Direct Tax Semester V 2014-2015

Direct and Indirect Taxes Paper I TYBCOM Semester V 2014-2015
Allocation of the Syllabus and Question Paper Pattern of Courses of B.Com.

Programme at T.Y.B.Com. Semester V with Effect from the Academic Year
2014-2015
Applied Component Group:

Direct and Indirect Taxes Paper-I
Direct Tax
Modules at a Glance
Sr. Modules No. of
No. Lectures
1 Income Tax
1.1 Basic Terms (S: 2, 3, and 4) 04
1.2 Scope of Total Income & Residential Status 04
1.3 Heads of Income 24
1.4 Deduction from Total Income 04
1.5 Computation of Total Income for Individual 09
1.6 Self - Evolution Assignment work
1.7 Internal Test Papers
Total 45
Pankaj Pandagale, Assistant Professor of Accountancy, GES Dr.T.K.Tope College, Parel, Mumbai -12 1
Sr. Modules / Units Page No.

No.
1.1 Basic Terms (S: 2, 3, and 4)
Assessee
Assessment 4 - 10
Assessment Year
Annual value
Business
Capital Assets
Income
Person
Previous Year
Transfer
1.2 Scope of Total Income (S: 5) 11 - 26
Residential Status (S: 6)
1.3 Heads of Income (S: 14; 14A) 27
(i) Salary (S: 15 to 17) 30 - 48
(ii) Income from House Properties (S: 22 to 27) 49 - 60
(iii) Profit and Gain From Business (S:28, 30, 31, 32, 35, 35D, 36, 37, 40,
40A and 43B) 61 - 64
(iv) Capital Gain (S: 45, 48, 49, 50, 54 EC) 65 - 71
(v) Income from Other Sources (S: 56 to S: 59) 72 - 78
Exclusions From Total Income (S: 10) 28 - 29
Exclusion related to specified heads to be covered with relevant head.eg. Salary,
Business Income, Capital Gain, Income from Other Sources
1.4 Deduction from Total Income 79 - 85
S 80C, 80CCC, 80D, 80DD, 80E, 80 U, 80TTA
1.5 Computation of Total Income for Individual 86 - 93
1.6 Assignment Work 94 - 97
1.7 Internal Class Test 98 - 100
Notes:
1. The Syllabus is restricted to study of particular sections, specifically mentioned rules and
notifications only.
2. All modules / units include Computational problems / Case Study.
3. The Law In force on 1st April immediately preceding the commencement of Academic year will
be applicable for ensuing Examinations.
Third Year B. Com.

Question Paper Pattern
Semester V end University Examination : 75 Marks
For the Academic Year: 2014-15
Duration : 2 Hrs.
All Questions are Compulsory Carrying 15 Marks each
Direct Taxes
Q. No. Particulars Marks marks
Objective Questions
(A) Sub questions to be asked 10 and to be answered any 8 08
1 (B) Sub questions to be asked 10 and to be answered any 7 07 15
( Multiple choice / True or False / Match the columns / fill in the
blanks)
2 Full Length Practical Question 15

OR 15

OR 15

OR 15
(A) Theory Questions 08

5 (B) Theory Questions 07
OR 15
5 Short Notes 15
To be asked 05, to be answered 03
Total Marks 60
Note: Full-length question of 15 marks may be divided into two sub questions of 08 and 07 marks.
1.1 Module / Unit

Basic Terms (Section : 2, 3, and 4)
Income tax plays a very important role in the national economy. It is one of the important sources of
revenue to the government. In addition, it is also looked upon as a tool for achieving the social and economic
objectives as laid down in our Constitution. It has been recongised as a good financial lever to narrow the
disparities in income. Regional economic imbalances are also being reduced by providing incentives and
concessions in income tax for starting new industries in backward areas. Thus, besides being a source of
revenue, income tax has become an effective instrument to ensure balanced soci-economic growth.
The present law of income-tax is contained in the Income tax Act, 1961, as amended upto date, the
Income tax Rules, 1962 as amended upto date the Finance Act, 2001. The Income Tax Act, 1961 came into
force on April 1, 1962 and it extends to the whole of India.
Taxes
Direct Indirect
1. Direct tax is a income tax. 1. Indirect tax is not a income

tax
2. A Tax directly levied on
income. 2. A Tax indirectly levied on
income.
3. The law relating to it is
contained in the Income Tax 3. Customs duties, excise duties,
Act, 1961. VAT, Service Tax etc.
The Income Tax Act is the machinery which determines which persons are liable to tax. It also
determines in respect of which incomes they are liable to tax. These incomes are classified under various
heads and then taxed. However, the Income Tax Act does not prescribe the rates at which different persons
and different incomes would be taxed. These rates are prescribed every year by Finance Act. Finance Act also
sets out the obligations and remedies of the tax payers.
IMPORTANT DEFINITIONS
Section 2 and 3 of the Income Tax Act contain definitions. Some of the important definitions
are being discussed in this chapter.
Assessee [ Sec. 2 ( 7 ) ] :
The following are the ingredients of the definition of assessee.
The Assessee means a person by whom any tax or any other sum of money is payable under this
Act.
A person is liable to pay tax as well as interest (for late payment of tax ) or penalty ( for concealment
of income , fraud etc. ) under the Income Tax Act.
Therefore, an assessee basically means a person liable to pay tax or interest or penalty.
Person gives the classification of the assessee according to their legal

status. This status is to be determined first to fix the tax liability, as
different rates of tax are prescribed for different persons.
Every person in respect of whom any proceeding under this Act has been taken for the assessment of
his income or of the income of any other person in respect of which he is assessable or of the loss
sustained by him or by such other person or of the amount of refund due to him or to such other
person.
Every person who is deemed to be an assessee under any provision of this act. The deemed assessee
is a person who has been treated as an assessee only in the eye of law, otherwise he was not an
assessee.
Every person who is deemed to be an assessee in default under any provision of this Act.
For example : The guardian of the minor is assessed on the income or loss of a
minor. Where a person is assessed on the income of any other person, he is also
entitled to claim the refund, if any, due to such other person.
For example : if any person who is required to deduct tax at source does not so
deduct it or after having deducted, fail to pay it to the Central Government, he is
deemed to be an assessee in default in respect of the tax.
For example : the legal representative of the deceased, the guardian of a minor,
the agent of a non-resident and the trustee of a trust ect. are deemed assessee.
Person [ Sec. 2 ( 31 ) ] :
The term person includes:
1. an individual ( covering male, female, major, minor, lunatic )
The term Individual would include only a natural person i.e. a human being. It will also include a
minor or a person of unsound mind.
2. a Hindu Undivided Family
The status of Hindu Undivided Family , commonly referred to as H.U.F. , is one arising from the
Hindu law. It consists of all persons lineally descended from a common ancestor and their wives, sons and
daughters.
3. a company
4. a firm
For the purpose of Income Tax Act, a Firm is treated as an entity separate and distinct from its
partners, though under the partnership law, a firm has not been accorded such a separate entity.
5. an association of persons or a body of individuals, whether incorporated or notThe term Association of
Person or Body of individuals has not been defined by the Act. Hence, these terms must be understood in
their plain ordinary meaning. Thus , when there is a combination of persons, formed for the promotion of a
joint enterprise, i.e. when co-adventurers join together in a common action, they constitute an Association of
Person if they do not satisfy the ingredients of a partnership. The Body of individuals normally refers to
trustees of a charitable trust where trustees have come together, not for personal gain, but for social
upliftment.
6. a local authority
The term Local Authority would include gram Panchayat, a municipality, district municipal
corporation, port trust or any other body entrusted by the Governement with the control and management of a
municipal or local fund.
7. every artificial Juridical ( legal ) person, not falling within any of the preceding sub-clause. An idol, deity
and a university are covered under this clause.
An Artificial Juridical Person would include an idol, a university, a Bar Council , a corporation
established under a special Act (LIC) etc.
Key Points:
1. Partnership firm means where 2 or more persons come together, sign a partnership deed, they decide
to carry on the business for a long term and agree to share profit/losses.
2. AOP means where 2 or more Persons come together and do business i.e. one individual, one firm
and one company can come together and start a business.
3. BOI means where 2 or more individual come together and start a business i.e. Mr. X, Mr. Y and Mr.
Z come together and start a business.
4. Difference between a Partnership and AOP/BOI:
Firm is constituted by signing a partnership deed and for a long-term,
Whereas,
AOP/BOI is usually for particular projects and is constituted without any deed or agreement and since
it is usually project wise , it is for short term.
Illustration (Short Question)

Persons Legal Status
1. Mumbai University An artificial juridical
person
2. HDFC Bank Ltd. Company
3. Mumbai Municipal Corporation Local Authority
4. Parel Kelavani Mandal Body of individuals
5. Highway view Co-op. Housing Society Ltd. Association of Persons
6. M/s Vip Trading Co. ( a Partnership business) Firm
7. Siddhartha Industries Limited Company
8. Mr. Ronak , Proprietor of Hi Style Apparels Individual
9. Prof. Shahi Desai Individual
10. B.E.S.&T undertaking Local Authority
11. Wadala Gram Panchayat Local Authority
12. A joint Hindu family consisting of X, his wife and his minor son H.U.F.
13. Mrs. K, legal heir of Mr. S Individual
14. K R C & Co. (Consisting of K, R & C doing business under a Partnership
Firm
Deed)
Assessment Year [ Sec. 2 ( 9 ) ] :

The Assessment Year means the period of twelve months commencing on the first day of April
every day. Thus, the assessment year begins on 1st April and ends 31st March every year.
Previous Year [ Sec. 3 ] :
Income tax charged on the total income of the previous year at the rates of the relevant assessment
year ( Sec. 4 ) . Thus , the income chargeable to tax in the assessment year is of the previous year.
The definition of previous year [ Sec. 3( 1 ) ] is analysed as under :
Financial year to be the previous year : Previous year means the financial year immediately preceding the
assessment year. For example, in relation to the assessment year 2014 - 15 immediately preceding financial
year is 2013-2014 beginning with April 1st , 2013 and ending with March 31st , 2014. Accordingly, it is the
previous year.
Previous Year (P.Y.) Assessment Year (A.Y.)
It is the financial year in which the It is the immediate next year of the P.Y.; in which P.Y.s
income is earned. income is charged to income tax.
It can be of 12 months or less than 12 It is always of 12 months.
months.
It any assessee starts his business/profession Assessment year will always start from the 1st April,
from any date other than 1st day of F.Y., irrespective of the date of the commencement of
then the P.Y. starts from the date of business/profession.
commencement of such business/profession.
Objective Question
e.g. Mr. A starts his business from 5th April, 2013
P.Y. : 05/04/2013 - 31/03/2014 A.Y. : 01/04/2014 - 31/03/2015
Next P.Y. : 01/04/2014 - 31/03/2015 Next A.Y. : 01/04/2015 - 31/03/2016
Assessment [ Sec. 2 (8) ] :

Assessment is the process of determining
i. the income or the loss of an assessee.
ii. the tax liability on the income so determined.
iii. the tax payable by or refund due to the assessee.
Income [ Sec. 2 (24) ] :

The income includes:
1. profit and gains
2. dividends
3. Voluntary contribution received by
a. a charitable or religious trust, or
b. a specified institution (e.g. a scientific research association, a sports association, a notified
charitable or public religious trust or an university or other educational institution or an electoral
trust)
4. perquisites taxable under the head Salaries or profits in lieu of salary
5. Special allowance or benefit specifically granted to an employee to meet expenses for the
performance of his duties. (Entertainment Allowance).
6. Allowance to an employee to meet his personal expenses at office, or to compensate him for the
increased cost of living (Dearness Allowance)
7. Benefit or perquisite obtained from a company by a director or a person having substantial interest
in the company or their relatives (provision of a motor car)
8. Benefit or perquisite of obtained by a representative assessee, a beneficiary, or any amount paid by

the trustee.
9. Profit on sale of an import licence, taxable.
10. Export cash assistance received from govt., taxable.
11. Refund of customs or excise duty received or receivable against export, taxable.
12. Benefit or perquisite from business or profession (gift received by a doctor from a patient), taxable.
13. Any interest, salary, bonus, commission or remuneration due to or received by a partner from a
firm, to the extent allowed to be deducted under section 40(b), taxable.
14. Capital gains chargeable
15. Profits of any business of insurance carried on by a mutual insurance company or a co-operative-by-
co-operative society with its members.
16. The profits and gains of any business banking (including providing credit facilities) carried on by a
co-operative society with its members.
Income means the amounts earned by a person by way of salary , rent, profit ,
fees, dividends, interest etc. A person gets income from many sources such as
employment (Salaries), properties (rent), business or profession (Profit or fees)
investments in shares (dividends), fixed deposits (interest) etc.
17. Winning from lotteries, prizes by draw of lots or by chance, crossword puzzles, races including
horse races, card games, game show, entertainment programme on television in which people
compete to win prizes, gambling or betting.
18. Contributions from employees to Provident Fund, or Superannuation Fund, or Employees
Insurance Fund etc. deducted by the employer from the salaries of the employees.
19. Any sum received under a keyman Insurance Policy including bonus on such policy.
20. Any sum (non-compete compensation etc).
21. Any movable/immovable property worth more than Rs.50000 as gift, taxable.
22. Any sum exceeding Rs.50000 received without consideration (a gift) by an individual or an HUF,
taxable.
23. Any specified shares worth more than Rs.50000 received as a gift.
The following is income as per Income Tax Act:
a. Gift received by a lawyer from his client Yes
b. Gift received by son on his birthday from parents No
c. Money received by dependent parents from their son No
d. Income received from smuggling activity Yes
e. Reimbursement of actual travelling expenses to an employee No
f. Arrears of bonus, received in lump sum by an employee Yes
g. Extra sales money received on account of devaluation of currency Yes
h. Man of the Match Prize received by a professional sportsman Yes
i. Compensation for death of father in a car accident received from the car owner by the son of
No
the deceased
j. Free tickets for air travel by Air India received by Mr. Vadera who had rented his premises to
Yes
Air India, in lieu of rent, as per the terms of rent agreement
State with reasons whether the following receipts are Income.

1. Income earned from smuggling gold into India.
2. Gift received from a patient to the Doctor.
3. Gift received by son on occasion of his marriage.
4. Award received by a professional sportsman.
5. Award received by a non-professional sportsman.
6. Reimbursement of Conveyance & Travelling expenditure of employee.
7. Gift received from a friend.
8. Pin money received by wife for her dress or personal expenses.
Fill in the blanks
1. Previous year means the _________ year immediately preceding the assessment year.
2. The first previous year of a newly set up business can be ____ 12 months.
3. A period of twelve months commencing on the first day of April every year is called ____.
4. An assessment is defined under income tax Act to include ___.
5. A person by whom any tax is payable under the act is known as an ___.
Exercise : Theoretical
1. Write short notes on : (Define )
a. Assessee b. Assessment c. Assessment Year d. Person e. Previous Year
2. Classify assesses according to their legal status. Give an illustration of each.
Short Questions
1. What is the status of the following persons?
a. Pune Municipal Corporation
b. Gokhale Education Society
c. Highway view Co-op. Housing Society
d. Jankalyan Bank
e. Madras Port Trust
f. Indian Sales Corporation ( a partnership between A , B and C )
g. Pune University
h. Chiplun Gram Panchayat
i. Bank of Maharashtra
j. Arjun, a minor son of Sachin
k. Mr. Ati-shahane , a person of unsound mind
l. Avani Textiles, Proprietor Avani Poddar
m. Reliance Industries Ltd.
n. Tirupati Devsthannam
o. Kambali Cricket Club
p. Marathwada University
q. M/s Appu & Pappu two Chartered Accountants in partnership
r. The Kaka Memorial Trust
s. Baban Barakya a minor
t. Joint venture among P Ltd., M Ltd., and Mr. N
u. O, M and G, individuals, constructed a Infinity Mall jointly and share the rent.
2. Determine the previous year for the following :
a. Assessment year 2014-15.
b. Newly set up business on 3rd Janunary, 2014 for Assessment year 2014-15.
c. Newly set up profession on 1st April, 2012 for Assessment year 2014-15
3. Determine the legal Status of the following:

a. Baba a minor son of Aaba
b. Ka-ku Steel Ltd.
c. Nagpur University
d. Om-sai Co-op.Housing Society
e. Bank of Baroda Ltd.
f. Mumbai Port Trust
g. Katrina Tai
h. Imran Bhau
i. A joint venture between Mr. contractor, Mr Painter, and Mr. Cementwala for construction of
kalpataru building.
j. Mr. Dharmaraja and his four brothers joining together to purchase a lottery ticket and sharing
the prize, if any, equally.
4. Determine the legal Status of the following:
a. Malvany Gram Panchayat
b. Da - ji Enterprises Private Limited
c. M/s Universal Export Agency with two partners Mr. Mohan Singh and Mr. Monkey Singh
d. Akhil Bhartiya Mitra Mandal
e. Hindu Idol
f. Sangmnar Municipal Corporation
g. Vijaya Bank Limited
h. Ramu Varma & Associates, Chartered Accountants practising under a partnership deed.
i. Sungrace Co-operative Housing Society.
j. Mr. Shah, proprietor of United Trading Company
5. Match the following columns

Column A Column B
1. Anil Tilak Company
2. Infosys Technologies Ltd. Association of Persons
3. Parel Gram Panchayat Firm
4. Vikhroli Sports Club Individual
5. University of Kerala Body of Individual
Artificial Juridical Person
Local Authority
Ans. 1. Individual 2.Company 3. Local Authority 4. Association of Persons 5. Artificial Juridical Person
6. Match the following columns

Column A Column B
1. Capital gain Assessment year 2014-15
2. Financial year immediately preceding the assessment Income
year
3. 01-04-2014 to 31-03-2015 Assessee
4. Hindu Undivided Family Assessee in default
5. Person with tax libility Previous year
Person
Remittance
Ans. 1. Income 2.Previous year 3. Assessment year 2014- 2015 4. Person 5. Asssessee
1.2 Module / Unit

Residential Status of an Assessee ( Section 6 )
Incidence of taxation varies according to the residential status of an assessee in the previous year. Hence , the
determination of residential status is very important so that an assessee may be correctly assessed to tax.
DETERMINATION OF RESIDENTIAL STATUS

Residential Status Section 6
Helps in determining whether Might change from Depends on the no. of Does not depend on
foreign income is taxable to a year to year days of stay in India. Citizenship.
resident or whether Indian income
is taxable to a
Non-Resident or Not
General Rules
1. Status for each year
The residential status of an assessee is to be determined for the previous year. His residential
status in the assessment year is immaterial for tax purposes. In one year the assessee may be
resident while in another year he may be non-resident.
2. Different residential status for different previous years not permissible
If a person is resident in India in a previous year relevant to an assessment year in respect of
any source of income he is deemed to be resident in India in the previous year relevant to that
assessment year in respect his other sources of income.
3. Burden of proof
Residential status of an assessee is a mixed question of facts, and law. It is the duty of the
assessee to place the relevant facts, evidence and material before the income tax authorities.
Residence of an Individual [ Sec. 6 (1) (6) (a) ]

Individual
Resident Non-Resident
An individual becomes Resident in India, in any previous year, if he satisfies any one of the following two
conditions.
1. He is in India for 182 days or more in previous year.
2. He is in India for 60 days or more in previous year AND stay in India for 365 days or more in
four years preceding the previous year.
If an individual satisfies any one of these conditions, he will become resident in India.
An individual is Non Resident in India in the relevant previous year if he does not satisfy any one
condition.
There are two EXCEPTIONS to the second condition.

1. An Indian citizen or foreign national of Indian origin, who is outside India (engaged in any avocation)
, comes on visit to India in any previous year.
2. An Indian citizen who leaves India in any previous year as a member of the crew of an Indian ship or
for the purpose of employment outside India.
An individual would be resident only if the first condition is satisfied.
Resident 6(1)
Resident and Resident But Not

Ordinarily Resident Ordinarily Resident
( R & O R ) 6 (6) (RBNOR)
A Resident who further satisfies following two conditions will become Resident and
Ordinarily Resident (R&OR).
Both of them must be satisfied.
1. He should have been in India 2 years out of 10 previous years , immediately

preceding the previous year in which he is resident.
AND
2. He should have been in India for the period of 730 days or more during the
Seven years, immediately preceding that previous year.
SUMMARY - INDIVIDUAL
Check whether
Check whether
Individual is covered
If YES he fulfils the
1st Basic Condition
By the Exceptions
If NO If NO
Check whether If NO
he fulfils any ONE of He is a Non-Resident
the two basic
conditions
If YES
If YES
He is a Resident
Then
He is a Resident
If N0 But not Ordinarily
Resident (RBNOR)
Check whether
he fulfils BOTH the
additional conditions
If YES
He is a Resident
And Ordinarily
Resident (R&OR)
Residence of a Hindu Undivided Family [ Sec. 6 (2) :
Check, where is the Control and Management of the HUF

situated
Wholly Partly Wholly

In In outside
India India India
RESIDENT NON - RESIDENT
If control and management of HUF is situated wholly, partly in India, then such
HUF will be treated as Resident in India.
Similarly, if control and management is situated wholly outside India, then it
will be treated as Non-Resident in India.
Once the HUF is a Resident, we can further classify into Ordinary Resident
and Not ordinary Resident.
If karta of the HUF (i.e. manager) is Resident and Ordinarily Resident, then
even the HUF becomes Ordinarily Resident and similarly if Karta is Resident and
not ordinarily Resident, then the HUF also becomes Not Ordinarily Resient.
Whether the HUF is Resident or Non-Resident depends on control or

management of the HUF and further whether the HUF is Resident and Ordinarily
Residentor Resident and Not Ordinarily Resident depends on the residential status
of the Karta i.e. the manager of the HUF.
Note : Place where control and management is situated means the place where
important decisions are taken and the Board Meeting are held.
Residence of a Company [ Sec. 6 (3) :

Company
Indian Company Foreign Company
If controlled If controlled
Wholly Partly Wholly Wholly Partly Wholly

From From Outside From From Outside
India India India India India India
Resident in India Non Resident in India
Note : A company cannot be further classified into ordinarily or not ordinarily resident.
The company may either be resident or non-resident in India in any previous
year depending upon the facts of the case.
The company is resident in India in any previous year if any one of the
following two conditions is satisfied :
1. Indian company :
If it is an Indian company, it is always resident in India in the previous
year. The place of control and management is of no relevance in this case. It
may be wholly or partly situated outside India.
An Indian company is a company which is formed and registered under
the Indian laws or Kashmir laws or the Union Territories laws relating to
companies and whose registered office is in India.
2. Control and management wholly in India :
A non-India company is resident in India in the relevant previous year if
control and management of its affairs are wholly situated in that year. Thus , a
foreign company may also be resident in India in relevant previous year if no part
of control and management of its affairs are situated outside India in that year.
Control and management refers to the head and brain which directs the
affairs of the policy, finance, disposal of profits and such other vital things
concerning the general and corporate affairs of the company.
Residence of a Firm, AOP, BOI, Local Authority, Artificial

Juridical Person (AFP) Sec. 6 (2) Sec. 6 (4) :
Check where the control and Management of
Firm / AOP / BOI / LA / AJP is situated
Wholly Partly Wholly

in in Outside
India India India
Resident in India Non Resident in India
Note: The above-mentioned persons cannot be classified further.

Control and management has the same meaning as that in case of HUF.
SCOPE OF TOTAL INCOME ( SECTION : 5 )

The scope of total income depends on the residential status of the assessee.
It determines which income is taxable in the hands of which assessee.
Eg. If an assessee is a resident and ordinarily resident, all types of income, whether Indian or foreign
will be taxable for him in India. Whereas, if an assessee is a non-resident, his foreign income will not
be taxable in India.
Let us study this in detail:

TYPES OF INCOME:
i. Indian Income:
Any income, which is received in India.
Income, which accrues / arises in India whether received in India
or outside India.
ii. Foreign Income:
Any income received outside India and which accrues / arises
outside India.
Any income from a business situated outside India, but which is
controlled from India.
TAXABILITY :
Indian Income
For Resident and For Resident but For Non-Resident

Ordinarily Resident Not Ordinarily (NR)
(R&OR) Resident (RBNOR)
(R&OR)
Taxable in India
TAXABILITY :
Foreign Income
For Resident and For Resident but For Non-Resident

Ordinarily Resident Not Ordinarily (NR)
(R&OR) Resident (RBNOR)
(R&OR)
Taxable in India Taxable in India only Not Taxable in

if it is business/ India
profession, which is
controlled / set up in
India
Taxability of income according to residential status of the assessee.
Resident And Resident But Not Non-

Particulars of Income Ordinarily Ordinarily Resident
Resident Resident (NR)
(R&OR) (RBNOR)
1. Income received and arises in Taxable Taxable Taxable

India
2. Income arises in India but receive Taxable Taxable Taxable
outside India
3. Income received in India but arises Taxable Taxable Taxable
outside India
4. Income received and arises outside Taxable Not Taxable Not
India Taxable
5. Income received and arises outside Taxable Taxable Not
India as business income but Taxable
controlled from India.
1. Mr. Arnold, US Citizen, came to India for the first time on 15th August, 2013. He left India on 26th
January, 2014. Determine his residential status for the Assessment year 2014-15.
Ans : Non - Resident
2. Mr. David, American Economist, came to India for the first time on 1st May 2013. He left India on
30th September 2013. Determine his residential status for the assessment year 2014-15.
3. Mrs. Pranita who is an Indian Citizen returned to India on a visit on 1st April 2011 and left India on
30th September, 2012. She was in India for more than 400 days during the financial years 2011-12
and 2012-13. She again came on a visit to India on 1st May, 2013 and left India on 30th September,
2013. What is her residential status for the assessment years 2013-14 and 2014-15.
Ans : - Resident - Non-Resident
4. Mr. Obama, who is an American Citizen came to India for the first Time on 17 th April, 2010. His
stay in India during
the last four years were as follows:
F.Y. 2010-11 - 333 days F.Y. 2011-12 - 111 days
F.Y. 2012-13 - 66 days F.Y. 2013-14 -55 days
What is his residential status for the four previous years mentioned above?
5. Mr. Babu, an Indian national, left India for Denmark on 1st January 2013. He returned to India on
31st May 2014. He got an ownership flat in Thane. Determine his residential status for the assessment
years 2013-14 and 2014-15.
Ans : - Resident and ordinarily Resident - Non - Resident
6. Mr. Bapu who was abroad returned to India on 25th June, 2013 and again left India, on 15th January,
2014. What is his residential status for the Assessment Year 2014-15?
Ans : Resident
7. Mrs. Babali who is an Indian citizen came on a visit to India on 1st June, 2013. She left India on 30th
Nov. 2013. Prior to 1-4-2013 she was in India for more than 365 days during the preceding four
previous years: 2009-10 to 2012-13. What is her residential status for assessment year 2014-15?
Ans : Resident
8. Mr. Baban who is an Indian citizen returned to India on 1st July 2013 on a visit. He left India on 26th
Dec, 2013. Prior to 1-4-2013 he was in India for more than 365 days during the preceding four years
2009-10 to 2012-2013.What is his residential status for the assessment year 2014-15?
9. Mr. Rahul who is an Indian citizen leaves India on 27th September, 2013 for the purposes of
employment outside India and comes to India on 1st April 2014. He was in India for more than 365
days during the four preceding previous years 2009-10 to 2012-13. What will be residential status of
Mr. Rajesh for the assessment year 2014-15?
10. Mr. James Brown of America came in India for the first time on 1st April, 2012 and started the
business in Mumbai. What is his residential status for the assessment year 2014-15?
Ans : Resident but not ordinarily Resident
11. Mr. Muralidharan from Sri Lanka came to India for the first time on 1st November 2012. He was in
India upto 31st October, 2013 on which day he left for Japan. During his stay in India he stays at
Delhi upto 31st March, 2013 and thereafter remains in Mumbai till his departure from India. What is
his residential status for Assessment Year 2013-14 and 2014-15?
12. Mr. Chagan was born in Parel, Mumbai in 1980. He went to New York in 1983 and was there till
31st March, 2004. Thereafter he returned to India. What is his residential status for the Assessment
Years 2013-14 and 2014-15?
Mumbai University Problems
13. Shri Ramesh an Indian Citizen, left India for the first time on 22/09/2012 for employment in U.K.
and did not return to India till 31st March, 2013. Determine his residential status for the Assessment
year 2014-15? (Modified MU-April 2011)
14. Shri Ramkumar furnishes the following information about his stay in India during the previous year
2003-04 to 2013-14 which is as follows :-
Financial Year No. of Days stay Financial Year No. of Days stay
2003-04 366 2009-10 178
2004-05 365 2010-11 65

2005-06 365 2011-12 62
2006-07 110 2012-13 70
2007-08 182 2013-14 100
2008-09 67
Determine his residential status for the Assessment year 2014-15. (Modified MU-April 2011)
15. Mr. Charlie Farande who is an Indian citizen went for employment to Dubai on 1st April, 2009 and
came on a visit to India on 01/07/2013 and left for Dubai on 15/12/2013. Determine his residential
status for Assessment Year 2014-15. ( Modified MU-Oct., 2010 )
16. Mr. Bret Lee an Australian citizen came to India for the first time on 1st April, 2009 and started a
business in Mumbai. He went out the India on 1st April, 2013 and came back to India on 1st January,
2014 and was in India thereafter. Find out his Residential status for Assessment Year 2014-15.
( Modified MU-April 2010 )
17. Mr.Hemant Bhosale a resident of USA came to India for the first time on 1st May, 2007. He stayed
here without break for 3 years and left for Japan on 1 st May, 2010. He returned to India on 1st April,
2011 and went back to USA on 1st December, 2011. He was posted back to India on 20th January,
2014 and has been in India since then. Determine his residential status for the previous year ended on
31st March, 2014 giving explanation for your answer. ( Modified MU-Oct., 2009 )
18. Professor Rajendra Bhatt a UK citizen (not a person of Indian origin ) is a visiting faculty at JNO
University, provides you the details of his visit to India during the last 7 years.
Previous Year No. of Days stay in India Previous Year No. of Days stay in India
2013-14 179 2009-10 190
2012-13 195 2008-09 100
2011-12 15 2006-07 125
2010-11 130
Prior to 1/04/2006 he did not visit India. Find out his Residential status for the A. Y. 2014-15.
( Modified MU-Oct., 2008 )
19. Mr. Thomas came to India for the First time and joined as Technical Manager with M/s East India
Airlines on 1st May, 2007. On 29th February, 2008 he left India and went to France for three years.
He came back to India on 2nd March, 2012 and rejoined as Technical Manager with M/s East India
Airlines. Since then he is in India. Determine the residential status of Mr. Thomas for the last five
years. State briefly your explanation for residential status determined. ( Modified MU-April 95 )
20. Mr. Zarsis, a U.K. National, comes to India for the first time on 15-4-2009. During the financial
years 2009-10,2010-2011, 2011-12, 2012-13 and 2013-14 he was in India for 120 days; 90 days; 3
days; 200 days and 65 days respectively. Determine his residential status for the Assessment year
2014-15 giving explanation for your answer. (Modified MU-Oct 95)
21. Ms. Kothari who is an Indian citizen went for employment to Muscat on 1st April, 2008 and since
then came on visit for the first time to India on 1-7-2013 and left for Muscat on 15-12-2013 .
Determine her residential status for Assessment Year 2014-15 stating explanation for your answer.
( Modified MU-Oct. 95 )
22. Mr. Amber, an Indian Citizen, went for further studies in England on 1st March, 2008 and came back
to India on 1st October, 2013 and since then he is in India. Determine his Residential Status for
Assessment Year 2014-15? (Modified MU-April 96)
23. Mr. Leo an American citizen, staying in Mumbai leaves Mumbai on 16th July 2013 for joining an
American firm as an employee. He was in India since 1st January, 1998 till he left for U.S.A. on 16th
July, 2013 for the purpose of employment. Determine his residential status.
( Modified MU-Oct. 96 )
24. Kohali, an Indian Cricketer submits the following information of stay outside India for the year
ending 31st March, 2014
Days Place
th th
13 April 2013 to 28 April 2013 Mirpur for Asia Cup 2013
3rd May 2013 to 9th July 2013 Summer Cricket Tour to Newzeland
27th August 2013 to 10th September 2013 Triangular series in Bangladesh
11th September 2013 to 1st October 2013 U.S.A.on Holidays
4th January 2014 to 26th March 2014 Summer Cricket Tour to England
He made his debut in international cricket on 11th March, 2011. Then in a match against West Indies,
he suffered a major injury necessitating two years hospitalisation in U.S.A.. He recovered and
returned back to India on 29th March, 2013. Thereafter, he was appointed by the Kenya Cricket Board
as the Manager of their team. Determine his residential status with reasons for the Assessment Year
2014-15. (Modified - April 97)
25. Mr. Sam a British Citizen came to India as a commentor during the following period:
Period Purpose
10-02-2013 to 20-04-2013 IPL , 2013
06-10-2013 to 25-12-2013 Winter Cricket Tour of England
04-01-2014 to 12-01-2014 Chief Guest Miss World Competition
02-03-2014 to 29-03-2014 Triangular Cup 2014.
Discuss with reasons the residential status of Mr. Sam for Assessment year 2014-15, assuming his
stay in India was 340 days in the preceding three calendar years prior to World Cup visit and 600 days
in the preceding seven years. ( Modified MU Oct. 97 )
26. Miss. Anita a resident of U.S.A. came to India for the first time on 1st May, 2005. She stayed here
without break for 3 years and left for Japan on 1st May, 2008 returned to India on 1st April, 2009 and
went back to U.S.A. on 1st December, 2009. She was posted back to India on 20th January, 2014 and
is still here. Determine her residential status for the Previous Year ended on 31st March, 2014 giving
explanation for your answer. ( Modified MU April 98 )
27. Mr. Tony, a British citizen had the following income during the year ended on 31st March , 2014
Rs.
1. Income from house property in India 15,000
2. Income from property in Rome 10,000
3. Interest from bank account in India 1,200
4. Income from business in Bangladesh, being controlled from India 16,000
5. Interest on bank account in U.S.A 11, 000
6. Salary earned and received in Tokyo 12,000
7. Income earned and received in London 13,000
8. Dividend from British Company received in India 17,000
Compute his Total Income for the assessment year 2014-15 if he is:
(i) A Resident (ii) A Resident but not ordinary Resident (iii) A Non-Resident. (Modified MU-Oct. 98 )
28. Mr. Arun, an Indian citizen, furnishes the following particulars of income earned during the previous
year relevant to assessment year 2014-15.
Rs.
1. Professional fees received in India 11,000
2. Income earned in India but received in Rome 12,000
3. Interest on deposits of Indian companies
i) Received in India 6,000
ii) Received abroad 7,000
4. Salary earned and received in Paris 14,000
5. Income from agriculture in Nepal 15,000
6. Income from business in U.K. controlled from India 16,000
Compute his total income for the assessment year 2014-15 assuming the residential status as :
(i) Resident and ordinary resident; (ii) Resident but not ordinarily resident; (iii) non resident in India.
( Modified MU - April 99 )
29. Mr. Lawarence, a Canadian citizen but of Indian origin came to India on 1st October, 2010 for the
first time. His total stay in India was as under.
Year ended No. of days
31st March 2010 25
31st March 2011 80
31st March 2012 180
31st March 2013 100
31st March 2014 25
He informs that he was in India from 1st April, 2013 to 28th June, 2014 (both days inclusive). Determine his
residential stays under the Income-tax Act 1961 for the, Assessment year 2014-15. ( Modified MU-Oct. 99 )
30. Mr. Narayan, had the following incomes during the previous year ended 31st March, 2014 :
Rs.
1. Professional Fees received in India for three months 39,000
2. Payment received in the United Kingdom for the services rendered 28,000
In India
3. Income from business in Sri Lanka being controlled from India. 17,000
4. Income from agriculture in Japan. 16,000
5. Interest received in Paris in respect of securities in German Companies 25,000
6. Amount brought into India out of the past untaxed profits earned in 34,000
Germany
You are required to compute his Total Income, if he is: (a) a resident and ordinarily resident,
(b) a resident but not ordinarily resident and (c) a non-resident. Modified MU April 2000
31. Miss Chaya, a foreign national, furnishes the following particulars of her income earned during the
previous year relevant to Assessment Year 203-14. You are required to compute her total Income, if
she is (a) Resident and Ordinarily Resident, (b) Resident but not Ordinarily Resident, (c) Non-
Resident.
Rs.
1. Income from Property in Rome received in India 11,000
2. Dividends from shares from Foreign Companies:
i) Received Abroad 12,000
ii) Received in India 13,000
3. Profit from business in Mumbai and managed from U.S.A. 14,000
4. Income from House Property in India 15,000
5. Interest on Bank Accounts in USA 16,000
6. Income earned in past but brought in India during the year 17,000
( Modified MU Oct. 2000 )
32. Ascertain the residential status of the assessees in the following Assessment Year 2014-15.
a) Ms. Nanku is a citizen of India. She left for Rome on 18th April, 2013 and could not return to
India till the end of the Financial Year 2013-14.
b) Mr. Ankit left for Paris, on 10th March, 2011 after having lived in India for 20 years. He returned to India
on 10th September, 2013. ( Modified MU April. 2001 )
32. Mr. Michal, a citizen of U.S.A. but a person of Indian origin came to India for the first time on 1st
Oct., 2007. He was in India from 1-4-13 to 28-6-13. His stay in past 5 years is as follows 2009-10 - 25
days, 2010-11 - 80 days, 2011-12 - 80 days and 2012-13 - 100 days, 2013-14 - 25 days. Determine the
Residential status for A.Y 2014-15.
( Modified MU Oct. 2001 )
33. Miss Julie, born in Canada in 1986, came to India, for the first time on 1st January, 2008 for
studying Indian Culture. She completed her study and went back to Canada on 10th May, 2013. She
was invited by University of Mumbai for fellowship and she arrived in Mumbai on 14th August,
2013. She returned back to Canada on 28th October, 2013.
Determine her residential status under the Income Tax Act, 1961, for the Assessment year 2014-15.
(Modified Bu April. 2002)
34. Mr. Amit furnishes the following particulars of his income earned during previous year ended 31-
03-14.
Rs.
1. Interest on U.K. Development Bonds (received in India) 42,000
2. Profit on Sales of Plant in Malaysia (Fully Received in India) 92,000
3. Profit on Sale of Property at Bombay (Received in India) 1,04,000
4. Income from Business in Sri-Lanka controlled from India 20,000
5. Rental income from Property in New York deposited by a tenant 25,000
In a Foreign Branch of Indian Bank deposited there
6. Pension from Employer in India received in Mauritius 60,000
You are required to compute his total income taxable in India if his residential status during the
previous year 2014-15 is : (i) Resident and ordinary Resident (ii) Resident but Not ordinarily Resident
& (iii) Non-Resident.
(Modified April. 2003.)
35. Mr. Sambhaji, a citizen of France gives you the following information for the year ended 31st
March, 2013
Rs.
i) Interest on fixed deposits with banks received in India. 10,000
ii) Income from house property in India 15,000
iii) Income from business in Singapore controlled from India 50,000
iv) Income from business in India earned in India but received in France 1, 00,000
v) Dividends from American company received in India. 22,000
vi) Interest on Bank accounts in France 25,000
vii) Salary earned and received in France 1, 50,000
Compute his total income for the Assessment Year 2014-15 if he is alternatively.
(i) Resident and Ordinarily Resident (ii) Resident but not Ordinarily Resident (iii) Non
Resident. (Modified April, 03)
36. Mr. Shane, an American Citizen, came to India for the first time on 1st April 2007 and started a
business in Mumbai. He went out of India on 1st April 2012 and came back to India on 1st January
2012 and was in India thereafter. Find out his residential status of A.Y. 2012-13.
(Modified April, 2004)
37. Mr. Dhaval, an Indian Citizen, went out of India for the first time for the purpose of his employment
outside India on 1st May 2013 and came back to India on 1st December 2013. Find out his residential
status for A.Y. 2014-15
(Modified April, 2004)
38. Mr. X is a U.S.A. citizen. He came to India on October 15, 2013 for a visit and was in India till 31st
March, 2013 in earlier previous years, he is in India as under:
2003-04 - 188days
2004-05 - 190 days
2005-06 - 185 days
2006-07 - 200 days
2007-08 - 40 days
2008-09 - 300 days
2009-10 - 195 days
2010-11 - 185 days
2011-12 - 100 days
2012-13 - 200 days
Find out the residential status of Mr. X for the assessment year 2014-15 assuming that he is not a
person of Indian origin. (Modified April, 2005)
39. Compute the income of Mr. Kaka for the assessment year 2014-15, assuming that he is resident but
not ordinarily resident in India during the previous year 2013-2014.
Rs.
i. Interest on company deposits in India 70,000
ii. Income deemed to be earned in India 31,000
iii. Income from business, situated in Japan and controlled in India
(40% is received in India and balance is received outside India) 84,000
iv. Salary received in India for services rendered outside India 92,000
v. Interest received from the Government of India
(Received outside India) 1, 60,000
vi. Interest received from a foreign company outside India
(On capital which is utilised outside India) 70,000
vii. Past untaxed profit of the year 2002-03 brought into India
in May, 2013 1,10,000
viii. Royalty received in India from a non-resident in respect of
technology used by such person outside India 50,000
ix. Pension from a former employer in India, received in Nepal 2, 30,000
(Modified April, 2005).
40. Mr. Sanjay, an Indian Citizen went to U.S.A. for the first time for the purpose of employment on 10th
May, 2013. He came back to India on 19th November, 2013. Find out his residential status for
Assessment Year 2014-15. (Modified March, 06)
41. Miss. Sanjali an Indian citizen furnishes the following information of her income earned during the
previous year 2013-2014.
i) Professional fees received in India Rs. 10,000
ii) Income earned in India and Received in France Rs. 15,000.
iii) Dividend on shares of Indian co-operative bank received in India Rs. 7,000.
iv) Salary earned and received in France Rs. 5,000.
You are required to find out her 'Gross Total Income' for assessment year 2013-2014 if she is alternatively.
i) Resident and Ordinarily Resident. ii) Resident But Not Ordinarily Resident and iii) Non Resident.
(M.U. - Oct. 06)
42. Mr. Abhijeet, an Indian Citizen, furnishes the following particulars of Income earned during the
previous year relevant to assessment year 2014-2015.
Rs.
1 . Professional Fees received in India 22,000
2. Income earned in India but received in Paris 24,000
3. Dividend on shares of Indian Companies 10,000
4. Salary earned and received in France 28,000
5. Income from Agriculture in Nepal 30,000
6. Income from Business in UK controlled from India 32,000
Compute his Income for Assessment Year 2014-15, assuming the residential status as:
1. Resident & Ordinarily Resident in India 2. Non resident in India. (MU April, 07)
43. Mr. Kallis, a South African Citizen but of Indian Origin came to India on 1 st November 2008 for the
first time. His total stay in India was as under:
Year Ended No. of days
31/3/2009 24
31/3/2010 80
31/3/2011 182
31/3/2012 100
31/3/2013 26
He informs you that he was in India from lst April, 2013 to 30th June 2014. Determine his residential
status for the previous year 2013-2014 (IDE M.U. April 07)
44. Mr.Bret Lee an Australian citizen came to India for the first time on 1 st April, 2009 and started a
business in Mumbai. He went out the India on 1st April, 2013 and came back to India on 1st January,
2014 and was in India thereafter. Find out his Residential status for Assessment Year 2014-15.
(April, 2010)
45. From the following income of Mr Rohit for the previous year 2013-2014, compute his gross total
income for the assessment year 2014-2015 if he is
(a) Resident and ordinarily Resident
(b) Resident but not ordinarily resident
(c) Non-resident ( Modified MU-Oct. 2013 )
Income Rs.
1 Dividend received from Mac donalds Ltd. a USA company in USA 18,000
2 Rent received from house in Kolkata 60,000
3 Income from agriculture in Sri Lanka 50,000
4 Income from business in Dhaka, controlled from Mumbai 60,000
5 Rent from office property in UK credited to bank account in Switzerland 20,000
6 Income from profession in Nairobi received in Nairobi which was set up in India 30,000
7 Pas untaxed foreign income brought to India, during the previous year 10,000
8 Royalties from Indian Companies 40,000
46. Amol, an Indian flim actor gives the following information of his stay outside for film shoting.
Period Place
12th April, 2013 to 27th April, 2013 USA

15th May, 2013 to 11th July, 2013 Srilanka
26th August, 2013 to 9th September, 2013 UK
th th
20 September, 2013 to 11 October, 2013 Newzeland
3rd January, 2014 to 25th March, 2014 South Africa
He made his debut in International films on 10th March, 2011 and went to Hollywood for 2 years and
returned to India on 28th March, 2013.
Determine his residential status with reasons for assessment year 2014-2015. ( March, 2014 )
OBJECTIVE QUESTIONS
MULTIPLE CHOICE QUESTIONS
i. Residential status is to be determined for:
(a) Previous year (b) Assessment year (c) Accounting year (d) None of these
ii. Incomes which accrue or arise outside India but are received directly into India are taxable in case of
(a) Resident only' (b) Both ordinarily resident and NOR (c) Non-resident (d) All the assesses
iii. Total Income of a person is determined on the basis of his:
(a) Residential status in India (b) Citizenship in India (c) None of these (d) Both of the above
iv. Y. Ltd., is an Indian company whose entire control and management of its affairs is situated outside India
Y.Ltd., shall be :
(a) Resident in India (b) Non-resident in India (c) Not ordinarily resident in India (d) None of these
v. A. Ltd., is registered in U.K. The control and management of its affairs is situated in India. R. Ltd. shall be
(a) Resident in India (b) Non-resident (c) Not ordinarily resident in India (d) None of these
vi. M, a foreign national visited India during previous year 2012-13 for 180 days. Earlier to this he never
visited India. M in this case shall be :
(a) Resident in India (b) Non-resident (c) Not ordinarily resident in India (d) None of these
vii. M, a foreign national but a person of Indian origin visited India during previous year 2012-13 for 181 days.
During 4 preceding previous years he was in India for 366 days. M shall be
(a) Resident in India (b) Non-resident in India (c) Not-ordinarily resident in India (d) None of the above
Viii. Income which accrue or arise outside India and also received outside India is taxable in case of :
(a) Resident only (b) Not ordinarily resident (c) Both ordinarily resident and NOR (d) None of the above
ix. Income which accrue outside India from a business controlled from India is taxable in case of :
(a) Resident only (b) Not ordinarily resident only (c) Both ordinarily resident and NOR (d) Non-resident
x. lncome deemed to accrue or arise in India is taxable is case of :
(a) Resident only (b) Both ordinarily resident and NOR (c) Non-resident (d) All the assesses
FILL IN THE BLANKS

1. An individual shall be deemed to be of Indian origin if he or any of his or ____ or _____
were born in undivided India.
2. HUF is said to be _____ in India if the control and management of its affairs is situated
in India.
3. Foreign company is resident in India if the control and management of its affairs is situated ____ in India
during the previous year.
4. Income which accrue or arise outside India from a business controlled from India is taxable in case of ____and
______
5. M, a person of Indian origin visited India on 11-11-2012 and plans to stay here for 330 During 4 years
prior to previous year 2012-13, he was in India for 759 days. Earlier to that he was never in India. For
assessment year 2014-15, M shall be _
6. On the basis of residential status a firm can be classified into ________ or _________
Match the pairs
Column A Column B
1. Foreign Income (a) Ordinary resident
2. Income received in India (b) Not ordinary resident
3. Foreign Business income controlled (c) Non-resident
from India (d) Taxable for OR, NOR, NR
4. Remittance in India (e) Taxable for OR, NOR
5. Highest tax liability (f) Not taxable for non-resident
6. Least tax liability (g) Not taxable
TRUE OR FALSE
1. Only individuals and HUFs can be resident, but not ordinarily resident in India.
2. Once a person is a resident in a previous year he shall be deemed to be resident for subsequent previous year.
3. Once a person is resident for a source of income in a particular previous year he shall be deemed
to be resident for all other sources of income in the same previous year.
4. An Indian company is always resident in India.
5. A resident in India cannot become resident in any other country for the same assessmenly
6. Residential status is to be determined on the basis of stay in India during assessment year.
7. Incomes which accrue or arise outside India but are received directly into India are taxable in case of
resident.
8. Income deemed to accrue or arise in India is taxable in case of all the asses sees.
9. Income which accrues or arises outside India from a business controlled from India is taxable case of only
not ordinarily resident.
10. Income which accrues or arises outside India and also received outside India is taxable in of both ordinarily
resident and not ordinarily resident.
11. Total income of a person is determined on the basis of his citizenship in India.
12. A company, whose managing director is a resident but "not ordinary resident" is treated as
"resident but not ordinarily resident in India".
13. A foreign company is always non-resident in India.
SHORT PROBLEMS
Determine the residential status of the following persons for the Assessment Year 2014-15:
0.1 : M, a person of Indian origin, visited India on 2-10-2012 and plans to stay here for 185 days. During 4 years prior to
previous year 2012-13, he was in India for 750 days. Earlier to that he was never in India.
0.2: M, a citizen of India, left India for U.S. on 16-8-2012 for booking orders on behalf of an Indian company for
exporting goods to U.S. He came back to India on 5-5-2013. He had been resident in India for the past 10 years.
0.3 : M, a citizen a India, is employed on an Indian ship. During the previous year 2012-13 he leaves India for Germany
on 15-9-2012 for holidays and returned on 1-4-2013. He had been nonnresident for the past 3 years. Earlier to that he was
permanently in India.
0.4: M Ltd. is an Indian company whose entire control and management of its affairs is situated outside India.
0.5: M Ltd. is registered in U.K. The control and management of its affairs is wholly situated in India.
0.6: M, a foreign national, visited India during previous year 2012-13 for 180 days. Earlier to this he never visited India.
0.7: M a foreign national but a person of Indian origin visited India during previous year 2012-13 for 181 days. During 4
preceding previous years he was in India for 400 days.
0.8: During the previous year 2012-13, M and Sons HUF was partly controlled from India by its Karta M who is a citizen
of India but stays outside India. For the purpose of managing the affairs of the HUF, M has been regularly visiting India.
Determine the residential status of the HUF for the assessment year 2014-15 if :
Case (A): M has been visiting India for 100 days every year for the last 12 years:
1.3 Module / Unit

Heads of income
Till now, we have studies, taxability of income on the basis of residential status
of an assessee.
Now we will be studying, which income will be taxable for an assessee and
under which head of income it will be included.
Heads of Income
Income Income Profits/Gains Capital Income

from from From Gain from
Salaries House Business/ ( CG ) Other
( IFS ) Property Profession sources
( IFHP ) (PGBP) ( IFOS )
Salary Annual value Profit of Gains arising Any other

income is of a house business / Gains on sale of income, which
taxable property i.e. of any capital asset was not taxable
under this Rent from HP profession is like Gold, in any other head
head is taxble taxable here House etc is is taxable here
taxable here. e.g. Bank interest
Module / Unit
INCOMES EXEMPT FROM TAX SECTION 10
Some of the incomes are exempt from tax. Hence, such incomes are excluded
while calculating Gross Taxable Income or Net Taxable Income.
Incomes fully exempt from tax and not to be included in Total income (Sec. 10)
1. Agricultural income [ Sec. 10 (1) ] :
It means
Any income which is
Derived from land
By doing agricultural operations / raising / producing etc.
It excludes :
Income which is not directly derived from land.
Income earned without agricultural operations.
2. Receipt by a member out of HUF income [ Sec. 10 (2) ] :
If any member of HUF
Receives any sum i.e.
Out of income of family
Income from impartibly estate of family (e.g. rent from a property , which
belongs to the family)
Is exempt U/s 10(2)
This is to avoid double taxation, because when HUF will receive the income,
it will pay tax on it and subsequently if the member of HUF is asked to pay tax
then the same income would be taxed twice.
3. Share of income of a partner from a firm [ Sec. 10 ( 2A ) ] :
4. Leave Travel Concession [ Sec. 10 (5) ] :
5. Gratuity [ Sec. 10 (10) ] :
6. Pension [ Sec. 10 ( 10A ) ] :
7. Leave Salary [ Sec. 10 ( 10AA ) ] :
8. Receipts under Life Insurance Policies [ Sec. 10 ( 10D ) ] :
Amount received on maturity of LIC policy is exempt U/s 10 (10D)
However, when Keyman Insurance Policy matures, the sum received is
taxable under PGBP / IFOS.
Also in case of other LIC Policies, if earlier the premium paid was more than
20% of capital sum assured then on its maturity, LIC amount will be taxable.
9. Payment from Statutory / Public Provident Fund [ Sec. 10 (11) ] :
10.Payment from Recognised Provident Fund [ Sec. 10 (12 ) ] :
11.Payment from Superannuation Fund [ Sec. 10 ( 13 ) ] :
12. House Rent Allowance [ Sec. 10 ( 13A ) ] :
13. Special Allowance for Expenses [ Sec. 10 ( 14 ) ] :
14.Interest on Securities [ Sec. 10 ( 15 ) ] :
Interest on Post office savings Bonds
Interest on NRI Bonds issued by an Indian Bank
Interest on Bonds, which are issued by Local Authority and notified by central
government.
Interest on Gold Deposit Bonds etc.

15. Scholarships [ Sec. 10 ( 16 ) ] :
16. Allowances to M.P. / M. L. A. [ Sec. 10 ( 17 ) ] :

Daily allowances are exempt
Any other allowance is taxable.
17.Awards & Rewards [ Sec. 10 ( 17A ) ] :
Any award / reward (cash / kind )
Given by Central Government / State Government and approved by Central
Government are exempt U/s 10 (17A)
18. Pension to Family member of Gallantry award winners [ Sec. 10 ( 18 ) ] :
Pension receive by
Family members of
Gallantry award winners (e.g. Param vir Chakra or Maha vir Chakra)
Are exempt U/s 10(18)
19. Pension to Family member of armed forces [ Sec. 10 ( 19 ) ] :
Provided, death has occurred while the person was on duty.
20. Dividend received from a domestic company [ Sec. 10 ( 34 ) ] :
Since the company, while distributing the dividend has already paid tax on it.
21. Income from Units [ Sec. 10 ( 35 ) ]
Any income received by a unit holder of UTI or any mutual fund is exempt
U/s 10 (35).
Module / Unit
INCOME FROM SALARIES ( SECTION : 15 TO 17 )
Salary means amount received by employee and monetary value of benefits provided by Employer at
free of cost or at concession rates. Salary means any payment made at regular intervals for services rendered.
If any person renders personal services as per any contract of employment (written or oral), the remuneration
received by him is known as Salary . Such remuneration or compensation received for services rendered is
taxable under the head Income from Salaries.
Important Facts relating to salary
a. Any receipts will be called as salary only if the relation between receiver & payer is of Employer
and Employee. For example Salaries or Payments of MPs and MLAs does not come under Salary
head because Assembly and its its members are not having relation of Employer and Employee.
b. According to income tax, there is no specific difference between Salary and wages. Employee or
Labour receives some payment against their services, which is called as Salary.
c. After retirement, the regular monthly pension given to the employee by the employee is also known
as income from Salary head. However, in case of death of the employee family pension received by
his dependents will be known as income from other sources.
Salary includes [section17(1)] :-

i. Wages
ii. Any annuity on pension
iii. Any gratuity
iv. Any fees, commission, bonus, perquisite on profits in lieu of or in addition to any salary on wages
v. Any advance of salary
vi. Any earned leave
vii. Employers contribution (taxable) towards recognized provident fund.
Income is taxable under head Salaries, only if there exists Employer - Employee Relationship between the
payer and the payee. The following incomes shall be chargeable to income-tax under the head Salaries:-
1. Salary Due
2. Advance Salary [u/s 17(1)(v)]
3. Arrears of Salary
Note:
(i) Salary is chargeable on due basis or receipt basis, whichever is earlier.
(ii) Advance salary and Arrears of salary are chargeable to tax on receipt basis only.
Name of the Assessee : __________________
Assessment Year : 2014 - 2015
Previous Year : Financial Year 2013 - 2014
Legal Status : Individual
Residential Status : R & OR
COMPUTATON OF INCOME FROM SALARIES
INCOME FROM SALARIES Rs.
A Salary ( Gross )
Basic Salary / Wages, Fees
1. **
Advance Salary **
Ex-gratia
Arrears of Salary, Annuity **
Fees, remuneration, commission **
Bonus ( Taxable on Receipt Basis) **
Leave Salary **
Gratuity **
Pension **
b Allowances
Dearness Allowance *
Entertainment Allowance *
City compensatory allowance *
House Rent allowance *
Lunch allowance , Fixed Medical Allowance *
Servant allowance * **
C Perquisites Taxable
Rent free Accommodation *
Concession in Rent *
Benefit/Amenity granted free of cost to specified employee *
Employees obligation discharged by employer *
Premium for period for Life of Employee/ Annuity *
Fring benefit/ Amenity * **
d Profit in lieu of salary
Compensation received from the employer **
Employers contribution to unrecognized P.F. and Interest thereon received **
Payment received for outstanding performance of duty or on the occasion of Diwali or Chrimstmas **
Employers contribution to Reconginsed Provident Fund in excess of 12% of Basic Salary **
Interest exceeding 9.5% p.a. **
Amount received under Keyman Insurance Policy **
GROSS SALARY **
Less : Deduction U/s 16
1. Entertainment allowance U/s 16 (ii) *
2. Professional Tax or Tax on employment U/s 16 (iii) * **
NET TAXABLE SALARY **
1. GRATUITY [Sec. 10 ( 10 ) ] :
Gratuity means
Lumpsum payment to an employee.
At the time of retirement, resignation or death etc.
Gratuity is a taxable income; however, it is exempt from tax to a certain extent, which is explained in
the table given below.
If gratuity has been received while still in service, it is taxable.
Status of Employee
Non-government Non-government
employee covered by employee not covered by
Government Payment of Gratuity Act,
Payment of Gratuity Act,
Employee 1972 1972
It is fully exempt Lease of following is exempt Lease of following is exempt

from tax U/s Gratuity Actually received Gratuity Actually received
OR OR
10(10) Rs. 10,00,000 Rs. 10,00,000
OR OR
15 days Salary month average Salary
Length of Service Length of Service
Salary = Basic + D. A. Salary = Basic + D. A. + Commission

15 days = Salary 15/26 month = Salary
Length of service (LOS)= No. of years Lengh of service (LOS)= No. of completed
from date of joining till the retirement years from joining to the retirement.
date. While calculating Length of service (LOS),
While calculating Length of service If the period is in month then ignore it.
(LOS) , if the months are more than 6, E.g. 17 years & 6 months then LOS = 17
then round off years.
E.g. 17 years & 6 months then LOS = 17 Consider only completed year.
years.
E.g. 17 years & 7 months then LOS = 18
years
Qu. Mr. Pagare retired on 31/12/2013. He was receiving basic salary of Rs.10000 p.m., D.A. of Rs.2000
p.m. and commission of Rs.1000 p.m. He had joined the company on 01/06/2006. Now, he is being given
gratuity of Rs.925000. Calculate the amount of gratuity taxable if is exempted and the amount of gratuity
taxable if:
a. Mr. A is a government employee.
b. Mr. A is covered by Payment of gratuity Act.
c. Mr. A is any other employee.
2. Pension [ Sec. 10 ( 10A ) ] :

It is usually a monthly payment to
Ex-employees post retirement.
Employees may opt to get full amount as Lumpsum payment instead of monthly
payment.
Pension
Lumpsum Monthly
Payment Payment
Also Known as Also Known as

Commuted Pension uncommuted Pension
For Govt. For other Fully Taxable

employees employees
Fully exempt
U/s 10(10A) If Gratuity Received If Gratuity not Received
Exemption will be Exemption will be

1/3 of Total Pension of Total Pension
Qu. Mr. DP retires on 31/05/2013. He gets pension of Rs.5000 p.m. upto 31/12/2013. On
01/01/2014, He get his 50% pension commuted and he receives Rs.5000. Compute the amount of
taxable pension for P.Y.2013-2014 as if
a. He is other employee, receiving gratuity.
b. He is other employee, not receiving gratuity.
c. Government employee.
3. Leave Salary [Sec. 10 ( 10AA ) ] :

Every employee is granted some specified no. of days for leave in a year. For eg: 30 days in a year.
Some avail leave of all the 30 days while same employees do not avail all the leave granted.
The ones who do not avail all the leave granted (i.e. leave granted but not taken) can in cash such
leave credit at the time of retirement, resignation etc.
Such leave salary is fully exempt for govt. employees.
For other employees, it is partly taxable and partly exempt U/s 10(10AA).
Exemption U/s 10 (10AA) is :
Lower of
a. Rs. 3,00,000
b. Actual leave Salary Received
c. Average Salary 10 months
d. Average Salary Leave Credit (months)
Average Salary = Basic Salary + Dearness Allowance + Commission
For last 10 Months
Leave Credit
As per Income Tax Act, only 30 days Leave can be granted to an employee for 1 year of service.
Leave Credit = [Completed years 30 days] - [Total leave taken]
4. Retrenchment Compensation to workmen [Sec. 10 ( 10B ) ] :

This compensation is paid to workmen.
Under Industrial Dispute Act, 1947 or
At the time of dismissal from job or
When the company is being closed down.
Retrenchment compensation is partly taxable and partly exempt.
Let us calculate the amount of exemption:
Exemption is lower of
a. Average salary 15/26 Completed years of service
b. Rs.5,00,000
c. Amount of compensation actually received.
5. Retrenchment Compensation to Employees [Sec. 10 ( 10C ) ] :

This compensation is paid to employees
at the time of voluntary retirement
This compensation is exempt upto Rs. 5 Lakhs and balance amount if any is taxable.
6. Payment Received from Public Provident Fund / Statutory

Provident Fund [Sec. 10 ( 11 ) ] :
Any payment received from above mentioned funds.
by any member
is exempt U/s 10 (11).
7. Payment from Recognised Provident Fund [Sec. 10 ( 12 ) ] :

Any payment i.e. accumulated balance received from such recognised provident fund
by any employee
is exempt u/s 10 (12)
8. Payment from Superannuation Fund [Sec. 10 ( 13 ) ] :

Any payment received by an employee
From an approved superannuation fund
on account of death, retirement or after attaining a certain age.
is exempt u/s 10 (13)
9. House Rent Allowance [Sec. 10 ( 13A ) ] :

Employees are given some House Rent allowance, so as to meet the rent expense, which they
actually incure.
This House Rent Allowance (HRA) which is received by the employee is exempt U/s 10(13A) to
a certain extent.
[for exam purpose : exemption amount will be mentioned in the question]
10. Special Allowances [Sec. 10 ( 14 ) ] :

Two types of special allowances are exempt U/s 10 (14)
i. U/s 10 (14) (i) :
Amount of exemption is lower of
a. Amount received
b. Amount actually spent
ii. U/s 10 (14) (ii) :
a. Amount received
b. Amount Specifically prescribed
a. U/s 10 (14) (i) :
Employees receive certain amount of allowance from the company for incurring some official
exepenses.
Few examples are : Travelling allowance, conveyance allowance, outstation duty allowance, uniform
allowance etc.
ii.U/s 10 (14) (i) :

Employees receive certain amount of allowance from the company for incurring certain personal
expenditure.
Few examples are : Children education allowance, Children Hostel expenses allowance, Transport
allowance (i.e. between office to residence and vice versa).
But here, as use had seen, exemption is lower of amount received and amount specifically prescribed.
Amount specifically prescribed:
a. Children Education Allowance :
Rs.100 p.m. per child, for maximum 2 Children
b. Children Hostel Allowance :
Rs.300 p.m. per child, for maximum 2 Children
c. Transport Allowance :
Rs.800 p.m.
Rs.1600 p.m. for handicapped / blind person
11. Leave Travel Concession [Sec. 10 ( 5 ) ] :

Leave Travel concession is an amount which is received by the employee from the employer for his
and his family leave to any place in India.
This can be received when the employee is in service or after retirement or termination.
This concession is available only for travelling expenses which is incurred at the time of leave.

a. Amount received as travel concession
b. Amount actually spent for travelling.
12. Perquisites [Sec. 17 ] :

Perquisites are personal benefits.
Which are provided by the employer to the employee.
For the purpose of taxation of perquisites they can be classified in 3 types
a. Perquisites, which are taxable only in the hands of special employees i.e. specified employee.
For E.g. Directors
Gas, electricity, water provided free of cost.
Services like sweeper, watchman, gardener, cook etc. provided free of cost.
Education facilities for family members of employee provided free of cost.
Specified employee Means:
Director of the company , or
Employee having 20% or more voting power in the company i.e. substantial interest, or
Any employee having salary of more than Rs.50000 i.e. excluding non-monetary
benefits.
b. Perquisites, which are not taxable for all employees.

i. Reimbursement of Medical Expenses
Expenses, which are incurred by the employee for medical treatment of himself or his
family, in a hospital, which is maintained by any local authority / government.
Expenses incurred for treatment of himself or his family in a hospital which is
approved by Chief Commissioner of Income Tax.
ii. Reimbursement of Medical Expenses upto Rs.15000 incurred by the employee
for medical treatment in case other than above.
iii. Cost of medical treatment of himself or his family in a hospital which is maintained
by the employee.
iv. Expenses incurred by an employer on medical treatment of the employee or his family
outside India.
v. Recreational facilities provided to employees.
vi. Allowances paid to judges of High court/Supreme court.
c. Perquisites, which are Taxable for all employees.

The following perquisites are taxable for all the employees.
Value of Rent Free Accommodation provided by the employer.
Free supply of gas, electricity or water for household consumption.
Salary of household employees paid by employer.
Wages paid by the employer for the domestic servants employed by the employee.
Value of free boarding and lodging expenses.
Free education facilities to the children of the employee or education allowance or
reimbursement of tuition fees to the extent it is not exempted U/s 10(14).
Subscription and bill paid to the club-houses by the employer.
Vacation at holiday homes or holiday trips at the cost of employer.
Income tax due on salary paid by the employer.
Use of motor car with or without a driver, at the cost of the employer for personal use.
d. Perquisites, which are NOT TAXABLE for all employees.

The following perquisites are not taxable for all the employees.
Subsidised lunch or dinner provided to an employee.
Free refreshments provided to the employees during the office hours and in the office
premises.
Recreation facilities provided to the employees
Amount spent on training of employees or fees paid for refresher management course.
Telephone provided at the residence of an employee.

Provision of medical facilities.
Goods sold by an employer to his employees at concessional rates.
Privilege passes and privilege ticket orders granted by railways to its employees.
Rent-free official residence provided to a Judge of a High Court or of the Supreme Court.
Free holiday trips to non-specified employees.
Actual travelling expenses paid / reimbursed by an employer for journeys undertaken by
employees for business purposes.
Conveyance facility provided to an employee to cover the journey between office and
residence.
13. Provident Fund :

There are three types of Provident fund
a. Statutory Provident Fund (Set up Govt.)
b. Recognised Provident Fund (Recognised by Income Tax)
c. Unrecognised Provident Fund (Unrecognised)
Provident fund is a account in which employer and employee, both, contribute same
amount.
The amount in Provident fund account also earns interest. It is known as interest on
Provident fund.
Contribution made by employee himself can never be taxable, since he himself has
contributed.
Contribution by employer is partly taxable and partly exempt U/s 10(12) in the hands
of the employee.
Taxability of Provident fund is explained in the table given below:
Statutory
Recognised Unrecognised
Particulars Provident
Provident Fund Provident Fund
Fund
1.Employers Exempt upto 12% of
Contribution to PF Exempt Salary, balance is Exempt
taxable
2.Interest earned in this Interest upto 9.5% is
Exempt Exempt
account exempt
3.Amount received at Employers Contribution of interest
the time of retirement Exempt Exempt earned on such contribution is taxable
U/s 17(3).
Deductions from Salary Sec. 16

1. Entertainment Allowance Sec. 16 ( ii ) :
Entertainment allowance is first included in salary its come under the head Salaries
and thereafter a deduction is given on the basis enumerated below:
Status of Employee
Non - Government Government
Nothing is deductible Least of the following is deductible:

Rs.5000
1/5 or 20% of basic salary
Actual amount received
2. Professional Tax Sec. 16 ( iii ) :

It is a tax, which is levied by Government.
It is deducted from salaries of all the employees U/s 16 ( iii )
OBJECTIVE QUESTIONS
A. Match the following columns
Column A Column B
1. Salary to partner by firm Capital Gains
2. Salary of a M.P. / MLA Profits in lieu of salary
3. Value of rent free accommodation Business Income
4. Receipts from Keyman Insurance Policy Tax free Perquisites
5. Professional Tax Perquisites
Income from other sources
Deduction from Salary
B. Match the following columns
Column A Column B
1. Value of Rent free Accommodation Allowance
2. Travelling allowance Perquisite
3. Keyman Insurance Policy deduction
4. Profession Tax Profit in lieu of Salary
5. Subsidiesed lunch to employee Non-taxable perquisite
C. Match the following columns
Column A Column B
1. Employers Contribution of SPF Interest is exempt
2. Employers Contribution of RPF Interest is exempt upto 9.5% p.a.
3. Interest Credited to SPF Interest is exempt upto 10.5% p.a.
4. Interest Credited to RPF Employers Contribution exempt from tax
Employers contribution is exempt from Tax up to 12% of Salary
D. Match the following columns

Column A Column B
1. Medical Reimbursement is not taxable up to Rs.5000
2. Entertainment allowance deduction is given to Rs.15000
3. Maximum amount of deduction for entertainment Government Employee
allowance
Non-Government Employee
E. Match the following columns
Column A Column B
1. Profession Tax Deduction U/s 80C
2. Employees Contribution to RPF Deduction U/s 16 (ii)
3. entertainment allowance Exempt from tax
4. Interest credited to PPF Deduction U/s 16 (iii)
Choose the most appropriate answer from following

Q.1. Salary of Man-Mohan becomes due on 1st of next month and it is paid on 10th that month. For the assessment
year 2014-15, the salary of Man-Mohan shall be taken from:
a. April, 2012 to March, 2013 b. March, 2012 to February, 2013
c. April, 2013 to March, 2014 d. March, 2013 to February, 2014
Ans : ____________________________________________________________________
Q.2. Compensation on termination of employment will be taxable under the head
a. Income from other sources b. Income from Salary c. Capital receipt d. Fully exempt
Ans : ____________________________________________________________________
Q.3. Medical reimbursement by employer is not taxable upto
a. 5,000 b. 10,000 c. 15,000 d. 20,000
Ans : ____________________________________________________________________
Q.4 Interest credited to RPF is _____
a. Fully exempt b. Exempt upto 9.5 p.a. c. Fully Taxable d. Exempt upto 8.5%
Ans : ____________________________________________________________________
Q.5. Deduction in respect of salary are covered U/s
a. 17 b. 16 c. 15 d. None
Ans : ____________________________________________________________________
Q.6. Maximum amount of deduction for entertainment allowance is
a. Rs.1,500 b. Rs.2,500 c. Rs.5,000 d. Rs.3,000
Ans : ____________________________________________________________________
Q.7. Profession tax deduction is allowed on
a. accrual basis b. Payment basis c. Both a & b d. Non-deductible
Ans : ____________________________________________________________________
Q.8. Payment received by a college lecturer from University for setting question papers
a. Salary b. Income from other sources c. Income from Business d. exempt income
Ans : ____________________________________________________________________
Q.9. Salary received by a Member of Parliament
Ans : ____________________________________________________________________
Q.10. Salary received by partner from firm
Ans : ____________________________________________________________________
Q.11. Un-commuted pension received by a Government employee is

a. Exempt b. Taxable c. 1/3 is exempt d. None of these
Ans : ____________________________________________________________________
FILL IN THE BLANKS

1. Reimbursement of medical expenditure to an employee of ___ from any doctor is taxable as ______.
2. Entertainment tax deduction is allowed only to ____.
3. Employer contribution to RPF to exempt upto ____ of salary.
4. Interest credited to RPF is exempt upto ____ p.a.
5. Salary income is taxable on _____ or _____ basis whichever is earlier.
6. _____ allowance deduction is allowed only to Government employees.
7. Profession tax deduction is allowed on ___ basis.
8. Arrears of Salary are taxable in the year of ____.
9. Telephone provided at the residence of an employee by employer is ___ perquisite.
10. Wages paid by the employer for the domestic servants employed by the employee is ____ perquisite.
11. Interest credited to Public Provident Fund is ____.
12. Employer-employee relationship determines the ____ of the salary.
13. ____ relationship is necessary for taxing the remuneration under the head income from salary.
14. Advance against salary is ____.
15. Mr.X is employed in ABC Ltd. and is getting children education allowance of Rs.75 p.m. per child for
three children and Mr. X has incurred Rs.500 p.m. on the education of each of the child, in this case
taxable amount shall be Rs. ____________.
16. Salary received by the partner from the firm in which he is a partner is taxable under the head ____
17. Income under the head salary is taxable only if there is a relationship of ____ and ____ between the
payer and the payee.
18. Profit in lieu of salary is taxable under the head _____
19. Compensation payable to an employee on termination of service is a capital receipt. It is ______.
20. Medi-claim insurance premium paid by employer on, the behalf of employee is a _____ Perquisite.
21. Employers contribution to recongnised provident fund during the previous year in excess of ______
of basic salary is taxable as salary.
STATE WHETHER TRUE OR FALSE

1. Income from forest trees of spontaneous growth is an agricultural income and hence exempted from
tax.
2. Gratuity paid to government employee is always fully exempt from a tax.
3. Uncommuted pension means receipt of Lumpsum amount is lieu of periodical taxable.
4. Uncommuted pension is always taxable.
5. Tax paid by the employer on Non-monetary perquisite provided to employee is to be treated as
taxable perquisite.
6. Maturity proceeds of keyman insurance policy is exempt from tax U/s 10(10D)
7. Salary received by a partner from the firm in which he is partner is taxable under the head income
from salaries.
8. Employer Employee relationship is necessary for taxing the remuneration under the head Income
from salary.
9. Entertainment allowance deduction is only allowed to Non-government employees.
10. Employees contribution to RPF is exempt from tax upto 12% of salary.
11. Income tax due on salary paid by the employer is a nontaxable perquisite.
12. Bonus received is taxable in the year of receipt and not in the year in which it is declared.
13. Advance against salary is taxable but advance of salary is not taxable.
14. Professional tax deduction is allowed on accrual basis.
Q.1) Mr. Chandramani is working as technical director in Mumbai Doordarshan Kendra,Worli. He provides you
the following information for the year ended 31 st March, 2014.
a) Basic Salary per month . . Rs.7,800/-.
b) Dearness Allowance per month . . Rs.4,000/-.
c) Ex- gratia . . Rs.8,840/-.
d) Entertainment Allowance of Rs.1,000 p.m. from 1-4-2006. Amount actually spent Rs.7,000/-
e) Perquisite Value of Car Rs.9,000/- in respect of personal use.
f) Profession Tax was deducted at source from salary Rs.2,500/-
On the Basis of the above information you are required to compute his taxable income from salaries.
Q.2) Mrs. Chandrakala is the export manager of Wipro Ltd. Since 1st January, 2004. She provides you the
information for the previous year ended 31 st March 2014 :
a) Salary @ Rs.38,000/- per month.
b) Ex-gratia Rs.37,000/-.
c) House Rent Allowance Rs.22,000/- (Exempt Rs.7,000/- .)
d) Entertainment Allowance @ Rs.2,000 per month.
e) Arrears of salary Rs.28,000/-.
f) Company deducted Profession Tax from salary Rs.2,500.
She was on leave for one month and went to Kashmir on 31 st March 2014. She took the salary of April in
advance.
Compute the taxable income under the head Salaries of Mrs. Asha for the assessment year 2014-15.
Q.3) Mr. Tiwari who was working as commissioner of Income Tax, retired on 31 st December2013.
following are the particulars of his income relating to the year ending on 31 st March, 2014.
a) Salary received Rs.9,000/- per month
b) Entertainment Allowance received Rs.500/- p.m. He spent on entertainment Rs.350/- p.m.
c) During the month of January, 2013 he received gratuity amounting to Rs.95,000/-
d) He received Rs.70,000/- the value of commuted Pension on 15th January 2014.
e) He receives uncommuted Pension from Government with effect 1 st January, 2014 which becomes due on
every last day of the month at the rate of Rs.3,200/- p.m.
f) He received arrears of salary Rs.9,400/- on 29th March, 2014.
g) He incurred the expenses incidental to Employment such as purchase of books, car expenses etc.
amounting to Rs.15,280/-
You are required to compute his taxable income for the assessment year 2014-15.
Q.4) Mr. Tarun shah is working as an accounts officer in a Government Department at Mumbai, Since 1992.
During the year he received Rs.4,48,000/- as salary, Rs.1,000/- as ex-gratia and Rs.4,500 as entertainment
allowance. He was provided with rent free furnished accommodation perquisite value of which was
ascertained at Rs.18,500 Conveyance allowance of Rs.4,000/- was received and actual expenses incurred
were Rs.4,200/-. Profession Tax paid during the year was Rs.1,080/-.
You are required to ascertain the income chargeable to tax under the head, Salaries of Mr. Tarun Shah
for the assessment year 2014-15.
Q.5) Miss Aasin is employed with Amway Sales & Service as a sales representative. She furnishes you the
following information for the assessment year 2014-15.
a) Salary @ Rs.25,000 per month.
b) Commission on sales Rs.47,000/-.
c) Bonus equal to one months salary was declared.
d) Entertainment allowance @ Rs.1,250 per month
e) House Rent Allowance Rs.5,000. (Exempt Rs.3,000/-.)
f) Perquisite value of conveyance provided by the employer for her personal use was ascertained at
Rs.12,000/-.You are required to ascertain the taxable income from salaries.
Q.6) Mr. Pawan is employed with M/s. Gold Plastics Ltd. Upto 30th September, 2013. During this period he
received :
a) Salary @ Rs.12,000/- per month and
b) Rs. 4,16,000/- as compensation for terminated of services.
On 1st December, 2013 he was appointed as supervisor in Silver Plastics Ltd. On the following terms
and conditions:
b) Car facility exclusively during office hours.
c) H.R.A. Rs.1,650 per month. (Exempt Rs.400 p.m.)
You are required to compute the taxable income of Mr. Pravin for the assessment year 2014-15.
Q.7) Mr. Phoolchand was appointed on 1st June, 2013 as a civil engineer with TMC Agencies. During the
year he received,
b) Bonus Rs.60,000/-.
c) Ex-gratia Rs.10,400/-
d) Conveyance allowance @ Rs.900/- per month. (Exempt Rs.800/- per month ).
e) Award from Thane Municipal Corporation for presentation of best design, Rs.5,000/-
f) Employers contribution to recognized provident fund in excess of the prescribed limits was Rs2,000/-
g) House Rent Allowance @ Rs.600/- p.m. (Exempt Rs.400 p.m.)
You are required to ascertain the taxable income under the head, Salaries of Mr.Prashant for the
assessment year 2014-15.
Q.8) Mrs. Rajani is an employee of M/s Modern Laboratories who furnishes you the following information
a) Net salary per month Rs.16,000/-
b) Income Tax deducted at source per month Rs.300/- and Profession Tax Rs.80/- per month.
c) Provident fund contribution deducted from salary Rs.500 per month.
d) Bonus equal to one months salary was declared.
e) Employer paid Rs.40,800/- being the rent of the house occupied by Mrs. Rajani.
On 1st October Mrs. Rajani was appointed as a director. During 6 months period ended 31 st March 2014,
six Board Meeting were held out of which Mrs. Rajani attended five. Board meeting fees Rs. 400/- per
meeting attended is paid to her. According to an award of the tribunal she received the arrears of salary
amounting to Rs.12,000/-
Calculate the taxable income under the head, Salaries of Mrs. Rajani for the assessment year 2014-15.
Q.9) Mr. Indrajeet is employed with M/s. Surya Electronics. Salary for the month is paid on 1 st day of the
following month. He furnishes you the following particulars for the assessment year 2014-15.
a) Received salary @ Rs.14,000/- p.m. for the period from 1st March 2013 to 28th February 2014.
b) Leave travel concession received was Rs.5,000/-. Amount exempt u/s 10(5) is Rs.4,000/-.
c) Reimbursement of car expenses in respect of office use Rs.12,000/-. (He used his own car for himself
as well as for office use.) d) Salary in lieu of leave Rs.5,000/-. e) Bonus Rs.8,000/-.
He was provide with free holiday home facility at Mahabaleshwar the cost of which is ascertained to be
Rs.4,000/-. You are required to ascertain the taxable income under the head, Salaries of Mr.Indrajeet for
the assessment year 2014-15.
Q.10) Mr. Sachin is employed with M/s Karmabhumi Enterprices. During the year he received salary @
Rs.8,000/- p.m. ex- gratia Rs.6,800/- and entertainment allowance of Rs.500/- per month. Profession Tax
was deducted at source from salary Rs.1,800/- during the year.
He was also doing a part- time job with Aakash Ganga Co-operative Housing Society on a monthly
remuneration of Rs.1,000/- Bonus equal to one months salary was paid to him.
You are required to ascertain the taxable income from salaries of Mr. Sachin for the A.Y. 2014-15.
Q.11) Miss Chhaya is a senior lecturer in philosophy in Pune university. She furnishes you the following details:
a) She draws a salary @ Rs.12,650/- per month.
b) House Rent Allowance Rs.650/- per month.
c) Allowance for looking after the evening shift of the college Rs.1,500 per month.
d) Examination fees from Shivaji University and Banaras Hindu University Rs.5,000/-
e) Expenses incidental to employment were Rs.6,000/- including purchase of books, conveyance etc.
f) Profession tax was deducted at source Rs.960.
You are required to ascertain the taxable income under the head, Salaries of Miss Chhays for the assessment
year 2014-15.
Q.12) Mr. Dipchand Parekh, a chief accountant in a factory at Baroda, furnishes you with the following information
and asks you to compute his income taxable under the head, Salaries for the assessment year 2014-15.
During the year ended 31st March, 2014 he received the following:
a) Salary Rs.1,96,000/-
b) Bonus Rs.8,000/-
c) A gift by the employer for the excellent work Rs.7,500.
d) Reimbursement of expenses incurred by him for attending companys work at Delhi Rs.25,000.
He was provided free use of Maruti Car with driver, the perquisite value of which was ascertained at Rs.18,750/-
and free use of unfurnished house the value of benefit being Rs.39,200.
Q.13) Shri Gajananrao Sirdeshpande is working as an accountant of M/s Yogini Industries Pvt. Ltd. He furnishes you
the following information for the assessment year 2014-15.
He received salary of Rs.12,000 per month. He is provided with unfurnished accommodation, the perquisite value of
which is considered to be Rs.28,800/- per annum. He is also given an Ambassador car for his office as well as his
personal use and perquisite value of this facility is considered to be worth Rs.9,000/- Company deducted Profession Tax
Rs.960/- from his salary during the year.
He was on leave for 25 days, During the period of his leave he went to Dehradun and stayed at the guest house of the
employer company. The perquisite value of which is ascertained at Rs.16,840/-.
The company paid the Railway fare from Mumbai to Dehardun and back for Shri Gajananrao, his wife and children.
The Railway fare amounts to Rs.7,500/- in all which is within the specified limit.
You are required to ascertain his taxable income under the head, Salaries for the assessment year 2014-15.
Q.14) Mr. Milind is the branch manager of The Thane Janata Sahakari Bank ltd. He furnished the following information
for the previous year ending on 31st March, 2014.
a) Received salary at Rs.9,000/- per month.
b) An award as the Best Manager of Rs.11,000/- was received on 26th January 2013 from the Board of Directors of the
Bank.
c) Notified Special Allowance for half yearly closing of Rs.1,500/- was received twice during the year. He incurred the
expenses of Rs.1080/- on each occasion to give refreshments to the staff of the branch, to complete the work of half
yearly closing in time.
d) Shri Milind received an award of Rs.5000/- from Commissioner of Police, Thane for showing the necessary courage to
prevent the terrorist who intended to kill the members of the staff.
e) Profession Tax for the year was Rs.960/-.
You are required to ascertain the taxable income under the head, Salaries of Mr. Milind for the assessment year 2014-15.
Q.15) Compute the income of Mr. Sunder under the head, Salaries for the year ended 31st March, 2014.
a) Salaries received during the year Rs.1,47,000/-.
b) Arrears of salary for earlier year received during the year Rs.6,000/-.
c) Salary for April, 2014 received on 31st March 2013 Rs.12,250/-
d) Bonus received Rs.3000/-.
e) Purchased car by taking a loan of Rs.15,000/-
f) Perquisite value of car provided by the employer Rs.3,600/-
g) Received traveling allowance Rs.15,000 out of which he spent Rs.12,000 only.
h) He received entertainment allowance Rs.3,000 p.m.
i) He spent for books Rs.1,500, profession tax Rs.1,080 and fees for membership of a professional body Rs.300/-.
j) L.I. Premium paid by the employer Rs.4,500/-.
Mumbai University old course Practical Problems:

Q.16) Mr. Ramlal is an employee of Tata Finance ltd. Since 2002 since then he is receiving entertainment allowance of
Rs.500 p.m. He submits following further information as on 31-03-2014.
a) Net Salary of Rs.4,000 p.m. (including Entertainment allowance of Rs.500 but after deducting income tax Rs.500:
Provident fund Rs.500 and Profession Tax Rs.70)
b) He is provided car for his exclusive use during office hours for office work. The petrol and other maintenance
expenses comes to Rs.12,000/- p.a.
c) Received Leave Travel Concession for himself and his family for proceeding on leave to home town of Rs.5,000/- as
prescribed, while actual amount spent by him was Rs.3,500/-
d) During the year, he received free service of a cook. (Cost to the employer Rs.4,400)
e) Received Rs.8,000 on encashment of leave to his credit.
Q.17) Mr. Hitesh was an employee of Reliance India Ltd., covered by the Payment of GratuityAct,1972, retired on 31 st
January, 20134 after 35 years and 7 months service. At the time of retirement his employer paid him gratuity of
Rs.65,000/- (exempt u/s 10(10) Rs.51,000) and he received Rs.50,000/- being the accumulated balance of recognized
Provident Fund. The due date of salary and allowances etc. was 1 st day of the next month and were paid on due date. He
was entitled to monthly pension of Rs.400/- with effect from 1st day of February,2014 which becomes due on the last day
of the month.
Compute the taxable income of Mr. Hitesh for the Assessment year 2014-15 on the basis of the following further
information :
1) Basic Salary Rs.2,500/- p.m.
2) House Rent Allowance Rs.400/- p.m. Taxable Value is 50% of the amount received .
3) Project allowance paid during the year Rs.12,000/-
4) Bonus paid during the year Rs.3,600/-.
5) In retirement, on encashment of earned leave at his credit of 15 months he received Rs.37,500/- (Exempt u/s
10(10AA) Rs.24,600)
Q.18) Mr. Suhas Desai submits the following informations pertaining to year ending 31-03-2014.
1) Basic Salary Rs.5,000 p.m.
2) Dearness Allowance Rs.3,000 p.m.
3) Bonus @ 20% on Salary plus Dearness Allowance.
4) Employee contribute 12.5% of Basic Salary & Dearness Allowance to Recognised Provident Fund every month.
Employer also contributes an equal sum.
5) Interest on Balance credited to his Recognised Provident Fund Account @ 14% p.a. Rs.17,500/-
6) House Rent Allowance Rs.10,000 p.a.
7) Profession Tax paid by employee Rs.2,500.
8) He retired from services on 31-3-2014 opting for 60% commutation of pension and received Rs.2,40,000 as the only
terminal benefits.
Compute his Income from Salaries for Assessment year 2014-15.
Q.19) Mr. Rajesh is a sales manager of Raj ltd. Provides you the following information for the year ending 31 st
March,2014.
a) Basic salary Rs.6,500 per month.
b) Dearness allowance Rs.1,000 per month.
c) Bonus Rs.8,000.
d) Commission 1% on sales for the year was Rs.15,00,000.
e) Perquisite value Rs.7,500.
f) Educational allowance Rs.300 per month (exempted Rs.100 per month)
g) Entertainment allowance Rs.825 per month since 1st January, 2005.
h) Professional tax deducted Rs.2,200
Compute the total Taxable Income of Mr. Rajesh of the assessment year 2014-15.
Q.20) Professor Tuttu, who is physically handicapped, is employed with TKT College of Commerce. He furnishes the
following information for the previous year ended 31 st March, 2014, and requests you to compute his total taxable
income for the Assessment Year 2014-15.
Salary of Rs.12,500 p.m.
Arrears of salary Rs.12,000
Entertainment allowance Rs.1,000 p.m.
Medical Reimbursment by the college Rs.12,000
Leave salary received Rs.10,000 during the year
Examinership fees from his college Rs.2,000.
Fees for setting T.Y.B.Com. papers from Mumbai University Rs.4,000/-
Royalty for writing book on accountancy Rs.20,000. Expenses incurred for writing manuscripts, proof reading etc. are
Rs.4,000.
Deducted from salary towards Profession Tax Rs.2,500.
Q.21) The following particulars are furnished by Mr. Nihar for the ending 31 st March,2014.
Rs.
Net salary received after deduction of tax at source 8,00,000
Tax deducted from salary 40,000
Ex-gratia received 1,60,000
House Rent Allowance (Exempt Rs.5,600) 18,400
Project allowance 16,800
Arrears of salary received for 2009-10 2,25,000
Professional Tax Paid by Employee 2,500
Interest from P.P.F. 2,100
Compute the taxable Income for the Assessment year 2014-15.
Q.22) Girish employed with DCM Ltd. Furnishes you with the following information.
i) The details of monthly salary for the year ended 31-3-2014 is as under:
From 1st April, 13 From 1stAug,13
to to
31st July, 2013 31st Mar,2014
Rs. Rs.
Basic Salary per month 3,000 10,000
Dearness Allowance per month 225% of Basic 20% of Basic
House Rent Allowance per month 600 30% of Basic
Income Tax Deducted per month 1,500 2,000
Professional Tax Deducted per month 200 200
ii) Perquisite value of Gas, Water and Electricity Supply Rs.2,500.

iii) Arrears of Salary received as per revised payscale Rs.58,800 (Net). Tax deducted on the arrears of Salary Rs.25,200.
iv) House Rent Allowance exempt u/s 10(13A) for the year Rs.NIL
Q.23) Mr. Dutta is employed with Cyber ltd. He provides the following information for the Assessment Year 2014-15
1) Net Salary per month Rs.9,000.
2) Income tax deducted at source Rs.900 per month.
3) Professional tax deducted at source Rs.100 per month.
4) He has been employed since 1st April, 2005 & received entertainment allowance of Rs.750 per month, since that date.
5) Perquisite Value of water Gas and Electricity Rs.10,000.
6) Received bonus during the year in respect of earlier year Rs.6,000.
7) Received arrears of salary for 2009-10 Rs.6,000.
8) The employer paid L.I.C. Premium of Mr. Dutta amounting to Rs.5,000.
9) Took advance salary of Rs.10,000, on account of marriage of his son and loan of Rs.6,000.
10) Mr. Dutta, who is also a director in the company received Rs.2,000 as directors, sitting fees during the year.
11) Mediclaim Premium paid by the company Rs.2,500.
12) He incurred the expenses incidental to employment, such as purchase of books, car expenses etc. amounting to
Rs.12,000.
13) He received Rs.16,000 as share of Profit from M/s. Reema Perfumes (a partnership firm), where he is a partner.
14) He received an amount to Rs.8,000 from betting in a club.
Compute his Taxable Income from Salaries for the assessment Year 2014-15.
Q.24) The following are the particulars of the income and expenses of Prof. Frank, employed with MIT college, Pune,
for the year ended 31st, March 2014:
1) Gross Salary Rs.25,000 per month.
2) Rent free bungalow, perquisite value of which is of Rs.60,000 per annum.
3) Leave salary of Rs.12,000.
4) Bonus Rs.20,000.
5) Arrears of salary of last three years Rs.2,00,000.
6) Professional tax deducted of RS.200 per month, from salary.
7) Examinership remunership from his college Rs.6,000.
8) He received Rs.5,000 as examiner from Mumbai University.
9) He has spent Rs.4,400 for purchase of books for the purpose of his employment.
10) He received Rs.3,000 for writing articles in The Economics Times.
11) Received from giving tuitions to students Rs.30,000 (for which he spent about 20% on conveyance.)
12) Received Award for the Best Teacher from Govt. Of Maharashtra Rs.11,000.
Compute his Income from Salaries for the assessment Year 2014-15.
Q.25) Shri Inamdar took voluntary retirement on 1st January, 2014 from a Private Bank after completing 26 year and 11
months of service.
He furnishes you with following information :
Basic Salary : Rs.2,800 p.m.
Dearness Allowance : 128% of Basic
Conveyance Allowance : RS.900p.m.
(Actual conveyance expn. Incurred Rs.600 p.m.)
Gratuity: Rs.1,29,200 (Average Salary for immediately preceeding 10 months is Rs.6496)
Commuted Pension : Rs.67,500 (60%)
Leave Encashment : 3 months Basic (Entire amount is taxable)
Uncommuted Pension : Rs.2,500 p.m.
Voluntary Retirement Compensation : Rs.8,72,000 (Exempt Rs.5,00,000)
Profession tax paid : Rs.3,000
After retirement he delivered lecturers as guest faculty in Indian Institute of Banking for which he received Honorarium
of Rs.22,000.
Compute his Taxable Income from Salaries for the assessment year 2014-15. (Oct. 2002)
Q.26) Dr. Ram Bharose is employed with Bhagwan Hospital as a full time Doctor. Following are details of his income
for the year ended 31st March, 2013:
1) Basic Salary Rs.12,000 per month.
2) D.A. @ 30% of Basic Salary.
3) H.R.A. Rs.10,000 [Exempt u/s 10(13A) Rs.4,500]
4) He is Provided Conveyance facility for journey from his residence to hospital and back.
5) Entertainment Allowance Rs.500 per month.
6) Arrears of Salary Rs.6,000.
7) Profession Tax paid by him Rs.2,400 for the year.
8) Best Doctor Award given to him by Bhagwan Hospital Rs.2,500.
9) He was selected as the best surgeon by the State Government and was awarded The Dhanvantari award instituted in
Public interest Rs.10,000.
10) He received honorarium for presenting papers in various seminars Rs.3,000.
11) He was owning a Surgical Equipment which was given on hire to Dr. Laxman Prasad.
Hire charge received by him were Rs.30,000.
The Expenses on maintenance amounted to Rs.2,500 and allowable depreciation Rs.4,500. (April 03)
Q.27) Mr. Betrabet is employed with Tata Information Ltd. He provides you with the following information for the
Assessment Year 2014-15.
1) Net salary Rs.9,500/- per month.
2) Income tax deducted at source of Rs.2,300/- per month.
3) Profession Tax deducted Rs.200/- per month.
4) He is employed since 1-4-2007 and he receives entertainment allowance of Rs.750/- per month
5) He is provided free gas, water and electricity : perquisite vale of which is Rs.9,900/- per annum.
6) He received bonus of Rs.8,000/- for the current financial year .
7) He received arrears of salary of Rs.8,500/- for the year 2007-08 during the current financial year.
8) The employer paid his L.I.C. premiums aggregating Rs.5,500/- .
9) He is permanently physically disabled person and incurred expenses of Rs.15,000/- for his medical treatment.
10) He took advance salary of Rs.18,000/- for the occasion in a family.
11) He received as a director of Godraj Industries Ltd. Rs.2,500/- as directors fees during the year.
12) He retired on 31-3-2014 and received Rs.2,00,000/- as Gratuity on the same day, out of which Rs.1,62,000 is exempt
u/s 10(10). Compute his Gross total income for the Assessment year 2014-15. (April 2003)
Q.28) Nikunji who is totally blind is employed with BXI Ltd. The details of his salary for the previous year 2013-2014
as follows:-
a) Basic Salary Rs.8,000 p.m.
b) D.A @ 75% of Basic
c) H.R.A. @ 20% of Basic
[Exempt amount Rs.400 p.m. u/s 10 (13A)]
d) Entertainment Allowance Rs.2,000 p.m.
e) Arrears of Salary Rs.5000
f) Advance against Salary Rs.6000
g) Contribution of Employer to Recognized Providend Fund
in excess of Prescribed limits Rs.2,300
h) Interest on Recongnised Provident Fund in excess of prescribed fund in
excess of prescribed limit. Rs.780
i) Bonus equal to 2 months basic was declared
j) Amount spent by him on entertainment Rs.500 p.m.
k) Education Allowance @ Rs.600 p.m.
[Exempt u/s 10 (14) Rs.1,200]
l) Perquisite value of vehicle provided by employer for personal use Rs.4,000
m) Professional Tax Deducted from Salary Rs.200p.m.
n) He paid medical insurance premium for himself and his wife Rs.7,000 by cheque
Compute the net taxable income for A.Y 2014-15. (April 2004)
Q.29) Mr. Ram joined a company, AB Ltd. On June 1, 2013 and was paid the following emoluments and allowed
perquisites as under:
Emoluments :- Basic pay Rs.50,000 per month
Dearness allowance - Rs.20,000 per month
Bonus (Target Achiever) Rs.1,00,000 per month
Perquisites :-
1) Furnished accommodation owned by the employer and provided free of cost. Taxable value of this rent free
furnished accommodation was Rs.2,20,000.
2) Motorcar owned by the company along with chauffeur for official and personal use, the taxable value being
Rs.36,000.
3) The company paid medical insurance premium of Mr.X amounting to Rs.15,000.
Before joining the company AB ltd. He was a Central Government employee and retired on May 31, 2013. He was paid
the following emoluments and perquisites till May, 31,2013 by the Government.
Rs.
Basic Salary - 96,000 p.a
Dearness Allowance - 6,000 p.a
Entertainment Allowance since 1960 - 24,000 p.a
From June 1, 2013 he receives the monthly pension of Rs,3,000 from the Government. He received Rs.30,000 as leave
Salary in respect of earned leave at his credit. He received Rs.1,20,000 as gratuity. Compute the taxable salary of Mr.
Ram for the assessment year 2014-15. (April 2005)
Q.30) Professor Nagmani was working with N.K.T College of Commerce. He received the following amounts during
the period of 6 months ending on 30-09-2013:
1) Salary @ Rs.10,500 p.m.
2) Arrears of salary Rs.8,500/-.
He left the N.K.T. College and joined immediately Gokhale college of commerce, Borivali w.e.f. 01-10-2013. During the
period ending on 31-03-2014, he received as follows:
a) Salary @ Rs.11,350/-
b) Wardenship Allowance @ Rs.1,400 p.m.
c) House Rent Allowance Rs.4,800 for 6 months (Exempt Rs.2,400).
d) Examinership fess Rs.3,600/-
He further informs you that during the year he received Rs.3,000 from Mumbai University on account of examinership
fees. He also received from M/s Guru Prakashan, Kalayan Rs.28,000/- being royalty for writing a book on, Auditing &
Accounting practices. Employers deducted Profession Tax at source amounting Rs.1,800/- in all during the previous
year.
You are required to compute the taxable income under the head, Salaries for the assessment year 2014-15.
Q.31) Mr. Ramesh is the Sales Manager of M/s BALKRISHNA FOOD PRODUCTS Pvt. Ltd. He provides you the
following information for the previous year ending on 31-3-2014.
1. Basic Salary @Rs.14,500 p.m.
2. Dearness Allowance Rs.1,500 p.m.
3. Bonus Rs.24,000/-
4. Commission on Sales @ 10%.
5. Sales during the year Rs.32,01,600/-.
6. Perquisite value of car Rs.27,540 being used for personal purposes.
7 Education Allowance @ 1,300 per month. (Exempt u/s 10(14) Rs.1.200/-)
8. Received Entertainment Allowance @ Rs.1,825/- p.m. since 1st January , 2005.
9. He was abroad on companys work during the month pf February, 2007. Expenses incurred by him abroad Rs.96,385/-
was reimbursed to him.
10. Employer deducted profession tax Rs.1,200/-
You are required to compute taxable salary of Mr.Ramesh for the assessment year 2014-15.
Q.32) Mr. Deepak is an employee of TISCO since 2001. Particulars of his income for the financial year 2013-2014 are
as follows:
1. He received a) Basic salary of Rs.13,000/- p.m. b) Dearness allowance of Rs.1,700/- p.m.
c) House Rent Allowance of Rs.1,500/- p.m.
[Exempted Rs.800 p.m.] d) Entertainment Allowance of Rs.1,500/- p.m.
e) Bonus of Rs.14,000/-.
2. During the year he received Rs.24,500/- as L.T.A for the entire family to go a Kashmir Exemption in respect of value
of Leave Travel Concession is allowable as per Rules. He duly incurred Rs.19,500/- expenses for his Kashmir Tour.
3. He Spends on entertainment Rs.1000 p.m. on an average for entertaining the visitors. Profession Tax was deducted at
source from his salary @ Rs.175/- per month.
You are requires to ascertain the income chargeable to tax under the head income from salaries for the
Q.33) Mr. Bhandari retires from Seva Textiles on 30-4-13. He is paid Rs.1,800 p.m. as pension. On his request Seva
Textile company pays Rs.36,000 in lieu of 50% of pensions from 1-12-2013. Prior to 30-4-13 he received salary of
Rs.4,500 p.m. and 4000 p.m. as DA. Assume that (A) gratuity is paid (B) no gratuity has been paid and find out the Net
Taxable Income from Salary for A.Y. 2014-15.
Q.34) Mr. Nilesh retires from Surya Foundation on 31-10-2005. He gets pension of Rs.2,000 p.m. upto 31-10-2013.
With effect from Nov. 1, 2006 he gets 60% of pension commuted for Rs.30,000. Prior to 31-10-2013 he used to get
Rs.5,000 p.m. as salary, Rs.3,000 p.m. as DA. Determine the amount of taxable salary under the following two
circumstances.
a. Gratuity is received by Mr.Nilesh b. Gratuity is not received by Mr. Nilesh.
Q.35) Mr. Manthan is not covered by Payment of Gratuity Act, retires on 28th Feb, 2013 after serving the employer
company for a period of 18 years and 10 months. He was drawing a salary of Rs.5,000 up to Sept., 2012 and thereafter
Rs.6,000/- per month. On retirement he is not in receipt of pension but gratuity of Rs.67,500 is paid. Compute taxable
salary in his case for the assessment year 2014-15, on the assumption that he paid Rs.2000 as profession tax.
Q.36) Ms.Jyoti, is not covered by the Payment of Gratuity Act, 1972 retires during F.Y. 2013-2014 from DNC Data
Systems and receives Rs.45,000 as gratuity after a service of 40 years 1 month. Her average monthly salary during the
last 10 months of service was Rs.2,200. Till the date of her retirement she received Rs.16,500 as salary, profession tax
deducted was Rs.1,500. Determine the amount of taxable salary.
Q.37) Mr. Ajay who was working as Commissioner of Labour retired on 31 st December, 2013. Following are the
particulars of his income relating to the year ending on 31 st March, 2014:
1. Salary received Rs.9,000/-p.m.
2. Entertainment allowance received Rs.1000 per month. He spent on entertainment Rs.800/- per month on an
average.
3. During the month of January, 20134 he received gratuity amounting to Rs.85,000/-.
4. He received Rs.1,25,000/- the value of commuted pension on 12th January 2014.
5. He received uncommuted pension from Government with effect from 1 st January, 2014 which becomes due on
every last day of the month at the rate of Rs.3,800/- per month.
6. He received arrears of salary Rs.13,600/- on 24th March,2014.
7. He incurred the expenses incidental to employment such as purchase of books, car expenses etc. amounting to
Rs.11,500/-
You are required to compute his taxable income for the assessment year 2014-15.
Q.38) Mrs. Sushila is employed with M/s Alliance Engineers Pvt. Ltd. She provides you the following information for
the assessment year 2014-15:
1) Net Salary per month 9,050

2) Income Tax deducted at source per month 200
3) Profession Tax deducted at source per month 150
4) Provident fund contribution deducted from salary per month 600
5) L.I.C premia deducted from salary per month 1000
6) Club fees met by employer 6,000
7) Salary in lieu of leave 6,000
8) She was given car for her exclusive use during office hours only.
Compute on the basis of above information taxable income under the head, Salaries of Mrs. Sushila for the assessment
year 2014-15.
THEORY QUESTIONS
1. Discuss the taxability of the Receipt of Advance Salary.
2. Indicate the circumstances where provision for Medical facilities or Reimbursement of Medical expenses by an
employer to employee will not be treated as perquisite.
3. Write short note on Profit in lieu of Salary.
4. Write short note on specified Employee.
Module / Unit
INCOME FROM HOUSE PROPERTIES
1. If the house property is Let out for Residential

purpose only
Computation of Net Taxable Income From House Property
Income from House Property (Let Out) Rs. Rs.
Gross Annual Value **
Less : Municipal Taxes U/S 23 (1) **

(Paid & Borne by owner only)
Net Annual Value **
Less : Deductions U/S 24 (1)
1. Annual Value **
2. Interest on Loan of House Property ** **
NET TAXABLE INCOME FORM HOUSE PROPERTY **
Computation of Gross Annual Value

a) Reasonable letting value
Fair Rent OR Municipal Valuation
Whichever is Higher
OR
Standard Rent
Whichever is Lower
b) Actual Rent Received ( 12 Months) - Unrealised Rent
c) a) OR b)
Whichever is Higher
d) c) - Vacant Months Rent
= GROSS ANNUAL VALUE
Prof. Pankaj
2. If the owner has occupied a house for his own

Residential purpose only
Computation of Net Taxable Income From House Property
Income from House Property (Self Occupied) Rs. Rs.
NET ANNUAL VALUE **
Less : Deductions U/S 24 (1)
1. Interest on loan of House Property ** **
LOSS ON HOUSE PROPERTY (**)
Prof. Pankaj
MUNICIPAL TAXES
Any taxes levied by a local authority i.e. Municipality in respect of the house property shall be
allowed as deduction in the year in which such amount of taxes is actually paid by the owner. No other
expenses will be allowed as deduction.
DEDUCTIONS U/S 24
a. Standard deduction :
A standard deduction of 30% of Net Annual Value is allowed.
b. Interest on loan taken for house property :
If the assessee / owner has taken any loan for house , shall be allowed as a deduction.
OBJECTIVE QUESTIONS
Column A Column B
1. Reasonable letting down value 30% NAV
2. Gross annual value of SOHP Deduction is interest accrued to loan account
3. Standard deduction Deduction is Interest paid of loan
4. Interest on housing loan for LOHP Higher of fair rent or municipal RateableValue
NIL
Column A Column B
1. Municipal Tax deduction Allowed in 5 equal installments
2. Pre construction interest on house Allowed upto Rs.30,000 or Rs. 1,50,000 as
applicable
3. Interest on housing loan for a SOHP No restriction on deductable interest
deduction
4. Interest on housing loan for a DLOP Allowed on accrual basis
deduction
5. Interest on housing loan for a LOHP Allowed only on payment basis for LOHP
deduction or DLOHP
C. Match the following columns
Column A Column B
1. Unrealised rent received Standard deduction of 30% of amount received is
during the year allowed.
2. Composite Rent Standard deduction of 30% of the amount received is
not allowed
3. Arrears of Rent Rent charged to the tenant for the house property along
with charges for extra facilities and amenities.
4. Co-ownership House property facilities and amenities more that 1 or
more persons.
State whether True or False

1. Municipal taxes are deductible from the gross annual value only when they accrue.
2. Unrealised rent is a deduction from net annual value.
3. An assessee has borrowed money for purchase of a house and interest is payable outside India. Such
interest shall be allowed as deduction, only if tax is deducted at source.
4. Kimaya is owner of building although the land was taken by him on lease. The income from such
house property shall be taxable under the head : income from house property.
5. The interest on new loan taken to square off interest liability towards the old loan is allowed as
deduction U/s 24 (b).
6. Reasonable letting down value is higher of fair rent or municipal valuation.

7. Municipal tax paid by owner is allowed as deduction for deemed to be let out property.
8. The assessee shall be allowed a statutory deduction of a sum equal to 30% of gross annual value.
9. The annual value of the property shall not be taken to be nil if the assessee cannot occupy his property
& resides at some other place due to his employment.

Q.1. Municipal valuation of the source is Rs.1,20,000 and actual rent received is Rs.1,25,000, fair rent is Rs.1,40,000.
The gross annual value in this case shall be. Assuming that reduction in rent is due to vacancy.
a. Rs.1,20,000 b. Rs.1,40,000 c. Rs.1,25,000 d. None of the above
Ans : ____________________________________________________________________
Q.2. Municipal valuation of the house is Rs.1,00,000, fair rent Rs.1,20,000 and actual rent received or receivable is
Rs.1,40,000. The Gross Annual Value in this case shall be
a. Rs.1,00,000 b. Rs.1,20,000 c. Rs.1,40,000 d. None of the above
Ans : ____________________________________________________________________
Q.3. Municipal Valuation of the house is Rs.1,20,000, fair rent Rs.1,40,000 and actual rent received or receivable is
Rs. 1,25,000. The gross annual value in this case shall be assuming that reduction in rent is not due to vacancy.
a. Rs.1,25,000 b. 1,20,000 c. 1,40,000 d. None of the above
Ans : ____________________________________________________________________
Q.4 A house property with fair rent Rs.1,00,000 is neither let out not self occupied throughout the previous year. Its
annual value shall be
a. Rs.1,00,000 b. Nil c. Rs.85000 d. None of the above
Ans : ____________________________________________________________________
Q.5. Unrealised rent is a deduction from
b. Gross annual Value b. Net annual value c. Municipal value d. None
Ans : ____________________________________________________________________
Q.6. A has two house properties, both are self-occupied. The Gross Annual Value of
a. Bothe house shall be nil b. One house shall be nil
c. No house shall be nil d. None of the above
Ans : ____________________________________________________________________
Q.7. An assessee has borrowed money for purchase of a house pro.& Interest is paid outside India. Such in shall
a. be allowed as deduction b. not to be allowed as deduction
c. be allowed as deduction if the tax is deduction at source d. None of the above
Ans : ____________________________________________________________________
Q.8. Municipal tax is deducted from
a. Net Annual Value b. Gross Annual Value c. Municipal Valuation d. None of the above
Ans : ____________________________________________________________________
Q.9. Madan has taken a house on rent and sublets the same to Anil. Income from such house property shall be taxable
under the head
a. Income from house property b. Income from other sources c. Business income d. None of the above
Ans : ____________________________________________________________________
Q.10. Municipal tax paid in respect of house property is allowed as deduction if paid by
a. Tenant b. Owner c. Both a & b d. None of the above
Ans : ____________________________________________________________________
Q.11. If the housing loan is taken for repairs of self occupied property, the interest on the loan is
a. Not deductible from Net Annual Value b. Deductible upto Rs.30,000 from Net Annual Value
c. Deductible in 5 equal installments from the previous year of repairs from Net Annual Value
Ans : ____________________________________________________________________(Mar, 2014)
Q.1) Mr. Chandan has let out the house property for Rs.75,000/- Municipal Valuation of the house is Rs.60,000
whereas fair rent of the property is Rs.68,000/-. Mr. Chandan has borrowed a loan of Rs.50,000/-@ 15% on 1st April
2008 for the purpose of his daughters marriage by mortgaging House Property. Following are the expenses incurred by
him during F.Y.2013-2014:
Municipal Taxes 20% of Municipal Valuation
Repairs 7,500
Annual charge 1,700
Land Revenue (outstanding) 500
Insurance 650
Collection charge 150
Annual charge of Rs.1,700/- is payable by Mr.Chandan to his mother as per will of his father.
Compute the taxable income for the Assessment Year 2014-15.
Q.2) Mr. Naryan is the owner of house property viz. Aakash Ganga which he uses for the purpose of his own residence.
Municipal valuation of the said property is Rs.80,000/- whereas Fair Ret is Rs.95,000. He paid Municipal Taxes of
Rs.14,000. Insurance charges of Rs.2,750 and Ground Rent Rs.1,800. Interest on Housing loan Rs.27,000.
Compute the taxable income for the Assessment year 2014-15.
Q.3) Shri Ambalal Shah owns a self-occupied house known as Dream Land The national rent of the house is
Rs.5,500 p.a. The Municipal Taxes paid for his property are Rs.1000/- He is employed with M/s Bhagawan das ltd on a
salary of Rs.6,000/- per month since 1995. There is no any other income.
You are required to calculate his gross taxable income for the assessment year 2014-15.
Q.4) Shri Dwarkadas Ved owns a house property known as Gokul Dham situated at Gandhidham, Gujarat. Municipal
rateable value of the house is Rs.3,000/-. Municipal taxes are 30% of Municipal rateable value. During the previous year
he could nor occupy this house because of his employment in Mumbai. House remained vacant and no any other benefit
is derived from this house. He paid interest of Rs.35,000 to HDFC on loan borrowed for the purpose of acquiring this
house. He is employed with M/s Accurate Enterprises on a monthly salary of Rs.7,500/- per month.
You are required to compute his taxable income for assessment year 2014-15 assuming
a) that the H.D.F.C Loan taken and acquisition of House property was prior to 1st April, 1999.
b) that the H.D.F.C. Loan taken and acquisition of House property was on 1 st April, 1999.
Q.5) Shri. Kamlesh owns a property at Bhendi Bazar Mumbai . The particular of the property let out on rent are given
below:
Annual rental value (Rs.5,000 p.m.) 60,000

Municipal taxes paid up by the owner 12,000
Ground rent 600
Collection charges incurred 500
Insurance premium on the property 500
The house remained vacant for one month only.
You are required to work out income from house property for the assessment year 2014-15.
Q.6) Shri Om Prakash owns a residential house property at Nasik. The particulars of his house are given below for the
Annual Rent 70,000

Municipal taxes paid 16,000
Insurance Premium 1,300
Ground rent 1,900
Interest on money borrowed for construction 10,000
Collection charges actually paid 3,000
Shri Om Prakash mortgaged the property for Rs.3,60,000 which were spent on his daughters marriage. He paid interest
of Rs.31,000 /- on mortgage loan this year. He also claimed that he has not realised rents from his tenants for previous
years to the extent of Rs.5,000/- and proved his claim to the entire satisfaction of the assessing officer that the conditions
for its admissibility were satisfied.
Q.7) Sanjay owns a house property at Calcutta. Following details are available regarding this property:
a) Actual Rent received per annum from the tenants 17,000

b) Municipal taxes per annum 4,600
c) Municipal rateable value 20,000
d) Legal expenses incurred in respect of taking legal proceeding against one tenant
for recovery of rent 1,250
e) Bank commission on realization of outstation cheque 115
f) Conveyance charge, typing charges incurred in connection with collection of rent 1,210
g) Amount of Land revenue actually paid during the previous year relating to a
period other than previous year 250
h) Commission paid to a broker for arranging the loan for purchase of the
above house property 2,350
i) Insurance premium paid to insure the loss of rent 850
You are required to compute the income from House Property, from the above information, considering:
i) All taxes are borne by the landlord and
ii) 50% of M. Taxes borne by the tenants.
Q.8) Shri Rajnikant owns 2 houses in Mumbai. The house No. 1 is self-occupied with other four (4) co-owners whereas
the house the no. 2 of which he is the only owner is let out at Rs.3,200/- p.m.
Compute his income from house property with the help of following further information for the assessment year 2014-15.
House House
No.1 No.2
Fair Rent 60,000 38,000
Municipal Rateable value [Net] 50,000 36,000
Municipal Taxes 3,500 6,000
Fire insurance premium 425 1,000
Expenditure on repairs 1,100 5,000
During the previous year 2013-2014 Shri Rajnikant could not occupy house no.1 for 3 month due to his overseas visit.
Q.9) Shri Bhushan owns two house properties in Mumbai of which he uses second property for his personal use. His
total income from sources other than property is Rs.30,000. The following are the particulars in respect of the properties;
Year of construction Building Building No.2
No.1 1960 1982
Municipal Rateable Value 36,000 16,000
Rent Received (for 10 months) 52,000 Self-occupied
Local Taxes 4,000 4,000
Actual Repairs 2,000 200
Ground Rent 400 -
Fire Insurance Premium -NIL 300
Vacancy 2 months -N.A
Collection charges 3,000 -NIL
Compute the total income of Shri Bhushan for the assessment year 2014-15.
Q.10) Mr. Prabhakar is the owner of 3 residential houses and one Bungalow. The three house are let out & the bunglow
is occupied by him for his own residence. The rental value of the three let out properties is Rs.42,000 and that of
Bunglow is Rs.70,000.
A. The expenses of the let out properties are as under:
Municipal Taxes Rs.7,500

Land Revenue Rs. 992
Ground Rent Rs. 848
Annual interest on mortgage of one of the properties
(interest has not been paid for last three months.
The loan was taken for marriage of his daughter) . Rs.4,000
Fire Insurance Premium Rs.1,600
Rent collection charges Rs.2,400
Legal charge for recovery of rent Rs. 600
Repairs and alteration expenses Rs.8,000
B. The expenses of the bungalow are :
Municipal Taxes Rs.12,000
Insurance Premium Rs. 3,500
Ground Rent Rs. 7,500
Mr. Prabhakar has invested in fixed deposits with the following:
1. State Bank of India Rs. 2,50,000 @ 10% interest p.a
2. Hindustan Petroleum ltd. Rs.2,50,000 @ 15% interest p.a
3. HDFC Rs. 3,00,000 @ 15%p.a.
Interest received during the year on above deposits was as under:
1. State Bank of India Rs.25,000
2. Hindustan Petroleum Ltd. Rs.37,500.
3. HDFC Rs.45,000.
Compute the Gross total income of Mr.Prabharkar for assessment year 2014-15. He agreed to pay Rs.2,500. for tax
services.
Q.11) Mr. Vidyadhar is the owner of three house properties in Baroda, the particulars of which are given as under:
I II III
House House House
Rs. Rs, Rs,
a) Actual Rent Received 40,000 Dwelling House 19,000
b) Fair Rent 40,000 52,000 19,650
c) Total Municipal tax 3,000 5,000 2,250
d) Municipal tax paid by tenant 1,500 --- ---
e) Vacancy ---- 3 months ---
f) Collection charges 1,000 --- 150
g) Insurance Premium 400 750 740
h) Interest on loan for house 1,90,000 1,19,000 1,500
Income from other sources Rs.5,00,000
Compute Income from House Property for the Assessment year 2014-15assuming.
a) That the loan taken and acquisition of dwelling house was prior to 1 st April,1999.
b) That the loan taken and acquisition of dwelling house was on 1st April ,1999.
Q.12) Mr. Indrajeet is the owner of two house properties, Ashokvan and Ramdarshan of which Ashokvan has been self-
occupied and other has been let out. Particulars of these properties are as follows:
Particulars Ashokvan Ramdarshan
Rs. Rs.
Actual Rent received (10 months) Nil 84,000
Municipal Valuation 80,000 80,000
Fair rent 90,000 88,000
Municipal taxes paid 8,000 8,000
Interest on borrowed funds 17,860 NIL
Fire insurance 900 1,900
Ground Rent 750 1,800
Land Revenue 3,850 3,900
Determine income from house property of Mr. Indrajeet for the assessment year 2014-15 assuming that the loan was
taken prior to 1st April, 1999.
Q.13) Mr. Abhjit is the owner of two house properties namely Shanti Niketan at Nasik and Shanti Dham at Nagpur.
Both the houses are occupied by Mr. Abhijit and are used as and when required. He furnished you the following for the
Particulars Shanti Niketan Shanti Dham
At Nasik at Nagpur
Rs. Rs.
Municipal Valuation 39,000 31,000
Municipal Taxes paid 7,385 4,440
Fair Rental Value 45,000 39,000
Fire Insurance 900 800
Ground Rent 567 440
Advice Mr. Abhijit taking into consideration the provision of income Tax Act, and compute the taxable income under the
head Income from house property.
Q.14) Mr. Shridhar and Mrs, Veena are equal owners of residential house property namely Shivenri consisting of
10 residential units situated at Pune. They borrowed loan of Rs,2,50,000/- from Mr. Ajay a resident of Rangoon @ 15%
p.a. interest. The tax was not deducted at source nor he is assessed to tax in India. The borrowed funds are used for
construction of House property Shivneri.
All the ten units were let out a monthly rent of Rs.650/- per month per residential unit. Municipal taxes of Rs,16,800/-
were paid during the year. Other payment in respect of the said properly are as under:
Rs.
Fire Insurance 960
Land Revenue 600
Repairs 1,700
Ground Rent 2,400
Collection Charge of Rent 1,800
Mr. Shridhar is employed with M/s Sharp consultants on a monthly salary of Rs,15,000/- p.m. He got two months salary
as bonus. He incurred the expenses of Rs.15,000/- on the purchase of Technical books which are useful for performing
his duties.
Compute Gross Total Income of Mr. Shridhar for the assessment year 2014-15.
Q.15) Mr. Surender and his five brothers became owner of the house Pushpak after the death of their father on 22-3-
2014. As per the will of their father each brother is required to pay Rs.20,000/- in lumpsum to their sister Mrs. Aparna as
against this house & these six brothers to share the benefits of this house equally. Following additional information is
provided.
Rent received Rs.94,000
Municipal Valuation Rs.80,000
Fair Rental Value Rs.1,05,000
Repairs Rs.17,480
Insurance Rs. 4,200
Municipal taxes Rs.21,000
Ground Rent Rs. 3,000
Compute the taxable income of Mr. Surender for the assessment year 2014-15under the head income from house
property.
Q.15) Miss Nalini is the owner of 3 house properties. House no. 1 and 2 self occupied whereas property no. 3 is letout
for business purpose. Miss Nalini furnished you the following information pertaining to the assessment year 2014-15:
Particulars Property No.1 Property No. 2 Property No.3
Municipal Valuation 34,000 52,000 50,000
Fair Rental Value 40,000 55,000 60,000
Rent Received -- -- 72,000
Municipal taxes paid 4,300 5,000 8,400
Insurance 1,200 1,500 2,00
Collection charges --- -- 1,200
Ground Rent 750 (paid) 1,300 (Outstanding) 2,600 (paid)
Repairs -- 2,000 6,000
Land Revenue 1,000 (paid) 1,200 (paid) 1,200 (outstanding)
You are required as a tax consultant to advise Miss Nalini & compute the income from house property.
Q.16) Mr Nandkishore owns two house properties, property no.1, viz, Indraprastha situated at Delhi and property no.
2, viz, Kamal Kunj situated at Rajkot. He gave the following particulars for the year ended 31 st March 2014.
A Property No.1 Indraprastha
a) Rent Received Rs.36,000
b) Municipal Valuation Rs.32,000
c) Municipal taxes (borne by tenant) Rs.4,000
d) Land revenue (outstanding) Rs.1000
e) Insurance Premium Rs.2,400
f) Interest paid to State Bank pf India on amount
borrowed on motagaged of property Rs.12,400
g) Collection charges Rs.900
As per the decree of the court Mr. Nandkishore is required to pay Rs.1,000/- p.m. to his mother towards her maintenance
out of the income of this property. Loan was taken from the Bank for the purchase of motor car.
B. Property no.2 Kamalkunj
Rateable value of this house is ascertained at Rs.36,000/-. He incurred the following expenses:
a) Municipal taxes Rs.3,250/- b) Interest paid to H.D.F.C. Rs.32,000/-. He borrowed funds from H.D.F.C. prior to 1st
April, 99 for the purpose of construction of this house. The house is occupied by Mr. Nandkishore for his own residence.
Determine the taxable income of Mr. Nandkishore under the head income from house property for the assessment year
2014-15.
Q.17) Miss Supriya is the owner of two house properties viz, Ushakiran and Vasundhara. Ushakiran was letout at
an annual rent of Rs.18,000/- while its municipal valuation was Rs.26,000/- Rs.2,000/- was paid for municipal taxes.
Cost of repairs were to be borne by the tenant. Miss supriya has borrowed Rs.2,00,000 for construction of this property
from Mr. Kennady an American resident @ 10% p.a. interest was payable quarterly. No tax has been deducted from
interest payable. Mr. kennady is neither assessed to tax in India nor any other person is taxable as his representative in
India. She further informs that Rs.3,000 has been paid as salary to a watchmen. House Vasundhara has been self
occupied. Interest on Borrowed funds for the purpose of acquisition of House Vasundhara amounts to Rs. 19,000/-.
This loan was taken prior to 1st April,99.
Compute the income under the head,Income from House Propertyof Miss Supriya for the assessment year 2014-15.
Q.18) Mr. Varun has become the owner of the house property viz, Sameer on the death of his father Mr. Pawan on
22nd February, 2013. As per the will of his father Mr. Varun has to pay Rs.3,500/- per month to his mother towards her
maintenance out of the income of this property.
The house property was letout for Rs.36,000/- and Rs.3,000/- was paid for municipal taxes. Cost of repairs were to be
borne by the tenant. Fire insurance premium of Rs.1,500/- was paid.
Mr. Varuns mother stays in Srilanka Mr. Varun remits Rs.3,500/- per month to his mother. No tax has been deducted
from the annual charge payable. Mr.Varens mother is neither taxed in India a nor any other person is taxable as her
representative in India.
Compute the income from house property of Mr. Varun for the assessment year 2014-15.
Q.19) Mr.Srikant is the owner of a house known as, Krishna Kuti of three residential units. The house was occupied
by Three tenants viz. Dilip, sanjay and sachin for their residential purposes. The other particulars of the house are given
below tenant wise for the year ended 31st March 2014.
Particulars First unit Second unit Third

Name of the tenant Dilip Sanjay unit
Sachin
Gross rateable value 16,000 18,000 20,000
Fair rent 12,000 20,000 21,000
Actual rent received 14,500 16,000 24,000
Municipal taxes paid 4,000 4,860 5,400
Expenses on repairs 1,450 2,500 3,500
The repair cost of the first and second units is to be borne by tenants themselves. Owner Mr. Srikant is to bear Municipal
taxes only in respect of the first unit, while Sanjay and Sachin reimbursed the Municipal taxes paid by the owner.
Compute the income from the house property of Mr. Srikant for the assessment year 2014-15.
Q.20) Mr. Vinay is a retired government employee getting a pension @ Rs.4,000/- per month. He owns two houses as
Sudarshan and Govardhan.
House Surdarshan was occupied by him for his own residence upto 31 st October 2013. and thereafter, w.e.f. 1st
November 2013. It was letout on a monthly rent of Rs.900/- p.m. other particulars of this house are as under:
Interest on funds borrowed for construction of this house Rs.5,000/-
Cost of repairs alterations Rs.4,800/-
Insurance Paid Rs.180/-
Ground Rent Rs.360/-
Municipal taxes for the financial year 2008-09 paid on 11th May, 2014 Rs.1,800/- House Govardarshan was letout on a
monthly rent of Rs.800/- p.m. upto 31st August 2013 and was self occupied from 1st September,2013. He paid Rs.4,250/-
towards repairs Rs.530/- towards insurance and Rs.120/ as land revenue. Municipal taxes amounting Rs.1,500/- were
outstanding as on 31st March, 2014.
From the above information you are required to compute the gross total income of Mr. Vinay for the assessment year
2014-15.
Q.21) Find out the Gross Annual Value and Income from house property in following house properties for assessment
year 2014-15.
Particulars H1 H2 H3 H4
Fair Rent 1,05,000 1,75,000 1,75,000 1,02,000
Municipal Valuation 1,42,000 1,74,000 1,26,000 1,42,000
Rent Receivable (12 months) 1,88,000 1,68,000 1,80,000 1,68,000
Vacant Period 1 month 1 month 1 month 3 months
Unrealised Rent 13,000 42,000 NIL 68,000
Interest on Loan 1,00,000 1,53,000 30,500 1,40,000
(Loan & acquisition of property is taken on
1.4.2002)
Q.22) Mr. Surana is the owner of two house properties. From the following information furnished by him for the year
ending 31st March 2013 compute is taxable income for the Assessment year 2014-2015. (April 95)
Particulars Property No. 1 Property No. 2
Nature of occupancy Self-occupied Let out for Business
Annual Rateable value Rs.20,000 Rs.30,000
Construction commended on and 1.4.97 1.4.96
completed on 1.4.98 28-2-99
Municipal Taxes paid
For the period 1-4-2013 to 31-3-2014. Rs.8,000 Rs.9,600
Insurance Premiums paid
For the period 1-10-2013 to 30-9-2014 Rs.2,000 Rs.2,000
Interest on Loan borrowed
For construction Rs.6,000 Rs.6,000
Q.23) Mr. Dhansukh who is mentally retarded, submits the details regarding the two house properties owned by him
for the year ending 31st March 2014:
Particulars House House
No.1 No.2
Fair Rent 25,000 35,000
Rent received 28,000 25,000
Municipal valuation 26,000 25,000
Repairs 5,000 8,000
Insurance premium for the period 2,000 3,000
1.10.2013 to 30.9.2014
Land reserve paid 2,500 4,000
Ground rent payable 1,600 6,000
Interest on funds borrowed on
Mortgaging House No.1
[Amount borrowed unutilized for the 4,000
construction of House No.2]
Date of Completion of construction 31.3.1993 31.3.1997
Nature of occupation Let out for Let out for
Residence Business
Other Information
1. House No.1 was vacant for 3 month during the year.
2. As per decree of the court, Mr.Dhansukh has to pay Rs.250/- p.m. to his widow sister towards her maintenance
out of the income of House No.2. Compute his taxable income for the Assessment year 2014-15. (OCT .95)
Q.24) Mr. Tushar Parekh owns a house which was let out for the part of the year for residential purposes and was self
occupied for the remaining period of the year. It was let out on monthly rent of Rs.3,000/- from 1st April,2013 to 30th
June, 2013 and from 1st November 2013 to 31st March 2014.
Compute the taxable income of Mr. Tushar for the year ending 31 st March 2014 after considering the following
information.
1) Municipal Annual value of the house Rs.24,000/-
2) Municipal taxes paid Rs.14,400/-
3) Interest on money borrowed for the construction of this house Rs.6,000/-
4) Land Revenue payable Rs.2,400/-
5) Ground Rent Payable Rs.2,400/-
6) Fire Insurance Premium Paid Rs.3,600/-
7) Repairing Expenses incurred Rs.2,400/-
8) The construction of the house commenced on 1st August,1997 and completed on 1st August, 1999. (April 96)
Q.25) Mr. Iqbal Tyrewala, a mentally retarded, is the owner of a House Property in Mumbai the construction of which
was commenced on 1st day of April 1996 and completed on 30th June, 1997. The property is let out for residential
purposes to two tenants Each tenants pays Rs.65,000/- as rent per year. The Municipal Annual Value of the property is
Rs.1,27,000 and fair rent is Rs.1,35,000.
After taking into consideration the following information, compute the taxable income of Mr. Iqbal for the year ending
31st March 2014.
a) Municipal taxes paid are 40% of the Municipal annual value of which 50% are borne by the tenants.
b) Land revenue paid during the year Rs.10,000 for the period 1.4.2013 to 31.3.2014 and Rs.5,000 paid on 4.4.2013 of
the period 1.4.2013 to 31.3.2014.
c) Fire Insurance premium paid Rs.5,000 during the year for the period 1.10.2013 to 30.9.2013.
d) Ground Rent payable Rs.12,000. (Oct. 96)
Q.26) Mr. Chetan is the owner of 2 House properties of which he uses the second for his personal use. Following ate the
details in respect of these 2 properties:
Particulars House House
No.1 No.2
Municipal rateable Value 26,000 36,000
Rent Received 30,000 S.O.P
Municipal Taxes 2,000 4,000
Actual Repairs 1,000 200
Ground Rent 200 ---
Insurance Premium 1,000 600
Vacancy 2 Months 3 Months
Collection Charges 3,000 ---
Interest on loan for construction 8,000 2,000
Compute his total income for Assessment Year 2014-15 (Oct. 98)
Q.27) Mr. Gharwala is the owner of various house properties. The details of which for the Previous Year 2013-2014 is
as follows:
a) Property I is let out on a monthly rent of Rs.7,500. The fair rent of the property is Rs.85,000 and municipal valuation
is Rs.80,000. Municipal Tax paid amounted Rs.8,000 p.a. put of which 50% of the tax is borne by tenant. The house
remained vacant for 2 months during the year. Mr. Gharwala had taken loan for construction of this property on which
interest paid amounted to Rs.35,000.
b) Property II is occupied by himself for his own residence. The municipal valuation of the property is Rs.1,20,000 and
Fair Rent Rs.1,50,000. The municipal taxes of Rs.12,000 were paid by him on 29 th March, 20013. He had constructed
this property after 1st April 1999. The construction started on 01.04.2009 and was completed on 31st March 2013. Loan of
Rs.2,00,000 @ 12% p.a. was taken on 1st April 2009 and is still outstanding. Interest is paid regularly.
c) Property III was inherited by him from his father which is also kept by him for his own residence. The Municipal
Valuation of the property is Rs.46,000 and Fair Rent Rs.48,000. Mr. Gharwala paid municipal taxes of Rs.4,600 on 10 th
April 2013 for above house property. He had to pay Rs.12,000 p.a. as annual charge to his sister. Interest on loan for this
house property paid was Rs.6,000 to Mr. Pointing of Australia without any TDS and there is no agent of Mr. Pointing in
India for the purpose of income tax.
d) He also owns an open plot of land which was given on rent during the year for rent of Rs.20,000.
e) He had taken a room on rent for his office work at the rent of Rs.1,500 p.m. However, instead of himself using the
room he subletted this room to another person at the rate of Rs.2,000 p.m. during the whole of P.Y. 2013-2014
Compute his Gross Total Income for the A.Y. 2014-15. (April 2004)
SHORT PROBLEMS
1. Municipal valuation of the house is Rs.100000 whereas the fair rent of house property Rs.115000 and standard
rent is Rs.120000; actual rent receivable is Rs.140000; municipal taxes paid 10%.
2. Municipal valuation of the house is Rs.130000, fair rent is Rs.150000, Standard rent is Rs.140000 whereas
actual rent receivable is Rs.135000; municipal taxes paid are 40000.
3. Fair rental value of a house is Rs.250000, standard rent Rs.220000, actual rent Rs.230000. Municipal taxes paid
for 7 years in advance Rs.240000.
4. M owns six houses in Mumbai. Details of which are as under.
Particulars I II III IV V VI
Municipal Value 20,00,000 24,00,000 36,00,000 42,00,000 48,00,000 45,00,000
Fair Rental Value 24,00,000 24,00,000 40,00,000 42,00,000 50,00,000 50,00,000
Standard Rent N.A. 24,00,000 50,00,000 30,00,000 N.A. 48,00,000
Actual Rent/ Annual Rent 18,00,000 36,00,000 48,00,000 36,00,000 54,00,000 42,00,000
5. M owns three houses in Navi Mumbai, particulars of which are as under:

Particulars I House II House III House
Date of 01/01/1997 01/01/1999 01/08/1997
completion
No. of 2 1 3
residential units
Municipal 12,000 7,200 6,000
Value
Fair Rental 15,000 7,500 7,500
Value
Standard Rent 13,000 8,000 7,200
Rent per unit 7,000 8,400 2,100
per annum
Municipal taxes Rs1,200 (due but Rs.800 for last year paid in this year, Rs.6,000 (It includes Rs.5,400
not paid) and Rs.900 of current year due but not paid as advance for next 9
paid years)
Module Unit
PROFITS AND GAINS FROM BUSINESS OR PROFESSION
Business [ Sec. 2 ( 13 ) ] :
Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade,
commerce or manufacture. It is not necessary that there should be a series of transactions in a business and that it should
be carried on permanently.
Profession [ Sec. 2 ( 36 ) ] :
Profession means the activities for earning livelihood that require intellectual skill or manual skill. E.g. the work
of a lawyer, doctor and auditor, engineer and so on. Profession includes vocation. Vocation means activities, which are
performed in order to earn livelihood E.g. brokerage, insurance agency, music etc.
EXPENSES AND PAYMENTS DEDUCTIBLE

1 Purchases of Materials 21 Directors Remuneration
2 Royalities 22 Profession Tax
3 Freight and Carriage 23 Expenses on Local festivals such as Diwali, Muhurta etc
4 Wages 24 Provision for sale tax payable
5 Salaries 25 Expenses on registration of trade marks
6 Pension paid to employees on retirement 26 Cash shortage found in business at the end of the day
7 Premium for insurance against loss of profit 27 Expenditure on special advertisement campaign at the time of
opening of the branches
8 Technical Fees 28 Expenditure, incurred to secure overdraft facilities for the
business purposes
9 Legal expenses 29 Expenditure on training of employees
10 Loss due to Theft 30 Compensation paid to a worker in order to dismiss him in the
interest of business
11 Loss on sale of Investments 31 Remuneration to family members
12 Embezzlement of cash 32 Loss caused by standing surety for others
13 Discounts 33 Loss due to failure to recover advance
14 Staff Welfare expenses 34 Loss by white ants
15 Travelling expenses 35 Loss by fire
16 Fees and subscription 36 Sales tax, excise duty etc
17 Telephone expenses including deposit under 37 Demurrage paid to the Railways
OYT scheme
18 Damages
19 Commission and Brokerage
20 Audit Fees
EXPENSES AND PAYMENTS NOT DEDUCTIBLE

1. Personal expenses of the assessee
2. Charities and donations
3. Penalties and fines
4. Extortion money
5. Advertisement expenditure
6. Interest, royalty and fees for technical services payable outside India
7. Income Tax, advance income tax, estate duty.
8. Wealth Tax
9. Salaries payable outside India
10. Employers contribution to a provident fund
11. Payments to relatives and other specified persons
12. Legal expenses incurred to defend criminal liability.
13. Expenses of a capital nature
14. Expenses incurred for the purpose which is an offence or which is prohibited by any law.
Questions
1. Mr.Varun is the owner of Jyoti Stores. He provides you the following information for the year ended 31 st
March, 2012.
Profit and loss for the year ended 31st March, 2014.
Particulars Rs. Particulars Rs.
To Salaries 75000 By Gross Profit 380000
To Travelling Expenses 1500
To Advertisement 35500
To Interest on Capital 18000
To Depreciation 17500
To Bad Debts 12500
To Misc.Expenses 40000
To Net Profit 180000
380000 380000
Following further information has been provided:
1. Depreciation allowed as per Income tax Rules is Rs.21000.
2. Advertisement expenses include Rs.25500 spent for the advertisement in souvenir of political party.
3. Rs.10000 paid as penalty imposed by Income tax officer has been wrongly included
in salaries.
Compute the taxable income of Mr.Varun for the assessment year 2014-2015.
2. Following is the profit and loss account of Hotel Kailas owned by Mr. Vijay for the year ended 31 st
March, 2014.
To Salaries (Including 66000 By Gross Profit 143250
Rs.36000 Vijays Salary)
To Profession Tax 1500 By Refund of 2000
Income Tax
To Income Tax 7500
To Cash Embezzled 11200
To Conveyance Exp. 1300
To Printing 2500
To Int. on Cap. 3000
To Rent 12000
To Depreciation on:
Furniture 1000
2750
Crockeries 1750
To Donation to Sports Club 2000
To Personal Drawings 15500
To Net Profit 20000
145250 145250
Compute the taxable income of Mr. Vijay for the assessment year 2014-2015.
3. M/s Sanjay Tours & Travels owned by Mr. Sanjay ascertained the net profit of Rs.157000 as per
profit and loss account prepared for the year ended 31st March, 2014. The detailed scrutiny of the
accounts revealed the following facts:
1. Depreciation charged to P & L A/c Rs.42000 while depreciation allowable for income tax
purposes work out Rs.38000.
2. Advertisement expenses debited to p & L A/c Rs.30000 which includes Rs.18750 being the
expenses incurred for introducing a new product the benefit of which will accrue for three
years.
3. It was found that Rs.60000 was paid to Mrs. Seema wife of Mr.Sanjay which was debited to
salaries staff. In fact she is not working with M/s Sanjay tours and Travels.
4. Mr. Sanjay the proprietor was paid the salary Rs.7000 per month which was debited to salary
and charged to p & L A/c.
5. Interest paid on proprietors capital amounting to Rs.32000 and Insurance on own life of
Rs.3000 were debited to P & L A/c.
6. Excise duty payable (outstanding as on 31st March) Rs.10000. The entire amount was paid
on 31st January, 2014. The above payment was made after the due date of filing the return of
7. Mr.Sanjays Capital Account was credited with a sum of Rs.400000. The same was received
from M/s Sita Tours under the agreement (made during the year) where in Mr. Sanjay
would not run his business in East Maharashtra for next 5 years.
Compute the taxable income of Mr. Sanjay for the assessment year 2014-2015
4. Mr.Gondhalekar is the owner of Samadhan stores. Following is the P & L A/c for the previous
year ended 31st March, 2014. On the basis of this information compute the income from business
or profession.
Profit and Loss A/c
For the year ended 31st March, 2014
Particulars Rs Particulars Rs.
To Opening stock 7,500 By Sales 190000
To Purchases 52,500 By Closing stock 60000
To Salaries 6,000 By Gift from 15000
father
To Insurance of shop 750 By Winning 5000
from Lotteries
To Rent, Rates & electricity 3,250
To Bonus to staff 300
To Embezzlement of cash 3,700
by Cashier
To Penalty for breach of
Weights & Measure rules 4,500
To Reserve for Bad Debts 4500
To Net Profit 187000
270000 270000
5. Following is the Profit and loss Account of M/s Sonali Traders owned by Mrs.Sonal for the year
ended 31st March, 2014.
Profit and Loss Account
For the year ended 31st March, 2014.
To salaries 31400 By Gross Profit 138000
To Advance Tax 1100 By Dividend from 2500
Indian Cos.
To Provision for Bad By Dividend from 1500
Debts Foreign Cos.
3600
To Insurances: By Bad Debts recovered 3000
Of Shop 4000
Of Own Life 1250 5250

To Rent 2400 By Winning from 5000
Lotteries
To Free Distribution of
Samples
1750
To Wealth Tax 1850
To Stationery 950
To Depreciation 12200
To Bonus to Staff 1000
To Net Profit 88500
150000 150000
Salaries include Rs.1900 paid as salary to staff for conducting market research. Bad Debts
recovered were not allowed as deduction in the earlier year during which it was written off.
Compute the taxable income of Mrs. Sonal under the head income from business or profession for
6. Mr.Subahash is the owner of Four Star Industries. Following is the Trading and Profit & Loss A/c
for the year ended 31st March, 2014
Trading and Profit and Loss A/c
For the year ended 31st March, 2014.
To Opening Stock 40000 By sales 675000
To Purchases 206500 By Closing 152000
Stock
To Salaries and wages 254000 By Sales Tax 8000
Refund
To Stationery 11500
To Sales Tax (Paid) 37500
To Rent 36000
To Electricity 18500
To Depreciation on Plant & Machinery 32000
To Employers contribution to P.F. 25000
To Expenses for carrying out an approved
programme of scienfic Research:Paid to
National Laboratory
Laboratory 20000
Land 15000
Buildings 20000
Salaries 14000
Materials 8000 84000
Other Expenses 7000
To Entertainment Expesnes 12000
To Net Profit 78000
835000 835000
Depreciation allowable on Plant and Machinery ascertained Rs.24000 as per Income tax Rules. Mr.
Subhash is also a partner in a partnership firm m/s Mangal Enterprises and his share in the total income
of the firm ascertained Rs.55555/-. There is no other income by way of remuneration or interest on
capital from the said firm. On the basis of the above information compute the income taxable under the
head Income from Business of Profession of Mr.Subhash for the assessment year 2014-2015.
Module / Unit
Capital Gain
Capital Asset :
Capital asset means property of any kind held by an assessee, whether
connected with his business or profession or not connected with his business or
profession.
It includes all kinds of property, movable or immovable, tangible or intangible,
fixed or circulating.
In the common parlance, the property has got four attributes
One can hold it
Enjoy it
Transfer it
It has got money value
Thus , anything which has got money value is property and so a capital asset.
Examples of Capital Assets

The share of a partner in the partnership concern
The goodwill of a business
Leasehold rights in mines
Right to get conveyance executed
Licence obtained for manufacturing of vanaspati products
Right to subscribe for shares in a company
Tenancy rights
Routs permits
Patents
Trade marks
Following assets are excluded from the definition of capital assets and hence, these are not to
be consider as capital assets.
1. Any stock in trade
2. Personal effects It includes movable property including wearing apparel and furniture held
by the assessee for personal use of the assessee.
(However, jewellery, archaeological collections, drawings, painting, sculptures of any work
of art if held for personal use then it is treated as a capital asset and not personal effects.
Jewellery includes ornaments made up of gold, silver, platinum or any other precious metal,
whether or not containing any semi precious stone.
3. Agricultural land in India provided it is not situated within the specified area(urban areas).
4. 6 % Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Gold Bands 1980
issued by the central government.
5. Special bearer bonds, 1991.
6. Gold Deposit Bonds issued under Gold Deposit Scheme, 1999.
KIND OF CAPITAL ASSETS

LONG TERM
SHORT- TERM CAPIAL ASSETS
CAPITAL ASSETS U/S
U/S 2(42)
2(29A)
Capital Assets other Capital Assets other

than shares held than shares held
less than 36 more than 36
months months
Capital Assets Capital Assets

being shares held being shares held
less than 12 more than 12
months months
COMPUTATION OF LONG TERM CAPITAL GAIN

LONG TERM CAPITAL GAIN
SALES CONSIDERATION **
LESS :INDEXED COST OF ACQUISITION **
LESS: INDEXED COST OF IMPROVEMENT **
LESS: TRANSFER EXPENDITURE **
__
LONG TERM CAPITAL GAIN **
Capital Gain
Cost Inflation Index
Financial year Cost Inflation Index Financial year Cost Inflation Index
1981-82 100 2000- 01 406
1982-83 109 2001-02 426
1983-84 116 2002-03 447
1984-85 125 2003-04 463
1985-86 133 2004-05 480
1986-87 140 2005-06 497
1987-88 150 2006-07 519
1988-89 161 2007-08 551
1989-90 172 2008-09 582
1990-91 182 2009-10 632
1991-92 199 2010-11 711
1992-93 223 2011-12 785
1993-94 244 2012-13 852
1994-95 259 2013-14 939
1995-96 281
1996-97 305
1997-98 331
1998-99 351
1999-00 389
OBJECTIVE QUESTIONS
Column A Column B
1. Section 54 Exemption from Capital gain tax if capital gain is invested in
a house property within specified time limit
2. Short Term Capital Asset Indexation is applicable.
3. Long Term Capital Asset Indexation is not applicable
4. House property sold after 36 Short term Capital Gain
months
5. House property sold after 35 Long term Capital Gain
months 29 days
Column A Column B
1. Furniture hold for personal use Capital Gain taxable in the year when
stock is sold
2. Diamands It is a capital Asset
3. Conversion of Capital Asset into Stock in It is not a capital asset
trade
4. Enhanced compensation on compulsory Conversion of stock is not transfer
acquisition
Cost of acquisition is Nil
Cost of improvement is nil
State whether the following are Capital assets within the definition of Section 2 (14).
1. Goodwill of the business.
2. Property held by a dealer in property
3. Residential house for personal use
4. Gold held by a jeweller
5. Loose diamonds
6. Gold watch for personal use
7. Leasehold right in land
8. Personal car
9. Investments in shares of Reliance Communication Ltd.
10. Flat in a Co-operative society
11. Vacant Land
12. Bungalow
13. Any land and building
14. Tenancy rights
15. Shares, Debentures, bonds
Q.1) Mr. Bandu purchased a house property in 1978 for Rs.1,92,000. He constructed an additional room in
1980 for Rs.25,000 and carried out certain renovation in September 1992 at Rs.3,50,000. The FMV as on
1.4.81 was Rs.2,10,000. The property was sold during the previous year of Rs.40,00,000. Compute the capital
gain.
Ans : Long Term Capital Gain Rs.3,76,592
Q.2) Mr. Zavier purchased a house on 1-3-85 for Rs.1,26,000. He made some improvements in July 1989 at
Rs.35,000, and sold the House during the previous year for Rs.20,00,000 Compute the capital gain.
Q.3) Mr. Dhavda purchased a commercial property for starting a retail shop, in 1965 for Rs.15,000. He
converted it into a departmental store by making further construction in Aug-Dec 1968. at cost of Rs. 51,000.
After his death on 14th August 1979. his son became the owner of the property as per will. He made certain
renovation in 1980-81 at a cost of Rs.60,000 and again in 1986-87 at a cost of Rs.39,000. He sold of the
property during the previous year at Rs.20,00,000. The brokerage to the selling agent was 1.25%. The FMV of
the property as on 1-4-81 was Rs.1,35,000. Compute the capital gain..
Q.4) Mr. Marathe purchased the property for Rs.2,40,000 on 1-9-74. He gifted the property to Mr. Bhinde
on 19th September 1985. On this property, the expenditure incurred was as follows:-
Person by whom incurred previous Year Amount
Mr. Marathe 1979-80 20,000
Mr. Marathe 1983-84 41,000
Mr. Bhinde 1991-92 96,000
The FMV of the property on 1-4-81 was Rs.2,80,000. Mr. Bhinde sold the property during the previous year
for Rs.30,00,000. Compute the capital gain.
Q.5) Mr. Nilesh acquired a property on 1-4-85 for Rs.6,00,000. He gifted it to Mr. Yoogesh on 1-4-89 . Mr.
yogesh made renovation in April 1991 for Rs.3,50,000. He sold the property during the previous year for Rs.
55,00,000. Compute the capital gain,.
Q.6) Mr. Rahul purchases 500 equity shares of Tata ltd, on April 10, 1994 for Rs.44 per share and pays and
Rs.800 as brokerage. On June 30, during the previous year, he receives 300 shares as bonus shares.
Determine the amount of capital gain if he sells all 800 shares on July 31, of the previous year for Rs.179 per
share. Compute the capital gain.
Q.7) A firm which deals in chemical goods and has three partner Ajit, Arun , and Abhay acquires gold on
may 10, 1982 for Rs 40,000. This is taken over at time of dissolution by Arun on march 31, 2014. though on
march 31, 2014 its market value is Rs 3,60,000, agreed value as per dissolution deed is Rs 2,00,000. determine
the amount of capital gain chargeable to tax for the assessment year 2014-15.
Ans : Long Term Capital Gain Rs.15,413
Q.8) Ajay and Vijay are two partners a firm perfect Engg. On January 1 , 2014 , Mr. Narayan joins the firm
and brings gold in a company as his capital contribution. Fair market value of these gold on January 1,2014 is
Rs.1,68,000 whereas amount credited in Mr. Narayans account in the firm is Rs.3,50,000. Assuming that
cost of acquisition in 1983-84 of this gold is Rs.45,000, find out the amount of chargeable capital gain for the
Ans : Long Term Capital Gain Rs.35,733
Q.9) On May 5 , 1989, Government acquires a commercial house property owned by Mr. Mahavir (Cost of
acquisition in 1983-84 : Rs.40,000). The government pays Rs.4,80,000 on April 10, 2013 as compensation.
Being aggrieved with the award, he files an appeal. The court, as per the order dated May 22, 2015, enhanced
the compensation to Rs.9,76,000. Mr. Mahavir receives the additional compensation of Rs. 4,96,000 on
August 17, 2015. Find out the capital gain taxable in the hands of Mr.Mahavir and in what year.
Q.10) During the previous year ending on March 31, 2013 Manthan sells the following:
Assets Date of sale Sale of Cost of Year of Fair market
proceeds acquisition purchase value on April
1, 1981
Agriculture Dec,10, 2013 6,00,000 1,70,000 1989-90 1,80,000
Land in rural May 25, 2013 17,00,000 2,30,000 1973-74 3,40,000
area (outside the
municipal
limits)
Agricultural
land in urban
area June 10 , 2013 25,00,000 2,50,000 1979-80 2,00,000
Personal car July 1, 2013 1,25,000 70,000 1991-92 NA
He also owns a house property which is let out for a monthly rent of Rs.5,000 p.m. Municipal Taxes paid by
Tenant is Rs.5000. Calculate his gross total Income A.Y. 2014-15.
Q.11) Mr. Dinesh purchased 1000 shares in J.C.T. Ltd in August 1992 at a cost of Rs.1,05,000. In November
1997 he started his business as dealer in shares and for that purpose he converted his investment in shares into
stock in-trade at their market value of Rs.2,00,000 as on 1-11-98. The shares are actually sold on 06-05-2013
for a sum of Rs.2,09,000. Calculate the capital gain of Mr. Dinesh.
Ans : Long Term Capital Gain Rs.34,731, Business Income Rs.9,000
Q.12) On 1-7-1990 Bharat purchased a running business. The consideration paid towards goodwill was
Rs.60,000. On 1-5-2013 he sold the business to Mr. Mangesh. The consideration received towards goodwill is
Rs.3,00,000. is the surplus of Rs.2,40,000 exigible to capital gain tax?
Q.13) Mr.Vinayak holds 1200 equity shares in Info Urge Ltd. Since 1980. The cost of acquisition is
Rs.12,000 and Fair market value as on 1st April 1981 is Rs.18,000. Info Urge Ltd. Offered 1200 right shares
@Rs.10 each at premium of Rs.50, on 1st April 2013. Mr.Vinayak subscribed 800 right shares and renounces
400 shares in favour of Mr.karan for right entitlement consideration of Rs.2880. Mr. Vinayak sells 2000
shares on 28th June, 2013 @Rs.100 per share. Find out the capital gain of Mr. Vinayak and cost of acquisition
of Mr.Karan assuming he paid the share Capital of 400 shares.
Q.14) Mr. Anand purchases a building on May 28, 2009 for Rs.2,50,000. During the previous years 2009-10
and 2010-11, the building is letout on the monthly rent of Rs.2000. During April 2012, it incurs an
expenditure of Rs.50,000 for making certain adjustment so that the building can be used for business
purposes. The building is used for business purposes till December 30, 2011 When it is sold for (a) Rs.25,000
, (b) Rs.6,10,000. Compute the capital Gain. Assuming Rate of Depreciation is 10%.
Q.15) Mr. Amol starts a new business on September 18, 2012. On October 10, 2012 he acquires Plant A
whose cost of acquisition is Rs.26,000 and rate of depreciation is 100 percent. He also acquires Plant B for
Rs.30,000 (rate of depreciation is 40 percent.) On March 31, 2012. On May 10, 2013 he sells plant A for
Rs.22,000 and Plant B for Rs.17,000 (expenditure incurred in connection with transfer is Rs.1000 and 500
respectively .) He, however, acquires the following plants during the previous year 2013-14.
Cost Rs. Rate of depreciation Date of purchase
(Percent)
Plant C 6,000 100 April 30, 2013
Plant D 12,000 40 May 19 , 2013
Plant E 21,000 25 June 10, 2013
Compute the Capital Gains.
Ans: Short term Capital Gain Rs.2,000
Q.16) Mr. Mungerilal who is a resident of Mumbai owns three houses, the particulars of which are given as
under for the year ended 31st March 2014:
i) The first house is occupied by him for his own residence, the Gross Annual value of which is Rs.30,000.
He paid Rs.2500 as property tax and Rs.6,000 as interest on loan taken for construction of house.
ii) The second house has been let out for a rent of Rs.10,000 per month. The municipal valuation of the house
was Rs.90,000 whereas the fair rent was Rs.1,10,000. The above house remained vacant for 2 months. He paid
Rs.9000 as property tax on 29th May 2014. The insurance premium paid amounted to Rs.2,225 and ground
rent Rs.1075. Unrealised rent of last year Rs.2,000 was recovered during the year.
iii) The third house property which was purchased at a cost of Rs.50,000 in the financial year 1983-84 was
sold on 15th April 2013. The purchaser paid Rs.4,00,000 on 1st May 2013 and balance consideration of
Rs.2,50,000 was paid on 30th June 2013. Mr.Mungerilal paid brokerage of Rs.13,000 for the sale transaction.
Compute the total taxable income of Mr.Mungerilal for the Assessment year 2014-15.
Ans : Income from House Property Rs.66,000 ; Long term Capital Gain Rs.2,32,259
Q.17) Mr.Sharewale Purchased shares in Indian companies (unlisted) as investment on 10th June 1982 for
Rs.2,00,000. On 1st June 2001 he started a business as a dealer in shares and transferred the entire holdings to
the business. The market value of the shares as on that date was Rs.8,00,000. The shares were sold by him for
Rs.9,20,000 on 20th July 2013.
Compute his income from capital gains from the above transactions for A.Y 2014-15.
Q.18) Mr. Gavaskar purchased a residential house on 01-06-1981 for Rs.1,50,000. He incurred expenses of
Rs.50,000 towards cost of improvement on 02-07-1983. He sold the house on 10-10-2013 for Rs.10 lakhs.
He invested Rs.15,00,000 in a new Residential House in Feb. 2013. You are required to compute his Capital
gain for Assessment year 2014-15.
Ans: Long term Capital Gain Rs.12,17,982
Q.19) During the previous year ending on March 31, 2014 Mr. Anil sells the followings:
Assets Date of sale Sale proceeds Cost of acquisition year of purchase FMV on 1-4-81
Agriculture land
In urban Area 10-6-13 53,00,000 6,17,250 1987-88 2,00,000
Agriculture land in
Rural Area 25-5-13 30,00,000 2,30,000 1983-84 3,40,000
Personal car 1-7-13 1,25,000 70,000 1986-87 NA
Calculate the income under the head capital gain of Mr. Anil for assessment year 2014-15.
Q.20) Mr. Kamlesh purchased a house property for Rs,1,00,000 on 27th August 1981. He made the following
additions/alterations to the house property.
Cost of construction of 1st Floor in financial year 1983-84 Rs.3,00,000
Cost of construction of 2nd floor in financial year 1990-91 Rs.4,00,000
He sold the property on 20th October 2013 for Rs.80,00,000. He paid the brokerage of Rs, 55,000 for the sale
transaction. Investment in new house property is Rs. 5,00,000 in Apirl,2013. Compute the capital gain of Mr.
Kamlesh chargeable to tax for assessment year 2014-15.
Ans: Long term Capital Gain Rs.7,12,816, Exemption U/s 54 Rs.5,00,000, Taxable LTCG Rs.2,12,816
Q.21) Mr. Parag purchased a residential flat on 02/05/2011 for Rs10,00,000. He paid on the same day the
stamp duty and registration charges of Rs.48,750 on purchase of flat. He sold the said flat on 17/03/2014 for
Rs.12,00,000. Compute his capital gain chargeable to tax for assessment year 2014-15.
Q.22) Mr. Kande purchased a House property for Rs.350,000 on 16thAugust 1981. He made the following
addition to the house property. Cost of construction of 1st floor the financial year 1985-86 Rs.2,25,000.
HE sold the property on 15th September 2013 for Rs.35 lakhs. He paid the brokerage of Rs.25,000 for the sale
transactions.
Compute the capital gain of Mr. Kande chargeable to tax for assessment year 2014-15.
Q.23)Mr. Dinesh Kamble purchased a house property for Rs.125000 on 16th August 1971. He made the
following addition to the house property.Cost of construction of 1st floor in financial year 1985-86 Rs.225000.
The fair market value of the property on 1-04-1981 was Rs.350000. He sold the property on 15th September
2013 for Rs.3500000. He paid brokerage of Rs.25,000 for the sale transaction.
Compute the capital gains Mr.Dinesh Kamble chargeable to tax for Assessment year 2014-15.[Oct.,2010]
Module / Unit
Income From other sources
Income from other sources is the fifth and the last head of income under which the total income is computed
and assessed. It is a residuary head and covers all the incomes which are not covered under the earlier 4 heads
of income.
Income taxable under the head Income from other sources [Section 56 ] :
a. General
Income of every kind, which is not exempt from Income tax under the Act and which does
not fall under any other head, is taxed under the head , Income from other sources.
In other words, Income from other sources is a residuary head of income. Incomes which
are taxable but which cannot be classified under any other head, are taxed under this head.
Thus , the characteristics of the income which are chargeable under this head are :-
1. It must be an income i.e. the receipt must be of a revenue nature and not of a capital nature. For
example daily allowance given by a father to son is not taxable under this head as it is not an income
at all.
2. The income must not be exempt under any other provision of the Act for example interest on post
office savings bank account, interest on public provident fund , daily allowance to member of
parliament , which are exempt under section 10.
3. The income must not fall under any of the other 4 heads of income i. Salaries ii. Income from
house property iii. Income from business or profession iv. Capital gains.
b. Specific
The following incomes are specifically taxable under this head
1. Dividends
Dividends received from a domestic company or from Unit Trust of India or any other recognised
Mutual Fund are exempt under section 10 .
Dividends from a foreign company or from a co-operative society are taxed under this head.
Gross amount of dividend i.e. net dividend received plus the tax deducted at source ( T.D.S.) , if any,
is included in taxable income.
2. Annuity deposit refund
3. Employees contribution to staff welfare schemes:

The contribution from employees towards provident fund, superannuation fund, Employees
State insurance fund etc. are to be included in the income of the employer.
4. Winnings from lotteries, crossword puzzles, races, card games, and other games or gambling or
betting of any kind.
Lottery includes prizes awarded to any person by draw of lots of by chance or in any other
manner whatsoever , under any scheme or arrangement by whatever name called (e.g. prizes
under Playwin ).
Cardgame includes any game show, an entertainment programme on television or
electronic mode, in which people compete to win prizes ( e.g. Kaun Banega Crorepati )
5. Income from machinery , plant or furniture owned by the assessee and given on hire.
Income from machinery, plant , furniture let on hire is taxable under this head.
6. Income by way of interest on securities.

Interest on any security of the Central or a state Government.
Interest o debentures or other securities for money issued by or on behalf of a local authority
or a company or a corporation established by a central , state Act.
7. Any amount received under a keyman insurance policy.
8. Refund of deposit (and interest ) under National Savings Scheme 1987.
9. Refund of principal invested under section 80CCB i.e. Equity Linked Savings Schemes of mutual
fund.
10. Any sum of money exceeding Rs.5000 received without consideration by an individual or a Hindu
Undivided Family (HUF) from any other person. In such cases the whole of such sum is taxable.
c. Other instances of income taxable under this head

1. Examinership fees received by a professor.
2. Paper setting received by a lecturer.
3. Directors fees , for attending Board meetings or Committee Meetings.
4. Family pension received after death of an employee by the legal heirs.
5. Interest from banks
6. Ground rent or lease rent
7. Royalty received by an author
8. Rent from property which is not owned by the assessee i.e. income from sub-letting of a property.
Deductions allowable from income under this head (Section 57)
Section 57 enumerates the following deductions which are allowed while computing income.
1. Expenses for relaisation of dividends and interest
2. Employees contribution to Provident fund
3. Repairs , insurance and depreciation on assets let out
4. Standard deduction of family pension
5. Standard deduction on interest on compensation
6. General expenditure
Expenses Disallowed ( Section 58 )

1. Any personal expenses of the assessee.
2. Any interest payable outside India on which tax has not been paid or deducted.
3. Any salaries payable outside India unless tax has been paid or deducted thereon.
4. Wealth tax paid.
5. Any expenses or allowance in connection with income by way of winning from lotteries, crossward
puzzles, races, card games, other games, gambling, or betting.
6. Disallowances under section 40A
QUESTIONS
Q.1. From the following particulars of Satish, compute his Income from other sources.
I. Directors fees received from S.S.Chemicals Ltd. Rs. 4600.
II. Agricultural income Rs.12500.
III. Ground rent Rs. 3600.
IV. Interest
a. from bank on fixed deposits Rs. 3400.
b. On post office monthly income account Rs.1600.
c. On government securities Rs.800.
d. On Deposit with Mukund Ltd. Rs. 3500.
e. On Public Providend Fund account Rs. 1000.
V. Dividend Rs. 8000.
VI. Lottery prize received Rs.50000.
VII. Rent from sub-letting a flat Rs. 12500. Rent paid to landlord on the flat is Rs. 5000.
VIII. Satish had during the year received a gift of Rs.45000 from his father.
He had borrowed Rs.20000 for investing in shares of companies on which the interest is payable
@ 12% p.a. Half of these shares, however, have not yielded any dividend.
He had also spent Rs.500 for realizing dividend and Rs.500 for realizing rent.
You are further informed that he had spent Rs. 10000 for the purpose of earning lottery prize.
Q.2. Mr. Rambo is a non-resident. He has earned following amounts during the previous year ended 31st
March 2014 :
1. Income from agricultural land in Pakistan Rs.200000 received in Pakistan.
2. Dividend from Foreign Companies received Rs. 5,000/-
3. Dividend from Indian Companies received:
a) Final dividend from Pace Construction Rs. 15,000/-.
b) Interim dividend from Glindia Ltd. Rs. 12,400 was actually paid by the company on 30th June 2013
4. Winnings from lotteries Rs. 500000 (T.D.S. Rs 50,000/-).
5. As on 1st April 2004 his investment as follows:
a) 10% Mumbai Municipal Debentures Rs. 50,000/-
b) 15% Debentures in Telco Ltd. of Rs. 1, 00,000 /-
c) 8% Port Trust Bonds of Rs. 30,000/-.
d) 9% Maharashtra Govt. Loan of Rs 40,000 /-
Compute the Gross Total Income of Mr. Richards for the assessment year 2014-15.
Q.3. Professor Dave of Mumbai University has received following receipt during the year ended 31st March,.
2014:
1. Salary income Rs 500000 (Gross)
2 Interest on National Saving certificates VII Issue Rs 7000/-.
3. Rs. 8135 as interest on Post Office Saving Bank
4 received Rs.300000 from L.I.C. on maturity of policy,
5. Examinership fees Rs. 12000 received from the Institute of Chartered Accountants of India. New Delhi
6. Income by way of Dividends from Indian companies
Raymond Ltd. Rs. 7500-..
Goderaj Industries Ltd. Rs 6850/-
Oswald Agro Ltd. Rs. 3150/-
7. Winning from crossword puzzles Rs. 18880/-
Compute the gross taxable income of Professor Dave for the assessment year 2014-15.
Q.4. Miss Aswini is a social worker. She owns a house property at Parel - Mumbai which is let out at an
annual rent of Rs. 25,000. She incurred following expenses in respect of house property:
Ground Rent 600
Repairs 2,000
Insurance 400
Municipal Taxes paid 1,000
Her other income is as follows:
1. Interest on Bank Deposits Rs.12, 500/-
2. Dividend on shares of Indian companies;-
Rs.500 from Larson & Turbo Ltd.
Rs.750 from Amarnath Textiles Ltd.
Rs.1, 500 from Bindal Agro Ltd.
She paid Rs.25/- for collection charges and Rs.2,000 as interest on loan borrowed for purchase of Bindal Agro
shares
3. Dividend from Unit Trust of India Rs. 47,000 /-
4. Accrued interest on NSC Rs.17, 800/-
5. Dividend from foreign companies Rs.14, 500/-
Compute Miss Priti's Gross Total Income for the assessment year 2014-15.
Q .5.Mr. Sujay is the owner of M/s. Hotel Om Sai . He informs you that.
1. Income from business Rs. 250000/-.
2. Recovered Rs. 25000 which was allowed as a deduction on embezzlement of cash by cashier in earlier
previous year . This has not been accounted in books of Hotel Om Sai.
3. Income by way Interest on debentures amounted to Rs. 12,000. He paid Rs. 6,000 as interest on amount
borrowed for purchase of Debentures to Mr. Ray, an American resident No tax has been deducted at source
nor there any representative assessee in India.
4. Received Rs. 35,000 royalty from PDP Prakashan for writing a book on Hotel Management. He incurred
the expenses for preparing manuscripts and purchase of certain books for reference Rs. 12,000/- These
expenses are bonafide and reasonable.
5. Mr. Sujay took Raj Bhavan on rent of Rs. 2,000 pm .He subletted this property to Mr. Sushant at Rs 2,500
per month w.e.f. 1st April, 2012.
6. Accrued interest on Indira Vikas Patara amounts to Rs. 15,000.
7. Directorship fees from Impex Associates Pvt. Ltd. received Rs. 12,000/-
8. Interest on deposits with ACC Ltd Rs. 12,000/- Calculate his total income for assessment year 2014-15.
Q.6. Following is the Receipt and payment A/c. of Mrs. Ujwala who is a professor in Arts & Commerce
college of Vidya Prasarak Mandal, Thane, for the year ending on 31 3.2014.
Receipts Rs. Payment Rs.
Salary from college 1,51,000 Household Expenses 41,500
Interest on Bank deposits 1,500 Investment in U.T.I. in monthly 1,20,000
Dividends from U.T.I 3,000 Income unit scheme on 31.3.2011
Examinership fees (B.U) 4,000 Exp. On House Property (Self
Award for Best Articles written on 10,000 occupied )
export Management Land Revenue 800
Gift from Father 65,000 Insurance 1,200
Dividend from : Repairs 8,000 10,000
Thane Janata Sahkari Bank 3,000 Donation to :-
VPMs Teacher Co.op Credit Society 2,000 Sant Godge Maharaj Dharmashala 10,000
LIC Policy matured: Trust 37,500
Principle amount 17,000 Purchase of Land
Bonus 5,000 22,000 Interest on loan borrowed for the
purpose of investment in shares of
Thane Janata Sahakari Bank 2,500
2,61,500 2,61,500
Compute Gross Total income of Mrs. Ujwala for the assessment year 2014-15.
Q.7. Mr. Nakul owns three residential units. Unit No. 1 is self occupied whereas unit nos.2 and 3 are let out.
Unit no. 2 is let out on a monthly rent of Rs.500 p.m. Municipal taxes are to be borne by tenant Expenses
incurred for this unit are.
Insurance 200
Collection charges 150
Ground Rent 100
Unit No. 3 is fully furnished with furniture and electrical appliances (including Refrigerator, television etc)
This unit is let out on a monthly rent of Rs.10,000. All expenses including municipal tax are to be borne by
tenant. (Income of building and appliances is inseparable.)
Annual interest due on 31st March ,2014 on the investment in 10% Maharashtra State Loan of Rs 15,000/-
which was received in April, 2011. Interest of Rs.1,000/- is credited to the public Provident Fund Account with
State Bank of India. He received Rs. 4,500/- as dividend from Unit Trust of India
You are required to compute the gross total income of Mr. Nakul for the assessment year 2014-15.
Q.8. Mr. Deviprasad Provides you the following information for the financial year 2013-2014.
1. Salary @ Rs.6,000 p.m.
2. Bonus for the year Rs.2,000 was declared
3. Honorarium for playing cricket from Parel Gymkhana rs.5,000/-
4. Received an award of Man of the Match of Rs.5,000/-
5. Arjun Award of rs.10,000 instituted in the public interest by Govt of Maharashtra for showing proficiency
in sports.
6. He owns the following securities on 1.4.2004
15% Mumbai port Trust Bonds Rs.15,000/- (interest payable annually)

10% Bonds of Narmada Cement Ltd.7,500/-
7. Interest on
Fixed Deposit with state Bank of India Rs.12,800/-
Interest Accrued on Indira vikas Patra Rs.11,200/-
Compute Mr. Deviprasads total income for the assessment year 2014-15.
Q.9. Mr. Hariprasad provides you the following information for the year ended 31st March 2014.
1. Received Rs.24000 from H.U.F as a member of H.U.F
2. Salary @ Rs.37000 p.m. from Marathwada Krishi Mahavidyalaya being a lecturer in the college.
3. Examinership fees received from Pune University Rs.25750.
4. Royalty from Anmol Prakashan Rs.32,250 for writing a book on progress & problems of agriculture in
India.
5. Received an award of Rs.25,000/- from krishi vikas Mhamandal instituted in public interest by
Government of Maharashtra in respect of Scientific Study of Krishi Udyog.
Compute the gross total income of Mr.Hariprasad for the assessment year 2014-15.
Q.10.Mr. Abhimanyu provides you the following information for the assessment year 2014-15.
1. Received rent Rs.7,500 from one of the tenants on 17th August, 2013 deduction was allowed in the earlier
years in respect of unrealized rent. The house in which this tenant was staying was sold in January, 2014.
2. Received Rs.2,00,000/- from the LIC under keyman Insurance Policy. This sum is neither chargeable to tax
under the head Salaries nor under the head, Profits and Gains of Business or Profession.
3. Net income form Sub- letting a house property @ Rs.500 per month.
4. Withdrawals form Public Provident Fund Account Rs.34,000. (Non Taxable)
5. He owns the following shares and securities as on 1.4.2008
i) Rs.50,000 : 7% Gujrat State Loan
ii) Rs.40,000 : 10% Debentures of Mumbai Port Trust
iii) Rs.10,000 : 8% Preference shares of Shakti Chemicals Pvt. Ltd.
(Dividend received on 26st December, 2014)
iv) Rs.5,000 : 10% Preference shares of Godrej & Boyce India Ltd
(Dividend received on 21st Feb, 2014)
v) Equity Shares of Rs.100/- each in Deepak fertilizers Ltd. 10% Dividend was declared in A.G.M. held in
November 2010 Equity shares were sold in March 2014.
Interest in respect of the securities became due on 31st December, 2013 and was duly received by 16th
January,2014.
Following expenses were incurred by him
a) Collection charges paid to Bank of India for collection of interest on securities Rs.78
b) Interest on loan borrowed from Bank of India against the pledge of Rs. 40,000, 10% Debentures of
Mumbai port Trust for the purpose of purchasing a motor car, paid Rs.3,575.
On the basis of above information, you are required to compute the gross total income of Mr. Abhimanyu for
Q.11.Mr. Sandeep is the owner of M/s. Sangam power laundry. He provides you the following information
for the previous year ended on 31st March 2014.
a) Income from business Rs.57,500/-
b) Rs.12,500/- were recovered from cashier which was allowed as business expenditure being embezzlement
of cash in earlier previous year. This was not accounted in the books of M/s. Sangam Power Laundry.
c) Mr. Sandeep took Pshapak Bhavan on rent of Rs,1,000/- p.m. He subletted this property to Mr. Vinod at
Rs.1,500/- p.m. w.e.f. 1st April, 2013.
d) Accrued interest on fixed deposit with Saraswat Co-operative Bank ltdRs.8,500
e) Interest on fixed deposits with DCM Toyato Pvt. Ltd. Rs.6,500/-
f) Directorship fees from Sudarshan Chemicals Rs.3,000/-
g) Interest on debenture amounted to Rs.6,000/- He paid Rs.3,000/- as interest on amount borrowed for
purchase of debentures of Mr.Philips, a German resident. No tax has been deducted at source nor there is any
representative assessee in India.
Determine the Gross taxable income of Mr. Sandeep for the assessment year 2014-15.
Q.12.Mr. Natrajan provides you the following information for the period ending on 31st March, 2014.
a) Gross Salary of Rs.90,000/- from M/s instant Chemicals Pvt. Ltd. Profession tax was deducted at source
Rs.1,440/-
b) Income from units of Unit Trust of India Rs.4,980/-
c) Withdrawals of rs.50,000 from P.P.F a/c with S.B.I.
d) Winning from lotteries Rs.5,000/-
e) Income by way of dividend form Indian companies-
i) M/s. Lucky Electronic Pvt. Ltd. Rs. 650/-
ii) M/s. Apple industries ltd. Rs.4,460/-
f) Dividend from foreign companies Rs.14,460/-
You are required to compute the gross taxable income of Mr. Natrajan for the assessment year 2014-15.
Q.13 Mr. Vasantrao is having taxable income from house property Rs, 32,000/- He also received the
following amounts during the year ended on 31'1 March, 2014.
a) Dividend from Voltas Ltd, Rs, 1,500 /-
b) Interest on fixed deposits with Bank of India Rs, 2,500/-
c) Interest on post office savings bank account Rs, 3,333/-
d) Winnings from lotteries Rs, 1, 00,000 from which tax was deducted at source Rs.35, 000/- and net amount
received Rs.65, 000/-
e) A gift from father out of natural love and affection Rs, 11,000/-
f) Received Rs. 70,000/- from L1C under Keyman Insurance Policy.
You are required to ascertain the Gross total income chargeable to tax for the assessment year 2014-15.
Q.14. Following is the Receipt & payment A/c of Mr. Banerjee who is professor in Khalsa College, Mumbai
for the year ended 31st March , 2014: . _
Receipt Rs. Payments Rs.
Cash in hand and with Bank at the 8,000 Deposits in 5 years (CTD) savings Bank
beginning 1,08,000 account with post office 24,000
Net Salary from College 12,000 Household Expenses 92,000
Interest on Bank Deposits 13,000 Expenses on self occupied house property 12,000
Dividend from U.T.I. 10,000 Purchase of land 40,000
Award for best article on public 4,000 Interest on loan borrowed for the purpose of 3,000
financing 50,000 investment in Debenture
Gift from mother 15,000 Donation to Prime Ministers National Relief 10,000
Received from LIC on maturity of policy Fund
Interest on Debentures Cash on hand & with the bank at the end of 39,000
the year
Net salary received after deduction of P.f contribution Rs.6,000/- Profession Tax Rs. 1,440/- and Income Tax
Rs. 12,000/-
Computer Gross Total Income of Mr. Banerjee for the assessment year 2014-15.
Q.15.Mr. Vivek provides you the following information for the year ended 31s1 March, 2014 :-
a) Received Rs, 10,000 /- as award from Mahatma Phule Krishi Vikas Mandal instituted in public interest by
Government of Maharashtra in respect of scientific study on dry farming.
b) Examinership fees received from Banaras University Rs, 12,500/-
c) Salary @ Rs, 13.500 /- pm. from Chattrapati Sikshan Mandal being a lecturer in college. Profession tax
deducted at source rs.1,440/-
d) Royalty from Vikas Prakashan Rs. 42,000 /- for writing a book on "Commercialization of Agriculture - A
need of the day,"
e) Received Rs. 5,000/- from H.U.F. as a member of H.U.F. and Rs. 10,000/- as a share in profit of the firm
M/s. Milan Traders . He did not receive any remuneration or interest from the firm.
Compute the gross total income of Mr. Vivek for the assessment year 2014-15.
Q.16. Mr. Narsimha is the Managing Director of M/s. Hindustan Food Products Pvt. Ltd. He furnishes you
the following information for the year ended 31st March, 2014. You are requested to compute his income
under the head," Income from Other Sources."
a) Director's Board Meeting fees 6,875
b) Interest on fixed deposits with Bank of India 1,250
c) Honorarium for an article published in a news paper" MONEY" 2,500
d) Dividend on shares of Impex India ltd. 7,375
e) Commission for underwriting shares of a new company 54,750
Q.17. Mr. Mokashi is a Heart specialist. He provides you the following information for the year ended 31st
March. 2014.
a) Interest on fixed deposits with Mumbai Chemicals Ltd. 12,250
b) Consultation and visiting fees 35,000
c) Paid bank charges to State Bank of India for collection of Interest 50
d) Winning from lotteries 7,500
e) Interest on P.P.F. A/c. with State Bank of India 678
f) Interest on National Saving Certificate VIIth Issue 10,000
Compute his income from other sources for assessment yea 2014-15.
Q.18. Mr. Aksahy lives in a rented house property viz. Gokul Dham the annual rent of which is Rs. 12,000/-
per annum. Half of the property has been subletted by him at a monthly rent of Rs. 750 .
During the year he received:
a) Interest on :
i) Post office saving Bank a/c. 2,450
ii) P.P.F. A/c. with State Bank of India 8,775
iii) Fixed deposits with Bank of Baroda 11,875
iv) Interest on National Saving Certificate 12,125
b) Winning from crossword puzzle in newspaper, " DAILY" 8,000
c) Dividend from Indian Companies 6,172
Compute his income from other sources for assessment year 2014-15.
1.4 Module / Unit

Deduction to be made in Computing Total Income
Chapter VI A of the Income Tax Act, 1961 provides for certain deductions to be made in computing the total
income.
The deductions of various payments or incomes of the assessee. The basic purpose of the deduction is
encouraging savings and increase contribution to national fund which is utilised for the national cause.
1. Deduction in respect of Life Insurance Premia, Deferred Annuity, Contribution to Provident
Fund, Subscription to Certain Equity Shares or Debentures U/S 80C .
This deduction is available only to an Individual or a Hindu Undivided Family.
Specified Savings qualifying for deduction U/S 80 C
1. Life Insurance premium Paid (individual, spouse and any child
2. Non-commutable deferred annuity
3. Deferred Annuity by Government
4. Contribution to Statutory Provident Fund Act, 1925
5. Contribution to Public Provident Fund
6. Contribution to Recognised Provident fund
7. Contribution to Superannuation Fund.
8. Post offfice CTD
9. NSS
10. NSS VIII issue
11. ULIP of UTI
12. ULIP of LIC
13. Annual Plan (Jeevan Dhara and Jeevan Akshay)
14. Equity Linked Saving Scheme of any Mutual Fund
15. Notified Pension Fund
16. Deposit scheme of NHB
17. Housing Finance Deposit
18. Tution Fees of any 2 Children
19. New House
20. Infrastructure debentures and Shares
21. Infrastructure Units
22. 5 Term Deposit with schedule bank
AMOUNT OF DEDUCTION U/S 80 C
ACTUAL AMOUNT INVESTED /PAID OR Rs. 100000
WHICHEVER IS LESS
2. DEDUCTION IN RESPECT OF CONTRIBUTON T CERTAIN
PENSION FUNDS U/S 80 CCC
This deduction is available to an individual only.
Where an assessee has paid or deposited in the previous year any sum out of his income ,
under an annuity plan of Life Insurance corporation or any other insurance companies
(Insurer) for receiving pension from the fund set up by the said corporation, will be allowed
as a deduction.
The amount of deduction is
ACTUAL AMOUNT PAID/DEPOSITED OR Rs.100000

Whicever is less
3. DEDUCTION IN RESPECT OF MEDICAL

INSURANCE PREMIA U/S 80D
This deduction is available to an individual, an HUF, AOP or BOI
Where an assessee has paid or deposited in the previous year any sum out of his
income , under insurance on the health of the assessee or his family (Family means
the spouse (Marriage Partner either husband or wife) and dependent children of
assessee or dependent parents.
The amount paid by Cheque only.
Amount of Deductions
4.DEDUCTION IN RESPECT OF MANTENANCE INCLUDING MEDICAL TREATMENT

OF A DEPENDANT WHO IS A PERSON WITH DISABILITY U/S 80 DD
This deduction is available to Resident Individual or HUF.
The assessee who has incurred an expenditure for the medical treatment including
nursing, training and rehabilitation of a dependent being a person of disability and/or
The assessee has paid on deposited under any scheme framed in this behalf by LIC or
any other insurer or administrator or specified company and approved by board is this
behalf, for maintenance of dependent, being a person of with disability.
Dependent means spouse, children, parents, brothers and sisters of the individual or
any of them.
Amount of Deduction U/S 80 DD

1. A Fixed amount of deduction of Rs.50000 is allowed irrespective of the amount
of expenditure incurred or deposited under the above mentioned point for a
dependent person with disability.
2. A higher deduction of Rs. 100000 shall be allowed in place of Rs.50000 when
such a dependent is a person with severe disability.
3. A person with severe disability means a person with 80% or more of one or more
disabilities like autism, celebral palsy, mental retardation and multiple
disabilities.
4.Deduction in Respect of Interest on loan Taken For Higher Education U/ S 80E

This deduction is available to an Individual assessee.
The loan is taken from financial institution for the purpose of his education or his
relatives (i.e. Spouse / Children or the student for whom the individual is the legal
guardian).
Financial institution means a banking company or a notified financial institution or an
approved charitable institution.
Higher education means Any course of study pursued after passing the senior secondary
examination or its equivalent from the any school, board or university recognised by the
central government or state government or local authority or by any authority authorised by
the central government or state.
Amount of Deduction U/S 80E

An Amount paid by the individual during the previous year by way of Interest on such loan
(7 succeeding assessment year)
OR
Unstill the above interest is paid in full
Whichever is earlier
Q.1) Mr. Bhushan is the owner of M/s. Techno craft. He informs you that:
1) Income from Business Rs.1,15,000/-
2) Directorship fees from Thane food corporation ltd. Received Rs.5,000.
3) Interest of deposit with companies Rs.30,000/-
4) Mr. Bhushan pays Rs.18,000/- towards pension fund of LIC compute the net taxable income of Mr.Bhushan for the
assessment year 2014-15from the above information.
Ans: Net Taxable Income Rs.1,32,000
Q.2) Mr. Ashok owns a self occupied house known as Girner. The notional rent of the house is Rs.12, 000 p.a. The
Municipal taxes paid for this property are Rs.2,000. He is employed with M/s Tec nova ltd. On a salary of Rs.10,000 per
month. There is no any other income. He paid Rs.11,000 to general insurance corporation in respect of medical insurance
for self, his wife and children. You are required to calculate his taxable income for assessment year 2014-15.
Q.3) Following is the information of Mr.Jayant for the Assessment year 2014-15.
1. Annual salary of Rs.5,54,000/-
2. Winning from lottery Rs.1,00,000/- (gross) and net amount received Rs.65,000/- after TDS of Rs.35,000/-
3. During the previous year he made the payment by cheque to general Insurance Corporation for medical insurance as
detailed below:
Rs.
For Self 5,450
For wife 5,450
For minor school going children 5,700
For father who is a senior citizen 6,400
For mother who is working as bank manger 1,450
Total 24,450
4. The employer deducted from his annual salary of Rs.54,000 the following
Profession Tax Rs.2,200
Provident fund Rs.4,500
Compute the taxable income of Mr.Jayant for the assessment year 2014-15.
Q.4) Mr. Ajit is a general manager of M/s Ankush Gears Pvt. Ltd. He draws a salary @ Rs.60,000/- p.m. Employer paid
Rs.4,275 as school fees as Mr. Ajits sons. He paid Rs.4,375/ to General Insurance Corporation in respect of Medical
Insurance for Self and his wife. He owns a house property which was let out at an annual rent of Rs.45,000. He paid
Rs.9,000 municipal taxes.
Medical treatment of dependent brother (being a person with disability) Rs.15,000. Compute on the basis of the above
information Net Taxable income of Mr.Ajit for the assessment year 2014-15.
Ans: Net Taxable Income Rs.6,90,000.
Q.5) Mr. Yogesh is the owner of M/s Kisan fertilizers. The net income revealed by P & L A/c was Rs.2,50,000. On
detailed scrutiny it was revealed that P & L A/c was credited by Rs.35,000/- received on account of maturity of LIC
Policy, & Rs.20,000 as interest on fixed deposite with Agro Chemical Ltd.
It was further noticed that P & L A/c was debited by the following amount:-
1. Donation made to :-
a) Prime Minister National Relief fund Rs.25,000
b) Thane Municipal Corporation for promotion of family planning Rs.15,000.
2.He also found that from the amount of drawings of Rs.60000. he spent Rs.51,000 on his spouse who was severelly
disabled (more than 80% disability).
Computer on the basis of the above information total taxable income of Mr.Yogesh for the assessment year 2014-15.
Q.6) Mr. Kaka is the owner of the M/s Paragon engineers. The net income revealed by profit and loss Account was
Rs.5,65,000 on detailed scrutiny of profit and loss account it was found that:
1. P & L A/c was credited by
a) Rs.60,000 received from LIC under Keyman insurance policy.
b) Rs10,000 received on account of withdrawals from PPF A/c with bank of India.
c) Winning from lotteries Rs.1,00,000.
2. P & L A/c was debited by the following amounts:-
a. Travelling expenses include travelling to Singapore for personal trip Rs.30,000.
b.Investment made in a scheme framed by LIC for severally disabled relative (his sister) Rs.45,000.
Determine on the basis of the above information Net taxable income of Mr.Kaka for the assessment year 2014-15.
Q.7) Mr. Rambhau is employed with M/s Rajkamal Bearings Pvt. Ltd. He furnished you the following information:-
Annual Salary including DA 1,35,000
Perquisite value of free rental accommodation 13500
Employers contribution in excess of the prescribed
Rules to a recognized provident fund 6,960
Rs.960 towards profession tax was deducted at source from salary.
Mr. Rambhau owns a bungalow, which he utilizes for the purpose of his own residence. During the year he paid
Rs.22,000 an interest to HDFC loan was taken prior to 1 st April 1999. He paid Rs.3000 to GIC for medical insurance of
self and his wife.
He spent Rs.85000 for medical treatment of his son who is physically disabled as described u/s 80DD.
Compute on the basis of above information total taxable income of Mr. Rahul for the assessment year 2014-15.
Ans: Net Taxable Income Rs.74,500
Q.8) Mr. Mungerilal is the purchase manager of Wanar Vanaspati Pvt. Ltd. His net taxable income under the head
salaries is Rs.1,36,000. Particulars of his other income are as follows :-
Income from units of unit Trust of India 4,000
Income form National Deposit scheme 1,000
Dividend from Indian companies 4000
Dividend from Foreign Companies 2000
Interest on PPF A/c with SBI 1,500
Interest on fixed deposit with Bank of Maharashtra 3,000
Interest on Central Government securities 2,000
Contribution to LIC towards Premium u/s 80CCC 10,000
Deposits in PPF Account made during the year 70,000
ICICI tax saving bonds eligible for Sec.80C 30,000
He spent Rs.49,000 on his wife who is severally disabled as defined u/s 80DD. However she has claimed deduction u/s
80U while computing her total income.
You are required to compute his net taxable income for the assessment year 2014-15.
Q.9) Mr. Keshav inamdar is owing a house property. The net taxable income under the head income from house
property is ascertained at Rs.45000
His income from other sources is Rs.35,000 the particulars of which are as follows :
Dividend on shares of the Thane Janata Sahakari Bank Ltd. 1,000
Interest on fixed deposits with post office 2,000
Interest of National Saving Certificate VIIIth issue 1,500
Dividend from Hindustan machine tools ltd. 5,500
Interest on fixed deposits with the Merchants Co. operative bank ltd. 43,000
Income from units of U.T.I. 13,000
Interest of deposit with national deposit scheme 1,000
Deposited in PPF for self and spouse 14,000
Mr.Keshav also took educational loan of Rs.5,00,000. During the year he repaid Rs.60,000 as principal and Rs.40,000 as
interest.
You are required to ascertain the taxable income of Mr.Keshav Inamadar for the assessment year 2014-15.
Q.10) Mr.Avdhoot is the sales manager of M/s Arihant engineers. His net taxable income under the head salaries is
Rs.67,000. Particulars of his other income and payments are as follows:
1. Income from magnum of SBI mutual fund 10,000
2. Income from interest on fixed deposits with
b) The Thane Janta sahakari Bank LTd. 7,500
c) Abhinav Sahakari Bank Ltd. 6,600
d) Bank of Baroda 5,900
During the previous year, he made the payments by cheque to General insurance Corporation for Medical Insurance of
his minor son and daughter amounting Rs.2,000.
Deposit in units of a mutual fund approved by the board u/s 80C of income tax act. Rs.80,000
Deposits in PPF Rs.30000.compute his taxable net income for the assessment year 2014-15.
Ans: Net Taxable Income Rs.NIL
Q.11) Miss Madhavis net taxable income under the head income form house property was Rs.1, 62,000 particulars of
her other incomes and payments are as follows:-
1) Interest on State Government Securities 3,000
Dividend from foreign Companies 9,750
Interest on deposits in PPF A/c 4,080
Income form units of U.T.I. 12,000
Income from interest on fixed deposits with bank of India 20000
Income from interest on saving bank account with bank of India 5,000
Repayment of Principal component of loan taken from Scheduled bank for SOHP Rs.60000
Inevstment in NSC Rs.50000.
Tution fees for 3 Children Rs.20000 each doing their Graduation from Mumbai University.
Compute the taxable income for the assessment year 2014-15.
Q.12) Mr.Chetan is the owner of M/s Guru Auto parts. His net taxable income from business is ascertained at
Rs.1,43,000.
Particulars of his other income is as follows
Interest on deposit with national deposit scheme 1,500
Interest on Indira Vikas Patra 1,500
Interest on securities of central government 4,000
Income from units of U.T.I. 3,000
Interest form State Government Securities 5,000
Income from Interest on Fixed Deposit with Bank 3,000
Interest on SB Account with Bank 7,000
He had taken an educational loan of Rs.5,00,000 for higher education of the daughter. Annual repayment of loan during
the previous year 2012-13 in principal is Rs.70000 and interest is Rs.30,000.
Determine the net taxable income of Mr.Chetan for the assessment year 2014-15.
Q.13) Mr. Arjun is totally blind (severe disable). He is resident in India and received salary from Aakar Associates
Rs.1,36,000. He is also received Rs.14,000 from U.T.I. Rs.20,000, Income from SBI Mutual fund, Interest Rs.3,000 on
fix deposits with SBI and interest on State Govt. Securities Rs.12,000. He deposited Rs.6,000 in 5 years CTD A/c with
Post office. Compute the net taxable income of Mr.Arjun for the assessment year 2014-15.
Q.14) Mr.Anand is a disabled person as is certified by medical authority. He runs a shop from which he earns net
income of Rs.73,000. He owns a house property which he utilized for his own residence. He pays Rs. 6,000 as interest to
bank of India on a loan borrowed for the construction of house property and Rs.3,150 as principal repayment of Housing
loan. This loan was taken prior to 1st April, 1999.You are required to compute the taxable income of Mr. Anand for
Q.15) Mr. Harishchandra is an Indian national residing in new york since 1985. he is totally blind (severe disability).
He was non resident in the previous year ending on the 31 st March 2014. His income accrued and arised in India and
received during the previous year as follows:
Income from units of UTI 20,000
Interest on fixed deposits with bank of India 25,000
Interest on fixed deposits with Telco ltd & Voltas 35,000
His taxable income from house property is Rs.65,000.Medical Insurance premium paid for self and spouse is Rs.21,000.
You are required to compute total income chargeable to tax of Mr. Harishchandra for assessment year 2014-15.
Q.16 ) Mr. Shankar informs you that his taxable income under the head income from house property is Rs.60,000 and
income from other sources is 23,500. The particulars of income from other sources are as follows:
a) Dividend from thane Janta Sahakari Bank Rs.1,000.
b) Income from units of Unit trust of India Rs. 13,000.
c) Interest on Saving bank account with Abhinav sahakari bank Rs. 15,000
d) Interest on national deposits scheme Rs.2,000.
e) Dividend from M/s compliance industries ltd. Rs. 3,005 and bank charge paid for collection of dividend Rs.5
f) He paid the general insurance corporation rs.13,500 in respect of medical insurance for self, his wife and children and
Rs.7,500 spent in cash as expenditure on preventive health check up.
Compute the net taxable income of Mr. Shankar for the assessment year 2014-15.
Q.17) Mr. Pathak is the purchase manager of M/s Rekha enterprises. During the year he received rs. 170000 as salary
from his employer. Particulars of his other income and payment are given below:
Dividend from foreign companies 6,500
Dividend from Indian companies 2,500
Income from units of unit trust of India 2,000
Interest on SB Account with SBI 5,000
Interest on fixed deposits with SBI 500
He incurred the expenditure of rs.12000 on pension plan of LIC.On the basis of the above information you are required
to compute the net taxable income for the assessment year 2014-15.
Q.18) Mr. Ashish is the owner of M/s Balaji food products. The net profit revealed by the P & L A/c is
Rs. 1,75,000. he paid to GIC for medical insurance as detailed below .
For preventive Health check up in cash 2,000
For self 3,950
For wife 3,950
For father who is working as principle collage 3,950
Total 13,850
He won Rs. 9000 from cross word puzzle.
During the year he spent Rs.80,000 on spouse who was physically dependent relative. Compute the net taxable income of
Mr. Ashish for the assessment year 2014-15.
Q.19) Mr. Abhijeet is employed with M/s Bharat Auto Ltd on a monthly remuneration of Rs.10,000 a sales manager. He
received during the year commission on sales Rs.4,00,000 and an award of Rs.1,00,000 for the best sales manager from
the employer company.
He earned Rs. 12000 from sub- letting house and Rs.13,000 by way of interest on fixed deposit with companies.
He made the following payments during the year.
Tution fees of his physically handicap dependent child Rs.10,000.
Compute on the basis of the above information net taxable income of Mr. Abhijeet for the assessment year 2014-15.
Q.20) Mr. Varun is a lawyer in Mumbai high court. His professional income during the previous year was Rs. 1,75,000.
He won a lottery of Maharashtra government of Rs.50,000. he paid to GIC for medical insurance Rs. 11,000 for self, his
wife dependent children and Rs. 2,000 for brother . He also spent Rs.8,000 on preventive medical check up. He met with
an accident and was severally handicapped on 31st March, 2014.
Compute the net taxable income for the assessment year 2014-15.
Q.21) Mr. Rajiv is a leading doctor of Thane. His income from profession and that from other sources its Rs.3,50,000
and Rs.52,500 respectively.
During the year he made certain payment, particulars of which are enlisted as under:
a) Purchase of Indira Vikas Patra Rs.10,000.
b) Deposited Rs. 25,000 under the annuity pension scheme of LIC.
c) He spent Rs.10,000 in cash and Rs.10,000 in cheque for preventive medical check up of self and spouse
respective.
Compute the taxable income of Mr. Rajiv for the assessment year 2014-15.
Q.22) Mr. Nitin is employed with M/s sundaram textiles. He furnished you the following information for the
a) Received salary @ Rs. 6,000 p.m. he was provided with free rental accommodation the perquisite value of which is
ascertained to be Rs. 6,000 bonus equal to one months salary was declared on 25 th March 2014 and paid on 10th May
2014.
b) He owns a flat at Vikhroli which was let out by him. The particulars of this flat are as under:
1. Rent received during the year @ Rs.2,500 p.m.
2. Municipal taxes amounts to Rs. 3,000 were born by the tenant.
3. Paid Rs. 1,500 towards insurance premium.
c) He spent Rs.25,000 for nursing his daughter who is physically dependent on him.
d) He paid to GIC for medical insurance for self, his wife and children Rs. 11,000.
Compute on the basis of the above information the taxable income of Mr. Nitin.
Q.23) Mr.Atul is a leading doctor of Thane. He provides you the following information for the previous year ended 31 st
March, 2014.
1. Income from profession Rs.1,05,000.
2. Income from other sources Rs.15,000 i.e. interest on Fixed Deposit with bank.
3. During the year the spent Rs.1,00,000 on nursing of his severely physically disabled spouse.
Compute the taxable income of Mr.Atul for the assessment year 2014-15
1.5 Module / Unit

Computation of Total Income for individual
COMPUTATION OF TOTAL INCOME
Q.1 Mr. Ajay is an individual with disability certified by medical authority employed with M/s. Ankush Engineering
Works Pvt. ltd. The Following information for the assessment year 2014-15 is furnished to you.
Rs.
Annual salary including DA 5,31,000
Ex-gratia 50,000
Perquisite value of free rental accommodation 80,000
Employer's contribution in excess of the prescribed
rules to a recognized rules to a recognized provident fund 11,500
Mr. Ajay owns a house property which he utilizes for the purpose of his own residence. During the previous financial
year 2013-2014 , he paid Rs. 36,000 to H.D.F.C. being repayment of loan of Rs. 12,000 and interest of Rs. 24,000.The
construction of this house was completed during the month of March, 1999 .This loan was taken prior to 1 st April ,99 .
Profession Tax paid is Rs.2,500.
You are required to determine the net taxable income of Mr. Ajay for the assessment year 2014-15
[GROSS TOTAL INCOME Rs.6,46,000 and NET TAXABLE INCOME Rs.5,84,000]
Q.2 Income from Mr.Bipin from Securities of State government is Rs 39,000. He owns two house property particulc's of
which are given below:
Nature of Occupancy Unit no. 1 self occupied Unit no.2 let out
Annual rent ---- 240000
Expenses
Repairs 1000 40000
Collection charges --- 1500
Municipal taxes 1000 20000
Insurance 400 12000
Ground rent 500 10000
He contributed Rs 70000 to PPF and spent Rs.76000 on his disabled daughter fully depended on him. Compute the
taxable income of Mr.Bipin for the assessment year 2014-15
[GROSS TOTAL INCOME Rs.1,93,000 and NET TAXABLE INCOME Rs.73,000]
Q.3 Mr. Surdas is totally blind. He is employed with M/s Avtar kishan Automobiles pvt Itd . He provides you the
following particulars for the year ended 31st March 2014.
Rs.
Salary induding DA 72,000
Conveyance allowance (exempt Rs 2,000) 4,000
Perquisite value of rental accommodation 4,000
Ex-gratia 3,000
His other incomes were
Winning from lottery 50,000
Dividend from Indian Companies 22,000
Interest on fixed deposits with Union Bank of India 33,000
Compute net total taxable income of Mr.Surdas for the assessment year 2014-15.
Q.4 Mr. Dinesh is a disabled person certified by medical authority, owning a general store. His profit and loss A/c for
the year ended 31st March 2014 is given below:
Rs Rs
To purchases 1,20,000 By gross sales 3,00,000
To salary to staff 26000 By rent received 48,000
To embezzlement of cash 31,000
To repairs of house property 12,000
To collection charges of rent 1,500
To Medical Insurance Premium paid for self 10,000
To Municipal taxes of house property 5,000
To income tax 6,500
To reserve for bad debts 14,000
To net profit 1,22,000
3,48,000 3,48,000
Compute the taxable income of Mr.Dinesh for the assessment year 2014-15.
Q.5 Mr.Rajendra is an employee of M/s Raj oil Mills Pvt ltd .During the year ended 31st March 2014 he received a net
salary of Rs 3,60,000 after making the following deductions.
1. Income tax Rs 19,000.
2. Total deduction in respect of contribution to recognized provident fund OF Rs. 40,000.
3. Total deductions in respect of contribution to LIC premium Rs 41,000
4. Profession tax Rs 2500.
During the year he earned the interest of Rs. 15,000 from securities of central government and rs. 16,500 by way
of interest on fixed deposits with Canara bank.
During the year he also made the following investments and payments:
1. ICICI Pension plan Rs.15,000.
2. Investment in NSC Rs.60,000.
3. Life Insurance Premium paid Rs.30,000.
4. Deferred Annuity plan Rs.30,000.
Compute the taxable income of Mr. rajendra for the assessment year 2014-15.
Q.6 Mr. Amit is employed with M/s Bhavani Pvt. Itd on a monthly salary of Rs 14,000 pm .According to an agreement
between company and trade union he was paid salary @ Rs 14,500 p.m. from 1st October 2013. He was paid house rent
allowance at 20% of salary (Rs 4,200 is exempt).
He contributed 10% of the salary to the recognized provident fund to which an equal contribution was made by the
employer. Profession Tax deducted Rs.2500.
Particulars of his other income is as under
Rs
Winning from lottery 1,00,000
Dividend on equity shares of
M/s Reliance industries ltd 13,000
State Bank of India 12,000
Interest on fixed deposits with State bank of India 14,000
He deposited Rs.20000 in PPF and paid Rs.30000 to ICICI pension plan.
Compute the taxable income of Mr. Amit for the assessment year 2014-15.
[GROSS TOTAL INCOME Rs.312500 and NET TAXABLE INCOME Rs.2,45,400]
Q.7 Following is the profit and loss A/c of M/s Match well Garments owned by Mr. Satish for the year ended 31st
March 2014.
To Opening stock 40,000 By sales 4,40,000
To Purchases 3,37,500 By Closing Stock 38,100
To Salaries and Wages 42,500 By dividend received from 4,900
ToExpenditure on severe Indian companies
disable dependent relative 15,000 By recovery of bad debts 10,000
To Rent 12,000 earlier allowed as a deduction
To household exp. 28,000 By interest on NDS 3,000
To Printing and Stationery 2,250 By Interest on Kamdhenu
To Telephone bills 1,150 deposit with co-op bank 4,000
To advertisement 500 By Amount received under 1,00,000
To motor car expenses 5,500 keyman insurance policy
To Insurance premium on
factory 5,000
To embezzlement of cash 7,500
To Profession tax 850
To Net Profit 1,02,250
6,00,000 6,00,000
On detailed scrutiny of profit and loss A/c it was revealed that salary include Rs.12, 000 of Mr.Satish. Household
expenses include Rs.8, 000 paid towards wealth tax. Half of the motor car expenses are attributable for personal purpose.
Advertisement expenses are incurred for an advertisement in a souvenir published by a political party. The above
expense does not include contribution to UTI pension fund of Rs.17000.
Compute on the basis of the above information net taxable income for the assessment year 2014-15.
Q.8) Mr.Rajnikant is the owner of M/s Decent sales & services. Net profit as per the profit and loss A/c is Rs.43, 500.
On detailed scrutiny of the profit and loss account it was revealed that:
1. Entertainment expenses of Rs.21,000 and guesthouse expenses of Rs.11,000 debited to P &L A/c.
2. Salary included Rs.18,000 taken up by Mr.Rajnikant
3. Rs.14,000 included in General expenses are in respect of purchase of refrigerator for personal use.
4. Professional fees include Rs.6,000 paid in respect of school fees of Mr.Rajnikants son.
5. Telephone expenses amounting to Rs.2,500 has been wrongly recorded under the head general expenses.
He owns a house property which is let out at a monthly rent of Rs.5,000 per month. Municipal taxes of Rs.10000 are paid
in respect of house property. He paid Rs.450 Ground rent and Rs.1,550 for insurance. He is a disabled person as certified
by medical authority.
Compute the Net taxable income of Mr.Rajnikant for the assessment year 2014-15.
Q.9) Mr. Guru Prasad of schedule tribe is a resident of Nagaland. He Provides you the following information.
1. Income from sole trading concern in Nagaland Rs.32,500.
2. He held the following investment:-
a. 10% Nagaland development bonds Rs.30,000 (issued by the government of Nagaland interest payable on 31st March )
b. 10% 10debentures of Rs.1,000 each in Nagraj food product ltd (interest payable on 31 st December)
c. Received directorship fees of Rs.2,000 from Nag bhoomi vikas Bank.
Compute the total income for assessment year 2014-15.
Q.10) Shri Jagdish a physically handicapped person established a small-scale industry and closed his account on 31st
March 2012. The P & L A/c prepared for the period ending 31 st March 2014 is given as under.
Rs. Rs.
To Salary to Staff 1,20,000 By Gross Profit 4,00,000
To rent 48,000 By Income from house 12,000
To advertisement 36,000 property
To Commission 12,000 (Rent Received )
To discount to retails 13,000
To reserve for doubtful debts 4,000
To provision for depreciation 8,500
To Printing and Stationery 6,000
To office expenses 9,500
To sundry expenses 10,000
To municipal taxes of house 3,000
property
To repairs of house property 3,000
To Net profit 1,39,000
4,12,000 4,12,000
The further information to be considered as under:
1. Commission paid is for securing orders for the business.
2. Sundry expenses include an amount of Rs.5,800 spent for purchase of furniture in office.
3. Allowable depreciation for the year amounts to Rs.6,500.
4. 80% of printing expenditure was incurred for printing wedding cards on occasion of his sons marriage .
6. Advertisement expenses incurred are beneficial for the period of three years.
Compute total income of Shri Jagdish for the assessment year 2014-15.
Q.11) Mr.Ravindra proprietor of Ravi engineers, furnishes you the following information for the pervious year ending
on 31st March 2014.
Rs. Rs.
To Salaries 72,000 By gross profit 3,60,000
To Rent 12,000 By dividend from Indian Cos 8,000
To depreciation 16,000 By Income tax refund 2,000
To motor car expenses 14,800
To printing & stationery 12,200
To labour welfare 33,000
To advertisement expenses 23,500
To drawings 32,500
To donations 14,000
3,70,000 3,70,000
He provides you the following additional information:
1. Half of the rent is attributable towards his residential flat.
2. Allowable depreciation as per income tax rules is Rs.17,500.
3. Half of the motor car expenses are for personal purposes.
4. Labour welfare includes Rs.1,000 expenses incurred for his own medical treatment.
5. Out of the total donations Rs.2,000 is paid for medical treatment of a poor student, balance is given to an approved
trust for the purpose of afforestation of wasteland.
6. Mr.Ravindra received Rs.12,000 an annual charge from his brother Mr. Avinash against the ancestral house property.
Determine on the basis of the above information total taxable income of Mr.Ravindra for the assessment year 2014-15.
Q.12) Mr. Clean who is severely disabled as certified by medical authority and whose capacity to work is substantially
reduced is a proprietor of M/s Beauty laundry. He furnishes for the following account
Receipts and Payments A/c
For the year ended 31-3-2014
Rs. Rs.
To Cash on hand (1-04-2013) 1,500 By Washing charges 90,000
To Labour receipts 1,40,000 By Salary 25,000
To ironing receipts 1,30,000 By Electricity charges 36,000
To Income from units of Unit 18,500 By rent 12,000
trust of India By drawing of Mr.clean 83,100
Winning from lottery 10,000 By Compensation for loss of 1,200
clothes 14,000
By Income tax 3,600
By Tailoring charges 1,200
By Miscellaneous expenses 33,900
By Closing balance (31-03-2014)
3,00,000 3,00,000
During the year, he made the following payment in cash which is included in drawings:
Rs.6000 to GIC for medical insurance on health of self, wife and children.
Compute the taxable income of Mr.Clean for the assessment year 2014-15.
Q.13) Shri Dayanand is practicing Chartered accountant in Mumbai. For the year ended 31 st March 2014.
His receipts and payments were as under:
Receipts Rs.
Fees received form client 1,50,000
Interest on FDR with Public ltd co. 5,000
Interest on FDR with Nationalized bank 15,000
An award from the institute of chartered
accountant of India, New Delhi for the best article
in magazine. 10,000
Payments Rs.
Salaries to assistant 36,000
Rent and electricity of office 18,970
Telephone charges 3,600
Printing and Stationery 1,200
Car hire and taxi fare etc. 3,000
Medical Insurance Premium paid 15550
Interest accrued on PPF Deposits 10000
PPF deposits 70000
Income tax 5,000
Gifts, presents, charity etc. 1,000
Compute his taxable income for the assessment year 2014-15.
assuming that 20% of telephone charges car hire and taxi fares etc. is for personal use.
[GROSS TOTAL INCOME Rs.118500 and NET TAXABLE INCOME Rs.33550]
Q.14) Following is the profit and loss account of Mr.Prakash for the year ending 31st March 2014, You are required to
compute taxable income for the assessment year 2014-15
Profit and Loss account for the year ending 31.3.2014
Rs. Rs.
To Salaries and bonus 1,54,000 By Gross profit b/d 476,000
To Provision for doubtful debts 12,000 By agricultural income 27,000
To advertisement expenses 80,000 By Share of profit from a
To Entertainment expenses 25,000 partnership firm as assessed a firm 40,000
To miscellaneous expenses 48,500 By Commission received
To Staff Welfare Expenses 51500 By Interest on securities of central 27,500
To Bad debts 4,500 govt. 11,000
To Interest on Capital By dividend from foreign
To Income tax 1,50,000 companies 1,000
To Expenses of severe physical 34,000 By Net Loss 20,500
dependent of treatment relative 25,000
6,03,000 6,03,000
Other Information :-
1. Advertisement expenses includes Rs.51,000 for introducing a new product the benefit of which will accrue for three
years and Rs.9,000 for advertisement in souvenir of a political party.
2. Payment towards Medical Insurance Premium Rs.21000 which includes payments made on behalf of dependent person
who are senior citizens.
Q.15) Shri Babu Bahi submits the following P & L A/c of his business.
Rs. Rs.
To Salaries and Wages 1,65,000 By Gross Profit 5,23,000
To Printing charges 25,500 By Income from national 8,000
To Travelling & Conveyance 16,000 deposit scheme (NET T.D.S.
To repairs 3,000 20%)
To Life insurance 12,000 By Interest on bank deposits 6,000
To bank charges for collection By Income from state 5,000
of income of national deposit Government securities
scheme 1,500 By Income tax refund 500
To bad debts 32,000
To income tax paid 14,000
To donations 12,000
To Provision for doubtful debts 11,500
To Interest on loan taken for
national deposit scheme 7,000
To depreciation 1,09,000
To Net profit 1,34,000
5,42,500 5,42,500
Note :-
1. Depreciation allowed as per income tax rules is Rs.88,000.
2. Printing includes Rs.2,500 paid for painting marriage invitation cards for the daughter.
3. Mr.Babu bhai had paid life insurance premium on the life policy for Rs.1,15,000 taken on the life of his wife.
4. Repayment of interest on loan taken for higher education is Rs.60000 and principal repayment is Rs.25000 for his
loan.
You are required to compute the taxable income of Mr.Babu bhai for the assessment year 2014-15.
Q.16) The following is the receipt and payment account of Dr.R.V. shenoy a medical practioner for the year ending 31 st
March 2014.
Rs. Rs.
To Balance b/d 4,000 By Staff Salaries 24,000
To Consultation fees at clinic 2,76,000 By Purchase 3,36,000
To Consultation fees from air 38,000 By motor car expenses 5,000
India (Net T.D.S. @ 5%) By Entertainment expenses 15,000
To Sale of medicine 32,000 By drawings 80,000
To loan from bank of India 2,00,000 By Insurance 10,000
(for motor car) By donation to Mumbai 50,000
To Sale of medicine 40,000 university (university of
To Receipt from times of India 4,000 National eminence )
for contributing medical By Donation to G.S.B trust an 20,000
articles approved institution
To award from Mumbai Doctor 6,000 By Income tax 30,000
association By Balance c/d 30,000
6,00,000 6,00,000
1. Purchase includes
a. Purchase of Medical books Rs.12,000 (each costing less than Rs.4,000)
[As stated under the Rules books owned by the assess carrying on profession is allowed as deduction 100%]
b. Purchase of motor car Rs.3,00,000 (01-09-2013)
c. Purchase of medicines Rs.24,000
2. Insurance includes :-
a. Medical indemnity insurance premium Rs.2,000.
b. Mediclaim insurance premium on health of his wife Rs.8,000/-
3. Motor car account showed a written down rule value balance of rs.50,000 as on 1.4.2013 as per income tax rules. The
motor car was sold on 1.3.2014 [The rate of depreciation is 20% as specified under rule]
4. 1/5th of motor car use is for private purpose.
5. Stock of medicines on 1.4.2013 Rs.3,000, on 31.3.2014 Rs.4,000.
6. Award is for Mumbai Doctor association is for the best articles of the year published in the times of India.
7. He advised one of his family friends on medical matters throughout the year who gifted him with membership of
sterling holiday resorts valued at rs.15,000 in appreciation of his service. Compute the total income of Dr. R.V Shenoy
Q.17) Mr.Suhas Desai submits the following information pertaining to the year ending on 31-3-14.
1. Basic salary Rs.5,000 pm.
2. Dearance allowed Rs.3,000 pm.
3. Bonus @20% on salary plus dearance allowed
4. Employee contributes 14.5% of basis salary & dearance allowance to recognized provident fund every month.
Employer also contributes an equal sum (Employers contribution exempt upto 12% salary and D.A)
5. Interest on balance credited to his recognized provident fund account @ 12% p.a. Rs.18,000 (exempt upto 9.5% p.a)
6. House rent allowance Rs.10,000 p.a.
7. Profession tax paid by employee Rs.960.
8. He retired from services on 31-3-2014 opting for 60% commutation of pension and received Rs.2,40,000 as the only
terminal benefit.
9. He owned a residential house which was used for his own residence fair rent Rs.30,000 and municipal taxes paid
Rs.3,000.
10. He spent the following amount:
a. Repair to house Rs.2,000.
b. Insurance of house Rs.1,000
c. Interest on loan for construction of house Rs.7,000.
11. He paid Rs.5,000 towards an annuity pension plan of life insurance corporation.
Compute the total income for assessment year 2014-15.
Q.18) Mrs. Sumati R.Sharma a resident individual submits the following particulars of her income for the year ended
31-3-2014.
1. Salary from K.S.S college Rs.8,000
2. Profession tax deducted from salary Rs.50 pm.
3. Family pension from the government of Uttar Pradesh where her late husband was serving Rs.6,000.
4. She has written a book of Zoology on which she gets royality of Rs.4,000 from the publisher. She spends Rs.500 on
typing stationery etc during the previous year.
5. Remuneration for acting as examiner in University examination Rs.1,500.
6. Interest on
a. Post office saving bank account Rs.1,000.
b. public provident fund with union bank of India Rs.2,400
c. Fixed deposit with Corporation bank Rs.10,350 (net of tax deducted at source @10%)
d. Interest accrued on N.S.C Rs.1,200.
e. Interest on Fixed deposits with DCW ltd. Rs.1,000
7. She spend Rs.12,000 on Medical treatment of physically handicapped Minor son during the Previous year.
Compute her total income for assessment year 2014-15.
Q.19) M/s Tanju Submit the following details for the A.Y. 2014-15.
Details of income from house property
House I House II
Fair Rent 30,000 30,000
Rent Received 39,000 36,000
Repairs 5,000 4,000
Insurance 10,000 2,000
Land Revenue 9,000 3,000
Ground Rent 8,000 ---
Interest on capital borrowed by mortgaging 7,000 4,000
House I (Funds utilized for construction of House --
II)
Unrealised Rent 4,800 ---
F.Y 2013-2014 2,000
F.Y 2012-2013 -- 8,000
Nature of occupation Let out for Let out for
resi. business
She invested Rs.70000 in PPF A/C, Rs.10000 in NSC and Rs.20000 as LIC premium paid for self and spouse. She also
paid Medical Insurance Premium of Rs.18000 for self, spouse and Rs.25000 dependent parents who are senior citizens.
[GROSS TOTAL INCOME Rs.40000 and NET TAXABLE INCOME Rs.Nil ]
Q.20) Miss Jyoti informs you the profit as per P & L for the year ended 31 st March 2013 is Rs.1,30,000. On detailed
scrutiny following discrepancies were revealed:
1. Depreciation allowable as per income tax act is Rs.21,000 where as amount debited is Rs.28,000.
2. Guesthouse expenses amounted to Rs.75,000 has been debited to P & L A/c.
3. Rs.4,500 received as contribution towards provident fund form employees however such sum has not been paid to P.F
A/c even though the due date was over.
4. Salary paid to son to the extent of Rs.21,000 was considered unreasonable.
Contributed Rs.9000 to an annuity plan of life insurance corporation of India for receiving pension.
5. Income from other sources is Rs.27500.
6. Mediclaim insurance premium paid for spouse is Rs.11000.
Compute the total Income of Miss Jyoti for A.Y. 2014-15.
Q.21) From the following P & L A/c of M/s Amit & Co. chartered accountants a proprietary firm, compute total income
of the proprietor Mr. Amit in respect of Assessment year 2014-15
P & L A/c
For the year ended 31-3-2014
Rs. Rs.
To books and periodicals 1,047 By profession fees 1,62,000
To Staff welfare expenses 2,276 By income form UTI 18,000
To Income tax 4,996 By amount received under 50,000
To Institute Fees 380 keyman insurance policy
To Postage 305
To donations 16,000
To Profession tax 850
To Rent and electricity 4,092
To Repairs and maintenance 5,728
To Revenue & Court fee stamp 396
To salaries & wages 25,036
To Sundries 3,553
To Telephone charges 1,191
To Travelling & conveyance 2,401
To Profession assistance
charges paid 7,489
2,30,000 2,30,000
Q.22) Mrs. Shah a practicing chartered Accountant furnishes the following particulars of her receipts and payment
account for the year ended 31st March 2014
Receipt and Payments Account
For the year ending 31st March 2014
Receipts Rs. Payments Rs.
To balance b/f 8,500 By Salary and bonus (including to 80,000
To Professional fees from 1,40,000 a son Rs.24,000)
clients By Printing and Stationery 5,500
To gift from father 15,000 By books and periodicals 2,400
To present from a client for 15,000 By conveyance expenses 9,000
winning the case By donation 10,000
To Salary from a college as a 41,000 By Purchase of a car 1,20,000
lecture (net after deducting By motor car expenses 20,000
income tax Rs.10,000) By Mediclaim insurance Premium 6,500
To Loan from Bank for 50,000 By interest on bank loan 5,000
purchase of a car By income tax 8,500
To Prize received from a rotary 4,500 By Profession tax 800
club as the best member of the By balance c/f 6,300
year.
2,74,000 2,74,000
a) Depreciation allowable on a motor car as per income tax rules is 20%.
b) Motor car is used for office as well as for personal use and in the past 25% of the expenses were treated as for personal
use.
Compute the taxable income of Mrs. Shah for the assessment year 2014-15.
Q.23) Shri Prateek a severally handicapped person (86%) is the proprietor of PK & Co. Following is the Profit and Loss
Account for the year ended 31st March, 2014-
Rs. Rs.
To Salaries 2,85,200 By Gross Profit 10,38,200
To Conveyance 66,100 By Interest Accrued on National Savings Certificates 12,500
(NSCs)
To General Expenses 45,950 By Gift from friend 51,000
To Interest Paid 1,16,100 By Duty drawback received 1,28,300
To MVAT 46,250
To Advertising Expenses 31,000
To Provision for Doubtful 15,000
Debts
To Contribution to PPF 60,000
To Depreciation 45,000
To Net Profit 5,19,400
12,30,000 12,30,000
Additional Information:
a. Depreciation charged is found to be in excess of Rs.6000 as per the Income Tax Laws.
b. Advertising expenses of Rs. 31000 are paid in cash to M/s Bright Advertising.
c. General expenses include Rs. 7500 being Medical expenses incurred for Shri Prateek.
d. MVAT include Rs.15000 paid towards penalty for delay in filing returns.
Compute the Net Taxable Income of Shri Prateek for Assessment Year 2014-15.
1.6 Module / Unit

Self - Evolution Assignment work
Answer the following questions:
1. Enumerate the deduction on account of Family Pension under section 57?

2. State the disallowance under section 40A (3) if a purchase bill of Rs.35000 was immediately paid by
the cash.
3. Whether interest on housing loan paid out of India is allowed as deduction under section 24?
Answer whether the following statements are correct with reason in one sentence:
1. Life Insurance Premium paid by cash Rs.5000 is eligible for deduction U/S 80 C.
2. The income earned Rs.10000 in the USA by Resident Indian is not taxable in India.
3. The residential property let out for commercial purpose is not taxable as income form house property.
4. Dr.Anand who is a full time employee of Jaslok Hospital receives Rs.50000 from Jaslok Hospital and
claims it to be income from business and profession.
5. Mr. Rajeev receives dividend of Rs.15000 from NKGSB Co-op.Bank Ltd. and claims it exempt U/s
10(33).
6. Mr. Aditya sells his motor car for Rs.100000 on 28.02.2013 and claims depreciation for 11 months.
7. Mr. Madhav spends Rs.25000 on medical treatment of his physically handicapped minor son who is
dependent on him and claims deduction of Rs.50000 U/s 80U.
8. Mr. Jawhar owns two houses both of which are not let out. Mr. Jawhar treats the annual value of
both the houses as NIL since both the houses are self occupied.
9. Mr. Pinkesh has a gross total income of Rs.175000 and his allowable investments for section 80C are
Rs.160000. He claims deduction of Rs.160000. Is he correct?
10. Mr. Raju earns Rs.200000 during Assessment Year 2014-15 as interest on PPF Account maintained
with state Bank of India. Whether tax needs to be paid?
11. Mr. Pawar paid Life Insurance Premium of Rs.10000 on behalf of his wife and claims deduction u/s
80C. Can he do so?
12. State whether remuneration received by a Member of Parliament is taxable as Income from
Salary?
13. Mr. Kapil Sawant purchased a flat on 1st June 2011 for Rs.400000 and sold it on 1st February, 2013
for Rs.475000. He claims the capital gain as Long Term. Is he correct?
14. Mr. Ameya Patwardhan has paid Medical Insurance Premium of his brother who is totally
dependent on him. Can he claim deduction U/s 80D?
15. A Partner has received interest on capital from his partnership firms and claims it as Income from
other Sources. Is he correct?
16. Mr.Sharad Bhinde paid a Medical Insurance Premium to GIC of Rs.6000 in cash on 15th February,
2013. Can he claim deduction U/s 80D? Is he correct?
17. Mr. Shrinivas Gupte purchased a residential flat on 1st January, 2012 and sold it on 30th Dec. 2013.
He claims the capital gain as long ter. Is he correct?
18. Mr. Yogesh Datey has given his commercial property on rent of Rs.100000 p.m. He claims this as a
business income. Is he right?
19. An Indian Company has its entire business in London. What is the residential status of the company?
20. Mr. P has debited Rs.20000 as sales tax to his P& L A/C which is unpaid till the due date of filling
of his Income-tax return. Can he claim this as a allowable deduction.
21. Vinayak received Rs.15000 as birthday gift from his father. Vinayak claims Rs.15000 is not taxable
in his hands. Is he right?
22. Manoj working as a manager of an agriculture estate received Rs.120000 as salary and claims it as
his agricultural income. Is he right?
23. Mr. Purohit, lecturer in Adarsha College, Mumbai, received Rs.8000 as examinership fees from
University of Mumbai. He claims it as Income from other sources. Is he right?
24. Ajay has two house properties, both are self occupied. He claims that annual value of both houses
shall be NIL. Is he right?
25. Varun paid interest on loan of Rs.130000 before commencement of production in his Business. He
claims this as revenue expenditure. Is he right?
26. Mrs. Vaijayantibai received a family pension of R.60000 during 2011-12. She claims a standard
deduction to the extent a 1/3 of such pension. Is she right?
27. Shri Nivrutti pays Rs.125000 as premium on his Life Insurance Policy. What is the maximum
amount of deduction available U/s 80C.
28. Omkar received Rs.750000 as compensation on Voluntary retirement and claims that entire amount
is exempt U/s 10 (10C). Is he right?
29. Miss Baby received a gift of Rs.21000 from her father at the time of her marriage. She claims that
Rs.21000 is not taxable in her hands, Is he claim correct?
30. Mr. Satish received Dividend of Rs.5000 from XYZ Ltd., an Indian Company. Can he claim this
dividend income as exempt U/s 10(34)?
31. Miss Gouri purchased a house property on 1st June, 2010 and sold it on 1st April, 2013. She treats this
property as long term capital asset. Is her claim correct?
32. Tushar carrying on an agency business received a sum of Rs.1200000 from his principal for
termination of agency. He claims that compensation received shall be exempt as it is a capital receipt.
Is he right?
33. P, G and O are Co-owners of a house property which is self occupied by the co-owners. They claim
that the annual value for each co-owner shall be Nil. Are they right?
34. Mr. Joshi has invested Rs.150000 in N.S.C. VII issue during the previous year 2012-13. How much
deduction can he claim u/s 80C?
35. Mr. Avinash owns two houses both of which are not let out. Mr. Avinash treats the annual value of
both the houses as NIL since both the houses are self occupied.
36. Mr. Jadhav spends Rs.25000 on his medical treatment; he is physically handicapped and claims
deduction of Rs.50000 u/s 80U.
37. The Residential property let out for commercial purpose is not taxable as income from house
property.
38. The income of Rs.10000 earns in USA by a resident Indian is not taxable in India.
39. Miss Sonu an ordinarily resident India earned Rs.50000 in USA and claims that this income is not
taxable in India. Is this claim right?
40. Mr. Sachin has earned Rs.10000 from a lottery ticket and claim Rs.500 as deduction for purchase of
lottery tickets. Can he avail this deduction?
41. What is the amount of deduction on account of family pension u/s 57 of the income tax act 1961?
42. Tata Steel ltd., an Indian company, has its major business in India. What is the residential status of
the company?
43. Miss Smita earns Rs.25000 as interest on Public Provident fund (PPF) Account. He claims this at his
income from salary. Is he right?
44. Shri Mohan had debited Rs.50000 to the Profit and Loss Account towards Sales Tax which is unpaid
till the due date of filing Income Tax return. Can he claim this amount as allowable business
expenditure?
45. Miss. Anita received dividend of Rs.20000 from Shamrao Vithal Co. Bank. She claims it as an
exempt income. Is her claim correct?
46. Mr. Pandharinath is working in a private organisation. He gets entertainment allowance of Rs.7000
during the previous year 2012-13. Can he claim entertainment allowance deduction U/s 16(ii)?
47. Miss Aalisha receives Rs.50000 as rent from a vacant plot of land owned by her. She claims this
income as Income from House Property. Is her claim correct?
48. Mr.Ramdas retired from a Governement Organisation. He received Pension @Rs.5000 p.m. during
the previous year 2012-13. He claims this pension as exempt being received from a Government
Organisation. Is his claim correct?
49. Mr. Amogh (Member of Parliament) has received remuneration of Rs.60000. He claims this at his
Income from Salary. Is he right?
SHORT QUESTIONS
1. Is it right to say that an Indian Company is always a resident in India?
2. Is a foreign company always Non-Resident in India?
3. What is the maximum amount exempt in case of leave encashment?
4. An employer received Rs.500000 under a key man Insurance policy taken on the life of an employee.
How will such amount be treated in the hands of the employer under the Income tax Act?
5. As per the agreement with its Trade Union, the due date for the payment of salaries by a concern is
the 5th of the next month. The salary for March, 2013 was paid on 10-04-2013. Will such payment be
disallowed under section 43B? Why?
6. Which type of person can be Resident and Not Ordinarily resident in India?
7. Under which head of income will the fees received by M, an Internal Auditor of a Private Ltd.
Company for performing the yearly Internal Audit, taxed?
8. For the purpose of exemption of leave encashment, which salary is taken into account?
9. M was granted deduction by the Income tax officer of unrealized rent to the extent of Rs.40000 in the
past. His actual claim for such unrealized rent was Rs.60000. He has been able to recover during the
current previous year Rs.45000 out of such unrealized rent. On what amount is he liable to be taxed
during the current previous year?
10. What is the rate at which interest on loan or capital of partner of a firm is allowed as deduction to the
firm?
11. Will the sale of the flat by its builder subject to tax under the head Capital Gains?
12. For the purpose of computation of Capital Gains what will be the full value of consideration where a
capital asset is converted into stock-in trade?
13. Mr. Nakamuch, president of Sony-India went to Tokyo, his home town on leave for two months. He
claims that the salary during such leave period does not arise from any service rendered in India.
Hence, it is not taxable in India. Comment.
14. Explain the taxability of dividend paid by a co-operative society in the hands of the member.
15. Can deduction under section 80U be claimed by an individual who is Not Ordinarily Resident in
India?
16. Give 2 examples of entities covered under the category Artificial Juridical Person.
17. In whose case is the tax liability highest: a. Resident and ordinary resident b. Non-resident, c.
Resident but not ordinary resident?
18. An employee is not convered under the Payment of Gratuity Act, 1972:
a. Which salary shall be considered for computing the exemption?
b. What will be the number of years taken if he has served for 16 years 6 months and 5 days for the
purpose of exemption?
c. What will be the maximum amount of Gratuity exempt from tax?
19. Which type of persons can claim the deduction for contribution to certain pension funds under section
80CCC?
20. What is the maximum amount that can be claimed as deduction under section 80D?
21. N is an employee of Central Governement. His Gross salary is Rs.504000. He is entitled to a
deduction of Entertainment allowance of Rs.5000.What shall be the amount of deduction in his case?
22. What is the head of income under which Interest on Capital received by a partner is taxed?
23. At what price will you compute the sale consideration of a capital asset transferred by a partner into
the business of firm?
24. Is it correct to say that a person may not have assessable income but may still be assessee? Give an
example.
25. A sum received under which type of Life Insurance Policy is not exempt from Tax?
26. During the current previous year, an employee was reimbursed Rs.24000 as expenses of medical
treatment which included Rs.7000 spent in a government hospital. What is the amount of taxable
perquisite.
27. Mr. Unfortunate, a non-Governement employee died while in service in a concern not convered under
the Payment of Gratuity Act. His widow received Gratuity of Rs.100000. Is the Gratuity taxable in her
hand?
28. M is employed with V Ltd. at a salary of Rs.10000 p.m. Due to financial crisis, V Ltd. has paid the
salary from Jan.2012 to March, 2012 only in June 2012. How much is the Gross salary of M for the
Assessment Year 2014-15.
Rewrite the statements given in A Group with the corresponding most appropriate statement from B Group
Column I Column II
1. Assessment Year a. F.Y. 2012-13
2. Assessee b. Gift above Rs.50000
3. Previous year c. 2014-15
4. Assessment d. Person liable to pay tax
5. Income e. Reassement
Column I Column II
1. Association of Person i. Infosys Ltd.
2. Company ii. Mr. Vijay Malaya
3. Individual iii. Membership only to Individuals
4. Artificial Judicial person iv. Membership to any person
5. Local Authority v. Mumbai University
6. Body of Individual vi. Ravi kiran a firm
Column I Column II
1. Anna Hajare a. Company
2. L & T Technologies Ltd. b. Association of Persons
3. Wadala Gram panchayat c. Firm
4. Vikhroli Sports Club d. Individual
5. Karnataka Univesity e. Body of Individual
f. Artificial Juridical Person
g. Local Authority
Internal Class Test

Gokhale Education Societys
Dr.T.K.Tope Arts & Commerce Night College, Parel, Mumbai 4000 12

Sub.: - Direct and Indirect Taxes
TYBCOM (2011-12) Test I Marks : 10
Full Name of Examinee:_____________________________________
Roll No : __________________ Date : __________________
Q.1. Entertainment allowance is deductable to the extent of Rs.5000 for a___
a. Private Company employee b. Government employee
c. Both of the above d. None of the above
Ans : ____________________________________________________________________
Q.2. Balaji Temple is assessable under the Income Tax Act as
a. A Individual b. An Artificial Juridical Person c. A Local Authority d. None of these
Ans : ____________________________________________________________________
Q.3. Chandan is neither a government employee nor covered under payment of Gratuity Act, 1972. He has
completed 21 years and 8 months of service. The number of completed years considered for gratuity
exemption shall be
a. 22 years b. 21 years c. 21 years and 8 months d. Average of a & b
Ans : ____________________________________________________________________
Q.4 Commuted pension received by a Government employee is:
Ans : ____________________________________________________________________
Q.5. Bonus is not taxable on ______ Basis.
a. Receipt b. due c. Advance d. None
Ans : ____________________________________________________________________
Q.6. Success Ltd. is registered in U.K. The control and management of its affairs is situated in India. Success
Ltd. shall be:
a. Resident in India b. Non-resident
c. Not ordinarily resident in India d. None of these
Ans : ____________________________________________________________________
Q.7. Shivaji University is assessable under the Income Tax Act as
a. A Individual b. An Artificial Juridical Person
c. A Local Authority d. None of these
Ans : ____________________________________________________________________
Q.8. Income which accrue outside India from a business controlled from India is taxable in case of :
a. Resident only b. Not ordinary resident only c. Both R&OR d.None of the above
Ans : ____________________________________________________________________
Q.9. A.O.P. is the abbreviation used for :
a. Association of persons b. Association of professors
c. Association of Panchayats d. Associate of person
Ans:____________________________________________________________________
Q.10. Residential status of an individual depends on the stay of the assessees in India during the:
a. Calendar year b. Accounting year c. Assessment year d. Previous year
Ans : ____________________________________________________________________
Roll No : __________________ Date : __________________
Q.1. Residential status is to be determined for:
Ans : ____________________________________________________________________
Q.2. Un-commuted pension received by a Government employee is:
Ans : ____________________________________________________________________
Q.3. Success Ltd. is registered in U.K. The control and management of its affairs is situated in India. Success
Ltd. shall be:
a. Resident in India b. Non-resident
c. Not ordinarily resident in India d. None of these
Ans : ____________________________________________________________________
Q.4 Kumar is neither a government employee nor covered under payment of Gratuity Act, 1972. He has
exemption shall be
a. 22 years b. 21 years c. 21 years and 8 months d. Average of a & b
Ans : ____________________________________________________________________
Q.5. Dividend is exempt in case :
a. It is paid by an Indian Company b. It is paid by a foreign company
c. It is paid by a multinational company d.It is paid by a joint venture unit.
Ans : ____________________________________________________________________
Q.6. Total Income of a person is determined on the basis of his:
a. Residential status in India b. Citizenship in India c. None of these d. Both of the above
Ans : ____________________________________________________________________
Q.7. Shivaji University is assessable under the Income Tax Act as
a. A Individual b. An Artificial Juridical Person
c. A Local Authority d. None of these
Ans : ____________________________________________________________________
Q.8. Income which accrue outside India from a business controlled from India is taxable in case of :
a. Resident only b. Not ordinary resident only c. Both R&OR d.None of the above
Ans : ____________________________________________________________________
Q.9. Manoj a foreign national visited India during previous year 2010-11 for 150 days. Earlier to this he
never visited India. Manoj in this case shall be:
a. Resident in India b.Non- resident c.Not ordinarily resident in India d.None of the above.
Ans : ____________________________________________________________________
Q.10. Minors Income which is clubbed with that of is parent is exempted upto ___
a. Rs.1500 per minor child b. Rs.1000 Per minor child c. Rs.1200 p.m. d. Rs.500 p.m.
Ans : ____________________________________________________________________

Roll No : __________________ Date : __________________
Q.1. Residential status of an individual depends on the stay of the assessees in India during the:
Ans : ____________________________________________________________________
Q.2. A.O.P. is the abbreviation used for :
a. Association of persons b. Association of professors
c. Association of Panchayats d. Associate of person
Ans : ____________________________________________________________________
Q.3. Success Ltd. is an Indian company whose entire control and management of its affairs is situated
outside India success Ltd. is :
a. Resident only b. Both ordinary resident and NOR c. Non- resident d. All the assesses
Ans : ____________________________________________________________________
Q.4. An employee is neither a government nor covered under the payment of Gratuity Act, 1972. He has
exemption shall be a. 17 years b. 16 years c. 16 years and 8 months d. None of the above
Ans : ____________________________________________________________________
Q.5. Bank of Maharashtra is assessable under the Income Tax as
a. Company b. A Local Authority c. An Artificial Juridical person d. Association of person
Ans : ____________________________________________________________________
Q.6. Martin Crow a foreign national visited India during previous year for 180 days. Earlier to this he never
visited India. Martin Crow in this case shall be:
a. Non- resident b. Resident in India c.Not ordinarily resident in India d.None of these
Ans : ____________________________________________________________________
Q.7. Prof.Vineet received 6th pay arriers on 14th May, 2010 retrospectively from 1 st Jan. 2008. The arriers
would be taxable in the previous year:
a. 2010-11 b. 2007-08,2008-09, 2009-10 c.2007-08 d. None of the above
Ans : ____________________________________________________________________
Q.8. Minors Income which is clubbed with that of is parent is exempted upto ___
a. Rs.1500 per minor child b. Rs.1000 Per minor child c. Rs.1200 p.m. d. Rs.500 p.m.
Ans : ____________________________________________________________________
Q.9. Bonus is taxable on ______ Basis.
a. Receipt b. due c. Advance d. None
Ans : ____________________________________________________________________
Q.10. Entertainment allowance is not deductable to the extent of Rs.5000 for a___
a. Private Company employee b. Government employee
c. Both of the above d. None of the above
Ans : ____________________________________________________________________

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Direct and Indirect Taxes Paper I TYBCOM Semester V 2014-2015

Allocation of the Syllabus and Question Paper Pattern of Courses of B.Com.

Applied Component Group:

Sr. Modules / Units Page No.

Third Year B. Com.

2 Full Length Practical Question 15

3 Full Length Practical Question 15

4 Full Length Practical Question 15

(A) Theory Questions 08

1.1 Module / Unit

1. Direct tax is a income tax. 1. Indirect tax is not a income

Person gives the classification of the assessee according to their legal

Illustration (Short Question)

Assessment Year [ Sec. 2 ( 9 ) ] :

Assessment [ Sec. 2 (8) ] :

Income [ Sec. 2 (24) ] :

8. Benefit or perquisite of obtained by a representative assessee, a beneficiary, or any amount paid by

State with reasons whether the following receipts are Income.

3. Determine the legal Status of the following:

5. Match the following columns

6. Match the following columns

1.2 Module / Unit

DETERMINATION OF RESIDENTIAL STATUS

Residence of an Individual [ Sec. 6 (1) (6) (a) ]

There are two EXCEPTIONS to the second condition.

An individual would be resident only if the first condition is satisfied.

Resident and Resident But Not

Both of them must be satisfied.

1. He should have been in India 2 years out of 10 previous years , immediately

Residence of a Hindu Undivided Family [ Sec. 6 (2) :

Check, where is the Control and Management of the HUF

Wholly Partly Wholly

RESIDENT NON - RESIDENT

Whether the HUF is Resident or Non-Resident depends on control or

Residence of a Company [ Sec. 6 (3) :

Indian Company Foreign Company

Wholly Partly Wholly Wholly Partly Wholly

Resident in India Non Resident in India

Residence of a Firm, AOP, BOI, Local Authority, Artificial

Wholly Partly Wholly

Resident in India Non Resident in India

Note: The above-mentioned persons cannot be classified further.

SCOPE OF TOTAL INCOME ( SECTION : 5 )

Let us study this in detail:

For Resident and For Resident but For Non-Resident

For Resident and For Resident but For Non-Resident

Taxable in India Taxable in India only Not Taxable in

Taxability of income according to residential status of the assessee.

Resident And Resident But Not Non-

1. Income received and arises in Taxable Taxable Taxable

2004-05 365 2010-11 65

12th April, 2013 to 27th April, 2013 USA

FILL IN THE BLANKS

1.3 Module / Unit

Income Income Profits/Gains Capital Income

Salary Annual value Profit of Gains arising Any other

Interest on Gold Deposit Bonds etc.

16. Allowances to M.P. / M. L. A. [ Sec. 10 ( 17 ) ] :

Salary includes [section17(1)] :-

It is fully exempt Lease of following is exempt Lease of following is exempt

Salary = Basic + D. A. Salary = Basic + D. A. + Commission

2. Pension [ Sec. 10 ( 10A ) ] :

Also Known as Also Known as

2. Interest on Loan of House Property

1. Interest on loan of House Property