Income Tax

NOBLE GROUP OF INSTITUTIONS 1
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INCOME TAX-1
UNIT - 1 Ch – 1 Introduction Of income Tax -1961

Q.1 DIRECT AND INDIRECT TAXES :
Taxes levied by governments can be classified into two categories : (1)
DirectTaxes, and (2) Indirect Taxes.
Those taxes whose burden cannot be shifted to others and the person
whopays these to the government has to bear it are called direct taxes. In other
words,direct tax is imposed on an individual or a group of individuals, which
affectsthem directly. i.e. which they have to pay to the government directly. e.g.,
Income-tax, Wealth-tax (abolished w.e.f. 1st April, 2016), Gift-tax etc.
Merits and Demerits of Direct Taxes
Merits of Direct Taxes Demerits of Direct Taxes
1. The larger burden of the 1. In the direct taxation, people areaware
directtaxes falls on the rich people of their tax liability andtherefore, they
whohave capacity to bear these would try to avoid or even evade the
andthe poor people with less taxes. Thepractice and possibility of
abilityto pay have to bear less taxevasion and avoidances is more in
burden. direct taxes than in case ofindirect
taxes.
2. Direct taxes are 2.Direct taxes are generally payablein
importantinstrument of lump sum or even in advanceand
reducinginequalities of income become quite inconvenient.
and wealth.
3. Unlike indirect taxes, direct 3.Another demerit of direct taxes istheir
taxesdo not cause distortion in supposed effect on the willto work and
theallocation of resources. As a save. It is assessedthat if heavy tax is
result,these leave the consumers imposed onincome, the tax payer will
betteroff as compared to indirect findthat the return from work
taxes. hasdecreased as compared withreturn
from leisure.
4. Revenue elarticity of direct 4. Direct taxes take away a part ofthe
taxes,espacially if they are purchasing power of the taxpayer and
ofprogressive type, is quite that has the effect ofreducing demand
high.As the national income and prices.
increases,the revenue on these
taxes alsorises a great deal.
Indirect taxes are those whose burden can be shifted to others so that those
who pay these taxes to the government do not bear the whole burden but passit on
wholly or partly to others. Customs duty and Good and Service Tax aresome
examples of indirect taxes.
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Merits and Demerits of Indirect Taxes
Merits of Indirect Taxes Demerits of Indirect Taxes
1 Indirect taxes are usually hiddenin 1. It is very rightly claimed thatthese
the prices of goods and taxes negate the principleof ability
servicesbeing transacted and, to pay and are therefore,unjust to
therefore,their presence is not felt the poor. Since one ofthe
so much. objectives is to collect
enoughrevenue, they spread over
to coverthe items, which are
purchasedgenerally by the poor.
This makesthese taxes regressive
in effect.
2. If the indirect taxes are properly 2.If indirect taxes are heavilyimposed
administered, the chances of on the luxury items, thenthis will
taxevasion are less. only help partiallybecause taxing
the luxuries alonewill not yield
adequate revenuefor the state.
3. Indirect taxes are a powerful toolin 3.As Indirect Taxes are added tothe
moulding the production sale prices of taxed goodswithout
andinvestment activities of touching the purchasingpower in
theeconomy. i.e. they can guide the first place, theinflationary
theeconomy in its forces are fed throughhigher
resourceallocation. prices, higher costs andwages and
again higher prices.
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Q.2 Write a difference between Direct Tax and Indirect Tax.
Ans. Concept of Direct and Indirect taxes can be well explained by way of distinguishing
each from other:
Difference between Direct & Indirect Tax
Sr. Direct Tax Indirect Tax
no.
1 Tax burden is on person Tax burden is passed on by,seller to
whohas Taxable Income. the ultimateconsumer. Thus,
tax burdenis borne by consumer.
2 Direct Tax revenue for Govt.is Indirect Tax revenue is morethan Direct
comparatively low Taxes.
thanIndirect Tax.
3 Direct Tax is progressive Indirect Tax is regressive innature. i.e.
innature i.e. Poor person has All the personswhether: they may be
to pay less as compared to Rich orPoor have to pay the sametax.
richpersons. No relief to poor.
4 Income tax, Wealth Tax GST, Custom Duty are theexamples of
arethe examples of Direct Indirect Tax.
Taxes.
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Q.3 Write a note on income tax rate in India with surcharge.
Ans.:1. Tax Rates
A. Individual or HUF Opting for Normal Tax Regime
1. Individual (Other than Senior Citizen)
Rate of Income-tax
Net Income Range
Assessment Year2022-23
Up to Rs. 2,50,000 –
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

2. Senior Citizen (Who is 60 years or more not less than 80 years during the
previous year)
Rate of Income-tax
Net Income Range
Assessment Year 2022-23
Upto Rs. 3,00,000 –
Rs. 3,00,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

3. Super Senoir Citizen (Who is 80 years or more at any time during the previous
year)
Rate of Income-tax
Net Income Range
Assessment Year 2022-23
Upto Rs. 5,00,000 –
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
B. Individuals or HUF opting for Alternate Tax Regime *(Section 115BAC)

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Rate of Income-tax
Net Income Range
Assessment Year2022-23
Up to Rs. 2,50,000 –
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 7,50,000 10%
Rs. 7,50,001 to Rs. 10,00,000 15%
Rs. 10,00,000 to Rs. 12,50,000 20%
Rs. 12,50,001 to Rs. 15,00,000 25%
Above Rs. 15,00,000 30%

Rebate under section 87A is available to resident individuals whose total
income during the previous year does not exceed Rs. 5,00,000. Rebate is available
to the extent of Rs. 12,500 only and no rebate will be available if total income
exceeds Rs. 5,00,000.
2. Surcharge
The amount of income tax shall be increased by a surcharge for the purpose of
the union calculated at the following rates-
A. where total income (including the Income by way ofdividend 10% of such
or the income under the provision of section111A and section income tax
112A of the Income-Tax Act) exceedsRs. 50,00,000 but does not
exceed Rs. 1 crore
B. where the total income (including the income by wayof 15% of such
dividend or the income under the provisions ofsection 111A and income tax
section 112A of the income-Tax Act)exceeds Rs. 1 crore. but
does not exceed Rs. 2 crores.
C. where the total income (excluding the income by way of 25% of such
dividend or the income under the provisions of section 111A and income tax
section 112A of the Income-Tax Act)exceeds Rs. 2 crores but
does not exceeds Rs. 5 crores.
D. where the total income. (excluding the income by way of 37% of such
dividend or the income under the provisions of section 111A income tax
and section 112A of the Income-Tax Act)exceeds Rs. 5 crores.
E. Where the total income (excluding the income by way of 15% of such
dividend or the income under the provisions of section 111A and income tax
section 112A) exceeds Rs. 2 crores,but is not covered under
clauses (c) and (d) above.
Provided that in case where the total income includes any income by way of
dividend or income chargeable under section 111A and section 112A of the Income
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Tax Act,the rate of surcharge on the amount of income tax deducted in respect of
that part of income shall not exceed 15%.
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Q.4 Write a note on method of Assessing Tax.
Ans:
(1) Step Method:
This method is an old one. In which income tax is levied at a single rate on
total income of an assessee. (For Example: Taxable Income Mr. A not a senior Citizen
for the assessment year 2022-23 is Rs. 8,00,000. Calculate the tax liability).
(2) Slab Methods:
This method is modern progressive method to levy income tax, in this method
total income ofan assessee is divided into different slabs and each slab is charged at
a different rate.(For Example: Taxable Income Mr. A not a senior Citizen for the
assessment year 2022-23 is Rs. 8,00,000. Calculate the tax liability).
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Q.5 Write a note on assessee.
Ans :
(a) An assessee is a person by whom any tax or any other sum of money ispayable
under this Act.Any other sum of money may include interest, penalty, taxetc.
(irrespective of the fact whether any legal proceeding has been takenor not.)
(b) Every person in respect of whom any proceeding under this act has been taken for
the assessment of -
1. His income or,
2. Of the income of any other person in respect of which heis assessable, or
3. Of the loss sustained by him or by such other person, or
4. The amount of refund due to him or to such other person (whetherthe person is
liable to pay such amount or not).
(c) In addition, it has been stated in the Act that "assessee includes everyperson, who is
deemed to be an assessee under any provisions of this Act."“Deemed Assessee"
would include :
(i) Trustees of a trust.
(ii) Legal Representative of a deceased person (U/s 159).
(iii) Representative Assessee of a Non-resident U/s 160(2) (Agent of aNon-
resident).
(iv) Legal Guardian or Manager entitled to receive the income on behalfof a Minor,
a Lunatic or an Idiot.
(v) Court of Wards/Official Trustee/Receiver entitled to receive incomeon behalf
of any other person.
(d) Assessee, according to the Act, includes every person who is deemed tobe an
assessee in default under any provisions of this Act. An assessee- in-default means
(i) a person who fails to deduct and / or remit TDS (Sec. 191)
(ii) a person who fails to pay tax and any other sum demanded (Sec. 220).
Remember that every assessee under the income-tax law must be a
'person',but every person is not necessarily an assessee.
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Q.6 Write a note on Person.
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Ans : According to 2(31) Person includes the following
 Individual
 A Hindu undivided Family.(HUF)
 A Company
 A Firm (M/s. , Bros. , & Sons, & Co. Traders.)
 An Association of person or body of individual either incorporated or not.
 Local Authority
 Artificial Juridical Person not included above.
For Example: Hindu idol like Tirupati Balaji
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Q.7 Identity the following in the lightes of definition of Person.
Ans
1. Ramanand Sagar Individual
2. Desai Bros. A Firm
3. Reliance PVLtd A Company
4. Navsari Municipal Corporation Local Authority
5. Joint Family of Mr. M, Mrs. M and Sons. Hindu Undivided Family
6. M/s Jivanlal & Sons. A Firm
7. Ramrahim Nagar Co operative Housing Society Association of person
8. Ideal of Ganesha Artificial Person
9. Vipro Ltd. A Company
10. Axay Kumar Individual
11. Kishan (Receiving Income as karta) HUF
12. Junagadh municipal corporation Local Authority
13. Vilashnagar Sindhi Association Association of Person
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Q.8 Write a not an Assessment:
Ans: Assessment is process of determining the correctness of income of an
assessee and to assess the amount of tax payment by him and procedure of impose
the tax liability, Reassessment is also included in Assessment.
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Q.9 Write a note on Assessment Year.
Ans : An Assessment year is period of 12 months. Commencing on 1st April and
ending on 31st march. Assessment year is 1. In which income of previous year is to
be assessed. The current assessment year is 2022-23 which commenced on 1 st April,
2022 and will end on 31st March 2023 in which income of previous year 2021-22 is
assesses. It is always a fix period of 12 months without the change of date (1 st April
to 31st March) during the assessment year 2022-23 income of Previous year is
assessed. According to the rate of tax Prescribed by finance act, 2021 presented in
the form of annual budget.
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Q.10 Write a note on previous year.
Ans: Previous year means a year immediately preceeding the assessment year. The
Current assessment year 2022-23 the previous year for this is 2021-22.Which
commenced on 1st April 2021 and ended on 31st march 2022. It is compulsory for all
assessee to present their a/c for the year ended on 31st march year for income tax
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purpose. Howeverassessee is free to keep their a/c in any accounting year for any
other purpose.
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Q.11 Write a note on Income.
Ans. Though the income-tax is a tax on incomes, the Act does not clearly definewhat is
income. Income means some monetary returns periodically received fromsome
definite source. The definition of income given in Sec. 2 (24) is inclusiveand not
exhaustive. It says that certain items are included in the term 'income'.According to
Section 2(24) income includes :
1. Profits and Gains of Business or Profession.
2. Dividend (Dividend received by a shareholder is an exempted income.)
3. Voluntary Contributions received by a Charitable / Religious Trust orUniversity /
Education Institution or Hospital / Electoral Trust / ApprovedResearch Association
or Institution.
4. The value of any perquisite or profit in lieu of salary taxable under clauses(2) and
(3) of section 17.
5. Special Allowance or Benefit specifically granted either to meet personalexpenses or
for performance of duties or an employment of profit.
6. Allowance granted to assessee to meet his personal expenses at the placewhere he
performs his official duties or at the place he ordinarily resides orto compensate
him for the increased cost of living.
7. Export Incentives like Duty Drawback, Cash Compensatory Support, Saleof Import
Licenses etc.
8. Interest, Salary, Bonus, Commission or Remuneration earned by a partnerof a Firm
from such Firm.
9. Capital Gains chargeable U/s 45.
10. Profits and Gains from the business of Banking carried on by a Co-operativeSociety
with its Members.
11. Profits and Gains from the business of Insurance carried on by MutualInsurance
Company or by Co-operative Society with its members.
12. Income received by a Trade, Professional or Similar Association, fromspecific
services performed for its members.
13. Winnings from Lotteries, Crossword Puzzles, Races including Horse Races,Card
Games and other games of any sort or from gambling or betting of anyform or
nature whatsoever.
14. Deemed Income U/s 41 or 59.
15. Sums received by an assessee from his employees towards 'Welfare
FundContributions' such as Provident Fund, Super-Annuation Fund etc.
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Q.12 Write a short note on Gross Total Income.

Ans. It is the total of taxable income under all the five heads before
makingdeductions under Sec. 80-C ,to 80-U. As per Sec. 14, income of a person
iscomputed under various heads and before aggregating these incomes, thelosses
under various heads can be set off against the income so computed.Unabsorbed
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depreciation, carried forward losses etc. are deducted. The resultantfigure finally
obtained is known as "Gross Total Income". When deductions underSec. 80-C to 80-
U are made, we get total income. These deductions U/s 80 includedeductions for
amount paid under media-claim, insurance policy, donations etc.
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Q.13 Write a short note on Total Income.
Total income is the income of the assessee from all sources on which he hasto
pay income-tax.
According to Sec. 2(45) "total income" means the total amount of
income,referred to in Sec. 5 computed in the manner laid down in this Act.
(I) Determine total taxable income according to Section-5 :
(1) The total income, of any previous year, of a person who is a residentof India
includes all income from whatever source derived.
(i)which is received in India or which is deemed to be receivedin India, or
(ii) which accrues or arises to him in India or which is deemed toaccrue or arise
to him in India.
(iii) accrues or arises to him outside India.
(2) In case of person who is not ordinarily resident in India, the incomewhich
accrues or arises to him outside India shall not be so includedunless it is derived
from a business controlled in or a profession setup in India.
(i) The total income of a person who is a non-resident includes allincomes from
whatever sources derived
(i) which is received in India or which is deemed to be receivedin India by him,
(ii) which accrues or arises to him in India or which is deemed toaccrue or arise
to him in India.
(II) Determine Total Income-tax payable by him on Total. Taxable Income, atthe
prescribed rates applicable to the relevant previous year. From the totalincome-tax
so payable, deduct relief rebate as per provisions of Sections87, 87A, 88E and 89.
Health and Education Cess 4% of I.T. + Surcharge(if any) is to be added to income-
tax.
(III) Where the total tax payable (including surcharge and both the educationcess) is
more than the advance tax and tax deducted at source, the balanceis the net tax
payable by an assessee. Interest under Sections 234A, 234Band 234C will also be
added.
(IV) Where the total tax payable (including surcharge and both the educationcess) is less
than the advance tax and T.D.S., the excess will be refundedto an assessee.
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Q.14 Write a short note on Exempted Income.
Agriculture Income etc.
(1) Agriculture Income:-
Section 2(1A) defines “agricultural income” as under :
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(i) Rent or revenue derived from land (situated in India) used for agricultural purpose;
(ii) Income derived from agricultural operations;
(iii) Income from farm building.
(2) Receipts from H.U.F. :-
Any HUF received by an individual as a member of Hindu Undivided Family is
exempted, Provided is exempted, provided it is paid out of the income of the family.
(3) Share of profit of a partner from a firm:-
(Which is separately assessed as such) in the hands of a partner of that firm is
fully exempted from tax. (Section 10 (2A)
(4) Foreign Allowances etc.:-
Any allowances or prerequisite paid by the Indian government to a citizen of
India for rendering services outside India (Basic Salary is taxable.)[Section 10(7)]
(5) Any death cum retirement gratuity:-
Any death cum retirement gratuity received by a government servant or by
an employee under the payment of Gratuity Act, 1972 or received by any employee
on his retirement or a termination of his employment, subject to certain limitations
(Gratuity received by employees covered under the payment of gratuity Act, 1972
exempted up to Rs. 10,00,0000 and for other private sector employees the
exemption is limited to Rs. 10,00,000) [Sec.10(10)]
(6) Any payment in commutation of pension received by an employees of central or
state government or of a local authority or of a statutory corporation. In case of
employee in private sector, such payment is exempted subject to following limits.
(i) In case where the employee also receives any gratuity, the commuted value of 1/3 of
the pension which he is normally entitled to receive is exempted, and
(ii) In any other case, the commuted value of ½ of such a pension is exempted [Sec.
10(10A)].
(7) Any amount of life insurance policy is tax-free. But this does not apply to a Keyman
insurance policy. [Sec. 10(10CC)]
(8) Any payment from a provident fund to which the Provident Fund Act, 1925 applies
or from any other provident fund setup by Central Government. [Sec. 10(11)]
(9) The accumulated balance of recognized provident fund payable to the employee,
subject to condition laid down in the Act. [Sec. 10(12)]
(10) House rent allowances granted to an assessee by his employer to the extent it is
exempted from tax. [Sec. 10(13A)]
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UNIT – 1 Ch - 2 RESIDENTIAL STATUS OF AN ASSESSEE
Theory Section
Q.1 Write a Note on Residential Status of an assessee.
Ans :(A) Basic Conditions :
(1) An Assessee should stay in India for 182 days or more during previous year
OR
(2) (i) An Assess Should stay in India For 60 days ormore during previous Year
And
(ii) An assessee should stay in India for 365 days or more during the last 4
previous years immediately proceeding the previous year.
(B) Additional Condition:
An Assessee should be resident in India for 2 years or more out of last 10
And
An Assessee should stay in India for 730 days or more during last 7
 Status :
1. Resident & Ordinary Resident: (ROR)
If an assessee satisfies any one or both of the basic conditions and also satisfies both
of the additional conditions, he is Resident or Ordinary Resident.
2. Resident But Not Ordinary Resident: (RBNOR)
If an assessee satisfies any one or both of the basic condition but does not
satisfies any one or both of the additional conditions, he is Resident but not
Ordinary Resident.
3. Non Resident: (NR)
If an assessee does not satisfy any one or both of the basic conditions, he is
Non Resident.
 Exceptions :
 The person who is citizen of India leaves India during previous year for taking up
employment abroad will require 182 days in place of 60 days.
 The person who is Indian citizen and member crew of Indian ship will require 182
days in place of 60 days.
 The person who is Indian citizen or Indian origin. Who comes to visit India during
previous year will require 182 days in place of 60 days.
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Q.2 Write a note on Incidence of Tax
Ans. The determination of residential status is important, because the scope of the
total income depends upon the residential status. According to Section 5, the total
income of various classes of assessee are charged on the following basis :
(A) Resident and Ordinarily resident :-
The total Income of any previous year of a person who is resident includes all
the following types of income from whatever source derived.
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(i) Income which is received or deemed to be received in India, by such person or by
somebody on behalf of such person.
(ii) Income which accrues or arises or which is deemed to accrue or arise to him in India.
(iii) Income which accrues or arises him outside India.
(B) Resident but not Ordinarily Resident :-
The liability of persons resident but not ordinarily resident is the same as that
of a resident, except some change in taxability of foreign incomes.
The total income of a ‘resident but not ordinarily resident’ includes the
following incomes :
(i) Any income received or deemed to be received in India.
(ii) Any income which accrues or arises or is deemed to accrue or arise in India.
(iii) Any income that accrues or arises to him outside India and is derived from a
business controlled in India or a profession set up in India or a profession set up in
India.
(C) Non residents :- Total income of a Non –resident in any previous year shall include
(i) Income which is received or is deemed to be received in India
(ii) Income which accrues or arises or is deemed to accrue or arise in India.
Foreign income of a Non-resident is exempted from tax even if is brought
(means after its receipt abroad) in India in the previous year.
The following chart summarizes liability of Resident and Non-resident persons :
No Particulars of Income Whether taxable
Resident Not
and Ordinarily Non
Ordinarily Resident Resident
Resident
1. Income received or deemed to be
received in India whether earned in Yes Yes Yes
India elsewhere.
2. Income which accrues or arises or is
deemed to accrue or arises in India Yes Yes Yes
during the previous year, whether
received in India or elsewhere
3. Income which accrues or arises
outside India and received outside
India from a business controlled Yes Yes No
from a business controlled from
India
outside India in the previous year Yes No No
from any other source.
outside India and received outside
India during the years preceding to No No No
the previous year and remitted to
India during the previous year.
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Practical Section
(1) Rahil, who is an Indian citizen left for Japan on 25th April, 2021. He did not return to
India until the end of P.Y. 2021-22. Determine his residential status for the A.Y.
2022-23.
Would make any difference in his status, had he visited India during Diwali,
2021 for 31 days.
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(2) Shri Girdhari went to Africa for a job on 1-1-2019. He returned to Indian on 1-2-
2020. Again, he went to Africa on 31-10-2020, returned to India on 1-7-2021 and
went back on 1-2-2022.
Determine his residential status for the assessment year 2022-2023.
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(3) Shri A, who is a citizen of Pakistan, is regularly coming to India for the last 14 years
and stays for 3 months in September, October and November. State his residential
status for the assessment year 2022-23. What difference will it make if he used to
stay for the months of October, November and December?
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(4) Mr. Patel who is an American citizen and not a person of Indian origin came to India
for the first time from the U.S.A. on 1-4-2015. He stayed here at a stretch for 3 years
and left for Germany on 1-4-2018. He returned to India on 1-7-2019 and remained
in India till 1-12-2019, when he went back to the U.S.A. He again came to India
taking up employment in a Mumbai branch of an American Company 25-1-2022.
What will be the residential status of Mr. Patel for the assessment year 2022-23?
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(5) Shree Ramson, an American citizen, came to India for the first time on 1 st June,
2015. From the following details determine his residential status for the assessment
year 2020-2021 and assessment year 2022-23.
Dates of Arrival in India Dates of Departure outside India
(1) 1-6-2017 15-8-2017
(2) 1-3-2018 1-05-2019
(3) 21-1-2021 2-04-2021
(4) 15-3-2022 15-5-2022
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(6) Shri Agarkar came to India from Russia for seven months on 15-10-2021. He is
an Indian Citizen. He stayed in India for previous years as follows :
Year Days
2020-21 235
2019-20 330
2018-19 Nil
2017-18 118
Determine the residential status of Mr. Agarkar for A.Y. 2022-23.
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(7) Mr. Krishna, an MBA is engaged in export business and visits France
frequently. From the particulars given below, determine his residential status
for the previous year 2021-'22.
Previous Year Stay in France Previous Year Stay in France
2014-15 187days 2019-20 70 days
2015-16 140 days 2019-20 225 days
2016-17 305 days 2020-21 309 days
2017-18 66 days 2021-22 283 days
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(8) The following are the income of Mr. A for the A.Y. 2022-23 :
(a) A business income earned in India Rs. 6,40000.
(b) Business income earned in Shri Lanka Rs. 20,000. The Head office of such business is
situated in Chennai.
(c) Income earned and received abroad Rs. 1,50,000 of which he has brought Rs. 15,000
in India.
(d) Income earned abroad in earlier previous years but brought in India during the
previous year (2021-22) Rs. 90,000.
Calculate his total income if he was:
(i) Ordinary Resident (ii) Resident but not Ordinary Resident
(iii) Non-resident.
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(9) Shri Bradman, a non-resident furnishes the following particulars of his income
earned during the previous year relevant to assessment year 2022-23.
Rs.
(1) Interest on Japan Development Bonds (one-third is received in India) 54,000
(2) Income from agriculture in Bangladesh received there but later on
remitted to India 31,000
(3) Income from property in London received outside India. 1,10,000
(4) Income earned from business in Germany which is controlled from
Delhi (Rs. 25000 is received in India) 65,000
(5) Interest on F.D. paid by an Indian Company but received outside India. 40,000
(6) Profits from a business in Ahmadabad and managed from outside 2,27,000
India.
Calculate his gross total income for A.Y. 2022-23. If he is ordinarily
resident or resident but not ordinarily resident, what will be his gross total
income?
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(10) Particulars of income of Shri Kaushik for the financial year 2021-22 are as
follows :
Rs.
(1) Profit from a business in India controlled from abroad 30,000
(2) Pension from former employer in India, received abroad 3,60,000
(3) Income from property in a foreign country (received in India) 60,000
Profit from property in a foreign country (not brought in India) 92000
(4) Income from profession in a foreign country (set up in India) not
brought in India 30,000
(5) Profit on sale of property in India but received abroad 60000
(6) Interest on foreign government securities half of which was received in
India 40000
Determine his taxable income in each of the following cases, if he is
(a) An ordinary resident (b) A resident but not ordinary resident
(c) A non-resident
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(11)Shri Janardan furnishes the following particulars of his income for the
financial year 2021-22.
Rs.
(1) Income from agricultural land situated outside India, received
there, later on remitted to India 4,25,000
(2) Rent from house property situated outside India, deposited in
foreign bank. 3,60,000
(3) Profit of a foreign business, which is controlled from India (Rs.
20,000 is received for the first time in India) 40,000
(4) Interest on foreign securities (of which ¼ has become due but
not yet received); balance of interest is directly received in India. 28,000
(5) Dividend on shares of Indian Companies, received directly
outside India. 12,000
(6) Profit from an Indian business (in Mumbai) which is managed
from abroad. 5,39000
(7) Profit on sale of a plot of land situated in India (which was
acquired for construction of residential house); entire sale proceeds
(Rs. 5,00,000) received outside India. 3,00,000
(8) Pension from a former Indian employer, received outside India 4,50,000
(9) Income received outside India during 2020-2021 is brought to 2,50,000
India during the current year
Find out his total gross income for the assessment year 2022-23:
(1) If he is an ordinary resident.
(2) If he is resident but not ordinary resident.
(3) If he is non-resident
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HOME ASSIGNEMNT
(1) Shri Jagirdaris an Indian Citizen. He went to the U.S.A. for taking employment on
15th April, 2021 and returned to India on 2nd November, 2021.
Determine the residential status of Shri Jagirdar for the assessment year 2022-
23.
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(2) Mr. Dravid visited India for the first time on 1-7-2016 he was also present in India
from 1-1-2022 to 3-3-2022. From the following information determine the
residential status of Mr. Dravid for the A.Y.2022-23:
Previous Year Stays in India (days)
2016-17 25
2017-18 182
2018-19 78
2019-20 125
2020-21 --
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(3) Shi Deepak furnishes the following particulars of his income earned during the
previous year relevant to the Assessment Year 2022-23.
Rs.
(1) Income from property in U.S.A. 3,80,000
(2) Interest on fixed deposit with Indian Company received outside 17,000
India.
(3) Business profits earned in earlier years and received in London 1,00,000
brought to India during current previous year.
(4) Profit from a business in London. Business is managed from 2,00,000
India. (40% of the profit is received outside India) 300000
(5) Pension from a former Indian employer received in U.S.A.
Compute his gross total income for the Assessment Year 2022- 23 in the following
circumstances.
(1) If he is Resident
(2) If he is Resident but not Ordinary Resident
(3) If he is non-resident.
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(4) Following are the incomes of Mr. Vikrambhai during the previous year 2021-
22 :
Rs.
(1) Salary (taxable) 2,40,000
(2) Interest on Bank Deposit (out of which Rs. 15,000 is received from 20,000
Foreign Bank)
(3) Profit from Business in New York (Business is controlled from India) 2,00,000
(4) Pension from former employer in India received in New York 75,000
(5) Agricultural income earned in New York 2,50,000
(6) Profit from business at Bombay (controlled from New York and 50% of
the profit is received in New York) 2,80,000
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Find out the total gross income for the A.Y. 2022-23.
 If he is an ordinary resident
 If he is a resident but not ordinarily resident
If he is a non-resident
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(5) Mr. Kakkad stayed in India for the period mentioned below after his first arrival.
Determine his residential status for the Assessment Year 2022-23.
Accounting year Days of presence
2017-18 70
2018-19 130
2019-20 120
2020-21 100
2021-22 90
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UNIT - 2 INCOME FROM HEAD SALARY
Statement Showing taxable income from Salary
Particulars Amount
1. Basic Salary -------
2. Dearness Allowances -------
3. Bonus -------
4. Commission -------
5. Taxable House Rent Allowances -------
6. Taxable Perquisites -------
7. Entertainment Allowances -------
8. Contribution of employer to recognized provident fund -------
9. Interest on recognized provident fund -------
Gross salary -------

Less: Standard Deductions (-------)
Employment tax (professional tax) (-------)
Total Taxable IncomeFrom Salary -------------
House Rent Allowance
Mumbai, Delhi, Calcutta, Chennai Other cities

(1) Actual HRA Received (1) Actual HRA received
(2) Rent paid – 10% of salary (2) Rent paid – 10% of Salary
(3) 50% of Salary (3) 40% of Salary
Whichever is less tax-free
Salary = Basic Salary + Dearness allowances (R) + % of commission on sales
Entertainment Allowance
Non-government employee Government Employee

Fully Taxable (1) Actual entertain allowance
(2) 20% of Basic Salary
(3) Rs.5,000
Whichever is less is Tax-free
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Discuss Different Allowances
(A) Allowances which are tax free subject to cost:-
(1) Travelling allowances
(2) Daily allowances
(3) Conveyance allowances
(4) Helper allowances
(5) Academic allowances
(6) Uniform allowances
(B) Allowances which areexempt to the extent of amount received or the limit
specify whichever is less.
(1) Children education allowance:- Rs.100 per month per child up to maximum of two
children.
(2) Hostel expenditure allowance:- Per month, per child Rs.300 up to maximum two
children.
(3) Tribal area, scheduled area, agency area allowance:- Maximum Rs.200 per month.
(4) Special compensatory hilly area allowance or high altitude allowance:- Exemption
up to Rs. 800 p.m..
(5) Border area, remote area, distributed area allowance:- Exemption varies Rs.200 per
month to Rs.1,300 per month.
(6) Compensatory filed area allowance:- Maximum Rs.2,600 per month.
(7) Compensatory Modified filed area allowance:- Maximum Rs.1,000 per month.
(8) Counter Insurgency allowance granted to members of armed force:- Maximum
Rs.3,900 per month.
(9) Transport allowance:- Allowance given to an employee (who is blind or deaf and
dumb or orthopaedically handicapped) to meet transport expenses for the purpose
of coomuting between his residence and the place of service is exempted @ 3,200
p.m. Actual expesnes are to be ignored.
For all other employees w.e.f. the assessment year 2019-20, no part of
transport allowance is considered exempt.
(C) Allowances exempted up to certain percentage or amount received (partly
exempted)
(1) House rent allowance
(2) Entertainment allowance
(3) Transport allowances to transport undertaking employees:- 70% of allowance or
Rs.10,000 per month whichever is less is exempted. For e.g. railway, airline, etc.
(D) Allowances which are exempted in case of certain persons

(1) Allowances to a citizen of India who is a government employee rendering services
outside India.
(2) Allowances to high court judges conditions of service act 1954.
(3) Sumptuary allowance given to high court and supreme court judges.
(4) Allowances received by an employee of UNO from his employer.
(5) Allowance received by a foreign technician.
(E) Allowances which are fully taxable.

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(1) Dearness allowance (2) City Compensatory allowances
(3) Medical allowances (4) Lunch / Tiffin allowance
(5) Overtime allowance (6) Warden allowance
(7) Family allowance (8) Servant allowance
(9) Any other allowance
Gratuity
Government employee & Local Authority Non-government employee
Service Continue Service Discontinue Service Continue Service Discontinue

Taxable Tax-free Taxable
Under the Act 1972 Other than Act

(1) Actual Gratuity (1) Actual Gratuity
(2) Last drawn salary × × No. of Years of service (2) Average salary on the basis oflast 10
months base × ½ × No. of yrs. of service completed
(3) Rs.20,00,000 (3) Rs. 20,00,000
Salary = Basic + Dearness allowance Salary = Basic + D.A. (R)+% on commission
on sale
Which is less is tax free
Pension
Government Employee & local authority employee other employee
Un-commuted Commuted Uncommuted Commuted

Fully taxable Tax free Fully taxable
If gratuity is received from employer If gratuity is not received from the employer
1/3 of total commuted pension is tax free ½ of total commuted pension is tax free
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 Write a note on perquisites.
Ans. Perquisite means any casual endowment fee or profit attached to an office or
position in addition to salary or wages.
(A) Perquisite exempt from tax for all types of employees
(1) Medical Perquisite
(a) Medical Facility:-
Free medical facility provided to an employee or his family member. In any
hospital maintained by employer is exempt.
(b) Medical reimbursement:-
Reimbursement by employer in any hospital maintained by government or
local authority or recognized by deputy chief commissioner is exempt.
(c) Health Insurance Premium:-
Such premium paid by employer for employee or his family members is
exempt.
(d) Group medical Insurance Scheme:-
Premium paid by employer for all the employees for above purpose is exempt.
(2) Free Food and beverages :-
Valuation of free lunch/ refreshment :-
(a) ‘Food and non-alchoholicbeverages’ provided during working hour in remote area
or in an off-shore installation is fully exempted.
(b) ‘Tea/ Snacks’ provided during working hours at any other place is fully exempted.
(C) ‘Food and non-alchoholicbeverages’ provided in office premises or through non-
transferable paid vouchers usable at eating joints is taxable as under :
Taxable Value :-
Cost to the employer in excess of Rs. 50 per meal less amount of any recovery
from employee; (negative balance to be ignored). Working hours include extended
office hours like overtime work on holidays.
(4) Training of employees:-
Amount spent on employee’s training or fees fund for refresher course
including meals and accommodation expenses.
(5) Leave travel concessions
(6) Premium paid by employer under deferred annuity scheme.
(7) Rent free accommodation and conveyance facilities to judges of high court and
Supreme Court.
(8) Rent free accommodation and free transport facility to any officer of parliament,
central government, minister and leader of opposition party are tax free.
(9) Gift to an employee or any family member in the form of cash, vouchers or token or
in kind up to Rs. 5,000 p.a.
(10) facility of computer, laptop to an employee or any family member is exempt, but it
should not be transferred to employee.
(11) Premium paid by employer for personal accident policy of employee.
(12) Interest free loan upto Rs. 20,000 for any purpose. And interest free loan for medical
treatment is exempted.
(13) Hotel accommodation on transfer of employee upto 15 days stay.
(14)Perquisites allowed outside India by Government to a Citizen of Indiafor rendering
service outside India
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(15) Travelling Facility to Employees of Railways or Airlines.
(16) Free Educational Facility provided to children of employees, in anInstitution
owned/maintained by employer, provided free of cost / value doesnot exceed Rs.
1,000 per month per child (Note : No limit on number of children).
(17) Computer/ Laptop given (not transferred) to an employee for official/ personal use.
(18) Transfer without consideration to an employee of a movable asset(other than
Computer, Electronic Items or Car) by the employer, after using itfor a period of 10
years or more.
(19) Conveyance, facility provided to an employee to cover the journeybetween office
and residence.
(20) Accommodation provided in a remote area to an employee workingat a Mining Site
or an Onshore Oil Exploration Site, or Project ExecutionSite, or accommodation
provided in an offshore site of similar nature.
(21) Periodicals and journals required to discharge of work.
(22) Scholarship: Scholarship to employees’ children voluntarily granted by the employer
is not assessable as a perquisite.
(B) PERQUISITES TAXABLE FOR ALL TYPES OF EMPLOYEES :
Under Section 17 (2) following perquisites are taxable for all types
ofemployees :
(1) The value of rent-free accommodation provided to the assessee byhis employer [Sec.
17 (2) (i)].
(2) The value of any concession in rent in respect of any accommodationprovided to the
assessee by his employer. [Sec. 17(2) (ii) ].
(3) Any sum paid by the employer in respect of any obligation which, butfor such
payment, would have been payable by the assessee. e.g. paymentof employee's
income-tax, personal debt etc. [Sec. 17(2)(iv)].
(4) Any sum payable by the employer, whether directly or through a fund(other than a
recognised provident fund or an approved superannuationfund), to effect an
assurance on the life of the assessee or to effect acontract for an annuity (i.e., life
insurance premium paid by theemployer on behalf of the employee). [Sec. 17(2) (v)]
(5) The value of any specified security or sweat equity shares allotted ortransferred,
directly or indirectly by the employer (or former employer),free of cost or at
concessional rate to the employee [Sec. I 7(2)(vi)]
(6) The amount of any contribution to an approved superannuation fundby the
employer in respect of the employee. to the extent it exceedsone lakh fifty thousand
rupees [Sec. I 7(2)(vii)]
(7) Valuation of free Domestic Servents [Rule 3 (3)]:
The salary paid by employer to domestic servents (Gardner, Sweeper,
Watchman, home attendant) is taxable as perquisite.
Note:Gardener’s salary paid by employer will not be considered separately taxable in
case of rent free house provided to an employee is owned by employer.
(8) Free Supply of Gas, Electricity or Water [Rule 3(4)] :

The rules for valuation are as under :
(1) Provided out of internal (own) resources : If the employer has suppliedgas,
electricity or water from his own resources, without purchasing them fromany
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outside agency, then the value of perquisite is taxable on the basis of
manufacturingcost per unit from the view-point of the employer. (less amount
recovered from theemployee). The balancing amount is taxable only if it is a positive
figure.
(2) Provided from external resources : If the same is purchased from outsideagency
and then supplied to the employees then
(i) It will not be taxable, if it is wholly used for official purposes.
(ii) If it is used for private purpose only, then the value will be equal tothe actual
amount paid / payable by the employer to the outside agency.
Note : Amount recovered from employee is to be deducted from the above value to find
out the ultimate taxable value. The balancing amount is taxableonly if it is a positive
figure.
(9) The value of any other fringe benefit or amenity as may be prescribed [Sec.
7(2)(viii)]
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Mode of Travel
By Air Economy class fare in National By Railway or any other mode of transport
carrier (Air Indian Airlines)
Where the place of destination Where the place of destination

is connected by railway I Class AC rail fare is not connected by railway
Where Govt. recognized public Where Govt. recognized

transport system exists public transport system does
I class or deluxe fare on such recognized not exists

Transport system I Class A/c rail fare (as if it
had been performed by railway)
Leave Salary
Service continue fully taxable Retirement or death
Government employees retirement or By other employees

Death/Legal heirs tax free (1) Actual leave salary
(2) 10 × Avg. Salary
(3) Leave Granted – Leave availed(Used) × Avgsalary
(4) Rs.3,00,000
Minimum of the above is tax free.
Salary = Basic + D.A. (R) + % of commission on sale
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 Write a note on provident fund.
Ans. Provident fund is a welfare scheme for the benefit of employees in which
certain sum is deducted by the employee as his contribution to provident fund every
-----------------------------------------------------------------------------------------------------------------
month employer also contributes certain percentage of salary of employee to
provident fund this contribution are invested and interest is credited to provident
fund.
(1) Statutory Provident Fund:-
The fund set up under the provident fund act 1925 is known as statutory provident
fund. It is maintained by government departments, RBI, statutory corporation
railways, SBI, local authority, university, colleges etc.
Following are provisions for statutory provident fund.
(1) Employee’s own contribution is qualified for deduction u/s 80C.
(2) Employer’s contribution to S.P.F. is exempted from tax. So, it is not included in his
salary income.
(3) Interest on both contribution credited to fund is also exempted.
(4) Accumulated balanced of provident fund repaid to employee on his retirement is
also fully tax free.
(2) Recognized Provident Fund:-
This fund includes the fund established under employees provident fund Act, 1952.
It fulfills certain conditions laid down in the 4th schedule of the act which is
recognized by commissioner of income tax on application of its trustees. Such funds
are maintained by banks, insurance companies and other private sector business
units. Following are the provisions.
(1) Employee’s contribution to such fund is qualified for deduction u/s 80C.
(2) Employer’s contribution is exempt from tax to the extent of 12% of the salary.
(3) Interest on accumulated balance of such fund is exempt from tax upto 9.5% per
annum.
(4) The accumulated interest repaid to employee on his retirement is exempted but
following conditions must be fulfilled.
(a) He should have rendered continuously service of 5 years with his employer.
OR
(b) His service should have been terminated because of his ill health beyond or other
circumstances beyond his control [less than 5 years].
OR
(c) The balance has been transferred to recognized Provident Fund account maintained
by his new employer.
(3) Unrecognized Provident Fund:-
A provident fund which is neither statutory nor recognized by IT commissioner is
known as unrecognized provident fund. Following are the provision for
unrecognized provident fund.
(1) Employee’s contribution does not qualify for deduction u/s 80C.
(2) Employers contribution is not included in his salary income and so, it is not taxable
every year but it is taxable when it is received.
(3) Accumulated interest of such fund is not taxable every year but it is taxable when it
is received.
(4) When accumulated balance of fund is repaid to employee on retirement the
employer’s total contribution, interest on employer’s contribution is taxable under
the head salary and interest in employee’s contribution is taxable under the head
other source.
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(4) Public Provident Fund:-
It is scheme for self employed persons like doctors, lawyers, artist, writers,
businessmen and salary earners to get relief from tax. It is introduced by the finance
Act, 1968. Following are the provisions for it.
(1) Any person who is not a minor can open an account with SBI and can deposit
minimum Rs.500 and maximum is Rs.1,50,000 during a year. Subscriptions are
accepted at all branches of SBI and at every head post office.
(2) The accumulated balance is repayable on completion of 15 years which is fully
exempted if assesses dies before this period, his legal heirs received his exempted
income.
(3) Loan available from such fund after 3 years and after 6 years withdrawal of certain
amount is also allowed.
(4) Subscribers are allowed to continue their public provident fund account after 15
years for 10 year’s slab.
(5) All the benefits are available contribution to fund or deposit to the scheme is
allowed as deduction under section 80C and accumulated balances is also tax free.
(6) Interest is credited 7.1 % per annum on such deposit at present.
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 Write a note on Dedcution u/s 80C
Ans. Under Section 80C deduction is available from total gross income of anindividual
assessee or Hindu Undivided Family.As per section 80C, an assessee will be entitled
to deductions for the whole ofamounts paid or deposited in the current financial
year in the following schemes, subject to a limit of Rs.1,50,000
(1) Payment of life insurance premium to effect or to keep in force an insuranceon the
life of the individual, the spouse or any child of the individual. It alsoincludes
payment made by government employees to the Central GovernmentEmployees'
insurance scheme and premium paid under children's deferredendowment
assurance policy up to 10% of policy.
Eligible premium for deduction must not exceed 20% of policy value(where
policy was taken before 1-4-2012). Excess premium paid on LifeInsurance Policy
issued on or after 1-4-2012 exceeding 10% of the capitalsum assured is not eligible
for deduction. [Section 80C(3)]
Notes:
(a) Premium paid on insurance policy other than a contract for a deferred
annuityissued before 1-4-2012 shall continue to be eligible up to 20% of the capital
sumassured.
(b) Premium paid on insurance policy issued on or after 1-4-2012 will continue tobe
eligible upto 10% of capital sum assured
Exceptions :
Where the policy, issued on or after 1-4-2013, is for insurance onlife of any
person with disability or severe disability as referred to inSection 80U or suffering
frotn disease or ailment as specified in therules made under Section 8ODDB the
premium upto 15% of capitalsum assured shall be considered eligible for deduction.
-----------------------------------------------------------------------------------------------------------------
(2) Any payment made to effect or to keep in force a contract for a non-
commutabledeferred annuity, on the life of the individual, the spouse or any child of
theindividual.
(3) Any gum deducted from the salary payable by, or, on behalf of the Governmentto
any individual, being a sum deducted in accordance with the conditions ofhis service
for the purpose of securing to him a deferred annuity or makingprovision for his
spouse or children, in so far as the sum deducted does notexceed 1/5th (20%) of the
salary.
(4) Any contribution (not being repayment of loan) towards statutory providentfund
and any contribution (not being repayment of loan) towards recognized provident
fund (to the extent it is eligible for deduction.)
(5) Any contribution (not being repayment of loan) towards 15 year's PublicProvident
Fund subject to a maximum limit of Rs. 1,50,000.
(6) Contribution towards an approved superannuation fund.
(7) Subscription to National Savings Certificate (VIII Issue and IX Issue) anddeposit in
Sukanya Samriddhi Account.
(8) Any sum paid as contribution in the case of an individual, for himself,spouse or any
child for participation in the Unit Linked Insurance Plan,1971 (ULIP) of the Unit
Trust of India;
(9) Contribution for participation in any Unit-Linked Insurance Plan (ULIP)of the LIC
Mutual Fund.
(10) Payment for notified Annuity Plan of the Life Insurance Corporation.New Jeevan
Dhara, New Jeevan Akshay or any other insurer (i.e. ImmediateAnnuity Plan of ICIC1
Prudential Life Insurance Company, Tata AIG EasyRetire Annuity Plan.)
(11) Any subscription made to units of any Mutual Fund, or UTI.
(12) Any contribution made by an individual to any pension fund set up bynotified
Mutual Fund or UTI or National Housing Bank.
(13) Any sum paid (including accrued interest) as subscription to 'Home LoanAccount
Scheme' of the National Housing Bank or contribution of any notifieddeposit scheme
of Pension Fund set up by the National Housing Bank.
(14) Any subscription made to any such deposit scheme, as the Central Governmentmay
specify for the purpose of being floated by
(a) public sector companies engaged in providing long-term finance forconstruction or
purchase of houses in India for residential purposes, or,
(b) any authority constituted in India by, or, under any law, enacted eitherfor the
purpose of dealing with and satisfying the need for housingaccommodation or for
the purpose of planning, development orimprovement of cities, towns and villages,
or for both. (i.e. notified PublicvDeposit Scheme of HUDCO)
(15) Tuition fees, whether at the time of admission or thereafter, paid to anyuniversity,
college, school or other educational institution situated in India,for the purpose of
full-time education of any two children of the employee.Full-time education includes
any educational course offered by any university,college, school or other educational
institution to a student who is enrolledfull-time for the said course. It is also clarified
that full-time education includesplay-school activities, pre-nursery and nursery
classes.
Note :
-----------------------------------------------------------------------------------------------------------------
It is clarified that the amount allowable as tuition fees shall include any
paymentof fee to any university college, school or other educational institution in
Indiaexcept the amount representing payment in the nature of development fees
ordonation or capitation fees or payment of similar nature.
(16) Any instalment (including part payment) towards the cost of purchase orconstruction
of a residential property to a housing board or co-operative society,Government
Bank, Co-operative Bank, LIC, National Housing Bank, EmployerPublic Limited
Company and University.
(17) Amount invested in approved debentures / equity shares of a public
companyengaged in infrastructure (including power sector) or units of a mutual
fundcreated for the development / maintenance of new infrastructure facility.
(18) Investment as a term deposit for a fixed period of not less than five yearswith a
scheduled bank, which is in accordance with a scheme framed andnotified by the
Central Government, in the Official Gazette for these purposes.
(19) Subscription to such bonds issued by the National Bank for Agriculture andRural
Development (NABARD), as the Central Government may, by suchnotification in the
Official Gazette, specify in this behalf
(20) Any investment in an account under the Senior Citizens Savings Scheme Rules,2004.
(21) Any investment as five year time deposit in an account under the Post OfficeTime
Deposit Rules, 1981.
(22) Amount contributed (for a fixed period of 3 years or more) by a CentralGovernment
employee to his NPS (Tier-11) account.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
 Taxable perquisites in case of transfer of any movable assets
Ans. The value of benefit arising to the employee from the transfer of any movable
asset owned by the employer is to be determined as under:
(1) Computer and other electronics items:-
Depreciation at 50% per annum under reducing balance method for each
completed year is deducted from the original cost of the asset also deducted from
the above figure and the balance is taxable.
(2) Motorcar:-
Depreciation at 20% per annum under reducing balance method for each
completed year is deducted from original cost of asset. Amount recovered from
employee is also deducted from above figure and remaining balance is taxable.
(3) Any other Asset:-
Depreciation at 10% per annum under straight line method for each
completed year is deducted from original cost of asset. Amount recovered from
employee is deducted from the above figure and remaining balance is taxable.
-----------------------------------------------------------------------------------------------------------------
Valuation of perquisite in respect of motor car:

Where car is owned or hired by employee
When car expenses are met by the Employee When running and maintenance expenses
it is not a perquisite and hence not taxable are met or reimbursed by the employer
If the car is used only official If the car is only used for If the car is partly used for official
purposes - Nothing is taxable private purposes : Taxable purposes and partly for private
value = Actual expenses purpose :
incurred by the employer Taxable value:
Actual expenses incurred by the
less amount recovered
employer less standard amount used
from employee. for official purposes less amount
Note: if the balancing recovered from the employees
amount is negative, it is to Note: If the balancing amount is
be ignored. negative it should be ignored.
Valuation of perquisite in respect of motor car:

Where car is owned or hired by employer
When running and maintenance expenses are When running and maintenance expenses
met or reimbursed by the employer are met or reimbursed by the employee.
If the car is used If the car is partly used for

only for official If the car is used If the car is partly used
official purposes and partly only for official
purposes: for private purposes: for official purposes and
Nothing is purposes: partly for private
(i) Rs. Rs. 1800 p.m. where Nothing is
taxable the cubic capacity of the purposes:
taxable (i) Rs. Rs. 600 p.m.
engine does not exceed 1.6
If the car is used only litres (=1600 c.c.) + Rs. 900 where the cubic
If the car is used only
for private purposes: p.m. if chauffeur is provided capacity of the engine
for private purposes:
Taxable of value: Or does not exceed 1.6
Taxable of value:
Actual expenses (ii) Rs. 2400 p.m. if the cubic litres (=1600 c.c.) + Rs.
Expenditure incurred
incurred by the capacity of the engine 900 p.m. if chauffeur is
by the employer in the
employer (including exceeds 1.6 litres provided
form of wear and tear
chauffeur’s salary + (=1600c.c.) + Rs. 900 p.m. if Or
(@ 10% p.a. of cost of
10% p.a. of actual cost chauffeur is provided (ii) Rs. 900 p.m. if the
car) or hire charges
of the car for normal Note: cubic capacity of the
payable + chauffeur
wear and tear of the Nothing is deductible for engine exceeds 1.6 litres
salary if payable by
car or actual hire amount recovered from the (=1600c.c.) + Rs. 900
the employer less
charges) less amount employee. p.m. if chauffeur is
amount recovered
recovered from the provided
from the employee.
employee. Note:
Note: If the balancing
Note: If the balancing Nothing is deductible
amount is negative, it
amount is negative, it for amount recovered
is to be ignored.
is to be ignored. from the employee.
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RENT FREE ACCOMMODATION
Govt. employees Other

employees
Unfurnished Furnished Unfurnished Furnished
License
fees Furniture is Furniture is
owned by hired by
Furniture is Furniture is employer employer
owned by hired by If house is If house is
employer employer owned by hired by As As
employer employer unfurnished unfurnished
License License fees + 10% of cost + Actual rent
+ Actual hire of furniture paid by
fees
charges employer
+ 10% cost
15% Actual rent
of OR Paid by
BABC employer
(Whichever is less is taxable)
If population is If population is upto If population is

upto 10 lacs 10 lacs to 25 lacs above 25 lacs
7.5% of BABC 10% of BABC 15% of BABC
BABC = Basic Salary + All Taxable Allowances/DA (R) + Bonus + Commission

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(1) Shri Apurva Patel, an employee of Mahavir Ltd. receives Rs.3,75,000 as gratuity
(under the Payment of Gratuity Act, 1972) on his retirement on 15 th December,
2021. He has served the company for a total period of 29 years and 8 months. At the
time of retirement his monthly salary and dearness allowance amounted to
Rs.15,600. Is the entire amount of gratuity exempt from Income Tax?
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(2) Shri Pankaj employed in a firm retires after 32 years and 6 months of service on
31-3-22 and receives a gratuity of Rs.12,15,000. His average monthly salary for the
ten months before the month of retirement was Rs.47,500. Is the amount of gratuity
received by the assesses exempt from tax? Would it make any difference if he had
received a gratuity of Rs.7,60,000?
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(3) Shri Randhir Kapoor retires from R. K. Ltd. after 34 years and 8 months of service
on 11-9-2021. At the time of retirement he received Rs.9,50,000 as gratuity. Prior to
1-1-2021 his basic pay was Rs.40,000 p.m. which was raised to Rs.45,000 with effect
from 1-1-2022. In addition to above he was paid dearness allowance of Rs.5,625
p.m., which was to be included in his salary for the purpose of provident fund (prior
to 1-1-2021 the rate of D.A. was Rs.5,000).
Is the amount of gratuity received by him exempt from tax?
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(4) Shri Bedi retired from a firm after a continuous service of 30 years and 10 months
and receives gratuity of Rs.3,00,000. At the time of retirement 31-3-22 he was
getting Rs.16,000 p.m. as salary.
What amount of gratuity will be taxable for the A.Y. 2022-’23?
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(5) Shri Ajit retired from “Amir Co. Ltd.” on 30th June, 2021 after completing services of
30 years and 6 months. He received gratuity of Rs.3,10,000. Other particulars are as
under:
Basic Salary was Rs.20,400 per month from 1-4-2021. Increment rate was
Rs.600 (from 1st April, every year). Dearness allowance was 40% of basic salary
(50% of which was added to basic salary for the purpose of provident fund
contribution).
Compute taxable gratuity for the assessment year 2022-’23.
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(6) Mr.A retired on 31-10-2021 after completing 30years service and receives
Rs.5,00,000 as gratuity from his employer. His average monthly salary for the ten
months before the month of retirement was Rs.8,000.
His monthly pension has been fixed at Rs.7,000. On 1-2-22. he receives Rs.2,70,000
as commuted pension by surrendering his ½ right to receive pension.
Determine the taxability income of pension and gratuity for the A.Y. 2022-‘23.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(7) Shri A retired on 31-10-2021 and received Rs.8,75,000 as gratuity from his
employer. His monthly pension has been fixed at Rs.15,000. On 1-2-220, he received
Rs.5,59,500 as commuted pension by surrendering his ½ right to receive pension.
Determine the taxable of pension / commuted pension for the A.Y. 2022-’23.
-----------------------------------------------------------------------------------------------------------------
(8) Mr. Jagdish retired after 35 years and 7 months service from a privatefirm . At the
time of retirement on 31-12-2021 his monthly salary wasRs. 20,000. Every year he
got an increment of Rs. 2,000 on 1st July. At thetime of retirement, he got commuted
pension of Rs, 2,40,000 computed60% of total commutable pension and gratuity of
Rs. 4,50,000.
D.A. was 50% of basic salary (60% of D.A was considered for retirement
benefit). Calculate taxable amount of gratuity and pension.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(9) Shri Pushpaben is employed in Gujarat Sachivalay. Her basic salary during the
previous year 2021-’22 was Rs.24,000 p.m. She is getting entertainment allowance
of Rs.1,000 p.m.
Calculate the exempted amount of entertainment allowance.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(10) Shri Atul was getting Rs.20,000 p.m. as basic salary from Shreeji Ltd. and 50% of it
as dearness allowance. In addition, he was getting house rent allowance of Rs.3,000
p.m. He resigned from the company on 30th November, 2021 and joined Vipul Ltd.
on 1st January, 2022. He gets from Vipul Ltd. basic salary at Rs.24,000 p.m., D.A. of
Rs.6,000 p.m. and house rent allowance Rs.4,000 p.m. The provident fund
contribution in Vipul Ltd. is calculated on salary including D.A.
If Shri Atul is paying house rent of Rs.4,000 p.m., determine his tax-free
house rent allowance for the A.Y. 2022 -’23.
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(11)Shri Mihir (employed in Mehsana) provides following details for the previous year
2021 -’22.
(1) Basic Pay : Rs.2,00,000 (2) Dearness Allowance : Rs.1,00,000
(3) Bonus : Rs. 10,000 (4) House rent allowance : Rs. 36,000
(5) Rent paid at the rate of Rs.3,000 per month for his residence. From 1 st February,
2022, he vacated the rented residence and moved to his own house.
(6) Only 40% of the Dearness allowance is being considered for the retirement benefits.
Compute exempted amount of House Rent Allowance for the assessment
year 2022-’23.
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(12)Shri Yuvrajsingh is serving in a private firm with salary of Rs.30,000 p.m. He also
gets 50% of Basic salary as dearness allowance, out of which 50% is considered for
retirement benefit. He also receives 25% of basic salary as House Rent Allowance.
He pays Rs.7,000 p.m. as rent for residential house.
Calculate taxable amount of House Rent Allowance.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(13) Shri Ganesh joined as a sales manager in a company of Mumbai from 1-1-20188
on a basic salary of Rs.13,800 in a grade of 12,000-600-15,000-1,000-25,000. For
the calculation of retirement benefits dearness allowance and commission on sales
were to be considered. The rates of dearness allowance were as under:
First six months of the year 2021 = 30% of the basic pay
Last six months of the year 2021 = 40% of the basic pay
First six months of the year 2022= 50% of the basic pay
-----------------------------------------------------------------------------------------------------------------
He has received Rs.1,200 per month as house rent allowance. In addition he
has also received Rs.20,260 as total commission during the year. He has paid
Rs.3,000 per month as house rent. Find out the taxable house rent allowance for
the Assessment Year 2022-’23.
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(14)An employee of a company, drawing an annual salary of Rs.1,20,000, is provided
with a rent-free furnished house (situated in a city having a population of 8 lakhs).
The cost of furniture provided by the employer is Rs.80,000. Annual rent paid by the
employer is Rs.24,000.
Calculate the taxable value of the perquisite.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(15) Shri Ranjit is employed in a Limited Company at Delhi. Following are the
particulars of his salary for the financial year 2021-’22:
Basic pay Rs.15,000 per month; Dearness allowance Rs.5,000 per month;
Bonus Rs.12,000; Entertainment Allowance Rs.8,000 per year; Furnished
accommodation for which the company charges Rs.1,000 per month. Original cost of
furniture is Rs.1,69,000 and rent payable by the company for the said house is
Rs.9,000 per month.
Determine the value of residential accommodation for the purpose of
inclusion in salary income of assessment year 2022-‘23.
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(16)During the previous year 2021-’22, Shri Mukund has received from a private
company monthly basic salary of Rs.10,000. Dearness allowance Rs.5,000,
Entertainment allowance Rs.400, Education and Hostel Allowance (total) Rs.700 for
three children of which one is staying in a hostel. Bonus is earned @ 30% of basic
pay and commission Rs.400 per month. 20% of dearness allowance is to be
considered for the calculation of retirement benefits.
From the beginning, the company has provided its owned residential house to
him. He occupied this house (in the city having population of more than 10 lakhs but
not more than 25 lakhs) up to 31-12-21. Furniture installed in this house costs
Rs.2,60,000. The company has paid Rs.30,000 annual rent for the additional
furniture. Rs.500 per month is deducted from his salary for this perquisite.
Determine the taxable value of the furnished accommodation for the
assessment year 2022-’23.
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(17)Find out the taxable value of perquisite for the A.Y. 2022-’23 from the following
particulars of director employee Shri Mahesh to whom the following assets owned
by X Ltd. were sold on 1-7-2021:
Car Rs. Laptop Rs. Furniture Rs.
Original cost of purchase 9,72,000 1,22,500 35,000
Date of purchase 1-5-2019 15-5-2020 20-5-2019
Sales Price taken by the company 5,15,000 25,000 10,000
The assets were put to use to the company from the say day they were
purchased.
(18) Shri Harshad Patel is drawing a monthly salary and dearness allowance of
Rs.50,000 and Rs.25,000 respectively. He contributes to his provided fund @ 15% of
-----------------------------------------------------------------------------------------------------------------
salary and dearness allowance. The employer’s contribution is 14.5%. He is also
getting an annual bonus of Rs.50,000. The employer has provided him a rent-free
unfurnished house (in a city having a population of 6 lakhs) in respect of which the
employer pays monthly rent of Rs.10,000.
During the previous year Rs.42,000 is credited to his provident fund account
as interest @ 10.5% p.a. Shri Patel has paid Rs.36,000 as premium on his own life
insurance policy and Rs.9,000 as premium on his son’s life insurance policy.
Compute the taxable salary income total gross income and deduction U/s 80C
if other taxable income of Shri Patel for the A.Y. 2022-‘23 is Rs.3,35,000 and if he
contributes to
(A) A statutory provident fund, (B) A recognized provident fund,
(C) An un recognized provident fund.
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(19) The total gross income of Shri Kalpanath Roy, for the accounting year 2021-’22
amounts to Rs.3,50,000. Compute the amount of deduction U/s 80C available from
total gross income:
Rs.
(1) Employee’s contribution to recognized provident fund (@ 15% of basic
salary) 14,500
(2) Premium paid on his life insurance policy of Rs.40,000 (taken before 1- 9,000
4-12)
(3) Paid into Public Provident Fund A/c 70,000
(4) Contribution under ULIP of L.I.C. 12,000
(5) Investment in the eligible shares of power sector company 43,000
(6) Deposit placed with SBI (for 5 – year period) 80,000
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
(20) Sandeep has made the following investments during the financial year 2021-
22 (Total Gross Income is Rs.4,75,000.):
Rs.
Own contribution to recognized P.F. 78,000
Deposit made in public provident fund 14,000
Investment in shares of infrastructure companies 35,000
Master equity plan of unit trust of India 6,000
National saving certificates Series VIII 20,000
Repayment of H.D.F.C. housing loan 36,000
Tuition fee paid for the education of his child 12,000
Calculate the amount of deduction under Section 80C.
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(21)Mr. H. V. Sardar is a specified employee. Determine his taxable salary and

deduction u/s. 80(C) for the previous year 2021-’22 from the following
particulars:
Rs.
-----------------------------------------------------------------------------------------------------------------
(1) Basic Salary 3,00,000
(2) Dearness Allowance 1,00,000
(3) Entertainment Allowance 60,000
(4) Medical Allowance 10,000
(5) Education allowance (for three children) 5,400
(6) Hostel Allowance (for one child) 6,600
(7) Employer’s contribution in Recognized P.F. (based on basic salary) 46,000
(8) Interest credited @ 12% p.a. rate to Recognized P.F. 48,000
(9) Commission at a rate of 6% on sales 30,000
(10) Medical expenses paid by the Employer 22,000
(11) Personal Electric Bill paid by the employer 8,000
(12) Bonus 30,000
(13) The employer has provided him rent-free house in Ahmadabad. It’s annual fair rent
is Rs.72,000. The employer has also provided furniture of Rs.2,00,000. The employer
has also appointed a gardener and a watchman. They are paid annual salary of
Rs.12,000 each by the employer.
(14) The employer has also provided him chauffer with car (engine’s cubic capacity 1.6
lts.) for his official as well as personal purposes. All its expenses are met by the
employer.
(15) His contribution to recognized provident fund is Rs.36,000. He has paid Rs.24,000
for his life insurance premium and also deposited Rs.70,000 in Public Provident
Fund.
The employer has deducted Rs.2,400 from his salary for professional tax.
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(22) From the following information of Mr.Dravid, calculate his taxable Income
from Salary and the deduction available under Section 80C for the A.Y. 2022-
’23:
(1) Basic Salary (after deduction of Income-tax of Rs.10,000 and employee’s contribution
to Recognized P.F. equal to 15% of Basic Salary) Rs.2,45,000.
(2) Dearness Allowance: 60% of Basic Salary.
(3) City Compensatory Allowance: 15% of Basic Salary.
(4) Children Education Allowance: Rs.200 per month, per child (for three children).
(5) Employer’s Contribution of Recognized P.F. is equal to Mr.Dravid’s contribution.
(6) Bonus: two months’ salary.
(7) Commission: Rs.500 per month.
(8) The employer has provided him a residential accommodation (in Bangalore) whose
fair rental value is Rs.5,000 p.m. Furniture costing Rs.1,00,000 is also provided by
the employer: The gardener is also provided by the employer, whose salary Rs.2,000
p.m. is paid by the employer.
(9) The employer has also given him a 1.8 litres cubic capacity motor car for personal as
well as office use. All its expenses (including driver’s salary) are paid by the
employer.
(10)Mr.Dravid has paid Rs.2,400 as profession tax and Rs.30,000 and Life Insurance
Premium.
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(23) Mr. J is a specified employee. Determine his taxable salary for P.Y. 2021-22 from the
following particulars:
1. Basic salary Rs. 22,500 p.m. up to 30th Nov., 2021 and there after Rs. 30,000 p.m.
2. Dearness Allowances (1/3r of retirement benefit) = 50% of basic pay
3. Telephone allowances is Rs. 20,000.
4. Education Allowance is Rs. 8,000 for 3 children.
5. Hostel Allownce for 1 child is Rs. 5,000
6. Interest at 12% p.a. credited to R.P.F. A/c is Rs. 36,000.
7. Gas, water, electricity charges paid by company (2/3rd for personal use) Rs. 18,000.
8. Compensation paid for injury suffered while office duty is Rs. 30,000.
9. Employer has provided a Chauffeur driven car (capacity 1.8 liters) fro official and
personal purpose. All expenses are met by employer Rs. 1,000 p.m. is deducted from
his salary for the said facility.
10. The employer has provided him resendentialaccomodation (in Ahemdabad) whose
fair rental value is Rs. 5,000 p.m. furniture costing Rs. 4,00,000 is also provided by
employer. The employee has contributed Rs. 16,550 towards this prequisite.
11. Company’s contribution to R.P.F. Rs. 45,200 and employee contributed Rs. 38,000.
12. Expenses paid by company on behalf of employee Club fees Rs. 10,000 p.a., LIC
premium Rs. 3,000 p.a.
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(24) Mr. Madhav is employed at Kolkatta with Mercantile firm as sales manager. From
the undernoted particulars, compute his taxable salary income and deduction U/s
80C for the Assessment Year 2022-’23:
(a) Basic Salary Rs.7,500 p.m. and bonus Rs. 70,000.
(b) Dearness Allowance at 20% of the basic salary but only 10% of salary is eligible for
service benefits.
(c) Incentive commission at 1% of the turnover achieved by him but not exceeding 50%
of monthly salary of Rs.7,500. The turnover achieved by him for the relevant
previous year was Rs.11,00,000.
(d) Mr.Madhav’s contribution to the Recognized Provident is Rs.15,000 for the year and
the employer also contributes an equal amount.
(e) Interest credited to Provident Fund at the rate of 11% per annum amounted to
Rs.4,400.
(f) The employer pays Mr. Madhav a house rent allowance of Rs.1,700 per month and
Mr. Madhav lives in a rented house for which he pays rent of Rs.2,000 per month.
(g) He is provided with a motor car of more than 1.6 lts. capacity which he uses both for
private and office purposes. The employer pays all expenses of the said car including
driver’s salary of Rs.6,250 per month.
(h) On 1-4-’21 he took a loan of Rs.1,50,000 from his employer to purchase a car. The
company charged interest @ 10.70% p.a. as against the prescribed rate of interest
by S.B.I as on 1-4-21 of 13.20%.
(i) He has been getting entertainment allowance of Rs.13,600 per year.
(j) Mr.Madhav’s son (a medical student) stays in the medical college hostel; his
empoyer has paid Rs.24,000 to Madhav as education cum hostel expenditure
allowance.
-----------------------------------------------------------------------------------------------------------------
(k) According to the terms of appointment his employer contributes a sum of Rs.6,000
per year to an approved superannuation fund on his Account. (Employee also
contributes an equal amount)
(J) During the relevant previous year Mr. Madhav paid the following life insurance
premium.
(i) On a policy of Rs.60,000 on his own life Rs.7,600 (Policy taken on 15-4-11)
(ii) On a policy of Rs.50,000 on his son’s life Rs.4,000 (Policy taken on 1-4-17)
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(25) On 1-10-16, Babli joined a company of Delhi in the grade of basic pay 20,000-400-
22,000-1,000-42,000 with three additional increments.
She receives dearness allowance at 30% of basic salary. In additions, she
received monthly entertainment allowance of Rs.200, Education allowance of
Rs.600. (for three children), Bonus @ 1% of basic pay and commission @ Rs.500 per
month.
The company contributes 13% to her recognized provident fund. Interest
credited to recognized provident at 12.5% Rs.2000. From 1-8-’20 the company has
provided a perquisite of unfurnished residence for which the company has paid
annual rent of Rs.30,000.
On 1-4-’21:
(1) The company gave her loan of Rs.5,00,000 at 4 % annual rate for 15 years for the
purpose of building. (SBI interest rate on such loan is 10%)
(2) The company gave her interest free loan of Rs.1,00,000 for-the purpose of computer.
(SBI interest rate on such loan is 16%)
(3) On 11-6-18 the company had purchased a digital camera at Rs.84,000. The company
had allowed her to use the camera for her personal purpose. On 1-9-21 she
purchased the camera from the company at Rs.6,500.
(4) On 1-8-18 the company had purchased a refrigerator & other appliances at
Rs.1,00,000.
The company had allowed her to use the refrigerator and other appliances. On
1-10-21 she purchased refrigerator & other appliances from the company at
Rs.50,000.
(5) On 1-8-19 the company had purchased a 16 H.P. motor car at Rs.5,00,000, the
company had allowed her to use the motor. All its running expenses were borne by
the employee. (Both purpose)
(6) On 1-11-21 she purchased the motor from the company at Rs.1,48,330.
(7) The company has paid her L.I.C. premium of Rs. 11,645.
Professional tax Rs.200 per month is deducted from her salary.
Find out the taxable income from salary for the A.Y. 2022-’23.
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(26) Rajni Kant Patel, a manger of Super Computers Ltd. gives the following particulars
of his income relevant to the assessment year 2022-23.
1. Basic salary Rs. 36,000 p.m.
2. Bonus Rs. 30,000 p.a.
3. Commission Rs. 45,000 p.a.
4. Entertainment Allowance Rs. 12,000 p.a.
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5. A rent free unfurnished house has been provided to him in Delhi; lease rent of
thehouse Rs. 2,40,000 p.a.
6. The company has provided free use of Ford Ikon 1300 cc Car for official aswell as
personal purposes; expenses are paid by the employer Rs. 84,000 (ofwhich 30% is
attributable towards personal use). The car is also being usedby the family members
of the employee. A sum of Rs. 12,000 is recoveredfrom Rajnikant for using the car
for private purposes.
7. The company has also paid Rs. 1,200 on account of professional tax on hisbehalf and
the remaining Rs. 1,200 is paid by Rajnikant.
8. On 1-7-2021, the company has gifted ,him a computer manufactured by thecompany
on its Founder's Day to Rajnikant (cost of the computer to employerbeing Rs.
34,000).
9. Employer's contribution towards recognised provident fund Rs. 54,000
p.a.(contribution of Rajnikant towards the fund Rs. 75,000).
10. Other details :
1. Ranjikant has paid Rs. 65,000 as insurance premium on his wife's lifeinsurance
policy.
2. His wife has also paid Rs. 16,000 as insurance premium on her husband'slife
insurance policy.
3. Rajnikant has also deposited Rs. 1,00,000 to his public provident fundaccount.
Determine his Taxable Salary Income, Total Taxable Income (assuming that
his taxable income from other heads of incomes was Rs. 4,03,200) and tax liability
for the Assessment Year 2022-23.
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(27) Shri Dhaval (a specified employee) is employed as a manager of a company. He is
provided the following facilities and a monthly salary of Rs. 60,000.
I. A motor car bought by the company on 14-6-2018 for Rs. 3,00,000 was transferred
to Shri Dhaval’s name on 10-5-2021 for a consideration of Rs. 92,000.
II. On 26-3-2022, the company gave him a birthday gift (in cash) of Rs. 4,500.
III. A residential flat in Mumbai (owned by the company) is provided as rent free
accommodation.
IV. A digital camera bought by the company on 15-6-2018 for Rs. 75,000 was provided
to him for his personal use and it was ultimate purchased by Shri Dhaval on 1-9-
2021 for Rs. 22,500.
V. The company paid Rs. 15,000 for personal purchases made by Shri Dhaval by using
the credit card. The company has also paid Rs.500 as annual fee to renew the credit
card.
VI. The company has paid bills of Rs. 16,500 for the use of telephone facility provided at
his residence.
VII. On 1-4-2021 the company has given him a loan of Rs. 30,00,000 for 15 years period
@ 5.20% interest rate for the purpose of house construction. The rate of interest for
similar loan given by SBI is 7.20% P.A.
Determine his Gross Salary for the A.Y. 2022-’23.
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(28) From the following details of salary income of Mrs. Aparna Goswami the managing
director of a company, for the financial year 2021-'22, compute her taxable salary of
A. Y. 2022-'23.
1. Basic salary Rs. 4,20,000.
2. Bonus Rs. 45,000.
3. Entertainment allowance Rs. 5,000.
4. Payment made by the employer for free supply of gas, electricity provided for
personal use Rs. 6,250.
5. House servant's salary reimbursed by the employer Rs. 14,400
6. Free education facility provided to three children in an institution maintained by
the employer, cost borne by company for providing such education is Rs. 39,000 of
which Rs. 3,600 is recovered from her salary.
7. Concessional lunch facility provided during office hours (cost per dish Rs. 100 for
290 days is borne by the company); a token amount of Rs. 20 per dish is deducted
from her salary.
8. Cost borne by the company for providing free holiday home facility at
Mahabaleshwar Rs. 36,000.
9. The company has also paid salary of cook and watchman at Rs. 9,600 and Rs. 18,000
respectively.
10. Mrs. Goswami bought personal articles worth Rs. 27,500 by using credit card
provided by the employer.
11. The company has transferred a motor car to her name at a token price of Rs. 22,400
as against its original cost of Rs. 2,50,000 (used by the company for last 4 years
Depreciation @ 20% p. a. rate under DBM is to be considered.
12. Company's contribution to Recognised Provident Fund Rs. 55,200.
13. Employee's contribution to Recognised Provident Fund Rs. 48,000.
14. Interest credited to her R. P. F. A/c @ 10.5% is Rs. 23,100.
15. Deposited by her in Public Provident Fund Rs. 60,000.
16. Professional tax paid by her Rs. 2,400.
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HOME ASSIGNEMNT
(1) Shri Parag retires on 14-6-2021 after 32 years and 6 months of service. At the time
of retirement he received gratuity of Rs.1,70,000. His basic pay during the calendar
years 2021 and 2022 was Rs.7,000 and Rs.8,000 per month respectively.
Compute the taxable amount of Gratuity for the Assessment Year 2021 -’22.
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(2) Shri Anil Sheth of Surat draws Rs.60,000 p.a. as basic salary, Rs.20,000 p.a. as D.A.
(which is added to salary for P.F. purposes) and Rs.20,000 p.a. as house-rent
allowance. He has actually paid Rs.24,000 p.a. as rent for his residential house.
Ascertain the amount of exempted house-rent allowance for the assessment
year 2022-’23.
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(3) Mr. Saurav retired from his job after 29 years 6 months and 15 days of service on
17-12-2021 and received gratuity amounting Rs.4,00,000. His basic salary at the
time of retirement was Rs.6,000 p.m., dearness allowance Rs.1,800 p.m., commission
on turnover 1%. He got an increment on 1-4-2021 of Rs.1,000 p.m. in basic.
Turnover achieved by the assesses Rs.1,00,000 p.m.
Calculate his taxable gratuity if he is a: (1) Government employee or
(2) Non government employee, covered under the Payment of Gratuity Act.
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(4) Shri Hareshbhai is working as a manager of a private company. The details
regarding the previous year ending 31st March, 2022 are as under:
(1) Basic salary per month Rs.10,000.
(2) Dearness allowance: 40% of Basic salary (331 3% of allowance is considered for
retirement benefits)
(3) Bonus – one month’s basic salary.
(4) 1% commission on sales Rs.32,700
(5) Educational and Hostel Allowance per month (for three children, one child studying
in hostel) Rs.1,500
(6) Conveyance allowance (only 25% spent) per month Rs.500
(7) Medical allowance per month Rs.400
(8) LIC premium of Rs.7,500 paid by the company on his behalf
(9) Gas and Electricity expense of Rs.3,500 paid by company on his behalf.
He is provided a free unfurnished house owned by company. The fair rent of this
house is Rs.3,000 p.m.
Compute the taxable value of residential accommodation for A.Y. 2022-’23
under the following circumstances:
(1) If the house is in Mehsana (Population 4 lakhs)
(2) If the house is in Vadodara (Population 15 lakhs)
(3) If the house is in Ahmadabad (Population 40 lakhs)
(4) If the house is not owned by the company and the company has to pay a monthly
rent of Rs.2,000.
(5) If the house is not owned by the company and the company has to pay a monthly
rent of Rs.3,500.
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(5) Abinav retired on 28-2-’22 from Bindra Ltd. after completing 30 years and 11
months services. He received Rs.6,43,820 as gratuity. He was receiving Rs.400 as
increment from 1st January every year. He received 25% of basic salary as dearness
allowance. For the calculation of retirement, benefits, 60% of dearness allowance
was considered. He was on leave with half pay (including dearness allowance) for
the period from 1-9-’21 to 31-12-’21. He received Rs.4,100 as dearness allowance
for the month of January, 2021. Find out the taxable gratuity for the Assessment
Year 2022-’23.
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(6) The particulars of income of Smt. Deval Dalai for the assessment ye 2022-'23
are given below :
(1) She joined the service (in a company at Delhi) from 1-1-2019 in the gradof Rs.
20,000-2,000-30,000-5,000-60,000 with two increments. Two additionincrements
were also sanctioned on 1-1-21, in appreciation of her special abiliD.A. is allowed @
50% of basic pay.
(2) Bonus Rs. 36,250; Commission Rs. 12,000 and an annual entertainmeallowance of
Rs. 3,000 were also paid during the year.
(3) A furnished house was provided to her at a concessional rent, whoestimated fair
rental value was Rs. 15,000 p.m.. The company has providedthe house furniture,
refrigerator etc. at a cost of Rs. 1,00,470. A token rentRs. 550 p.m. was deducted
from her salary in respect of this perquisite.
(4) She was provided a car by the company for both the purposes. The runnexpenses of
the car were met by the assessee.
(5) Her contribution to 'Recognised Provident Fund' was Rs. 37,400,
whileemployer's contribution was Rs. 54,800.
From the above informations, compute her taxable salary income .
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(7) Mr. Vishwam joined a company on 1-4-2019 as an accountant in the
salaryscale of Rs. 18,000 - 1,000 - 30,000, Annual increment becomes due on
1st April.He is a specified employee. He provides the following details for the
year ending31st March, 2022
(1) D.A. @ 40 % of basic salary.
(2) Contribution to recognized provident fund by both @ 12% of salary.
(3) City Compensatory Allowance @ Rs. 2,000 p.m.
(4) Interest 12% p.a. rate credited to R.PF A/c Rs. 2,400
(5) House Rent Allowance Rs. 1,000 p.m.
(6) Entertainment Allowance Rs. 1,000 p.m.
(7) Tour and Travelling Allowance Rs, 24,000 (of which Rs. 8,000 is saved)
(8) The company has provided 1.8 cc car partly for private use and partly foruse. All its
expenses are met by the employee.
(9) Free education is provided to two children in a school run by the company.Average
monthly cost of such education in a similar school is Rs. 1,000 perchild.
(10) The company pays Rs. 6,000 for gas-water facilities for his personal use.
(11) Leave encashment amount received in cash Rs. 6,000
(12) Free lunch is provided on 200 working days (cost per lunch Rs.100)
(13) The company pays Rs. 600 p.m. for telephone facility.
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(14) He has paid professional tax of Rs, 2,400 and house rent of Rs. 36,000.
Compute his taxable salary for the assessment year 2022-23
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(8) Shri Mahavir Parikh is employed with a sole trader’s firm in Ahmadabad. He is a
member of unrecognized provident fund. He draws a basic salary of Rs.15,000 p.m.
and D.A.@ 30% of his basic salary. He also gets house rent allowance @ 20% of his
basic salary. He has to pay house -rent @ Rs.3,300 p.m. He contributes 15% of his
basic salary to the fund and the firm also contributes equally.
He retires on 1st November, 2021 after 28 years of service. He gets
Rs.4,83,000 as accumulated balance from the provident fund. It consists of
rs.1,92,000 as interest on total contribution made by both the parties. He also gets
Rs.3,40,800 as gratuity. His average monthly salary of the year preceding the month
of retirement amounted to Rs.15,000.
On 1st December, 2021 he joins another sole trader’s firm in Rajkot at a salary
of Rs.30,000 p.m. He also gets 5% commission on sales affected by him. The total
sales made by him (during 4 months ending on 31st March, 2022) amounted to
Rs.16,80,000. He has been provided rent-free unfurnished house for which the firm
has to pay an annual rent of Rs.72,000. His contribution to the recognized provident
fund based on basic pay is Rs.27,180 (the firm has also contributed an equal
amount).
He has paid a total amount of Rs.21,660 as annual premium on various
personal life insurance policies and has invested Rs.30,000 in National Savings
Certificates (VIII issue).
Compute his taxable salary income for the assessment year 2022-’23.
Also find out the amount of deduction available u/s 80C.
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(9) Mr. Bean retired from cartoon ltd. after continuos service of 20 Years. He received
Rs. 4,80,000 as leave encashment on 31-12-2021 for unavailed leave of 480 days. He
was allowed 36 days leave for every completed year. His average monthly salary for
last 10 months before the retirement was Rs. 20,000. Calculate taxable leave salary
for A.Y. 2022-23.
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(10) Mr. Mickey retired from Mouse Ltd. on 30-11-2021 after 30 years & 8 months. His
basic salary at the time of retirement was Rs. 45,000, D.A. @ 50% of Salary of which
66 % was considered for provident fund purpose. He received Rs. 7,00,000 for
leave salary as against 630 days of leave. As per terms of appointment he was
allowed 35 days leave for each completed year. He got increment every year on 1-7
and last increment of Rs. 3,000.
Compute taxable leave salary for the A.Y. 2022-23.
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UNIT - 3 HOUSE PROPERTY
(1) Write a note on category the house.
Ans.
(1) Self OccupiedProperty:-
When an assesses owns a house property which is used for self resident, it is
known as self occupied property. No tax is payable on such house however interest
on housing loan is allowable as expense.
(2) Let out Property:-
When an assesses has one or more house property and has let out the above
house property to tenant for any purpose other than agriculture related activity, it is
known as let out property. Income tax is payable on such house property.
(3) Partly Let out property:-
When an assesses has a house property. He uses the same house property
partly for self resident and remaining portion is let out for any purpose other than
agriculture related activity, it is known as partly let out property, tax is payable on
proportionate value of let out part only.
(4) Deemed let out property:-
When an assesses has more than one house property, and he resides either in
all the houses or one house but remaining houses are vacant, any one house will be
considered SOP and remaining all houses are considered DLOP. Tax is fully payable
on DLOP.
(5) Others:-
(1) When an assesses has house property uses the same for agriculture related activity,
the income is considered to be the part of agriculture income which is fully tax free.
(2) When an assesses has house property which is used for self business or profession,
income is taxable under the head profit and gain of business or profession.
(3) When an assesses has let out the property for agriculture related activity, income is
tax free.
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(2) Write a note on net annual value.
Ans. Net annual value is such an amount on which 30% standard deduction and
interest on loan is deductible to compute taxable income. It can be found out as
follows:
Municipal value is compared with fair rent or reasonable rent, maximum of
both the values is carried forward.
The above carried forward value is compared with standard rent and
minimum of both the values is carried forward.
Such above carried forward value is compared with actual rent receivable and
however un-realized rent is deducted from actual annual rent receivable. The
maximum of both the values is carried forward which is known as Gross Annual
Income.
Municipal tax or Local tax paid by owner or landlord is deducted from GAV
and balance is called NAV.
However, minimum value and actual rent receivable whichever is higher is
carried forward but rent of vacancy period is deducted from the value.
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A.Y. = 2020-21 P.Y. = 2019-20
Assesses= Person =
Statement showing Taxable Income from House Property
H1 LOP H2 LOP H3 SOP
(1) Municipal Value --------- ---------
(2) Fair Rent --------- ---------
(3) Maximum --------- ---------
(4) Standard Rent --------- ---------
(5) Minimum --------- ---------
(6) Actual Rent Receivable --------- ---------
(7) Maximum / GAV --------- ---------
- Municipal tax paid by owner (---------) (---------)
Net Annual value --------- ---------
- Ded. u/s 24
(I) Standard Deduction (30% of NAV) (---------) (---------)
(II) Interest on Loan (---------) (---------) (---------)
Total Taxable Income from House --------- --------- (---------)
Property
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(3) Write a note on interest on loan.
Ans.
(A) For LOP, PLOP and DLOP:-
Interest on loan taken for purchase, construction, repairing, and
reconstruction is allowable on accrual basis for previous year.
Interest paid during construction period is also known as pre-construction
period interest or capitalized interest is allowable in five equal yearly installments
after completion of construction.
(B) For SOP:-
1. Loan taken before 1-4-2000:-
When loan is taken for purchase, construction, repairing, reconstruction
maximum amount allowable is Rs.30,000.
2. Loan taken on or after 1-4-2000:-
When loan is taken for purchase or construction, maximum amount allowable
is Rs.2,00,000, if loan is taken for repairing or reconstruction, maximum amount
allowable is Rs.30,000.
Capitalized interest is also allowable in five equal yearly installments.
Aggregate limit for all the interest is Rs.2,00,000 for SOP.
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Int. on loan
LOP, DLOP, PLOP SOP
p.y. Cap. Int. Before Cap.int. on or after

Totally 1/5 1- 4 - 2000 1/5 1- 4 -2000
Rs.30,000
Pur., Cons. Rep./

Rs.2,00,000 Ren./
Rec.
Rs. 30,000
Rs.2,00,000
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4. Write a note on Borrowed Capital.
Ans. When any sum is borrowed by theassessee for any of the following specific purposes —
(i) to acquire, (ii) to construct,(iii) to repair, (iv) to renew or reconstruct the property,
then the amount of interestpayable (of the current year and pre-construction period) on
the borrowed capitalis allowed as a deduction. This deduction is allowable on accrual
basis (even ifbooks of accounts are kept on cash basis).Following points should also be
considered :
1. As the deduction AS granted on accrual basis, it should he claimed on yearly basis,
whether paid or not
2. Interest on fresh loan (even if at a higher rate), taken to repay theold loan (borrowed for
any of the specific purposes) is also allowedas a deduction.
3. Interest on unpaid interest is not deductible.
4. Interast on loan taken to purchase plot of land, on which house isconstructed, is also
deductible,
5. Interest of pre-construction period Such accumulated interest of 'pre-construction
period' is deductible in five equal annual instalmentsbeginning from the previous year .
in which construction of property iscompleted Pre-construction period means the
period commencing on thedate of taking loan and ending on 31st March immediately
preceding theyear of completion of construction or date of repayment of loan,
whicheveris earlier.
6. No deduction is admissible in respect of brokerage or commissionpayable for
procurement of loan.
Interest on borrowed loan is the only deduction to be allowed from the net
annualvalue (Nil) of self-occupied house.
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Remember that in case of a let-out house property total amount of
interestpayable on a loan taken for any of the specified purposes is fully allowed as
deduction.
In case of a self-occupied residential house property (maximum for twoself-
occupied houses) : If capital is borrowed on or after 1st April, 2000. The deduction is
allowed as under :
1. If such loan is taken for reconstruction or repairs / renewals of houseproperty,
maximum interest of Rs. 30,000 p.a. is to be allowed.
2. If such loan is taken for the purpose of purchase or constructionof the house and the
house is actually bought or constructed within 5years period from the end of the
financial year in which the loan istaken (Provided a certificate is given by the lender of
loan in this regard) a maximum interest of Rs. 2,00,000 p.a. is to be allowed.
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1. The following are the details of buildings owned by Mr. X :
Name of the property A B C
(1) Use of property Self -occupied Let –out Used for own
business
(2) Municipal valuation(yearly) Rs.8,000 Rs.45,000 Rs.15,000
(3) Municipal tax 30% 40% 40%
(4) Date of completion 1-5-2020 31-3-2020 1-5-2020
(5) Loan taken for
contraction(Rate of interest Rs. 3,00,000 Rs. 2,00,000 Nil
:12%P.a)
(6) Repair expenses Rs. 12,400 Rs. 12,500 Rs. 22,600
(7) Insurance premium paid Rs. 1,200 Rs, 2,200 Rs. 3,200
The Municipal tax was paid by the owner. House property No. B (which
consists of two identical units) was rented to two tenants at Rs. 2,100 p.m. per unit.
One tenant had vacated the house on 31-1-2022 without paying six months’ rent.
This unit remained vacant up to 31-3-2022.
From this information calculate the income from house property of Mr. X for
the previous year ended on 31-3-22.
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2. Mr. Gabbarsingh is owner of a house property. Determine Gross Annual value
from the following information:
(1) Annual rent receivable Rs. 84,000
(2) Vacancy period 3 months
(3) Municipal Assessment Rs. 90,000
(4) Fair rent (Annual) Rs. 85,000
(5) Standard rent Rs. 72,000
Also find corrected Gross Annual value if unrealized rent is Rs. 21,000
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3. Shri Parthivbhai constructed a house in 2020. 50% portion of the house is let-
out and 50% portion is used as self-residence (both these units are not
similar). (in regard to facilities). This portion of self-residence is also given on
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rent four months during the previous year. Other details of house are as
under:
Rs.
(1) Municipal valuation 1,45,000
(2) Rent of 50% let-out portion 8,000(per months)
(3) Rent of residential portion on rent for four months 5,000(per months)
(4) Municipal Taxes 25,000
(5) Ground Rent Payable 3,100
(6) Repairs 6,000
(7) Fire Insurance Premium 2,100
(8) Interest on Loan taken for Construction 30,000
Calculate Income from House properties for A.Y. 2022-23.
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4. From the following information about the House Properties owned by Mr.
Vishal Rathod, you are required to compute his taxable income under the head
of house property income for the A.Y. 2022-2023.
Particulars Nature of use House I House II House III House IV
Let out for Let out for Self Self
Residence Business Occupied Occupied
Rs. Rs. Rs. Rs.
(1)Municipal Value 1,80,000 2,80,000 4,00,000 3,80,000
(2) Standard Rent 1,90,000 2,70,000 3,80,000 4,20,000
(3) Fair Rent 2,30,000 3,00,000 4,20,000 4,00,000
(4) Actual Rent receivable (of
let out period only) 1,98,000 3,45,000 ---- -----
(5) Vacancy period 1 month ½ month ---- ----
(6) Municipal Taxes paid by
Mr. Vishal 6,000 12,000 15,000 5,000
(7) Municipal Taxes paid by
Tenant 5,000 18,000 ---- ----
(8) Municipal Taxes payable
by Mr. Vishal Rathod 4,000 8,000 5,000 15,000
(9) Municipal Taxes payable
by Tenant 4,000 12,000 ---- -----
(10) Rent Collection Cost 3,000 4,000 ---- ----
(11) Repairs & Maintenance 10,000 15,000 25,000 20,000
(12)Year of completion of 2018-19 2014-15 2015-16 1999-2000
construction
(13) Capitalized Interest
(total) 1,00,000 1,50,000 2,00,000 1,50,000
(14) Interest for previous year
2019-20(unpaid) 10,000 25,000 40,000 50,000
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5. Ms. Gunjan owns the followings house properties, the details of which are as
under:
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Particulars House-1 House-2 House-3
(Rs.) (Rs.) (Rs.)
Use of property Self - Occupied Let- out Self-Occupied
Municipal valuation 1,10,000 78,000 88,000
Faire rental value 1,12,000 77,000 88,000
Actual rent (monthly) - 6,500 -
Standard rent - 76,000 -
Municipal tax 5,000 3,000 4,000
Repair charges and other 7,600
expenses 8,200 7,600
Interest on loan (paid) 2,200 4,000 1,200
Interest on loan (Unpaid) 1,800 3,000 1,300
Capitalized interest on loan 20,000 25,000 11,500
(total)
Vacancy period - 2 months -
Year of completion of
construction 2015-16 2014-15 2016-17
You are required to compute her taxable income from houseproperty
for the assessment year 2022-’23.
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6. Shri Dineshbhai Shah and Shri Arvindbhai Patel are the co-owners in housing
properties. Their shares in house properties and incomes are 45% and 55%
respectively. They have two properties “Ashiyana”, and “Shamiyana”
respectively. Particulars of these properties are as under:
Particulars Ashiyana Shamiyana
House House
Rs. Rs.
(1) Monthly Rent 4,000 8,000
(2) Municipal Taxes paid @ 20% of Muni. Valuation) 12,000 18,000
(3) Land Revenue 400 2,000
(4) Fire Insurance Premium 640 800
(5) Salary to Rent collector 2,400 3,000
(6) Interest on loan taken for improvement in house 20,000 10,000
(7) Vacancy Period 3 months
Compute the taxable income of Shri Dineshbhai Shah Arvindbhaipatel under the
head “Income from House- property for the A.Y. 2022-’23, after taking into
consideration the following further information:
Particulars Shri Dineshbhai ShriArvindbhai
Shah Rs. Patel Rs.
(i) Gross annual value of self- occupied house 8,400 9,000
(ii) Municipal taxes 800 1,000
(iii) Interest on loan taken for purchase of house 14,900 12,200
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7. Shri Vikrambhai Zaveri is the owner of three houses The details for the year
ending 31st March, 2022 are as under;
Particulars House House House
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Vasant Varsha Vaibhav
Rs. Rs. Rs.
(1) Use of house property Let out for Self Self
Residence Occupied Occupied
(2) Fair rent- annual 1,15,000 90,000 60,000
(3) Standard rent (Annual) 1,00,000 - -
(4) Municipal tax at 10% 12,000 8,000 4,000
(5) Insurance premium 6,000 5,000 5,000
(6) Loan for house repairing at
10% interest taken on 1-4-’16 2,00,000 3,20,000 1,31,000
(7) Interest on loan taken for
Payment of municipal tax 1,500 1,000 1,000
(8) Expense for collection of rent 3,000 - -
(9) Year of completion of
Construction 2015-‘16 2015-‘16 2015-‘16
Other Information:
(1) House Vasant (which consists of two different units) was rented to two tenants.
Monthly rent of Unit- 1 and Unit-2: Rs.4,000 and Rs.4,500 respectively.
(2) The tenant of Unit-1 had vacated the Unit on 28-2-22. This Unit remained vacant
thereafter.
(3) The tenant of Unit-2 had vacated the Unit on 31-1-22. This Unit remained vacant
thereafter.
Calculate the taxable income from house property for the A.Y.2022-’23.
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8. Given below are the particulars of house property owned by Shri Rajbhai:
Particulars House House House
“Labh”Rs. “Shubh” Rs. “Amrit” Rs.
(1) Municipal valuation 80,000 75,000 30,000
(2) Annual fair rent 90,000 1,00,000 36,000
(3) Standard rent … 1,10,000 …
(4) Municipal taxes (unpaid) 20% 20% 20%
(5) Payment for tenants’ amenities … 3,000 …
(6) Repairs 4,000 5,000 3,000
(7) Insurance premium (paid) 2,500 2,000 1,500
(8) Interest (of P.Y. 2021-’22) on Loan
taken for construction 30,000 30,000 10,000
(9) 1/5 part of total interest of
th … 15,000 5,150
Construction period
(10)Year of completion of construction 2020-‘21 2017-‘18 2018-19
(11) Use of the house Self Let- out for Self
occupied Residence occupied
Other details:
(1) House “Shubh” (Consisting of two separate units and the area is in the ratio of 3:2)
has been let-out to two tenants. Monthly rent of Unit 1 Rs.4,500 and that of Unit 2
Rs.3,000 (rent of unit 2 is inclusive of charge for tenants’
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(2) The tenant, who was in possession of Unit-1, had vacated the house on 31-1-2021
without making payment of last two months rent. This unit remained vacant upto
31-3-22.
(3) The tenant, who was in possession of Unit-2, had also vacated the house on 1-3-20.
This unit remained vacant upto 31-3-’22.
Compute the taxable income under the head ‘Income from House-
Property’ for the A.Y.2022-23.
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9. Shri Parth owns four houses which are self- occupied. The particulars
regarding these houses are as under:
House House House House
No.1 Rs. No.2 Rs. No.3 Rs. No. 4 Rs.
Standard Rent under Delhi
Rent Control Act 42,000 64,000 1,00,000 43,000
Fair Rent 45,000 60,000 95,000 44,000
Municipal valuation 40,000 70,000 90,000 38,000
Municipal taxes (paid) 4,000 20,000 30,000 15,000
Ground rent 3,000 2,000 4,000 1,500
Land revenue (unpaid) 1,500 - 2,000 1,2001
Interest on loan taken for
Payment of municipal taxes 1,000 800 - 500
Interest on loan taken for
Purchases or construction of
houses:
(paid during 2021-22)
(1) Taken before 1-4-’99
(for construction) 10,000 - 70,000 -
(2) Taken for purchase of house
(loan taken on 1-4-2020) - 80,000 1,00,000
After considering all options of Income- tax benefit, which house should be
treated as self- occupied? Also compute income from house property as per the best
option selected by you for the assessment year 2022-’23.
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10. Mr. Gautambhai Patel of New Delhi owns several properties which are let- out
to tenants. He is owner of the house in which he is living at Daryaganj and its
municipal valuation is Rs. 90,000 p.a. From the following statement of account
for the year ending on March 31, 2022, compute his taxable income from
house property.
Rs. Rs.
To Municipal Taxes: By Rent:
(excluding tenants share) Green Park House 1,20,000
Green Park House 4,000 Vasant Vihar House 2,40,000
Vasant Vihar House 8,000 South extension house
South extension House 3,200 (occupied for 10 months) 1,50,000
Gupta Colony Flat 2,400 Gupta colony flat
Daryaganj Bungalow 6,000 (Completed on 1-10-’21
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To ground rent of Gupta and Let out for Residential
Colony Flat 2,500 purpose) 6,,000
To Repairs 94,900
To Collections charges:
Green Park House 4,800
Vasant Vihar 8,000
South Extension 6,400
Gupta Colony 4,800 24,000
To interest paid to Bank
(Loan taken for construction
Of South extension House) 60,000
To Interest on loan
(taken for Repairs of
Daryaganj house) 65,000
To Excess of Receipts over
Payments 3,00,000
5,70,000 5,70,000
Municipal valuation of the house (annual) : Green Park House Rs.1,20,000,
vasant Vihar House Rs.20,000, South Extension House Rs.1,60,000, Gupta Colony
Flat Rs.1,20,000.
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11. Shri Vanmalibhai owns four houses, the details of which are as under:
Particulars House-1 House- 2 House-3 House- 4
Rs. Rs. Rs. Rs.
(1) Municipal value 60,000 40,000 54,000 72,000
(2) Fair rent 45,000 42,000 60,000 65,000
(3) Rent receivable (monthly) 4,500 - - -
(4) Municipal tax paid 10% 2.5 % 5% 2.5%
(5) Standard rent 57,000 - -
(6)Int. on loan for Construction 30,000 15,000 - 18,000
(due)
(7) Int. paid during construction 30,000 15,000 - 12,000
Period (capitalized)
(8) Int. on loan taken for 200 300 - -
payment of municipal taxes 4,500 - - -
(9) Outstanding rent Let out Self For own Self
(10) Nature of occupation for Occupied Business Occupied
Residence
(11)Year of completion of
construction 2019-‘20 2017-‘18 2017-‘18 2017-‘18
Calculate taxable income from house property of Shri Vanmalibhai for
the A.Y. 2022-’23.
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12. Rahul owns a house property in Ahmadabad, which consists two units, the
municipal value of which is Rs.2,80,000; whereas the fair rent may be taken
Rs.3,00,000. Unit 1 has 60% Floor area and unit 2 has 40% floor area, Unit 1 was self
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occupied for own residence upto 30-11-2020, which remained vacant for one month
and thereafter w.e.f. 1-1-2022 was let out for Rs.18,000 p.m. Unit 2 was let out for
Rs.12,000 p.m. since last 5 years.
Other particulars of the house property are as under:
(1) Municipal tax paid Rs.50,000.
(2) Fire insurance premium Rs.6,000.
(3) Interest on money borrowed for construction of the house: Rs.48,000.
Compute his taxable income for the assessment year 2022-23.
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HOME ASSIGNEMNT
1. Rubina Khan owns two houses, of which House-1 is let out to the employer
company (in which Rubina Khan is service as a cost accountant). The
defaulting tenant of House-2 has become insolvent and has vacated the house
on 31-1-2022. Determine the taxable income from the house properties for the
A. Y. 2022-’23.
Particulars House-1 House-2
Rs. Rs.
(1) Fair Rent 60,000 1,82,000
(2) Annual Rent 63,000 1,80,000
(3) Municipal Valuation 61,000 1,85,000
(4) Standard rent N.A. 1,72,000
(5) Municipal Tax paid 14,000 40,000
(6) Repairs 3,500 7,700
(7) Insurance Premium 3,000 33,000
(8) Ground Rent 7,500 24,000
(9) Interest on Capital borrowed by Mortgaging House no. 1
(Funds are used for construction of House-2) 18,000 …
(10) Un- realized rent of the previous year 2020-’21
collected in 45,000 …
P.Y.2021-’22
(11) Unrealized rent of 2021-’22 … 60,000
(12) Nature of Occupation Let out Let out
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(2) Vijay and Vinay were co- owners of two house property. Their shares of
ownership and income were 30% and 70% respectively. The details of
properties for the year ending 31st march, 2021 are as under;
Particulars House-1 House-2
Rs. Rs.
(1) Actual rent per month 9,000 10,000
(2) Standard rent annual 1,10,000 -
(3) Fair rent- annual 1,00,000 90,000
(4) Municipal Tax at 2.5% 2,000 2,500
(5) Collection charges 1,000 2,000
(6) Land revenue 3,000 1,000
(7) 10% house loan for construction
(Outstanding on 1-4-22) 1,66,500 3,50,000
(8) Interest on housing loan (paid during construction
period) 30,000 40,000
(9) Construction completed on 31-3-2021 31-3-2021
(10) Vacancy period 1 Month 15Days
Other Information:
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Details of their self - occupied houseproperty:
Particulars Vijay Vinay
Rs. Rs.
(1) Municipal valuation annual 1,50,000 80,000
(2) Fair rent annual 1,30,000 72,000
(3) Municipal tax 2.5% 2.5%
(4) Interest on housing loan for construction
(Loan taken on 1-4-17) 30,000 50,000
(5) Interest on housing loan (paid during construction period) 40,000 60,000
(6) Construction completed on 31-3-‘19 31-3-‘19
Compute the house property income of Vijay and vinay for the A.Y. 2022-’23
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(3) Ajaybhai owns three houses named “Shridhar”, “ Shri Hari” and “Shri Ram”.
Compute the taxable income under the head “Income from house property” for
the A.Y.2022-23. from the following:
Particulars Shridhar Shri Hari Shri Ram
(1) Use of the house Self Self Let out
Occupied Occupied
Rs. Rs.
(2) Monthly value as per municipal assessment 4,000 3,000 5,000
(3) Monthly Fair Rent 3,500 2,000 5,500
(4) Monthly Standard Rent 3,500 2,500 6,000
(5) Actual Rent received Monthly - - 6,000
(6) Vacancy Period - - 1month
(7) Municipal Tax Paid 9,000 4,000 12,000
(8) Housing Loan Interest 30,000 25,000 40,000
(9) Year of completion of construction 2017-‘18 2018-‘19 2019-‘20
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(4) Shri Parv owns four houses, the details of which are as under:
Particulars H1 H2 H3 H4
1. Municipal Value 60,000 40,000 81,000 96,000
2. Fair rent 45,000 42,000 90,000 90,000
3.Rent receivable (monthly) 4,500 3,200 - -
4.Municipal tax paid 10% 2.5% 10% 2.5%
5. Standard rent 57,000 - - -
6. Int on loan for construction 30,000 15,000 - 18,000
(Due)
7. Int paid during construction 30,000 15,000 - 12,000
period (Capitalized)
8. Int on loan taken for payment 200 300 - -
of municipal taxes
9. Outstanding rent 4,500 - - -
10. Nature of Occupation LOP LOP Own SOP
(Residence) (Residence) Business
11. Year of completion of 2019-20 2017-18 2017-18 2018-19
construction
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Calcualte taxable income from house property of Shri Parv for the A.Y. 2022-23.
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(5) Bhairav started business of letting properties on rent for commercial and
residential purposes. For the previous year 2021-22, rent is Rs. 3,40,000 on accrual
basic. Fair rent is Rs. 2,92,500.
Bhairav pays one-third of the municipal taxes, while the balance two-thirds is paid
by tenants. Total municipal tax@12% for the previous year amounts to Rs. 35,360
Other details are as under:
(1) Amount receivable from the tenants for providing different amenities (included in
the rent of Rs.3,40,000) Rs.36,000
(2) Un realized rent (defaulting tenant has neither vacate the property nor steps have
been taken to vacate the property) Rs.3500
(3) Interest on capital borrowed for the purpose of construction Rs.24,000.
(4) 3 flats of rental value of Rs.1500 p.m and 6 flats of rental value of Rs. 900 p.m
(inclusive of cost of amenities) remained vacant for 6 months and 7 month
respectively during the P.Y. 2021- 22.
Determine his taxable income from house-property for the A.Y. 2022-23.
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(6) From the following particulars ascertain the ‘Net Annual Value’ of each let-out
for the assessment year 2022-’23:
House No.1 House No. 2 House No.3 House No.4
Rs. Rs. Rs. Rs.
(1) A.V. as per municipal 7,200 12,000 2,400 6,000
records
(2) Annual rent receivable 6,000 10,000 2,700 7,200
(3) Actual rent received 4,800 7,200 2,700 4,800
(4) Accrued rent 1,200 2,800 ….. …..
(5) Local taxes paid by the 500 800 450 1,200
owner
(6) Local taxes paid by the ….. 400 …. ….
tenant
(7) Construction period 2009-10 2006-2007 1-1-2014 to 1-6-2019 to
31-1-2016 31-7-2021
House No.4 was let-out for residential use from 1-8-2021.
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(7) From the following details of house Property of Manjusha Devi, compute her
taxable income of A.Y. 2022-’23 under head Income from houseproperty.
(a) Let- out House:
(1) Annual valuation as per Municipal Assessment Rs.78,000
(2) Local taxes (paid) annual Rs.7,200
(3) Date of completion of construction: 31-3-2021
(4) 15% loan taken for construction (on 1-1-’19) Rs.2,40,000
(b) Self Residential House
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(1) Construction of- the house was completed on 30-9-’18 and total interest on loan
taken for construction accumulated to Rs.60,000. This loan was repaid on 31-3-
2021.
(2) During 2021 -’22 a fresh loan was taken to construct the second floor and its
outstanding interest amounted to Rs.72,000.
(3) During 2021-’22 another loan was taken to make repairs and alteration (Required as
per Vastu Shastra) on 1st Floor and its outstanding interest amounted to Rs.35,000.
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8. Shri Rajnikant Shah is the owner of three houses. On the basis of the following
information compute his taxable income under the head “Income from House
Property” for the assessment year 2022-23:
Particulars House-1 House-2 House- 3
Rs. Rs. Rs.
(1) Use of House Let out Let out For Self
for for Residence
Residence Business
(2) Municipal Valuation (annual) 36,000 90,000 1,20,000
(3) Fair Rent (Annual) 40,000 84,000 -
(4) Receivable rent (annual) 36,000 72,000 -
(5) Standard rent (annual) 42,000 - 1,40,000
(6) Municipal Taxes (Paid) 2,000 4,000 4,000
(7) Interest on loan for Construction 10,000 - 35,000
(8) Capitalized interest of pre construction 10,000 - 40,000
period (Total) -
(9) Vacancy Period 1 month - -
(10) Unrealized rent 4,000 - -
(11) Unreceived Rent (yet to be received) - 6,000
(12) Land Revenue 2,450 4,000 2,000
(13) Construction completed on 31-1-‘21 30-6-‘18 31-3-‘06
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UNIT - 4 Profit and gains of Business or profession

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Theory Section
Q.1 Write a note on allowable expenses.
Ans. Some expenses are expressly allowed as deduction from income by the
income tax act under section 30 to 37 which are as follows.
(1) Rent, rates, taxes etc.,of business premises :-
Rent, rates, taxes, repairs, insurance, maintains of premises are allowed if it is
used wholly or partly for business or profession current actual repairs are allowed if
it is revenue in nature
(2) Expenses of plant, machinery, furniture etc :-
Current actual revenue expenditure on repairs and insurance on plant
machinery and furniture is allowed under section 31.
(3) Depreciation :-
Depreciation of building, plant ,machinery, furniture or an other assets owned
by asessee for the purpose of business or profession is allowed at prescribed rates
under section (32)
(4) Expenditure or scientific research under section (35)
(a) Expenditure on in house research :-
When scientific research is undertaken by asessee himself it is called in
houseresearchhere following expenses are allowed.
(i) Any capital expenditure incurred by an assessee is allowed as deduction.
(ii) Any revenue expenditure incurred by an asessee is allowed as deduction.
(iii) Any expenditure on acquisition of land will not be allowed.
(b) Contribution for research
(i) Such contributions must be for scientific research or for social or statistical research.
(ii) Such contribution must be given to any national laboratory financed by government
or any notified university, college, institution IIT.
(iii) 100% to 150% of the amount contributed is allowed as deduction.
(5) Expenditure on know how and section 35 AB :-
If expenditureis incurred after 31st March, 1998 no deductionis allowed as
deduction.However depreciation is available.
(6) Amortization of Certain Preliminary Expenses (Sec. 35D and Rule6AB) :
Preliminary expenses, i.e., expenses of setting up of business or itsextension
are allowed as deduction to an Indian company or to non-corporateresident
assessee. The expenditure should have been incurred after 31-3-1970,(i) before the
commencement of his business, or (ii) after commencement of hisbusiness in
connection with extension of his industrial undertaking or in connectionwith his
setting up a new industrial unit.
Incurred after 31-3-1998, preliminary expenses are allowed to be writtenoff
equally over 5 years subject to a maximum amount calculated @ 5% of thecost of
project (means actual cost of fixed assets). In case of Indian companiesan option of
taking 5% of capital employed has been allowed.
(7) Insurance premium under section 36(1)(I):-

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The amount of Insurance premium paid for risk of damage of stock or stores
used for the purpose of business or profession.
(8) Expenses relating to employees section 36 (i)(ii) :-
Bonus or commission is deductable if it is paid under the payment bonus Act
1965. Any sum paid by the way of contributiontowards recognized provided fund or
an approved super annuation subject to prescribed limit is allowed.
(9) Interest on borrowed capital under section 36(1)(iii):-
The amount of interest in respect of capital borrowed for the purpose of
business is allowable expenditure but the borrowing must be real.
(10) Discount on zero coupon bond:-
Such bonds must have been issued by any infrastructure company or public
sector company on or after 1st June, 2006 and life of the bond should be minimum 10
years to maximam 20 yrs such company must not have paid any amount before
maturity or redemption and central government must have given permission.
(11) Loss on animals section 36 (i)(vi):-
When animal are used for the purpose of business and not as stock in trade
have died or become permanently useless such a loss is allowable. However the
amount of sale price of animal or dead body of animal must be deducted from the
loss.
(12) Bad debts section 36 (i) (vii):-
Any bad debt or part there of is allowed on the certain conditions which are as
follows.
(a) The bad debt must be incidental to the business or profession carried on by the
assessee.
(b) The sum allowed as bad debt must be owing business or profession.
(c) The amount should have been taken into account to compute income of the previous
year or earlier previous year.
(d) It should have become irrecoverable in the previous year.
(e)Assessee should take proper steps to collect the debts.
(13) Expenditure for promoting family planning advertisements section 36 (i)
(ix):-
Such expenditure must be incurred by a company assessee, it must be revenue
in nature and it must be for employees.
If such expenditure is of capital in nature, it is deductible in 5 equal yearly
installments.
(14) Expenditure on Advertisement section 37(1):-
Any revenue advertisement expenditure is allowed fully as deduction. If such
advertisement expense is defferedrevenue in nature then expenditure is allowed in
5 equal yearly installments.
Ifadvertisement expense is incurred for criminal purpose or advertisement
prohibited by law, such expense is disallowed.
When advertisement expenditure is paid to any political party, it is disallowed.
(15) Traveling expense :- Any traveling expenditure incurred by aseessee for the
purpose of business or profession, traveling performed by assessee his employees or
any other person on behalf of assessee is allowed as deduction.
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There are some further deduction are allowed which are known as general
deduction according to section 37 which are follows:-
(1) Expenses related to purchase, manufacture and sale of goods .
(2) Those general expenses which are incurred for the purpose of business or
profession but not covered under section 30 to 36.
(3) Anylegal expenses incurred by a company in resisting winding up claim by share
holders.
(4) Legal expenses to defend or maintain an existing title of a capital asset of business or
expenses incurred for defending monopoly rights.
(5) Amount of sales tax and expenses in connection with litigation (claim) and appeal
with regard to sales tax.
(6) Compensation paid on account of negligence in running the business.
(7) Compensation paid for termination of trading agreement to avoid future losses.
(8) Compensation paid for termination of employment of an employee in interest of
business.
(9) Compensation paid to managing director for termination of his service in the
interest of business.
(10) Compensation paid to employee for an injury or death due to accident during
employment.
(11) Civil defence expenses, payment to company registrar, payment of penalty or
damages etc.
(12) Insurance premium for loss of profit policy or for employees state insurance or for
workmen compensation.
(13) Pension and gratuity paid to employees under their respectiveact.
(14) Revenues expenditure on welfare of employees.
(15) Commission brokerage, etc, for, getting business.
(16) Subscription to a trade or professional association or subscription
compulsorily payable for example:-Medical association membership fees paid by
a doctor, mahajanlago paid by a trader.
(17) Present given to employees on the occation of Diwali and other occation but income
tax officer must be satisfied.
(18) Expenditure on issue of debenture or raising loans like registration fees, brokerage,
stamp duty, etc.
(19) Royalty payable for patent or copy rights.
(20) Interest payable on unpaid purchase price of any business asset used for business.
(21) Audit fees and expenses related to accounts.
(22) Professional tax and service tax.
(23) Recurring expenses on basic training of apprentices under the act.
(24) Payment made under own your telephone scheme is fully deductible.
(25) Administration expenses like salary postage, stationary, etc,.
(26) Expenses incurred on the occation of mahurat on special festivals. Are allowable if
income tax officer is satisfied.
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Q.2 write a note on dis-allowable/ non-deductible / Inadmisible expenses.
Ans.
[1] For all types of assessee:-
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(a) Any interest royalty technical fees or any other sum of money payable outside India
without deducting T.D.S. [Tax deducted at source].
(b) Any sum payable under the head salaries outside India without deducting T.D.S.
(c) Payment of security transaction tax and freinge benefit tax .
(d) Any sum payed on account of income tax wealth tax, F.B.T. and any tax of similar
nature chargable under any foreign law.
(e) Any payment to P.F. or other fund for benefit of employeeswithout deducing T.D.S.
[2] For partnership firm:- Any sum paid by way of interest, salary, bonus, commission
or remuneration by the firm to the any partner is expressly disallowable but
approved remuneration paid to a working partner is allowedas per the act.
[3] Payment to relative:-
Any expenditure incurred by an assessee is liable to be disallowed to the
extent it is considered excessive and unreasonable.
(a) Payment to relatives, directors or partners.
(b) Payment to a person who has substantial interest in business and to the relative to
the such person.
(c) Payment to a person in whose business the assessee has substantial interest whether
direct or indirect.
[4] Payment or aggregate of payments made to a person in a day for anyexpenditure
incurred in business exceeding Rs. 10,000 should alwaysbe made either by a crossed
cheque or by a crossed bank draft, otherwiseno deduction will be allowed for such
payment or payments. However,in respect of certain cases, payment of expenditure
of Rs.10,000 isallowed otherwise than by crossed cheque, e.g., payments made in
ruralareas or in small towns where no banking facilities are available,
whereexceptional or unavoidable circumstances exist.
[5] Any capital expenditure incurred for the purpose of business or profession.
[6] Personal expenditure or drawings of the assessee.
[7] Expenses and payments not wholly paid for the purpose of business or profession.
[8] Any amount of reserve like general reserve, bed debt reserve. However special
reserve of the approved financial institution is allowed.
[9] Provision for any kind of taxation.
[10] Past losses which is almost written off to profit and loss A/c.
[11] Charities or presents of non business in nature.
[12] Depreciation in excess of prescribed limit.
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Practical Section
(1) Shri Parimal Ghosh is the owner of a factory. He requests you to determine his total
taxable business income for the A.Y. 2022-23 on the basis of the following profit and
loss account for the year ended on 31-3-2022.
Particulars Amount Particulars Amount
To Opening stock 5,00,000 By Sales 80,00,000
To Purchase 50,00,000 By rent received 9,00,000
To Wages 20,00,000 By Closing stock 7,00,000
To Audit fees 20,000 By Bad debt recovery (of 25,000
which Rs. 1,000 was not
allowed in previous year)
To Building repairs (let 5,98,000
out)
To Rent collection charges 42,000
To General expenses 30,000
To Commission on loan 10,000
To Bad debt reserve 40,000
ToBad debt 50,000
To interest on capital 1,40,000
To Contribution to staff 50,000
welfare fund
To Income tax provisions 1,50,000
To Depreciation 65,000
(Approved)
To reserve for future 30,000
contingency
To Net Profit 9,00,000
96,25,000 96,25,000
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(2) Following is the Trading and Profit and Loss Account for the year ending 31st
March, 2021 of Shri Hasmukhbhai :
Dr. Profit and Loss A/c. Cr.
Particulars Rs. Particulars Rs.
To Opening Stock (1) 2,20,000 By Sales 30,00,000
To Purchases (3) 8,00,000 By Goods destroyed by fire 30,000
To Purchases Expenses 50,000 By Closing Stock (2) 1,35,000
To Factory Expenses 1,30,000
To Gross Profit 19,65,000
31,65,000 31,65,000
To Salaries 4,50,000
To Office Expenses (10) 2,60,000 By Gross Profit b/d 19,65,000
To Taxes (9) 5,000 By Sundry Income 35,000
To Fire Insurance : By Bad-debts recovered (4) 10,000
Let-out house 1500 By Share dividend 6,000
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Stock and stores 3500 5,000 By Commission 4,000
To LIC Premium 7,500 By Rent of let-house 30,000
To Loss on Sale of 10,000
Investment
To Depreciation on Plant 40,000
(5)
To Motor Car Expenses (6) 15,000
To Diwali-Puja Expenses 1,000
To Loss by Fire (Goods) 8,000
To Donation (Approved) 11,000
To Drawings 12,500
Net Profit 12,25,000
20,50,000 20,50,000
Other Information :
(1) Valuation of opening stock is 10% more than its cost price.
(2) Valuation of closing stock is 10% less than its cost price.
(3) Purchases include Rs. 40,000 of a purchase bill paid by using a credit card.
(4) 25% amount of Bad-debts recovery was allowed as deduction in earlier year.
(5) Admissible depreciation on plants is Rs. 30,000.
(6) Admissible depreciation on Motor-car is Rs. 21,000, 1/3 use of motor-car is for
personal purposes.
(7) Interest of capital Rs. 5,000 and admissible advertisement expenses of Rs. 21,410
have not been recorded in the books.
(8) Discount received from the creditors Rs. 4,000 has not been credited in the above
Profit and Loss account.
(9) Taxes include Rs. 1,500 of local tax paid for let-out house.
(10) Office expenses include Rs. 25,000 of Lap-Top purchased for business.
Calculate the taxable income of business for the A.Y. 2022-23.
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(4) Mrs. Sulakhasana is a business woman. Profit and Loss A/c. of her business for
the year ending 31st March,2022 is as under.
Rs. Rs.
To Stationery 2,500 By Gross Profit 20,30,000
To Salary 9,30,000 ByBad-debts recovery
To Godown Rent 36,000 (allowed as loss in previous
To Advertisement 10,000 year) 6,000
To Bad-Debts Reserve 6,000 To Discount 4,000
To Int. on Capital 30,000 To Dividend 20,000
To Owner’s Salary 24,000 By Gift (from her husband) 10,000
To Bad-Debts 2,500 To Lottery Income 1,00,000
To Income-Tax 13,000 To Income-Tax Refund 5,000
To Depreciation 12,000 (Including Rs. 600 of
To Motor Expenses 7,000 interest approved by ITO)
To Free Samples (Goods) 2,000
To Loss on Sale of Furniture 2,500
To Discount Reserve 1,500
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To Office Expenses 26,000
To Defalcation of cash by 60,000
Cashier
To Insurance :
Shop 2,000
Life 11,000
To Penalty for late filing of
Sales-Tax Return 3,000
To Legal Expenses 4,000
To Net Profit (trd. To Capital 9,90,000
A/c)
21,75,000 21,75,000
Other Details :
(1) 1/5th of use of motor-car is for personal purposes.
(2) Office expenses include Rs. 1000 of daughters college-fees and Rs. 500 of Pooja Exps.
(business).
(3) Admissible depreciation under Income-tax rule is Rs. 10,000, which includes Rs.
5000 for the motor-car.
(4) Stationery bill of Rs. 1,000 is unpaid which has been included in the above figure.
Compute Mrs. Sulakshana’s taxable business income for the assessment year 2022-
23.
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(5) Shri Anand’s Profit and Loss Account for year ended on 31-03-2022.
To Opening Stock 2,42,000 By Closing Stock 3,15,000
To Purchases 10,00,000 By House Rent 14,000
To Salary 1,98,000 By Sales 17,02,555
To Depreciation on 25,000 By Bad Debts Return 20,000
Machinery
To Interest on Capital 20,000
To Bad-debt Reserve 19,000
To Income Tax 18,000
To Advertisement Expenses 26,000
To Donations 16,000
20,51,555 2051555
Additional Information:
(1) Opening stock is valued at 10% more than the cost and Closing stock is valued at
5% more than the cost.
(2) The approved depreciation on machinery is Rs. 4000.
(3) The advertisement expenses shown in the above P&L A/c includes Rs. 17000 as
advertisement given in the newspaper owned by a political party.
(4) The opening balance of Motor on 1-4-2021 was Rs. 90000, on which 20%
depreciation is allowable. The use of motor for business is 2/3 portion.
(5) Goods of market price of Rs. 19000 were purchased at Rs. 14000 and taken for
house hold consumption were included in the sales at Rs. 25000.
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(6) Shri Anand (who is an author of a book) has received Rs. 10000 as royalty.
(7) The amount of donation shown above does not include Rs. 10000 given as cash
donation to S.G. University.
(8) The amount of Bad Debt return includes Rs. 13000 (which was not allowed in the
past).
Find out the taxable income from Business-Profession for the A.Y. 2022-23.
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(6) Arun’s profit and loss account for the year ended on 31-3-2022.
Rs. Rs.
To Insurance 10,000 By Gross Profit 1,75,000
To Interest on Loan 15,000 By Miscellaneous 8,000
To Interest on Capital 12,000 By Interest on Govt. 5,000
To Salary 30,000 Security
To Rent-Taxes 10,000
To Motor-Expenses 9,000
(total)
To Legal Expenses 2,000
To Travelling Expenses 50,000
To Net Profit 50,000
1,88,000 1,88,000
Additional Information :
(1) Rs. 2000 as life insurance included in the above amount of insurance.
(2) The written down value of motor on 1-4-2021 was Rs. 75000. The prescribed rate of
depreciation is 20%. Consider 1/3 use of motor is for personal purpose.
(3) On 1-4-2021 Rs. 35000 was paid for advertisement. The benefit of such amount will
be derived for five years.
(4) On 1-1-2022 a machinery of Rs. 344000 was purchased, for which Rs. 6000 was paid
as traveling expenses (included in the traveling expense of Rs. 50000). 20%
depreciation is approved on the machinery.
(5) Rs. 4889 as bad debts has been approved by the assessing officer for the P.Y. 2021-
22, which is not recorded in the above P&L A/c.
Find out the taxable income from the business for the A.Y. 2022-23.
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(7) Shri Manankumar is doing business as a sharebroker. He furnishes the
following details for the year ended on 31-3-2022:
Dr. Profit & Loss Account Cr.
Rs. Rs.
To Office Exps. 2,28,638 By Brokerage (Dalali) 12,91,430
To Stationary Exps. 27,768 By Profit in Share’s 1,10,180
To Telephone Exps. 32,284 Trading A/c.
To Staff-Bonus Exps. 3,335 By Dalali on Cash Share 1,33,740
To Subscription 4,463 By Profit on Share Badala 5,540
To Newspaper subscription 2,152 A/c.
To Salaries 6,95,500 By Dividend 3,850
To Conveyance Exps. 11,694 By Long Term Capital Gain
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To Office Rent 2,445 (Taxable) 73,510
To Account Charges 10,000
To Electric Exps. 8,879
To Professional Tax 250
To Advocate Fees 3,252
To Bad Debt Reserve 12,900
To Income-Tax 57,034
To Car-Depreciation 67,500
To Charity 7,090
To Purchase of
New Computer Machine 60,000
To General Reserve 55,000
To Net Profit transferred
to Capital A/c. 3,28,066
16,18,250 16,18,250
Dr. Shri Manankumar’s Capital Account Cr.
Rs. Rs.
To Household Exps. 1,25,000 By Opening Balance 1,91,701
ToAccidentInsurance 275 By Amount Received from
Premium Life Insurance Corp. on
To Life Insurance 17,000 account of maturity of 15,000
Premium Policy
To Contribution to PPF 1,60,000 To Net Profit transferred 3,28,066
To Investment in ICICI from Profit and Loss
Tax Saving Bonds 30,000 Account
To Mediclaim Premium 2,000
To Gift to Daughter 10,000
To Closing Balance 1,90,492
5,34,767 5,34,767
Other Particulars :
(1) Allowable Depreciation on car is Rs. 65000.
(2) Donation of Rs. 5,555 to a recognized institution is included in charity expenses.
(3) Depreciation on computer is not allowable this year.
(4) 50% out of total of conveyance expenses is for personal use.
Compute taxable Business income for Assessment Year 2022-23.
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(8) Following is the profit and loss account of Mr. saurav for the year ending on
31-3-2022.
To opening stock 90,000 By sales 90,51,000
To purchases 80,08,750 By closing stock 1,80,000
To salaries an wages 1,75,000 By share dividend 88,000
To rent and rates 1,31,000 By sundry incomes 30,000
To commission 21,500
To household expenses 1,00,000
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To income tax 36,100
To sales tax 50,250
To advertisement 35,000
To postage and telegram 4,000
To interest on capital 76,000
To reserve for bad debts 3,400
To depreciation on asset 18,000
To net profit 6,00,000
93,49,000 93,49,000
Additoinal information:-
(1) Closing stock and opening stock have consistently been valued at 10% below cost
price.
(2) Depreciation on asset as per income tax provisions is Rs. 17,200.
(3) Amount of sales includes a sum of Rs. 41,250 representing the value of goods
withdrawn for personal use which costing Rs. 27,850 and its market value on the
date of withdrawn was Rs. 45,240.
(4) Household expenses include a contribution of Rs. 20,000 towards provident fund.
You are required to calculate taxable income from business for Mr. Saurav for the
assessment year 2022-23.
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(9) Following is the Profit and Loss Account for the year ending on 31 st March,
2021 of M/s. Prijal Trading & Co.
Particular Rs. Particulars Rs.

To Salary & Allowances 6,70,000 By Gross Profit 26,00,000
To Postage & Telephone 10,000 By Interest & Dividend 80,000
To Office Rent 2,15,000 By Rent (which includes Rs.
To Local Taxes for Building 10000 from employee’s
including Rs. 2000 for staff Staff quarters) 30,000
quarters 8,000 By Interest charged to
To B.D.R. 7,000 debtors for late payment 5,000
To Bad debt includes Rs. By Profit on Sale of
2000 for debt (debtor’s Investments 25,000
A/c. not yet-closed) 8,000 By Sundry Income 2,000
To Donation 5,000
To Interest (includes Rs.
7000 on capital) 15,000
To Motor-Car Exp. 20,000
To Provision for Tax 2,50,000
To Depreciation
On Machinery 20,000
On Motor-Car 15,000
On Furniture 12,000
To Sales Tax 35,000
To Insurance Premium 18,000
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To Misc. Exp. 30,000
27,42,000 27,42,000
(1) Salary includes Rs. 1,15,000 paid to the owner of the business.
(2) Sales Tax includes Rs. 6000 remaining unpaid at the end of the year, while Rs. 10000
paid during the year in respect of previous year has not been included.
(3) 40% of the use of motor-car is meant for personal purposes.
(4) Ins. Premium includes Rs. 6000 for life ins. Policy of the son of owner.
(5) W.D.V. of assets as on 1-4-2021 were as follows : Machinery Rs. 80000, furniture Rs.
40000, Rates of Depreciation allowable are 15% and 10% respy. A new machine was
purchased on 1-12-2021 for 40000 on which depreciation allowable is 15%.
(6) Misc. Exp. Includes instruments purchased but not put into business use for 10000.
Calculate Taxable income under the head Income from Business and
Profession for A.Y. 2022-23.
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(10)Shree ‘A’ has prepared the following Profit and Loss Account for the year
ended on 31-3-2022.
To Salaries and allowances 60,000 By Gross Profit 2,25,000
To Local taxes (of rented By Agricultural Income 20,000
house) 3,000 By Rent of House 25,000
To Postage-telegram 3,000 By Profit on Sale of Machine 21,000
To Building Repairs Exp. 6,000 By Sundry Income 1,000
To Sales Tax 25,000 By Bad Debts Recovered 8,000
To Bad Debts 8,000 By Net Loss 76,000
To Bad Debts Reserve 8,000
To Depreciation on Machines 17,500
To Advertisement Exp. 6,000
To Depreciation on Car 22,500
To Shop Expenses 22,000
To Provision for Income-Tax 25,000
To Daughter’s Marriage 1,00,000
Exps.
To House-hold Expenses 70,000
3,76,000 376000
(1) Salaries & allowances include Rs. 5000 paid to son as salary, who stays in a hostel.
(2) Of sales-tax debited Rs. 6000 is still unpaid. Sales tax pertaining to earlier year Rs.
12000 paid during the year has not been debited to profit and loss account.
(3) Out of bad debts recovery 30% of the amount is in respect of bad debts not allowed
as deduction in earlier year.
(4) The opening written down value of the “block of machines” was Rs. 100000. The
permissible rate of depreciation (for the financial year 2021-2022) as per income-
tax provisions is 15%. The machine which was sold during the year out of the said
block was purchased in 1-4-2018 at a cost of Rs. 80000. in books of accounts the
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depreciation is calculated at the rate of 20% on reducing balance method on the
entire opening balance.
(5) 60% use of car is for personal purpose; Shop expenses include Rs. 10000 of car
expenses. Admissible rate of depreciation on car is 15%, which has been fully
charged to P & L A/c.
Compute the taxable income from business for the assessment year 2022-23.
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(11) Shri Ramesh presents the following information. Compute his taxable
business income for the Assessment Year 2022-23
Trading and Profit & Loss Account Cr.
(for the year ended on 31-3-2022)
To Salary 70,000 By Gross Profit b/d 1,50,000
To Deductible Expenses 30,000 By Salary 30,000
To Car Expenses 15,000 By Interest on Debentures
To Bad Debts Reserve 10,000 (net after TDS at the rate of 20 11,940
To Provision for Income Tax 20,000 %)
To Depreciation on By Net Loss 57,060
Computers 70,000
To Depreciation on Car 3,000
ToDepreciation on 10,000
Furniture
To Depreciation on Other 21,000
Assets
2,49,000 2,49,000
The details in respect of various business assets are as under :
Assets Written Purchases during Sales During Eligible Rate
down value the year Rs. the year Rs. of
as on Depreciation
1-4-21 Rs.
(1) Five 1,45,000 -- One computer 60%
Computers at
(2) One Car 1,00,000 -- Rs. 10000 15%
(3) Furniture 80,000 On 3-7-21Rs. 10,000 Rs. 80000
(4) Other Assets On 1-1-22 Rs. 10,000 -- 10%
1,50,000 On 1-1-22 Rs. 80,000 -- 15%
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(12)Shri Kumble is a practicing Doctor, From the following Cash Account for the
year ended 31-3-2022, calculate his taxable income from profession and
deduction available under Sec. 80 C.
To Op. Bal. B/d. 52,750 By Hospital Rent 1,54,000
To Rent of Operation Theatre 1,20,000 By Hospital Exps. 25,000
To Consultation Fees 2,12,000 By Life Insurance 3,000
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To Gifts Received from 20,000 Premium
Patients By Investment in Public 30,000
ToGifts Received from 3,500 P.F.
Relatives on his Birthday Fire Ins. Premium :
To Sale of Medicines 1,20,000 Hospital 10,000
To Sale of Surgical Residence 5,000 15,000
Equipments 10,000 By Municipal Taxes :
To Bank Interest 2,200 Hospital 5,000
To Int. on Deposits 1,500 Residence 3,000 8,000
By Drawings 30,000
By Purchase of 1,10,000
Medicines
By Purchase of Surgical 75,000
Equip. (1-1-2022)
By Vehicle Exp. 20,000
(Personal)
To Balance C/F 71,950
5,41,950 5,41,950
(1) He has earned salary of Rs. 56000 from Medical College.
(2) Opening Balance of surgical equipments after initial depreciation was Rs. 75000.
The rate of Depreciation is 25%.
(3) Opening Stock of medicine was Rs. 35000 and closing stock was Rs. 45000.
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(13)Dr. M. S. Zaveri owns a Surgical Hospital at Vadodara. He gives you following
information pertaining to the financial year 2021-2022 Compute his taxable
business income and deduction U/s 80C :
Rs.
(1) Receipts at the hospital :
(I) Consultation charges 6,40,000
(i) Operation charges 14,70,000
(ii) Hospital Income (gross) 55,000
(iii) Net surplus in supply of drugs 8,000
(iv) Gifts (in cash) from patients 12,000
(2) Payment during the year :
(i) Income-tax and wealth-tax 1,22,000
(ii) Hospital Expenses 16,50,000
(iii) Personal Expenses 15,000
(iv) Car Maintenance (1/4 is allowed) 60,000
(v) Purchase of Instruments (through bank loan) 60,000
(vi) Paid to Public Provident Fund 54,000
(vii) LIC Premium 42,000
(viii) Allowable Depreciation Charges 9,000
(ix) Traveling Expenses 45,000
(x) Refunds of 1 installment towards bank loan (Rs. 20000 22,800
st
+ Interest)
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(3) His son, (who is M.B.B.S.) and daughter-in-law (who is a commerce graduate) attend
hospital work regularly and they get salary of Rs. 35000 and Rs. 17000 per month
respectively (included in hospital expenses).
(4) Traveling expenses included Rs. 10000 for family pilgrimage and Rs. 35000 towards
his exclusive business promotion tour to Dubai.
(5) LIC premiums are paid for self Rs. 20000, for his son Rs. 12000 and for Mrs. M. S.
Zaveri Rs. 10000.
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(14)From the following information of Dr. M compute his taxable income under the
head “Income from business of Profession” for the A.Y. 2022-23.
Receipt and Payment Account
(for the year ended on 31-3-2022)
To Balance b/d 20,000 By Hospital Rent 1,20,000
To Visit Fees 30,000 To Salaries 1,60,000
To Consulting Fees 3,70,000 To Telephone Bill 6,000
To Sale of Medicine 40,000 To Purchase of Books 4,000
To Operation Fees 60,000 To Daughter’s Marriage Exp. 70,000
To Operation Threate Rent 15,000 To Motor Car Exp. 20,000
To Income from House 20,000 To Municipal Taxes 6,000
Rent To Traveling Exp. 4,000
To Salary from College 25,000 To Miscellaneous Expenses 3,000
To Profit on Sale of Shares 35,000 To Insurance Premium 5,000
To Interest Income 10,000 To Purchase of Medicine 80,000
To Dividend on Shares 5,000 To Purchase of Computer 40,000
To Sale of Surgical To Closing Balance 1,32,000
Instruments (31-3-22) 10,000
To Gift from Patient 10,000
6,50,000 6,50,000
(1) The opening written down value of surgical instruments was Rs. 50000.
Depreciation allowed is 30%. On 1-3-2022 he purchased new surgical instruments
(out of personal funds) for Rs. 10000.
(2) Loss in speculation business Rs. 15000.
(3) Municipal taxes includes Rs. 1000 for residential house.
(4) The opening stock of medicine was Rs. 11000 which was 10% overvalued, while
closing stock was Rs. 54000 which was undervalued by 10%.
(5) Salaries include Rs. 10000 paid to his son, who is studying in college.
(6) Hospital rent includes 40% for residential house.
(7) Insurance premium includes Rs. 3000 for life insurance premium.
(8) The opening W.D.V. of motor car was Rs. 100000. Depreciation allowable is 20%.
Motor car is used equally for office and personal use.
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(15)Dr. Samir’s Receipt and payment account for the year ended on 31-3-2021 is as
under :
To Balance b/f 50,000 By Clinic Rent 2,20,000
To Visit Fee 3,10,000 By Electricity Expenses 1,00,000
To Consultation Fee 3,70,000 By Purchase of Medical 10,000
To Sales of Medicine 30,000 Books
To Operation theatre rent 1,90,000 By Purchase of Surgical
To Sales of Surgical Equipment through bank 1,30,000
Equipment (1-10-18) 11,000 loan
To Income of house rent 16,000 (1-2-2020)
To Salary from 34,000 By Motor Expenses 12,000
MedicalCollege By Purchase of Medicine 45,000
To Royalty (net) 9,000 By Lions Club Membership 1,000
To Profit in Card games 20,000 Fee
To Interest 23,000 By Medical Ass. Membership 2,000
To Gift from Patients 37,000 Fees
By Insurance 13,000
By Municipal Taxes 4,000
By Staff Salaries 2,80,000
By Payment of Bank loan
installment (12000 +
interest) 13,000
By Travelling Expenses 20,000
By Balance c/d 2,50,000
11,00,000 11,00,000
(1) The opening balance of surgical equipments was Rs. 60000. Depreciation allowed is
40%.
(2) Loss in card games amounted to Rs. 2323.
(3) Municipal tax of Rs. 1500 of let-out house is included in the municipal taxes shown
above.
(4) Traveling expenses includes Rs. 6000 for family pilgrimage and Rs. 14000 towards
his exclusive business promotion tour.
(5) The opening W.D.V. of motor was Rs. 200000. Depreciation allowable is 15%. The
1/5 use of motor car is for personal purpose.
(6) The opening stock of medicine is Rs. 35000 and closing stock is Rs. 10000.
From the above details find out the total taxable income under the head of “Business
Profession” for the assessment year 2022-23.
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(16)The receipt and payment account of Dr. Dhavint for the previous year 2021-22
is as under.
Receipts Rs. Payments Rs.
Balance brought down 1,640 Rent for clinic 63,000
(for two years)
Income from clinic 4,90,430 Repairing to clinic 3,360
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Salary received from medical college 1,68,000 Purchase of equipments 3,980
P.O.S.B. interest 2,700 Salary paid to staff 3,65,000
Insurance policy matured 55,000 Misc. expenses 4,470
Interest: Medicines purchases 12,700
On debentures 4,200 Payments to H.D.F.C for:
On company fixed diposit 2,800 Housing loan 17,640
On S.B.I fixed deposit 3,700 Interest on housing loan
9360 27,000
On S.B.I saving Account 730 11,430 Income tax 17,540
Tax on house property 3,000
Investment in national
saving certificates 30,000
Deposited in P.P.F. 23,000
L.I.C. preminum paid 8,510
Investnment in mutual 10,000
fund
Loan of a friend 20,000
Personal expenses 1,27,000
Balance carried forward 10,640
7,29,200 7,29,200
Assesess maintains his books of accounts on cash basis. He had purchased a
new house property on 31-3-2018 in which he resides. He had taken a housing loan
of Rs. 2,80,000 for this house from housing development finance corporation ltd.
annual fair rent to this house is considered to be Rs. 24,000. Opening stock of
medicines was Rs. 3,400 and closing stock was Rs. 2,100. Depreciation is allowed
@100% on equipments.
Calculate the income from business/profession for the A.Y. 2022-23.
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(17) Shri Dineshbhai Shah is practicing as a C.A. and keeps the accounts on cash
basis. He furnishes the following information for the year ended on 31-3-22 :
Dr. Profit and Loss A/c. Cr.
Rs. Rs.
To Salaries 2,10,000 By Professional Incomes :
To Stipend 42,000 2018-2019 20,000
To Rent 6,000 2019-2020 6,30,000 6,50,000
To Subscription 2,000 By Salary from
To Drawings 20,000 CommerceCollege 3,18,000
To Motor-Car Expenses 15,000 By Rent income from let-out 12,000
To Office Expenses 80,000 house
To Taxes (including taxes By Bank Interest and dividend 12,000
of house given on rent) 8,000 By Short term Capital Gain from
To Travelling Expenses 15,000 Sale of Shares 20,000
To Insurance Expenses 12,000 By Misc. Income 3,000
To Income-Tax 5,000
-----------------------------------------------------------------------------------------------------------------
10,15,000 10,15,000
(1) He owns a house which is let-out on a monthly rent of Rs. 1000. He has paid Rs. 3000
as its municipal taxes.
(2) The 1/3rd use of motor-car is personal. The W.D.V. of the car as on 1-4-2021 is Rs.
200000. The rate of depreciation is 15%. The depreciation has not been debited to P
& L A/c.
(3) He has purchased National Saving Certificates worth Rs. 20000 on 1-3-2022.
(4) Insurance Premium includes Rs. 8000 for Life Insurance
(5) Calculation the taxable income from business for the Assessment year 2022-23.
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HOME ASSIGNMENT
(1) The Trading and Profit and Loss Account for the year ended on 31-3-2021 of
Shri Mulayam is as under :
Rs. Rs.
To Opening Stock 99,000 By Sales 4,51,500
To Purchases 3,00,000 By Closing Stock 1,98,000
To Salary 56,000 By Bad Debt Recovery 10,000
To Bad Debts 2,000 By Rent of Let-
To Bad Debts Reserve 3,000 OutBuilding 15,500
To Insurance Prem. By Dividend 25,000
(Stock) 1,000
To Interest on Capital 6,000
To Income-Tax 9,000
To Outstanding Income- 1,000
Tax
To Provision for Taxation 2,000
To Sales Tax 21,000
7,00,000 7,00,000
(1) He has not taken any steps to recover the bad debts written of in the books.
(2) Outstanding Interest on capital is Rs. 1000, which is not included in the above
interest on capital.
(3) Sales tax shown above in profit and loss account includes :
Unpaid sales tax Rs. 5000 for the current year.
Rs. 6000 paid during the current year which was outstanding for the last year.
(4) Opening stock has been valued at 10% more than the cost and closing stock has
been valued 10% less than the cost.
(5) Out of bad-debt recovery 70% was disallowed in the past.
(6) Opening written down value of motor was Rs. 53333, on which 15% depreciation is
allowable as per income tax act. Rs. 20000 of motor expenses are un-recorded The
motor-car is being used ¼ for personal purposes.
Find out the “Taxable income from business-profession” for the
assessment year 2022-23.
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(2) Profit and Loss Account for the year ended on 31-3-2022 of Mr. Hitenkumar is
as under. Compute his taxable income from Business and Profession.
Debit Rs. Credit Rs.
To Depreciation 8,000 By Gross Profit 88,000
To Subscription 2,000 By Profit from the sale of 28,000
To Taxi-Rent 7,000 Land
To Bad debt reserve 3,000 To Prize from Horse-race 16,000
To Fitting charge of 5,000 By Birthday Gift 21,000
machine 1,000 By Bad debt recovered 5,000
To Exps. To raise loan 4,000 By Bank Interest 2,000
-----------------------------------------------------------------------------------------------------------------
To Legal Exps. 10,000
To Sales-tax 15,000
To Purchase of stationary 10,000
To Loss due to theft 95,000
To Net Profit
1,60,000 1,60,000
(1) Taxi-rent includes Rs. 3000 for the Travelling Exps. Of his family.
(2) 30% of the sales-tax debited is still unpaid.
(3) A cycle costing Rs. 3000 and Diamond (stock-in-trade) costing Rs. 7000 are stolen by
a worker. This loss is debited to P/L A/c. as theft.
(4) The closing stock of un-used stationary is Rs. 2000.
(5) Bad debt recovered includes Rs. 3000 which is not allowed as bad debt.
(6) Allowable amount of depreciation is Rs. 10000.
(7) Audit fees Rs. 2,000 is not recorded in the books.
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(3) Mr. Suresh Patel is a cloth merchant. Following information is obtained from
the books for the Accounting Year 2022-23.
Prepare Statements : (1) Allowable Expenses and (2) Disallowable Expenses under
the head of Profits and gain from Business and Profession.
Name of the Expenses Rs. Name of the Expenses Rs.
(1) Interest on loan 16,000 (13) Donation to recognized 4,000
(2) Interest on Capital 5,000 institution
(3) Bad Debt 14,000 (14) Donation to unrecognized 5,000
(4) Bad Debt Reserve 3,000 Inst.
(5) Sales tax paid 12,000 (15) Exps. To raise the loan 11,000
(6) Income Tax 21,000 (16) Wealth Tax 2,000
(7) Insurance of Machine 17,000 (17) Professional Tax 13,000
(8) Life Insurance (18) Exps. Of Illegal Business 14,000
Premium 8,000 (19) Compensation to worker for
(9) Office Salary 49,000 the injury 15,000
(10) Owner’s Salary 51,000 (20) Worker’s Welfare Exps. 16,000
(11) Goods stolen
(cost) 12,000
(12) Furniture stolen 3,000
1,60,000 1,60,000
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(4) The Income and Expenditure Account of Dr. Ramesh Dave for the previous
year 2021-22 is as under :
Expenditure Rs. Income Rs.
To Staff salary 2,24,000 By Income from Nursing
To Marriage expenses of son 36,000 Home (Surgical) 3,60,000
To Electricity 64,000 By Income from operations 90,000
To Purchase of medicine and By Dividend (gross) 6,000
stores 66,000 By Interest of treasury saving
-----------------------------------------------------------------------------------------------------------------
To Telephone Expenses 10,000 cert. 2,000
To Rent of nursing home 36,000 By Consultation fees 12,000
To Depreciation of 12,000 By Winning from lottery 6,000
Instruments By Birthday gift (of a minor 61,000
To Depreciation of other 2,000 son)
assets By Rental income of house 92,000
To Local taxes 8,000 property
To Rent of equipment 4,000
To Insurance Premium 14,000
To Excess of income over
expense 1,53,000
6,29,000 6,29,000
(1) Salary included Rs. 12000 paid to his wife who is a qualified nurse and attends duty
on week ends only.
(2) The allowable depreciation on surgical instruments is Rs. 20000 and on other assets
is Rs. 1500.
(3) Municipal taxes include the sum of Rs. 3000 paid in respect of his property which is
let out.
(4) He has received honorarium of Rs. 75000 as a visiting professor.
(5) Insurance premium includes Rs. 4000 being mediclaim insurance (self) and Rs. 2000
being life insurance premium.
Compute the taxable income of Mr. Dave from business and profession for the A.Y.
2022-23.
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NOBLE GROUP OF INSTITUTIONS 1

UNIT - 1 Ch – 1 Introduction Of income Tax -1961

Rs. 2,50,001 to Rs. 5,00,000 5%

Rs. 5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

Upto Rs. 3,00,000 –

Rs. 3,00,001 to Rs. 5,00,000 5%

Rs. 5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

Upto Rs. 5,00,000 –

Rs. 5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

B. Individuals or HUF opting for Alternate Tax Regime *(Section 115BAC)

Rs. 2,50,001 to Rs. 5,00,000 5%

Rs. 5,00,001 to Rs. 7,50,000 10%

Rs. 7,50,001 to Rs. 10,00,000 15%

Rs. 10,00,000 to Rs. 12,50,000 20%

Rs. 12,50,001 to Rs. 15,00,000 25%

Above Rs. 15,00,000 30%

Q.12 Write a short note on Gross Total Income.

UNIT – 1 Ch - 2 RESIDENTIAL STATUS OF AN ASSESSEE

Gross salary -------

Total Taxable IncomeFrom Salary -------------

House Rent Allowance

Mumbai, Delhi, Calcutta, Chennai Other cities

Non-government employee Government Employee

(D) Allowances which are exempted in case of certain persons

(E) Allowances which are fully taxable.

Government employee & Local Authority Non-government employee

Service Continue Service Discontinue Service Continue Service Discontinue

Under the Act 1972 Other than Act

Government Employee & local authority employee other employee

Un-commuted Commuted Uncommuted Commuted

(8) Free Supply of Gas, Electricity or Water [Rule 3(4)] :

Where the place of destination Where the place of destination

Where Govt. recognized public Where Govt. recognized

I class or deluxe fare on such recognized not exists

Service continue fully taxable Retirement or death

Government employees retirement or By other employees

Valuation of perquisite in respect of motor car:

Valuation of perquisite in respect of motor car:

If the car is used If the car is partly used for

Govt. employees Other

Unfurnished Furnished Unfurnished Furnished

(Whichever is less is taxable)

If population is If population is upto If population is

BABC = Basic Salary + All Taxable Allowances/DA (R) + Bonus + Commission

(21)Mr. H. V. Sardar is a specified employee. Determine his taxable salary and

LOP, DLOP, PLOP SOP

p.y. Cap. Int. Before Cap.int. on or after

Pur., Cons. Rep./

UNIT - 4 Profit and gains of Business or profession

(7) Insurance premium under section 36(1)(I):-

Particular Rs. Particulars Rs.

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