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CA.

Ajay Jain 9310167881

Handout No. 8|1

SALARY
A.324. Answer already given in question bank. A.325 Computation of Total Basic salary (i) Salary on 1.4.11 Salary on 1.4.12 Salary for P/Y 12-13 1.4.2012 to 31.3.2013 = 6,000 x 12 (ii) Salary on 1.2.11 Salary on 1.2.12 Salary on 1.2.13 Salary for P/Y 12-13 1.4.12 to 31.1.13 = 2,500 x 10 1.2.13 to 31.3.13 = 3,000 x 2 Total Salary (iii) Salary on 1.6.08 Salary on 1.6.09 Salary on 1.6.10 Salary on 1.6.11 Salary on 1.6.12 Salary for P/Y 12-13 1.4.12 to 31.5.12 = 13,500 x 2 1.6.12 to 31.3.13 = 15,000 x 10 (iv)Salary on 1.3.08 Salary on 1.3.09 Salary on 1.3.10 Salary on 1.3.11 Salary on 1.3.12 Salary on 1.3.13 Salary for P/Y 12- 13 1.4.12 to 28.2.13 = 39,000 x 11 1.3.13 to 31.3.13 = 46,000 x 1 A.326 (A) Since, no rent has been paid, no exemption of HRA shall be given. (B) 1. Received =2,400 2. Rent paid - 10% of salary = 2,000 10% of 12,000 = 800 3. 40% of salary = 40% of 12,000= 4,800 Least of the above is 800. Therefore, 800x12 = 9,600 shall be Exempt. (C) 1. Received = 10,000 2. Rent paid - 10% of salary = 12,000-10% of 16,000 = 10,400 3. 50% of salary = 50% of 16,000 = 8,000 Least of the above is 8,000. Therefore, 8,000x12 = 96,000 shall be Exempt. (D) 1. Received = 2,000 2. Rent paid - 10% of salary = 1600 - 10% of 6,000 = 1,000 5,000 6,000 72,000 2,000 2,500 3,000 25,000 6,000 31,000 10,000 11,000 12,000 13,500 15,000 27,000 1,50,000 1,77,000 15,000 20,000 25,000 32,000 39,000 46,000 4,29,000 46,000 4,75,000

CA. Ajay Jain 9310167881


3. 40% of salary = 40% of 6,000 = 2,400 Least of the above is 1,000. Therefore, 1,000x12 = 12,000 shall be Exempt. (E) 1. Received = 3,000 2. Rent paid - 10% of salary = 800-10% of 10,000 = Nil 3. 40% of salary = 40% of 10,000 = 4,000 Nothing shall be Exempt. A.327 (A) 1. Received = 3,000 2. Rent paid - 10% of salary = 2,000 - 10% of 6,000 = 1,400 3. 50% of salary = 50% of 6,000 = 3,000 Least of the above is 1,400. Therefore 1,400x12 = 16,800 shall be Exempt. (B) Since, no rent has been paid, no exemption of HRA shall be given. (C) 1. Received =1,000 2. Rent paid - 10% of salary = 1,200 - 10% of 8,000 = 400 3. 50% of salary = 50% of 8,000 = 4,000 Least of the above is 400. Therefore, 400x12 = 4,800 shall be Exempt. (D) 1. Received = 2,000 2. Rent paid - 10% of salary = 800 - 10% of 7,000 = 100 3. 40% of salary = 40% of 7,000 = 2,800 Least of the above is 100. Therefore 100x12 = 1,200 shall be Exempt. (E) 1. Received = 3,000 2. Rent paid - 10% of salary = 3,000 - 10% of 10,000 = 2,000 3. 40% of salary = 40% of 10,000 = 4,000 Least of the above is 2,000. Therefore, 2,000x12 = 24,000 shall be Exempt.

Handout No. 8|2

A.328 Amount Received (5,000x12) Less: Exempt (Note) Taxable Amount Note:-Least of the following shall be exempt: 1. Received = 5,000 2. Rent paid 10% of salary = 2,000 - 10% of 30,000 = Nil No need to compute any further. Therefore, Exemption shall be Nil. A.329 Amount Received (5,000x12) Less: Exempt (Note) Taxable Amount Note:-Least of the following shall be exempt: 1. Received = 5,000 2. Rent paid 10% of salary = 4,000 - 10% of 30,000 = 1,000 3. 40% of salary = 40% of 30,000 = 12,000 60,000 (12,000) 48,000 60,000 Nil 60,000

CA. Ajay Jain 9310167881


Least of the above is 1,000. Therefore, Exemption shall be 1,000x12 = 12,000

Handout No. 8|3

A.330 Amount Received (5,000x12) Less: Exempt (Note) Taxable Amount Note:-Least of the following shall be exempt: 1. Received = 5,000 2. Rent paid 10% of salary = 20,000 - 10% of 30,000 = 17,000 3. 40% of salary = 40% of 30,000= 12,000 Least of the above is 5,000. Therefore, Exemption shall be 5,000x12 = 60,000 A.331. Answer already given in question bank. A.332 Answer already given in question bank. A.333 Answer already given in question bank. A.334. 1. 2. 3. 4. 5. 6. 7. 8. Computation of income under head salary Basic Salary (16,000 x 12) Transport allowance (Note 2) Children Education Allowance [(150 x 3 100 x 2) x 12] Conveyance allowance [(1,000-600) x12] Tribal Area allowance (200 200) Allowance for Research (500 x12) HRA (Note 1) City compensatory allowance (400x12) Gross Salary 1, 92,000 Nil 3,000 4,800 Nil 6,000 25,200 4,800 2,35,800 60,000 (60,000) Nil

Note:-1. Calculation of HRA (i) Received = 3,000 (ii) Rent paid 10% of salary = 2,500 - 10% of 16,000 = 900 (iii) 50% of salary = 50% of 16,000 = 8,000 Least of the above is 900. Therefore, Exemption shall be 900 x 12 = 10,800 Received Amount (3,000 x 12) Less: Exempt (900 x 12) (10,800) Taxable Amount

36,000

25,200

(2) Nothing shall be taxable because transport allowance given to the assessee is less than the limit of 800. Therefore full amount shall be exempt. A.335. Calculation of value of benefit taxable in the hands of Tiwari For P/Y 2012-13 Value of benefit (7,00,000x10/100 x 59/365) No. of days for which the asset was used = 28(Feb.) + 31(March) = 59 days

11,315

CA. Ajay Jain 9310167881


A.336.

Handout No. 8|4


4,000

Calculation of value of benefit taxable in the hands of Tiwari For P/Y 2012-13 Value of benefit (2,000 x 2) [Feb. & March] Note: In this case actual hire charges shall become taxable.

A.337.

Value of benefit Note: If Laptop is given for personal use or official use, then Nil value shall be taxable. Calculation of taxable amount in the hands of Mr.J Value of benefit (12,000 x 10/100 x 304/365) No. of days for which the asset was used = 30+31+31+30+31+30+31+31+28+31= 304 days Answer already given in question bank. Answer already given in question bank.

Nil

A.338.

` 999

A.339. A.340. A.341

He can claim only 2 exemptions because 1 LTC of previous block cannot be claimed after 1st year and as this is the second year in the block. The journey exemption brought forward cannot be utilized. It was to be utilized in the calendar year 2011 itself. A.342 Calculation of Taxable amount in the hands of J Business class ticket Less: Economy class ticket Taxable Amount

10,000

(7,000) 3,000

A.343

First AC rail fare by shortest route is exempt as per Income Tax Act, but exemption can never exceed the amount of benefit. Hence, in this case nothing shall be taxable and exemption shall be restricted upto `2,000.

A.344 Expenses Exempt (without limit) 25,000 Expenses Exempt (with limit) 20,000 17,000 18,000 22,000 35,000 60,000 Less: Exempt 37,000 (15,000) 22,000 40,000 Nil 40,000 Taxable

(i) (ii) (iii) (iv) (v) (vi)

Total Taxable perquisite = 22,000+40,000 = 62,000 A.345.

CA. Ajay Jain 9310167881

Handout No. 8|5


2, 00,000 5,000 2,05,000 2, 05,000 30,000 2,35,000

Gross Total Income Add: Boarding & Lodging expenses Total Income Since, Total Income is greater than 2,00,000, Travelling Expenses shall be Taxable. Total Income Add: Travelling expenses

A.346. Gross total income 1,90,000 Add: Boarding & Lodging expenses 5,000 Total Income 1,95,000 Since, Total Income of Bimari Ram is less than 2,00,000 i.e. 1,90,000. Therefore travelling expenses shall be exempt. A.347. Answer already given in question bank. A.348. (i) (ii) Nil Taxable as fully used for official purpose Value of Perquisite Salary of Driver met by Employer 3,000x12 Add: Wear & tear 10% of 2, 00,000

(iii)

(iv) (v) (vi)

36,000 20,000 56,000 Since the car is used partly official and partly personal, actual expenses are irrelevant Value of Perquisite (2,400+900)x12 39,600 Same as above (900+900)x12 21,600 (a) Actual Expenditure i.e., 70,000 shall be taxable (b) Nil Taxable (c) Total actual expenses 70,000 Less: 1,800x12 21,600 Or 90% of 70,000 63,000 whichever is higher (63,000) Taxable 7,000 (d) Total expenses Less: 1,800x12 Or 20% of 70,000 Taxable 70,000 21,600 14,000 whichever is higher Car 1 39,600 (2,400+900x12) (21,600) 48,400 Car 2 54,000 (20,000+4,000 +10% of 3Lakh) 32,400 (1,800+900x12)

(vii)

1. Let car 1 be partly official and partly personal And car 2 for personal use

Total (39,600+54,000) = 93,600 2. Let car 1 be for personal use & car 2 be partly 74,000 Official and partly personal (60,000+4,000+10,000) Total (74,000+32,400) = 1,06,400 It is better to avail option A.

CA. Ajay Jain 9310167881


A.349 Actual Expenses (5,000x12) Less: 1,800 x 12 Less: 900 x 12 (for chauffer) Or Less: 90% of 60,000 Taxable Amount

Handout No. 8|6

Note: 1. If nothing mentioned about cubic capacity, then we assumed it to be below 1.6 liters.

60,000 21,600 10,800 32,400 54,000 whichever is higher (54,000) 6,000

A.350 Actual Expenses (5,000x12) Less: 1,800 x 12 Less: 900 x 12 (for chauffer) Or Less: 40% of 60,000 Taxable Amount A.351 (A) Nil (B) (4,000 + 10,000 + 8,000) = 22,000 x 12 = 2,64,000 (C) (1,800 + 900 = 2,700) = 2,700 x 12 = 32,400 A.352 (A) Nil (B) (4,000 + 8,000) = 12,000 x 12 = 1,44,000 (C) 4,000 + 8,000 = 12,000 2,400(20% of 12,000) or 1,800 + 900 = 2,700 (12,000 2,700 = 9,300) 9,300 x 12 = 1,11,600 A.353 Calculation of salary 1. Basic pay (Note 1) 2. Dearness allowance (96,000 x 40% x 30%) 3. 4. 5. 6. 7. 8. Commission (`300 x 9) Children Education Allowance [(250 x 6 x 9) (100 x 2 x 9)] Allowance for personal expenses [(12,000-8,400) x 9] Domestic servant Overtime allowance (200 x 9) Dress Allowance (400-50) x 9 Salary for the purposes of House Rent Allowance 96,000 11,520 2,700 11,700 32,400 NIL 1,800 3,150 1,59,270 60,000 21,600 10,800 32,400 24,000 whichever is higher 32,400) 27,600

Value of house taxable in the hands of employee:(i) Rent paid by employer = 8,000 x 9 = 72,000 (ii) 15% of salary 1,59,270 = 23,890 Whichever is less 23,890 4,500 = 19,390

CA. Ajay Jain 9310167881


Note: 1.Computation of basic salary Salary on 1.11.2009 Salary on 1.11.2010 Salary on 1.11.2011 Salary on 1.11.2012 Salary on 1.11.2013 Salary for the purpose of house: 1.7.2012 to 31.10.2012 = 9,000 x 4 = 36,000 1.11.2012 to 31.3.2013 = 12,000 x 5 = 60,000 Total salary for the year = 96,000 5,000 7,000 9,000 12,000 15,000

Handout No. 8|7

A.354 Calculation of salary 1. 2. 3. 4. 5. 6. Basic[Note 1] Dearness Allowance (74,000 x 30%) Reimbursement of income tax of employee Tribal Area Allowance [(300 - 200) x 12] Rent free house [Note 2] Furniture(2,00,000 x10% x 151/365) Income u/h salary 1-2-2009 1-2-2010 1-2-2011 1-2-2012 1-2-2013 Salary for the P/Y 2012-13 From 1.4.2012 to 31.1.2013 (6,000 x 10) From 1.2.2013 to 31.3.2013 (7,000 x 2) Total Salary 3,500 4,000 5,000 6,000 7,000 60,000 14,000 74,000 74,000 22,200 8,000 1,200 6,027 8,274 1,19,701

Notes:1. Basic salary:-

2. Computation of Value of RFA:From 1-11-12 to 31-3-13 40,180 x 15% Or 3,000 x 5 Whichever is lower i.e., 6,027 15,000 6,027

(i) (ii) (iii)

Salary for RFA:Basic Salary [(6,000 x 3) + (7000 x 2)] DA (32,000 x 30% x 80%) Tribal Area Allowance (100 x 5)

32,000 7,680 500 40,180

A.355 (i) (ii) Mumbai House Rent paid = 2,000 15% of salary = 15% of 50,000 = 7,500 Whichever is lower 2,000 x 12 = 24000 Chennai House 15% of salary = 15% of 50,000 = 7,500 7,500 x 12 = 90,000

CA. Ajay Jain 9310167881


A.356 (i) (ii) First 90 days(April, May & June) Mumbai House 15% of salary = 15% of 50,000 = 7,500 x 3 = 22,500 2,000 x 3 months = 6,000 Whichever is less i.e.6,000 Chennai House 15% of salary = 15% of 50,000 = 7,500 x 3 = 22,500 More beneficial to the assessee is to taxable Mumbai House.

Handout No. 8|8

After 90 days(July to March) Mumbai House 2,000 x 9 = 18,000 + Chennai House 7,500 x 9 = 67,500

Computation of taxable value of rent free house Upto 90 days Mumbai House (April, May, June) After 90 days Mumbai House (July to March) Chennai House (July to March) Total Amount of Rent free accommodation A.357 (i) (ii) A.358 (i) (ii) Rent paid = 8,000 15% of salary = 15% of 1,00,000 = 15,000 Least of the above is 8,000. Therefore, taxable amount shall be 8,000 x 12 = 96,000. Note: If house is taken on rent then population of city is not relevant. A.359 (i) (ii) Rent paid = 18,000 15% of salary = 15% of 1,00,000 = 15,000 Least of the above is 15,000. Therefore, taxable amount shall be, 15,000 x 12 = 1,80,000. A.360 Value fixed by Govt. (license fees) = 500 x 12 = 6,000 A.361 10% of salary = 10% of 20,000 = 2,000 x 12 7.5% of salary = 7.5% of 20,000 = 1,500 x 12 24,000 18,000 6,000 18,000 67,500 91,500

CA. Ajay Jain 9310167881


(i) (ii) Rent paid = 24,000 24% of salary = 24% of 2,00,000 = 48,000

Handout No. 8|9

Least of the above is 24,000. Therefore, taxable amount shall be, 24,000 x 12 = 2,88,000. A.362 Taxable amount Less: Recovered from employee Taxable amount 2,88,000 (12,000) 2,76,000

Note: It is assumed that the value fixed by government is being recovered from the employee.

A.363

Calculation of rent free accommodation RFA shall be taxable from 1-1-2013 to 31-3-2013 Taxable Value of Rent free House (Note 1) Add: Taxable value of furniture (Note 2) Total amount of rent free accommodation Less: Amount recovered from employee Taxable amount of rent free accommodation Note: 1. Calculation of taxable amount of house 15% of salary 15% of 50,000 = 7,500 x 3 = 22,500 2. Calculation of taxable amount of furniture 10% of 24,000 x 90/365 = 592 20,092 22,500 592 23,092

(3,000)

A.364 (i) (ii) Rent Paid = 4,000 15% of salary = 15% of 30,000 = 4,500 Least of the above is 4,000. Therefore, taxable amount shall be = 4,000 x 12 = 48,000

A.365 Answer already given in question bank. A.366 Answer already given in question bank. A.367 Answer already given in question bank. A.368. Answer already given in question bank.

CA. Ajay Jain 9310167881


A.369. Answer already given in question bank. A.370. Computation of Interest Free Loan Rate of Interest shall be (10% - 7%) = 3% For the month of June = 3,00,000 x 3/100 x 1/12 For the month of July = 4,00,000 x 3/100 x 1/12 August to December = 4,00,000 x 3/100 x 5/12 January to March = 9,00,000 x 3/100 x 3/12 Taxable Amount

Handout No. 8|10

750 1,000 5,000 6,750 13,500

A.371.

Calculation of benefit of interest For the month of March = 1, 00,000 x 12% x 1/12 = 1,000

A.372.

Calculation of benefit of interest For the month of Feb. (5,00,000 x 10% x 1/12) For the month of March (Note) Total Value of benefit

4,167 NIL 4,167

Note: Interest for the month of March will be Nil as there is no outstanding balance on the last day of month of March. A.373. Answer will remain same.

A.374.

Calculation of benefit of interest Rate of interest shall be (10% - 2%) = 8% Interest for the month of February (5,00,000 x 8% x 1/12) Interest for the month of March (Note) Total value of benefit

3,333 NIL 3,333

Note: Interest for the month of March will be Nil as there is no outstanding balance on the last day of month of March. A.375. Answer already given in question bank. A.376. Pension receive during the P/Y 2012-13 1,000 x 5 = 5,000 A.377. Computation of Pension received during the P/Y 2012-13 (i) Uncommuted Pension (2 x 2,000) (ii) Commuted Pension Total Pension received

4,000 1,00,000 1,04,000

CA. Ajay Jain 9310167881


A.378. Computation of pension received during the P/Y 2012-13 (i) Uncommuted pension 1-7-2012 to 31-12-2012 (6 x 3,000) 18,000 1-1-2013 to 31-3-2013 (3,000 x 70% x 3) 6,300 (iii) Commuted pension Total pension received Computation of pension taxable during the year Commuted Pension: (i) Commuted value of 100% pension (2,00,000/30% x 100%) (ii) of step(i) is exempt (6,66,667 x ) Taxable amount of commuted pension 2,00,000 3,33,334 = NIL Taxable amount of uncommuted pension 18,000 + 6,300 = 24,300 A.379. Answer already given in question bank. A.380. (i) (ii) (iii) Computation of taxable Gratuity Amount received = 15,00,000 10, 00,000 52,000 x 15/26 x 40 years = 12,00,000 Least of the above is 10,00,000. Therefore, 10,00,000 shall be Exempt. Amount received Exemption Taxable amount of Gratuity

Handout No. 8|11

24,300 2,00,000 2,24,300

6,66,667 3,33,334

Less:

15,00,000 (10,00,000) 5,00,000

A.381. (i) (ii) (iv)

Computation of taxable Gratuity Amount received = 15,00,000 10, 00,000 26,000/26 x 15 x 40 years = 6,00,000 Least of the above is 6,00,000. Therefore, 6,00,000 shall be Exempt. Amount received Exemption Taxable amount of Gratuity Computation of taxable Gratuity Amount received Exemption Taxable amount of Gratuity 7,00,000 (4,05,000) 2,95,000 15,00,000 (6,00,000) 9,00,000

Less:

A.382.

Less:

Note: (1) Least of the following shall be exempt: (i) Amount received = 7,00,000 (ii) 10, 00, 000

CA. Ajay Jain 9310167881


(iii) 27,000/30 x 15 x 30 years = 4,05,000 Least of the above is 4,05,000. Therefore, 4,05,000 shall be Exempt. (2) Average salary for the last 10 months = (25,000 x 6)+(4 x 30,000) = 27,000 10

Handout No. 8|12

A.383. Answer will remain same, because for employee who is not covered under gratuity act, only complete 12 month period shall be taken. A.384. Answer already given in question bank. A.385. Answer already given in question bank. A.386. Answer already given in question bank. A.387. Answer already given in question bank. A.388. Answer already given in question bank.

A.389.

Calculation of taxable salary for P/Y 12-13 Salary (Excluding Employees contribution) (44,000 x 12) Add: Employees contribution (6,000 x 12) Taxable Salary Note:- Employees contribution is taxable in all the case be it SPF, URPF or RPF. 5,28,000 72,000 6,00,000

A.390. A.391.

Calculation of taxable salary for P/Y 12-13 Taxable income = 30,000 x 12 = 3,60,000 Calculation of taxable salary for P/Y 12-13 Salary (Excluding Mrs. Ts contribution) (10,000 x 12) Add: Mrs. Ts Contribution (1,000 x 12) Taxable Salary 1,20,000 12,000 1,32,000

A.392. Yes, deduction shall be available of such contributions u/s 80C of chapter VI-A. (This topic will be discuss later on under chapter deduction). A.393. Answer already given in question bank. A.394. Answer already given in question bank. A.395. Answer already given in question bank. A.396. (iii) Calculation of taxable amount of Leave Salary 60,000 x 10 = 6,00,000

CA. Ajay Jain 9310167881


(iv) Leaves allowed = 50 days or 30 days whichever is less i.e. 30 days Less: Leaves actually taken = 25 days Balance leaves = 5 days Converted into rupees = 15 years x 60,000 x 5/30 days = 1,50,000 A.397. (iii) (iv) Calculation of taxable amount of Leave Salary 15,000 x 10 = 1,50,000 Leaves allowed = 70 days or 30 days whichever is less i.e. 30 days

Handout No. 8|13

Less: Leaves actually taken = 5 days Balance leaves = 25 days Converted into rupees = 20 years x 15,000 x 25/30 days = 2,50,000 A.398. (iii) (iv) Calculation of taxable amount of Leave Salary 15,000 x 10 = 1,50,000 Leaves allowed = 60 days or 30 days whichever is less i.e. 30 days

Less: Leaves actually taken = 55 days Balances leaves = Nil Since 4th limit is nil, hence exemption shall be nil. Therefore, full amount shall be taxable. A.399. (iii) (iv) Calculation of taxable amount of Leave Salary 90,000 x 10 = 9,00,000 Leaves allowed = 45 days or 30 days whichever is less i.e. 30 days

Less: Leaves actually taken (Note) = 20 days Balance leaves = 10 days Converted into rupees = 35 x 90,000 x 10/30 days = 10,50,000 Note:Leaves Allowed = 45 days

Less: Leaves accumulated (not taken) = 25 days Leaves taken = 20 days A.400. (iii) (iv) Calculation of taxable amount of Leave Salary 30,000 X 10 = 3,00,000 Leaves allowed = 60 days or 30 days whichever is less i.e. 30 days

Less: Leave actually taken = 5 days Balances leaves = 25 days Converted into rupees = 15 years x 30,000 x 25/30 days = 3,75,000

Note: - Leaves Allowed = 60 days Less: Leaves standing to credit (not taken) = 55 days

CA. Ajay Jain 9310167881


Leaves taken = 5 days A.401. (i) Calculation of taxable amount of Leave Salary Leaves allowed = 40 days or 30 days whichever is less i.e.30 days

Handout No. 8|14

Less: Leaves taken =22 days Balance leaves = 8 days Converted into rupees = 7 years x 6,000 x 8/30 days = 11,200 (ii) Leaves allowed = 40 days or 30 days whichever is less i.e. 30 days

Less: Leaves taken = 25 days Balance leaves = 5 days Converted into rupees = 7 years x 6,000 x 5/30 days = 7,000

Note:-

Leaves allowed = 40 days

Less: Leaves standing to his credit (not taken) = 15 days Leaves taken = 25 days

A.402.

Calculation of taxable amount of Leave Salary Leaves allowed = 12 days or 30 days whichever is less i.e.12 days Less: Leaves actually taken = 10 days Leave not taken = 2 days Converted into rupees = 2 days x 20 = 40 40 shall be fully taxable because A has not yet retired.

A.403. The answer will remain same as the employee has not yet retired and we are computing leave salary during continuity of his job. A.404. Nil, because leave salary of government employee at the time of retirement is wholly exempt. A.405. Amount received Less: Exemption (Note) Taxable amount Note:- Least of the following shall be Exempt:1. Amount received = 2,00,000 2. 3,00,000 Calculation of taxable amount of Leave Salary 2,00,000 Nil 2, 00,000

3. 6,000x10 = 60,000

CA. Ajay Jain 9310167881


4. Leaves allowed = 50 days or 30 days whichever is less i.e.30 days Less: Leaves actually taken = 30 days Balance leaves = Nil Least of the above is Nil, therefore, Exemption shall be Nil.

Handout No. 8|15

A.406. Answer already given in question bank. A.407. Answer already given in question bank. A.408. Answer already given in question bank. A.409. Answer already given in question bank. A.410. Answer already given in question bank. A.411. Answer already given in question bank. A.412 Answer already given in question bank. A.413 Answer already given in question bank. A.414 Answer already given in question bank. A.415 Answer already given in question bank. A.416 Answer already given in question bank. A.417 Answer already given in question bank.
[

A.418

Computation of Income under head salary Basic salary (Note 1) Dearness Allowance(30% of 2,78,000)(Note 2) Transport Allowance [(900 - 800) x 12] Conveyance Allowance (300x12) (Note 3) Gift (9,000 - 5,000) Free Meal [(1,500 x 12) - (50 x 25 x 12)] (Note 4) Medical Expenses (18,000 - 15,000) Professional tax HRA (Note 5) RFA (Note 6) Electricity and water charges (1,000x3) Furniture [(200x3)+(30,000x10/100x90/365)] Gross Salary Less: Deduction u/s 16 Income u/h Salary Notes:- 1. Computation of basic salary Salary on 1.2.2009 20,000 Salary on 1.2.2010 21,000 Salary on 1.2.2011 22,000 Salary on 1.2.2012 23,000 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

2,78,000 83,400 1,200 3,600 4,000 3,000 3,000 3,000 25,200 9,330 3,000 1,340 4,18,070 (3,000) 4,15,070

CA. Ajay Jain 9310167881


Salary on 1.2.2013 Salary for the P/Y 2012-13 1.4.2012 to 31.1.2013 1.2.2013 to 31.3.2013 Total salary [(23,000 x 10)+(24,000 x 2)] 24,000 23,000 24,000 2,78,000

Handout No. 8|16

2. It is assumed that DA is not under contract. 3. It is assumed that nothing has been spent on conveyance. 4. It is assumed that there are 25 working days in a month. 5. Computation of HRA (a) Received = 4,000 (b) Rent paid 10% of salary = 3,500 - 10% of 23,000 = 1,200 (c) 40% of salary = 40% of 23,000 = 9,200 Least of the above is 1,200. Therefore, Exemption shall be 1,200 x 9 = 10,800 Taxable amount = 36,000 - 10,800 = 25,200 6. Computation of RFA From 1-1-13 to 31-3-13 Salary for the purpose of RFA 1. Basic Salary (23,000+24,000 x 2) 2. Transport allowance (100x3) 3. Conveyance (300x3) 15% of salary = 15% of 72,200 Less: Received from employee Taxable amount

71,000 300 900 72,200 10,830 (1,500) 9,330

7. It is assumed that population of the city is more than 25 lakhs.

A.419 Answer already given in question bank.

A.420 Answer already given in question bank. A.421 Answer already given in question bank. A.422 Answer already given in question bank. A.423 Answer already given in question bank. A.424 Answer already given in question bank. A.425 Answer already given in question bank.

CA. Ajay Jain 9310167881


A.426 Answer already given in question bank. A.427 Answer already given in question bank. A.428 Answer already given in question bank. A.429 Answer already given in question bank. A.430 Answer already given in question bank. A.431 Answer already given in question bank.

Handout No. 8|17

HOUSE PROPERTY
A.435

Gross Annual Value (Note 1) (-)Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24

2,16,000 (2,000) 2,14,000


64,200 80,000 (1,44,200) 69,800 2,16,000 1, 00,000 `2,16,000 2, 16,000

Standard deduction 30% of 2, 14,000 Interest Income u/h House Property u/s 22

Note: (1) Gross Annual Value (a) Expected Rent (MV ` 2,16,000 or FRV `1,92,000 whichever is higher ) (b) Actual Rent (10,000 x 10 months) Whichever is higher

Gross annual value as per Sec 23(1)(a) shall be

CA. Ajay Jain 9310167881

Handout No. 8|18

(2) In this case Sec23(1)(c) will not apply because even if house would not have been vacant, then AR would have been 10,000x12 = 1,20,000 which is still less than ER, thus the shortfall of rent is not due to vacancy. Relief under this section is available only if the difference is due to Vacancy. (3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses. A.436 A.437 A.438 Answer already given in question bank Answer already given in question bank

Gross Annual Value [Refer Note1] (-)Municipal taxes Annual value u/s 23(1)(c) (-) Deductions u/s 24

2,00,000 2,000 1,98,000


59,400 80,000 (1,39,400) 58,600

Standard deduction (30% of 1,98,000) Interest on loan Income u/h House Property u/s 22

Notes: (1) Gross Annual Value:(a) Expected rent (higher of MV ` 2,16,000 or FRV ` 1, 92,000) (ER is always taken for the entire p/y) 2, 16,000

(b) Actual Rent [20,000x10] AR is always taken only for the period it is actually let out. Gross annual value as per Sec 23(1)(c) shall be
(2)

2, 00,000 2,00,000

Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses.

A.439

Standard deduction (30% of 2,14,000) Interest on loan Income u/h house property u/s 22 Notes:-

Gross annual value (-) Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24

[Refer Note]

2,16,000 2,000 2,14,000


64,200 80,000 (1,44,200) 69,800

1.

Gross Annual Value:(i) Municipal Value (ii) FRV Whichever is higher (a) (b) Expected Rent Actual Rent (20,000X10)

2,16,000 1,92,000

2,16,000

2,16,000 2,00,000

CA. Ajay Jain 9310167881

Gross annual value as per Sec 23(1)(a) shall be 2,16,000 Since the house was not vacant but self occupied by owner for few months, house shall be deemed to be let out for full 12 months.

Handout No. 8|19

A.440

Gross Annual Value (Note 1) (-)Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24

Building A (Self occupied) NIL


NIL (30,000) (30,000)

Building B (Let out) 2,16,000 2,000 2,14,000


(64,200) (80,000) 69,800

Standard deduction Building B(30% of 2,14,000) Interest on loan Income u/h house property u/s 22

Net Income u/h House Property = (30,000)+69,800 = 39800 Note: (1) Gross Annual Value Expected Rent (MV ` 2,16,000 or FRV `1, 92,000 whichever is higher) Gross annual value as per Sec 23(1)(a) shall be Nothing is mentioned about actual rent, so that (2) As per Sec 23(2), annual value of self occupied house shall be nil.

2, 16,000 2, 16,000

(3) Interest in case of self occupied building, the interest shall be limited to ` 30,000 as it was taken for repair. No such restriction shall be applicable for let-out house. A.441

Gross Annual Value (Note 1) (-)Municipal taxes Annual value u/s 23 (-) Deductions u/s 24

Floor 1 (Let out) 2,40,000 (10,000) 2,30,000


(69,000) (90,000) 71,000

Floor 2 (Self occupied) Nil


Nil (30,000) (30,000)

Standard deduction 30% Floor 1-(30% of 2,30,000) Interest on loan Income u/h House Property u/s 22

Net Income u/h House Property = 71,000 + (30,000) = 41,000 Note: (1) Gross Annual Value Expected Rent (MV ` 1,08,000 or FRV ` 96,000 whichever is higher) Actual Rent (`20,000 x 12) Gross annual value as per Sec 23 shall be As per Sec 23(2), annual value of floor 2(self occupied) shall be nil. A.442 Gross Annual Value [Note1] 2,16,000

1, 08,000 2,40,000 2,40,000

CA. Ajay Jain 9310167881 (-)Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24

Handout No. 8|20 (2,000) 2,14,000


64,200 80,000 (1,44,200) 69,800

Standard deduction(30% of 2,14,000) Interest on loan Income u/h House Property u/s 22

Note: (1) Gross Annual Value Expected Rent (MV ` 2, 16,000 or FRV `1, 92,000 whichever is higher) Actual Rent (`10,000 x 10) Gross annual value as per Sec 23(1)(a) shall be

2, 16,000 1,00,000 2, 16,000

(2) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses. A.443 A.444 Answer already given in question bank

Floor 1

Floor 2

Self occupied(`)
Gross annual value [Note1] (-) Municipal taxes Annual Value u/s 23(1)(b) (-) Deduction u/s 24 Standard deduction Floor 2 (30% of 1,19,000) Interest on loan Income u/h house property u/s 22 Notes:Nil Nil (30,000) (30,000)

Let Out(`)
1,20,000 1,000 1,19,000 (35,700) (40,000) 43,300

Net income from House Property = 43,300 + (30,000) = 13,300

(1) Gross Annual Value:- (i) Municipal Value (9,000x12) (ii) FRV (8,000x12) Whichever is higher (a) Expected Rent (b) Actual Rent
Gross annual value as per Sec 23(1)(b) shall be (2) As per Sec 23(2), annual value of self occupied house shall be nil.

1,08,000 96,000 1,08,000 1,08,000 1,20,000


1, 20,000

(3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses.

A.445

Computation of income u/h house property for P/Y 12-13 :Gross Annual Value (Note 1) (-) Municipal taxes paid Annual Value u/s 23(1)(b) (-)Deductions u/s 24 Standard Deduction (30% of 1,19 ,000) Let out Portion (`) 1, 20,000 (1,000) 1, 19,000 35,700

CA. Ajay Jain 9310167881

Interest on loan for repairs (80,000/2) Income u/h house property u/s 22

40,000

Handout No. 8|21

(75,700) 43,300

Note :-(1)Gross Annual Value (a) Expected Rent (MV ` 1, 08,000 or FRV `96,000 whichever is higher) Actual Rent (`10,000 x 12) Gross annual value as per Sec 23(1)(b) shall be

1, 08,000 1,20,000 1,20,000

(2) Self-occupied floor will have no treatment u/h house property but treatment u/h PGBP.
(3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses. A.446 A.447 A.448 Answer already given in question bank Answer already given in question bank Answer already given in question bank

A.449 A.450 A.451


A.452

Answer already given in question bank Answer already given in question bank Answer already given in question bank
Answer already given in question bank

A.453 Answer already given in question bank


A.454 Since Yuvi has purchased a house in Delhi and has treated it to be self occupied, the house in Chandigarh shall be deemed to be let out as per section23(4).

Standard deduction (30% of 1,60,000) 48,000 Interest on loan 70,000 Income u/h house property u/s 22 Note: (1) Gross Annual Value Expected Rent (MV ` 1,40,000 or FRV ` 1,60,000 whichever is higher) Actual Rent Gross annual value as per Sec 23(1)(a) shall be

Gross Annual Value (Note 1) (-)Taxes paid to state government (not allowed deduction) Annual value u/s 23(1)(a) (-) Deductions u/s 24

1,60,000 NIL 1,60,000


(1,18,000) 42,000 1, 60,000 Nil 1,60,000

(2) Interest in case of Let out building shall not be limited to ` 30,000/1,50,000. A.455

(i) The house is deemed to be let out and thus entire 40,000 shall be allowed deduction. (ii) 20,000, actual value(20,000) or maximum Limit (30,000) whichever is less

CA. Ajay Jain 9310167881 Handout No. 8|22 This house is covered u/s 23(2) but deduction cannot exceed Actual interest payable. (iii) ` 1,60,000 since the house is let out and not self occupied. (iv) Restricted to the limit of ` 30,000 , the house is self occupied and the loan has been taken for repair and not construction/purchase. (v) House A =` 30,000 ,since the house is self occupied and the loan has been taken for repair and not construction/purchase. House B = 1,70,000 - no restriction on interest deduction if the house has been let out. (vi) ` 1,80,000 no restriction on interest deduction if the house has been let out. (vii) Current Years interest 1,00,000
Add: Pre construction periods interest = 3,00,000/5 Total Deduction to be claimed = 60,000 1,60,000

(viii) Current Years interest

Add: Pre construction periods interest = 3,00,000/5 60,000 Total Deduction to be claimed 1,60,000 But deduction shall be limited to 1,50,000 All three conditions are satisfied so no restriction of 30,000. Deduction allowed = 1,50,000

1,00,000

A.456 Pre- construction period Current year period Nil construction completed in the year of taking 1 yr `10,000 loan Nil loan repaid before PY 12-13 16 months - `2,667 Nil loan repaid before PY 12-13 Nil 5 yrs have expired Nil - construction completed in the year of taking 1 yr `10,000 loan 1 yr - `10,000 4 yrs - `8,000 30 months / 2.5 yrs - `5,000 22 months - `3,667 6 months - `1,000
A.457

4 months - `3,333 6 months - `5,000 1 yrs - `10,000

(+)
Note:-

Current year interest Pre construction interest (Note 1) Total Interest deductible in P/Y 12-13

60,000 84,000 1,44,000

1. 2.

Pre-construction interest deductible in p/y 12-13 = 4,20,000/5 = 84,000

5,00,000 x 12 x 7/100 = 4,20,000

3. As nothing has been specified, it is assumed that the full loan amount is still outstanding.

Deduction of interest relating to these years shall start from the year 10-11 i.e. the year of completion of the house. Therefore total interest from 03-04 to 09-10 shall be aggregated & shall be divided by 5 & deduction shall start from the year 10-11.

From the year 03-04 to 09-10, although interest was payable but no deduction of interest shall be allowed in those years, since the house was not in existence during those years.

CA. Ajay Jain 9310167881


A.458

Handout No. 8|23

Current year interest (+)Pre construction interest (Note 1) Total Interest deductible in P/Y 12-13 Note:1. 5,00,000x12/100 = 60,000

60,000 12,000 72,000

2.

Pre-construction interest deductible in P/Y 12-13 = 60,000/5 = 12,000 During 09-10 although interest was payable for the year , no deduction of interest shall be allowed since the house was not in existence

As nothing has been specified, it is assumed that the full loan amount is still outstanding.

A.459

Current year interest (+)Pre construction interest (Note1 ) Total Interest deductible in P/Y 12-13 Note :1. 2.

60,000 48,000 1,08,000

Pre-construction Period = 4 years Pre construction interest = 5,00,000x12/100 x 4 = 2,40,000 Pre-construction interest deductible in p/y 12-13 =2,40,000/5 = 48,000 As nothing has been specified, it is assumed that the full loan amount is still outstanding.

A.460

Current year interest (+)Pre construction interest (Note1) Total Interest deductible in P/Y 12-13 Note :1.
2.

60,000 48,000 1,08,000

Total Pre-construction interest = 5,00,000x12/100x4 = 2,40,000 Pre-construction interest deductible in p/y 12-13 = 2,40,000/5 = 48,000

3.

The month of completion is not relevant, only the year of completion is relevant. Interest of the entire year of completion is allowed deduction in the same year.

As nothing has been specified, it is assumed that the full loan amount is still outstanding.

A.461

Current year interest for 10 months (+) Pre construction interest (note)
Note:-

Total Interest deduction to be allowed in P/Y 12-13

50,000 51,000

1,01,000

Pre-construction Period = 3 months + 4 years = 51 months

CA. Ajay Jain 9310167881

Interest for p/y 12-13 = 2,55,000/5 = 51,000 A.462

Interest = 5,00,000x12%x51/12 = 2,55,000

Handout No. 8|24

Note :-

Current year interest (+)Pre construction interest Total Interest deductible in P/Y 12-13 1.

Nil 36,000 36,000

Pre-construction Period is 3 years i.e., 1-1-08 to 31-12-10 Since the entire loan has been repaid on 31.12.10, i.e. before P/Y 12-13, therefore entire interest is Pre-construction Period interest & will be allowed deduction in 5 equal installments from the year of completion, i.e. from PY 12-13.
Interest to be allowed deduction is 5,00,000 x 12%x3 = 1,80,000/5 = 36,000

A.463

Current year interest Add: Pre construction interest Total Interest to be allowed deduction in 12-13

60,000 Nil 60,000

Note:Pre construction interest is nil as full amount of interest has been allowed deduction in 5 equal installments starting from P/Y 07-08 to P/Y 11-12 A.464

Current year interest Add: Interest of Pre-construction Period Interest to be allowed deduction in p/y 12-13

60,000 Nil 60,000

Note: The entire interest from 1-4-2009 shall be allowed deduction in P/Y 09-10 itself, since the construction was completed in the same year in which the loan was taken. Therefore, there will be no pre construction periods interest. A.465

Current year interest


Note:-

Interest of Pre-construction Period (note-1) Interest to be allowed deduction in p/y 12-13

30,000

42,000 72,000

1. 3,00,000 x 10 x 7/100 = 2,10,000

2. From the year 03-04 to 09-10, interest was payable but no deduction of interest shall be allowed in that year as the house was not in existence.

Pre-construction interest deductible in 12-13 = 2,10,000/5 = 42,000

(i)
A.466

Deduction of interest related to these years shall start from p/y 10-11, when the construction is completed. Thus total interest from 03-04 to 09-10 shall be aggregated & divided by 5 and deduction shall start from p/y 10-11.

As nothing has been specified, it is assumed that the full loan amount is still outstanding. 44,000 8,800 52,800

Current year interest (+) Pre construction interest (Note 1) Total Interest deductible in P/Y 12-13 Note:(i) Pre-construction period = 1-4-2009 to 31-3-2010

CA. Ajay Jain 9310167881 4,00,000x11/100 x 1 year= 44,000 (ii) (iii)


A.467

Handout No. 8|25

Pre-construction interest deductible in 12-13 = 44,000/5 = 8,800

During 09-10, no deduction of interest shall be allowed since the house was not in existence, although, interest was payable for the year 09-10 also. As nothing has been specified, it is assumed that the full loan amount is still outstanding.

Current year interest 48,000 (+) Pre construction interest (note) 38,400 Interest to be allowed deduction in p/y 12-13 86,400 Note:(i) Pre-construction period = 1-4-2008 to 31-3-2012 = 4 years Interest of Pre-construction Period = 6,00,000 x8 /100x4 = 1,92,000 (ii)
Pre construction interest to be allowed deduction in P/Y 12-13 = 38,400

As nothing has been specified, it is assumed that the full loan amount is still outstanding.

A.468

Current year interest 49,000 (+) Pre construction interest 39,200 Total interest to be allowed deduction in p/y 12-13 88,200 Note:(i) Pre-construction period = 1-4-2008 to 31-3-2012 = 4 years Interest relating to Pre-construction Period = 7,00,000x7x4/100 = 1,96,000 outstanding.

Pre construction interest to be allowed deduction in P/Y 12-13 = 1,96,000/5 = 39,200 (ii) As nothing has been specified, it is assumed that the full loan amount is still

A.469

(+)Pre construction interest (note) Total Interest deduction to be allowed in P/Y 12-13 Note:Pre-construction Period = 01-10-2008 to 31.03.2012 Interest for p/y 12-13 = 2,29,500/5 = 45,900 A.470

Current year interest for [9,00,000 x6% x 10/12]

45,900 90,900

45,000

= 3 months + 4 years = 51 months interest = 9,00,000x6%x51/12 = 2,29,500

Note :-

(+) Pre construction interest Total Interest deductible in P/Y 12-13 1.

Current year interest

35,880 35,880

Nil

Pre-construction Period is 3 years i.e., 1-1-08 to 31-12-10 Since entire loan is repaid on 31.12.10, i.e. before PY 12-13, entire interest pertains to Pre-construction Period & will be allowed in 5 equal installments from the year of completion of house. Interest to be allowed deduction is 4,60,000x13%x3 = 1,79,400/5 = 35,880

A.471 (+) Pre construction interest

Current year interest

79,800

Nil

CA. Ajay Jain 9310167881


Note:-

Total Interest to be allowed deduction in P/Y 12-13

Handout No. 8|26

79,800

Pre construction interest is nil as full amount of interest has been allowed deduction in 5 equal installments starting from P/Y 07- 08 to 11-12. Therefore since the period of 5 years has already expired assessee cannot claim deduction of pre- construction periods interest anymore.

A.472

Current years interest [8,60,000x12%] 1,03,200 Add: Interest of Pre-construction Period [Note] Nil Total Interest deduction for 12-13 1,03,200 Note:- Since construction was completed in the year of taking loan itself and the house came into existence, pre construction period does not exist.

A.473
[

(i) ` 1,60,000 as the house has been deemed to be let out u/s 23(3).
(ii) 30,000 will be deducted as this house is self occupied and the loan has been taken for

repair and not purchase/construction.

(iii) ` 1,70,000 No restriction will be applied as the house is let out and not self occupied. (iv) The house shall be treated as self occupied u/s 23(2). So ,deduction shall be 20,000

because it shall be the lower of actual interest (20,000) and maximum limit (30,000).

(v)

House A = Self Occupied Since, the House A is self occupied, therefore the deduction of interest would be allowed subjected to the limit of `30,000.Hence deduction shall be 30,000. House B = Let out Therefore, Deduction will be allowed an actual basis. Hence, deduction of `40,000 Since, the house was let out deduction would be allowed on actual basis. Hence ,deduction `40,000

` 1, 40,000 - No restriction will be applied as the house is let out and not self occupied. (vii) Current Years interest 20,000
(vi) Add: Pre construction periods interest = 1,00,000/5 Total Deduction to be claimed (viii) Current Years interest Add: Pre construction periods interest = 1,00,000/5 Total Deduction to be claimed All three conditions are satisfied so maximum limit shall be 1,50,000. A.474 Answer already given in question bank

20,000 40,000

20,000

20,000 40,000

A.475 Gross Annual Value (Note 1) (-)Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24 -

Floor 1 (Let out) 1,08,000 1,500 1,06,500


(1,21,950) (15,450)

Standard deduction (30% of 1,06,500) Interest on loan (1,80,000x50%) Income u/h house property/s 22

31,950 90,000

CA. Ajay Jain 9310167881

Note: (1) Gross Annual Value (a) Expected Rent 1, 08,000 (MV ` 9,000x12 = 1,08,000 or FRV ` 8,000x12 = 96,000 whichever is higher) (b) Actual Rent (5,000x12) 60,000 Gross annual value as per Sec 23(1)(a) shall be 1, 08,000 (2) The floor which has been occupied for own business or profession shall not be treated u/h House property. (3) Interest in case of Let out building, the interest shall not be limited to ` 30,000/1,50,000. (4) Deduction for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses.

Handout No. 8|27

A.476 A.477 A.478

Answer already given in question bank Answer already given in question bank Answer already given in question bank Gross Annual Value (note1) 2,16,000

A.479

(-)Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24

2,000 2,14,000
64,200 80,000

Standard deduction (30% of 2,14,000) Interest on loan Income u/h House Property u/s 22

(1,44,200) 69,800

Note :(1) Gross Annual Value MV (18,000 x 12) = 2, 16,000 FRV (16,000 x 12) = 1, 92,000 Expected Rent Actual Rent (20,000x10) Whichever is higher Gross Annual Value

2,16,000 2, 00,000 2, 16,000

Assumption: - Here, it is assumed that : (i) the tenant has vacated the property ,and (ii) he is not in occupation of any other property of the assessee ,and (iii) legal proceeding have been started against him. (2) Deduction for expenses like repair ,insurance ,land revenue, ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses. A.480

Gross Annual Value(note)

(-)Municipal taxes Annual value u/s 23(1)(a) (-) Deductions u/s 24

2,000 2,14,000
(64,200) (80,000)

2,16,000

Standard deduction(30% of 2,14,000) Interest Income u/h House Property u/s 22

1,44,200 69,800

CA. Ajay Jain 9310167881


Note :(1) Gross Annual Value MV (18,000x12) = 2, 16,000 FRV ( 16,000x 12) = 1, 92,000 Expected rent Actual Rent (10,000 x 10 ) Gross Annual Value

Handout No. 8|28

2,16,000 1, 00,000 2,16,000

(2) Deductions for expenses like repair, insurance, land revenue, ground rent ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses.

A.481 Answer already given in question bank A.482 Answer already given in question bank A.483 A.484 A.485 Less: Less: Answer already given in question bank Answer already given in question bank Gross Annual Value (Note 1) Municipal taxes paid Annual Value u/s 23(1)(a) Deductions u/s 24 60,000 (10,000) 50,000

(i) (ii)

Standard Deduction(30% of 50,000) Interest on loan (Note 2) 60,000 48,000

(15,000) 40,000

(55,000)
( 5,000)

Income under head house property u/s 22 Notes:-

1. Gross Annual Value:-(i) Municipal Value (ii) FRV Whichever is higher (a) Expected Rent (b) Actual Rent Whichever is higher Gross Annual Value

60,000 60,000 36,000

But expected rent cannot exceed standard rent (72,000).Therefore expected rent shall be 60,000

Interest:- No limit of interest is applicable since the house was let out therefore any amount of interest on loan whether taken for repair, purchase etc. will be allowed full deduction. (3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,collection expenses ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses. A.486 Less: Less: Gross Annual Value (Note 1) Municipal taxes paid Annual Value u/s 23(1)(b) Deductions u/s 24 3,00,000 (5,000) 2,95,000

60,000

(i)

Standard Deduction.

88,500

CA. Ajay Jain 9310167881 (30% of 2,95,000) (ii) Interest (Note 2)


Income under head house property u/s 22 Notes:[

Handout No. 8|29 1,60,000 (2,48,500)


46,500

1.Gross Annual Value:-(i) Municipal Value (ii) FRV Whichever is higher

2,40,000 2,88,000 2,88,000

But expected rent cannot exceed standard rent. Therefore expected rent shall be 2,76,000

(a) Expected Rent 2,76,000 (b) Actual Rent 3,00,000 Whichever is higher is Gross Annual Value

3,00,000

2.Interest:-

Since the house has been let out it doesnt make any difference that whether loan was taken before 1999 or after 1999. Gross Annual Value (Note 1) Less: Municipal taxes paid(Note2) Annual Value u/s 23(1)(c) Less: Deductions u/s 24. 7,000 NIL 7,000

A.487

(i) (ii)
Notes:-

Income under head house property u/s 22

Standard Deduction Interest (5,000+2,000)

(30% of 7,000)

2,100 7,000

(2,100)

9,100

1. Gross Annual Value:(a) Expected Rent 10,000 ER is always taken for the entire p/y (b) Actual Rent 7,000 [1,000x7] AR is always taken only for the period it is actually let out. As per Section 23(1)(c) GAV shall be 7,000 2. Municipal Taxes :- ` 4,000 will not be allowed deduction from Gross Annual Value since they have been paid by the tenant. 3. Ground Rent :- ` 6,000 is covered under 30% Standard deduction provided u/s 24.
[

4. Interest :- Current year interest


Add: Pre-construction interest A.488 Gross Annual Value (Note 1) Less: Municipal taxes paid (Note 2) Annual Value u/s 23(1)(a) Less: Deductions u/s 24

` 5,000
` 2,000

7,000
10,000 NIL 10,000

(i) (ii)
Notes:-

Standard Deduction. Interest (Note 3)

(30% of 10,000)

3,000 7,000

(10,000)
Nil

Income under head house property u/s 22

CA. Ajay Jain 9310167881 Handout No. 8|30 1. Gross Annual Value:(a) Expected Rent 10,000 ER is always taken for the entire p/y (b) Actual Rent 10,000 [1,000x10] AR is always taken only for the period it is actually let out. As per Section 23(1)(a), GAV shall be 10,000 Clause (c) & (b) are not applicable, since AR is not less than ER. 2. Municipal Taxes :- ` 4,000 are not allowed deduction from GAV ,because they have been paid by the tenant. 3. Ground Rent :- ` 6,000 is covered under 30% Standard deduction provided u/s 24.
[

4. Interest :- Current year interest


Add: Pre-construction period A.489 Less: Less:

= ` 5,000
= ` 2,000

7,000
Gross Annual Value (Note 1) Municipal taxes paid (Note 2) Annual Value u/s 23(1)(c) Deductions u/s 24 1,00,000 5,000 95,000

(i)

(ii)
Notes:-

Standard Deduction (30% of 95,000) Interest (Note 3 )

28,500 42,000 (70,500)


24,500

Income under head house property u/s 22

1. Gross Annual Value:(a) Expected Rent 1,20,000 [10,000 x 12] ER is always taken for the entire p/y (b) Actual Rent 1,00,000 [1,000x10] AR is always taken only for the period it is actually let out. As per Section 23(1)(a). As per sec 23(1)(c),if AR is less than ER due to such vacancy ,GAV shall be AR .Thus ,GAV shall be 1,00,000 2. Interest :- Even if loan is taken for repairs still deduction is allowed without limit in case of let out house.

3. Deduction for expenses like repair, insurance ,land revenue ,ground rent ,collection expenses ,etc are included in standard deduction of 30% and hence no separate deduction shall be allowed for these expenses. A.490 Less: Less: Gross Annual Value (Note 1) Municipal taxes paid(3,000x12) Annual Value u/s 23(1)(a) Deductions u/s 24. 2,16,000 (36,000) 1,80,000

(i) (ii)
Note :-

Standard Deduction Interest on loan

(30% of 1,80,000)

Income under head house property u/s 22

54,000 50,000

(1,04,000)
76,000

In Question ` 90,000 FRV for 5 months is given, whereas FRV is always taken for 12 months.

1.

Gross Annual Value:(a) Expected Rent

2,16,000

CA. Ajay Jain 9310167881 Handout No. 8|31 [18,000 x 12] ER is always taken for the entire p/y (b) Actual Rent 1,00,000 [20,000x5] AR is always taken only for the period it is actually let out.
2. A.491

As per Section 23(1)(a) GAV shall be 2,16,000 Since the house is let out for part of the year, therefore it is not covered u/s 23(2) .Hence, the purpose of loan does not matter. Gross Annual Value (Note 1) Less: Municipal taxes paid Annual Value u/s 23(1)(a) Less: Deductions u/s 24. 2,40,000 (30,000) 2,10,000

(i)

(ii)

Standard Deduction (30% of 2,10,000) Interest on Loan (Note)

63,000 1,80,000 (2,43,000)


(33,000)

Income under head house property u/s 22

Note :- (1)Since nothing has been mentioned ,it has been assumed that FRV of the house is equal to the actual rent .Hence ,GAV shall be 2,40,000. (2)Interest :For the year 12-13 (15,00,000 x 10/100 x 1) Pre-construction period (from 1-4-2009 to 31-3-2010) (15,00,000 x 10/100 x 1)/5 Total deduction of interest for the previous year 12-13 1,50,000 + 30,000 1,80,000

Deduction of interest of pre-construction period is allowed for 5 years equally starting from the previous year 10-11. A.492 Annual Value u/s 23(2) Less: Deductions u/s 24 Income under head house property u/s 22 Note :- Interest :For the year 12-13 (15,00,000 x 10/100 x 1) Pre-construction period (from 1-4-2009 to 31-3-2010) (15,00,000 x 10/100 x 1)/5 Total deduction of interest for the previous year 12-13 But limited to 1,50,000 + 30,000 1,80,000 1,50,000 Nil

Interest (Note)

(1,50,000)

(1,50,000)

Deduction of interest of pre-construction period is allowed for 5 years equally starting from the previous year 10-11 But in one year maximum deduction of interest in case of self occupied house cannot exceed 1,50,000 A.493 Step I:- (Taxable value if house is treated as let out) Gross Annual Value Less: Municipal taxes paid Annual Value u/s 23(1)(a) Less: Deductions u/s 24 Delhi 70,000 (10,000) 60,000 USA 1,00,000 (5,000) 95,000

(i)

Standard Deduction @ 30%

(18,000)

(28,500)

CA. Ajay Jain 9310167881 (ii) Interest (Note)

Income under head house property

Handout No. 8|32 (1,60,000) (40,000)


(1,18,000) 26,500 USA Nil Delhi Nil

Step II:- (Taxable value if house is treated as Self occupied) Annual Value u/s 23(2) Less: Deductions u/s

(i)

Income under head house property u/s .22

Interest (Note )

(30,000)
(30,000)

(30,000)
(30,000)

Step III:Delhi USA Option A (3,500) Self-occupied (30,000) + let out 26,500 Option B (1,48,000) Let out (1,18,000) + Self-occupied (30,000) Because income is less under option B Therefore Gauti should treat USA. house as self occupied and Delhi. house as let out

A.494
A.495

Answer already given in question bank


Gross Annual Value (Note ) Municipal taxes paid Annual Value u/s 23(1) (a) Deductions u/s 24 30,000 (1,000) 29,000

Less: Less:

(i)

(ii)
Note:-

Standard Deduction (30% of 29,000) Interest on loan

(8,700) NIL (8,700)


20,300

Income under head house property u/s 22

(1) Gross Annual Value:-

(a) Expected Rent

2,500x12 =

30,000

(b) Actual Rent 3,000x7 = 21,000 Whichever is higher is Gross Annual Value 30,000 (2) The Interest paid outside India without Deduction of TDS is not allowed deduction as per sec 25. (3) For Allowing Deduction of unrealized rent: - The following conditions must be fulfilled. (a) Tenant has vacated the property. (b) Tenant is not in any other business occupation of any other property assessee. (c) Necessary legal proceedings have been taken against the tenant Recovery u/s 25AA [{3,000 x (7+5)} 30,000] Income u/h house property In P/Y 15-16 6,000 6,000

As per ICAI ,no standard deduction shall be allowed from subsequent recovery of unrealized rent. Note: Unrealized rent is taxable only to the extent not taxed earlier. Thus ,30,000 has been deducted. It does not matter whether the assessee is the owner of the house property or not at the time of recovery.

CA. Ajay Jain 9310167881 A.496 Answer already given in question bank
A.497 A.498 A.499 A.500 A.503

Handout No. 8|33

Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank

PGBP
Computation of total income of A Ltd. for P/Y 12-13 1. PGBP (Note 1) 2. Capital Gain 3. Income u/h Other sources interest on Bank FD Note 1: Computation of income u/h PGBP of A Ltd. for P/Y 12-13 Receipts 1. Cash sales 1,16,00,000 2. Receipts from Debtors 4,00,000 Payments 1. Depreciation 30,000 2. Rent of Building (16,00,000 x ) (Note 1) 4,00,000 3. Cost of producing goods 94,00,000 4. Payment to ROC 1,00,000 5. Damages paid to workers 2,00,000 6. Expenses on raising debentures 4,00,000 Total taxable income u/h PGBP Notes 14,70,000 2,00,000 4,00,000 20,70,000

1,20,00,000

(1,05,30,000) 14,70,000

1) Rent shall be deductible for only that portion of building which was occupied for business. 2) Interest received on bank F.D. is taxable u/h other sources. A.504 Allowed Deduction ii, iii, v, vi, vii, ix, xii, xvi Not Allowed Deduction i, iv, viii, x, xi, xiii, xiv, xv A.505 Taxability u/h PGBP Taxable u/h PGBP iii, vi, vii, viii, ix, xi, xii, xiii, xv Taxable under any other head- ii, x Not Taxable anywhere i, iv, v,xiv, xvi A.506 Computation of income u/h PGBP of Mr. M for A/Y 2013-14 Net profit as per profit and loss account Debited items: 1. Opening Stock overvalued [ 11,00,000 x 10/(100 + 10) ] 2. Advance income tax [not allowed deduction u/s 40(a)] 3. Self assessment income tax [not allowed deduction u/s 40(a)] 4. Penalty for income tax [any kind of penalty not allowed deduction u/s 40(a)] 5. Interest for late payment of income tax [not allowed deduction u/s 40(a)] 6. Provision for income tax [any kind of provision is not deductible] 7. Sales tax [no treatment required, it is allowed deduction] + 1,00,000 + 20,000 + 5,000 + 1,000 + 1,000 + 7,000 ----` 20, 00,000

CA. Ajay Jain 9310167881

Handout No. 8|34

8. Provision for sales tax [any kind of provision is not deductible] + 5,000 9. Interest for late payment of sales tax [no treatment required, it is allowed deduction] ----10. Penalty for sales tax [any kind of penalty not allowed deduction u/s 40(a)] + 200 11. Expenses on income tax proceedings [legal expenses allowed deduction in all cases] ----12. Expenses on sales tax proceedings [legal expenses allowed deduction in all cases] ----13. Audit fees [no treatment required, deduction allowed] ----14. Payment for handling income tax matters [salary to staff is allowed deduction] ----21,39,200 Less: Income credited to P& L A/c but are not taxable 1. Gross sales [no treatment required, taxable income] ----2. Income tax refund [not taxable, as deduction was not allowed when paid] 1,000 3. Interest on income tax refund [taxable u/h Other Sources] 100 4. Sales tax refund [no treatment required, Taxable as it was allowed deduction when paid] ----5. Interest on sales tax refund [taxable u/h Other Sources] 300 6. Refund of income tax penalty [not taxable, as deduction was not allowed when paid] 100 7. Refund of sales tax penalty [not taxable, as deduction was not allowed when paid] 150 Add: Closing stock overvalued [ 4,50,000 x 10/(100 10) ] Income taxable u/h PGBP u/s 28 A.507 Allowed Deduction ii, iii, v, vi, vii, ix, xiii, xv, xvi Not Allowed Deduction i, iv, viii, x, xi, xii, xiv A.508 Taxability u/h PGBP Taxable v, vi, vii, ix, x, xii, xiii, xiv Taxable under any other head ii, xi Not Taxable I, iii, iv, viii, xv, xvi, A.509 A.510 A.511 Answer already given in question bank Answer already given in question bank Amount of deduction 1. 30,000 2. 40,000 3. 60,000 Deduction 1. 15,000 2 25,000 3. 25,000 4. 15% of 25,000 ( Note 1) 5. 25,000 (Limit is 35,000 in case of payment made to transporter) 6. 25,000 7 Nil 8. 25,000 (Note) + 50,000 21,87,550

A.512

CA. Ajay Jain 9310167881


9. 25,000

Handout No. 8|35

Note 1. Provisions of sec 40A(3) shall not be attracted in case of capital goods, Deduction shall be given by way of depreciation u/s 32. 2. It is assumed that the vegetables were purchased directly from a farmer, therefore expenditure shall be covered under Rule 6DD. Thus, full deduction shall be allowed in such case.

A.513 (i) Provisions of section 40A(3) are attracted in this case because the aggregate of payment made to G in a day is in excess of ` 20,000. Hence no deduction is allowed. (ii) Provisions of section 40A(3) do not apply in this case, because the aggregate of payment made in cash does not exceed ` 20,000, i.e. ` 15,000 in this case. Thus, full deduction shall be allowed. (iii) Provisions of section 40A(3) do not apply in this case, because payment made in cash on a single day does not exceed ` 20,000. Hence, full deduction shall be allowed. (iv) Provisions of section 40A(3) do not apply in this case, because the aggregate payment made in excess of ` 20,000 i.e. ` 11,00,000 is being done for capital assets. This section is not applicable for purchase of capital assets. (v) For a real estate dealer, building is a part of stock -in-trade. As it is not a capital asset for him, the provisions of section 40A(3) apply and since the payment exceeds ` 20,000, hence no deduction is allowed. (vi) Provisions of section 40A(3) shall apply in this case where a single payment of ` 30,500 is being made by crossed cheque. The provisions shall apply in case payment is made by crossed cheque/cash/bearer cheque. Provisions of section 40A(3) apply, because the payment is made in excess of ` 20,000 by crossed cheque.

(vii)

(viii) Provisions of section 40A(3) apply, because in case of transport operator, if payment of an amount greater than ` 35,000 is made in cash, then the entire expenditure shall be disallowed.

A.514

It is assumed that the assessee follows accrual system of accounting. Year of Deduction 1. 2012-13 2. 2013-14 3. 2012-13 4. 2015-16 5. 2012-13

CA. Ajay Jain 9310167881


6. 2014-15 7. 2014-15 A.515 Answer already given in question bank. A.516 Answer already given in question bank A.517 Answer already given in question bank

Handout No. 8|36

A.518 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. A.519 A.520 A.521 A.522 A.523 A.524 Section 35(1)(i) 35(1)(i) 35(1)(i) 35(1)(i) 35(1)(iv) 35(1)(iv) 35(1)(iv) 35(1)(iia) 35(2AA) 35(1)(iii) 35AC 35CCA No Deduction u/h PGBP No Deduction u/h PGBP No Deduction u/h PGBP No Deduction u/h PGBP Amt. Nil Nil 100% 100% 100% 100% 100% 125% 200% 125% 100% 100% PGBP PGBP PGBP PGBP PGBP PGBP PGBP PGBP PGBP PGBP PGBP PGBP Head

Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Computation of income u/h PGBP of X & Co Step I (Calculate Book Profit) Net Profit Add: Office expenses (VAT reserve) Less: Rent of building (Taxable u/h House property) Add: Interest to Y in excess of 12% [ (16-12)% x 8,000/16% ] Add: Salary to partners (4,50,000 + 10,000) Book Profit (income u/h PGBP without any deduction of salary to partners) ` 20,000 5,000 (10,000) 2,000 4,60,000 4,77,000

CA. Ajay Jain 9310167881


Step II (Calculate maximum deduction of salary to firm) Book profit 4,77,000 1. 90% of 3,00,000 2,70,000 2. 60% of 1,77,000 1,06,200 Maximum salary 3,76,200

Handout No. 8|37

Step III (Calculate deduction of salary by comparing maximum with actual salary) Maximum or Actual whichever is less = Deduction of salary to firm = lower of ` 3,76,200 and ` 4,50,000 (no deduction is allowed for salary to non-working partner) = ` 3,76,200 Step IV (Calculate income u/s 28) Book Profit Less: deduction of salary Income of firm u/h PGBP u/s 28 Step V (Calculate income taxable in the hands of partners) X: ` 3,76,200 (Salary) Y: ` 6,000(Interest) Only that amount is taxable in the hands of the partners which is allowed deduction to the firm. A.525 Step I (Calculate Book Profit) Net Profit Less: Dividend (Taxable u/h other sources) Add: Interest [ (13-12)% x 26,000/13%] Add: Reserve (No deduction is allowed) Add: Salary to partners (2,00,000 + 20,000) Book Profit (Income u/h PGBP without any deduction of salary to partners) Step II (Calculate maximum deduction of salary to firm) Book profit 1. 90% of 2,76,000 2,48,400 (Since the book profit is less than 3,00,000) Maximum salary 2,48,400 2,76,000 Computation of income u/h PGBP of X & Co ` 60,000 20,000 2,000 14,000 2,20,000 2,76,000 ` 4,77,000 (3,76,200) 1,00,800

Step III (Calculate deduction of salary by comparing maximum with actual salary) Maximum or Actual whichever is less = Deduction of salary to firm = ` 2,48,000 or ` 20,000 whichever is less (No deduction for salary to non-working partner) = ` 20,000 Step IV (Calculate income u/s 28) Book Profit Less: Salary of working Partner B Income of firm u/h PBGP u/s 28 ` 2, 76,000 (20,000) 2,56,000

CA. Ajay Jain 9310167881


Step V (Calculate income taxable in the hands of partners) A: Interest of ` 24,000 B: Salary of ` 20,000

Handout No. 8|38

Only that amount is taxable in the hands of partners which is allowed deduction to the firm. A.526 (A) When Income is computed on Normal Basis Particulars Income u/h PGBP X 1,00,000 (40L - 38L - 1L) Income u/h other Source 5,00,000 Gross total income 6,00,000 Less: Deduction u/c VI- A (Donation to political party) (30,000) Total Income 5,70,000 (B) When Income is computed on Presumptive Basis Particulars Income u/h PGBP Income u/h other Source Gross Total Income Less: Deduction u/c VI- A (Donation to political party) Total Income Y 24,00,000 (60L - 34L - 2L) 5,00,000 29,00,000 (30,000) 28,70,000

X 3,20,000 (8% of 40,00,000) 5,00,000 8,20,000 (30,000) 7,90,000

Y 4,80,000 (8% of 60,00,000) 5,00,000 9,80,000 (30,000) 9,50,000

Note:- Mr. X should compute his income on normal basis but he will have to get his accounts audited and maintain books of account. On the other hand, Mr. Y should compute his income on presumptive basis. Thus, total income of Mr. X is ` 5,70,000 and of Mr. Y is ` 9,50,000. Their tax liabilities are calculated as under X Total income Tax on: First 2 lakhs Next 3 lakhs @ 10% Balance 70,000 @ 20% Add: Education cess 2% x 44,000 Add: SHEC* 1% x 44,000 Tax liability ` 5,70,000 Nil 30,000 14,000 44,000 880 440 45,320 Y Total income Tax on: First 2 lakhs Next 3 lakhs @ 10% Balance 4,50,000 @20% Add: Education cess 2% x 1,20,000 Add: SHEC* 1% x 1,20,000 Tax liability ` 9,50,000 Nil 30,000 90,000 1,20,000 2,400 1,200 1,23,600

*SHEC = Secondary and Higher Education Cess A.527

CA. Ajay Jain 9310167881


income on presumptive basis. Thus his total income shall be ` 7,90,000. His tax liability shall be calculated as under Total income Tax on: First 2 lakhs Next 3 lakhs @ 10% Balance 2,90,000 @ 20% Add: Education cess 2% x 88,000 Add: Secondary & higher education cess 1% x 88,000 Tax liability

Handout No. 8|39

If Mr. X was not maintaining any books of accounts, then he will have no option except to compute his

7,90,000

Nil 30,000 58,000 88,000 1,760 880 ` 90,640

A.528 When income is computed on normal basis Income u/h PGBP (50,00,000 30,00,000 - 1,00,000) Income u/h House property Total Income When income is computed on presumptive basis Income u/h PGBP [(5 heavy trucks x 3 months x 5,000 p.m.) + (4 x 12 x 4,500) + (1 x 4,500 x1)] Income u/h House property Total Income 2,95,500 ` 19,00,000 5,00,000 24,00,000

5,00,000 7,95,500

Since income is less when income is computed on presumptive basis, it is assumed that the assessee follows this basis for computing his business income. Statement of tax liability of Ajay Jain (Truck wala) for A/Y 2013-14 ` Total income Tax on: First 2 lakhs Next 3 lakhs @ 10% Balance 2,95,500 @ 20% Add: Education cess 2% x 89,100 Add: Secondary & higher education cess 7,95,500 Nil 30,000 59,100 89,100 1,782

CA. Ajay Jain 9310167881


1% x 89,100 Tax liability Tax payable rounded off u/s 288B Notes:

Handout No. 8|40


891 91,773 91,770

1. Assuming that the cash was paid to the supplier on a single day for one expenditure, no deduction is allowed as per 40A(3) because the payment exceeds ` 20,000. 2. While computing income on presumptive basis, part of a month is ignored. Also, income is calculated for the period during which the asset was owned by the assessee. Thus, date of starting usage is irrelevant. A.529 In case Ajay Jain purchased 2 light vehicles instead of 1 on 31st march, 2013 he would own 11 trucks on that date. Computation of income on presumptive basis u/s 44AE is allowed only if the assessee does not own more than 10 trucks at any time during the previous year. Thus, Ajay Jain cannot follow presumptive basis and shall have to compute his business income on normal basis only. Therefore, his total income for P/Y 2012-13 shall be ` 24,00,000. His, tax liability will be calculated as follows:Tax on: First 2 lakhs Next 3 lakhs @ 10% On next 5 lakhs @ 20% Balance 14 lakhs @ 30% Add: Education cess 2% x 5,50,000 Add: Secondary & higher education cess 1% x 5,50,000 Tax liability A.530 A.531 A.532 A.533 A.534 A.535 A.536 Calculation of Depreciation u/s 32 Furniture, rate - 10% Opening WDV Add: Cost of assets purchased ` 50,000 40,000 Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank ` Nil 30,000 1,00,000 4,20,000 5,50,000 11,000 5,500 5,66,500

CA. Ajay Jain 9310167881


Less: Sale price of assets sold WDV Depreciation u/s 32 (10% of 60,000)

Handout No. 8|41


90,000 (30,000) 60,000 6,000

A.537 Calculation of Depreciation u/s 32 Block I (Residential Building, rate 5%) Opening WDV Add: Cost of assets purchased WDV Depreciation u/s 32 (5% of 2,00,000 x 50%) [Note] Block II (Office building, rate 10%) Opening WDV Add: Cost of assets purchased WDV Depreciation u/s 32 (10% of 5,00,000)
[

` Nil 2,00,000 2,00,000 5,000

Nil 5,00,000 5,00,000 50,000

Total depreciation:- `(5,000 + 50,000)= ` 55,000 Note: - As the residential building has been used for less than 180 days, half depreciation is charged. A.538 Calculation of Depreciation u/s 32 Plant & machinery Add: Opening WDV (A, B) Cost of assets purchased (C & D = 20,000 + 30,000) Sale price of assets sold (A) WDV ` 40,000 50,000 90,000 (10,000) 80,000

Less:

Calculation of Depreciation (a) Plant C (Note) = 20,000 x 15% x 50% = ` 1,500 (b) Plants (B & D) = (80,000 - 20,000) x 15% = 60,000 x 15% = ` 9,000 Total Depreciation 1,500 + 9,000 = ` 10,500 Note: - Since the plant has been used for less than 180 days, half depreciation is charged. A.539 Calculation of Depreciation u/s 32 Plant & machinery Opening WDV (A,B) Add: Cost of assets purchased (C & D = 20,000 + 30,000) Less: Sale price of assets sold ` 40,000 50,000 90,000 (85,000)

CA. Ajay Jain 9310167881


WDV Calculation of Depreciation 5,000 x 15% x 50%

Handout No. 8|42


5,000 375

Note:- Depreciation for the asset which is used for less than 180 days is given first and then depreciation is provided for remaining assets used for 180 days or more, if there is any value left. A.540 Computation of taxable Income of Mr. Dude ` (i) Business Receipt (ii) Less: Business Expenses (a) Rent paid (4,000 x 12) (b) Assistants salary (6,000 x 12 ) (c) Depreciation (note 1) Taxable Income 5,00,000 48,000 72,000 30,000

(1,50,000) 3,50,000

Note 1:- Depreciation of Laptop 50,000 x 60% = 30,000 Note 2:- Depreciation of building is not charged because he has paid rent for it. Note 3:- For computing his taxable income, the assessee cannot charge depreciation as per his wish, but according to WDV method and as per the prescribed rates in Income tax rules. A.541 Calculation of Depreciation of Various Assets u/s 32 ` (i) (ii) (iii) (iv) Fans and Tube light (10% of 50,000) Office Building (10% of 40,00,000) AC (15% of 20,000) Car (15 % of 3,00,000) Total Depreciation u/s 32 5,000 4,00,000 3,000 45,000 4,53,000

A.542 Calculation of Depreciation of Kitab Mahal ` (i) (ii) (iii) (iv) Copyright of book (25% of 5,00,000) Building (Residential) (5% of 20,00,000) Aero plane (40% x 40,000 x 50%) (note) Building (Non Residential) (10 % of 30 ,00,000 x 50%) Total Depreciation u/s 32 1,25,000 1,00,000 8,000 1,50,000 3,83,000

Note: - Half depreciation is charged because asset is used for less than 180 days.
[

CA. Ajay Jain 9310167881


A.543

Handout No. 8|43

No, it is not possible for CA Ajay Jain to disregard depreciation because it is mandatory to claim depreciation. Moreover, the unabsorbed depreciation can be carried forward to next years for set off (adjustment). Calculation of Depreciation for CA Ajay Jain for A/Y 2013-14 ` (a) ITR & Excus (20,00,000 x 100%) (b) AC (15,00,000 x 15% x 50%) (c) Other books: On opening balance of 30,00,000 : (30,00,000 x 60%) On new purchases of 50,00,000 (Note 1) : (50,00,000 x 60% x 50%) (d) Printer (Note 1) (30,000 x 60% x 50%) (e) Laptop (Note 2) (40,00,000 x 60% x 50%) Total Depreciation u/s 32 20,00,000 1,12,500 18,00,000 15,00,000 9,000 12,00,000 66,21,500

Notes:1. Since the books purchased are used for less than 180 days, half depreciation shall be allowed for them. 2. On computer printers, as per ICAI depreciation is charged @ 15% but as per the judgement of various courts, it is charged @ 60%, as it is a part of computer. Printer has been used for less than 180 days, so half depreciation is charged. 3. Since laptops are used for less than 180 days, half depreciation shall be given on them.

A.544 (i) (ii) (iii) (iv)

Calculation of depreciation for Mr. Factory Ram ` Second hand machine (15% of 1,00,000) (Note 1) AC (15% of 50,000) (Note 1) Car (15 % of 5,00,000) (Note 1) Plant [ 4,00,000 x (15+20)% ] Total depreciation u/s 32 15,000 7,500 75,000 1,40,000 2,37,500

Note 1:- No Additional depreciation is allowed for second hand machinery, new machine used in office and for road transport vehicles. Note 2:- Deduction of 100% of capital expenditure incurred on research related to business is allowed u/h PGBP u/s 35. Thus, deduction shall be 100% of 3,00,000 = ` 3,00,000.

A.545 If the Plant was purchased on 5.10.2012, the depreciation is calculated as follows:` (i) Second hand Machinery (Note 1) (1,00,000 x 15%) 15,000

CA. Ajay Jain 9310167881


(ii) AC (50,000 x 15%) (Note 1) (iii) Car (5,00,000 x15%) (Note 1) (iv) Plant [ 4,00,000 x (15 + 20)% x 50%] (used for less than 180 days) Total depreciation u/s 32

Handout No. 8|44


7,500 75,000 70,000 1,67,500

Note: -1. No additional depreciation is allowed for second hand machinery, new machinery used in office and for road transport vehicle. Note: - 2. Deduction of 100% of capital expenditure incurred for scientific research related to business is allowed u/s 35. Thus deduction allowed = 100% x 3,00,000 = ` 3,00,000.

A.546 Calculation of Depreciation

` Opening WDV Add: Cost of assets purchased Less: (30,000) Sale price of assets sold WDV Depreciation u/s 32 (15% of 1,20,000) Note: - The WDV and FMV of the sold asset are irrelevant. 1,20,000 18,000 1,00,000 50,000 1,50,000

A.547 If the Plant was purchased on 5.10.2012, the depreciation is calculated as follows:Opening WDV Add: Cost of assets purchased Less: Sale price of assets sold WDV Depreciation of new plant (note) = 50% of 15% of 50,000 = ` 3,750 Depreciation of remaining plant = (1,20,000 - 50,000) x 15% = ` 10,500 Total Depreciation (3,750 + 10,500) = ` 14,250 Note:- Half depreciation is charged as the machinery is used for less than 180 days. ` 1 00,000 50,000 1,50,000 (30,000) 1,20,000

A.548

CA. Ajay Jain 9310167881


Calculation of Depreciation ` Opening WDV Add: Cost of assets purchased Less: Sale price of assets sold WDV Depreciation u/s 32 New Plant (note) = 50,000 x 15% x 50% = ` 3,750 (notes 1, 2) Remaining Plant = (1,30,000 - 50,000) x 15% = ` 12,000 Total Depreciation = 3,750 + 12,000 = ` 15,750

Handout No. 8|45

2 00,000 50,000 2,50,000 (1,20,000) 1,30,000

Note 1:- The asset has been used for less than 180 days so half depreciation is charged. Note 2:- Firstly Depreciation is charged for the asset which is used for less than 180 days and then for the remaining value of asset. Note 3:- The FMV and WDV of asset sold are irrelevant. A.549 Answer already given in question bank A.550 Answer already given in question bank A.551 Block of Assets Calculation of Total Depreciation for Mr. X Op. WDV Additions Sale ` Furniture 10% 20,000 Office Building 10% 5,00,000 Machinery 15% 6,00,000 Residential Building 5% ` 1,10,000 + 10,000 8,00,000 ` (3,000) (4,00,000) Cl. WDV Depreciation ` 17,000 1,00,000 7,20,000 8,00,000 ` 1,700 10,000 99,000 20,000 1,30,7000

Note 1:- Depreciation on machinery has been calculated as follows:Opening Balance = 6,00,000 x 15% = 90,000 Additions during the year (used for less than 180 days) = 1,20,000 x 15%x 50% = 9,000 Total Depreciation on Machinery = 90,000 + 9,000 = ` 99,000. Note 2:- The residential building was put to use for less than 180 days. Hence, half depreciation shall only be allowed.

A.552 Since the assessee is engaged in manufacturing, additional depreciation can be claimed on new machineries purchased u/s 32.

CA. Ajay Jain 9310167881


Block of Assets 1. Furniture (20,000 3,000) x 10% 2. Office building (5,00,000 4,00,000) x 10% 3. Machinery (i) 6,00,000 x 15% (ii) 1,20,000 x (15+20) % x 50% 4. Residential building 8,00,000 x 5% x 50%

Handout No. 8|46


Depreciation (`) 1,700 10,000 90,000 21,000

1,11,000 20,000 1,42,700

Note: - It has been assumed that AC was installed in the manufacturing area.

A.553

Calculation of Depreciation of A ltd. & B Ltd. Step 1:- Calculation of Depreciation as if no conversion took place Machinery Opening WDV Add:- Purchase at actual cost Less: Sale at sale price WDV Depreciation (15% of 5,00,000) Step 2 :- Proportionate depreciation of A Ltd. & B Ltd. Period for which A Ltd. Used the machinery = 365 - 31 (March) 1 (28th Feb) Period for which B Ltd. Used the machinery = 31 (March) + 1 (28th Feb) A Ltd. 75,000 x 333/365 = ` 68,425 Total Depreciation of A Ltd. = ` 68,425 = 333 days = 32 days B ltd. 75,000 - 68,425 = ` 6,575 ` 5, 00,000 5,00,000 75,000

Note:- The Depreciation for furniture shall be charged by B Ltd only because it has been put to use after conversion and half depreciation shall be charged as it has been put to use for less than 180 days. = 30,000 x 10% x 50% = 1,500 Total Depreciation of B Ltd. = 6,575 + 1,500 = ` 8,075 A.554 Calculation of Depreciation u/s 32 Block I (Plant & Machinery) ` Opening WDV 30,000 Cost of assets purchased Nil Sale price of assets sold (5,000) WDV 25,000 Depreciation u/s 32 3,750 (25,000 x 15 %) Block II (Intangible assets) ` Opening WDV 50,000 Add: Cost of assets purchased 10,000 Less: Sale price of assets sold Nil WDV 60,000 Depreciation u/s 32 15,000 (60,000 x 25 %)

Add: Less:

CA. Ajay Jain 9310167881


` 40,000 Nil (8,000) 32,000 3,200

Handout No. 8|47


Block IV (building) ` Opening WDV Nil Cost of assets purchased 30,000 Sale price of asset sold Nil WDV 30,000 Depreciation u/s 32 1,500 (30,000 x 10 % x 50%) ` Nil 25,000 Nil 25,000 15,000

Block III (Furniture) Opening WDV Add: Cost of assets purchased Less: Sale price of assets sold WDV Depreciation u/s 32 (10% x 32,000) Block V(Car) Opening WDV Add: Cost of assets purchased Less: Sale price of assets sold WDV Depreciation u/s 32 (2,00,000 x15 %)

Add: Less:

` Nil 2,00,000 Nil 2,00,000 30,000

Block VI(Computer) Opening WDV Add: Cost of assets purchased Less: Sale price of assets sold WDV Depreciation u/s 32 (25,000 x 60%)

Total Depreciation u/s 32 = 3,750 + 15,000 + 3,200 + 1,500 + 30,000 + 15,000 = ` 68,450 Note:- Students can also include car in Block I, as depreciation in both the blocks is charged @ 15%. In such case, depreciation of Block I will be ` 33,750 and no separate block of car shall be created. A.555 Particulars Calculation of Depreciation
[

WDV as on 1-4-2012

Additions during the year

Assets sold WDV as on during the year 31-3-2013

Depreciation

` Block 1 Building 10%(A,B,C,F) 21,95,000 Block 2 Building 5%(D,E) Block 3 Machinery 15%
(A,B,F,G,H)

` 5,40,000 Nil

` Nil ( 4,00,000)

` 27,35,000 1,70,000

` 2,73,500 8,500

5,70,000

2,42,000

1,78,000 16,000 Nil

Nil (1,90,000) Nil Nil

4,20,000 45,000 1,18,000 1,00,000

63,000 13,500 11,800 25,000 3,95,300

Block 4 Machinery 30% (C,D,E,I) 2,19,000 Block 5 Furniture 10% (A,B) 1,18,000

Block 6 Intangible assets 25% Nil 1, 00,000 Total Depreciation u/s 32 Notes:

1. For block 1:- WDV as on 1-4-2012 = 10,20,000 + 5,40,000 + 6,35,000 = 21,95,000 2. For block 2:- WDV as on 1-4-2012 = 2,60,000 + 3,10,000 = 5,70,000 3. For block 3:- (i) WDV as on 1-4-2012 = 60,000 + 1,82,000 = 2,42,000 (ii) Additions = 1,12,000 + 4,000 + 62,000 = 1,78,000

CA. Ajay Jain 9310167881


4. For block 4:- (i) WDV as on 1-4-2012 = 1,65,000 + 4,000 + 50,000 = 2,19,000 (ii) Sales = 1,10,000 + 80,000 = 1,90,000 5. For block 5:- WDV as on 1-4-2012 = 1,10,000 + 8,000 = 1,18,000 6. For block 6:- Additions = 40,000 + 60,000 = 1,00,000

Handout No. 8|48

A.556 Calculation of Depreciation of Ajay Jain and Ajay Jain Pvt. Ltd. Step I: Calculate depreciation as if no conversion took place Opening WDV Add:- Purchased a new machine on 20-10-2012 WDV Computation of depreciation (i) Used for less than 180 days :- 2,00,000 x 15% x 50% (ii) Remaining machinery : - 15% x (17,00,000 2,00,000) Total Step II: Calculate proportionate depreciation for both the assesses Ajay Jain Period New machine 20-10-2012 to 30-12-2012 = 72 days Old machine 1-4-2012 to 30-12-2012 = 274 days (i) (i) Depreciation ` 15,000 x 72/(72 + 91) 6,626 2,25,000 x 274/365 1,68,904 1,75,530 Ajay Jain Pvt. Ltd. Period 31-12-2012 to 31-3-2013 91 days (for both machines) 15,00,000 2,00,000 17,00,000 ` 15,000 2,25,000 2,40,000

Depreciation (i) 15,000 x 91/(72 + 91) (ii) 2,25,000 x 91/365 (iii) 3,00,000 x 15% x 50% (Note)

` 8,374 56,096 22,500 86,970

Note:- New machinery has been purchased after the conversion took place. So, only Ajay Jain Pvt. Ltd. is eligible to charge depreciation. This machinery has been put to use for less than 180 days, so half depreciation is charged.

A.557 12-13 ` O/WDV (1-4-2012) Add: 1,00,000 (actual cost of assets acquired)

Calculation of Depreciation u/h PGBP 13-14 ` O/WDV 90,000 (1-4-2013) Add: (actual cost of assets acquired) 14-15 ` O/WDV 81,000 (1-4-2014) Add: (actual cost of assets acquired)

CA. Ajay Jain 9310167881


Less: (sale price of assets sold) WDV Depreciation ( 10% of 1,00,000) 1,00,000 Less: (sale price of assets sold) WDV Depreciation (10% of 90,000) 90,000

Handout No. 8|49


Less: (1,50,0000) (sale price of assets sold) WDV* Nil *(because block has finished) Depreciation Nil

10,000

9,000

A.558 Calculation of Depreciation u/h PGBP 12-13 ` 13-14 ` O/WDV 2,70,000 (1-4-2013) Add: (actual cost of assets acquired) Less: (sale price of assets sold) WDV 2,70,000 Depreciation (10% of 2,70,000) 27,000 15-16 ` 14-15 ` O/WDV 2,43,000 (1-4-2014) Add: (actual cost of assets acquired) Less: (sale price of assets sold) WDV 2,43,000 Depreciation (10% of 2,43,000) 24,300

O/WDV (1-4-2012) Add: (note) 3,00,000 (actual cost of assets acquired) Less: (sale price of assets sold) WDV 3,00,000 Depreciation (10% of 3,00,000) 30,000

O/WDV 2,18,700 (1-4-2015) Add: (Actual cost of assets acquired) Less: 1,80,000 (sale price of assets sold) WDV* Nil *(because block has come to an end) Note: - The depreciation shall be nil as the block has ceased to exist. Any subsidy or grant or reimbursement given directly or indirectly, by central govt. or state govt. or any authority or by any other person, for the purchase of an asset is not included in the cost of such asset. Thus, actual cost of the building is 3,05,000 5,000 = ` 3,00,000.

A.559

Depreciation shall be nil in this case because the actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee u/s 35 or 35AD shall be nil. Note that in P/Y 15-16, if deduction has been claimed u/s 35AD, the sale proceeds of the asset shall be taxable u/h PGBP u/s 28. Calculation of Depreciation

A.560

CA. Ajay Jain 9310167881


u/h PGBP 12-13 ` 13-14 ` O/WDV O/WDV 3,75,000 (1-4-2012) (1-4-2013) Add: (note) 5,00,000 Add: (actual cost of assets acquired) (actual cost of assets acquired) Less: Less: (sale price of assets sold) (sale price of assets sold) WDV 5,00,000 WDV 3,75,000 Depreciation Depreciation (25% of 5,00,000 ) 1,25,000 (25% of 3,75,000) 93,750 15-16 ` O/WDV 2,10,937 (1-4-2015) Add: (actual cost of assets acquired) Less: (50,000) (sale price of assets sold) WDV* Nil (*because block has finished)

Handout No. 8|50


14-15 ` O/WDV 2,81,250 (1-4-2014) Add: (actual cost of assets acquired) Less: (sale price of assets sold) WDV 2,81,250 Depreciation (25% x 2,81,250) 70,313

Note :- Depreciation shall be Nil since the the block of asset has ceased to exist. Interest on loan taken for purchase of a capital asset, for the period till the asset is first put to use, is added to the cost of the asset. However, interest after the asset is first put to use cannot be capitalized. Therefore, actual cost of patent = 4,90,000 + 10,000 = ` 5,00,000. A.561 Calculation of Depreciation u/h PGBP 12-13 ` O/WDV 4,00,000 (1-4-2012) Add: NIL (actual cost of assets acquired) Less: NIL (sale price of assets sold) WDV 4,00,000 Depreciation (15% of 4,00,000) = 60,000 13-14 ` O/WDV 3,40,000 (1-4-2013) Add: 1,00,000 (actual cost of assets acquired) Less: NIL (sale price of assets sold) WDV 4,40,000 Depreciation (15% of 4,40,000) = 66,000 14-15 ` O/WDV 3,74,000 (1-4-2014) Add: NIL (actual cost of assets acquired) Less: (5,00,000) (sale price of assets sold) WDV * NIL *(WDV cant be negative) Depreciation NIL

Note: In P/Y 15-16, the whole of the sale proceeds of machinery A shall be taxable as short term capital gain. A.562 Calculation of depreciation u/h PGBP

CA. Ajay Jain 9310167881


12-13 ` O/WDV NIL (1-4-2012) Add: 4,00,000 (actual cost of assets acquired) Less: NIL (sale price of assets sold) WDV 4,00,000 13-14 ` O/WDV 3,40,000 (1-4-2013) Add: 1,00,000 (actual cost of assets acquired) Less: NIL (sale price of assets sold) WDV 4,40,000

Handout No. 8|51


14-15 ` O/WDV 3,74,000 (1-4-2014) Add: NIL (actual cost of assets acquired) Less: (5,000) (sale price of assets sold) WDV 3,69,000

Depreciation (15 % of 4,00,000) = 60,000

Depreciation (15 % of 4,40,000) = 66,000 15-16 O/WDV (1-4-2015) Add: (actual cost of assets acquired) Less: (sale price of assets sold) WDV Depreciation (15% of 3,13,650)

Depreciation (15%of 3,69,000) = 55,350 ` 3,13,650 NIL NIL

3,13,650 47,048

A.563 A.564 A.565 A.566 A.567 A.568

Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank

A.569 Opening WDV Less: Sale WDV* *(WDV cant be negative) Depreciation

P/Y 12-13 U/h PGBP 10,000 (12,000) NIL NIL

A.570

P/Y 13-14 The machinery sold in this year shall be treated u/h capital gains. Calculation of Depreciation for P/Y 12-13 No Depreciation shall be charged as block has ceased to exist.

CA. Ajay Jain 9310167881


A.571 A.572 Opening WDV Less: Sale WDV* *(WDV cant be negative) Depreciation A.573 Calculation of Depreciation for P/Y 12-13 ` Opening WDV Less: Sale (7,000) WDV Depreciation (15% of 18,000) A.574 Calculation of Depreciation for P/Y 12-13 ` Opening WDV Less: Sale WDV Depreciation (15% of 1,000) A.575 ` Opening WDV Less: Sale (12,000) WDV *(WDV cant be negative; the block has ceased to exist) Depreciation A.576 ` Opening WDV U/h PGBP Calculation of Depreciation for P/Y 12-13 Depreciation for the P/Y 12-13 shall be Nil as the block has ceased to exist. P/Y 12-13

Handout No. 8|52

` 25,000 (27,000) NIL NIL

25,000

18,000 2,700

3,000 (2,000) 1,000 150

3,000

NIL NIL

20,000

CA. Ajay Jain 9310167881


Add: Purchase Less: Sale WDV* *(WDV cant be negative; the block has ceased to exist) Depreciation

Handout No. 8|53


5,000 (27,000) NIL NIL

A.577 U/h PGBP Since all the assets in the block have been sold, therefore the block ceases to exist. Thus, depreciation shall be Nil. A.578 U/h PGBP Opening WDV Add: Purchase Less: Sale WDV* *(WDV cant be negative) Depreciation A.579 U/h PGBP ` Opening WDV Add: Purchase Less : Sale WDV Depreciation (25% of 22,000) A.580 A.581 Answer already given in question bank 20,000 5,000 (3,000) 22,000 5,500 ` 20,000 5,000 (27,000) NIL NIL

Computation of Income u/h PGBP of Dr. Akash for A/Y 2013-14 Closing balance of Receipts and Payments A/c Less: opening balance of Receipts and Payments A/c Net change in cash & bank Add: Medicines purchased for brother (personal expense, disallowed) Add: Machineries purchased (capital expenditure, deduction allowed u/s 32) Less: Depreciation on machinery 15% x 7,00,000 Add: Interest on education loan (note 1) Add: Purchase of infra bonds (these are investments, not an expense) Less: Income u/h house property Income u/h PGBP u/s 28 ` 8,23,500 (3,60,000) 4,63,500 20,000 7,00,000 (1,05,000) 20,000 46,000 (2,50,000) 8,94,500

CA. Ajay Jain 9310167881 Notes:

Handout No. 8|54

1. Deduction for interest on education loan is allowed u/c VI-A from gross total income and is therefore, not deductible under business head.
2. Sale of jewellery shall be taxable u/h capital gains.

A.582 A.583 A.584 A.585 A.586 A.587 A.588 A.589 A.590

Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. No, because it is just like an employee compensation expenditure. No, because staff welfare expenses are business expenses. Yes, as no deduction is allowed for reserves. Yes, no deduction is allowed for interest on proprietors capital as per sec 36(1). No, it is just like a business loss. No, it is business expenditure. No, because when it will be received back, it shall be taxable. Yes, as per sec 36(1) health insurance premium for employees should be paid by any mode other than cash. Yes, as per sec 37, expenditure should be exclusively for business only. Thus personal expenses are disallowed. Yes, as per sec 36(1), no deduction is allowed for contribution to URPF. Yes, gifts to relatives shall be added back because it is a personal expenditure. Yes, (20,000 - 1,500) shall be added back as per sec 35D. Deduction allowed has been calculated as 5% x 1,50,000 x 1/5 = ` 1,500. 13. No, 100% deduction for such donation is allowed u/s 35CCA 14. No, further amount ` 2,500 shall be allowed as deduction u/s 35(1)(iii). 15. No, 100% deduction is allowed for capital expenditure incurred for scientific research u/s 35(1)(iv). 16. Yes, deduction for family planning expenditure is allowed only to a company. Therefore, no deduction is allowed to the assessee Mr. X

CA. Ajay Jain 9310167881

Handout No. 8|55

17. No, because deduction is disallowed when the penalty is paid under any act and not for breach of contract. 18. No, because it is a general expenditure u/s 37 19. No, because there is no condition that for claiming deduction, insurance premium of building should not be paid in cash. 20. Yes, (8, 00,000 - 8, 00,000/5) because as per sec 35DDA deduction shall be allowed in 5 years in 5 equal installments. 21. No, because it is a general business expenditure as per sec 37. 22. Yes, (2,000 - 2000/2) because it is a personal expenditure. 23. No, because it is a revenue expenditure and not a capital expenditure. 24. Yes, because giving donation is not business expenditure and deduction is allowed for some specific donations only. 25. No, because deduction is allowed for expenditure on legal proceedings. 26. No, because expenditure is for recreation of employees. Following incomes have been credited to P & L A/c. Following shall be the treatment:1. 2. 3. 4. Nothing, because it is taxable u/s 41(4). Nothing, because it is a taxable u/s 41(1). Nothing, because it is taxable u/s 28. Deducted from net profit, as per sec 28 amount received from multilateral fund of Montreal protocol is not taxable. 5. Deducted from net profit because it is taxable u/h other sources. 6. Deducted from net profit as profit on sale of plant & machinery is taxable u/h capital gains. A.591 Allowed Deduction ii, iii, iv, v, viii, ix, x, xi, xv, xvi Not Allowed Deduction i, vi, vii, xii, xiii, xiv A.592 (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) Allowed deduction u/s 36(1); health insurance premium is disallowed only if paid in cash. Not allowed, as it is a personal expense. Allowed deduction as it is like an incentive (bonus) given. Not allowed as it is taxable in hands of firm. Also, it is not an expense but an appropriation of profits. Not allowed because u/s 36(1) no deduction is allowed for commission paid to employees in lieu of profits. Allowed as it is a financial expense. Allowed but upto 12% p.a. Allowed as it is a business loss. Not allowed even by way of depreciation. No deduction allowed for animals used in the business. Deduction shall be allowed only at the time of death of animal. Allowed, as these are bad debts expenses. No deduction is allowed for family planning expenditure incurred by an HUF. Deduction is allowed to a company for family planning expenditure. Since, it is a capital expenditure, deduction shall be allowed in 5 years in 5 equal installments.

CA. Ajay Jain 9310167881


(xiv) A.593 (i) (ii) (iii) (iv) (v) (vi) (vii) House Property Other Sources PGBP Salary PGBP Capital gains PGBP (viii) (ix) (x) (xi) (xii) (xiii)

Handout No. 8|56

Not allowed because u/s 36(1) no deduction is allowed to a firm for family planning expenditure. PGBP Capital Gains PGBP Salary PGBP Not Taxable u/s 28.

A.594 (i) (ii) (iii) (iv) (v) (vi) (vii)

Other Sources Other Sources PGBP Other Sources Other Sources PGBP Capital Gains

(viii) (ix) (x) (xi) (xii) (xiii) (xiv)

PGBP PGBP PGBP PGBP PGBP PGBP Not Taxable

CA. AJAY JAIN, 9310167881


A.595 A.596 A.597 A.598 A.599 A.600 A.601 A.602 A.603 A.604 A.605 A.606 A.607 A.608 A.609 A.610 A.611 A.612 A.613 A.614 A.615 A.616 A.617 A.618 Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank Answer already given in question bank

Handout No-12| 1

CA. AJAY JAIN, 9310167881

Handout No-12| 2

CAPITAL GAINS
A.625 Computation of Taxable Capital Gain of Mr. Y for A/Y 13-14 Period of holding from 1-1-2012 to 31-5-2012 (5 months) Sale Consideration Less: Cost of Acquisition (10,000) 5,000 (STCA) ` 15,000 Short term capital gain

A.626 Computation of Taxable Capital Gain of Mr. B for A/Y 13-14 Period of holding from 1-4-2010 to 30-6-2012 (2 years 3 months) (STCA) Sale Consideration Less: Cost of Acquisition (9,000) ` 12,000

Short term capital gain 3,000 Note: FMV on the date when the asset was gifted to the assessee by the previous owner is irrelevant.

A.627 Computation of Taxable Capital Gain of Mr. X for A/Y 13-14 Period of holding from 1-6-1982 to 30-6-2012 (LTCA) Sale Consideration Less: Indexed Cost of Acquisition (50,000 x 852/109) Long term capital gain A.628 Computation of Taxable Capital Gain of Mr. X for A/Y 13-14 Period of holding from 1-4-1975 to 30-6-2012 Sale Consideration Less: Indexed Cost of Acquisition (8,000 x 852/100) Long term capital gain ` 10,00,000 (3,90,826) 6,09,174

(LTCA) ` 10,00,000 (68,160) 9,31,840

Note:- Since the asset is acquired before 1-4-1981, therefore cost of acquisition shall be the higher of actual cost and FMV as on 1-4-1981. A.629 Computation of Taxable Capital Gain of Mr. B for A/Y 13-14 Period of holding from 1-4-83 to 31-5-12 Sale Consideration Less: Indexed Cost of Acquisition (10,000 x 852/116) Less: Indexed Cost of Improvement (5,000 x 852/133) Long term capital gain A.630 Computation of Taxable Capital Gain of Mr. W for A/Y 13-14

(LTCA) ` 5,00,000 (73,448) (32,030) 3,94,522

CA. AJAY JAIN, 9310167881


Period of holding from 1-4-81 to 31-5-12

Handout No-12| 3
(LTCA) ` 1,00,000 (85,200) (2,000) 12,800

Sale Consideration Less: Indexed Cost of Acquisition (10,000 x 852/100) Less: Indexed Cost of Improvement (2,000 x 852/852) Long term capital gain A.631 Answer already given in question bank. A.632 Answer already given in question bank. A.633 Answer already given in question bank. A.634 Answer already given in question bank. A.635 Answer already given in question bank. A.636 Computation of Taxable Capital Gain of Mr. S for A/Y 13-14 Period of holding from 1-4-81 to 31-5-12 Sale Consideration Less: Indexed Cost of Acquisition (10,000 x 852/852) (Note 1) (10,000) Long term capital gain 90,000

(LTCA) ` 1,00,000

Note 1:- Indexation is done from the first year (F/Y 12-13) in which the asset is held by the assessee (Mr. S). However, in the case of Manjula J. Shah, the Bombay High Court held that indexation shall be done from the first year in which the asset was held by the previous owner. A.637 Computation of Taxable Capital Gain for the brother for A/Y 13-14 Period of holding from 1-4-72 to 30-6-12 Sale Consideration Less: Indexed Cost of Acquisition (10,000 x 852/785) (Note 1) (10,854) Less: Indexed Cost of Improvement (5,000 x 852/133) (Note 2) Less: Indexed Cost of Improvement (3,000 x 852/852) Taxable Long term capital gain

(LTCA) ` 5,00,000

(32,030) (3,000) 4,54,116

Note 1:- Indexation of cost of acquisition shall be done from the first year in which the asset was held by the assessee. For this purpose, cost of acquisition shall be the higher of actual cost or FMV on 1-4-1981 since the asset was purchased before 1-4-1981. Note 2:- COI before 1.4.81 will be ignored completely. A.638 Computation of Taxable Capital Gain for the Son for A/Y 13-14 Period of holding from 1-4-74 to 31-3-12

(LTCA) `

CA. AJAY JAIN, 9310167881


Sale Consideration Less: Expenses on transfer (8,00,000 x 2.5%) Net sale consideration Less: ICOA (1,20,000 x 852/140) (Notes 1 & 3) (7,30,286) Less: ICOI (30,000 x 852/116) (2,20,345) Less: ICOI (70,000 x 852/281) (2,12,242) Taxable Long term capital gain

Handout No-12| 4
8,00,000 (20,000) 7,80,000

(3,82,873)

Notes :- 1. Cost of acquisition will be the higher of actual cost and FMV as on 1-4-1981 since the asset was purchased before 1-4-1981. 2. Cost of improvement before 1-4-1981 shall be ignored completely. 3. Cost of acquisition shall be indexed from the first year in which the asset was held by the assessee.

A.639 Answer already given in question bank. A.640 Answer already given in question bank. A.641 Answer already given in question bank. A.642. Computation of Taxable Capital Gain for Mr. Superstar the for A/Y 13-14 Period of holding from 1-4-75 to 31-5-12 Sale Consideration Less: Expense on transfer Net sale consideration Less: ICOA { (54,000 2,000) x 852/582 } (Notes) (76,124) Less: ICOI (15,000 x 852/140) (91,286) Less: ICOI (3,000 x 852/711 ) Less: ICOI (35,000 x 852/852) (35,000) Taxable Long term capital Gain 3,81,995 (3,595) 6,00,000 (12,000) 5,88,000

(LTCA) `

Notes:- 1. Cost of acquisition shall be the higher of the actual cost and the FMV as on 1-4-1981 since the asset was purchased before 1-4-1981. 2. Indexation shall be done from the first year (F/Y 2008-09) in which the asset was held by the assessee. 3. Amount forfeited by Mr. Rockstar will not be deducted; only the amount forfeited by the assessee, i.e. by Mr. Superstar from Mr. 5Star will be deducted from the cost of acquisition. 4. Cost of improvement incurred before 1-4-1981 shall be ignored. A.643 Answer already given in question bank. A.644 Answer already given in question bank. A.645 Answer already given in question bank. A.646 Answer already given in question bank.

CA. AJAY JAIN, 9310167881


A.647 Answer already given in question bank. A.648 Answer already given in question bank. A.649 Answer already given in question bank. A.650 Answer already given in question bank. A.651 Answer already given in question bank. A.652 Answer already given in question bank. A.653 Answer already given in question bank. A.654 Answer already given in question bank. A.655 Answer already given in question bank. A.656 Answer already given in question bank. A.657 Answer already given in question bank. A.658 Answer already given in question bank.

Handout No-12| 5

A.659 Step I Step II Step III (85,200)

Income u/h capital gains POH from 1-4-81 to 31-5-12 Sale consideration ICOA (10,000 x 852/100) Long Term Capital Gain

LTCA ` 1,00,000

14,800

A.660 Step I Step II Step III (30,429) Step IV (19,571) Income u/h capital gains u/s 45(1) A.661 Income u/h capital gains Long term capital gain Less: Exemption u/s 54 Income u/h capital gains u/s 45(1) Exemption u/s 54 is not available to a partnership firm. A.662 ` 19,571 Nil 19,571 Nil Long Term Capital Gain Exemption u/s 54 19, 571 Income u/h capital gains POH from 1-4-86 to 30-6-12 Sale consideration ICOA (5,000 x 852/140) LTCA ` 50,000

CA. AJAY JAIN, 9310167881


Step I Step II Step III (20,000) Step IV Short Term Capital Gain Exemption u/s 54 Income u/h capital gains u/s 45(1)

Handout No-12| 6
Income u/h capital gains POH from 1-4-10 to 30-6-12 (2 years 3 months) Sale consideration COA STCA ` 30,000

10,000 Nil 10,000

Note:- Exemption u/s 54 is not allowed since the asset transferred is STCA. A.663 (i) (ii)

(iii) (iv)

(v)

Exemption u/s 54 is not allowed because the new house has been purchased after 2 years from the date of transfer of the old house, i.e. after 1-7-2014. Exemption u/s 54 is allowed because the new house has been purchased within the specified time i.e., before 1-7-14 (provided the unutilized amount of capital gain in P/Y 12-13 was deposited in Capital Gains Account Scheme by the due date of ROI in A/Y 13-14). Exemption u/s 54 is allowed because the new house has been constructed within the specified time i.e., before 1-7-15. Exemption u/s 54 is allowed because the new house has been purchased on 1.8.2011, i.e. after 1.7.2011. The time allowed for purchasing the new house is one year before & two years after the date of transfer of the old house. No exemption is available u/s 54 because the new house is purchased before the time allowed, i.e. before 1-7-2011. Step I Step II Step III Income u/h capital gains of Mr. V POH from 1-4-81 to 31-12-12 Sale consideration ICOA (10,000 x 852/100) Long Term Capital Gain Step IV Exemption u/s 54 Income u/h capital gains u/s 45(1) Nil 14,800 (LTCA) ` 1,00,000

A.664

(85,200)

(14,800)

Note:- If assessee deposits the capital gain in Capital Gains A/c scheme before the due date of return, exemption shall be allowed. A.665 Income u/h capital gains (i) Taxable amount = ` 14,800 as long term capital gain in P/Y 2015-16 because the new house is purchased after 2 years from the date of transfer of the old house, i.e. after 1-1-2015. Moreover, now the amount cannot be used for construction. Taxable amount = Nil, since the assessee purchased the house upto the specified time, i.e. before 1.1.15. Taxable amount = Nil. As per Sec 54, construction of the new house should be completed within 3 years from the date of transfer, i.e. till 1.1.16. This condition is satisfied in this case.

(ii) (iii)

CA. AJAY JAIN, 9310167881


(iv)

Handout No-12| 7

Taxable = ` 14,800 as long term capital gain in P/Y 2015-16, since the amount is not used till the last date (1-1-2016) allowed u/s 54. Income u/h capital gains of Mr. V Step I Step II Step III P/Y 12-13 POH from 1-4-81 to 31-1-13 Sale consideration ICOA (2,000 x 852/100) Long Term Capital Gain Step IV Exemption u/s 54 Income u/h capital gains P/Y 15-16 (Capital gain of house in Chennai) POH from 30-7-13 to 29-2-16 (31 months 2 days) Nil 2,960 LTCA ` 20,000

A.666

(17,040)

(2,960)

STCA

` Sale Consideration 6,000 Less: COA (5,000 - 2,960) (Note) (2,040) Income u/h capital gains 3,960 Note: Since the new house is sold within 3 years from the date of its purchase, the capital gains exempted earlier u/s 54 shall be deducted from its Cost of Acquisition (COA).

A.667 If the Chennai house is sold after 1-2-2016, it would not make any difference to the answer unless the house is sold on or after 30-7-2016 in which case long term capital gain shall arise and no deduction of capital gains exempted earlier u/s 54 shall be made from the cost of acquisition. A.668 Income u/h capital gains P/Y 12-13 Long Term Capital Gain (Note 1) Step IV Less: Exemption u/s 54F (Note 2) (1,60,000 x 1,96,000/1,99,000) Income u/h capital gains u/s 45(1) P/Y 14-15 Capital gain on sale of Delhi House Step I Step II Step III POH from 31-5-13 to 31-12-14 (19 months 1 day) Sale consideration COA Short Term Capital Gain STCA ` 2,00,000 (1,60,000) 40,000 ` 1,96,000 (1,57,588) 38,412

CA. AJAY JAIN, 9310167881

Handout No-12| 8

Withdrawal of Exemption: Since the new house is sold within 3 years of its acquisition, therefore the exemption earlier allowed u/s 54F shall be withdrawn now and taxable as long term capital gain of ` 1,57,588 Therefore, Income u/h capital gains for P/Y 14-15 = ` 40,000 + 1,57,588 = ` 1,97,588 Note 1:- In the case of debentures, the benefit of indexation is not allowed POH 1.4.81 to 31.3.2012 (LTCA) Sale consideration 2,00,000 Less: Expense on transfer (1,000) Net sale consideration Less: COA Long term capital gain

1,99,000 (3,000) 1,96,000

Note 2:- Exemption is available because the assessee does not own more than one residential house (except the new house) on the date of transfer of the debentures. A.669 Answer already given in question bank. A.670 Answer already given in question bank. A.671 Answer already given in question bank. A.672 Answer already given in question bank. A.673 Answer already given in question bank. A.674 Answer already given in question bank. A.675 Answer already given in question bank. A.676 Step I Step II Step III (85,200) Long Term Capital Gain Step IV (50,00,000) Income u/h capital gain 29,14,800 Note:- (1) The Investment in one previous year cannot exceed ` 50 lakhs. (2) Investment should be made within 6 months from the date of transfer. Hence exemption shall be allowed. Exemption u/s 54EC (Purchase of NHAI Bonds 79,14,800 but limited to) 79,14,800 Income u/h capital gains POH from 1-4-81 to 31-3-2012 Sale consideration ICOA (10,000 x 852/100)

LTCA ` 80,00,000

CA. AJAY JAIN, 9310167881

Handout No-12| 9

A.677 If the debentures were sold on 29-9-2015, i.e. within three years from the date of their acquisition, the capital gain of ` 50 lakhs exempted earlier in P/Y 2012-13 shall become taxable in P/Y 2015-16 as long term capital gain.

A.678 If Mr. X took a loan on security of RECL/NHAI bonds within a period of 3 years from their acquisition, then the capital gain which was earlier exempted shall become taxable. Accordingly, ` 50 lakhs shall be taxable as long term capital gain in P/Y 2015-16.

A.679 Step I

Income u/h capital gains POH from 31-12 -08 to 31-12-12 (4 years 1 day)

LTCA `

Step II Step III (7,320)

Sale consideration ICOA (5,000 x 852/582) Long Term Capital Gain

20,000

12,680

Step IV

Exemption u/s 54EC Nil Income u/h capital gains 12,680 Note:- For claiming deduction u/s 54EC, capital gain scheme is not applicable.

A.680

Computation of income u/h capital gains of Mr. A for A/Y 13-14 LTCG Less: Exemption u/s 54EC Taxable LTCG ` 12,680 12,680 Nil

Note:- The bonds have been purchased within 6 months from the date of transfer. Hence, the exemption will be given u/s 54 EC. A.681 Answer already given in question bank A.682 Step I Step II Computation of income u/h capital gains of Mr. B for A/Y 13-14 POH from 1-4-81 to 30-6-12 Sale consideration Less: Expense on transfer Net sale consideration Less: ICOA (Notes 1, 2) [ (10,000 + 2,000) x 852/100 ] Long Term Capital Gain Less: Exemption u/s 54F (Note 3) (1,00,000 x 92,760/1,95,000) Income u/h capital gains u/s 45(1) LTCA ` 2,00,000 (5,000) 1,95,000 (1,02,240) 92,760 (47,569) 45,191

Step III

Step IV

CA. AJAY JAIN, 9310167881

Handout No-12| 10

Notes:- 1. In this case, FMV of the land purchased shall not be taken because this land was purchased on 1-4-1981, not before 1-4-1981. 2. Brokerage paid for the purchase of land shall be added to its cost. 3. Exemption is available because the assessee had purchased the new asset (house purchased on 1-8-2011) within one year before the date of transfer of the land. A.683 If Mr. B purchased another house, apart from the new house, on 1.6.2014 i.e. within two years from the date of transfer (1.7.2012) then the exemption of ` 47,569 given earlier will now be taxable as LTCG in A/Y 15-16 A.684 Answer already given in question bank. A.685 Answer already given in question bank. A.686 Answer already given in question bank. A.687 Answer already given in question bank. A.688 Answer already given in question bank. A.689 Answer already given in question bank. A.690 Answer already given in question bank. A.691 Answer already given in question bank. A.692 Answer already given in question bank. A.693 Answer already given in question bank. A.694 Answer already given in question bank. A.695 Answer already given in question bank. A.696 Answer already given in question bank. A.697 Answer already given in question bank. A.698 Answer already given in question bank. A.699 Income u/h Capital Gains P/Y 12-13 No income arises under this head as the value of block is positive and the block of asset continues to exist as there is one asset still left in the block. Machinery O/WDV Add: Cost of assets purchased (A, B) Less: Sale price of asset sold (B) (4,00,000 + 1,00,000) ` Nil 5,00,000 (5,000)

CA. AJAY JAIN, 9310167881


WDV (A) A.700 U/h capital gains P.Y. 12-13 Sale Consideration Less: WDV on 1.4.2012 (10,000) Short Term Capital Gain (2,000) A.701 U/h capital gains P.Y. 12-13 Sale Consideration Less: Value of Block (O/WDV + cost of assets acquired) Short Term Capital Loss

Handout No-12| 11
4,95,000

` 12,000

` 6,000 (10,000) (4,000)

Note:- Block of asset has ceased to exist since all the assets in the block have been sold. A.702 U/h capital gains P.Y. 12-13 Sale Consideration (X, Y) Less: Value of block (25,000) Short Term Capital Gain Note:- Block continues to exist as asset Z is still left but the value of the block is Nil. 2,000 ` 27,000 acquired ]

O/WDV

(X,

Y,

Z)

cost

of

assets

A.703 U/h PGBP

P.Y. 12-13 ` 25,000 (7,000) 18,000 2,700

O/WDV Less: Sale Price WDV Depreciation (18,000 x 15%) U/h capital gains

No treatment is required u/h capital gains because the block continues to exist.

CA. AJAY JAIN,9310167881


A.704

Illustrations - Answers | 1

P/Y 12-13 No treatment is required u/h capital gains because the block of asset continues to exist. O/WDV (O, P, Q) Less: Sale Consideration (P) WDV (O, Q) A.705 P/Y 12-13 Treatment u/h Capital Gains Sale Consideration (P) Less: Value of Block [ O/WDV (O, P, Q) + Cost of asset acquired ] (3,000) Short Term Capital Gain 9,000 Note: Depreciation shall be nil because the WDV of the block becomes nil but the block continues to exist. A.706 Treatment u/h Capital Gains P.Y. 12-13 ` ` 12,000 ` 3,000 (2,000) 1,000

Sale consideration 12,000 Less: Value of Block (O/WDV + cost of asset acquired) (10,000) Short term capital gain 2,000 Note: Depreciation shall be nil because the WDV of the block becomes nil but the block continues to exist. P.Y. 13-14 Sale consideration 3,000 Less: Value of block (O/WDV + cost of asset acquired) Nil Short Term Capital Gain 3,000 Note: Depreciation shall be nil because the WDV of the block becomes nil but the block continues to exist. A.707 U/h Capital Gains P.Y. 12-13 Sale Consideration (X, Y, Z) Less: Value of Block [ O/WDV (X, Y) + Cost of asset acquired (Z) ] Short term capital gain A.708 U/h Capital Gains P.Y. 12-13 Sale Consideration (X, Y, Z) Less: Value of Block [ O/WDV (X, Y) + Cost of asset acquired (Z) ] Short Term Capital Loss A.709 ` 3,000 (25,000) (22,000) ` 27,000 (25,000) 2,000

CA. AJAY JAIN,9310167881


U/h Capital Gains P.Y. 12-13

Illustrations - Answers | 2

` Sale Consideration (X) 27,000 Less: Value of Block [ O/WDV (X, Y) + Cost of asset acquired (Z) ] (25,000) Short Term Capital Gain 2,000 Note: Depreciation shall be nil because the WDV of the block becomes nil but the block continues to exist. A.710 U/h Capital Gains P.Y. 12-13 No treatment is required as the block still exists and the value of block is positive. 20,000 5,000 (3,000) 22,000

O/WDV (X, Y) Add: Cost of asset Z acquired Less: Sale consideration (X) Remaining value of block (Y, Z) A.711 U/h Capital Gains P.Y. 14-15 Sale consideration Less: Value of block (O/WDV + Cost of assets acquired) Short Term Capital Gain Note1:- The date of sale of the asset does not matter. Note 2:Purchases Less: Depreciation for p/y 12-13 WDV on 1.4.2013 Less: Depreciation for p/y 13-14 WDV on 1.4.2014 U/h Capital Gains P.Y. 15-16 Sale consideration Less: Value of block (O/WDV + cost of assets acquired) (2,18,700) Short Term Capital Gain Note:(30,000) WDV on 1.4.2013 Less: Depreciation for P/Y 13-14 WDV on 1.4.2014 Less: Depreciation for P/Y 14-15 WDV on 1.4.2015 Cost of asset (3,05,000 5,000) Less: Depreciation for P/Y 12-13

` 1,50,000 (81,000) 69,000

1,00,000 (10,000) 90,000 (9,000) 81,000

A.712

` 1,80,000

(38,700) 3,00,000

2,70,000 (27,000) 2,43,000 (24,300) 2,18,700

Any subsidy/grant/reimbursement given directly or indirectly by central govt. or state govt. or any authority established under any law or by any other person for the purchase of an asset is not included in the cost of such asset.

CA. AJAY JAIN,9310167881


A.713 U/h Capital Gains P.Y.15-16 Sale consideration Less: Value of block (O/WDV + cost of assets acquired) (2,10,937) Short Term Capital Loss

Illustrations - Answers | 3

` 50,000

1,60,937

Note:- 1 Any interest before purchase of asset is added to its cost and depreciation is claimed, while the interest after purchase is claimed as deduction u/s 36. Note:- 2 Cost of purchases 4,90,000 Add: Interest for purchase 10,000 Total cost of asset 5,00,000 Less: Depreciation for P/Y 12-13 (1,25,000) WDV on 1.4.2013 3,75,000 Less: Depreciation for P/Y 13-14 (93,750) WDV on 1.4.2014 2,81,250 Less: Depreciation for P/Y 14-15 (70,313) WDV on 1.4.2015 2,10,937 A.714 U/h capital Gains A.Y. 15-16 Sale consideration Less: Value of block (O/WDV + cost of assets acquired) (3,74,000) Short Term Capital Gain A.Y. 16- 17 Sale consideration Less: COA Short term capital gain Note 1:- Machinery Purchased (A) Less: Depreciation for P/Y 12-13 (60,000) WDV on 1.4.2013 Add: Machinery Purchased (B) Less: Depreciation for P/Y 13-14 (66,000) WDV on 1.4.2014 (A, B) Less: Sale price (B) (5,00,000) Depreciation for P/Y 14-15 (as block ceases to exist) A.715 Answer already given in question bank. A.716 Answer already given in question bank. 1,00,000 NIL 1,00,000 4,00,000 ` 5,00,000

1,26,000

3,40,000 1,00,000 4,40,000

3,74,000

NIL

CA. AJAY JAIN,9310167881


A.717 Answer already given in question bank. OTHER SOURCES A.724 (i) (ii) Other Sources PGBP

Illustrations - Answers | 4

(iii) Salary A.725. (i) (ii)

Taxable 15,000 Not taxable

(iii) Not taxable (iv) Taxable - 1,00,000 (v) Taxable - 1,60,000 [inadequate consideration]

(vi) Taxable for ` 11,000 (vii) Taxable for ` 20,000 (viii) Taxable ` 51,000 (ix) (x) (xi) Taxable worth ` 1,20,000 Not taxable car is not a property Taxable

(xii) ` 2,00,000- taxable (xiii) Not taxable (xiv) Taxable (xv) Not taxable (xvi) ` 70,000 taxable (xvii) Not taxable (xviii) Taxable u/h salary

CA. AJAY JAIN,9310167881


(xix) Not taxable (xx) Not taxable, taxable only when difference above ` 50,000

Illustrations - Answers | 5

(xxi) Taxable, cheque is equivalent to cash

A.726. (i) Taxable u/h other sources (ii) Taxable u/h other sources (iii) Taxable u/h other sources (iv) Taxable u/h other sources - foreign co. (v) Taxable ` 13,250 (26,250 12,000 1,000) (vi) Taxable u/h other sources = 10% of 3,20,000 = 32,000 taxable (vii) FV= 1,34,400/96 x 100 = 1,40,000 x 10%= 14,000 taxable u/h Other Sources. (viii) Since, the question specify that interest received it means that amount is after TDS or net of TDS, but we always taxable gross amount i.e. before TDS = 29,700 x 100/90= 33,000 (ix) Not taxable (x) Not taxable (xi) Not taxable (xii) Not taxable (xiii) Not taxable (xiv) Assumed after TDS= 28,000 x 100/70 = 40,000 (xv) (250 x 12) (125 x 12)= ` 1,500 (xvi) Taxable u/h Other Sources (xvii) ` 8,000 (xviii) Taxable (xix) Not taxable - as from Indian co.No deduction of expense of ` 2,000 as income exempt (xx) Taxable u/h other sources (xxi) Taxable u/h other sources ` 70,000 3,000 = ` 67,000 (xxii) Taxable u/h other sources ` 17,000 (xxiii) ` 5,00,000 50% of 5,00,000 = ` 2,50,000 taxable. In case interest received on compensation only deduction of 50% shall be allowed for expenses. (xxiv) Not taxable (xxv) Taxable u/h other sources= 2,10,000 x 12 (26,000 + 76,000 + 2,85,000 + 20,000 + 50,000)= 20,63,000 A.727. Answer already given in question bank. A.728 A.729 A.730 A.731 A.732 Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank.

CA. AJAY JAIN,9310167881


A.733 A.734 A.735 A.736 Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. CLUBBING A.738 Mr. Aashik Mrs. Aashik Nil Because relation of husband and wife did not exist at the time of transfer A.739 Mr. Patni bhagat Nil Because at the time of accrual of income relation of husband and wife did not exist

Illustrations - Answers | 6

u/h capital gain Sale Consideration 15,000 Less :COA (10,000) Capital Gain 5,000

Mrs. Patni bhagat u/h capital gain Sale Consideration (6crores) Less: COA (5 crores) Capital Gain 1 crore

A.740 Mrs. Lallu ram will pay tax u/h other sources on ` 50,000 because the asset was transferred under an agreement to live apart. A.741 Income of ` 40,000 earned by the minor shall be clubbed in the hands of the parent whose total income is greater (before including income of the child),i.e. either Durbhagyashali or Mrs. Durbhagyashali . [Income = 8% of 5, 00,000 = ` 40,000]

A.742 Income shall be taxable in the hands of that parent who maintains the child, i.e. Mrs. Durbhagyashali. A.743 It shall not be clubbed in the hands of parent because the income has been earned due to his own skill. It shall be separately taxed in the hands of Matkuram. Exemption of 1,500 will not be given. A.744

CA. AJAY JAIN,9310167881

Illustrations - Answers | 7

Income from debentures shall not be clubbed in the hands of any as the child is suffering from severe disability. In the hands of child income shall be 3,00,000 Less: Deduction u/c VI-A 80 U (1,00,000) 2,00,000

A.745 Rent received

Income in the hands of Roturam Income under house property 2,40,000 (72,000) 1,68,000 Income of Hansmukh u/h Other Sources 5,00,000 x 10%= ` 50,000 (Interest on asset transferred to daughter- in law without any consideration.)

Less: Standard deduction @ 30% Taxable income under head HP Income of Gunwati u/h Other Sources 3,00,000 x 10%= ` 30,000 (Interest on her own income)

A.746 Mr. Byajee u/h Other Sources 5,00,000 x 10% =50,000 Mrs. Byajee u/h Other Sources ` Interest on income =50,000 x 8% = 4,000 Income on further investment of income from asset transferred shall not be clubbed

A.747 Mr. Dhanwan u/h capital gain 20,000 to be clubbed as asset has been transferred without adequate consideration Mrs. Dhanwan u/h capital gain Sale consideration Less: COA Capital gain

70,000 (50,000) 20,000

A.748 Mr. Dhanwan u/h capital gain Capital loss ` 5,000 is to be clubbed, Mrs. Dhanwan u/h capital gain Sale consideration 45,000

CA. AJAY JAIN,9310167881


as losses are also clubbed. (50,000)

Illustrations - Answers | 8
Less: COA

Loss

(5,000)

A.749 Mr. Bhagoda House property ` 84,000 Deemed owner(10,000 x 12) Less: Deduction u/s 24 (30%) (36,000) 84,000 A.750 A.751 Mr. Planner 50,000 x 1,00,000/7,00,000 = ` 7,143 Mrs. Planner Tax can be recovered from Mrs. Bhagoda Mrs. Bhagoda 1,20,000

50,000 (7,143) 42,857 Note: If any asset is transferred to daughter in law without adequate consideration, income from asset transferred will be included in income of transferor.

A.752 Mr. Planner 7,143 Same as above Mrs. Planner 42,857

Note: The answer will remain the same as we always take the amount transferred on 1st day of previous year. A.753 Mr. Planner NIL Mrs. Planner 50,000

CA. AJAY JAIN,9310167881


Note: Since nothing was transferred on of Mr. Planner. A.754 1st

Illustrations - Answers | 9
day of previous year, nothing shall be clubbed in the hands

Share from partnership firm is exempt

A.755 Mr. Parivarik 5,00,000 HUF Nil

A.756 Mr. Parivarik Own share =(1/5th) 1,00,000 Add: Share of spouse= 1,00,000 Add: Share of minor son = 98,500 (1,00,000-1,500) 2,98,500 Mrs. Parivarik Clubbed in the hands of spouse Aawara(Major Son) Own share=(1/5th)1,00,000

Seedhu(Minor son) Clubbed in the hands of that parent whose Total income is greater(before including minors income)

Mr.Jhagdalu Own share= (1/5th)1,00,000

A.757 Mr. Dhani Ram Other incomes (+) Mrs. Dhani Ram [sec 64(1)(ii)] 8,00,000 2,00,000 10,00,000 Fraud Ltd. Profit 25,00,000 (+) 40A(2) 2,00,000 PGBP 27,00,000

A.758 A.759 A.760 A.761 A.762 A.763

Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank.

CA. AJAY JAIN,9310167881


A.764 A.765 A.766 A.767 A.768 Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank. Answer already given in question bank.

Illustrations - Answers | 10

SET OFF & CARRY FORWARD A.772 P/Y 12-13 13-14, 14-15, 15-16, 16-17 A.773 A/Y 12-13 _____ P/y 11-12 Zero Year Following are the P/Y to which loss from STCG of the A/Y 12-13 can be c/f:12-13, 13-14, 14-15, 15-16, 16-17, 17-18, 18-19,19-20 A.774 P/Y 09-10 _______ A/Y 10-11 Following are the A/Y to which loss from speculative business of the P/Y 09-10 can be c/f:11-12, 12-13, 13-14, 14-15 A.775 If nothing is mention then it is assume that it is non speculative business A/Y = 08-09 _____ P/Y= 07-08 carried forward for 8 Years 08-09, 09-10, 10-11, 11-12, 12-13, 13-14, 14-15, 15-16 A.776 P/Y = 12-13 ________ A/Y = 13-14 12-11, 11-10, 10-09, 09-08, 08-07, 07-06, 06-05 A.777 A/Y = 12- 13 _______ P/Y = 11-12 03-04, 04-05, 05-06, 06-07, 07-08, 08-09, 09-10, 10-11 A.778 Profits of business Less: (i) Loss of Business of P/Y (ii) Current year Dep.+ Current year capital expenditure (35,000+40,000) (iii) Business loss of P/Y (25,000) 5,00,000 (30,000) (75,000) 2004-05

CA. AJAY JAIN,9310167881

Illustrations - Answers | 11

(iv) Unabsorbed Depreciation of P/Y+ Scientific research of P/Y (10,000+15,000+45,000) (70,000) Total Income 3, 00,000 Note :- Losses of past year are not allowed inter- head adjustments A.779 Income u/h PGBP Less: Loss u/h PGBP Less: Loss u/h HP p/y 12-13 Taxable Income 8,00,000 40,000 3,00,000 4,60,000 LTCG Less: STCL P/Y 11-12 Less: STCL A/Y 13-14 Taxable Income 4,00,000 30,000 1,00,000 2,70,000

Total Income = (4,60,000 +2,70,000) =7,30,000 Details of losses;1. Loss u/h HP A/Y 13-14 = 3,00,000 - 3,00,000 = Nil 2. STCL of A/Y 13-14 = 1,00,000 - 1,00,000 = Nil 3. Loss u/h HP of A/Y 05-06 = 50,000(Note) 4. STCL of A/Y 12-13 = 3,00,000 - 3,00,000 = Nil 5. Loss u/h PGBP of A/Y 06-06 = 40,000 - 40,000 = Nil Note :- Loss u/h HP cannot be carried forward because 13-14 is the last year of carry forward. A.780 Answer already given in question bank.

A.781 A.782 A.783

Answer already given in question bank. Answer already given in question bank. Answer already given in question bank.

A.784 A.785

Answer already given in question bank. Answer already given in question bank.

A.786

Answer already given in question bank.

A.787 Answer already given in question bank. A.788 Answer already given in question bank.

A.789 Answer already given in question bank. A.790 Answer already given in question bank. A.791 Answer already given in question bank.
[ [

CA. AJAY JAIN,9310167881


A.792 A.793 Answer already given in question bank.

Illustrations - Answers | 12
Answer already given in question bank.

A.794 Answer already given in question bank. A.795 A.796 A.797 A.798 Answer already given in question bank.
[

Answer already given in question bank. Answer already given in question bank. Answer already given in question bank.

A.799 Answer already given in question bank. A.800 Answer already given in question bank.

A.877

AGRICULTURAL INCOME Computation of Total Income of Mr. A For A/Y 13-14 Income u/h Salary Income u/h Capital Gain (Note 1) Income u/h Other Sources (Note 2) Gross Total Income 1. Lottery 2. LTCG 3. STCG u/s 111A 4. Remaining Income (3,60,000 - 1,00,000 - 80,000 - 40,000) 1,40,000 Less: Deduction u/c VI A (i) u/s 80C - Investment in PPF (50,000) Total Income 1. 2. 3. 4. Computation of Tax liability of Mr. A Lottery (30%of 1,00,000 ) Tax on remaining income (90,000 - 90,000 = Nil) LTCG [20% of (80,000 - 80,000)] STCG u/s111A [15% of 40,000-(2,00,000 - 90,000 - 80,000)] Total Tax Liability Add: Education Cess @ 2% of 31,500 Add: SHEC @ 1% of 31,500 Total Tax Liability Rounded off u/s 288B 30,000 40,000 80,000 50,000 1,50,000 1,60,000 3,60,000 1,00,000 80,000 40,000 90,000 3, 10,000 30,000 Nil Nil 1,500 31,500 630 315 32,445 32,450

Notes: 1. Income u/h Capital Gain (i) STCG STCG u/s 111A LTCG Total 2. Income u/h other sources (i) Lottery (ii) Interest (ii) (iii)

1,50,000

1,00,000 60,000

CA. AJAY JAIN,9310167881


Total 1,60,000

Illustrations - Answers | 13

3. It could have been assumed that interest has been received on notified bonds/Securities exemption u/s 10(15) could have been given. A.878 Computation of Total Income of Ms. J for the A/Y 13-14 Income u/h House property Income u/h PGBP Income u/h Capital Gain (Note 1) Income u/h Other Sources - Lottery Gross Total Income 1. Lottery 2. LTCG 3. STCG u/s 111A 4. Remaining Income (8,20,000 - 70,000 - 2,00,000 - 4,00,000) 1,50,000 Less:- Deduction u/c VI A (i) 80C 40,000 (ii) 80 D 10,000 (50,000) Total Income Computation of Tax liability of Ms. J Lottery (30%of 70,000 ) Tax on remaining income (1,00,000-1,00,000 = Nil) LTCG [(20% of 2,00,000-(2,00,000 -1,00,000)] STCG u/s 111A (15% of 4,00,000) Tax Liability Add: Education Cess @ 2% of 1,01,000 Add: SHEC @ 1% of 1,01,000 Total Tax Liability 50,000 1,00,000 6,00,000 70,000 8,20,000 70,000 2,00,000 4,00,000

1,00,000 7,70,000

1. 2. 3. 4.

21,000 Nil 20,000 60,000 1,01,000 2,020 1,010 1,04,030

Notes: (1) Income u/h Capital Gain (i) STCG u/s 111A 2,00,000 (ii) LTCG 4,00,000 Total 6,00,000

A.879 Answer already given in question bank. A.880 Income u/h PGBP Sale price of chips Less: Average market price Less: Expenses of factory Income u/h PGBP (Non Agriculture Income) Agriculture income = 20,000 15,000 A.881 DELETED IN CLASS A.882 Answer already given in question bank. A.883 1,00,000 (20,000) (70,000) 10,000 5,000

CA. AJAY JAIN,9310167881

Illustrations - Answers | 14
8,00,000 (6,00,000) (50,000) 1,50,000 60,000 90,000

Computation of Business Income of Tata Tea Ltd. Sale price of Tea Less: Expenses of Tea factory Less: All Expenses of Tea Gardens Total Business Income Non Agricultural Income = 40% of 1,50,000 Agricultural Income = 60% of 1,50,000 A.884 Non Agricultural Income = 25% of 1,50,000 Agricultural Income = 75% of 1,50,000 A.885 Non Agricultural Income = 35% of 1,50,000 Agricultural Income = 65% of 1,50,000

37,500 1,12,500

52,500 97,500

A.886 Answer already given in question bank. A.887 Answer already given in question bank. A.888 Answer already given in question bank. A.889 Computation of Total Income of Mrs. L for the A/Y 13-14 1. Income u/h Salary 2. Income u/h Capital Gain LTCG 2,00,000 STCG u/s 111A 80,000 3. Income u/h Other Sources (i) Lottery 50,000 (ii) Dividend from Indian co. Exempt Gross Total Income 1. Lottery 2. LTCG 3. STCG u/s 111 A 4. Remaining Income (5,30,000 50,000 2,00,000 80,000) Less: Deduction u/c VI-A 80 E Total Income Statement of tax liability of Mrs. L Step1: Tax on agricultural income + non-agricultural income [4,90,000+7,00,000=11,90,000] 1. Lottery (30% of 50,000) 2. Tax on [Remaining income + Agriculture Income] [1,60,000+7,00,000= 8,60,000] 3. LTCG [20% of 2,00,000] 4. STCG u/s 111A [15% of 80,000] Total Step 2: Tax on [Exemption limit of Mrs. L + Agriculture Income] [2,50,000+7,00,000] 15,000 97,000 40,000 12,000 1,64,000 1,15,000 2,00,000

2, 80,000

50,000 5, 30,000 50,000 2,00,000 80,000 2,00,000 (40,000) 1,60,000 4,90,000

CA. AJAY JAIN,9310167881


Step3: Tax liability (Step1 - Step2) (1,64,000-1,15,000) Add: Education cess [2% of 49,000] Add: SHEC [1% of 49,000] Total Tax Liability

Illustrations - Answers | 15
49,000 980 490 50,470

Note1:- Tax as per slab rate on Remaining income + Agriculture Income (i) 2,50,000 = Nil (ii) 5,00,000 2,50,000 = 2,50,000 x 10% = 25,000 (iii) 8,60,000 5,00,000 = 3,60,000 x 20% = 72,000 97,000

A.890 Computation of Total income of Mr. Hari Sadu for A/Y 13-14 (i) (ii) (iii) (iv) Income u/h salary (10,000 x 12) Income u/h HP (Note 1) Income u/h PGBP Income u/h other sources (i) Interest received on debentures (ii) Lottery Income u/h Capital Gains (i) LTCG (ii) STCG u/s 111A Gross Total Income 1,20,000 1,75,000 Nil 1,00,000 50,000 2,00,000 80,000

1,50,000

(v)

2,80,000 7,25,000 50,000 2,00,000 80,000

1. 2. 3. 4.

Lottery LTCG STCG u/s 111A Remaining Income (7,25,000 - 50,000 2,00,000 80,000)

3,95,000

Less: Deduction u/c VI-A 80DD Total Income

(50,000)

3,45,000 6,75,000

Computation of Tax liability Step 1: Tax on (Agriculture + Non agriculture income) (i) (ii) (iii) (iv) Remaining Income + Agriculture Income (3,45,000 + 5,00,000 = 8,45,000) LTCG (20% on 2,00,000) Lottery (30% on 50,000) 111A (15% on 80,000) Total 69,000 40,000 15,000 12,000 1,36,000

Step 2: Tax on agriculture+ exemption limit = 5,00,000 + 5,00,000 = 10,00,000 5,00,000 = Nil 10,00,000 5,00,000 = 5,00,000 x 20% = 1,00,000

CA. AJAY JAIN,9310167881


Total = 1,00,000 Step 3: Tax liability (Step 1Step 2) (1,36,000 - 1,00,000) Add: Education cess @ 2% of 36,000 Add: SHEC @ 1% of 36,000 Total Tax Liability

Illustrations - Answers | 16
36,000 720 360 37,080

A.891 Computation of total income of Mr. Chulbule Pandey for A/Y 13-14 (i) (ii) (iii) Income u/h PGBP 3,00,000 Income u/h House property 3,00,000 Income u/h Capital gain LTCG 3,00,000 STCG 1,00,000 4,00,000 Income u/h Other sources lottery 90,000 Gross Total Income 10,90,000 1. Lottery 90,000 2. LTCG 3,00,000 3. Remaining income (10,90,000 90,000 3,00,000) 7,00,000 Less: Deduction u/c VI-A (i) 80C 1,20,000 But limited upto 1,00,000 (ii) 80D 15,000 (1,15,000) 5,85,000 Total income 9,75,000 Computation of Tax liability

(iv)

Step 1: Tax on (Agriculture + Non agriculture income ) 1. Remaining Income +Agriculture Income (5,85,000 + 5,00,000 = 10,85,000) 2. Lottery @ 30% of 90,000 3. LTCG @ 20% of 3,00,000 Total Step 2: Agriculture Income + Exemption limit = 5,00,000 + 2,00,000 = 7,00,000 Up to 2,00,000 = Nil Next 3,00,000 = 10% of 3,00,000 = 30,000 Balance (7,00,000 2,00,000 3,00,000) = 20% of 2,00,000 = 40,000 Total (30,000 + 40,000) Step 3: Net tax liability (step 1 step 2) (2,42,500 -70,000) Add: Education cess @ 2% of 1,72,500 Add: SHEC @ 1% of 1,72,500 Total Tax liability Rounded off u/s 288B A.892 Answer already given in question bank. A.893 Answer already given in question bank.

1,55,500 27,000 60,000 2,42,500

70,000 1,72,500 3,450 1,725 1,77,675 1,77,680

CA. AJAY JAIN,9310167881


A.894 Answer already given in question bank. A.895 Answer already given in question bank. A.896 Answer already given in question bank.

Illustrations - Answers | 17

Deductions - Answers
A.803 Computation of total income for the P/Y 12-13 Basic salary (50,000 x 12) Dearness Allowance (10,000 x 12) Employers Contribution Gross Total Income Less: Deductions u/c VI-A (i) LIC premium (ii) 80CCC Pension fund of ICICI (iii) 80CCD Employees contribution a. 7,20,000 x 10% = 72,000 b. 90,000, whichever is lower Employers contribution a. 7,20,000 x 10% = 72,000 b. 90,000, whichever is lower Total Income 72,000 (1,57,000) 6,53,000 72,000 85,000 5,000 80C 8,000 6,00,000 1,20,000 90,000 8,10,000

Note: Salary for the purpose of Sec 80-CCD

CA. AJAY JAIN,9310167881


Basic Salary Add: DA (under terms) 6,00,000 1,20,000 7,20,000 A.804 Answer already given in question bank. A.805 Answer already given in question bank. A.806 A.807 Answer already given in question bank. Answer already given in question bank.

Illustrations - Answers | 18

A.808

Computation of the total income for the P/Y 12-13 Basic salary (2,25,000 + 25,000) (After adding employees contribution to pension scheme) Dearness Allowance (2,25,000 x 40%) Commission based on fixed % of turnover Employers Contribution to (notified pension scheme) NPS of govt. Gross Total Income Less: Deductions u/c VI A (i) Sec 80C NSC purchased during the year 50,000 Repayment of housing loan 10,000 Tuition fees of children 3,000 Deposit in Public provident fund 2,000 65,000 (ii) Sec 80CCC Pension scheme of insurance company 35,000 (iii) Sec 80CCD Employees contribution a. 3,25,000 x 10% = 32,500 b. 25,000, whichever is lower 25,000 As per Sec 80-CCE deduction shall be restricted to Employers contribution a. 3,25,000 x 10% = 32,500 b. 25,000, whichever is lower Total Income Note: Salary for the purpose of Sec 80-CCD Basic Salary Add: Dearness Allowance (30% of 2,50,000) 2,50,000 75,000 3,25,000

2,50,000 1,00,000 1,20,000 25,000 4,95,000

1,25,000 1,00,000 25,000 (1,25,000) 3,70,000

A.809 A.810 1. 2. 3.

Answer already given in question bank. Insurance premium paid on own life (10% of 22,500) Because premium was paid late, insurance company charged late fees of ` 500 Insurance premium paid on the life of mother 2,250 -

CA. AJAY JAIN,9310167881


4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Illustrations - Answers | 19
4,000 2,000 50,000 1,000 2,000 22,000 12,500 2,000 40,000 1,37,750

Insurance premium paid on the life of father Insurance premium paid on the life of Mrs. X Insurance premium paid on the life of his major son (10% of 20,000) Insurance premium due before March 31, 2013 but paid on April 4, 2013 on own life Contribution towards employees provident fund Contribution towards public provident fund Contribution made for participating in unit-linked insurance plan Repayment of loan taken from LIC for purchase of a house Tuition fee of Xs son Investments in units of a notified Mutual Fund for financing infrastructural facility Premium paid for annuity plan of insurance company Total deduction But as per section 80CCE maximum deduction shall be limited to 1,00,000 Therefore, deduction allowable will be 1,00,000

A.811 Gross total income Less: Deduction u/c VI-A (i) 80C (ii) 80CCD ` 30,000 But limited 10% of gross total income of 2,90,000 Total Income A.812 Computation of total income of Amirchand for the assessment year 2013-14 Income under head Salary Basic salary (25,000 x 12) 3,00,000 Dearness allowance (30% of 3,00,000) 90,000 House rent allowance 96,000 Less: Exempt (Note 1) (84,600) 11,400 C.E.A. (150 x 2 x 12) 3,600 Less: Exempt (100 x 2 x 12) (2,400) 1,200 Motor car (1,800 x 12) 21,600 Employers contribution to pension scheme of Central Government [10% of 3,54,000 (3,00,000 + 54,000)] 35,400 Gross salary 4,59,600 Less: Deduction u/s 16 Nil Income u/h salary 4,59,600 Income from other sources 1,10,000 Gross Total Income 5,69,600 Less: Deduction u/c VI-A (i) 80C 30,000 (ii) 80CCD Employees contribution a. 40,000 b. 10% of salary = 10% of 3,54,000 = 35,400 Whichever is lower 35,400 Employers Contribution 35,400 (1,00,800) Total Income 4,68,800 Notes:(i) Calculation of amount of exemption for HRA 2,90,000 70,000 29,000 99,000 1,91,000

CA. AJAY JAIN,9310167881

Illustrations - Answers | 20

Salary for HRA Basic Salary + Dearness allowance (under terms of employment) 3,00,000 + 60% of 90,000 = 3,54,000 Least of the following shall be exempt (i) HRA Received = 8,000 x 12 = 96,000 (ii) Rent paid 10% of salary = 1,20,000 10% of 3,54,000 = 84,600 (iii) 50% of salary = 50% of 3,54,000 = 1,77,000 Least of the above is 84,600. Therefore, exemption shall be 84,600. (ii) For the purpose of computing the maximum limit of 1,00,000 u/s 80CCE, employers contribution to pension fund scheme of govt. shall not be included. Hence, entire deduction of 1,00,800 shall be allowed deduction.

A.813 A.814 A.815

Answer already given in question bank. Answer already given in question bank.

Particulars Basic salary and dearness allowance Telephone allowance Employers contribution towards NPS (13% of ` 5,50,000) Salary income Income from other sources Gross total income (GTI) Less: Deductions Under section 80C (PPF) Under section 80CCC (annuity plan of LIC)

` 5,50,000 60,000 71,500 6,81,500 2,00,000 8,81,500

(a) (b)

(70,000) (5,000) (55,000) (55,000) 1,55,000 Nil 15,000 7,11,500

Under section, 80CCD [contribution of X towards NPS, subject to a maximum of 10% of salary] (c) Under section 80CCD [contribution by employer towards NPS, subject to a maximum of 10% of salary] (d) Maximum deductible amount [i.e., (a) + (b) + (c) , subject to a maximum of ` 1,00,000+(d)] Under section 80CCF (notified infrastructure bonds) deduction deleted from p/y 12-13 Under section 80D (medi-claim insurance premium) Net income A.816 A.817 Gross Total Income 1. Winning from lottery 2. LTCG 3. STCG u/s 111A Answer already given in question bank.

4,00,000 2,00,000 40,000 30,000

CA. AJAY JAIN,9310167881


4. Remaining Income (4,00,000 2,00,000 40,000 30,000) Less: Deductions u/c VI-A (i) 80 E 50,000 (ii) 80 G (refer note) 1,50,000 Total Income Note: Computation of deduction u/s 80G U/s 80G - A 1,00,000 x 100% U/s 80G - B 1,00,000 x 50% Total deduction u/s 80G A.818 Gross Total Income 1. Winning from lottery 2. LTCG 3. STCG u/s 111A 4. Other Incomes Less: Deductions u/c VI-A (i) 80 C (ii) 80 G (refer note) Total Income

Illustrations - Answers | 21
1,30,000

(2,00,000)

Nil 2,70,000

1,00,000 50,000 1,50,000

15,00,000 2,00,000 3,00,000 4,00,000 6,00,000 1,00,000 2,10,000

(3,10,000)

2,90,000 11,90,000

Note: 1. Computation of deduction u/s 80G U/s 80G - A 1,00,000 x 100% 1,00,000 50,000 50,000 10,000 2,10,000 U/s 80G - B 1,00,000 x 50% U/s 80G C (Note 2) 50,000 x 100% U/s 80G D (Note 2) 20,000 x 50% Total deduction u/s 80 G 2. Computation of Adjusted GTI: 1) Gross Total Income 15,00,000 Less: LTCG (3,00,000) Less: STCG u/s 111A (4,00,000) Less: Other deduction u/c VIA (1,00,000) Adjusted Gross Total Income 7,00,000 Maximum Donation = 10% of Adjusted Gross Total Income = 10 % of 7,00,000 = 70,000 A.819 A.820 A.821 Answer already given in question bank. Answer already given in question bank. Answer already given in question bank.

A.822 Answer already given in question bank. A.823 Answer already given in question bank. A.824 Answer already given in question bank. A.825 Answer already given in question bank.

CA. AJAY JAIN,9310167881

Illustrations - Answers | 22

A.826 Income from profession

Computation of total income for A/Y 2013-14 ` 10,00,000 11,80,000 98,000 22,78,000 2,00,000 9,80,000

Capital gains (` 2,00,000 + ` 9,80,000) Income from other sources (` 6,000 + ` 92,000) Gross total income 1. STCG u/s 111A 2. LTCG 3. Other Incomes (22,78,000 - 2,00,000 - 9,80,000) 10,98,000 Less: Deductions u/c VI-A i. Section 80D 10,000 ii. Section 80GG [see note] 1,200 (11,200) Total Income Note It is assumed that all conditions of sections 80GG are satisfied. Adjusted GTI for the purpose of section 80GG: Gross Total Income Less: LTCG 9,80,000 Less: STCG u/s 111A 2,00,000 Less: Other deductions u/c VI-A 10,000 Adjusted Gross Total Income Amount deductible under section 80GG is calculated as fallows
[

10,86,800 22,66,800

22,78,000

(11,90,000) 10,88,000

a. 2,000 x 12 = 24,000 b.25% of Adjusted GTI = 25% of 10,88,000 = 2,72,000 c. Rent paid 10% of Adjusted GTI = 1,10,000 1,08,800 = 1,200 Least of the above is 1,200. Therefore, 1,200 shall be deductible under section 80GG. A.827 Computation of total income for A/Y 2013-14

Professional income\salary 6,00,000 Interest on bank deposit (assumed to be from saving deposit) 50,000 Gross total income 6,50,000 Less: Deductions i. Section 80C 24,000 ii. Section 80D 9,500 iii. Section 80TTA 10,000 iv. Section 80GG (Refer Note 1) 19,350 (62,850) Total Income 5,87,150 Note: (1) Deduction under section 80GG (a) 2,000 x 12 = 24,000 (b) 25% of Adjusted GTI = 25% of 6,06,500 = 1,51,625 (c) Rent paid 10% of Adjusted GTI = 80,000 60,650 = 19,350 Least of the above is 19,350. Therefore, 19,350 shall be deductible under section 80GG. (2) Adjusted GTI: Gross Total Income 6,50,000 Less: Other Deductions u/c VI-A (24,000 + 9,500 +10,000) (43,500) Adjusted GTI 6,06,500 A.828 Answer already given in question bank.

A.829 Answer already given in question bank.

CA. AJAY JAIN,9310167881


A.830 Answer already given in question bank.

Illustrations - Answers | 23

Advance Tax
A.898. Tax Liability of Mrs. A = `1,500+45 = 1,545

On ` 2, 15,000 `2, 00,000 = Nil `15,000 x 10% = `1,500 Total tax liability = 1,500 Add: Education cess @ 3% = 30 Add: SHEC @1% = 15 Total tax liability = 1,500 + 30 + 15 = 1,545 Note:- She is not covered by the provisions of Advance Tax because Tax Liability i,e. `1,545 is less than `10,000. She is not required to pay advance tax. Thus she has to pay tax in A/Y along with return.
A.899.

Tax Liability of Mrs. B = `19,570 On ` 3,90,000 `2,00,000 = Nil

`1,90,000 x 10% = `19,000 Total tax liability = 19,000 Add: Education cess @ 3% = 380 Add: SHEC @1% = 190 Total tax liability = 19,000 + 380 + 190 = 19,570 Note: - She is covered by the provisions of Advance Tax because her Tax liability is more than ` 10,000

CA. AJAY JAIN,9310167881 Due date On 15th September On 15th December On 15th March
A.900. A.901. A.902.

Illustrations - Answers | 24 Amount Payable `19,570 x 30% = 5,871 `19,570 x 60% = 11,742 `19,570 x 100% = 19,570

Yes, she have to pay interest as penalty u/s 234B and 234C. Mrs. C need not to pay any tax on her own, as entire tax on her income has been deposited by way of TDS by her employer. Computation of Income of Mrs. D (i) (ii) Income from Salary Income u/h House Property Gross Total Income Computation of Tax liability of Mrs. D Tax liability [on 2,00,000 = Nil] [on 1,50,000 x10% = 15,000] Add: Education Cess @2% Add: SHEC @1% Tax Payable Less : Tax deducted at source by employer Net tax Payable less than `10,000. She will deposit tax in A/Y along with return. 3,00,000 50,000 3,50,000 15,000

300 150 15,450 (11,000) 4,450

Note:- She is not covered by the provisions of Advance Tax because Tax Liability i,e. `4,450 is

A.903.

Computation of Income of Mrs. E (i) (ii) Income from PGBP Income u/h Other Sources - Interest Gross Total Income Less: Deduction u/c VI-A 80 C - Deposit in NSC Total Income Computation of Tax liability of Mrs. E Tax liability [on 2,00,000 = Nil] [on 2,50,000 x 10% = 25,000] Add: Education Cess @2% Add: SHEC @1% Tax Payable Less: Tax deducted at source by Bank Net tax Payable less than `10,000. She will deposit tax in A/Y along with return. 1,50,000 4,00,000 5,50,000 (1,00,000) 4,50,000 25,000

500 250 25,750 (21,000) 4,750

Note:- She is not covered by the provisions of Advance Tax because Tax Liability i,e. `4,750 is

A.904.

CA. AJAY JAIN,9310167881 Due date Total Amt. payable Upto every due date 15 Sep 50,000 x 30% = 2012 15,000 15Dec 2012 50,000 x 60% = 30,000

Total payment upto the date

Illustrations - Answers | 25 Outstanding Interest Amt. Amount

10,000 (10,000+15,000) 25,000

5,000

5,000 x 1% x 3 months 5,000 x 1% x 3 months Nil

150

5,000

150 Nil 300

15Mar2013 50,000 x 100% = 50,000 Total int. u/s 234 C

(10,000+15,000+25,000) 50,000 Nil

Note: - u/s 234 C, interest liability for deferment of tax is 1% per month for a period of 3 months for every deferment.
A.905.

Due date

15 Sep 2012 15Dec 2012 15 Mar 2013 Total int. u/s 234 C

Total Amt. payable Upto every due date 1,00,000 x 30% =30,000 1,00,000 x 60% = 60,000 1,00,000 x 100% = 1,00,000

Total payment upto the date

Outstanding Interest Amount

Amt.

150 25,000 5,000 (25,000+35,000) 60,000 Nil 40,000 60,000 5000x 1% x 3 Nil Nil 400 40,000x 1% x 1 month 550

Note:- U/s 234C, interest liability for of tax is 1% per month for a period of 3 months for every deferment. However for last Instalment of 15th March, Interest Liability would be 1% for one month.

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