CA Inter Taxation MCQ Test 3 (Income-tax + GST): answer key

Question 1 · 2 marks · Chapter 3 Unit 2: Income from House Property · easy

Scenario. Meera owns a residential house in Indore, which she let out throughout the previous year 2025-26. The municipal value of the property is ₹2,10,000 per annum, its fair rent is ₹2,80,000 and the standard rent under the applicable Rent Control law is ₹2,50,000. The tenant paid rent of ₹20,000 per month for all 12 months. Municipal taxes for the year amounted to ₹21,000; Meera paid ₹15,000 herself and the tenant paid the remaining ₹6,000 directly to the municipal authority. Meera had borrowed capital for acquiring the house and paid interest of ₹90,000 during the year. Assume that the figures stated are the only relevant amounts and all conditions for deduction of interest are satisfied.

What is the Gross Annual Value (GAV) of Meera's house property for the Assessment Year 2026-27?

1. ₹2,50,000 (correct answer)
2. ₹2,10,000
3. ₹2,40,000
4. ₹2,80,000

Answer: A — ₹2,50,000

Working. Expected Rent = Higher of municipal value ₹2,10,000 and fair rent ₹2,80,000, restricted to standard rent of ₹2,50,000 = ₹2,50,000. Actual rent = ₹20,000 × 12 = ₹2,40,000. GAV = Higher of expected rent ₹2,50,000 and actual rent ₹2,40,000 = ₹2,50,000.

Explanation. Under section 23(1), expected rent is the higher of municipal value and fair rent, restricted to standard rent. The higher of ₹2,10,000 and ₹2,80,000 is ₹2,80,000, capped at ₹2,50,000. Actual rent for twelve months is ₹2,40,000. Therefore, GAV is ₹2,50,000. The tempting ₹2,80,000 option ignores the standard-rent restriction.

Where it goes wrong. Applying fair rent without restricting expected rent to standard rent.

Authority. Section 23(1)(a); Section 23(1)(b)

Question 2 · 2 marks · Chapter 3 Unit 2: Income from House Property · medium

What is the Net Annual Value (NAV) of Meera's house property for the previous year 2025-26?

1. ₹2,44,000
2. ₹2,29,000
3. ₹2,50,000
4. ₹2,35,000 (correct answer)

Answer: D — ₹2,35,000

Working. GAV = ₹2,50,000. Municipal taxes actually paid by Meera during the previous year = ₹15,000. Municipal taxes paid by the tenant = ₹6,000, not deductible by Meera. NAV = ₹2,50,000 − ₹15,000 = ₹2,35,000.

Explanation. NAV is calculated by deducting municipal taxes actually paid by the owner during the previous year from GAV. Meera paid ₹15,000 herself. The ₹6,000 paid directly by the tenant is not deductible by her. Thus, NAV is ₹2,50,000 minus ₹15,000, giving ₹2,35,000. The tempting ₹2,29,000 option wrongly deducts the entire municipal tax liability.

Where it goes wrong. Deducting municipal taxes paid by the tenant instead of restricting the deduction to taxes paid by the owner.

Authority. Section 23(1); Section 23(1)(c)

Question 3 · 2 marks · Chapter 3 Unit 2: Income from House Property · medium

Compute the income chargeable under the head 'Income from house property' for Meera for A.Y. 2026-27. Round amounts to the nearest rupee, wherever necessary.

1. ₹1,45,000
2. ₹74,500 (correct answer)
3. ₹70,000
4. ₹1,64,500

Answer: B — ₹74,500

Working. GAV = ₹2,50,000. Less: Municipal taxes paid by owner = ₹15,000. NAV = ₹2,35,000. Less: Standard deduction under section 24(a) = 30% × ₹2,35,000 = ₹70,500. Less: Interest on borrowed capital under section 24(b) = ₹90,000. Income from house property = ₹2,35,000 − ₹70,500 − ₹90,000 = ₹74,500.

Explanation. Section 24 permits a standard deduction of 30% of NAV and deduction of interest on borrowed capital for a let-out property. The standard deduction is ₹70,500 and interest is ₹90,000. After deducting both from NAV of ₹2,35,000, taxable house-property income is ₹74,500. The tempting ₹70,000 option incorrectly calculates the 30% deduction on GAV instead of NAV.

Where it goes wrong. Applying the 30% standard deduction to GAV instead of NAV or omitting one of the section 24 deductions.

Authority. Section 23(1); Section 24(a); Section 24(b)

Question 4 · 2 marks · Chapter 5: Aggregation of Income, Set-off and Carry Forward of Losses · medium

Scenario. Raghav, an individual, exercises the option of shifting out of the default tax regime for the previous year 2025-26. His salary income is ₹7,80,000. His computation shows a loss of ₹2,60,000 under the head 'Income from house property' and a current-year loss of ₹1,20,000 from a non-speculative business. He has no income from any other head apart from salary. He validly exercised the option to opt out of the default tax regime by furnishing Form 10-IEA on or before the due date under section 139(1), but he furnishes his return of income only after that date, so the return is belated. Assume that both losses are otherwise computed in accordance with the provisions of the Act.

What is the maximum amount of Raghav's house-property loss that can be set off against his salary income in A.Y. 2026-27?

1. ₹1,20,000
2. Nil
3. ₹2,60,000
4. ₹2,00,000 (correct answer)

Answer: D — ₹2,00,000

Working. Current-year house-property loss = ₹2,60,000. Maximum inter-head set-off under the optional tax regime = ₹2,00,000. Salary income = ₹7,80,000, which is sufficient to absorb the permitted set-off. Amount of house-property loss carried forward = ₹2,60,000 − ₹2,00,000 = ₹60,000.

Explanation. Since Raghav has exercised the option of shifting out of the default tax regime, house-property loss can be set off against income under other heads, subject to a maximum of ₹2,00,000 in the same assessment year. His salary income is sufficient to absorb this amount. The remaining ₹60,000 is unabsorbed. The ₹2,60,000 option ignores the statutory inter-head restriction.

Where it goes wrong. Setting off the entire house-property loss against salary without applying the ₹2,00,000 restriction.

Authority. Section 71; Section 71B; Section 115BAC(1A)

Question 5 · 2 marks · Chapter 5: Aggregation of Income, Set-off and Carry Forward of Losses · easy

How much of Raghav's non-speculative business loss of ₹1,20,000 can be set off against his salary income in the same assessment year?

1. ₹2,00,000
2. Nil (correct answer)
3. ₹60,000
4. ₹1,20,000

Answer: B — Nil

Working. Business loss = ₹1,20,000. Income from salary = ₹7,80,000. Business loss cannot be set off against salary. Income under any other positive head is not given. Therefore, allowable set-off against salary = Nil.

Explanation. A business loss may generally be adjusted against income under other heads, but section 71 specifically prohibits setting off business loss against salary income. Raghav has no positive income under another head against which this business loss can be adjusted. Consequently, none of the ₹1,20,000 can be set off against salary. The full-set-off option overlooks the salary exception.

Where it goes wrong. Applying the general inter-head set-off rule without considering the specific restriction on business loss against salary.

Authority. Section 71

Question 6 · 2 marks · Chapter 5: Aggregation of Income, Set-off and Carry Forward of Losses · hard

Considering that Raghav filed a belated return, which statement correctly describes the carry-forward treatment of his unabsorbed losses?

1. Only the business loss of ₹1,20,000 can be carried forward for up to eight assessment years.
2. Both the business loss of ₹1,20,000 and the house-property loss of ₹60,000 can be carried forward for eight assessment years.
3. Only the unabsorbed house-property loss of ₹60,000 can be carried forward for up to eight succeeding assessment years. (correct answer)
4. Neither loss can be carried forward because the return was filed after the due date.

Answer: C — Only the unabsorbed house-property loss of ₹60,000 can be carried forward for up to eight succeeding assessment years.

Working. House-property loss originally = ₹2,60,000. Current-year inter-head set-off = ₹2,00,000. Unabsorbed house-property loss = ₹60,000. This loss can be carried forward for up to eight succeeding assessment years, even though the return is belated. Business loss = ₹1,20,000. Since the return was not filed within the section 139(1) due date, section 80 prevents its carry-forward under section 72.

Explanation. Section 80 requires a return of loss under section 139(3) to be filed within the due date under section 139(1) for carrying forward business loss under section 72. A belated return does not satisfy this condition. However, this timely-return requirement does not apply to house-property loss under section 71B. Therefore, the unabsorbed ₹60,000 house-property loss can be carried forward for up to eight succeeding assessment years.

Where it goes wrong. Assuming that the timely-return condition for carrying forward business loss also applies to house-property loss.

Authority. Section 80; Section 139(3); Section 139(1); Section 71B; Section 72(1)

Question 7 · 2 marks · Chapter 3 Unit 5: Income from Other Sources · easy

Scenario. During the previous year 2025-26, Aarav received two pieces of jewellery from a friend without consideration. Their fair market values on the respective dates of receipt were ₹36,000 and ₹29,000. The jewellery is held by Aarav as capital assets, and none of the exceptions to section 56(2)(x) applies.

What amount is chargeable to tax under the head 'Income from other sources' under section 56(2)(x) in respect of the jewellery received by Aarav?

1. ₹15,000
2. Nil
3. ₹65,000 (correct answer)
4. ₹29,000

Answer: C — ₹65,000

Working. Fair market value of first jewellery receipt = ₹36,000. Fair market value of second jewellery receipt = ₹29,000. Aggregate fair market value = ₹36,000 + ₹29,000 = ₹65,000. Since the aggregate exceeds ₹50,000, the whole aggregate value of ₹65,000 is chargeable to tax under section 56(2)(x).

Explanation. For movable property received without consideration, section 56(2)(x) taxes the aggregate fair market value when it exceeds ₹50,000. The fair market value of the two jewellery receipts totals ₹65,000. Accordingly, the entire ₹65,000 is taxable. The tempting ₹15,000 option wrongly treats the amount exceeding ₹50,000 as taxable instead of applying the threshold to determine whether the aggregate receipt is chargeable.

Where it goes wrong. Taxing only the amount exceeding ₹50,000 instead of the entire aggregate fair market value.

Authority. Section 56(2)(x)

Question 8 · 1 marks · Chapter 8: Provisions for Filing Return of Income and Self-Assessment · hard

Scenario. A payer credits an amount to Devika on 21 September 2025, when her PAN is inoperative because Aadhaar has not been linked. Devika completes the Aadhaar linkage, and her PAN becomes operative on 29 November 2025. The payer is determining whether the higher-rate TDS consequence under section 206AA applies to that credit.

Under CBDT Circular No. 9/2025 dated 21 July 2025, is the payer eligible for relief from the higher TDS rate under section 206AA in respect of this credit?

1. Yes, because the PAN became operative by 30 November 2025, being two months from the end of September 2025. (correct answer)
2. No, because the PAN had to become operative within two months from 21 September 2025 itself.
3. No, because the circular's relief applies only to amounts credited up to 31 July 2025.
4. No, because the PAN had to become operative by 30 September 2025.

Answer: A — Yes, because the PAN became operative by 30 November 2025, being two months from the end of September 2025.

Working. Date of credit = 21 September 2025. End of the month of credit = 30 September 2025. Two months from the end of that month = 30 November 2025. Date on which PAN became operative = 29 November 2025. Since PAN became operative within the prescribed period, the payer qualifies for relief from the higher TDS rate under section 206AA.

Explanation. For amounts paid or credited on or after 1 August 2025, Circular No. 9/2025 provides relief where the PAN becomes operative within two months from the end of the month of payment or credit. September 2025 ends on 30 September, making 30 November 2025 the relevant deadline. Devika's PAN became operative on 29 November, so the payer qualifies. The 30 September 2025 cut-off applies to an earlier payment period.

Where it goes wrong. Calculating the two-month period from the actual credit date or applying the earlier 30 September 2025 deadline to a credit made after 31 July 2025.

Authority. Section 139AA(2); Section 206AA; Circular No. 9/2025 dated 21.07.2025

Question 9 · 2 marks · Chapter 2 - Supply under GST · easy

Scenario. Avyukt Motion Systems Pvt Ltd is registered in Pune, Maharashtra and carries on business there. In July 2026, it buys a production-line unit from Sumeru Industrial Supplies, a Pune supplier, for a single package price of ₹18,00,000. The package comprises taxable supplies of the unit, delivery, transit insurance and on-site calibration; Sumeru invariably supplies them together in its ordinary business, and customers regard the unit as the main element, with the other elements ancillary to its use. In the same month, Avyukt buys a festive hamper for ₹4,500 from Rangilo Gifts containing tea, chocolates and a ceramic cup. Each item is taxable and can be supplied independently; the items are not naturally bundled, and Rangilo charges one consolidated price. Avyukt also obtains legal services for business litigation from K&S Advocates, a firm located in Delhi. K&S issues its invoice on 3 June 2026; Avyukt records payment in its books on 5 August 2026 and its bank account is debited on 6 August 2026. Separately, Avyukt engages Ishan Design Studio, an architect located in Indore, to prepare plans directly relating to a commercial property situated in Goa. All service suppliers and Avyukt are located in India; Avyukt is GST-registered in Maharashtra.

How should the production-line package supplied by Sumeru Industrial Supplies be classified for GST, and how is its tax liability determined?

1. It is a composite supply and is treated as a supply of calibration services because calibration is necessary for operating the unit.
2. It is a composite supply and is treated as a supply of the production-line unit, being the principal supply. (correct answer)
3. It is a mixed supply and is taxed at the rate applicable to the component attracting the highest rate.
4. It comprises independent supplies, each of which must be taxed separately at its respective rate.

Answer: B — It is a composite supply and is treated as a supply of the production-line unit, being the principal supply.

Explanation. The package contains multiple taxable supplies naturally bundled and supplied together in the ordinary course of the supplier's business. The production-line unit is the predominant element; delivery, insurance and calibration are ancillary. It is therefore a composite supply, treated as a supply of the principal supply under section 8(a). The option treating it as a mixed supply overlooks the natural bundling and principal-supply relationship.

Where it goes wrong. Confusing a naturally bundled composite supply with a mixed supply or treating an ancillary element as the principal supply.

Authority. CGST Act, sections 2(30), 2(90) and 8(a); Study Material, Chapter 2, pages 2.71-2.72

Question 10 · 2 marks · Chapter 2 - Supply under GST · medium

What is the GST treatment of the festive hamper supplied by Rangilo Gifts?

1. It is a composite supply and is taxed at the rate applicable to the ceramic cup.
2. It is a mixed supply but each component is taxed separately at its respective rate.
3. It is a composite supply and is taxed at the rate applicable to tea as the principal supply.
4. It is a mixed supply and is taxed at the rate applicable to the component attracting the highest rate of tax. (correct answer)

Answer: D — It is a mixed supply and is taxed at the rate applicable to the component attracting the highest rate of tax.

Explanation. Each hamper component can be supplied independently, and the facts state that the items are not naturally bundled. Since they are supplied together for one consolidated price and do not form a composite supply, the hamper is a mixed supply under section 2(74). Section 8(b) taxes a mixed supply as the particular supply attracting the highest rate, not by treating tea as the principal supply or taxing each item separately.

Where it goes wrong. Applying the principal-supply rule for composite supplies instead of the highest-rate rule for mixed supplies.

Authority. CGST Act, sections 2(74) and 8(b); Study Material, Chapter 2, pages 2.77-2.78

Question 11 · 2 marks · Chapter 3 - Charge of GST · easy

Who is liable to pay GST on the legal services supplied by K&S Advocates to Avyukt Motion Systems Pvt Ltd?

1. Avyukt Motion Systems Pvt Ltd, under reverse charge, as the recipient is a business entity located in the taxable territory. (correct answer)
2. Avyukt Motion Systems Pvt Ltd, under forward charge, because it is the registered recipient.
3. Both K&S Advocates and Avyukt Motion Systems Pvt Ltd are jointly liable to pay GST.
4. K&S Advocates, under forward charge, because the supplier is a registered firm.

Answer: A — Avyukt Motion Systems Pvt Ltd, under reverse charge, as the recipient is a business entity located in the taxable territory.

Explanation. Legal services supplied by a firm of advocates to a business entity located in the taxable territory fall under the notified reverse-charge category. Accordingly, the recipient business entity, Avyukt, is liable to pay GST. K&S's registration or its status as supplier does not convert the notified service to forward charge; the reverse-charge entry places liability on the business-entity recipient.

Where it goes wrong. Assuming that a registered service provider must always pay GST under forward charge.

Authority. CGST Act, section 9(3); Notification No. 13/2017-Central Tax (Rate), entry 2; Study Material, Chapter 3, page 3.18

Question 12 · 2 marks · Chapter 4 - Place of Supply · medium

What is the place of supply of K&S Advocates' legal services, and how is the transaction classified for levy of tax?

1. Maharashtra; inter-State supply attracting IGST, payable by Avyukt under reverse charge. (correct answer)
2. Delhi; inter-State supply attracting IGST, payable by K&S Advocates under forward charge.
3. Maharashtra; intra-State supply attracting CGST and Maharashtra SGST.
4. Delhi; intra-State supply attracting CGST and Delhi SGST.

Answer: A — Maharashtra; inter-State supply attracting IGST, payable by Avyukt under reverse charge.

Explanation. Because Avyukt is registered, section 12(2) places the supply at the location of the registered recipient, Maharashtra. K&S is located in Delhi, so the supplier's location and place of supply are in different States; the transaction is inter-State and attracts IGST. The place of supply is not the advocate firm's location merely because the legal work is performed there. The recipient pays the tax under reverse charge.

Where it goes wrong. Using the supplier's location instead of the registered recipient's location under the general rule for services.

Authority. IGST Act, sections 7(3) and 12(2); CGST Act, section 9(3); Study Material, Chapter 4, pages 4.26-4.27

Question 13 · 2 marks · Chapter 4 - Place of Supply · medium

What is the place of supply of the architect's service supplied by Ishan Design Studio, and what is the nature of the supply?

1. Pune, Maharashtra; inter-State supply.
2. Goa; intra-State supply.
3. Goa; inter-State supply. (correct answer)
4. Indore, Madhya Pradesh; intra-State supply.

Answer: C — Goa; inter-State supply.

Explanation. Architectural services directly related to immovable property are governed by the specific rule in section 12(3)(a), rather than the general registered-recipient rule. The place of supply is where the property is located or intended to be located. Since the commercial property is in Goa, Goa is the place of supply. The supplier is located in Madhya Pradesh, making the supply inter-State.

Where it goes wrong. Applying the general rule for registered recipients instead of the specific immovable-property rule.

Authority. IGST Act, sections 7(3) and 12(3)(a); Study Material, Chapter 4, pages 4.21-4.22

Question 14 · 2 marks · Chapter 6 - Time of Supply · hard

What is the time of supply of the legal services provided by K&S Advocates under reverse charge?

1. 2 August 2026
2. 5 August 2026
3. 6 August 2026
4. 3 August 2026 (correct answer)

Answer: D — 3 August 2026

Working. 1. Supplier's invoice date = 3 June 2026.\ 2. Sixty days from the invoice date expire on 2 August 2026. The immediately following day, i.e. the 61st day, is 3 August 2026.\ 3. Date of payment = earlier of the date entered in the recipient's books (5 August 2026) and the date of bank debit (6 August 2026) = 5 August 2026.\ 4. Time of supply = earlier of 3 August 2026 and 5 August 2026 = 3 August 2026.

Explanation. Under section 13(3), the time of supply is the earliest of the recipient's date of payment and the date immediately following 60 days from the supplier's invoice. Payment is recorded in the books on 5 August, earlier than the 6 August bank debit. The 61st day after 3 June is 3 August, which precedes 5 August. The 60th day, 2 August, is not the statutory date.

Where it goes wrong. Taking the 60th day instead of the day immediately following 60 days, or selecting the bank debit date instead of the earlier date of payment.

Authority. CGST Act, section 13(3); Study Material, Chapter 6, pages 6.35-6.36

Question 15 · 2 marks · Chapter 14 - Tax Deduction at Source and Collection of Tax at Source · hard

Scenario. During November 2026, the Karnataka Public Works Department, registered in Karnataka, awards a taxable-services contract to Rishit Services, a registered supplier located in Karnataka, for ₹3,20,000 excluding GST; the place of supply is also Karnataka. It pays an instalment of ₹1,50,000 excluding GST. Separately, an ECO collects consideration for inter-State taxable supplies of a registered seller worth ₹4,80,000, of which supplies worth ₹80,000 are returned.

What are the respective amounts of TDS and TCS for November 2026? Amounts are in rupees; no rounding is required.

1. TDS Nil; TCS ₹2,000
2. TDS ₹3,000; TCS ₹2,400
3. TDS ₹3,000; TCS ₹2,000 (correct answer)
4. TDS ₹1,500; TCS ₹2,000

Answer: C — TDS ₹3,000; TCS ₹2,000

Working. TDS calculation:\ Contract value = ₹3,20,000, which exceeds ₹2,50,000. Hence, TDS applies.\ Payment made during November = ₹1,50,000 (excluding GST).\ CGST TDS = 1% × ₹1,50,000 = ₹1,500.\ SGST TDS = 1% × ₹1,50,000 = ₹1,500.\ Total TDS = ₹1,500 + ₹1,500 = ₹3,000.\ \ TCS calculation:\ Inter-State taxable supplies through ECO = ₹4,80,000.\ Less: Supplies returned = ₹80,000.\ Net value of taxable supplies = ₹4,80,000 − ₹80,000 = ₹4,00,000.\ TCS = 0.5% × ₹4,00,000 = ₹2,000.\ \ Therefore, TDS = ₹3,000 and TCS = ₹2,000.

Explanation. The contract value of taxable services exceeds ₹2,50,000 and the supplier's location, place of supply and recipient's registration are all in Karnataka, so TDS applies. The intra-State deduction is 1% CGST plus 1% SGST on the ₹1,50,000 payment, totalling ₹3,000. Inter-State TCS is 0.5% of net supplies after returns: ₹4,80,000 less ₹80,000 equals ₹4,00,000; TCS is ₹2,000. The gross-sales distractor fails to deduct returns.

Where it goes wrong. Applying only 1% as the combined intra-State TDS rate, ignoring the contract-value threshold, or calculating TCS on gross supplies without reducing returns.

Authority. CGST Act, sections 51(1) and 52(1); IGST Act, section 20; Study Material, Chapter 14, pages 14.5-14.9 and 14.17-14.18

Question 16 · 1 marks · Chapter 15 - Returns · easy

Scenario. M/s Rivan Supplies is a regular registered person, files returns monthly and has not opted for QRMP. It is not an input service distributor, non-resident taxable person, composition taxpayer, TDS deductor or TCS operator. It is preparing its GSTR-3B for October 2026.

By what date must M/s Rivan Supplies furnish its GSTR-3B for October 2026?

1. On or before 22 November 2026
2. On or before 20 November 2026 (correct answer)
3. On or before 20 December 2026
4. On or before 10 November 2026

Answer: B — On or before 20 November 2026

Explanation. An ordinary registered taxpayer required to furnish a monthly return under section 39(1) files GSTR-3B on or before the 20th of the month succeeding the tax period. The return relates to October 2026, so its due date under the supplied material is 20 November 2026. The 22nd and 24th dates relate to quarterly QRMP filers, not this monthly filer.

Where it goes wrong. Confusing the monthly GSTR-3B due date with the quarterly QRMP filing dates.

Authority. CGST Act, section 39(1); CGST Rules, rule 61; Study Material, Chapter 15, pages 15.32-15.33