Professional Documents
Culture Documents
TAX PLANNING
UNIT - I
I
(a)
Introduction
1
A person may not have assessable income but may still be assessee.
2
In some cases assessment year and previous year can be same financial year.
3
SHEC is half of the education cess.
Residential status
4
A resident in India cannot become resident in any other country for the same assessment
year.
5
A foreign company is always non-resident in India.
Heads of Income
6
Salary received by the partner from the firm in which he is a partner is taxable under the
head salary.
7
Municipal tax is a deduction from net annual value.
8
Cost of acquisition is always indexed if there is any long term capital gain.
9
Interest on securities is always taxable under the head Income from Other Sources.
(b)
Introduction
1
Income tax extends to:
(a) Whole of India
(b) Whole of India except Jammu and Kashmir
(c) Whole of India except Sikkim
(d) Whole of India except Jammu and Kashmir and Sikkim
2
A.O.P should consist of:
(a)
Individuals only
(b)
Persons other than individuals only
(c)
Both the above
3
Education cess is leviable on:
(a)
Income tax
(b)
Income tax + surcharge
(c)
Surcharge
Residential status
4
Residential status is to be determined for:
(a)
Previous year
(b)
Assessment year
(c)
Accounting year
5
Total income of a person is determined on the basis of his:
(a)
Residential status in India
(b)
Citizenship in India
(c)
None of the above
(d)
Both of the above
Heads of income
6
Gratuity shall be fully exempt in the case of:
(a)
Central and State Govt. employee
(b)
Central and State Govt. employees and employees of local authorities
(c)
Central and State Govt. employees and employees of local authorities and
employee of statutory corporation.
7
X has two house properties. Both are self-occupied. The annual value:
(a)
of both house shall be nil
(b)
one house shall be nil
(c)
of no house shall be nil
8
Where a company purchases its own shares there will be capital gain to the:
(a)
Company
(b)
Shareholder
(c)
Neither to the company nor to the shareholder
(d)
Both to the company and the shareholder
9
Preliminary expenses incurred are allowed deduction in
(a) 10 equal instalments
(b) 5 equal instalments
(c) full
10
Brought forward unabsorbed capital expenditure on scientific research can be carried
forward :
(a) for any number of years
(b) 8 years
(c) 10 years
(c)
Introduction
1
Previous year means the __________
___________ immediately proceeding the
assessment year.
2
A person leaves India permanently on 15-7-2010. The assessment year for income earned
till 15-7-2010 in this case shall be __________.
Residential status
3
Income which accrue or arise outside India from a business controlled from India is
taxable in case of ______________.
4
A Ltd. is a foreign company whose part of control and management of its affairs is
situated outside India. A Ltd. shall be ____________.
Heads of Income
5
Monthly pension received by a govt. employee is _____________.
6
Interest on capital borrowed for repairs of self-occupied house property is deductible to
the maximum extent of __________.
7
Total income for A.Y. 2011-12 of an individual including long term capital gain of Rs.
60,000 is Rs. 1,90,000. The tax on total income shall be _________.
8
Salary, bonus, commission or remuneration due to or received by a working partner from
the firm is taxable under he head _____________.
9
A firms business income is nil/negative. It shall still be allowed a deduction on account
of remuneration to working partner to the extent of _____________.
10
The lottery, cross word puzzle, races, card games income, etc. are taxable at the rate of
________.
II
Introduction
1
Define the term Income.
2
Write short note on person as defined in the Income Tax Act.
3
Define assessee.
4
State with reasons whether the following companies are those in which public are
substantially interested:
(i) X Ltd. is a public company with a share capital of Rs. 3,00,000. It consists of 20,000
equity shares of Rs. 10 each and 1,000 - 8% Preference Shares of Rs. 100 each. Of this
5,000 equity shares and 900 preference shares are held by Govt. of India.
(ii) A Ltd., a private company, has issued 15,000 equity shares of which 4,000 are held by 2
directors, 500 by another director, 2,500 by two public men and balance 8,000 by forty
persons equally.
(iii) B & Co. Ltd., whose shares are listed on Mumbai Stock Exchange.
(iv) Z & Co. Ltd. is registered u/s 25 of the Indian Companies Act, 1956 for promotion of
commerce. It has been detected that it distributes a part of its profits to its members.
Residential Status
5
Write short note on income received in India.
6
A was born in Dhaka in 1945. He has been staying in Canada since 1974. he comes to
visit India on 13-10-2009 and returns on 29-3-2010. Determine his residential status for
assessment year 2011-12.
Heads of Income
7
Salary is taxable either on due basis or on receipt basis. Discuss.
8
Distinguish between a recognized provident fund and unrecognized provident fund.
3
9
10
11
12
13
14
III
Introduction
1
Income tax is charged on income of the previous year. Do you fully agree with this
statement? If not, what are the exceptions?
Residential Status
2
The residential status is determined for each category of persons separately. Discuss in
detail how would you determine the residential status for each category.
3
How does the tax liability of a not ordinarily resident person differ from that of a resident
and ordinarily resident person under the Income Tax Act? Explain.
Heads of Income
4
What is transferred balance when unrecognized provident fund is recognized. Discuss
the tax treatment with the help of a simple illustration.
5
Ownership itself is the criterion for assessment under the head Income from House
Property.
6
Discuss the tax treatment, with the help of examples, when a house property is owned by
two or more persons.
7
Indexed cost of acquisition is not required for computation of long term capital gain.
Discuss.
8
Although there is a transfer of capital asset and there are capital gains, but they are
exempt from tax. Discuss.
9
What do you understand by Income from other sources. State the main incomes which
are included under this head.
10
Explain the provisions relating to taxation of winning from lotteries and horse races.
Computation of taxable income
11
Explain in detail the procedure for computation of income of an individual.
IV
Practical Questions:
Residential Status
1
During the previous year 2010-11, X, a foreign citizen, stayed in India for just 69 days.
Determine his residential status for the A.Y. 2011-12 on the basis of the following
information:
(i) During 2007-08, X was present in India for 365 days.
(ii) Mrs. X is resident in India for A.Y. 2011-12.
(iii) During 2004-05 and 2003-04, X was in Japan for 359 and 348 days respectively and for
the balance period in India.
4
A Ltd. is an Indian company. It carries on business in New Delhi and London. The entire
control and management of A Ltd. is situated outside India. 80% of the total income of
the company is from the business in London. What is the residential status of A Ltd.
During the previous year 2010-11, X, a foreign citizen, stayed in India for just 69 days.
Determine his residential status for the A.Y. 2011-12 on the basis of the following
information:
(i) During 2009-10, he was not present in India but during 2008-09 he came to India for 276
days.
(ii) During 2007-08, X was present in India for 90 days.
(iii) During 2004-05 and 2003-04, X was in India for 359 and 348 days respectively.
(iv) Earlier to 2003-04, he had been regularly coming to India for 100 days every year.
From the following incomes earned by Mr. X during the financial year 2010-11,
determine his total income for the assessment year 2011-12 if he is (1) resident and
ordinarily resident; (2) not ordinarily resident; (3) non-resident.
S. No.
Detail
Rs.
a)
Profits from a business in Bombay managed from London
1,60,000
b)
Pension for services rendered in India but received in Burma
15,000
c)
Interest on U.K. Government bonds half of which is received 4,000
in India
d)
Income from property situated in Pakistan received there
20,000
e)
Past foreign untaxed income brought to India during the 7,000
previous year
f)
Income from agricultural land in Nepal received there and then 30,000
brought to India
g)
Income from profession in Kenya which was set up in India, 12,000
received there
5
The following are the particulars of income of X for the previous year 2010-11.
Determine his total income for the assessment year 2011-12 if he is (1) resident and
ordinarily resident; (2) not ordinarily resident; (3) non-resident.
S. No.
Detail
Rs.
a)
Capital gain on sale of property in Delhi received in USA
1,80,000
b)
Income from a business in USA controlled from Delhi
2,20,000
c)
Income from a business in Bangalore controlled from USA
3,80,000
d)
Rent from property in USA received there but subsequently 6,00,000
remitted to India
e)
Interest from deposits with an Indian company received in 40,000
USA
f)
Profits for the year 2008-09 of a business in USA remitted to 1,75,000
India during the previous year 2009-10 (Not taxed earlier)
g)
Gifts received from his parents
4,45,000
h)
Interest payable by Punjab Government, received in USA
1,00,000
Heads of Income
6
X is employed with ABC Ltd. on a basic salary of Rs. 5,000 per month. He is also
entitled to dearness allowance @100% of basic salary, 50% of which is included in salary
for as per terms of employment. The company gives him HRA of Rs. 3,000 per month
which was increased to Rs. 3,500 per month w.e.f. 1-1-2011. He also got an increment of
Rs. 500 in his basic salary w.e.f. 1-2-2011. Rent paid by him during the previous year
2010-11 is as under:
April and May, 2010 Nil, as he stayed with his parents
June to October, 2010 Rs. 3,000 per month for an accommodation in Ghaziabad
November, 2009 to March, 2011 Rs. 4,000 per month for an accommodation in Delhi.
Compute his gross salary for A.Y. 2011-12.
7
A is Dy. General Manager in a Private Ltd. company at Jabalpur. He was appointed in the
grade of Rs. 6,500 250 9,500 on 1-1-2004. he gets 30% Dearness Allowance and 10% City
Compensatory Allowance of his basic salary. He contributes 11% of basic salary and dearness
allowance to recognized provident fund and his employer also contributes the same amount. The
following facilities have also been provided by the company:
(i) A furnished house, owned by the employer, is provided to him for residence. The monthly
fair rent of the house is Rs. 3,100, and the cost of furniture was Rs. 50,000.
(ii) He has also been provided a motor car of 1.4 litre capacity which is used for official and
his private purposes both. The drivers salary and all the xexpenses relating to official use
of car are borne by his employer.
(iii) He is given a facility of a watchman and a cook. They are paid Rs. 650 and Rs. 800 per
month respectively.
As per the contract, the salary becomes due on the last day of every month. Compute his
salary income for the A.Y. 2011-12. The professional tax Rs. 2,000 was deducted from his
salary. Assume population of Jabalpur is less than 25 lakhs but more than 10 lakhs.
8
Z owns a house at Delhi of the fair rent of Rs. 3,600 p.m. (Municipal value Rs. 30,000).
During the previous year 2010-11, the house is let out for residential purpose on a
monthly rent of Rs. 4,000 from 1-4-2010 to 30-6-2010 and self-occupied fro residential
purpose for the remaining part of the year. Municipal taxes Rs.6,000, fire insurance
premium Rs. 3,000, Land revenue Rs. 2,000. Ground rent Rs. 1,000 and collection
charges Rs. 600 were paid during the year. A loan of Rs. 50,000 was taken on 1-4-2005
@10% p.a. for the construction of the house which was completed on 1-1-2008. Rs.
10,000 was paid towards the loan account on 1-4-2007. Find out his taxable income from
house property for the A.Y. 2011-12.
X gifted diamonds worth Rs. 2,00,000 to his wife Mrs. X on 1-11-1995. These were
acquired by him on 1-4-1981 for Rs. 1,00,000. On 1-4-2010, Mrs. X sold these diamonds
for Rs. 4,00,000 and invested the same in a plot for Rs. 6,00,000. The remaining amount
was paid by her out of her own funds. The plot was sold for Rs. 7,00,000 on 28-12-2010.
Compute the income chargeable to tax in the hands of Mr. X and Mrs. X on the sale of
diamonds as well as plot if C.I.I. for 1995-96 is 281.
10
Mr. A lives in Bangalore. He owns not only house properties in Bangalore but cultivable
land near Mangalore. He lives in a house which had been bought by him in January, 1986
for Rs. 2,31,000. The agricultural land measuring 10 hectares is being cultivated by his
father for over 15 years. Its fair market value as on 1-4-1981 was Rs. 8,00,000. The
residential house is sold by him for Rs. 14,00,000 in December, 2010 and another house
bought within three months at a price of Rs. 3,00,000 to be used for residential purposes.
Agricultural land is also sold for Rs. 55,00,000 in January 2011. on 30-6-2011, he bought
another agricultural farm for Rs. 5,00,000 which will be cultivated by him. Gold
ornaments were also sold by him in November, 2010 for Rs. 3,00,000 the fair market
price thereof as on 1-4-1981 being Rs. 30,000. He bought fresh jewellery for Rs. 80,000
within six months of sales. You are required to compute taxable capital gains of Mr. A for
A.Y. 2011-12. CII of financial year 1985-86 and 2009-10 is 133 and 632 respectively.
XYZ Ltd., a domestic company manufactures textiles. For the year ending 31st March,
2011, Profit and Loss Account showed a net profit of Rs. 9.5 lakh. This included the
following debits to the Profit and Loss Account:
(a) Dividends amounting to Rs. 2 lakh paid to the shareholders.
(b) Interest amounting to Rs. 10,000 paid on the loan taken for the payment of company's
income-tax liability. .
(c) Interest amounting to Rs. 15,000 paid on the loan taken to make donation to an approved
charitable institution.
(d) Rs. 1,20,000 spent by the managing director on his visit to :
(i)
Canada to buy machinery and finalise a collaboration agreement for a new
independent undertaking proposed to be set-up (cement factory) Rs. 70,000.
(ii)
U.S.A. to study export market for textiles: Rs. 50,000.
(e) Company sold a block of assets at a loss of Rs. 50,000.
(f) Company incurred expenditure of Rs. 2,00,000 as' follows :
(i)
advertisement in newspaper: Rs. 50,000.
(ii)
advertisement in Souvenir of a political party: Rs. 25,000.
(iii) capital expenses on scientific research related to business Rs.
1,25,000.
(g) Rs. 10,000 paid to legal advisers in respect of proceedings before income-tax authorities.
(h) Penalty of Rs. 24,000 for importing yarn in contravention of import regulations.
(i) The company has paid during the year a lumpsum amount of Rs. 30 lakh to acquire
technical know-how from a laboratory owned by the government. This is being treated as a
deferred revenue expenditure and a sum of Rs. 5 lakh has been charged off to P&L A/C.
Compute the total income and tax liability of the company.
12
X Ltd. is a public company engaged in the business of printing and publication of books.
Its profit and loss account for the year ended 31-3-2010 disclosed a net profit of Rs.
8,00,000. Particulars noted from the companys accounts and obtained on enquiry from
the company are given below:
(i) The head office of the company is situated in a building taken on lease. During the year, the
company incurred an expenditure of Rs. 1,00,000 on extension of and improvements to
this building. The sum of Rs. 1,00,000 was debited by the company to its P&L A/C.
(ii) In the past, the company used to value its closing stock at cost. This year the closing stock
was valued at 105 below the cost at Rs. 90,000. The company has resolved that it will
henceforth adopt this method of valuation, consistently from year to year.
(iii) A motor car purchased by the company in the past for Rs. 25,000 was sold to an employee
of the company for Rs. 16,000 which was also the written down value of the car at the
beginning of the year. The market value of the car on the date of sale was Rs. 24,000.
(iv) Credits to the P&L A/C included dividend of Rs. 80,000 received from an Indian company.
(v) Debits to the P&L A/C included the following:
(a) Rs. 10,000 regarding expenditure incurred for printing invitation cards and hiring and
transport charges of furniture and shamiana in connection with the inauguration of a new
branch opened for expanding the business.
(b) Rs. 20,000 paid as penalty to government for the companys failure to perform the job of
printing and supply of text books within the stipulated time. Company had to pay penalty
for 4 months delay @ Rs. 5,000 per month as per agreement with the government.
(c) Rs. 8,000 deposit made under own telephone scheme.
(d) Rs. 5,000 being interest paid to bank on monies borrowed to pay income-tax Rs. 4,000
and wealth tax Rs. 1,000.
(e) Rs. 12,000 paid fro shifting of business premises from the original site to the present site
which is more advantageously located.
Compute the total income of the company for the A.Y. 2011-12. Give reasons for additions
made or deductions allowed in respect of the various items.
UNIT - II
I
(a)
(c)
(d)
Individual or HUF
Individual or HUF who is resident in India
For claiming deduction u/s 80C In respect of life insurance premium can be paid by
assessee for:
(a)
Himself only
(b)
Himself or the spouse
(c)
Himself, spouse and minor children
(d)
Himself, spouse and dependent children
(e)
Himself, spouse and any child
An assessee has paid life insurance premium of Rs. 25,000 during the previous year for a
policy of Rs. 1,00,000. He shall:
(a)
Not be allowed any deduction under Sec 80C
(b)
Be allowed deduction under Sec 80C to the extent of 20% of the capital sum
assured i.e. Rs. 20,000
(c)
Be allowed deduction for the entire premium as per the provisions of Sec 80C
Deduction in respect of contribution for annuity plan to certain pension fund u/s 80CCC
is allowed to:
(a)
Any assessee
(b)
Individual assessee only
(c)
Individual or HUF
(d)
Individual who is resident in India
As per Sec 80CCE deduction u/s 80C, 80CCC and 80CCD cannot exceed:
(a)
Rs. 1,00,000
(b)
Rs. 1,10,000
(c)
Rs. 1,50,000
(c)
Deduction to undertaking which develops, maintains, etc. any industrial park allowed if
such undertaking is owned by:
(a)
an Indian company
(b)
an Indian company or a consortium of such companies
(c)
any assessee
10
Where the return of income is filed after the due date specified u/s 139(1):
(a)
all deductions under Chapter VIA i.e. 80C to 80U will be allowable
(b)
all deductions under Chapter VIA i.e. 80C to 80U will not be allowable
(c)
all deductions under Chapter VIA i.e. 80C to 80U excepting 80-IA, 80-IAB, 80IB, 80-IC, 80-ID, 80-IE will be allowable
(d)
all deductions under Chapter VIA i.e. 80C to 80U except 80-IA will be allowable
(c)
X, aged 66 years a resident in India has GTI of Rs. 2,90,000. This includes long-term
capital gains of Rs. 95,000 and interest on govt. securities amounting to Rs. 20,000. He
deposited Rs. 15,000 in PPF account during the previous year. Compute his tax liability
for the A.Y. 2010-11.
Dividend Policy
10
R holds shares in a domestic company in which public are not substantially interested On
1.8.2004, he obtained a loan of Rs. 5,00,000 @ 14% interest per annum from the
company. As on that, the company had accumulated profits of Rs. 4,00,000. Explain the
tax implications of the transaction on R and also the company.
Discuss the applicability of tax on dividend distributed by a company for the shareholder
and company.
Practical Questions:
a. Basic Salary
Rs. 10,000 per month
b. DA (forming part of salary for retirement benefits)
30% of basic salary
He has been provided with a motor car of 1.8 ltr. engine capacity which he uses partly for
official purposes and partly for his personal use. The running and maintenance expenses of the
motor car are met by the employer. However, the employer recovers Rs. 500 per month from
the employee for use of such motor car.
He is also provided with a furnished accommodation in Delhi. The house has been taken on
rent by the company at Rs. 7,000 p.m. The cost of furniture provided is Rs. 90,000.
Besides salary, he has earned the following income:
i) Interest on bank deposits
Rs. 14,000
ii) Winnings from card games
Rs. 12,000
Compute the total income of X for A.Y. 2011-12 assuming that he donates Rs. 10,000 to
National Children Fund.
2
(i) Advertisement in Malaysia for exploring the possibilities of export to that country, Rs.
9,000.
(ii) Payment to an advertising agent Rs. 4,000 in cash. The payment is supported by
proper voucher.
(e) Interest payment included the following:
(i) Rs. 1 lakh paid to depositors all of whom were shareholders of the company, on fixed
deposits and Rs. 2 lakhs to a bank on overdraft account.
(ii) Rs. 3,000 paid by way of interest to a non-resident and Rs. 10,000 paid as interest on
fixed deposits from a relative of the Managing Director without deduction of tax at
source.
(iii) Rs. 5,000 paid to bank on loan taken for meeting income-tax liabilities.
(f) As per the Payment of Bonus Act, the bonus liability worked out to Rs. 3 lakhs.
However, following past practice, the company paid Rs. 4 lakhs, which worked out to 20
per cent of salaries of staff.
(g) The Profit and Loss Account shows a credit of Rs. 5,000 for dividend on 1-6-2010 from a
company engaged in the manufacture of cement. Dividend distributed by R (P) Ltd. for
the financial year 2010-2011 on 1-10-2011 is Rs. 1,50,000
Compute the total income of the company. Please indicate, in brief, the reasons for any
adjustments that you make in support of your computation.
4
ABC Ltd., a closely held Indian company, is engaged in the business of manufacture of
paints in India. A profit and loss account for the year ending 31-3-2011 is given below:
PROFIT AND LOSS ACCOUNT
Rs.
Rs.
Salary and wages
7.5 Sales
48.00
Postage and telegram
0.40 Amount withdrawn from
3.00
general reserve
Traveling and conveyance
0.50
Depreciation
5.00
Income tax
4.00
Wealth tax
0.10
Excise duty due
1.00
Provision for future losses
0.60
Proposed dividend
0.80
Loss of subsidiary company
0.50
Audit fee
0.25
Director remuneration
8.00
Deferred tax liability
1.35
Net profit
21.00
Total
51.00 Total
51.00
Additional information:
1. The excise duty due on 31-3-2011 was paid on 2-12-2011.
2. Custom duty of Rs. 1,20,000 which was due on 31-3-2008 was paid during the financial
year 2010-11.
3. Depreciation as per income tax is Rs. 11.43 lakhs.
4. The company wants to set off the following losses/allowances:
For tax purposes
For accounting
13
purposes
Brought forward loss of assessment year 2009-10
12,00,000
10,00,000
Unabsorbed depreciation
3,00,000
3,00,000
Compute the total income of the assessee and the tax liability for the assessment year 2011-12.
5 The business income of the assessee before claiming depreciation, for the financial year
2010-11 is Rs. 15,00,000. The book profit of the company as per the provisions of Sec
115JB is Rs. 8,00,000. the other details are as under:
1) Current year depreciation
2,80,000
2) Brought forward business loss
8,00,000
3) Brought forward unabsorbed depreciation 5,20,000
Compute the tax liability of the company fro the A.Y. 2011-12.
6 From the following information compute the total income of X Ltd. and the tax liability
for A. Y. 2011-12 :
To Expenses relating to
business
To Income tax paid
To General Reserve
To
provision
for
contingent liability
To
Provision
for
diminution in value of
an asset
To proposed Dividend
To Balance c/d
By sale
By deferred tax
1,00,000
7,00,000
1,00,000
50,000
50,000
2,50,000
9,00,000
9,00,000
Additional information:
(i)
Brought forward loss as per books of account Rs. 1,00,000
(ii)
Brought forward unabsorbed depreciation as per income tax Rs. 3,00,000
(iii)
Brought forward depreciation as per books of account Rs. 80,000
(iv)
Brought forward loss under the head capital gains (computed as per Incoem Tax Act)
Rs. 60,000.
7
2,00,00,000
Out of Rs. 30,00,000 share capital of Rs. 100 per share, the company reduces Rs.
3,00,000 share capital at Rs.10 per share. The accumulated profits of the company were
Rs. 1,50,000. .Mr. Ramesh holds 500 shares of the company.
Compute the amount of deemed dividend u/s 2(22)(d).
10
Mr. Ram took a loan of Rs. 1,00,000 on 10.9.2010 from a company in which the public
are not substantially interested. The company also paid insurance premium Rs. 5,000 on
his behalf. He holds 25% equity shares of the company. On the date of loan and paying
the premium, the accumulated profits of the company were Rs. 80,000. Subsequently in
the same year, the company declared dividends to its shareholders. The dividends on the
shareholding of Mr. Ram amounting Rs. 15,000 was set-off against the amount of loan
etc. Compute the amount that should be included in the income of Mr. Ram.
11
R Ltd. has accumulated profits of Rs. 3,00,000 excluding capitalized profits i.e. bonus
shares of Rs. 1,00,000 issued in the past. The company distributed assets of Rs. 2.50,000
to the shareholders. Compute the amount taxable as dividend if the market value of the
asset on the date of the distribution is:
(a) Rs. 2,00,000.
(b) Rs.3,50,000.
15
16
UNIT - III
I
(a)
as reduced by the amount actually paid by, or recovered from the employee in respect of
such security or shares, shall be the value of fringe benefits.
(b)
Tax Planning with reference to location of undertaking, Type of activity and ownership
pattern
3
Remuneration should be paid to ____
(a)
working partner only
(b)
dormant partner only
(c)
both of the above
4
Bonus shares
5
At the time of issue of bonus shares, tax liability arises in the hands of
(a)
the shareholder
(b)
the company issuing bonus shares
(c)
Both of the above
(d)
None of the above
(c)
For determining effective tax savings in case of purchase of asset out of own funds or
borrowed capital __________ and ________ have to be considered.
Managerial Remuneration
5
Fringe benefit tax is paid by the __________.
6
FBT is levied @ _______ on the value of fringe benefits.
II
whichever is earlier. Under section 10(10) gratuity is exempt from tax when it is received.
If a person retires on March 14, 2007 but gratuity is received on April 4, 2008 state, as to
(a) when gratuity will be taxed, (b) when exemption under section 10(10) will be
allowed, and (c) when relief under section 89 could be claimed
IV
Practical Questions:
Tax Planning with reference to location of undertaking, Type of activity and ownership
pattern
1
A, B and C have decided to set-up a business. For this purpose A, B and C are having Rs.
6,00,000, Rs. 3,00,000 and Rs. 3,00,000 respectively. They wish (i) to charge interest on
their capital/loan @ 12% p.a., Salary A Rs. 20,000 p. m., B: Rs. 10,000 p. m., C Rs.
10,000 p.m. and share profits in the ratio 2 : 1 .: 1, or (ii) B and C to receive half the
income as salary nominating A as the sole owner of the business.
They expect the income of Rs. 8,00,000 (before charging interest on capital/ loan) during
the relevant year.
As an income tax expert you are approached by A, B and C for considered opinion as to
whether they should have a firm or a sole proprietary concern of A, while B and C
becoming employees and moneylenders to the concern so that they can reduce their tax
liability? What is your advice and what arguments would you give in support of your
advice?
2
There are two members A and B in a joint Hindu family having a capital of Rs.
12,50,000. They can run a business as a business of an individual by joining the other as
an employee and money-lender or as a H.U.F.
(i) If the business is run as of an individual, the other member will receive salary of Rs. 2
lakh and interest @ 12% on 6,25,000.
(ii) If the business is run as a H. U.F. each member will be receiving salary Rs. 1,50,000.
Suggest which form of business organisation should be adopted from tax point of view, if
the expected business income is Rs. 5,50,000 for P.Y 2011 12.
On the basis of the following information suggest to A and B whether they should invest
their funds in their own partnership firm @ 12% p.a. or invest it in the firm of C and D @
15% p.a. (the market rate of interest) and accept deposits of C and D @ 15% p.a. for their
firm :
(i) Profits of firm before interest and remuneration to partners Rs. 6,00,000
(ii) Remuneration to partners Rs. 10,000 p.m. each;
(iii) Funds for investment Rs. 4,00,000 each;
(iv) Other income of partners Rs. 3,00,000 each
20
Compute the taxable income from capital gains of Mrs. X for the A.Y. 2011-12 assuming
that he does not own any other residential house and the above shares are not sold
through recognized stock exchange.
5
P purchases 500 listed equity shares of Rs. 10 each for Rs. 40 per share in 1989-90 and
incurs an expenditure of Rs. 400 on brokerage. In May 1993, he receives 100 bonus
shares. In September, 2010 he gets 100 right shares for Rs. 20 rach. He sold 100 bonus
shares in November, 2009 at Rs. 30 per share and 100 right shares @ 30 per share in
December 2010. the bonus shares as well as right shares have kept in a separate
depository. Both the sales were made through the stock exchange. Rs. 15 were paid as
securities transaction tax. Find out the capital gains for the assessment year 2011-12.
Tax Consideration in respect of specific managerial decisions like Make or buy, own or
lease
6
From the following information determine whether the assessee should purchase an asset
or take on lease:
Cost of asset Rs. 1,00,000.
Rate of depreciation 15%.
Rate of interest 10%.
Repayment of loan by the assessee Rs. 20,000 p.a.
Rate of tax 30.9%.
Residual value Rs. 20,000 after five years.
Profit of the assessee Rs..1,00,000 before depreciation, interest and tax/before lease rent
and tax.
Lease rent Rs. 30,000 p.a.
7
A motor car company requires 10,000 units of a part of car engines. From the following
information, suggest to the company whether it should make the part itself or buy it from
the market:
Total cost of 10,000 units
Direct material
20,000
Direct labour
80,000
Variable factory overhead
40,000
Fixed factory overhead
80,000
Total cost
2,20,000
A manufacturer offers to sell the same part @Rs. 20 per unit.
If the company manufactures the part, it does not require any additional facility.
An asset costing Rs. 1,00,000 is to be acquired. There are two alternatives available to
the entrepreneur. First one is buying the asset by taking a loan of Rs. 1,00,000 repayable
in five equal installments of Rs. 20,000 each along with interest @ 14% p.a. Assuming
that lease rentals processing fees, interest as well as the principal amounts are payable at
the year end. The second one is leasing the asset for which annual lease rental is Rs.
30,000 up to five years. The lessor charges 1 % as processing fees in the first year.
Assume the internal rate of return to be 10% and the present value factor at 10% is:
Years
1
2
3
4
5
PV Factor
.909 .826 .751 .683 .621
21
Suggest which alternative is better in the above case. Assume the tax rate to be 33.99%
and rate of depreciation @ 15%.
9
The management of X Ltd. wants to acquire a new machine. The cash price of the
machine is Rs. 1,00,000. The company has enough cash reserves to finance the purchase.
However, it seeks your advice, whether from the point of view of tax planning, it should
buy the machine or get it on lease. On the basis of the following particulars, explain the
suitability of each alternatives.
(i) Rate of Income Tax : 35%.
(ii) Rate of depreciation under the Income Tax Act : 25%.
(iii) Expected life of the machine: 9 years.
(iv) Lease rent: Rs. 31,000 per annum for the first five years and Rs. 300 per year afterwards.
(v) Present value of Re. 1 discounted at 14%; Year One-0.877; Year Two-0.769; Year Three0.675; Year Four-0.592; Year Five0.519; Year Six-0.456; Year Seven-O.400; Year
Eighth-0.351 and Year Nine-0.308.
10
A company requires 20,000 units of a component every year for next five years. The
component can either be manufactured by the company in its factory or be purchased
from the market. From the following information suggest to the company whether it
should make the component or buy it from the market:
1. Material cost per unit Rs. 4
2. Labour cost per unit Rs. 6
3. Variable overhead cost per unit Rs. 2
4. If the company manufactures the part, it has to purchase a machine by taking a loan from
the bank. The present value of net cash outflow in this regard in five years will be Rs.
1,00,000.
5. The component is available in the market at (a) Rs. 12.5 per unit, (b) Rs. 14 per unit
11
X Ltd. manufactures electric pumping sets. The company has the option to either make or
buy from the market component Y used in manufacture of the sets. The following details
are available:
The component will be manufactured on new machine costing Rs. 1 lakh with a life of 10
years. Materials required cost Rs. 2 per kg. and wages Re. 0.30 per hour. The salary of the
foreman employed is Rs. 1,500 per month and other variable overheads include Rs.
20,000 for manufacturing 25,000 components per year. Material requirement is 25,000
kgs. and requires 50,000 labour hours.
The component is available in the market at Rs. 4.30 per piece.
Will it be profitable to make or to buy the component? Does it make any difference if the
component can be manufactured on an existing machine?
12
2. If the company decides to buy the component from a supplier the component would cost
Rs. 18 lakh, Rs. 20 lakh, Rs. 22 lakh. Rs. 28 lakh and Rs. 34 lakh respectively in each of
the five years.
The relevant discounting rate and tax rate are 14 per cent and 33.2175 per cent
respectively. Additional depreciation is not available. Should XYZ Ltd make the
component or buy from outside?
13
XYZ Lt/d. is considering the purchase of a new machine costing Rs. 60,000 with an
expected life of 5 years with salvage value of Rs. 3,000, in replacement of an old
machine purchased 3 years ago for Rs, 30,000 with expected life of 8 years.
The present market value of this old machine is Rs. 35,000. Because of the purchase of
new machinery, the annual profits before depreciation are expected to increase by Rs.
12,000. The relevant depreciation rate for the machine is 15 per cent on written down
value basis and the tax rate is 33. 99 per cent.
Assume the after tax cost of capital (discounting rate) to be 14 per cent. Advise the
company suitably.
14
The directors of a domestic company, whose existing capital is Rs. 1 crore all in equity
shares, proposes to expand its business for which an additional investment of Rs. 50 lakh
would be needed. The entire money can be raised either by issue of equity shares or by
issue of 10% debentures. They decide in favour of issue of equity shares. As a tax
consultant, do you approve the proposal? Assume that rate of return is 20% and rate of
income tax is 30%.
Managerial Remuneration
15
16
Offer B
7,50,000
1,60,000
3,00,000
20,000
4,700
17,500
3,00,000
25,000
-
1,25,000
-
15,000
60,000
72,000
1,00,000
2,400
7,200
7,200
14,00,000
90,000
14,00,000
UNIT - IV
I
(a)
Advance tax is payable only when notice of demand is issued by the A.O.
Tax deducted at source for the month of March should be deposited on or before the date
prescribed under Sec 139(1).
The rate of tax to be deducted at source in case of fee for professional service is 10%.
(b)
(b)
(c)
When its total income exceeds the maximum amount which is not chargeable to
income tax
In all cases irrespective of any income or loss earned by it
If the assessee has to carry forward the loss, the return of loss must be submitted:
(a)
On or before the due date mentioned in Sec. 139(1)
(b)
At any time before the end of the relevant assessment year
(c)
At any time before the expiry of one year from the end of the relevant assessment
year
The assessee could not file his return of income for assessment year 2007-08 within the
time allowed as per Sec. 139(1). His assessment u/s 144 was completed on 15-1-2009 and
it was communicated to him on 19-1-2009. the assessee in this case could file the belated
return till:
(a)
14-1-2009
(b)
15-1-2009
(c)
18-1-2009
(d)
19-1-2009
(e)
31-3-2009
The minimum and maximum period of rigorous imprisonment under Sec. 276 for
removal, concealment, transfer or delivery of property to thwart tax recovery shall be:
(a)
Any period upto 1 year and fine
(b)
Any period upto 2 years and fine
(c)
Any period upto 3 years and fine
The minimum and maximum penalty under Sec 272A(1)(d) for failure to apply for
allotment of PAN under Sec 139A or quote such number in challan, etc. shall be:
(a)
Rs. 500
(b)
Rs. 500 and Rs. 5,000
(c)
Rs. 10,000
25
10
11
12
The Commissioner shall not revise the order under Sec 264:
(a)
Where an order has been made more than one year previously
(b)
Where an order has been made more than 2 years previously
(c)
Where an order has been made more than 4 years previously
Advance Tax
13
The advance tax is payable by the assessee if the advance tax payable during the financial
year:
(a)
Exceeds Rs. 1,500
(b)
Exceeds Rs. 5,000
(c)
Is Rs. 10,000 or more
14
TDS
15
16
The liability to deduct tax at source in case of income from interest on securities arises at
the time of:
(a)
Payment of interest
(b)
Accrual of interest
(c)
Credit of interest to the account of the payee / interest payable account or payment
thereof whichever is earlier.
(c)
27
TDS
4
Tax is to be deducted at source, if the winning from lottery exceeds Rs. _________.
II
X, an individual, has got his books of account for the year ending 31-3-2010 audited
under Sec 44AB. His total income for the assessment year 2011-12 is Rs. 1,90,000. He
desires to know if he can furnish his return of income for the assessment year 2011-12
through a Tax Return Preparer.
A return of income was filed within the statutory time provided under the Act, without
making the payment of self-assessment tax due as per return. The same was paid before
completion of assessment. The AO wants to declare the return as invalid. Is the AO
justified?
Define self-assessment.
Advance Tax
5
What are the due dates for payment of installments of advance tax?
6
Write short note on payment of advance tax on income estimated by the assessee himself.
7
Discuss the provisions relating to payment of advance tax as per order of the AO.
Advance Rulings
8
Define advance ruling
9
Explain the meaning of applicant under Sec 245N (b)
Avoidance of Double Taxation
10
Explain relief for double taxation with sections.
III
Advance Tax
8
What do you understand by Payment of Advance Tax or Pay as you Earn Scheme. 10.
What happens in case of default in payment of advance tax?
TDS
9
10
Advance Rulings
11
Discuss in detail the procedure for filing application for advance ruling .
12
What is Advance Ruling? When does a ruling become void?
Avoidance of Double Taxation
13
Briefly explain the provisions of Sec. 91 of the Income Tax Act relating to avoidance of
double taxation.
14
IV
Practical Questions:
A notice to levy penalty under Sec 271(1)(c) was issued on 11-6-2010. The assessee in
response thereto filed on 13-7-2010 a written submission requesting to decide the matter.
The AO before whom this reply was filed retired on 31-7-2010 and the officer, who
succeeded him passed the penalty order without providing any further opportunity, but by
taking into cognizance the reply filed by the assessee. Whether the order by the AO is
valid?
29
4. Mr. X, a resident of India, provides you the following particulars of his income for the A.Y.
2011-12.
1. Interest on government securities
25,000
2. Income from house property (computed)
45,000
3. Business income
3,30,000
4. Income from a foreign country with which no agreement for relief or 1,00,000
avoidance of double taxation exists
5. Income tax paid on income mentioned in 4
20,000
Compute the amount of income tax payable in India.
5. X (28 years) is resident and ordinarily resident in India. His income is Rs. 3,46,000 from a
business in India and Rs.1,92,000 from a business in a foreign from a business in India and Rs.
1,92,000 from a business in a foreign country with whom India has ADT agreement. According
to ADT agreement, income is taxable in the country in which it is earned and not in the other
country. However, in the other country, such income can be included for computation of tax rate.
According to the tax laws of the foreign country, business income of Rs. 1,92,000 is taxable @
23%. During the pervious year, X has deposited Rs. 42,000 in his public provident fund account
(out of which Rs. 10,000 is deposited out of foreign income). He has also received an interest of
Rs. 32,000 on government securities. Find out Xs liability under the Income Tax Act for the
assessment year 2011-12
CI Index
Financial Year
CI index
1981-82
100
1996-97
305
1982-83
109
1997-98
331
1983-84
116
1998-99
351
1984-85
125
1999-2000
389
1985-86
133
2000-01
406
1986-87
140
2001-02
426
1987-88
150
2002-03
447
1988-89
161
2003-04
463
1989-90
172
2004-05
480
1990-91
182
2005-06
497
1991-92
199
2006-07
519
1992-93
223
2007-08
551
1993-94
244
2008-09
582
30
Financial Year
CI Index
Financial Year
CI index
1994-95
259
2009-10
632
1995-96
281
2010-11
711
References:
1
Ahuja Girish, Gupta Ravi, Simplified Approach to Corporate Tax Planning and
Management, 11th Edition, 2010-11, Bharat Law House Pvt. Ltd.
2
Ahuja Girish, Gupta Ravi, Systematic Approach to Income Tax, Service Tax and VAT,
24th Edition, Bharat Law House Pvt. Ltd
3
Ahuja Girish, Gupta Ravi, Practical Approach to Income Tax, Service Tax, VAT, CST and
Wealth Tax, 21st Edition, 2010-11, Bharat Law House Pvt. Ltd.
4
Singhania V.K., Singhania Monica, Students Guide to Income Tax, 43rd Edition, 2010-11,
Taxmann Publications (P) Ltd.
5
Singhania V.K., Singhania Monica, Corporate Tax Planning and Business Tax
Procedures, 14th Edition, 2010, Taxmann Publications (P) Ltd.
31
INCOME TAX
QUESTION BANK FOR CLASS PRACTICE
(FOR PRIVATE CIRCULATION ONLY)
RESIDENTIAL STATUS
Q4. Mr. A furnishes the following particulars of his income earned during the
previous year
relevant to the assessment year 2011-12 :
Rs.
(1) Interest on German Development Bonds (one-third is received in India)
51,000
(2) Income from agriculture in Bangladesh, remitted to India
31,000
(3)
Income
from
property
in
Canada
received
in
U.S.A.
1,10,000
(4) Income earned from business in Kuwait, business being controlled from
Mumbai (Rs. 25,000 is received in India)
65,000
(5) Dividend from an Indian Company
15,000
(6) Royalty received in Singapore from Mr. David, a resident in India, for
technical services provided for a business carried on in Singapore 25,000
(7) Profit from a business in Chennai; this business is controlled from Singapore
1,25,000
(8) Profit on sale of a building in India, but received in Nepal
2,50,000
(9) Income from agriculture in Punjab, received in Mumbai.
30,000
(10) Profit from business in Indonesia; this business is controlled from Delhi
(60% of the profit deposited in a bank there and 40% is remitted to India)
40,000
(11) Interest received from Mr. D, a non-resident, on the loan provided to him
for a business in India
28,000
Compute his Gross Total Income, if he is :
(i)
Resident, (ii) Not Ordinarily Resident, (iii) Non-Resident.
Q5. Determine the residential status of Mr. R for the previous year 2010-11 who
left India for the first time on 15-9-2006 and came back on 1-9-2009. He again left
for Dubai on 15-6-2010 and came back on 14-2-2011 to settle in India.
Q6. Particulars of income of Shri A who is resident but not ordinarily resident for the
Assessment Year 2011-12 are given below:
(a) Profit from business in U.S.A. received in India, Rs. 1,00,000.
33
employer has provided a small car but expenses are met by Kishore.
Compute his taxable Salary for the assessment year 2011-12.
Q2. Mr. X, an employee with a Furniture dealer, submits the following particulars of
his income for the Assessment Year 2011-12 and you are required to compute his
gross income from salary :
(1) Basic salary on 1.4.2009 Rs. 12,000 p.m.
(2) Dearness allowance at Rs. 1,000 p.m., which is taken into account for
retirement benefits.
(3) Free unfurnished accommodation in Mumbai. The rent paid by the employer
is Rs. 5,000 p.m.
On 1st September, 2010 his employer requested him to revise terms of
employment due to the bad financial position of the company. The revised terms
were:
(1) Basic Salary Rs. 9,000 p.m. from 1.9.2010.
(2) Dearness Allowance Rs.. 700 p.m.
(3) No accommodation to be provided.
For this revision in his terms, his employer paid him a lump-sum of Rs. 20,000,
when he agreed to such revision. His employer also sold him on 1.6.2010 old furniture
for Rs. 3,000. The cost of furniture on 1.4.2007 was Rs. 10,000. Assume that salary is
due on the last day of the month.
Q3. Mr. X has furnished the following details with regard to his salary income for the
year ended 31st March, 2011 : Compute his taxable salary.
(i) Salary at Rs. 6,000 per month.
(ii) Bonus at six months' salary.
(iii) Travelling allowance for tour at Rs. 300 per month.
(iv) Entertainment allowance ofRs. 250 per month.
(v) Commission equal to four months' pay.
(a) He is also provided with free furnished quarters at Kota valued at Rs. 3,000 per
month and furniture and fittings of the value of Rs. 10,000. He is also provided
with free lunch at the
company valued at Rs. 40 per meal for 300 working
days.
(b) He claims: (i) Electricity and water charges incurred by him for his residence
Rs. 1,600 per annum. (ii) Entertainment and travelling allowance in full.
(c) His contribution to company's Recognised Provident Fund is at Rs. 1,000 per
month and the employer contributes an equal sum. The interest credited to the
Provident Fund Account is Rs. 12,000 at 9.5%.
35
5,000
250
100
(d) Employer's and employee's contribution to a recognised provident fund Rs. 7,900
each.
(e) Interest from provident fund @ 9.5% p.a. 4,000
(f) City Compensatory Allowance
60 p.m.
(g)Medical Allowance1,000
(h) He has been provided by his employer a large car. Except the driver's salary, the
expenses for private use are borne by himself. The car is used for both official and
personal purposes.
(i) He has been provided with the facility of an unfurnished house by the employer in
a small town for which the employer charges Rs. 200 p.m. The fair rent of the house is
Rs. 9,000 per annum. The house is owned by the employer.
(j) The employer has employed for him a sweeper @ Rs. 200 p.m., and a servant @
Rs. 750 p.m.
Compute the taxable income under the head salary for the assessment year 2011-12.
36
Q6. Sri S, who is a retired employee of the Nepal Government, started service in a
private firm at Meerut. He furnished the following particulars of his income for the
financial year 2010-11 :
(i) Salary
Rs.
1,500 p.m.
100 p.m.
100 p.m.
250 p.m.
700 p.m.
(d) Her son is studying in a school run by the company. The annual expenses
incurred by the company per student is Rs. 3,600 but he had been sent for
education to a similar school a sum of Rs. 1,200 would have been payable
during the year.
(e) She proceeded on one month's leave to Shimla by car where she stayed in the
37
Q9. Shri R who resides in Allahabad, got the following emoluments during the
previous year ending on March 31,2011:
From X Ltd. : 6 months basic pay @ Rs. 3,000 p.m., dearness pay forming part of
basic pay @ Rs. 250 p.m., and house rent allowance @ Rs. 1,000 p.m. .
From Y Ltd. : 4 months 'basic pay @ Rs. 4,000 p.m., dearness allowance @ 25% of
basic pay, commission on sale @ 5% (on sales effected during four months Rs.
1,00,000), house rent allowance @ Rs. 2,500 p.m.
From Z Ltd.: 2 months salary @ Rs. 8,000 p.m., dearness allowance @ Rs. 1,000
p.m., house rent allowance Rs. 3,000 p.m. During this period, he lived in his own
38
house.
He paid Rs. 3,000 p.m. as house rent throughout the previous year except two months
when he lived in his own house.
Determine the amount of house rent allowance taxable for the assessment year 201112.
Q10. Mr. D, an employee in a company at Delhi, is drawing a salary of Rs. 8,000 p.m.
plus 10% of his salary as dearness pay. He is getting entertainment allowance of Rs.
1,000 p.m. He has spent Rs. 5,000 on entertainment of the company's customers. He is
provided with a rent-free unfurnished house of the fair rental value of Rs. 4,000 p.m.
The house is owned by the company. He is also provided with a small car for his
personal and official use and all expenses of its running, maintenance and driver are
met by the company. D borrowed Rs. 1,00,000 interest free loan from the company to
construct the house before one year. The State Bank of India charges interest on such
loans @ 8% p.a.
Calculate the value of perquisites of Mr. D for the assessment year 2011-12.
Q11. Mr. V is reader in a college, run by a society, on a monthly salary of Rs. 14,000.
Besides salary he also gets 43% of salary as dearness allowance, Rs. 800 p.m.
entertainment allowance and Rs. 400 p.m. as proctor's allowance. During the year he
gets Rs. 250 p.m. as additional D.A. He contributes 10% of his salary to Provident
Fund. The college contributes an equal amount. Interest credited to his provident fund
@ 12% amounted to Rs. 10,000. Three children of Mr. V are studying in an institution
run by the society, which runs the college for which he paid nothing. Normally
expenditure in an institution of that standard comes to Rs. 1,500 p.m. for one student.
Mr. V is provided with a rent-free accommodation which is owned by the college. Its
fair rental value is Rs. 2,500 p.m.. A gardener for the up keep of the garden on the
back side of the house is also provided. The salary of gardener amounting to Rs. 200
p.m. is also paid by the college. During the year Mr. V proceeded on two months.
leave with full pay to his home at Jaipur. The college paid Rs. 4,500 being the air fair
to and from Jaipur for him and his wife for this purpose.
Compute the taxable salaries income of Mr. V for the year ending on 31st March,
2011.
Q12. Mr. P submits the following particulars of his income and you are required to
compute his gross income from salary for the previous year ended on 31st March,
2011 assuming that salary is due on the last day of the month:
(1) Employed in Q Ltd. upto 30th September, 2010 at a basic salary of Rs. 3,000
39
p.m. and dearness allowance of Rs. 1,600 p.m. On 1st October, 2010, he resigned from
this service.
(2) Joined R Ltd. from 1st December, 2010 at a monthly basic salary of Rs. 4,000
and dearness allowance of Rs. 2,000 p.m. He also received transport allowance at Rs.
500 p.m. and bonus equal to 10% of his salary plus dearness allowance from this
company.
Q13. Following are the particulars of the income of a woman for the previous year
ended 31st March, 2011 :
(a) Salary Rs. 15,000 per month.
(b) Her contribution to provident fund was at 14% of Salary, the employer also
contributes a similar amount.
(c) Interest credited to her provident fund account at 9.5% per annum Rs. 19,000.
(d) She is provided by her employer with a rent-free (unfurnished) house in a
small town of the Annual Value of Rs. 25,000.
(e) Proceeds of an endowment policy Rs. 10,000.
She paid Rs. 600 as Employment Tax of the State Government.
Find out her taxable salary for the assessment year 2011-12; if (i) the provident
fund is
recognized, and (ii) it is unrecognized.
Q14. Compute the taxable salary of Smt. G of Kanpur for the assessment year 201112 from the following particulars:
(i)
(ii) Dearness allowance Rs. 2,000 p.m. (which enters the retirement benefit as per the
terms
of employment).
(iii) Bonus Rs. 8,000 p.a.
(iv) Rent-free accommodation provided by the employer, the fair rental value of which
is Rs. 30,000 p.a. The cost of the furniture provided therein Rs. 10,000.
(v) Entertainment allowance Rs. 500 p.m.
(vi) Her contribution to Recognized Provident Fund is at 15%.
(vii) Employer's contribution to Recognized Provident Fund is Rs. 9,600p.a.
(viii) Interest on Recognized Provident Fund balance at 9.5% p.a. is Rs. 1,900.
(ix) Free use of a large Motor-car for both official and personal purposes. Driver is
also provided by the employer.
Q15. X is working in a Company at Hyderabad on a salary of Rs. 10,500 p.m. and
dearness allowance of Rs. 1,250 p.m. and medical allowance of Rs. 500 p.m. He
40
1,800 p.m.
2,632 p.a
2,632
9,000
2,400
4,800
1,000
(vii) Free service of water & gas for which the payment was done by the
employer 1,200
(viii) He was provided with a cook whose salary was borne by the employer
7,200
(ix) Sri B was provided with a motor-car by his employer for official and personal
use.
(x) He claims the following deductions: (a) Rs. 700 in connection with purchase
of Books.
(b) He paid Rs. 60 for State Employment Tax.
Q17. X is a pilot in Indian Airlines. He draws Rs. 72,000 as salary, Rs. 18,000 as
dearness allowance, Rs. 70,000 as flight allowance to meet personal expenses while
on duty, Rs. 12,000 as conveyance allowance (actual expenses Rs. 9,000) and Rs.
7,200 as educational allowance for his three children studying in a public school.
Determine the taxable value of the allowances paid to him.
41
Q.18 Mr. A was appointed as the Branch Manager of a company at Jaipur on 1 2 2009 in
the pay scale of Rs. 6,000 100 7,000. He also receives 10% of his pay as D.A., Rs. 150
p.m. as medical allowance and Rs. 300 as conveyance allowance.
The company has given him a rent free residential house since 1 7 2010. the fair rent of
the house is Rs. 10,000 p.a. The company has incurred the following expenses in respect of
this house from July 2010 to March 2011.
Repairs Rs. 2,000, Electricity Bills Rs. 350, Water Bills Rs. 200, Telephone Bills Rs. 800. The
electricity and water bills are in the name of the employer but the telephone bill was in the
name of the employee.
On 1 10 2010, his conveyance allowance was stopped and he was given a motor car of 1.4
ltr. engine capacity for both official and personal use. All the expenses of running and
maintenance of car including salary of driver, are paid by the company.
He as well as the company contributes 14 % of his pay to a recognized provident fund. Interest credited during the previous year to his
provident fund A/C @ 12 % p.a. Rs. 1,250.
Compute his taxable income under the head salaries for the assessment year 2011-12
assuming that he has not spent any amount of conveyance allowance for official
duties.
Q.19 . Mrs. B is offered an employment by XYZ Ltd. At a basic salary of Rs. 24,000 p.m. other
allowances according to rules of the company are:
Dearness Allowance: 18% of basic pay (not forming part of the salary), bonus one months
basic pay, project allowance: 6% of basic pay.
The company gives Mrs. B an option either to take a rent-free unfurnished
accommodation at Bhopal for which the company would directly bear the rent of Rs.
15,000 p.m. or to accept a house rent allowance of Rs. 15,000 p.m. and find out own
accommodation. If Mrs. B opts for H.R.A., she will have to pay Rs. 15,000 p.m. as
rent. Calculate the income of Mrs. B for the A.Y.2011-12 and state which one of the
two options should be opted by her? Her income from other sources is Rs. 1,70,000.
Q.20 Mrs.X a finance manager of Y Ltd. New Delhi furnishes the following particulars for
the previous year 2010-11:
Basic salary Rs. 16,000 per month; dearness allowance Rs. 2,000 per month; bonus 3
months basic salary; commission Rs. 1,000 per month ; contribution of the employer
and employee to recognized provident fund is Rs. 28,000 each; entertainment
allowance Rs. 12,000 per annum; allowance to meet cost of education and hostel
expenditure of three children @ Rs. 5,000 p.a. each. Rent free unfurnished
accommodation provided in Delhi by the company for which company pays a rent of
Rs. 2,600 per month. Housing loan of rs. 5,00,000 at the interest rate of 6% p.a. is
advanced on October 1, 2008.(no repayment made during the year)(rate of State Bank
of India is 10%) , Titan watch costing Rs. 4,800 is gifted by the company on the
foundation day of the company and a maruti swift car which was purchased by the
company on August 10, 2002 for Rs. 4,00,000 is sold to the employee on September
16, 2010 for Rs. 1,80,000. She makes the following payments and investments during
the year : Life insurance premium paid on the life of her major son Rs. 20,000,
42
800 p.m.
200 p.m.
43
1,200 p.m.
4,000
20,000
Being principal of the college, he has been given a free telephone at his domestic, costing the
college Rs. 3,200. The college has also provided him a domestic servant @ Rs. 200 per month.
He spent Rs. 21,000 on the treatment of his wife in a private hospital in Delhi. The medical bill
was fully reimbursed by the college. During the year, the college also reimbursed him Rs. 6,000
for his travel to Kashmir under L.T.C. scheme.
He is a member of Statutory Provident Fund to which the college contributes 8% of his salary,.
Interest on accumulated P.F. is Rs. 3,300; the rate of interest being 13%. He pays rent of Rs.
1,300 p.m. in respect of accommodation occupied by him for his residence. He donated Rs.
9,000 during the year to the Government for the promotion of family planning and Rs. 4,000 to
National Defence Fund. His own contribution to P.F. is 15% of Basic Salary and D.A.
Compute (i) his salary income (ii) Total Income (iii) tax payable.
Q.23 X was employed with a Private company G Ltd. and was entitled to a salary of Rs. 10,000
p.m. He was also entitled to D.A. 40% of salary forming part of salary for retirement
benefits. Besides the above, he was entitled to the following allowances/ perquisites.
Transport allowance
1,000 p.m.
(for commuting from residence to office and back out of which he spends Rs. 600 p.m.)
Medical allowance
500 p.m.
He spends Rs. 2,000 on his medical treatment and Rs. 1,000 on the treatment of his brother
not dependent on him
Education allowance (for one child)
130 p.m.
Entertainment allowance w.e.f. 1-5-2010
500 p.m
He was also entitled to a rent free unfurnished accommodation in Delhi, the fair rental
value of which is Rs. 10,000 p.m. He resigned on 31-12-2010 and joined RBI w.e.f. 1-12011 in the grade of Rs. 14,000-400-15,200-500-18,200. He was also entitled to the
following allowances/ perquisites.
D.A. (forming part of salary) 30% of basic, Entertainment allowance Rs. 1,000 p.m., motor
car of (1.5 ltrs) with driver, which he uses partly for his official purposes and partly for
personal purposes. The expenses of running and maintenance were met by the employer.
Medical reimbursement of the expenses incurred on the treatment of his wife Rs. 20,000.
He is also provided with the rent free furnished accommodation by the employer the FRV
of which is Rs. 10,000 p.m. Cost of furniture provided is Rs. 1,20,000.
Compute his income under the head salary.
Q.24 Mrs. X is the Director of a tyre company at Bangalore since 1-1-1992. She was placed
in the grade of Rs.14,000 400 18,000 600 27,000 plus a Dearness Allowance @ 20% of
her basic pay, half of which enters into retirement benefits. She contributes 10% (of salary and
50% of DA) to a recognized provident fund to which her employer contributes an equal amount.
She has been provided with a rent-free house owned by the company, the fair rent of which is
Rs.72,000 p.a. She is getting a Transport allowance of Rs.1000 p.m. for traveling from residence
44
to office and back, Medical Allowance of Rs.1000 p.m. and Servant Allowance of Rs.500 p.m.
Her club bills worth Rs.5,000 were also paid by the company.
She has been provided with the facility of a gardener and a cook who are each paid Rs.150
p.m. by the employer. She has also been provided with a car of 2000 cc by the employer, for
official use only.
Two children of Mrs.X are studying in an institute run by the employer for which no fees is
paid. Normal expenditure per student in such an institution is Rs.200 p.m.
She deposited a sum of Rs.10,000 towards her PPF account, Rs.20,000 on the life insurance
premium on the life of self (Sum assured Rs.3,00,000), Rs.8,000 towards NSC VIII th issue and
Rs.30,000 towards IDBIs infrastructure bonds.
Calculate the tax payable by her for the assessment year 2011-12.
Q25 . A has been employed with PQR Ltd. since 1-5-1995. He retired from his service, w.e.f. 112-2010 and received the following from the company.
Rs.
Basic Salary
12,000 p.m.
Dearness Allowance (60% is part of salary for retirement benefits) 2,000 p.m.
Commission
4,000 p.m.
He was provided with rent free accommodation in Delhi by the company which it had taken on a
rent of Rs. 12,000 p.m. He contributed 15% of his salary to a recognised provident fund to which
his employer contributed an equal amount.
Besides the above, he received Rs. 1,40,000 as gratuity, Rs. 48,000 for 120 days leave standing
to his credit and Rs. 2,40,000 from recognised provident fund. He was covered under Payment of
Gratuity Act and was entitled to 35 days leave for each completed year of service. He was also
entitled to pension of Rs. 6,000 pm w.e.f 1-12-2008. He got 60% of the pension commuted w.e.f
1-2-2009 and received a sum of Rs. 2,40,000 as commuted pension.
.
W.e.f. 1-2-2011 he took employment with Y Ltd. on the following terms
Rs.
Basic Salary
20,000 p.m.
DA (not forming part of salary for retirement benefits) 2,000 p.m.
HRA
8,000 p.m.
He has been paying rent to his former employer @ Rs 13,000 p.m. w.e.f. 1-12-2010 as he did
not vacate the house till date.
Compute the tax payable by A for the Assessment Year 2011-12.
45
(iii)
the
property
according
to
his
father's
will.
The house remained vacant for one month during the previous year. Find out the
income from house property for the assessment year 2011-12.
Q2. Mr. J owns a house which is let out for residential purposes. The construction of
the house was completed in June 2007. The Annual letting value of the house is Rs.
96,000. Municipal Taxes paid Rs. 20,000. He spent Rs. 24,000 on White washing. On
1.4.2005 he had borrowed Rs. 30,000 on pro-note at 12% interest and spent it on the
construction of the house. Nothing has been repaid out of this loan so far. Mr. J earns
salary of Rs. 7,400 per month. He has a scooter for going to office and spends for
petrol, etc., on an average Rs. 300 per month. Compute his income from House
Property and also his Total Income for the Assessment Year 2011-12.
Q3 Mr. X owned two buildings -in Chennai. Details related to the properties are
given below:
Rs.
Building I (used as residence) Annual rental value 45,000
Taxes paid
8,000
Repairs-Actual
10,000
48,000
Taxes paid
12,000
5,000
The Mortgage loan was Rs. 50,000 and it was used as follows:
Remodeling Building No. II for getting a higher rent 25,000
Advanced to Firm XYZ, where Mr. X is a partner, free of interest, 20,000
Personal use and meeting cost of education of son
46
5,000
You are requested to work out the income from house property of Mr. X for
assessment year 2011-12.
Q4. From the following particulars furnished by Shri H, compute his total income for
the Assessment Year 2011-12:
Rs.
Rs.
Rs.
Salary received
Rs.
1,36,600
3,000
5,100
Property C
8,100
400
500
700
1,600
400
250
650
Property C
750
50
Property B
75
Property C
100
225
700
Total Income
3,925
4,175
Rs. 1,40,775
(a) The assessee has settled in Mumbai for purpose of his employment where he
resides in a rented house.
(b) All the house properties are at Kolkata. Property A is for self-occupation. Properties B and C are let out for residential
purposes.
(c) According to Municipal records the annual value of properties A, Band Care Rs.
2,500, Rs. 2,500 and Rs. 4,500 respectively.
(d) The assessee was on leave for three months during previous year ended 31st
March, 2011. During that period he resided in the Property A. No other benefit was
derived from that property during the previous year.
47
(e) Rs. 5,000 raised on the mortgage of Property B was utilized for purchase of
agricultural lands, the income from which is exempt from Income tax.
Q5. Mr. Lal owns a big house, the construction of which was completed in May, 2009.
50% of the floor area is let out for residential purposes on a monthly rent of Rs. 22,500.
25% of the floor area is used by the owner for the purpose of his profession, which
remaining 25% of the floor area is utilised for the purpose of his residence. Other
particulars of the house are as follows:
Rs.
(i) Municipal Valuation
6,00,000
(ii) Standard Rent
9,00,000
(iii) Municipal Taxes Paid
80,000
(iv) Repairs
30,000
(v) Interest on capital borrowed for repairs
3,00,000
(vi) Ground Rent
8,000
(vii) Annual Charges
10,000
(c) 25% portion let out for residential purpose (Rs. 2,000 p.m.)
(d) 25% portioillet out to commercial firm (Rs. 2,000 p.m.)
Other particulars of the house are as follows:
(i) Municipal corporation tax Rs. 12,800 (actual payment during the previous year
2008-09 Rs. 9,000); (ii) Repairs Rs. 4,500; (ii) Ground rent Rs. 6,800; (iv) Annual
charge Rs. 4,000 (created by will by his father); (v) Fire insurance premium Rs. 2,000;
(vi) Rent collection charges Rs. 1,500.
He has taken a loan from housing board to construct the house @ 12% per annum Rs.
2 lakh. Interest was due Rs. 24,000 during the previous year. Out of which Rs. 20,000
48
was paid. Compute income from house property for the assessment year 2011-12.
Ist House
Self
llnd House
Self
Business
---
---
IV house
Let out for
business
5,400
paid
by
But
deducted from
Repairs (Rs.)
Interest on loan
Vacancy period
500
-2 months
300
-------
--1 month
Rent
-300
---
Additional information:
1.
Sri R, along with his family stayed in Mysore for two months.
2.
Interest was paid on loan obtained by mortgaging the 4 th house
for the purpose of his daughters education in computers.
3.
During the year he won Rs. 20,000 from bettings and received
salary Rs. 1,22,500.
Find out income from house property and income from other sources.
.Q.8. Mr. A owns a house property at Delhi. 60% of the house property is self-occupied for
residence and 40% is let out on a monthly rent of Rs. 10,000. The let out portion was also
self-occupied from 1-10-2010 to 31-12-2010. However, w.e.f. 1-1-2011 the entire house was
let out for Rs. 25,000 pm. The construction of the house property was completed on 31-121994.
The following expenses were incurred for the above house property during the year ending
on 31-3-2011.
Municipal tax paid:
For financial year 2007-08
10,000
49
Q.9. Mr. C owns a house property. It is used by him throughout the previous year 2010-11 for
his (and his family members) residence. Municipal value of the property is Rs. 1,66,000,
whereas fair rent is Rs. 1,76,000 and standard rent is Rs. 1,50,000. The following expenses
are incurred by Mr. C: Repairs: Rs. 20,000; municipal tax: Rs. 16,000; insurance: Rs. 2,000;
interest on capital borrowed to construct the property: Rs. 1,36,000; interest on capital
borrowed by mortgaging the property for daughters marriage: Rs. 20,000 (in either case
capital is borrowed before April 1,1999). Income of Mr. C from business is Rs. 7,10,000.
Find out the net income for assessment year 2011-12.
Q.10 Compute Income from house property:
Annual rent
Standard Rent
Municipal valuation
Vacancy
Recovery of unrealized rent for earlier year allowed as deduction
Fair Rent
Municipal taxes
Interest paid on loan taken for house property
Rs. 60,000
Rs. 48,000
Rs. 40,000
one month
Rs. 2,000
Rs. 50,000
20%
Rs. 15,000
Q11. Mr. X has two house properties situated at New Delhi; Property A was self-occupied for his
residence. Property B has two identical units. Unit I was also self-occupied but unit II was let out
for residential purposes. The other particulars of the property are given below:
Property A
Property B
Municipal Valuation
60,000
90,000
Rent for property let out
4,000 p.m.
Date of completion
1-6-1983
30-9-93
Expenses on repairs
5,000
11,000
Collection charges
2,000
Ground rent
1,000
Interest on money borrowed for construction
20,000
36,000
50
Q.12 .Mr. X is the owner pf three house properties in Delhi, particulars of which for the year
ended 31-3-2011 are as below:
Ist house
2nd house
3rd house
Date of construction
31-12-1997
31-1-1997
31-12-1992
Rs.
Rs.
Rs.
Actual Rent received
70,000
38,000
Self occupied
Municipal value
1,20,000
38,000
55,600
Standard Rent
90,000
80,000
30,000
Municipal Tax paid by X
12,000
3,800
24,000
Municipal Tax paid by
Tenant
2,000
14,000
-------Collection Charges
3,000
3,000
_____
Insurance premium
5,000
5,000
5,000
Interest on loan taken for
Renovation of house
4,800
6,000
12,000
Unrealized Rent allowed
In the past, recovered
During the previous year
4,000
Mr.X resides in Mumbai for three months during the previous year in connection with his
business and for all three months the house remained vacant. During the period of his stay in
Delhi he did not occupy any other house of his own. Compute his income taxable under the
Income from House Property.
51
by the company
16,00,000
14,50,000
goods
8,20,000
Proposed dividend
8,05,000
general reserve
liabilities
40,000
General Reserve
60,000
30,000
30,000
15,000
Net Profit
5,70,000
20,000
8,40,000
36,40,000
36,40,000
Other relevant information are as follows:
1)
An outstanding liability related to sales tax for 2002-03 paid during 2010-11 Rs.50,000 that was not charged to above P&L A/C.
2)
Brought forward loss as per books of account is Rs.60,000 while the brought forward depreciation as per books of account is Rs.
80,000
3)
4) Brought forward loss under the head capital gain Rs. 3,50,000.
Compute the tax liability of X Ltd. for the assessment year 2011-12.
Q2. From the following Profit and Loss Account of Mr. Y, ascertain his income from business
and Gross Total Income for the assessment year 2011-12.
Rs.
To salary (including
proprietors salary)
To general expenses
To advertisements
To interest on proprietors capital
To interest on bank loan
45,000
5,000
14,000
2,000
4,500
Rs.
By Gross Profit
1,22,000
By bad debt recovered
(Not allowed earlier by A.O.
due to lack of evidence)
2,000
By rent received
3,000
By interest on Post-Office
52
Q3. Mr. B is a registered medical practitioner. He keeps his books on cash basis, and his summarized cash account for the year ended 31-3-2011
is as under:
Balance b/d
Loan from bank for
private purpose
Sale of medicines
Consultation fees
Visiting fees
Interest on govt. securities
Rent from property (not
subject to local taxes)
Rs.
4,48,000
Cost of medicines
6,000
50,500
1,10,000
48,000
9,000
Surgical equipments
Motor car
Car expenses
Salaries
Rent of dispensary
7,200
General Expenses
Personal expenses
53
Rs.
20,000
8,000
4,40,000
12,000
63,200
3,200
600
23,200
6,000
600
400
6,000
95,500
6,78,700
6,78,700
Compute his income from profession for the assessment year 2011-12 taking into account
the following further information:
i)
th of motor car expenses are in respect of his personal use.
ii)
Depreciation allowable on car is 15% and surgical equipments is 15%. Both the assets
were purchased in December 2006.
Opening stock and closing stock of medicines was Rs. 40,000 and Rs. 24,000
respectively.
Q.4. Dr. A is a renowned medical practitioner who maintains books of accounts on cash basis.
The following is the receipts and payments account for the financial year 2010-11:
Rs.
Rs.
Balance brought forward
44,000 Rent of clinic
Consultation Fees
2004-05
24,800
2003-04
5,000 2005-06
1,200
2004-05
1,35,000 Water & Electricity Bills
2,000
Visiting Fees
30,000 Purchase of professional books
40,000
Loan from bank
1,25,000 Household Expenses
47,800
Sale of medicines
60,000 Collection charges for
Gifts and presents
5,000 dividend income
100
Royalties for articles published
Motor car purchased
1,30,000
in various journals
6,000 Surgical equipment purchased
24,800
Dividend
10,000 Income tax
10,000
Interest on govt. securities
7,000 Salary to staff
15,000
54
15,000
5,000
11,000
15,000
40,000
45,300
4,27,000
4,27,000
Compute his income from profession for the assessment year 2011-12 after taking into account
the following information:
1) Books worth Rs.25,000 were purchased on 15-5-2010 and the balance on 5-2-2011.
2) Car was purchased on 1-1-2011 and the surgical equipment on 4-9-2010.
3) It is estimated that 1/3 of the use of car is for his personal use.
4) Gifts and presents include Rs.2,000 from patients in appreciation of his medical service
and Rs.3,000 received as birthday gifts.
5) Opening and closing stock of medicines amounted to Rs.10,000 and Rs.6,000
respectively.
Q.5 .The following is the Profit and Loss Accoount of Mr. X for the year ended 31-3-2011.
Debit
Rent of business premises
96,000 Gross Profit
7,38,500
Staff salary
4,20,000 Unclaimed credit balance
Printing and Stationery
15,000 transferred
42,000.
Telephone
20,000 Prize from Lottery (gross)
37,500
Purchase of Trade Mark
Refund of custom penalty
25,000
Mark in May 2008
41,500 Dividend from UTI
5,000
Loss of stock in trade due to
Interest on Post office
White ants
3,000 saving bank
2,000
Audit fees
5,000
Scholarship for a poor but
deserving student
5,000
55
10,000
30,000
3,000
25,000
1,76,000
----------8,50,000
-----------
-------------8,50,000
------------
Notes;
1. The unclaimed credit balance of Rs. 42,000 represents:
(a) Due to a trade creditor no longer payable. Rs. 15,000
(b) Deposits made by a person who in not traceable Rs. 27,000.
2. Life insurance premium is in respect of a deferred annuity for Rs.1,50,000.
3. The fixed deposits are as follows:
Asset
WDV Additions Dep:
Date of Additions
Furniture and fittings
60,000
20,000
10%
5-10-2010
Typewriters and Calculators
80,000
------15%
---------Cycle
----1,600
15%
1-12-2010
Machine
12,000
---15%
-----Compute tax payable be Mr. X for the Assessment year 2011-12
CAPITAL GAINS
Q. 1 Mr. A provides the following data regarding his transaction for the sale of his
residential house for assessment year 2011-12. Compute the amount of Capital
Gain to be included in the Total Income for the assessment year 2011-12 :
House purchased in 1987-88
Sold in November 2010
5,00,000
28,50,000
3,50,000
Deposited in the Capital Gains Alc Scheme, 1988 in January 2009 4,00,000
The cost inflation indices for 1987-88 and 2010-11 were 150 and 711
respectively.
Q 2 From the following data, you are required to work out the capital gains for
Assessment Year 2011-12 :
56
Assume that the property being sold and the new property being acquired are both
residential:
Index 1985-86-133, 2010-11-711.
Q.3 M/s. P. Bros. Chennai running an industrial undertaking were ordered by City
Corporation, Chennai- to shift their unit from urban area of Chennai. They shifted
their concern during 2010-11 and in the process sold some of the assets whose details
are given below:
Assets
P &M
Land
Building
Acquired in
1989
June 1983
1989
Rs.
Rs.
Rs.
Sale proceeds
10,00,000
7,00,000
12,00,000
W.D.V. on 1.4.2010 [cost U/S 50(2)] 4,40,000
7,32,500
Cost of acquisition 6,00,000
1,40,000
10,00,000
Amount invested during Dec. 2010
due to shifting .
8,00,000
2,00,000
5,00,000
Compute the taxable capital gain for the assessment year 2011-12
(C.I.I. for 1983-84 is 116; 1988-89 is 161; 2010-11 is 711)
Q.4. During the previous year 2010-11, Mr. Ramesh sells the following capital assets:
Sale
Cost of
Year of
Fair Market
proceeds
Acquisition Acquisition
Value as on
1 - 4 1981
(Rs.)
(Rs.)
(Rs.)
Land
1,58,00,000
18,50,000
1977
28,00,000
Gold
9,86,000
2,40,000
1980
2,41,000
Listed Debentures
1,57,000
75,000
1975
40,000
Assume that his business income is Rs. 1,46,000, determine his net income for the
assessment year 2011-12.
Q5. Mr. A lives in Bangalore. He owns not only house properties in and around Bangalore but
also cultivable land near Mangalore. He lives in a house which had been bought by him in
January, 1986 for Rs. 2,31,000. The agricultural land measuring 10 hectares is being
cultivated by his father for over 15 years. Its fair market value as on 1-4-1981 was Rs.
57
8,00,000. The residential house is sold by him for Rs. 14,00,000in December 2010 and
another house bought within 3 months at a price of Rs. 3,00,000 to be used for residential
purposes. Agricultural land is also sold for Rs. 46,00,000 in January 2011. on 30-6-2011 he
bought another agricultural farm for Rs. 5,00,000 which will be cultivated by him. Gold
ornaments were also sold by him in November, 2010 for Rs. 2,00,000 the fair market price
thereof as on 1-4-1981. being Rs. 30,000. He bought fresh jewellery for Rs. 80,000 within 6
months of sales. You are required to compute taxable capital gains of Mr. A for the A. Y.
2011-12.
(Capital Gain Index No. of the year 1981-82 = 100, 1986-87 = 133, 2010-11 = 711)
Q6 You are required to compute the total income for the assessment year 2011-12.
P sold a house property on 30-11-2010 for Rs.3,50,000. He had acquired this property from
O under a will on 1-6-1991 and expended Rs.19,900 on its improvement in 1991-92. Compute
Ps income under the head Capital Gains for the assessment year 2011-12 assuming that O had
acquired this property at the cost of Rs.40,000 in 1981-82 and further spent Rs.15,000 during the
same year on its improvements. The cost inflation indices are as under:
1981-82 100,
1991-92 199,
2010-11 711.
Q.7 X was the owner of the following assets:
Gold purchased on 15th December 1977 for Rs. 1,40,000 (market price as on 1-4-1981
Rs.1,82,000)
Land purchased on 15th Dec. 1979 for Rs. 31,60,000 (market price as on 1-4-1981 Rs.5,60,000)
Listed Debentures purchased on 15th December 1976 for Rs. 3,14,000 (market price as on .1-41981 Rs. 2,00,000)
He sold these assets in financial year 2010-11 as follows;
Gold for Rs. 38,00,000, Land for Rs. 1,54,00,000 and Debentures for Rs. 5,10,000). Compute
Capital gain taxable for Mr. X for the assessment year 2011-12.
(Capital gain Index no. 1981-82 ;100 and 2010-11 ;711 )
Q8. X owns several assets but does not own any residential house. He sells the following assets
and requests you to compute his capital gains for the assessment year 2011-12.
(1) Shares (purchased in April, 1992 for Rs. 1,20,000) sold through recognised stock exchange
on 15-12-2010 for Rs. 2,00,000.
(2) On 1-4-1981, he had agreed to sell the jewellery to Y for Rs. 5,60,000 which was
purchased in 1975 for Rs. 3,00,000. However, the sale could not be effected as Y backed
out. He now sold the jewellery on 15-7-2010 for Rs. 32,40,000 and incurred Rs. 40,000
incidental selling expenses on account of brokerage and commission. He also invested Rs.
3,00,000 on 20-10-2010 in a Deposit Account with a public sector bank under the Capital
Gains Deposit Account Scheme. In December, 2010 he also purchased a small residential
house for Rs. 3,80,000.
(3) Debentures (listed) (purchased in September, 1993 for Rs. 1,00,000) sold on 1-12-2010 for
Rs. 1,60,000.
(4) Sold his motor car (purchased in August, 1992 for Rs. 1,40,000) on 15-3-2011 for Rs.
1,60,000.
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( Capital Gain Index No.: 1981-82 = 100, 1992-93 = 223, 2010-11 = 711 )
Q3. Shri N, a resident individual, submits the following particulars of her income
from other sources for the year ended 31stMarch, 2011:
1. Family pension from the Government of Uttar Pradesh Rs. 42,000.
2. She has written a book for schools on which she gets a royalty of Rs. 17,000 from the
publisher. She has spent Rs. 3,000 on books, stationery, typing, etc. during the previous
year.
3. She has received remuneration for doing invigilation in Examination Rs. 1,000.
4. Remuneration for acting as examiner Rs. 1,800. She incurred Rs. 75 on postage, etc. in
connection with the examination work, which were reimbursed by the University.
5. Cash worth Rs. 1,00,000 was found in the previous year in her bank locker, the source
of
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INDIVIDUALS
Q1. Mr. X, an employee of a company, has furnished the following particulars of his
income for the year ended 31st March, 2011 :
.
(a) Salary from 1st April, 2010 to 31st December, 2010 @ Rs. 9,000 per month and
D.A. @ Rs. 5,000 p.m.
(b) Entertainment allowance from 1st April, 2010 to 31st December, 2010@ Rs. 1,000
per month.
(c) Premium paid by the employer to Life Insurance Corporation on a policy for Rs.
5,000 taken on his life and for his benefits Rs. 600. .
(d) Premium paid by Mr. X out of his own pocket on Life Insurance policies on his own
life Rs. 3,500.
(e) Interest on Savings Account with Bank Rs. 400.
(f) Interest on National Plan Certificates Rs. 500.
(g) Own house in his own town (built in 1966) was occupied by his brother-in-law free
ofrent.
The annual letting value of the house according to municipal valuation is Rs. 2,000 and
municipal taxes for the year are Rs. 400.
(h) The employer had provided him a small car both for his official use and private use
for the above period. The maintenance expenses are met by the employer. .
Compute the total income of Mr. X for the assessment year 2011-12.
Q2. Mr. X, a Government employee and a citizen of India, is sent to London on office
duty on 1st June, 2010. He stays there upto 31st January, 2011. The salary and
allowance drawn by him during this period are given below:.
Rs. .
4 months' salary in India. .
72,000
1,44',000'
Overseas allowance
96,000
Free residence in London (Rent Rs. 10,000 per month for 8 months)
80,000
The full amount of 8 months' salary was spent in London and nothing was brought to
India. He owns property in Delhi which he uses for his residence. During the period of
his stay in London the house was occupied by his wife and children. Annual rental
value of the house is Rs. 5,600. Municipal taxes paid in respect of this house during the
year 2010-11 were Rs. 600 and ground rent paid Rs. 200. His bank interest in India was
Rs. 4,200. He paid Rs. 20,000 donation to a charitable institution to which section 80G
applies. Compute
his total income.
Q3. Mr. B. presents the following information regarding previous year ended
31.3.2009 :
(1) Taxable profits from Poultry farming business Rs. 90,000. Taxable profits
from dairy business Rs. 75,000.
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(2) Taxable profits from small-scale industry in rural area (established in 200102) Rs.
2,60,000. The industry produces article listed in schedule 11 of Income Tax Act.
(3)
.
Dividend
received
from
co-operative
society
Rs.
2,700.
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Q5. The following are the particulars of Mr. X for the previous year 2010-11. You
are asked to compute his net tax liability or amount refundable, as the case
may be :
Business Income
1,46,900
Rent of property
10,000
Municipal tax on property paid
1,000
Agricultural Income
10,000
Long-term capital gains
15,000
Lottery winning from Kerala State
50,000
Life Insurance premium paid
10,000
Contribution to Public Provident Fund
15,000
Casual Income from crossword puzzles
1,200
Q6. Shri Ravi who is 70 years old has submitted the following particulars of his
income for the previous year 2010-11 :
Rs.
(i)
Income from profession as musician:
(a)
Earned and received in India
1,39,000
(b)
Earned and received in foreign country and
brought in India.
1,60,000
2,99,000
(ii)
Interest from Government Securities
17,000
(iii)
Accrued interest on National Saving Certificates during the
previous year
17,000
During the previous year he has made the following payments:
Rs.
(i)
National Saving Certificates VIII issue purchased
10,000
(ii)
Premium on self insurance policy
6,000
(iii)
Deposited in Public Provident Fund Account
10,000
(iv)
Health Insurance premium of his children paid by cheque
9,000
(v)
House rent paid for rented house of his own residence
36,000
Compute his total income and tax payable by him for A.Y. 2011-12
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Municipal Tax Rs. 3,000; Insurance Rs. 500, Ground Rent Rs. 500; Collection
Charges Rs. 600;lRepairs Rs. 4,000; Interest on Loan utilized for making substantial
extensions to the property Rs. 2,000.
Mrs. M: Interest on Government Securities Rs. 12,000, she received a legacy of Rs.
2,00,000 left to her by her grandmother and paid life insurance premium of Rs.
2,000.
Mr. N: During the year, Mr.N was engaged in speculation of shares which resulted
in a profit of Rs. 20,000. Besides, he also did speculation business which resulted in
a loss of Rs. 30,000. He paid Rs. 8,000 as life insurance e premium on a policy of
Rs. 30,000.Prepare statements showing the respective assessable incomes of the
three partners for the assessment year 2011-12.
Q3. Shri Avinash, Shri Ajay and Shri Abhay are partners in a partnership firm
Avinash & Co. sharing profits in the ratio 5:3:2:. The net profit of the firm as per its
P.& L. Account for the year ending 31st March, 2011 was Rs. 3,60,000
The debits to the Profit and Loss Account included the following:
(i) Rs. 3,000 for depreciation of scooter purchased by Avinash for Rs. 15,000 on Ist
April, 2008, which is used wholly for the business of the firm and Rs. 3,600 for
Scoooter Allowance to Avinash at Rs. 300 per month for meeting the cost of petrol
and repairs etc. of this scooter.
(ii) Rs. 30,000 paid as Commission to Smt. Vijay, wife of Shri Ajay, for acting as
the Sole
selling agent of the firm.
(iii) Rs. 2000 paid as fees to Smt. Alka, wife of Shri Abhay for appearing as an
advocate in an appeal filed by the firm in the Rajasthan High Court.
(iv) Rs. 50,000 spend on scientific research including Rs. 30,000 for the construction
of research laboratory completed on 30th September, 2008.
(v) Rs./ 10,000 spent by the firm for the purpose of promoting family planning
amongst its employees including Rs. 6,000 capital expenditure.
(vi) ;Rs. 3000 paid in proportion of 5:3::2 to the Life Insurance Corporation for
getting each partners life insured for Rs. 15 ,000.
Prepare the Statement of Total Income of the firm for the Assessment Year 2011-12
and also compute the income tax payable by the firm on its total income
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Q4. The profit and loss account of the Firm of M/s A and B, sharing profits and
losses in the ratio of 3:2, for the previous year ending on 31dst March 2011 is as
follows:
Rs.
Rs.
Cost of goods sold
9,50,000
Remuneration of partners
20,000
Remuneration to employees
5,45,000
Sales
3,00,000
Dividends
1,70,000
Long term
Capital gain
1.90,000
Interest to Partners
Other expenses
Sales tax outstanding
Net profit
15,000
1,00,000
10,000
20,000
________
__________
11,60,000
11,60,000
________
__________
Additional information is given below:
(1)
Other expenses include the following:
(i) Entertainment expenses Rs. 20,000
(ii) V.I.P. bags, costing Rs. 1,500 each given to ten customers who exceeded
the sales target fixed under sales promotion scheme.
(iii) Rs. 32,500 paid in cash to an advertising agency.
(2)
Outstanding sales tax was paid as 14th July, 2009
(3)
The firm is not evidenced by instrument.
(4)
The detailed particulars of remuneration and interest to A and B, working
partners, are given below:
Amount actually paid
A
B
(i)
Salaries
70,000
80,000
(ii)
Bonus
60,000
40,000
(iii)
Commission
20,000
30,000
(iv)
Interest
9,000
6,000
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(v)
Other incomes
You are required to compute for the assessment year 2011-12: total income and tax
liability of the firm.
_____________________________________________________________
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