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Question 1):

Introduction:

Taxation under salary is an important factor for every business organization and each elements are to be
considered for the computation of the same. It is the main duty of an accounts manager to ensure that
the accurate tax has been deducted and paid to the government.

Concepts and Application:

As an accounts manager, the gross salary of all employees are to be calculated in order to compute the
taxes to be deducted under the head of salary. In the given scenario, the income declaration form and
other supporting documents are to be collected from Miss Nihali. These are to be verified along with the
documents.

After that, the gross salary for the financial year is to be identified under each income tax slabs as given
below:

 Up to income of Rs 250000 , nill tax applicable


 In between Rs 250001 to Rs 500000, 5% of tax applicable with 4% of educational cess.
 In between Rs 500001 to Rs 1000000, 20% of tax applicable with 4% of educational cess.
 Above of Rs 1000001, 30% of tax applicable with 4% of educational cess.

Before identifying the total income taxable under each income slabs, all tax deductions are to be done
as per the income tax act. There are many elements in the salary are taxable or partially taxable.

Now the flat tax deduction of Rs 40000 can be availed for the medical and convenience allowances. So it
should be deducted from the gross salary.

Also in the case of HRA, if an individual is paying rent or staying with parents under agreement, he/she
can avail the tax reduction subject to the three conditions. The tax deduction under HRA can be availed
based on the followings:

1) Actual hra received


2) Rent paid in excess of 10% of basic salary
3) 50% of basic salary

On the above three, only the lowest amount can be availed as hra exemption.
As an accounts manager, the rent receipts from Miss Nihali are to be collected for the same.

Also the investment details are to be collected for the tax exemptions for the head of salary. These are
coming under the section 80 c of the income tax act. The tax exemption upto Rs 150000 can be availed
under the same. It includes PPF, LIC premiums, equity linked schemes, tuition fees to children and more.

Also the tax exemption under section 80d of the income tax act can be availed through medical
insurance premiums. These can be availed for any family person related to an individual under income
tax act. An individual can avail up to Rs 25000 for his spouse/ her husband and for senior citizens, an
amount of Rs 50000.

Also the tax exemption can be availed for the interest on home loans up to Rs 2 lakhs for an individual as
he/she is the owner of the same. The principal component of repayment of loan can also be availed as
tax exemption under section 80 c of the income tax act up to Rs 150000.

As per the section 80e of the income tax act, the loan amount for higher studies as educational loan can
be taken as tax exemption. Also as per the section 80g of the income tax act, the amount about 50% or
100% can be taken as tax exemption in the form of donations to any charity organizations.

The savings account interest also can be taken up to Rs 10000 on their income under section 80tta of
the income tax act.

After considering all the above factors, the gross income of Miss Nihali should be calculated and the
amount of tax is to be derived under income tax slabs as per the above. The tax amount should be
equally divided months by months and should be deducted from the salary.

Conclusion:

The tax should be deducted and deposited into respective individual tax accounts. After every financial
year, the form 60 should be collected from income tax site and should be conveyed to all employees of
the organization. It is also import that every documents mention under the income declaration forms
are collected and filed.
Question 2):

Introduction:

Every monetary related transactions are taxable unless some exemptions in the cases of special
occasions. The tax exemption will be available only up to some limit and above that, it is mandatory to
pay taxes by every individual under income tax act.

Concepts and Application:

In the given scenario, Mr abhishek now only passed MBBS and practicing as doctor in his own way. He
has been given with a gift of Rs 51000 as cash by one of his father’s friend. As per the section of 56(2),
any gift received more than rupees fifty thousand is taxable unless it is from his/her relatives on the
occasion of marriage.

The relatives can be anyone who are related to their family. The gift can be anything in the form of
money, immovable and movable properties without consideration or partial consideration.

In the first case, Mr abhishek received the gift as cash and it is more than Rs 50000. Also it is not
received from his relative. So the condition for exemption is not satisfied. Hence the gift received is
taxable and Abhishek has to pay the tax for the same.

This income will come under the head of income from other sources. It is for the entire financial
transaction and it is for one time transaction. If it was received from his relatives, it would be exempted
from income. Also if it was received at the occasion of his marriage, it could be taken as exemption.

For example, if he is getting the same gift from any on his cousins and amount exceeding Rs 50000, that
gift will not come under taxable income and no matter the amount size and occasion.

In the second scenario, he has been gifted with a plot of land by one of his parents as a toke of
appreciation for his dedication and all. As per the section 56(2), the plot of land will come under
immovable property. It is also taxable gift if it is given without consideration. For this case, it is not
mentioned that it was given under any consideration or not. Also it did not declare any stamp duty
details on the same.

For example, if the immovable property is given without consideration and the stamp duty exceeds Rs
50000 in a financial year, it will be taxable. But if it is given with consideration and stamp duty does not
exceeds on the same, it will be exempted from tax. Also there is another case that, the immovable
property will be given under will. Then it is not taxable. But if the rent is received by you, it will be
taxable as per the act.

Also it is compulsory to have a gift deed while gifting anyone with any money, immovable and movable
properties. All the details are to be filled and maintained in order to submit on the occasion of tax filing
for the financial year.

So in both situations, the gifts received by Mr Abhishek come under taxable income unless the above
conditions are not there. It should be treated as income from other sources and he should add with his
total annual income for filing of the same.

Conclusion:

Any gifts exceeding five thousand rupees are taxable if some conditions are not met. So make sure that
gifts are considered and taken carefully for the calculation of taxes.
Question 3):

a) The gross income of Mr Arman is coming Rs 1350000. The followings are the main deductions
can be claimed under chapter VI-A:

Gross Total Income=Rs 1350000

As per section 80 c, the following deductions are applicable:

PPF amount paid= Rs 75000

LIC premium paid= Rs 30000

Repayment of housing loan to Bank of Baroda=Rs 125000

Total actual amount coming as per below details= Rs 230000

The maximum tax deduction under section 80c of Income Tax Act=Rs 150000

So the tax deduction under section 80 c can be Rs 150000

As per section 80D, the following deductions are applicable:

Medical insurance premium for self and wife=Rs 10000

Medical insurance premium paid for his mother= Rs 25000

The total premium is Rs 35000

As per section 80D of income tax act, the maximum allowed is Rs 25000 for all ages.

So the tax decution under section 80D can be Rs 35000

Hence the total tax deductions is Rs 185000(Rs 150000+Rs 35000)

b) An additional income as royalty lumsum amount of Rs 1500000 received

So Gross Income will be Rs 2850000(1350000+1500000)

As per section 80QQB of income tax act, any profit or appreciation given to the literatures and publishes
can be exempted up to some limit from the total income.
It is called royalty income and it can be any income earned by an author for his/her profession or any
amount received as advance for copyright or any amount received as lumsum amount as appreciation.

The minimum of below amount is to be taken as deduction

1) Rs 3 lakhs or
2) The amount actually received as royalty income

So in this case, the royality income is Rs 1500000. So it cannot be taken fully as exempted. The tax
deduction will be only for Rs 3 lakhs as per the act.