500, so tax after marginal relief = ₹69,17,000. Health and education cess @4% = ₹2,76,680. Final tax liability = ₹69,17,000 + ₹2,76,680 = ₹71,93,680.
Where it goes wrong. Adding cess to the pre-marginal-relief figure of ₹71,62,500, which overstates the liability.
Authority. Finance Act 2026; Section 115BAC of the Income-tax Act, 1961
Question 9 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Ms. Riya, a resident individual aged 30 years, has total income of ₹12,08,000 for AY 2027-28 under the default tax regime. What is her tax liability including health and education cess after claiming rebate under Section 87A?
₹8,320 (correct answer)
₹60,800
₹8,000
₹61,120
Answer: A — ₹8,320
Explanation. Tax before rebate: ₹20,000 (5% of ₹4,00,000) + ₹40,000 (10% of ₹4,00,000) + ₹800 (10% of ₹8,000) = ₹60,800. Since total income exceeds ₹12,00,000, rebate under Section 87A = tax − (total income − ₹12,00,000) = ₹60,800 − ₹8,000 = ₹52,800. Tax after rebate = ₹8,000. Cess @4% = ₹320. Total = ₹8,320.
Where it goes wrong. Allowing the full ₹60,000 rebate even though total income exceeds ₹12,00,000, or denying marginal rebate altogether.
Authority. Section 87A of the Income-tax Act, 1961; Section 115BAC of the Income-tax Act, 1961
Question 10 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Shri Vikramaditya HUF, a resident HUF, has total income of ₹1,00,80,000 for AY 2027-28 under the default tax regime. What is its final tax liability including health and education cess after marginal relief?
₹31,14,384
₹30,34,720 (correct answer)
₹29,18,000
₹30,00,000
Answer: B — ₹30,34,720
Explanation. Tax before surcharge = ₹3,00,000 + 30% of ₹76,80,000 = ₹26,04,000. Surcharge @15% = ₹3,90,600; total = ₹29,94,600. Tax at ₹1 crore = ₹25,80,000 + 10% surcharge ₹2,58,000 = ₹28,38,000. Income excess = ₹80,000; threshold = ₹29,18,000. Marginal relief = ₹29,94,600 − ₹29,18,000 = ₹76,600. Tax after relief = ₹29,18,000. Cess @4% = ₹1,16,720. Final liability = ₹30,34,720.
Where it goes wrong. Applying 15% surcharge at ₹1 crore, or missing that at ₹1 crore the applicable surcharge rate is 10%.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 11 · 2 marks · Taxation - DT Ch 01: Basic Concepts · medium
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Mr. Rohan, a resident individual, has income-tax before surcharge of ₹2,00,000 and surcharge of ₹20,000 for AY 2027-28. He is eligible for rebate under Section 87A of ₹10,000. What is the amount of health and education cess?
₹8,800
₹8,000
₹8,400 (correct answer)
₹7,600
Answer: C — ₹8,400
Explanation. Health and education cess is levied at 4% on income-tax plus surcharge, after reducing rebate under Section 87A. Amount = ₹2,00,000 + ₹20,000 − ₹10,000 = ₹2,10,000. Cess = 4% of ₹2,10,000 = ₹8,400. Cess is not computed on total income or on rebate amount.
Where it goes wrong. Computing cess on ₹2,20,000 without reducing rebate, or on ₹2,00,000 by ignoring surcharge.
Authority. Finance Act 2026; Section 87A of the Income-tax Act, 1961
Question 12 · 2 marks · Taxation - DT Ch 01: Basic Concepts · medium
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Ms. Kavya, a resident individual aged 28 years, has total income of ₹11,90,000 for AY 2027-28 under the default tax regime. What is her tax liability after rebate under Section 87A?
₹59,000
₹60,000
₹1,000
Nil (correct answer)
Answer: D — Nil
Explanation. Tax on ₹11,90,000 = ₹20,000 (5% of ₹4,00,000) + ₹39,000 (10% of ₹3,90,000) = ₹59,000. Since total income does not exceed ₹12,00,000, rebate under Section 87A is all of tax or ₹60,000, whichever is less. Rebate = ₹59,000. Tax after rebate = Nil. No cess is payable because tax liability is nil.
Where it goes wrong. Restricting rebate to ₹12,500 by applying the optional-regime limit, or adding cess despite nil tax.
Authority. Section 87A of the Income-tax Act, 1961; Section 115BAC of the Income-tax Act, 1961
Question 13 · 2 marks · Taxation - DT Ch 01: Basic Concepts · medium
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Mr. Ishaan, a resident individual, has total income of ₹2,00,00,000 for AY 2027-28 under the default tax regime. What surcharge rate applies to his income-tax?
15% (correct answer)
10%
25%
Nil
Answer: A — 15%
Explanation. For an individual under the default tax regime, surcharge is 10% where total income exceeds ₹50 lakh but does not exceed ₹1 crore; 15% where total income exceeds ₹1 crore but does not exceed ₹2 crore; and 25% where total income exceeds ₹2 crore. At total income of ₹2,00,00,000, it does not exceed ₹2 crore, so the 15% rate applies.
Where it goes wrong. Applying 25% by treating ₹2 crore as exceeding the ₹2 crore threshold, or applying 10% by ignoring the ₹1 crore threshold.
Authority. Finance Act 2026; Section 115BAC of the Income-tax Act, 1961
Question 14 · 2 marks · Taxation - DT Ch 01: Basic Concepts · hard
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Mr. Neel, a resident individual aged 40 years, has total income of ₹50,05,000 for AY 2027-28 under the default tax regime. What is his tax after marginal relief but before health and education cess?
₹11,89,650
₹10,85,000 (correct answer)
₹10,80,000
₹10,81,500
Answer: B — ₹10,85,000
Explanation. Tax before surcharge on ₹50,05,000 = ₹3,00,000 + 30% of ₹26,05,000 = ₹10,81,500. Surcharge @10% = ₹1,08,150; total = ₹11,89,650. Tax at ₹50,00,000 = ₹10,80,000; no surcharge at that level. Income excess = ₹5,000; threshold = ₹10,85,000. Marginal relief = ₹11,89,650 − ₹10,85,000 = ₹1,04,650. Tax after relief = ₹10,85,000.
Where it goes wrong. Ignoring marginal relief and retaining the higher figure of ₹11,89,650, or adding surcharge to the ₹50 lakh threshold.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Question 15 · 2 marks · Taxation - DT Ch 01: Basic Concepts · medium
Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.
Ms. Tara, a resident individual aged 35 years, has total income of ₹24,00,000 for AY 2027-28 under the default tax regime. What is her income-tax before surcharge and cess?
₹2,80,000
₹3,20,000
₹3,00,000 (correct answer)
₹2,40,000
Answer: C — ₹3,00,000
Explanation. Under Section 115BAC, tax up to ₹24,00,000 is: nil up to ₹4,00,000; 5% of ₹4,00,000 = ₹20,000; 10% of ₹4,00,000 = ₹40,000; 15% of ₹4,00,000 = ₹60,000; 20% of ₹4,00,000 = ₹80,000; 25% of ₹4,00,000 = ₹1,00,000. Total = ₹3,00,000. No surcharge is levied because total income does not exceed ₹50,00,000.
Where it goes wrong. Applying 30% to the entire income or adding surcharge even though income is below ₹50 lakh.
Authority. Section 115BAC of the Income-tax Act, 1961; Finance Act 2026
Authorities cited in this paper
Section 115BAC of the Income-tax Act, 1961 · Finance Act 2026 · Section 87A of the Income-tax Act, 1961
Questions people ask
What does this Taxation - DT Ch 01: Basic Concepts - Test 1 practice test cover?
This practice test carries 30 marks across 15 questions covering statutory provisions, computation rules, and case scenarios.
How many questions are there and what is the time limit?
There are 15 questions carrying 2 marks each, giving a maximum score of 30 marks in 35 minutes with no negative marking.
Which statutory provisions are tested?
Questions strictly reflect the Income-tax provisions applicable for the May 2027 examination attempt following the ICAI Study Material.
Is this test affiliated with ICAI?
No. This is an independent practice paper prepared for CA Intermediate students. It is not issued by or affiliated with ICAI.
