Vivek Gaba Tax Scanner PDF

TAX SCAN-NER
Covering summary of
Income Tax,
and their objectives
The law stated in this book is as amended

By the FINANCE ACT 2017 in Income Tax
Practical Problems are solved as per the

law applicable for assessment year 2018-19
Exclusively for CS-EXECUTIVE Students
CA VIVEK GABA
(ACA, CCTP, B.com)
6th Edition
Assessment Year 2018-19
First Edition: August, 2013
Sixth Edition: March, 2018
Price: ` 560/-
Email: cavgtax@gmail.com, vivekgaba92@gmail.com
©Allrights reserved. No part of this book may be reproduced or distributed in any

manner whatsoever or by any means translated in any other language without prior
written permission of the author.
Every effort has been made to avoid errors and omissions in this publication. Inspite of this, error
may creep in. Any mistake error or discrepancy note may be bought to our notice through mail or
phone call which shall be taken care of in the next edition. It is notified that neither the publisher
nor the author or seller will be responsible for any damage or loss of action to anyone of any kind,
in any manner, there from. It is suggested that to avoid any doubt the reader should cross check all
the facts, law and contents of the publication with original Government publication or notification.
No part of this book may be reproduced or distributed in any means or reproduced on any disc,
tape, perorated media or other information storage device etc. without prior written permission
of the author. Breach of this condition is liable for legal action.
All disputes are subject to Delhi jurisdiction only.

JAI SACHIDANAND
Dedicated to
My parents
Shri Yograj Gaba
Smt. Vinita Gaba
(My Visible God)
Every bit and piece of my work is dedicated to every sleepless

night my mother has spent for me..
PREFACE
The book adopts a fresh and new approach to understand and gain in-depth knowledge of the
provision of taxation in a summarized and illustrative manner for the students of CS-
EXECUTIVE. The law stated in the book is as per the Finance Act 2016/2017 and the
problems are solved keeping in mind the amended provision of the act. The objective of the
book is to present the law in simple and easy language so as to make taxation student
friendly by illustrating provision in graphical and tabular manner.
The book has been written keeping in mind newly introduced OMR based paper in the exams.
There are more than 4,000 objective questions for the practice.
The book has been written keeping in view the new syllabus as notified by the ICSI.
KEY FEATURES OF THE BOOK
a) Suitable for quick revision with 100% coverage: The book covers entire syllabus at a
place and is suitable for quick revision.
b) Includes MCQ: The book includes MCQ for all the chapters which will help you for
preparing for the exam in the best manner.
c) Suitable from revision just before exam: It’s difficult for the students to revise entire
syllabus in one day just before the day of exam. The book has been written keeping in
mind the same and also suitable brushing up the concepts for examination.
d) Includes most important solved problems: The book also contains objective and practical
question that will help students in the application of law.
e) All concepts in simple and easy language: All the provisions have been explained in easy
language and also in graphical and tabular manner to make study easy and simple.
I would like to thank Lord for his constant courage, blessing and everything that has been
provided by Almighty to each one of us. I would like to thank CA Ashish Kalra and CA
Neetu Kalra for their constant support, faith, blessing, encouragement and guidance.
I would like to thank my Parents for their constant love, support, encouragement, blessing and
a big source of inspiration.
I would like to acknowledge the efforts put in by my friends who have always motivated and
inspired me to do my best and give my maximum in each and every situation.
Part A
Direct Tax
Success is not the key to happiness. Happiness is

the key to success. If you love what you are doing,
you will be successful…
INDEXName of Chapter Page
Part A
1. Constitution of India 1 – 21
2. Basic Concepts of Tax Laws 22 – 35
3. Residential Status 36 – 51
4. Income from House Property 52 – 71
5. Income under head Salary 72 – 100
6. Capital Gains 101 – 157
7. Profits & Gains of Business and Profession 158 – 211
8. Income from Other Sources 212 – 231
9. Computation of Total Income 232 – 233
10. Deductions under chapter VIA 234 – 257
11. Income exempt from Income Tax 258 – 262
12. Clubbing of Income 263 – 272
13. Filing of return & Assessment Procedures 273 – 292
14. Advance Tax 293 – 299
15. Taxation of Charitable or Religious Trusts 300 – 307
16. Agriculture Income 308 – 313
17. Alternate Minimum Tax (AMT) 314 – 317
18. Minimum Alternate Tax (MAT) 318 – 321
19. Taxation of AOP/ BOI 322 – 324
20. Appeal 325 – 328
21. Tax deducted at Source 329 – 350
22. Set off & Carry forward of Losses 351 – 357
23. Dispute Resolution Panel 358 – 359
24. Settlement Commission 360 – 361
25. Advance Ruling 362 – 364
26. Tax Planning and Tax Management 365 – 366
27. Double Taxation Avoidance Agreement 367 – 369
28. Transfer Pricing 370– 381
CONSTITUTION OF INDIA 1
TAX: Meaning & Need of Taxes
1 MEANING OF TAX
A tax (from the latin taxo) is mandatory financial charge / levy

imposed upon a taxpayer (an individual or a legal entity) by
Government in order to fund various public expenditures.
ARTICLE 265: Taxes not to be imposed saved by Authority of Law

 NO TAX shall be levied or collected except by authority of law
‘”
 Considering above constitutional provision, tax can be defined as “compulsory exaction

of money under force of an enactment”.
2 NEED OF TAXES
 Primary aim is to raise revenue to fund governance of nation.

 Money raised by taxation to carry out
many functions Such as:
 Infrastructure
 Education
 health
 military
 defence and other operation of
govt. itself
3. LEVY OF TAX & POWER TO ENACT LAW PROVIDED BY CONSTITUTION:
 Constitution of India has vested legislative power (power to make laws) with
parliament and state legislature.
1|Page
For Classes & Information: 1
VIVEK GABA
iVidya Academy, Laxmi Nagar, Delhi, Ph: 7703880232
ARTICLE 254: Inconsistency between laws made by parliament and laws
made by Legislatures of State
Subject to the provision of this Constitution

- Parliament may make laws for the whole or any part of territory of INDIA, and
- Legislative of State may make laws for the whole or any part of STATES.
(1) No law made by the Parliament shall be deemed to be invalid on the ground that it
would have extra-territorial operation.
ARTICLE 246: Subject-matter of laws made by Parliament and by legislature

of States
(1) Notwithstanding anything in clauses (2) and (3),

Parliament has exclusive power to make laws
- with respect to any matters enumerated in List I of the VIIth Schedule of the
constitution(in this Constitution referred as ―Union List‖)
(2) Notwithstanding anything in clauses (3), Parliament and, Subject to clause (1),
Legislature of any State shall also have power to make laws
with respect to any matters enumerated in List III of the VIIth Schedule of the
constitution(in this Constitution referred as ―Concurrent List‖)
(3) Subject to clause (1) and (2),

Legislature of any State has Exclusive power to make laws for such state or any
part thereof
- with respect to any matters enumerated in List II of the VIIth Schedule of the
constitution(in this Constitution referred as ―State List‖)
List III: Concurrent

Fields of Legislature List I: union List List II: State List
List
(VII Schedule) of 1. ______________ 1. 1. ________________
Constitution of ________________
India 97. Any other matter

not enumerated in 66.
List II or List III _______________ 47. ______________
Power of Legislation Parliament State Legislature Parliament as well as
(Article 246) State Legislature
Extent of Whole of India Whole of State Whole of India (CG)
applicability of law Whole of State (SG)
so made (Article
245)
2|Page
VIVEK GABA
4 TYPES OF TAXES
Particular Direct Taxes Indirect Taxes

Basic Meaning Taxable person and the Taxable person and the
person effectively paying person effectively paying the
the tax (i.e., the final tax (i.e., the final taxpayer is
taxpayer) are normally normally different.
same.
Indirect tax (paid to
Direct tax (paid to government) is supposed to
government) cannot be be shifted from taxable person
transferred or shifted to to a different person.
another person Example: GST & Custom
Duty.
Example: Income Tax. IDT = Tax collected indirectly
from final taxpayer.
DT= Tax collected directly
from final taxpayer.
Nature of Tax Direct tax is progressive by Indirect tax is regressive by
nature. nature.
 These are linked  These are not linked
to paying capacity to the paying
capacity.
Indirect Taxation is gaining popularity due to psychological reasons.
 Psychology with direct taxes: It is psychologically very difficult

For a person to pay some amount after it is received in his
hands. Hence, there is psychological resistance. [This is the
reason why even Income tax act is widening the scope of TDS
& Advance tax].
 Psychology with Indirect taxes: Since the price of goods or services is already
inclusive of IDT, the customer i.e. the ultimate tax payer does not feel a direct pinch
while paying IDT and hence, resistance to IDT is much less compared to resistance
to direct taxes.
3|Page
VIVEK GABA
Constitution of India: Meaning
 The Constitution lays down the basic structure of

government under which the people are governed.

 It establishes the main organs of government- the executive,

the legislature and the judiciary.

 The constitution not only defines the powers of each organ

but also demarcates their responsibilities.

 It regulates the relationship between the different organs and

between the government and the people.
CONSTITUTION
GOVERNMENT THE PEOPLE
LEGISLATIVE Make Laws
EXECUTIVE Enforces Laws
JUDICIARY Interprets Laws
4. UNIQUENESS OF OUR CONSTITUTION
 It is the LONGEST WRITTEN CONSTITUTION OF ANY INDEPENDENT NATION in the

world containing Total 448 articles (Earlier 395) and 12 schedules.
 Dr. B. R. Ambedkar was the Architect of Indian Constitution.
TWO Important Dates in Indian History:

15th August 1947 Independence The date on which India achieved independence.
Day
th
26 January, 1950 Republic Day The date on which the Constitution of India came into
force as the governing document of India.
The constitution is superior to all other laws of the country. Every law enacted by the
government has to be in conformity with the constitution, (if it is not in conformity with
constitution, then it being ultra-virus to constitution will be invalid and void.
Structure Of Government: 3 Organs
4|Page
VIVEK GABA
3 ORGANS/DEPARTMENTS
LEGISLATIVE ORGAN EXECUTIVEORGAN JUDICIARYORGAN

(Make Laws) (Implement Laws) (Interprets Laws)
(Central Parliament President Court

Level) +
Council of Ministers
(State Level) Legislative Assembly Governor Court

+
Council of Ministers
4. [A] STRUCTURE OF PARLIAMENT (LEGISLATIVE BODY)
Parliament
Lok Sabha Rajya Sabha

House of the People Council of States
(Lower house) (Upper house)
Max. No. of 552 members 250 members
Members
Leader of Narendra Modi (BJP) Arun Jaitely (BJP)
house
Leader of Vacant Ghulam Nabi Azad, INC (since June
opposition 2014)
5|Page
VIVEK GABA
5. [B] STRUCTURE OF CENTRAL GOVERNMENT (EXECUTIVE BODY)
works with
President (Head) Council of Members
(They aid and advice President)
Head (Prime Minister) Others
Minister of External Affairs
Minister of Finance Minister of Home Affairs
Minister of Textile
6. [C] STRUCTURE OF JUDICIARY (JUDICIAL BODY)
Discussed later in detail

Amendment of the Constitution of India due to GST Laws
 Constitution (101st Amendment Act, 2016 was enacted on 8th September, 2016.
Significant amendment made by the Constitution (101st

Amendment) Act, 2016 are as follows:
1. The GST shall be levied on all goods and services except alcoholic liquor for
human consumption.
7. Article 366 (12A):
“Goods and services Tax” means any tax on SUPPLY of goods, or services
or both EXCEPT taxes on the supply of the alcoholic liquor for human consumption;
(Inserted clause)
6|Page
VIVEK GABA
2. The tax shall be levied as dual GST separately by the Union and the States.
 Parliament will have power to make laws with respect to GST imposed by
 the Union (CGST) and the State Legislature will gave power to make laws
with respect to GST imposed by the States (SGST).
 Parliament will have exclusive power to make laws with respect to GST
where supply of goods and/or services takes place in the course of
inter-state trade or commerce (IGST).
 Article 246-A: Special provisions with respect to GST (detailed discussion later)
3. Petroleum & petroleum products would subject to GST.

[However, it has been decided that five products, viz. petroleum crude, motor
spirit (petrol), high speed diesel, natural gas and aviation turbine fuel would be kept
out the purview of GST in the initial years of implementation]. Refer Article- 279-A(5).
4. In the case of tobacco and tobacco products, the Centre alone would have the power
to levy excise duty in addition to the GST.
5. Taxes on entertainments and amusements to extent levied and collected by a

Panchayat or a Municipality or Regional Council or a District Council shall
not be subsumed under GST.
The local bodies of states could continue to levy such taxes.
6. Article 279-A of the Constitution empowers the President to constitute a joint forum
of the Centre and States namely, Goods and Services tax Council (GST Council).
(GST Council was formed on 10.09.2016 & notified on 12.09.2016)
GST Council Consists of the following:

 Union FM & Union Minister of State (Revenue)
 Ministers in Charge of Finance / Taxation of each State
 Chairperson – Union FM
 Vice Chairperson – to be chosen amongst the ministers of State Government.
Council to be guided by need for:

 A harmonized structure of GST; and
 A harmonized national market for goods & Services
Council to make recommendations on:

 Taxes to be subsumed in GST
 Exemptions & Threshold limits
 GST rates
 Model of GST Law 7 & Procedures etc.
7|Page
VIVEK GABA
Important Point:
GST Model = Dual GST Model in India
Dual Model: the Centre and State simultaneously levying it on a common tax base.
Part XI of Constitution: RELATIONS BETWEEN THE UNION AND THE STATES
Legislative Relations (Distribution of Legislative Powers
Question: Why does introduction of GST require a Constitutional Amendment?

Answer:
Currently, the fiscal powers between the Centre and States are clearly demarcated in the
constitution with almost no overlap between the respective domains.
 The Centre has powers to levy tax on the manufacture of goods (except alcoholic
liquor for human consumption, opium, narcotics etc.) while the States have powers to
levy tax on the sale of goods. In the case of inter-state sales, the centre has power to
levy tax (the central sales tax) but, the tax is collected and retained entirely by the
sates.
 As foe services, it is Centre alone that is empowered to levy Service tax. Introduction
of the GST required amendments in the Constitution so as to simultaneously empower
the Centre and the States to levy and collect this tax. The constitution of India has
been amended by the constitution (101st amendment) Act, 2016 for this purpose. Article
246A of the constitution empowers the Centre and the States to levy and the collect
the GST.
ARTICLE 246-A: Special provision with respect to GOODS AND

SERVICES TAX.
This is a NEW ARTICLE inserted in the constitution (Special provision for GST). It says that
(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and,
subject to clause (2), the Legislature of every State, have power to make laws with
respect to goods and services tax imposed by the Union or by such State. (CGST,
SGST & UTGST)
Author Observation:
Legislative Competence to make laws w.r.t. to levy/imposition of GST:
- Parliament empowered to levy GST.
- Simultaneously, Legislature of State also empowered to levy GST.
With respect to GST, following articles have been overruled:
8|Page
VIVEK GABA
 Article 246
 Article 254
(2) Parliament has exclusive power to make laws with respect to goods and services tax
where the supply of goods, or of services, or both takes place in the course of inter-State
trade or commerce.(IGST).
Author Observation:
 GST leviable on Inter-State supply = Integrated (IGST)
 Parliament has exclusive power to make law with respect to IGST.
Explanation: The provision of this article shall in respect of goods & services referred to in
clause 5 of 279A, take effect from the date recommended by GST Council.
Author Observation:
Article 279A(5) covers following 5 goods:
 Petroleum crude,
 High speed diesel, motor spirit (commonly known as petrol),
 Natural gas and aviation turbine fuel.
GST on these will be applicable from such date as will be recommended by GST council in
future.
ARTICLE 248: Residuary powers of Legislature
(1) Subject to Article 246A, Parliament has exclusive powers to make any law with
respect to any matter not enumerated in the Concurrent List or State List
(2) Such power shall include the power of making any law imposing a tax not mentioned in
either of those lists.
ARTICLE 254: Inconsistency between laws made by parliament and

laws made by Legislatures of State
(1) In case there is a conflict between the laws legislated by State Government and Central
Government in respect of entries contained in Concurrent list, law made by Union
Government prevails.
One exception to this rule, if law made by State contains any provision repugnant (in conflict)
to earlier law made by Parliament, law made by State Government prevails, if it has
received assent of President. Even in such cases, Parliament can make fresh law and amend,
repeal or vary law made by State.
9|Page
VIVEK GABA
CERTAIN TAXATION ENTRIES IN UNION AND STATE LIST
(Before Introduction of GST)
List I: Union List List II: State List
82 Taxes on incomeotherthan 46 Taxed on Agricultural Income

Agricultural Income
83 Duties of customs including export
duties
84 Duties of excise on tobacco and 51 Duties of excise on
other goods produced and (a) Alcoholic liquor for human
manufactured in India consumption
Except (b) Opium and narcotics
(a) Alcoholic liquor for human But not including
consumption Medicinal and toilet preparations
(b) Opium and narcotics containing alcohol, opium and
But not including narcotics
Medicinal and toilet preparations
containing alcohol, opium and
narcotics
86 Wealth Tax (DELETED)
92-A Taxes on sale or purchase of goods 54 Taxes on sale or purchase of goods
(1956) (other than newspaper), where such (1956) (other than newspaper)(VAT)
sale or purchase takes place in subject to Entry 92A of List I
course of Inter-State
Trade/Commerce
(CST)
92-C Taxes on Service (Not Effective) 55 Tax on Advertisement
97 Any other matter not enumerated in 60 Taxes on professions, trades and
List II or III including any tax not employments
mentioned in either of those list
(Example:- Service Tax)
10 | P a g e
VIVEK GABA
CERTAIN TAXATION ENTRIES IN UNION AND STATE LIST
(After Introduction of GST)
List I: Union List List II: State List
82 Taxes on incomeother than 46 Taxed on Agricultural Income

Agricultural Income
83 Duties of customs including export
duties
84 Duties of Excise on following goods 51 Duties of excise on
manufactured or produced in India (c) Alcoholic liquor for human
namely: consumption
i. Petroleum Crude (d) Opium and narcotics
ii. High Speed Diesel But not including
iii. Motor Spirit (Petrol) Medicinal and toilet preparations
iv. Natural Gas containing alcohol, opium and
v. Aviation Turbine Fuel narcotics
vi. Tobacco & Tobacco Products
86 Wealth Tax (DELETED)
92-A Taxes on the sale of petroleum 54 Taxes on the sale of petroleum
(1956) crude, high speed diesel, motor spirit (1956) crude, high speed diesel, motor spirit
(commonly known as petrol), natural (commonly known as petrol), natural
gas, aviation turbine fuel and gas, aviation turbine fuel and
alcoholic liquor for human alcoholic liquor for human
consumption, sale in the course of consumption, but not including sale
inter-State trade CST) in the course of inter-State trade or
commerce or sale in the course of
international trade or commerce of
such goods.”(VAT)
92-C Taxes on Service (Not Effective) 55 Tax on Advertisement
97 Any other matter not enumerated in 60 Taxes on professions, trades and
List II or III including any tax not employments
mentioned in either of those list
(Example:- Service Tax)
11 | P a g e
VIVEK GABA
Summary Table:
Goods/Services Supply Production Intra-State Sale Inter-State Sale

(Excise) (VAT) (CST)
Alcoholic liquor NO Yes Yes Yes
for human (NEVER) (State Excise)
consumption
Tobacco & Yes Yes note 1
NO NO
Tobacco (Cen. Excise)
products
5 Petroleum NO Yes note 2
Yes Yes
Product (for (Cen. Excise)
Sometime)
Money NO NO NO NO
Security NO NO NO NO
Note 1: Amendment to Entry 84 of COI + Amendment made in CEA, 1944 ( by Taxation law Amendment Act, 2017)
Note 2:Amendment made in CST Act, 1956 (by Taxation law Amendment Act, 2017)
ARTICLE 279A: Formation of GOODS AND SERVICES TAX Council
Section 12 of the Act proposes to insert a new Article 279A after Article 279 which deals
with Goods andServices Tax Council.
This is a new article (Formulation of GST Council) which reads as follows:
 The President shall, within sixty days from the date of commencement of the
Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a
Council to be called the Goods and Services Tax Council (GSTC).
(GST Council was formed on 10.09.2016 & notified on 12.09.2016)
The Goods and Services Tax Council (GSTC) shall consist of the following members,
namely:—
i. Chairperson- Union Finance Minister;
ii. Member from Central Govt. - Union Minister of State in charge of Revenue or
Finance;
iii. Members from State Govt. – Minister of Finance or any other Minister nominated by
each State Government.
iv. Vice chairperson – to be chosen amongst the Ministers of State Government.
12 | P a g e
VIVEK GABA
7. IMPORTANT NOTE:
i. One half of the total number of Members of the Goods and Services Tax Council
(GSTC) shall constitute the quorum at its meetings.
ii. Every decision of the Goods and Services Tax Council (GSTC) shall be taken at a
meeting, by a majority of not less than three-fourths of the weighted votes of the
members present and voting, in accordance with the following principles, namely:—
iii. The vote of the Central Government shall have a weightage of one third of the total
votes cast, and
iv. The votes of all the State Governments taken together shall have a weightage of two-
thirds of the total votes cast, in that meeting. (Refer : Illustration at the end)
v. 3/4th Majority is prescribed so that neither Union nor states in isolation i.e., by their
own can take any decision
Need of GST Council:
 GST Council shall be guided by the need for a harmonised structure of goods and
services tax and for the development of a harmonised national market for goods and
services.
The Goods and Services Tax Council (GSTC) shall make Recommendations to the Union
and the States on —
i. The taxes, cesses and surcharges levied by the Union, the States and the local
bodies which may be subsumed in the goods and services tax;
ii. The goods and services that may be subjected to, or exempted from the goods and
services tax;
iii. Model Goods and Services Tax Laws, principles of levy, apportionment of Integrated
Goods and Services Tax and the principles that govern the place of supply;
iv. The threshold limit of turnover below which goods and services may be exempted from
goods and services tax;
v. The rates including floor rates with bands of goods and services tax;
a. Any special rate or rates for a specified period, to raise additional resources during any
natural calamity or disaster;
b. Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu
and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand; and
vi. Any other matter relating to the goods and services tax, as the Council may decide.
13 | P a g e
VIVEK GABA
vii. The Goods and Services Tax Council (GSTC) shall recommend the date on which the
goods and services tax be levied on petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel.
LEGISLATIVE PROCEDURE
(Law making process at level of Parliament)
PASSING OFF BILLS by PARLIAMENT
Types of Meaning Some Features

Bills
Money Bill1 A bill which deal  Money bill can only be introduced in the LokSabha.
with imposition,
 Upon being passed in LokSabha, are sent to the
abolition and
RajyaSabha, where it can be deliberated on for up to
alteration of any
14 days.
tax.
 If not rejected by the RajyaSabha, or 14 days lapse
from the introduction of the bill in the RajyaSabha
without any action by the house, or recommendations
made by the RajyaSabha are not accepted by
LokSabha, the bill is considered passed.
Note: Finance Bill is the part of Money Bill.
1
Ordinary Bill A bill other than  These can be introduced in either of the house.
money bill
 After the bill has been passed by the house where it
was ordinarily tabled (LokSabha or RajyaSabha), it is
sent to the other house, where it is kept for a
maximum period of 6 months.
 If the other house rejects the bill or a period of 6

months elapses without any action by that House, or
the House that originally tabled the bill does not
accept the recommendations made by the members
of the other house, it results in a deadlock. This is
resolved by a joint sitting of both houses, presided
over by the speaker of the LokSabha and decided by
a simple majority.
CONSTITUTIONAL PROVISIONS RELATED TO FINANCE
1
A money bill can be introduced in LokSabha only. If any question arises whether a Bill is a Money Bill or not, the
decision of Speaker thereon is final. The Speaker is under no obligation to consult anyone incoming to a decision
or in giving certificate that a Bill is a Money Bill. The certificate of the Speaker to the effect that a Bill is a Money
Bill. The certificate of the Speaker to the effect that a Bill is a Money Bill, is to be endorsed and signed when it is
transmitted to RajyaSabha and also when it is presented for his assent.
14 | P a g e
VIVEK GABA
Part XII of Constitution: FINANCE, PROPERTY, CONTRACTS AND SUITS
ARTICLE 265: Taxes not to be imposed saved by authority of law
NOTAX shall be levied or collected except by authority of law (i.e ACT)
ARTICLE 269A: Levy and collection of Goods and Service tax in course of Inter-
State trade or commerce.
This is a new article (levy & collection of IGST) which reads as follows:
GST in Inter-State supply shall be levied & collected by Central Government, but shall be
apportioned.
(1) Goods and services tax on supplies in the course of inter-State trade or commerce
shall be levied and collected by the Government of India and such tax shall be
apportioned between the Union and the States in the manner as may be providedby
Parliament by lawon the recommendations of the Goods and Services Tax Council.
Explanation — for the purposes of this clause, supply of goods, or of services, or both in the
course of IMPORT into the territory of India shall be deemed to be supply of goods, or of
services, or both in the course of inter-State trade or commerce.
Author Observation:
GST leviable on Inter-state supply = IGST
 Parliament/CG will levy and collect IGST.
 IGST shall be apportioned between the union (CG) and the states.
 Manner of apportionment has been laid down under IGST Act made by Parliament.
(5) Parliament may, by law, formulate the principles for determining the place of supply,
and when a supply of goods, or of services, or both takes place in the course of
inter-state trade or commerce.
Author Observation:
IGST Act has been made by parliament has these purposes.
Principle for determination of Place of Supply:
Place of Supply of Goods Sec 10: POS of goods (other than import/export supply)
Sec 11: POS of in case of Import/export supply)
Place of supply of Services Sec 12: POS of services where both supplier and recipient
are located in India
Sec 13: POS of services where supplier or recipient is located
outside India
Principle for determination of Place of Supply:
Inter-State Supply Section 7

Intra-State Supply Section 8
15 | P a g e
VIVEK GABA
1. INTER-STATE SUPPLY
The GST to be levied by the Centre on intra-state supply of goods and/or services would be
called the Central GST (CGST) and that to be levied by the states would be called State
GST (SGST).
 The CGST and SGST would be levied at rates to be jointly decided by the Central
and States.
 The rates would be notified on the recommendations of the GST Council.
Note: Supply within Union Territory (without legislature) is also intra-state supply. Such supply
would attract CGST and UTGST.
1. INTER-STATE SUPPLY
 An IGST would be levied and collected by the Centre on inter-state supply of goods
and services. IGST will be a sum total of CSGT and SGST/UTGST.
 Accounts would be settled periodically between the Centre and States to ensure that
SGST portion of IGST is transferred to the destination State where the goods or
services are eventually consumed.
2. LEGISLATIVE FRAMEWORK:
Intra-State Central Goods and Services Act, 2017 It is levying CGST.

Supply State Goods and Services Act, 2017
[29 states and 2 union Territories (with state
legislature) will be having their respective SGST
Acts] It is levying SGST
Though there would be multiple SGST legislations,
the basic features of law, such as chargeability,
definition of taxable event and taxable person,
classification and valuation of goods and services,
procedure for collection and levy of tax and like
would be uniform in all the SGST Legislation, as far
as feasible. This would necessary to preserve the
essence of dual GST.
Union Territory Goods and services Tax Act, 2017
[All 5 Union territories (without state legislature) will
be governed by single UTGST Act] It is Levying UTGST
Inter-State Integrated Goods and Services Tax Act, 2017 It is levying IGST
Supply
16 | P a g e
VIVEK GABA
Threshold Exemption & Composition Scheme:
In GST regime, tax (i.e. CGST and SGST/UTGST for Intra-State supplies and IGST for
inter-State supplies) shall be paid by every taxable person and in this regard provisions
have been prescribed in the law.
However, for providing relief to small businesses, following provisions have been made:
Threshold Exemption Supplier having aggregate turnover upto This Exemption is only
20 lakhs (for Notified States, the Limit is for supplier making intra-
10 lakhs) state supply.
Composition Levy Optional facility to supplier having The optional facility is for
aggregate turnover in the preceding year supplier making Intra-
did not exceed 75 lakhs not exceed state supply & Inter-State
100 lakhs. Supply.
Such supplier shall be liable to pay
GST at a notified rates (NO ITC shall
be admissible to them)& Further
composition levy cannot be collected
from recipient.
ARTICLE 270: Taxes levied and distributed between the Union and the
States
(1) All of the taxes and duties referred in Union List
Except - the duties and taxes referred in Article 268, 268-A and 269
- Surcharges on taxes and duties referred in Article 271
- anycess levied for specific purposes under any law made by Parliament
 shall be levied and collected by Government of India and
 shall be distributed between Union and States in the manner provided in clause (2)
(2) Such % as prescribed referred to the net proceeds of any such tax or duty in any FY
 shall not form part of the Consolidated fund of India,
butshall be assigned to the States within which the tax or duty is leviable in that
year
AND
 shall be distributed among States in such manner as may be prescribed in clause (3)
(3) In this article “PRESCRIBED” means prescribed by President by order after considering
the recommendation of the FINANCE COMMISSION.
(4) (1A) + (1B)
 CGST levied on Intra-State Supply (Article 246A(1) shall also be distributed.

 IGST component apportioned to the Union (Article 269A(1) shall also be distributed.
17 | P a g e
VIVEK GABA
ARTICLE 271: Surcharge on certain duty and taxes for the purpose
of Union
Notwithstanding anything contained Article 270

Parliament may at any time increase any of duties and taxes as referred in Article 270, by a
SURCHARGE for purposes of the Union
and the whole proceeds of any such surcharge shall form part of CONSOLIDATED FUND
OF INDIA.
Other
Other AmendmentsininOld
Amendments OldArticles
Articles after
after CAA,
CAA,2016
2016
1. AMENDMENT TO ARTICLE 249

Article 249 deals with the power of parliament to legislature with respect to a matter in the
state list in the national interest. After amendment article 249(1) read as follows –Article 249(1)
– Notwithstanding anything in the foregoing provisions of this Chapter, if the Council of States
has declared by resolution supported by not less than two- thirds of the members present
and voting that it is necessary or expedient in the national interest that Parliament should
make laws with respect to Goods and service tax provided under article 246A or any
matter enumerated in the State List specified in the resolution, it shall be lawful for Parliament
to make laws for the whole or any part of the territory of India with respect tothat matter while
the resolution remains in force.that matter while the resolution remains inforce.
Article 250 deals with the power of parliament to legislature with respect to a matter in the
state list if a proclamation of emergency is in operation. After amendment article 250(1) read
as follows –
Article 250 (1) Notwithstanding anything in this Chapter, Parliament shall, while a Proclamation
of Emergency is in operation, have power to make laws for the whole or any part of the
territory of India with respectGOODS AND SERVICE TAX provided under article 246Aor any
of the matters enumerated in the State List.Knowledge)
Article 268 deals with duties levied by union but collected and appropriated by the states. The
amendment propose some deletion of words . After amendment article 268 read as follows –
(1) Such stamp duties are mention in the union list shall be levied by the government of
India but shall be collected–
In the case where such duties are leviable within any union territory
In other cases, by the states within which such duties are respectively leviable.
18 | P a g e
VIVEK GABA
(2) The proceeds in any financial year of nay such duty leviable within any state shall not
form part of consolidated fund of India, but shall be assigned to states.
3. OMISSION OF ARTICLE 268 A
Article 268A deals with service tax levied by Union and collected and appropriated by the
Union and States.This has been omitted being irrelevant.
4. OMISSION OF ARTICLE 269
Article 269 deals with taxes levied and collected by the Union but assigned to the States.The
amended Article 269 (1) reads as follows -Article 269 (1)-Taxes on the sale or purchase of
goods and taxes on the consignment of goods except asprovided in Article 269A shall be
levied and collected by the Government of India but shall be assigned and shall be deemed
to have been assigned to the States on or after the 1st day of April, 1996 in the manner
provided in clause (2).
5. NEW ARTICLE 269A
The newly inserted Article 269A provides for levy and collection of goods and services tax in
course of inter-State trade or commerce.
Article269A(1) provides that goods and services tax on supplies in the course of inter-State
trade or commerceshall be levied and collected by the Government of India and such tax shall
be apportioned between the Unionand the States in the manner as may be provided by
Parliament by law on the recommendations of the Goodsand Services Tax Council.
The explanation to this clause provides that supply of goods, or of services, or both in the
course of import intothe territory of India shall be deemed to be supply of goods, or of
services, or both in the course of inter-Statetrade or commerce.
Note: IGST Act, 2017 was passed by Parliament on the basis of Article 269A.
Article269A(2) provides that the amount apportioned under clause (1) shall not form part of
the ConsolidatedFund of India.
Article 269A(3)provides that where an amount collected as tax levied has been used for
payment of the taxlevied by a State under Article 246A, such amount shall not form part of
the Consolidated Fund of India.
Article 269A(4)provides that where an amount collected as tax levied by a State under article
246A has been used for payment of the tax levied under clause (1), such amount shall not
form part of the Consolidated Fund of the State.
19 | P a g e
VIVEK GABA
Article 269A(5)provides that the Parliament may, by law, formulate the principles for determining
the place of supply, and when a supply of goods, or of services, or both takes places in the
course of inter-State trade or commerce.
Article 270 deals with distribution of revenues between the Union and States. After amendment
Article 270 (1)reads as follows -
The newly inserted clauses are -
Article 270(1A) - The tax collected by the Union under clause (1) of Article 246A shall
also be distributedbetween the Union and the States in the manner provided in clause(2).
Article 270(113) - The tax levied and collected by the Union and clause (2) of article 246A
and article 269A,whichhas been used for payment of the tax levied by the Union under
clause (1) of article 246A, and the amountapportioned to the Union under clause (1) of
article 269A, shall also be distributed between the Union and theStates in the manner
provided in clause (2).
Article 271 deals with surcharge on certain duties and taxes for the purpose of the Union.
After amendmentArticle 271 reads as follows-
Article 271 - Notwithstanding anything in Articles 269 and 270, Parliament may at any time
increase any of theduties or taxes referred to in those Articles, except the goods and services
tax under Article 246A, by a surchargefor the purposes of the Union and the whole proceeds of
any such surcharge shall form part of the ConsolidatedFund of India.
Article 286 deals with the restrictions as to imposition of tax on the sale or purchase of the goods
by State. After amendment, Article 286 reads as follows:
Article 286 (1) - No law of a State shall impose, or authorize the imposition of, a tax on the
supply of goods or of services or both, where such supply takes place-
1. outside the State; or
2. in the course of the import of the goods into, or export of the goods out of, the
territory of India.
3. Article 286 (2) - Parliament may by law formulate principles for determining when a
supply of goods or services or both takes place in any of the ways mentioned in clause
(1).
20 | P a g e
VIVEK GABA
How to Amend Constitution of India?? (Just for Knowledge)
Constitutional Amendment Bills are basically of 3 types

 Bill that can be passed by simple majority by both the houses.
 Bill that needs to passed by both the houses separately by absolute majority of the
total membership & by special majority of not less than 2/3 members of house present
& voting.
 Bill that needs to be passed as mentioned in point (ii) & further needs to be ratified by
at least half of the states.
 A constitution amendment bill can be introduced in any house of the parliament.
 A bill for the purpose of amendment of constitution CAN NOTbe introduced in any
state legislature.
 The Ordinance making power of the President CAN NOTbe used

to amend the Constitution.
 Prior recommendation of President is NOT needed in introducing the constitution

amendment bills.
 Constitution Amendment Bills are not treated as Money Bills or Financial Bills even if
they have some provisions related to them.
 A constitution amendment bill must be passed in both the houses separately by

absolute majority (more than 50%) of the total membership of that house and by
special majority of not less than 2/3 members of the house present and voting.
 The expression “total membership” means the total number of members comprising the
House irrespective of whether there are vacancies or absentees on any account.
 The expression “present and voting”, means members who vote for “ayes” or for
“noes”. Members who are present in the House and vote “abstention” either through
the electronic vote recorder or on a voting slip or in any other manner, are not treated
as “present and voting.
 If there is a disagreement between the two houses on a constitution amendment bill,

there is NO provision of joint sitting to resolve the deadlock.
 If a bill seeks to amend the federal provisions of the Constitution, it must also be
ratified by the legislatures of half of the states by a simple majority.
 Once the bill is passed in both houses, the bill is sent to president for approval. The
24th Amendment Act of 1971 had made it obligatory for the President to give hisassent
to a constitutional Amendment Bill. Thus, for a Constitution amendment bill, a President
can neither withhold his assent not return the bill for reconsideration.
21 | P a g e
VIVEK GABA
BASIC CONCEPT OF TAX LAWS 2
FORMATION OF ACT
Budget for every year presented on last working day of February.

However, in the election year, the Budget is presented after the formation of
new government.
Budget 2016 presented on 1st February 2017 containing Finance Bill, 2017
and becomes Act on 31st March 2017
Finance Bill contains amendments in Direct and Indirect taxes.
Normally amendments are for the previous year 31.3.2018 i.e.

Assessment Year 2018-19.
Bill when passed by LokSabha&RajyaSabha and assented by President becomes Finance Act,
2017.
RATE OF TAX (given in FA)

for Assessment Year 2018-19
Individual , HUF , AOP/BOI

Individual (Resident less than Individuals
60 year, Non-resident-in all Resident, age of 60 years or Resident, age of 80 Rate
cases) HUF, AOP/BOI & more at any time during the years or more at any
artificial juridical person PY but less than 80 years time during the PY
Up to ` 2,50,000 Up to ` 3,00,000 Up to ` 5,00,000 Nil
` 2,50,001 to ` 5,00,000 ` 3,00,001 to ` 5,00,000 Not applicable 5%
` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 10,00,000 ` 5,00,001 to ` 20%
10,00,000
Above ` 10,00,000 Above ` 10,00,000 Above ` 10,00,000 30%
The rates of tax are on incremental basis.
For Classes & Information: 23 |22

Page
VIVEK GABA
@
Sec 87A Rebate of maximum ` 2,500
(Amended by Finance Act 2017)
Rebate is allowed from tax paid subject to fulfillment of following conditions:
(1) The assessee is an individual.
(2) He is resident in India (ROR or RNOR),
(3) His total income*upto` 3,50,000
Quantum: LOWER of following

(i) the income tax payable or;
(ii) `2,500
*
Total income = GTI- deduction u/s 80C to 80U.
ASSESSEE
Resident Individual Resident individual having

Other than
aged 80 years or
resident individual total income up to `5,00,000
more
No question of rebate since
No Rebate Maximum rebate upto`2,000
exemption is of `5,00,000
Example: Taxable income is ` 5,00,000. Tax liability for different tax payers will be as follows:
Resident individual Non- Firm/
Particulars Above 60-80 Less resident domestic
80 years years than 60 individual or company
any HUF
Income tax on 5,00,000 Nil 10,000 12,500 12,500 1,50,000
Less: Rebate u/s 87A (resident
individual tax or 2,500, lower) Nil 2,500 2,500 N.A. N.A.
Income tax Nil 7,500 10,000 12,500 1,50,000
Add: Surcharge (income less than 1 cr) Nil Nil Nil Nil Nil
Income tax and Surcharge Nil 7,500 10,000 12,500 1,50,000
Add: Education cess @ 2 % Nil 150 200 250 3,000
Add: SHEC @ 1% Nil 75 100 125 1,500
Tax liability Nil 7,725 10,300 12,875 1,54,500
Co-operative society
Level of Total income Rate of tax
Where the total income does not exceed ` 10,000 10% of the total income
Where the total income exceeds` 10,000 but does ` 1,000 plus 20% of the amount by
not exceed ` 20,000 which the total income exceeds ` 10,000
Where the total income exceeds ` 20,000 ` 3,000 plus 30% of the amount by
which the total income exceeds ` 20,000

Page
VIVEK GABA
Assessee other than individual and co-operative society
(Amended by FA, 2017)
Firm Local authority Domestic Company Foreign company
30% 30% * 40%
25% or 30% as
the case may be
Important Note*
Where the total turnover or gross receipt in the previous year 2015-16 does not exceed 50 crore
the Tax rate is 25 % otherwise Tax rate is 30%.
If total income If Total Income is If total income is in If total income

is the range of more the range of is more than
than 50 lakh to 1
crore
Firm Nil Nil 12% 12%

Co-operative society Nil Nil 12% 12%
Local authority Nil Nil 12% 12%
Domestic Company Nil Nil 7% 12%
Foreign company Nil Nil 2% 5%
* Marginal relief is available
Marginal Relief will be given to an assessee when increase in tax liability due to surcharge is
more than increase in income beyond which surcharge is applicable.
INCOME-TAX ACT, 1961 has prescribed following SPECIFIC RATES:
a) Long term capital gains shall be taxable @ 20%. In case of non-corporate non-residents and
foreign companies, long-term capital gains arising from transfer of unlisted securities would be
subject to tax @10% without giving effect to indexation provision and currency fluctuation.
(Discussion in detail in the Chapter of Capital Gains).
b) Short term capital gains on transfer of equity share in a company or a unit of an equity
oriented fund on which STT has been paid @ 15%.
c) winnings from any lottery, crossword puzzle, race including horse race, card game etc. shall be
charged @ 30%.
d) Unexplained Investment, undisclosed income, Unexplained income, Unexplained expenditure etc.

Taxable @ 30%
e) Section provides that any income by way of aggregate dividend in excess of 10 lakh shall be
chargeable to tax in the case of Individual, HUF or a firm who is resident in India, at the rate
10% (on excess portion). Further, te taxation of dividend income in excess of 10 lakh shall be

Page
VIVEK GABA
on gross basis i.e. No deduction in respect of any expenditure or allowance or set off of loss
shall be allowed to the assessee in computing the income by way of dividends.
Education cess @ 2% of Income tax (inclusive of surcharge) and SHEC @ 1% of income tax
(inclusive of surcharge) shall be leviable (Total 3% applicable on computed tax).
CLARIFICATIONS REGARIDNG ATTAINING PRESCRIBED AGE OF

60/80 YEARS ON 31ST MARCH ITSELF, IN CASE OF SENIOR /
VERY SENIOR CITIZEN WHOSE DATE OF BIRTH FALLS ON 1ST
APRIL,
FOR PURPOSE OF INCOME TAX ACT, 1961
Circular No. 28/2016, Dated 27-7-2016
1. Higher tax exemption limits have been prescribed under the past finance act for resident senior
citizen taxpayers who have attained the age of 60 years. Even in such cases, the exemption
limit still higher for very senior citizens who have attained the age of 80 years. A doubt has
been raised the attainment of the aforesaid qualifying ages for availing higher exemption in
cases of the persons whose date of birth falls on 1 st April of calendar year. In other words, the
broader question under consideration is whether a person born on 1 st April of a particular year
can be said to have completed a particular age on 31 st march, on the preceding day of his/her
birthday or on 1st April itself that year.
2. The matter has been examined. Although specific provision does not exist in this regard under
the income tax act, 1961, the Hon‖ble Supreme court an occasion to consider a similar issue in
the case of PrabhuDayalSesma vs. State of Rajasthan & another 1986, 1948 wherein it has
dealt with on general rules to be followed for calculating the age of the person. In this
judgment, Apex Court observed that while counting the age of the person, whole of the day
should be reckoned and it start from 12 o‖clock in the midnight and he attains the specified
age on the preceding, the anniversary of his birthday.
3. In view of the aforesaid judgment, the CBDT, hereby clarifies that a person born on 1 st April
would be considered to have attained a particular age on 31 st March, the day preceding the
anniversary of his birthday. In particular, the question of attainment of age of eligibility for being
considered a senior / very senior citizen would be decided on the basis of above criteria.
Therefore, if a person is born on 1st April, 1958/1938 the he shall get slab of 3,00,000 / 5,00,000
in the previous year 31-3-2018.
SEC 2(9):
ASSESSMENT YEAR
The period of one year commencing from 1st April to 31st March. Assessment year 2018-19 will
commence on 1.4.2018 and end on 31.3.2019. This is Assessment year for financial year (previous

Page
VIVEK GABA
year) 2017-18 i.e. year ending on 31st March 2018. It is year in which return is filed for income
earned in previous year.
Note: Assessment year shall be period of 12 months. In other words, an Assessment year cannot
be more or less than the period of 12 months.
SEC 3:
PREVIOUS YEAR
Previous year is the financial year in which income is earned. It also means the financial year
immediately preceding the Assessment year.
Note:It may be 12 month or less than 12 months(starting from the business set up of the
assessee)
SEC 2(7):
ASSESSEE
Assessee means a person by whom any tax or any other sum of money is payable under this
Act and includes the following:
a) Person in respect of whom any proceeding under the Income-tax has been taken.
b) Person who is deemed to be an assessee. This includes the legal representative of deceased
or legal guardian of minor.
c) Person deemed to be assessee in default.
SECTION 4:
BASIS OF CHARGE(CHARGING SECTION OF INCOME TAX)
Every person whose total income of the previous year exceeds the maximum amount which is not
chargeable to income tax, is an assessee and chargeable to Income tax at rates or rates
prescribed in the Finance Act for the relevant assessment year. However, his total income shall
be determined on the basis of his residential status in India.
OBJECTIVE QUESTION FOR PRACTICE
1. The basic exemption limit in case of a non-resident individual being a senior citizen is:
a) ` 3,00,000 b) ` 2,40,000 c) ` 2,50,000 d) ` 2,00,000
2. Which of the following is not an example of capital receipt?

a) Money received on issue of shares b) Money received on sale of land
c) Money received on sale of goods d) None of the above

Page
VIVEK GABA
3. Which one of the following is not a capital receipt
a) Dividend on Investment b) Bonus shares
c) Compensation received for vacating business place d) Sale of know-how
4. The income tax Act extends to

a) whole of India b) whole of India except Jammu and Kashmir
c) whole of India except Sikkim d) whole of India except Jammu & Kashmir & Sikkim
5. Part I of Schedule I of the Finance Act 2017 has given the rates of IT for the AY:
a) 2013-14 b) 2014-15 c) 2017-18 d) 2018-19
Solution: 1 - c), 2 - c), 3 - c), 4 - a), 5 - d)
OBJECTIVE QUESTIONS
1. Education cess @ 2% & secondary and higher education cess @ 1% is payable on

a) Income-tax only b) Income-tax plus surcharge
b) Income Tax minus rebate d) any of the above, depends on
question
2. The rates of income tax are mentioned in -

a) Income-tax Act, 1961 b) Annual Finance Acts
c) both Income-tax Act, 1961 and Annual Finance Acts d) None of the above
3. The surcharge applicable in the case of an individual is -

a) 2% of tax payableif total income exceeds100 lakh
b) 10% of tax payableif total income exceeds100 lakh
c) 15% of tax payable if total income exceeds ` 100 lakh
d) Surcharge not levied on individual
4. In respect of a Resident Individual, who is of the age of 60 years or more at any time during
the previous year 2016-17
a) Higher basic exemption of ` 2,00,000 is available
b) Higher basic exemption of ` 2,50,000 is available
c) Higher basic exemption of ` 3,00,000 is available.
d) Higher basic exemption of ` 5,00,000 is available.
5. The surcharge applicable to a domestic company for A.Y. 2018-19 is -

a) 2% always irrespective of level of income
b) 10% if total income exceeds ` 1crore.
c) 5% if total income exceeds ` 1crore
d) 7% if the total income exceeds ` 1crore but upto` 10 crore.
6. The surcharge applicable to a foreign company for A.Y. 2018-19 is -

a) Nil
b) 2% if the total income exceeds ` 1crore upto` 10 crore
c) 2.5% if the total income exceeds ` 1croreupto` 10 crore
d) 5% in all cases

Page
VIVEK GABA
7. A non-resident individual having taxable income in India of ` 3,00,000 shall be allowed rebate
of how much under section 87A
a) 2,000 b) 3,000 c) 5,000 d) Nil
8. ABC Inc, a foreign company has a total income of ` 1crore. What would be the amount of
surcharge applicable?
a) 10% b) 2% c) 5% d) Nil
9. Direct tax is a kind of tax where burden of tax is …………....... on payer.

a) directly b) indirectly
c) either a) or b) d) none of these
10. The provision of income tax is governed under which act`

a) Income tax Act, 1961 b) Income tax Act, 1922
c) Direct tax code d) All of the above
11. Decisions pronounced by ...... becomes law.

a) Supreme Court b) High Court
c) Income tax Appellate Tribunal d) None of the above
12. ............. capital is that capital which is turned over in business and results in profit or loss
a) fixed b) circulating c) any d) none
13. ...... capital is not directly involved in business

a) fixed b) circulating c) any d) none
14. A newly set up business coming into existence, the first previous year will commence from
a) Date of set up of business b) 1st April of previous year
c) Any date after set up of business d) one day before date of set up of business
15. Exemption limit of ` 3,00,000 or ` 5,00,000 is applicable for

a) Resident Individual b) Non-resident Individual
c) Both resident and non-resident Individual d) none of them
16. A resident individual aged 70 year shall be allowed exemption of

a) ` 2,50,000 b) ` 3,00,000 c) ` 5,00,000 d) Nil
17. A non-resident individual who is 85 years of age shall be allowed exemption of ........ from
taxable income
a) ` 5,00,000 b) ` 2,00,000 c) ` 2,50,000 d) Nil
18. Which of the following is not an example of capital receipt?

a) money received on issue of shares b) money received on sale of land
c) money received on sale of goods d) none of the above
19. Income tax is charged on the basis of rate prescribed by

a) Income tax Act b) Finance Act
c) Central Board of Direct Taxes d) Ministry of Law
20. Income includes

a) only legal income b) Illegal income
c) both legal and illegal d) None of them

Page
VIVEK GABA
21. Charging section of income tax is
a) Section 4 b) Section 9 c) Section 15 d) Section 28
22. Rebate under section 87A is allowed to

a) Resident individual b) any individual (resident or non-resident)
c) Resident individual and HUF d) all assesse
23. Rebate under section 87A shall be allowed to the maximum extent of
a) ` 3,000 b) ` 2,500 c) ` 2,000 d) tax payable
24. Any rent or revenue derived from land may be treated as agricultural income if
a) It is derived from land b) the land is used for agricultural purposes
c) the land is situated in India d) All of the above condition shall be satisfied
25. Which of the following income is agricultural income

a) Rent received from agricultural land b) Income from dairy farm
c) Income from poultry farm d) Dividend from a company engaged in agriculture
26. Which of the following income is an agricultural income

a) Income from brick making
b) Income from agricultural land situated in Pakistan
c) Prize from Government on account of higher crop yield
d) Compensation received from insurance company on account of loss of crop
27. Which of the following income is not included in term income under the Income tax Act, 1961
a) Profit and gains b) Dividend from foreign company
c) Profit in lieu of Salary d) Reimbursement of travelling expenses
28. A person includes:

a) Only Individual
b) Only Individual and HUF
c) Individuals, HUF, Firm, Company only
d) Individuals, HUF, Company, Firm, AOP/ BOI, Local Authority, Every Artificial Juridical Person
29. Every assesse is a person, and

a)every person is also anassessee b) every person need not be an assessee
c) an individual is always an assessee d) A HUF is always an assesse
30. Describe the status of the following person, X and Y are legal heirs of Z. Zdied in 2016andX
and Y carryon his business without entering into a partnership.
a) Firm b) Limited Liability Partnership
c) Company d) Body of Individual
31. Assessment year is a period of

a) more than 12 months b)12 months and less than 12 months
c) 12 months only d)12 months and more than 12 months
32. All assesse are required to follow

a) uniform previous year which must be calendar year only
b) uniform previous year which must be financial year only
c) any period of12 months d) Period starting from 1st July to 30th June only

Page
VIVEK GABA
33. First previous year in case of a business/profession newly set up on 31.3.2018 would:
a) Start from 1st April, 2017and end on 31st March, 2018
b) Start from 31st March, 2018 and will end on 31st March, 2018
c) Start from 1st January, 2018 and end on 31st December, 2018
d) Start from1st January, 2018 and will end on 31st March, 2018
34. A person follows Calendar year for accounting. For taxation, he has to follow:
a) Calendar year only-1st January to 31st December
b) Financialyearonly-1st April to 31st March
c) Any of the Calendar or Financial year as per his choice
d) He will have to follow extended year from 1Januaryto next 31 March(period of15 months)
35. In which of the following cases, income of previous year is assessable in previous year itself:
a) Assessment of persons leaving India
b) A person in employment in India
c) A person who is into illegal business
d) A person who is running a charitable institution
36. In case of female individual, who is of59 years of age, what is the maximum exemption limit
for AY 2018-19
a) ` 2,50,000 b) ` 3,00,000 c) ` 5,00,000 d) Nil
37. Calculate Income-tax payable by an Individual (aged 30 years) for AY 2018-19 if his total
income is ` 1,01,20,000:
a) ` 33,10,160 b) ` 32,75,775 c) 28,12,500 d) `Nil
38. Out of the following, which capital receipt is not taxable?

a) Capital gains of` 10,00,000
b) Amount of` 5,00,000 won by way of lottery, games, puzzles
c) Amount of` 2,00,000 received by way of gift from relatives
d) Amount of` 1,00,000 received by way of gift from a friend on marriage anniversary
39. Total income is to be rounded off to nearest multiple of....... and taxis to be rounded off to
nearest multiple of.........
a) Ten, Rupee b) Hundred, Ten c) Ten, Ten d) Rupee, Rupee
40. Assessee is always a person but a person may or may not be an assessee.
a) True b) False c) Partly true d) None of the above
41. A person may not have assessable income but may still be assessee
42. A new business was set up on 15-11-2017 and commenced business from 1-12-2017. The
first previous year in this case shall be:
a) 15-11-2017 to 31-3-2018 b) 1-12-2017 to 31-3-2018
c) 2018-2019 d) 2017-18
43. Surcharge in case of an individual or HUF for assessment year 2018-19 is payable at rate of:
a) 12% of the income-tax payable provided the total income exceed ` 6,00,000.
b) 10% of the income-tax payable provided the total income exceeds `50,00,000

Page
VIVEK GABA
c) 5% of the income-tax payable if the total income exceeds ` 1,80,50,000
d) 15% of the income-tax payable provided the total income exceeds ` 90,00,000
44. The maximum amount on which income-tax is not chargeable in case of firm is:
a) ` 2,00,000 b) ` 2,50,000 c) ` 5,00,000 d) Nil
45. A co-operative society is taxable at flat rate of 30% on Total Income

46. Education cess is leviable in case of

a) An individual and HUF b) A company assessee only
c) All assesses d) Only Individual
47. In case of an individual and HUF, education cess is leviable only when total income of such
assessee
a) exceeds ` 10,00,000 b) always levied, irrespective of level of income
c) exceeds` 7,00,000 d) exceeds ` 1,00,00,000
48. The total Income of the assessee has been computed as ` 2,53,494.90. After rounding off,
total Income will be taken as ……….
a) ` 2,53,500 b) ` 2,53,490 c) ` 2,53,495 d) ` 2,54,000
49. A circular of the CBDT u/s 119 of the Income tax Act 1961
a) can override or detract from the Act b) cannot override or detract from the Act
c)may override the entire act d) None of the above
50. The circulars issued by CBDT are binding on:

a) Assessee b) Income-tax Authorities i.e. Assessing Officers
c) Both the above d) None of the above
51. Decision passed by Supreme Court is binding on

a) All courts and tribunal b) Income tax authorities
c) Assessee d) All of the above
52. The amount of education cess and secondary and higher cess to be collected along with
income tax for the assessment year 2018-19 is
a) 2% b) 1% c) 3% d) Nil
53. Calculate rebate available u/s87A to non-resident individual having total income of ` 3,00,000.
a) ` 3,000 b) ` 1,500 c) ` 2,000 d) Nil
54. Calculate rebate available u/s87A to a resident individual having total income of ` 3,00,000.
a) ` 3,000 b) ` 1,500 c) ` 2,500 d) ` 2,000
55. Rebate under section 87A is allowed only on fulfillment of which condition
i) Assessee should be resident individual
ii) the Income of assessee is upto ` 3,50,000
iii) All assessee
a) (i) and (ii) b) only (ii) c) (ii) and (iii) d) (iii)

Page
VIVEK GABA
56. Income of a business commenced& Set-up on 1stMarch, 2018 will be assessed during the
assessment year…………………….?
a) 2017-2018 b) 2016-2017 c) 2018-2019 d) 2013-2014
57. The maximum exemption limit under the income Tax Act ,1961 in case of a women who is 65
year of age and who is non-resident in India is ` …………………………?
a) 2,00,000 b) 2,50,000 c) 3,00,000 d) 5,00,000
58. The tax payable or refund due to an assessee is to be rounded off to the nearest…………?
a) 10 b) 1 c) 100 d) None of the above
59. Accounting standard notified under section 145 is applicable for ………… system of accounting?
a) Cash b) mercantile c) Hybrid d) None of the above
60. The maximum income of ` 2,50,000 is not chargeable to income tax in case of a resident
woman of 65 years age?
a) True b) False c) Party true d) None of the above
61. AOP should consist of :

a) Individual only b) Persons other than individual only
62. Body of individual should consist of:

a) Individual only b) Persons other than individual only
63. From which entry does Central Government get power to levy Income tax
a) Entry 97 of Union List b) Entry 92C of Concurrent List
c) Entry 82 of Union List d) Entry 92C of State List
64. Surcharge is applicable on:

a) Every company assessee if its total income exceeds ` 1crore
b) Every assessee (whether individual, company, firm etc.), if total income exceeds ` 1crore
c) Surcharge is not applicable on Income Tax
d) Every domestic company if its total income exceeds ` 1crore
65. Finance Act is ……………

a) white paper presented for introduction of Income tax act
b) an act containing notifications, circulars issued by CBDT
c) an annual act in which amendment of Income tax, service tax etc. is contained
d) none of the above
66. Aggregate of incomes computed under five heads of income after applying clubbing provisions
and making adjustments of set off, carry forward and set off the losses is known as ………
a) Taxable income b) Gross Total income
c) Total Income d) Net Income
67. Hindu undivided family (HUF) includes:

a) Family of Muslims, Christians b) family of Jains, Sikhs, Buddhist
c) Both of the above d) None of the above

Page
VIVEK GABA
68. Surcharge is calculated as a % of ……….
a) Gross Total income b) Basic Tax
c) Total Income d) Tax + Total income
69. A joint family of Mr. Ravi, Mrs. Ravi and their son Raj and daughter Simmy is a
a) HUF b) Firm c) BOI d) Artificial judicial person
70. Education cess @ 2% and Secondary higher education cess @ 1% is levied on

a) Income tax + Surcharge + Marginal relief
b) Income tax + Surcharge – Marginal relief
c) Total Income + Income tax + Surcharge – Marginal relief
d) Income tax + Surcharge
71. Rates of ―normal‖ income tax:

a) remains same for all type of person b) vary from person to person
c) Any of the above d) None of the above
72. Rates of tax on ―Special income‖ is:

a) remains same for all type of person b) vary from person to person
73. A person leaves India permanently on 15-11-2017. The assessment year for income earned till
15-11-2017 in this case shall be:
a) 2015-16 b) 2018-19 c) 2017-18 d) None of the above
74. A local authority is taxable at flat rate of income-tax

75. Income tax is rounded off to

a) Nearest ten rupees b) Nearest one rupee
c) Nearest hundred rupees d) No rounding off of tax is done
76. Income tax is a form of

a) Direct tax b) Indirect tax
c) Either a) or b) d) none of them
77. Which of the following are deducted to compute tax payable
a) Tax deducted and collected at source b) Advance tax
c) Double Taxation relief d) All of the above
78. Light Ltd., a domestic company has income of ` 10 crore, what rate of surcharge is applicable
on same
a) 10% b) 2% c) 7% d) Nil
79. The rate of tax applicable to a firm for A.Y. 2018-19is -

a) 30% b) 35% c) 40% d) 20%
80. The rate of tax applicable to a domestic company for A.Y. 2018 -19 if company T.O in P.Y
2015-16 was 43 croreis -
a) 30% b) 25% c) 40% d) 45%
81. If a domestic company has income of ` 1crore, surcharge at the rate of ...... is applicable
a) 10% b) 7% c) 5% d) Nil

Page
VIVEK GABA
82. Income of …......... year of an assessee is taxed during ............ year.
a) financial year, previous year b) assessment year, previous year
c) previous year, assessment year d) previous year, financial year
83. Corporate society is taxable at the flat rate of 30%. Is the statement valid
a) valid b) invalid c) Partially valid d) none of them
84. Surcharge @..... shall be levied if total income of domestic company exceeds ` 10 crore.
a) 2% b) 5% c) 12% d) Nil
85. Assessment of person leaving India under section 174 is done in relevant …………………..
a) Assessment Year b) Previous Year c) Financial Year d) Exempt
86. Salary received from member of parliament is taxable under the head
a) PGBP b) Salary
c) Other Sources d) None of the above
87. Year in which income is taxable is known as …… & year in which it is earned is known as ......
a) Previous year, Assessment year b) Assessment year, Previous year
c) Assessment year, financial year d) financial year, Previous year
88. Mrs. V (Age 82 year) is non-resident in India for the assessment year 2018-19. For the
previous year 2017-18, her income chargeable to tax in India is `8,30,000. Find out Tax
liability.
a) 98,880 b) 80,860 c) 78,500 d) 86,000
89. Mr. V, resident in India for the assessment year 2018-19. For the previous year 2017-18, his
income chargeable to tax in India is ` 10,00,000. Find out Tax liability if born on (i) 15th Jan,
1938 (ii) 15th Jan, 1958 (without cess)
a) 1,00,000 / 1,12,500 b) 1,16,800 / 1,36,800
c) 1,03,000 / 1,15,875 d) None of the above
90. Income-Tax Act Extends to:

a) Whole of India b) Whole of India except J&K
c) Whole of India except Sikkim d) Whole of India except J&K and Sikkim
91. Surcharge on Income-Tax is payable by:

a) All Assessee b) Indian Company
c) Foreign company d) Firm & Company Only
92. The maximum amount on which income tax is not chargeable in case of HUF for assessment
year 2018-19.
a) 2,00,000 b) 2,20,000 c) 2,50,000 d) 1,80,000
93. The maximum amount on which income tax is not chargeable in case of Firm for assessment
year 2018-19.
a) 1,00,000 b) 2,50,000 c) 2,00,000 d) Nil
94. Education Cess is leviable on:

a) Tax + Surcharge – Marginal relief (if any)
b) Tax
c) Tax – Rebate (d) Either of above

Page
VIVEK GABA
95. The Total Income of the assessee has been computed as `2,53,432.80. For rounding off, the
total income will be taken as:
a) 2,53,430 b) 2,53,433 c) 2,53,432 d) 2,53,440
96. Rebate u/s 87 is available to:

a) Individual & HUF b) Individual
c) Resident Individual d) Resident Individual & HUF
97. Tax computed is 8,256.12. After rounding off tax payable is:
a) 8,250 b) 8,256 c) 8,257 d) 8,260
98. Marginal relief is allowed in case of individual if Total Income exceeds:

a) 10 Lakhs b) 50 Lakh c) 1Crore d) 100 Crore
99. Normal Rate / General rate of Income Tax prescribed by –

a) Finance Act b) Income Tax Act d) Both of the above d) None
100. Special Rate / Specific Rate of Income Tax prescribed by –

a) Finance Act b) Income Tax Act d) Both of the above d) None
ANSWERS
1. d) 14. a) 27. d) 40. a) 53. d) 66. b) 79. a) 92. c)

2. b) 15. a) 28. d) 41. a) 54. c) 67. b) 80. b) 93. d)
3. c) 16. b) 29. b) 42. a) 55. a) 68. b) 81. d) 94. d)
4. c) 17. c) 30. d) 43. d) 56. c) 69. a) 82. c) 95. a)
5. d) 18. c) 31. c) 44. d) 57. b) 70. b) 83. b) 96. c)
6. b) 19. b) 32. b) 45. b) 58. a) 71. b) 84. c) 97. d)
7. d) 20. c) 33. b) 46. c) 59 b) 72. a) 85. b) 98. b)
8. d) 21. a) 34. b) 47. b) 60. b) 73. c) 86. c) 99. a)
9. a) 22. a) 35. a) 48. b) 61. c) 74. a) 87. b) 100. b)
10. a) 23. b) 36. a) 49. b) 62. a) 75. a) 88. b)
11. a) 24. d) 37. a) 50. b) 63. c) 76. a) 89. a)
12. b) 25. a) 38. c) 51. d) 64. b) 77. d) 90. a)
13. a) 26. d) 39. c) 52. c) 65. c) 78. c) 91. a)

Page
VIVEK GABA
RESIDENTIAL STATUS 3
@Sec 5 Scope of Total Income
“Resident/ ROR”: Total Global Income is taxable subject to some exception.
“RNOR”: Total Global Income except income earned outside India from a business not controlled
from India and business set up in India.
“Non-resident”: Only that income which are received & earned In India.
SEC 6 :
RESIDENCE IN INDIA
ASSESSEE
INDIVIDUAL HUF
Resident Non- Resident Resident Non- Resident
Any one basic condition Both basic condition not control and management
satisfied satisfied of its affairs
wholly or partly wholly outside
situated in India India
1. BASIC CONDITION
1. 182 days or more in India (Aggregate) in the relevant previous year or;
2. 60 days or more in Indiaand365 days or more in India in 4immediately preceding relevant

previous year.
Cases where only first condition is to be checked:

a) Indian citizen or person of Indian origin1 visit India during previous year
b) Indian citizen leaves India during previous year for the purpose of employment outside India or
as member of crew of Indian ship.
Note: Check Condition One only in the previous year in which they visit in India or they left India
for the purpose of Employment.
A person is said to be of Indian origin if he, either of his parents or either of his grand-parents were born in India or
1
undivided India (i.e. before 1947)

Page
VIVEK GABA
RULE 126 :
COMPUTATION OF PERIOD OF STAY IN INDIA IN CERTAIN CASES
1) For the purposes of section 6, in case of an individual, being a citizen of India and a member
of the crew of a ship, the period or periods of stay in India shall, in respect of an eligible
voyage, not include the period computed in accordance with sub-rule (2).
2) The period referred to in sub-rule (1) shall be the period beginning on the date entered into the
Continuous Discharge Certificate in respect of joining the ship by the said individual for the
eligible voyage and ending on the date entered into the Continuous Discharge Certificate in
respect of signing off by that individual from the ship in respect of such voyage.
1. ILLUSTRATION OF AMENDMENT:
Mr. Vivek is employed by an Indian Ship and in on Frequent tours abroad on the ship as member
of crew of Indian Ship. During the previous year 31-3-2016, he was a member of crew of the ship
which undertook the following voyage:
1. Ship left Mumbai, India on 1-5-2015 for destination to Australia. However, the ship first
reached cochin from Mumbai on 10-5-2015 to take passengers from there. Ship left cochin
on 13-5-2015 and reached Australia on 26-5-2015.
2. Ship returned from Australia on 10-6-2015 and came Cochin on 20-6-2015. Ship then sailed
to Mumbai on 11:00 P.M on 5-7-2015.
3. For the above voyage, the continuous Discharge Certificate shows the date of joining the
ship for the said voyage as 1-5-2015 and shows date of signing off from the ship for the
said voyage to 5-7-2015.
4. Mr. Vivek left for round the world trip on ship as a member of crew of ship on 1-9-2015
from Mumbai. Ship travelled from Mumbai to Cochin and picked up passengers from there.
The ship finally left Chennai for abroad on 15-9-2015. The ship returned to Chennai on 15-
12-2015 And thereafter dropped passengers at Cochin and then finally arrived Mumbai on
11:00 P.M on 30-12-2015.
For above voyage, the continuous Discharge Certificate shows the date of joining pf the ship
fo the said voyage on 1-9-2015 and shows date of signing off from the ship for said voyage
to be 30-12-2015.
Prior to amendment by Finance Act, 2015, the actual presence of Mr. Vivek in India was
counted to determine the period of his stay in India. However, after the amendment by
Finance Act, 20115 the following period shall not be included for computing his stay in India.
Period from 1-5-2015 to 5-7-2015 = 66 days
Period from 1-9-2015 to 30-12-2015 = 121 days
Therefore, his total stay outside India shall be 66 days + 121 days = 187 days
Since the year 31-3-2016 has 366 days, therefore total stay in India 366 days – 187 days =
179 days.

Page
VIVEK GABA
Since his total stay in India less than 182 days, therefore he is non-resident for the previous
year 2015-2016.
IF ASSESSEE (Individual/ HUF) becomes Resident
Then check
Resident and ordinarily resident Resident but not ordinarily

resident
f BOTH Additional Condition SATISFIED IF ANY Additional Condition is NOT SATISFIED
1. ADDITIONAL CONDITION (AC)
a) ”Resident” in India in Any 2 out of 10immediately preceding relevant previous years and;
b) Present in India for 730 or more during 7 immediately preceding relevant previous year.
Note 1: For a HUF to be a “ROR”, both the above additional conditions must be satisfied by Karta
of HUF.
Note 2: All other assesse except Individual and HUF will be either “R” or “NR”.
ASSESSEE
COMPANY (Amended by FA 2016) OTHER THAN COMPANY
Indian Company Foreign Company Resident Non- Resident
when
Always Resident Non- Resident
Control and Control and
Resident
management of its management of
Place of Place of
affair is wholly or its affair is wholly
effective effective
partly in India outside India
management management o/s
in India India
Rules to be considered while determining Residential Status

1. Residential status is determined for each category of persons separately.
2. Residential status is always determined for the previous year.
3. A person may be a resident of more than one country for any previous year.
4. Citizenship of a country and residential status of that country are separate concepts.
5. To be treated as received in India the income should be first received in India.
6. Any Past untaxed profits shall not be considered to be the Income of the current year in any
status i.e. ROR, RNOR & NR.

Page
VIVEK GABA
@
SEC 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA
(AMENDED BY FA 2015)
a) Salary income if service rendered In India.
b) Salary from Govt. of India to an Indian citizen.
c) Income from Property Situated in India.
d) Income from Transfer of Capital asset Situated in India.
Capital Asset being share in a company incorporated outside India - deemed to be situated
in India, if the share derives, directly or indirectly, its value substantially from the assets located
in India.
e) Interest, Royalty, Fees:
- Paid by CG/SG
- Paid by Non-govt. if USED IN INDIA.
f) Income from a business connection in India
Exceptions in case of Non-Resident
i) Purchase of goods in India for Export

ii) Collection of News and views for transmission outside India by NR.
iii) Shooting of Films in India if such NR is
- An individual if he is not a citizen of India
- Firm if no partner is citizen or Resident of India.
- Company if no shareholder is citizen or Resident of India.
CRUX OF SECTION 5
AND SECTION 9
WHERE TAX INCIDENCE ARISES IN CASE OF ROR RNOR NR
Income received in India (whether accrued in or outside India) Yes Yes Yes
Income deemed to be received in India (whether accrued in or outside India) Yes Yes Yes
Income accruing or arising in India (whether received in or outside India) Yes Yes Yes
Income deemed to accrue or arise in India (whether received in or o/s India) Yes Yes Yes
Income received or accrued outside India from a business controlled from Yes Yes No
outside India or a profession set up in India
Income received or accrued outside India from a business controlled from Yes No No
outside India or a profession set up outside India
Income earned and received outside India but later on remitted to India No No No
(whether tax incidence arises at the time of remittance)
Past untaxed profits (not taxable as relates to past years) No No No
Agricultural Income in India (exempt under section 10(1)) No No No
Long term capital gains (on STT paid shares) exempt under section 10(38) No No No
Dividend from domestic company (exempt under section 10(34)) or Income No No No
from a Mutual Funds specified under section 10(23D) (exempt u/s 10(35))

Page
VIVEK GABA
PRACTICE QUESTIONS
Question: Mr. Nishant Khurana earns the following income during the financial year 2016-17:
`
1. Income from house property in London, received in India 60,000
2. Profits from business in Japan and managed from there (received in Japan) 9,00,000
3. Dividend from foreign company, received in India 30,000
4. Dividend from Indian company, received in England 50,000
5. Profits from business in Kenya, controlled from India, Profits received in Kenya 3,00,000
6. Profits from business in Delhi, managed from Japan 7,00,000
7. Capital gains on transfer of shares of Indian companies, sold in USA and gains were
received there 2,00,000
8. Pension from former employer in India, received in Japan 50,000
9. Profits from business in Pakistan, deposited in bank there 20,000
10. Profit on sale of asset in India but received in London 8,000
11. Past untaxed profits of UK business of 2014-15 brought into India in 2015-16 90,000
12. Interest on Government securities accrued in India but received in Paris 80,000
13. Interest on USA Government securities, received in India 20,000
14. Salary earned in Bombay, but received in UK 60,000
15. Income from property in Paris, received there 1,00,000
(Presume all the above incomes are computed incomes)
Determine the gross total income of Mr. Nishant Khurana if he is (i) resident and ordinarily
resident, (ii) resident but not ordinarily resident, (iii) non-resident in India during FY 2016-17.
Solution:
Particulars ROR NOR NR
(1) Income received in India 60,000 60,000 60,000
(2) Income accruing/arising and received outside India 9,00,000 — —

(4) Income accruing in India but exempt u/s10(34) — — —
(5) Income accruing/arising and received outside India, 3,00,000 3,00,000 —
but business controlled from India
(6) Income accruing/arising in India 7,00,000 7,00,000 7,00,000
(7) Income accruing/arising in India 2,00,000 2,00,000 2,00,000
(8) Income accruing/arising in India 50,000 50,000 50,000
(9) Income accruing/arising and received outside India 20,000 — —
(11) Past untaxed profits — — —
(15) Income accruing/arising and received outside India 1,00,000 — —
Gross Total Income 25,28,000 15,08,000 12,08,000

Page
VIVEK GABA
OBJECTIVE QUESTIONS
1. Total income is based on / total income varies according to:

a) residential status of assessee b) citizenship of assessee
c) both A and B d) none of the above
2. ………………… is determined for each category of persons separately:

a) Residential status b) Citizenship c) Originship d) All the above
3. A person may be resident in ………… in any previous year:

a) more than one country b) only one country
c) only two country d) none of the above
4. A person may be a ……………………. but may not be…………….

a) citizen of India, resident of India b) resident of India, citizen of India
c) Both a) and b) d) None of the above
5. It is the duty of ……………… to place all material facts to determine his correct residential status in
front of Assessing Officer:
a) Assessee b) Income tax officer
c) CBDT d) All the above
6. Individual is a resident in India if he is in India for a period or periods amounting in all to:
a) more than 182 days b) 182 days or more
c) less than 182 days d) 60 days or more
7. The condition of 182 days or more shall be checked in:

a) relevant previous year b) relevant assessment year
c) relevant calendar year d) relevant valuation date
8. In case of exception in basic condition, which of the following condition will be checked:
a) stay in India for 182 days or more
b) stay in India more than 182 days
c) stay in India 60 days or more and 365 or more in 4 I.P.P.Y
d) None of the above
9. For an assessee to fall in exception, he should leave India:

a) for the purpose of employment
b) in the course of employment
c) for the purpose of employment or member of crew of an Indian ship
10. In exception one, the condition of 182 days or more should be checked in the relevant
previous year in which:
a) He/ she left India b) He/ she visits India

Page
VIVEK GABA
11. In exception two of section 6, the condition of 182 days or more must be checked in the
relevant previous year in which
a) he visits India b) he left India
c) depends upon the residential status of assessee d) None of the above
12. A person merely undertakings tours abroad in connection with his employment in India would
a) avail relaxation of exception one in section 6
b) not avail relaxation of exception one in section 6
c) no provision in law
13. In computing the period of stay in India it is …………………. that stay should be for a ……..
a) not necessary, continuous period b) necessary, continuous period
c) Either a) and b) d) None of the above
14. Which of the following statement is false?

a) Presence in territorial waters of India (TWI) would also be regarded as present in India
b) Place and purpose of stay is immaterial
c) After introduction exceptions, Condition 2 has not been deleted
d) In computing period stay in India, day of entry & leaving India are not considered as stay
in India
15. HUF will become Non-resident if:

a) control & management is wholly situated outside India
b) control & management is partly in India and partly outside India
c) control & management is wholly situated India
16. Indian company is said to be resident in India if:

a) Control wholly or partly in India b) Always resident
c) Control wholly in India c) Control wholly outside India
17. If foreign company POEM is in India, then it is:

a) Non-resident in India b) Resident in India
c) RNOR in India d) None of the above
18. If the POEM of an Indian company is wholly outside India, then company will become:
a) Resident in India b) Non-resident in India
c) RNOR in India d) None of the above
19. An individual, resident in India, shall be resident and ordinary resident in India if he satisfies
a) Any one basic condition b) Both additional condition
c) Both basic condition d) Any one additional condition
20. In 2nd additional condition, assessee should have stayed in India for:
a) more than 730 days during 7 immediately preceding previous year
b) 730 days or more during 7 immediately preceding previous year
c) 365 days or more during 4 immediately preceding previous year
d) 182 days or during relevant immediately preceding previous year

Page
VIVEK GABA
21. HUF which is Resident India shall be said to ROR in India if:
a) any adult of HUF satisfies both additional conditions
b) Karta of HUF satisfies any one basic condition
c) Karta of HUF satisfies both additional conditions
d) Karta of HUF satisfies any one additional condition
22. Past untaxed profit of the financial year 2002-03 brought to India in 2016-17 is chargeable to
tax in the assessment year 2017-18 in hands of:
a) All the assessee b) ROR
c) Non-resident in India d) None of the above
23. A person say, Mr. X has been non-resident in 9 out of 10 preceding previous year; his
residential status is:
c) ROR in India d) RNOR in India
24. Income accruing from agriculture activity in foreign country is taxable in case of an assessee
who is:
a) Resident/ Resident and ordinarily resident b) Resident and not ordinarily resident
c) Non-resident d) None of the above
25. Foreign income received in India during the previous year is taxable case of which assessee:
a) Resident b) Not-ordinarily resident
c) Non-resident d) All the above
26. Income earned and received outside India but later remitted to India, is taxable in case of:
a) All assessee b) ROR
27. An individual born in India left for employment from India to France on 30.10.2017. He visited
outside India for the first time. His residential status for the assessment year 2018-19 will be
a) ROR b) RNOR c) Non-resident d) None of the above
28. Income which accrue or arise outside India from business controlled from India is taxable in
case of:
a) ROR b) Non-resident
c) Both ROR & RNOR d) All of the above
29. A resident in India cannot become resident in any other country for the same previous year:
a) True b) False
c) Partly true partly false d) None of the above
30. “X” was born on 5th May, 1992 in India & later on took the citizenship of U.S.A. Neither his
parents nor his grandparents were born in divided/ undivided India. “X” in this case shall be:
a) Citizen of India b) Person of Indian origin
c) A foreign national d) None of the above
31. “X”, a foreign national visited India during the previous year 2017-18 for 180 days. He had
never visited India prior to this visit. “X” in this case shall be:
c) RNOR d) None of the above

Page
VIVEK GABA
32. Salary payable by Government to an Indian citizen who is non-resident in India for services
rendered outside India is not taxable in India:
a) True b) False
c) Partly true partly false d) None of the above
33. Steve Waugh, the Australian cricketer comes to India for 100 days every year. Find out his
residential status for the A.Y. 2018-19.
a) Non-resident b) ROR
34. Mr. C, a Japanese citizen left India after a stay of 10 years on 01.06.2015. During financial
year 2016-17, he came to India for 46 days. Later, he returned to India for 1 year on
10.10.2017. Determine his residential status for the A.Y. 2018-19.
a) Resident & ROR in India b) RNOR
35. Wipro Ltd., Indian company has most of its business o/s India. Determine its residential status.
a) Resident b) Non-resident c) RNOR d) None of the above
36. Mr. Nishant Khurana earns the following income during the financial year 2016-17:
I. Income from house property in London, received in India 60,000
II. Profits from business in Japan and managed from there (received in Japan) 9,00,000
III. Dividend from foreign company, received in India 30,000
IV. Dividend from Indian company, received in England 50,000
Compute his income presuming that he is ROR, RNOR and NR.
a) 9,90,000 / 90,000 / 90,000 b) 10,40,000 / 1,40,000 / 1,40,000
c) 10,40,000 / 90,000 / 90,000 d) None of the above
37.Mr. Nishant Khurana earns the following income during the financial year 2017-18:
I. Past untaxed profits of UK business of 2015-16 brought into India in 2017-18 90,000
II. Interest on Government securities accrued in India but received in Paris 80,000
III. Interest on USA Government securities, received in India 20,000
Compute his income presuming that he is ROR, RNOR and NR.
a) 1,00,000 each b) 80,000 each
c) 1,90,000 each d) None of the above
38. Income accrued outside India and received outside India is taxable in case of:
a) Resident and ordinary resident(ROR) b) Resident but not ordinary resident(RNOR)
c) Non-resident d) ROR, RNOR and Non-Resident
39. An Indian company would:

a) be resident in India if its POEM is wholly situated in India
b) be resident in India if its POEM is wholly or partly situated in India
c) be resident in India if its POEM is wholly situated outside India
d) be always resident in India irrespective of POEM

Page
VIVEK GABA
40. Determine the residential status of a HUF if HUF's control and management is wholly situated
in India and Karta of HUF is a Non-resident in India for that previous year.
a) Resident and Ordinary Resident (ROR) b) Resident but not ordinary resident (RNOR)
c) Non-Resident (NR) d) Either ROR or RNOR
41. Profits of ` 2,00,000 is earned from a business in USA which is controlled in India, half of the
profits being received in India. How much amount is taxable in India for a Non- resident
individual?
a) ` 2,00,000 b) Nil c) ` 1,00,000 d) ` 3,00,000
42. Foreign income received in India during the previous year is taxable in the case of
a) Resident b) Not ordinarily resident
c) Non-resident d) All of the above
43. If Anirudh has stayed in India in the P.Y. 2017-18 for 181 days, and he is non-resident in 9
out of 10 years immediately preceding current previous year and stayed in India for 365 days
in all in 4 years immediately preceding current previous year and 420 days in all in 7 years
immediately preceding current previous year, his residential status for AY2018-19 would be
a) Resident and ordinarily resident b) Resident but not ordinarily resident
44. Incomes accruing or arising outside India but received directly into India are taxable in case of
a) Resident only b) Both ordinarily resident and NOR
c) Non-resident d) All of the above
45. Income which accrue or arise outside India and also received outside India taxable in case of:
a) ROR only b) not ordinarily resident
c) both ordinarily resident and NOR d) none of the above
46. Once a person is resident for a source of income in a particular previous year he shall be
deemed to be resident for all other sources of income in the same previous year
a) True b) False
c) Partly true d) None of the above
47. Once a person is resident for a source of income in a particular previous year he shall be
deemed to be resident for same sources of income in the all previous year
a) True b) False
48. R Ltd. is registered in U.K. The POEM situated in India. R Ltd shall be :
c) Not ordinarily resident in India d) None of the above
49. R, a foreign national visited India during previous year 2017-18 for 180 days. Earlier to this he
never visited India. R in this case shall be:
50. A person is said to be resident in India if he satisfies:

a) Any one basic condition b) Both basic condition
c) Both additional conditions d) Any one additional condition

Page
VIVEK GABA
51. A company other than an Indian company would be a resident in India for the previous year
2015-16, if during that year its…………….. is situated in India?
a) Control b) Management
c) place of effective management d) Any of the above
52. The residential status of an assessee is determined for relevant…………….?

a) Previous year b) Assessment year
c) Calendar year d) None of the above
53. The incidence of tax on any assessee depends upon this………………. under this act?
a) Residential status b) Originship of country
c) Citizenship of country d) All the above
54. An Indian company is always resident in India no matter where and to what extent its control
and management is situated?
55. Vivek ltd. is a company registered in Japan. The POEM is wholly situated in o/s India. Vivek
ltd is non-resident company in India?
56. Income earned and received outside India but later remitted to India, is taxable in the case of?
a) Resident or ROR b) RNOR
57. Every year, the residential status of an assessee;

a) May change b) Will not change
c) Will certainly change d) None of the above
58. Income accruing in India in the previous year is taxable for;

a) Resident b) Not ordinary resident
59. R Ltd., an Indian company whose entire POEM is situated outside India. R Ltd., shall be
60. An income from house property which is received and accrued outside India but during the
same year it is remitted to India, the income will be taxable in the hands of …………..
a) Resident and ordinarily resident b) Non resident
c) Non ordinarily resident d) All of the above
61. Profits of `1,00,000 for the year 2016-17 of business in Germany remitted to India
duringthepreviousyear2016-17(not taxed earlier)would be:
a) Taxable in India for ROR only b) Not taxable in India for all
c) Taxable in India for all (ROR, RNOR and NR) d) Taxable only for RNO Rand NR
62. Once a person is a resident in a previous year, he shall be deemed to be resident for
subsequent previous year also:

Page
VIVEK GABA
63. Afcon Infrastructure Ltd. is Japanese company, is POEM from India. Determine its residential
status for the assessment year 2017-18.
a) Resident b) Non-resident c) RNOR d) None of the above
64. Residential status is determined for each category of person:

a) Jointly b) Separately
65. Remuneration for rendering services on a foreign ship is exempt in case of

b) A resident b) A non-resident who is not a citizen in India
c) Not ordinarily resident d) A citizen of India
66. A firm, AOP, etc. is said to be resident in India in any previous year if:
a) Control & management is wholly or partly in India
b) Control & management is wholly situated outside India
c) Control & management is wholly in India
67. In case of assessee being individual, if none of the basic condition is satisfied then he will be
a) Resident in India b) RNOR in India
c) Non-resident in India d) ROR in India
68. A company, other than an Indian company, would be treated as a resident in India for the
previous year 2016-17 if its POEM during the year is situated:
a) in India b) in o/s India
c) whether in India or o/s India d) None of the above
69. In the following cases assessee will become resident in India in previous year:
a) if his stay in India is 182 days or more in relevant previous year
b) if his stay in India is 60 days or more in relevant PY and 365 days or more in 4 I.P.P.Y
c) either of above
70. If a person is resident in a previous year in respect of any source of income, he shall be
deemed to be:
a) Resident of his other source of income b) Resident of only such income
c) Non-Resident of his other source of income d) None of the above
71. No person other than individual or HUF can be RNOR in India:

72. Salary payable by a company to an Indian citizen for services rendered outside India is an
income which is deemed to accrue or arise in India:
73. The incidence of taxation depends on the:

a) Residential status of the assessee b) Accommodation of the assessee
c) Citizenship of the assessee d) Marital status of the assesse

Page
VIVEK GABA
74. In first additional condition, assessee should have been ………………… in at least 2 out of 10
previous year immediately preceding the relevant previous year
a) Resident in India b) Stay in India
c) Citizen of India d) None of the above
75. Income accrued and received in Japan and is taxable in India in the case:
a) ROR b) ROR & RNOR
c) Resident & Non-resident d) Non- resident
76. Assessee will become Resident and ordinarily resident, if he does satisfy:
a) Both additional condition b) Any one additional condition
c) Both a) and b) d) Any one basic condition
77. Residential status is determined:

a) for every previous year b) for every assessment year
c) only for one previous year d) only for one assessment year
78. Citizenship of a country and residential status of that country is

a) same concept b) separate concept
c) depends on the person origin d) None of the above
79. There are ………exception of the general provision relating to residential status of an individual
a) One b) Two c) Three d) Four
80. R, a foreign national visited India during previous year 2017-18 for 180 days. Earlier to this he
never visited India. R in this case shall be:
a) Resident in India b) Non-resident
81. In exception two of section 6, person should be:

a) Indian citizen b) Indian origin
c)Indian citizen or Person of Indian origin d) None of the above
82. A person of Indian origin means if parents or grandparents of person were born ……… in India
a) before 1947 b) before 1857
c) before 1950 d) after 1947
83. Which of the following statement is true:

a) In computing period stay in India day of entry & leaving India considered as stay in India
b) After introduction of two exception to Section 6, condition number 2 has been deleted
c) Place and purpose of stay is relevant for determination of residential status
84. Any income arising outside India shall be taxable in case of individual having which residential
status?
a) Resident and not ordinarily resident b) Non-resident
c) Resident and ordinarily resident d) None of the above
85. HUF will become resident in India if:

a) control is wholly or partly in India b) control is wholly outside in India
c)control is wholly in India d) None of the above

Page
VIVEK GABA
86. Which of the following assessee may be ROR after being resident in India:
a) Individual b) HUF
c) Company d) Both a) and b)
87. Which of the following assessee may be “RNOR” in India:

a) Partnership firm b) Joint stock company
c) Association of persons d) Hindu undivided family
88. Every year, the residential status of an assessee:

a) may change b) will certainly change
c) will not change d) None of the above
89. An Indian company is always resident in India, irrespective of fact to what extent its POEM is
situated in India
a) Correct b) Incorrect c) Partly correct d) None of the above
90. Income accruing in India in previous year is taxable for:

a) Resident b) Not-ordinarily resident
91. Income which accrue or arise outside India but received directly in India is taxable in case of:
a) Resident only b) Both ROR & RNOR
c) Non-resident d) All the assesse
92. Income deemed to accrue or arise in India is taxable in case of:

a) Resident only b) Both ROR & RNOR
c) Non-resident d) All the assesse
93. Once a person is a resident in a previous year, he shall be deemed to be resident for
subsequent previous year also:
94. Mr. B, a Canadian citizen, comes to India for the first time during the P.Y.2013-14. During the
financial years 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18 he was in India for 55 days,
60 days, 90 days, 150 days and 70 days respectively. Determine his residential status for the
A.Y.2018-19.
a) Resident in India b) RNOR
95. Mr. D, an Indian citizen, leaves India on 22.09.2017 for the first time, to work as an officer of
a company in France. Determine his residential status for the A.Y. 2018-19.
a) Resident & ordinarily resident in India b) RNOR
96. Dividend from British Co. of ` 2,00,000 received in London will be taxable in case of:
a) Resident and ordinary resident (ROR) only b) Not ordinary resident (NOR)only
c) Non-resident (NR)only d) ROR, NOR and NR all

Page
VIVEK GABA
97. Raman was employed in Hindustan Lever Ltd. He received salary at `40,000 p.m. from
01.04.2016 to 27.09.2016. He resigned and left for Dubai for first time on 01.10.2016 and got
salary of rupee equivalent to`80,000 p.m. from 01.10.2016 to 31.03.2017. His salary for October
to December 2016 was credited in his Dubai bank account and salary for January to March
2017 was credited in his Bombay account directly. He is liable to tax in respect of –
a) Income received in India from Hindustan Lever Ltd
b) Income received in India and in Dubai
c) Income received in India from Hindustan Lever Ltd. and income directly credited in India
98. Income accruing in London and received there is taxable in India in the case of
a) resident and ordinarily resident only
b) both resident and ordinarily resident and resident but not ordinarily resident
c) both resident and non-resident
99. Income which accrue outside India from a business controlled from India is taxable in case of
a) Resident only b) Not ordinarily resident only
c) Both ordinarily resident and NOR d) Non-resident
100. Total Income of a person is determined on the basis of his:
a) residential status in India b) citizenship in India
c) none of the above d) both of the above
101. Income received in India in previous year is taxable in the hands of:
a) Resident b) Not-resident
c) Non ordinarily resident d) all of the above
102. An income of 6,00,000 from profession which is set up in India but controlled from USA. The
income neither accrues in India nor received in India. it will be taxable in India in the hands of
a) Resident and ordinarily resident b) Non ordinarily resident
103. An income of 6,00,000 from profession which is set up in India but controlled partly from UK
and partly from India. The income neither accrues in India nor received in India. In whose
hands it will be taxable?
a) Resident and ordinarily resident b) Non ordinarily resident
104. “X” was born England. His parents were born in India in 1951 and his Grand Parents were
born in South Africa. “X” in this case shall be:
a) A person of Indian origin b) A foreign national
105. Mr. Akash Tanwar has following income:

 Income from business in Germany amounting to ` 3,00,000 and half of it received in India
 Interest income of ` 1,00,000 from UK Development Bond and entire interest income was
credited to a bank account in UK. Subsequently, the amount was transferred in India.
 He has a business in Bombay and entire income of ` 3,00,000 was received in UK.

Page
VIVEK GABA
 Compute his income presuming that he is ROR, RNOR and NR.
a) 7,00,000 / 4,50,000 / 4,50,000 b) 7,00,000 / 5,50,000 / 4,50,000
c) 7,00,000 / 6,00,000 / 4,50,000 d) 7,00,000 / 7,00,000 / 4,50,000
106. Income which accrue or arise outside India and also received o/s India is taxable in case of:
a) Resident / ROR only b) RNOR
c) ROR & RNOR d) None of the above
107. Total Income of a person is determined on the basis of his:

a) Residential Status in India b) Citizenship in India
c) Both of above d) None of above
108. Vivek was born 2nd August, 1992 in India and he later on took the citizenship of U.S.A Neither
his parents nor his grandparents were born in undivided India Vivek in this case shall be a:
a) Person of Indian origin b) Foreign national
c) Citizen of India d) Resident in India
109. Vivek was born in India in 1992. His parents were born in India 1952. His grandfather was
born in Lahore in 1937 but his grand-mother was born in England in 1941. Vivek will be a:
a) Citizen of England b) Person of Indian origin
c) Citizen of pakistan d) Resident of Lahore
110. Ashish, Foreign National, visited India during previous year 2015-16 for 180 days. Earlier to
this he never visited India Ashish in this case shall be:
a) Resident b) Non-Resident in India
111. Vivek, Foreign National, but a person of India origin visited India during previous year 2017-18
for 181 days. During 4 preceding previous year he was in India for 400 days. Vivek shall be:
a) Resident in India b) RNOR
ANSWERS
1. a) 14. d) 27. c) 40. d) 53. a) 66. a) 79. b) 92. d) 105. a)

2. d) 15. a) 28. c) 41. c) 54. a) 67. c) 80. b) 93. b) 106. a)
3. a) 16. b) 29. b) 42. d) 55. a) 68. a) 81. c) 94. c) 107. a)
4. c) 17. b) 30. c) 43. b) 56. d) 69. c) 82. a) 95. c) 108. b)
5. a) 18. a) 31. b) 44. d) 57. a) 70. a) 83. a) 96. a) 109. b)
6. b) 19. b) 32. b) 45. a) 58. d) 71. a) 84. c) 97. b) 110. b)
7. a) 20. b) 33. c) 46. a) 59. a) 72. b) 85. a) 98. a) 111. c)
8. a) 21. c) 34. a) 47. b) 60. a) 73. a) 86. d) 99. c)
9. c) 22. d) 35. a) 48. a) 61. b) 74. a) 87. d) 100. a)
10. a) 23. d) 36. a) 49. b) 62. b) 75. a) 88. a) 101. d)
11. a) 24. a) 37. a) 50. a) 63. a) 76. a) 89. a) 102. c)
12. b) 25. d) 38. a) 51. c) 64. b) 77. a) 90. d) 103. c)
13. a) 26. d) 39. d) 52. a) 65. b) 78. b) 91. d) 104. b)

Page
VIVEK GABA
INCOME FROM
HOUSE PROPERTY 4
@
SEC 22 : BASIS OF CHARGE
1) Annual value of building or land appurtenant thereto.
 Assessee is engaged in business of letting, even then it is taxable under head House
Property
 Assessee is engaged in letting out vacant land, then the income is taxable u/h OS
2) If it is used for own business or profession, then it is not taxable under this head.
3) If it is used for own residence, the same may be taxable.
4) Taxable only if assessee is owner of the building
SEC 27 : DEEMED OWNER
1) Gift to spouse/ minor child (except minor married daughter), transferor is owner
2) Holder of impartible estate
3) Allotment under house building scheme of society.
4) Acquirer of house in part performance of contract.
5) Lessee of building, if lease is for a period exceeding 12 years.
@
COMPUTATION
Gross annual value (GAV) xxx
Less: Municipal taxes paid by owner during P.Y. xxx
Net annual value (NAV) xxx
Less: Deduction u/s 24
i) Standard deduction (30% of NAV) xxx
ii) Interest on borrowed capital xxx
Income from House Property Xxx
CONCEPT OF COMPOSITE RENT
COMPOSITE RENT
INSEPARABLE SEPARABLE
Whole rent in OS/ PGBP (lifts,

Building
security, power back up, society Furniture or other facilities
maintenance, parking etc.) U/H PGBP or OS U/H House Property

Page
VIVEK GABA
@
SEC 24 : DEDUCTIONS
i) Standard Deduction – 30% of NAV
ii) Interest on borrowed capital
1. Interest of pre-construction period(Loan is obtained prior to completion of construction).Total

interest prior to previous year in which the property has been acquired or constructed -
deductible in 5 equal installments. Deduction is allowed from year when is property acquired or
construction gets completed. Interest for the previous year in which construction is completed or
property is acquired shall be allowed in that year itself.
2. Interest on unpaid interest is not allowed as deduction.
3. Brokerage, commission etc. paid for arranging loan shall be disallowed.
4. Borrowing of fresh loan to pay original loan shall be allowed as deduction.
@
SEC 23 : ANNUAL VALUE
CASE 1: Property let out throughout year
GAV shall be computed as follows:
1. Compare Fair Rent and Municipal Valuation and select the higher.
2. Compare the rent so selected with Standard Rent and the lower of the two shall be
considered to be Expected Rent. (It is also called Annual Letting Value)
3. Compare Expected Rent with Rent Received or Receivable and the higher shall be
considered to be Gross Annual Value
FAIR RENT Rent received/

HIGHER receivable
MUNICIPAL
Standard HIGHER is GAV
VALUATION
Rent LOWER is Expected Rent
CASE 2:Self-occupied building: Used for own residence: Annual value= NIL, if not let out
CASE 3: Building not occupied due to employment, reside at other place not belonging to him:
Annual value= NIL, if not let out
 No deduction of municipal taxes & standard deduction shall be allowed when AV is NIL.
DEDUCTION FROM PROPERTY (CASE 2 & 3)

(a) Where the property has been acquired, constructed, Actual interest payable subject
repaired, renewed or reconstructed with borrowed capital to maximum of ` 30,000.
before 01.04.1999.
(b) Where the property is acquired or constructed with capital Actual interest payable subject
borrowed on or after 01.04.1999 and such acquisition or to maximum of ` 2,00,000, if
construction is completed within 3 5years from the end of certificate is obtained.
the financial year in which the capital was borrowed.

Page
VIVEK GABA
(c) Where the property is repaired, renewed or reconstructed Actual interest payable subject
with capital borrowed on or after 01.04.1999. to a maximum of ` 30,000.
Illustration: An individual owned a house property which was self-occupied. He obtained loan for
the construction of same house on 1st April 2014 of ` 16,00,000 at the interest rate of 10 %. The
construction got completed on 28th March 2017. No installment of loan has been paid yet.
Determine Income under head House Property for the assessment year 2018-19?
Solution:
Computation of Income under head House Property for the assessment year 2018-19
Annual value of the house Nil
Less: Deduction under section 24
Standard Deduction @ 30% Nil
Interest on borrowed capital
For previous year 2017-18: 16,00,000 *10% 1,60,000
st st
For preconstruction period (1 April 2014- 31 March 2017)
16,00,000 *10% * 2 = 3,20,000 64,000
Deduction Limited to 2,00,000 2,00,000
Loss under head House Property 2,00,000
CASE 4: deemed to be let out

Where assessee has more than 1 self-occupied house, then except 1, remaining houses shall be
deemed to be let out.
CASE 5: let out but vacant during whole/part of previous year

 If because of vacancy, Actual rent is less than Expected rent, actual rent shall be GAV
 Actual Rent is more than Expected Rent, Actual rent or Expected rent, whichever is higher
CASE 6: Let out during one part & Self-occupied during another part of year
Valuation as if let out throughout previous year (Case 1)
Actual Rent- for the period for which let out
Expected Rent- for entire previous year
If Fair Rent is missing, then the Actual rent shall be deemed as Fair Rent.
UNREALIZED RENT
While computing gross annual value of a let out property, the unrealized rent is to be deducted
from actual rent received or receivable if:
a) Tenancy is bonafide
b) Defaulting tenant has vacated property or steps taken to vacate the property
c) Defaulting tenant is not in occupation of any other property of assessee
d) Assessee has taken steps to start legal proceedings for recovery of unpaid rent.

Page
VIVEK GABA
Sec 25AA Recovery of unrealized rent
Rent not realized but subsequently realized then it shall be deemed to be income in the PY when
realized, whether or not assessee is owner.
Sec 25B Provisions for arrears of rent

Receipt of arrears of rent, not charged to tax- deemed to be income when received after deducting
30% of such amount.
New Section 25A (Inserted by Finance Act, 2016)

Recovery of Arrears of Rent / Unrealised Rent
(i) Taxable in the year of receipt / realization
(ii) Deduction@30%ofrentreceived/realized
(iii) Taxableevenifassesseeisnottheownerofthepropertyinthefinancialyearofreceipt/realisation.
@
Sec 26 Co-ownership
Property is co-owned by more than 2 persons, share of each included in his income.
If property is self-occupied, each co-owner‖s annual value= NIL and deduction of ` 30,000/`2,00,000
shall be allowed to each co-owner.
Question: Objective questions:

1. Surbhi is owner of house, the detail of which are given below, compute GAV
Municipal Value ` 32,000 Actual rent ` 32,000
Fair rent ` 36,000 Standard rent ` 40,000
a) ` 36,000 b) ` 35,000 c) ` 30,000 d) ` 40,000
2. Rent received by original tenant from sub tenant is taxable under head ___________
3. When annual value of one self-occupied house is nil, the assessee will be entitled to the
standard deduction @ _______
4. Municipal Value ` 14,000, Fair rent ` 14,500, Standard rent ` 14,200, Actual rent as property
let out throughout the previous year ` 16,800. Unrealized rent of previous year ` 7,000. The
annual value of house property shall be:
a) ` 9,800 b) ` 14,200 c) ` 7,200 d) ` 7,500
5. Rent from house property let out by an assessee to his employees when such letting is
incidental to his main business, will be chargeable to tax under the head _________.
Solution: 1 – a), 2 - Other Sources, 3 – Nil, 4 – b), 5 – PGBP

Page
VIVEK GABA
OBJECTIVE QUESTIONS
1. If income is from sale of house property, it will be taxable under the head………
a) Capital Gains b) Business or Profession
c) Other Sources d) None of the above
2. The term house property shall include ………………………

a) buildings b) land appurtenant thereto
c) both a) and b) d) None of the above
3. Varun has one big house and includes vast open area within its boundaries. The house has
been let out at a rent of ` 1,00,000 p.m., out of which rent of ` 25,000 p.m. is attributable to
the open land. How much rental income is taxable under the head house property?
a) ` 1,00,000 per month b) ` 75,000 per month
c) ` 50,000 per month d) none of the above
4. House property includes which type of house property

a) only residential houses and shops
b) only residential houses, shops and godowns
c) only residential houses, shops, godowns, cinema building and workshop
d) residential houses, shops, godowns, cinema building, workshop building, hotel buildings etc.
5. If composite rent is inseparable, it shall be taxed under head

a) Other Sources b) House Property
c) Business or Profession d) PGBP or Other Sources
6. If any person has let out only land, which is not essential part of a building, income is taxable
c) Business or Profession d) Salary
7. If assessee is running hotel business or business of providing paying guest accommodation,

income shall be taxable under the head ……….
8. If assessee is engaged in the business of warehousing, income is

9. taxable under head ……..
10. An individual who transfers any house property to his or her spouse otherwise than for
adequate consideration. Who shall be deemed owner of the house?
a) Individual who transferred b) spouse of the individual
c) equally in the hands of individual and spouse d) None of the above
11. An individual who transfers any house property to his minor child. Who shall be deemed owner
of the house?
a) minor child of individual

Page
VIVEK GABA
b) individual who transferred the house property
c) equally in the hands of individual and minor child
12. An individual who transfers any house property to his minor married son. Who shall be
deemed owner of the house
a) minor married son of individual
b) An individual who transferred the house property
13. Raman gave his house to his wife, Rashi under an agreement to live apart. Who shall be
owner of the house?
a) Raman b) equally in hands of Raman and Rashi
c) Rashi d) None of the above
14. Tiger has entered into a contract for sale of one house to Shyam for ` 70 Lakhs. The
agreement was entered into on 01.01.2017 and the sale was to be effected on 15.04.2017, but
Shyam made full payment on 27.03.2017 and taken possession of the house. Who shall be
deemed to be owner of the house for the previous year ending 31.3.2017. Who shall deemed
as owner of House Property ?
a) Tiger b) Shyam
c) Both Tiger and Shyam d) None of the above
15. What is Standard rent of house property?

a) the rent of similar types of buildings in the same locality
b) rental value determined by the municipality for the purpose of charging municipal tax
c) the highest possible rent as per Rent Control Act
16. Which of the following step need to be followed for computation of GAV
(i) Compare the rent so selected with Standard Rent and the lower of the two shall be
considered to be Expected Rent.
(ii) Compare Expected Rent with Rent Received or Receivable and the higher shall be
considered to be Gross Annual Value
(iii) Compare Fair Rent and Municipal Valuation and select the higher.
(iv) Compare Fair Rent and Standard Rent and select the higher.
(v) Compare the rent so selected with Municipal Valuation and the lower of the two shall be
considered to be Expected Rent.
a) (iii), (v) and (ii) b) (iv), (i) and (ii)
c) (iii), (i) and (ii) d) (iii), (iv) and (i)
17. Compute the GAV of the house whose Municipal Value is ` 80,000, Fair Rent is ` 90,000 and
Actual rent received/ receivable is ` 72,000.
a) ` 72,000 b) ` 80,000 c) ` 90,000 d) None of the above
18. Compute the GAV of the house whose Municipal Value is ` 65,000, Fair Rent is ` 65,000,
Standard Rent is ` 58,000 and Actual rent received/ receivable is ` 60,000.

Page
VIVEK GABA
a) ` 60,000 b) ` 65,000 c) ` 58,000 d) Nil
19. Compute the GAV of the house whose Municipal Value is ` 75,000, Fair Rent is ` 80,000,
standard rent is ` 78,000 and Actual rent received/ receivable is ` 72,000.
a) ` 72,000 b) ` 78,000 c) ` 75,000 d) ` 80,000
20. Unrealized rent is equal to ……………..

a) amount of rent payable but not paid by a tenant
b) amount of rent payable and paid by a tenant
c) amount of rent neither payable nor paid by the tenant
21. The amount realized shall be taxable in the year

a) in which such rent is realised b) to which such rent pertains
c)any of the year, discretion of Assessing Officer d) not taxable at all
22. Where the assessee has incurred any expenditure on recovery, it ………………..
a) will be allowed to be deducted b) will not be allowed to be deducted
c)may be allowed as deduction d) will be added to amount recovered
23. Municipal tax shall be allowed to be deducted from gross annual value while computing net
annual value. Is the statement valid?
a) Valid b) Invalid c) Partly valid d) None of the above
24. If the municipal tax is due but not paid, in that case deduction ………….
a) shall be allowed b) is not allowed
c)may be allowed d) may not be allowed
25. If the municipal tax has been paid by the tenant, the deduction of same
a) may be allowed b) shall be allowed
c)is not allowed d) may not be allowed
26. During the previous year 2016-17 municipality has levied taxes ` 20,000, but the assessee has
paid ` 15,000. What amount of deduction shall be allowed to the assessee?
a) ` 20,000 b) ` 15,000 c) ` 17,500 d) Nil
27. Municipality has levied taxes of `45,000 but the assessee has paid ` 55,000 which includes `
5,000 for the earlier year and ` 5,000 for the subsequent year. What amount of deduction
shall be allowed to the assessee?
a) `45,000 b) ` 55,000 c) ` 50,000 d) ` 60,000
28. If municipal taxes paid are more than the amount of Gross Annual Value, there …………….
a) cannot be negative Net Annual Value b) can be negative Net Annual Value
c) any of the above d) None of the above
29. Every assessee shall be allowed deduction of notional expenditure equal to ……….. of net annual
value
a) 30 % b) 25 % c) 35 % d) Nil
30. Actual expenditure incurred by the assessee ……… taken into consideration for the computation
of amount taxable under head House property
a) shall be b) shall not be c) may be d) may not be

Page
VIVEK GABA
31. NAV of one house is ` 4,00,000 and actual expenditure incurred on repairs is ` 75,000. What
amount of deduction is allowed under section 24(a).
a) ` 75,000. b) ` 1,20,000 c) ` 1,00,000 d) Nil
32. Where property has been acquired, constructed, repaired, renewed or reconstructed with
borrowed capital, the amount of interest payable on such capital, ……. deducted while computing
income under the head house property.
a) shall be b) shall not be c)may be d) may not be
33. Only simple interest is allowed on ………………..

a) due basis b) payment basis
c) Partly on payment basis d) None of the above
34. If a house has been constructed on 01.07.2017 by taking a loan on 01.11.2010, the prior
period shall be from which date to which date?
a) 01.11.2010 to 31.03.2017 b) 01.11.2010 to 1.07.2017
c)01.11.2010 to 30.06.2017 d) None of the above
35. Aman had taken a loan of ` 5,00,000 for construction of property on 01.10.2016. Interest was
payable @ 10% p.a. The construction was completed on 30.06.2017 No principal repayment
has been made up to 31.03.2018. Compute interest allowable as deduction under section
24where property is let out for the A.Y.2018-19.
a) ` 5,000 b) ` 7,500 c) ` 55,000 d) ` 45,000
36. Ram had taken a loan of ` 5,00,000 for construction of property on 01.10.2015. Interest was
payable @ 10% p.a. The construction was completed on 30.06.2017. No principal repayment
has been made up to 31.03.2018. Compute interest allowable as deduction under section 24
where property is let out for the A.Y.2018-19.
a) ` 15,000 b) ` 17,500 c) ` 55,000 d) ` 65,000
37. Where the self-occupied property whose GAV is nil has been acquired, constructed, repaired,
renewed or reconstructed with borrowed capital before 01.04.1999. What is the maximum
deduction of interest that shall be allowed for the AY 2018-19?
a) ` 2,00,000 b) ` 30,000
c) ` 1,50,000 d) deduction is allowed without any limit
38. Aparna has one house property where she stays with her family. The rent of similar property
in the neighborhood is ` 25,000 p.m. The municipal valuation is ` 23,000 p.m. Municipal taxes
paid are `8,000. Loan of ` 20,00,000 was taken on 01.01.2011 from ICICI Housing Finance
Ltd. The construction was completed on 25.11.2013. The accumulated interest up to 31.3.2013
is ` 1,50,000. During previous year 2017-18, Aparna paid ` 1,88,000whi ch included `
1,44,000 as interest. Compute Aparna‖s income from house property for AY 2018-19. All
conditions for higher deduction of interest are satisfied.
a) Loss of ` 1,50,000 b) Loss of ` 1,74,000
c)Loss of ` 30,000 d) Loss of ` 2,00,000

Page
VIVEK GABA
39. Where the property consists of a house or part of a house which cannot actually be occupied
by the owner by reason of fact that owing to his employment, business or profession carried
on at any other place, he has to reside at that other place in a building not belonging to him,
annual value of such house or part of the house
a) shall be taken to be Nil
b) shall not be taken to be Nil
c) may be taken to be Nil
d) computed normally by comparing FMV, Standard rent, Actual rent
40. In which of the following case GAV of the house is taken as nil.
a) When the house is self-occupied by the assessee
b) When assessee could not occupy the house because of employment and had to reside in
other building not belonging to him
c) Both a) and b)
a) When the house is self-occupied by the assessee
b) When assessee could not occupy the house because of employment and had to reside in
other building belonging to him
c) Any of the above
42. Where the interest is payable outside India, the shall not be deducted if
a) tax has not been paid or deducted
b) there is no person in India who may be treated as his agent
c) both of the above
43. An assessee who claimed deduction of unrealized rent for ` 45,000 and was allowed. Later,
he realized ` 30,000 along with arrear of rent being ` 45,000. What will be the taxable
amount?
a) 75,000 b) 52,500 c) 61,500 d) 66,000
44. V is the owner of a house, the details of which are given below:
Municipal Value ` 30,000
Actual Rent ` 32,000
Fair Rent ` 36,000
Standard Rent ` 40,000
a) ` 36,000 b) ` 35,000 c) ` 30,000 d) ` 40,000
45. Sameer purchased a house for his residential purpose after taking a loan in January 2016.
During the previous year 2017-18, he paid interest on loan ` 1,67,000. While computing the
income from house property, the deduction of how much is allowed?
a) ` 30,000 b) ` 1,00,000 c) ` 1,67,000 d) ` 1,50,000

Page
VIVEK GABA
46. Calculate the Gross Annual value from the following details:
Municipal Value -` 45,000 Fair rental value-` 50,000
Standard rent -` 48,000 Actual Rent- `42,000
a) ` 50,000 b) `48,000 c) ` 45,000 d) ` 42,000
47. M took a loan of` 6,00,000 on 1.4.2015from a bank for construction of a house which is
occupied by him. The loan carries an interest @ 10%p.a. The construction is completed on
15.6.2017. The entire loan is still outstanding. Compute the interest allowable for
theassessmentyear2018-19.
a) ` 60,000 b) ` 1,80,000 c) ` 84,000 d) ` 24,000
48. A had oneself-occupied house property in Mumbai for residence. Fair rent of that property is
` 56,000 per annum. Municipal valuation is ` 28,000. Municipal taxes paid are ` 5,000
including ` 1,000 for an earlier year. The house was constructed in December, 2009 with a
loan of ` 12,00,000from a bank taken in November, 2007. During previous year 2017-18, the
assesseere funded ` 2,30,000 which includes ` 1,68,000 as current year interest. Compute
the in come from house property for assessment year 2018-19?
a) Loss of ` 30,000 b) Loss of ` 1,68,000
c) Nil d) Loss of ` 1,50,000
49. Which out of the following is not a case of deemed ownership of house property?
a) Transfer to a spouse for in adequate consideration
b) Transfer to a minor child for in adequate consideration
c) Holder of an impartible estate
d) Co-owner of a property
50. A has two house properties. Both are self-occupied. The annual value
a) of both house shall be nil b) of one house shall be nil
c) of no house shall be nil d) None of the above
51. An assessee has borrowed money for purchase of a house & Interest is payable outside
India. Such interest shall
a) be allowed as deduction
b) not to be allowed on deduction
c) be allowed as deduction if the tax is deducted at source
d) such interest shall not be considered
52. What is the maximum amount of deduction allowed in respect of income from house property
in respect of self-occupied property for which loan is taken for the repair of the property?
a) ` 30,000 b) ` 1,50,000 c) ` 2,00,000 d) Nil
53. What is maximum amount of deduction allowed in respect of income from house property in
respect of self-occupied property for which loan is taken for the construction of the property
and other condition relating to higher deduction is fulfilled?
a) ` 30,000 b) ` 1,50,000 c) ` 2,00,000 d) Nil

Page
VIVEK GABA
54. An individual owned a house property which was self-occupied. He obtained loan for
construction of same house on 1st April 2015 of ` 16,00,000 at interest rate of 10 %. The
construction got completed on 28th March 2018. No installment of loan has been paid yet.
Determine Income under head House Property for the assessment year 2018-19?
a) ` 2,00,000 b) ` 1,50,000 c) ` 30,000 d) ` 2,24,000
55. An individual owned house property which was self-occupied. Interest amounting to ` 50,000
has been paid during the year in respect of loan obtained for repair of house. Determine
amount of deduction available in respect of house Property for assessment year 2017-18?
a) ` 50,000 b) ` 1,50,000 c) ` 30,000 d) ` 2,00,000
56. Aman had taken a loan of ` 20,00,000 for construction of property on 01.10.2016. Interest was
where property is self-occupied for the A.Y.2017-18.
a) ` 20,000 b) ` 2,20,000 c) ` 1,50,000 d) ` 2,00,000
57. Ram had taken a loan of ` 15,00,000 for construction of property on 01.10.2014. Interest was
where property is self-occupied for the A.Y.2018-19.
a) `45,000 b) ` 1,50,000 c) ` 1,95,000 d) ` 2,00,000
58. Vivek purchased a house for this residential purpose after taking a loan in January, 2014.
During the previous year 2016-17, he paid interest on loan 1,67,000. While computing income
from house property, the deduction is allowable to the extent of?
a) 30,000 b) 1,00,000 c) 1,67,000 d) 1,50,000
59. The net annual value of house let-out is 1,00,000 and actual amount spent by assessee on
repair and insurance premium is 20,000, amount of deduction allowed u/s 24(a) shall be ……………
a) 30,000 b) 1,50,000 c) 1,00,000 d) 20,000
60. Vivek, after sale of his house property during August, 2015 received arrears of rent amounting
to 40,000 on 2nd February, 2017. The said income is chargeable to tax under head …………………?
a) 28,000 under head house property b) 28,000 under head PGBP
c)40,000 under head house property d) 40,000 under head PGBP
61. Vivek received 30,000 as arrears of rent during the previous year 2018-19. The amount taxable
under section 25B would be…………………?
a) 21,000 b) 30,000 c) 1,50,000 d) None of the above
62. Income from vacant plot of land is taxable under the head ―income from other sources‖
63. Rent from house property let-out by an assessee to his employer when such letting is
incidental to his main business, will be taxable under head ―Income from house property‖.
64. It is not possible to have negative income under the head ―Income from house property‖.

Page
VIVEK GABA
65. What amount of deduction is available under section 24(b) for previous year 2017-18 in case
of let out property as per following detail:
Amount of loan (for construction of property) : ` 12,00,000
Date of loan : 1.01.2015
Rate of interest : 12%
Date of completion of construction : 31.1.2018
a) 2,08,800 b) 2,37,600 c) 1,50,000 d) 1,44,000
66. Which of the following is not taxable under head House Property?
a) swimming pool b) stadium
c) vacant land d) land appurtenant to building
67. Where self-occupied property whose GAV is nil is repaired, renewed or reconstructed with
capital borrowed on or after 01.04.1999. What is the maximum deduction of interest that shall
be allowed?
a) ` 1,50,000 b) ` 30,000
c) Nil, no deduction is allowed d) deduction is allowed without any limit
68. If Fair rent is ` 15,000 p.m. and Municipal valuation is ` 16,000 p.m. and Standard rent is `
15,500 p.m., rent received or receivable is ` 17,000 p.m. Compute the GAV of the house
a) ` 15,500 p.m. b) ` 17,000 p.m. c) ` 16,000 p.m. d) ` 15,000 p.m.
69. Statutory deduction or standard deduction is provided under section

a) 24(b) b) 24(a) c) 22 d) 23
70. Deduction for interest on the capital borrowed is provided under section
a) 24(b) b) 24(a) c) 22 d) 23
71. Which is the charging section of Income under head House property?
a) 28 b) 22 c) 23 d) 56
72. When composite rent is separable, rent of furniture or other facilities shall be taxable under
head …..
73. When composite rent is separable, rent relating to building shall be taxable under head …..
74. If any person is holding house property as stock-in-trade for the purpose of letting out, income
shall be taxable under the head ……………………
75. F Ltd is holding 700 flats for the purpose of letting out, income shall be taxable under ……..
76. If any person has a hotel building which has been let out, income from such hotel building
shall be taxable under the head …………..

Page
VIVEK GABA
77. How is the income under head House Property computed?

a) Gross Annual Value - Municipal Tax Paid by owner
b) Gross Annual Value - Municipal Tax Paid by owner and tenant - Deduction u/s 24
c) Gross Annual Value - Municipal Tax Paid by owner - Deduction u/s 24
d) Gross annual value - Municipal Tax borne by owner - Deduction u/s 24
78. If ownership of property is disputed, income from house property shall be taxable in the hands
of ……
a) beneficial owner b) who pretends to be owner of house
c) who stays in the house d) None of the above
79. A and B claim to be the owner of a particular house property which has been let out to C.
The rent is being received by A, in this case, …………. is the beneficial owner and income is
taxable in hands of ……….
a) A, B b) B, A c) A, A d) B, B
80. An individual who transfers any house property to his or her spouse otherwise than for
adequate consideration or in connection with an agreement to live apart. Who shall be deemed
owner of house?
a) An individual b) spouse of the individual
c) equally in the hands of individual and spouse d) None of the above
81. An individual who transfers any house property to his minor married daughter. Who shall be
deemed owner of the house
a) minor married daughter of individual
b) An individual who transferred the house property
82. Mohit gifted his house to his wife, Samridhi. Income from such house is taxable in hands of ….
a) Mohit, in capacity of deemed owner b) Samridhi
c) equally in hands of Mohit and Samridhi d) None of the above
83. Rakesh gave his house to his wife, Sanya for adequate consideration. Income from such
house is taxable in hands of ………
a) Rakesh, in capacity of deemed owner b) Sanya
c) equally in hands of Rakesh and Sanya d) None of the above
84. A member of a co-operative society, company or other association of persons to whom a

building is allotted or leased under house building scheme of the society, company or
association. Income from such house is taxable in hands of ……………
a) member of co-operative society, company or other association of persons
b) co-operative society, company or other association of persons
c) any of the above (d) none of the above

Page
VIVEK GABA
85. A person who is allowed to take or retain possession of any building or part thereof in part
performance of a contract of the nature referred to in section 53A of the Transfer of Property
Act, 1882. Who shall be deemed to be the owner of that building?
a) No person shall be deemed to be owner of the building
b) Seller of the building
c) Person who is allowed possession of building
86. If any person has given the possession of any building to the proposed buyer and has taken
full payment, in that case, even if the ownership in documents is in the name of seller. Who
shall be considered to be owner of building?
a) proposed buyer b) seller
c) Both buyer and seller d) None of the above
87. Annual value of house property is computed under section?

a) 22 b) 24 c) 23 d) 26
88. What is fair rent of house property?

b) rental value determined by the municipality for the purpose of charging municipal tax
c) rent received or receivable
89. What is Municipal valuation of house property?

b) rent received or receivable
c) rental value determined by the municipality for the purpose of charging municipal tax
90. While computing gross annual value of a let out property, which of the following shall be
deducted from actual rent received or receivable.
a) Municipal rent b) fair rent
c) unrealized rent d) None of the above
91. Unrealized rent means ……………..

a) the rent which the owner can realize
b) the rent which the owner cannot realize
c) any of the above
92. Which of the following condition shall be satisfied for the rent to be unrealized rent?
a) tenancy is bonafide
b) the defaulting tenant has vacated, or steps have been taken to compel him to vacate the
property
c) defaulting tenant is not in occupation of any other property of the assessee and all
reasonable steps to institute legal proceedings for recovery
d) all of the above

Page
VIVEK GABA
93. Where assessee could not realise rent from a property let out to a tenant and the same is
subsequently realized, the amount so realized
a) shall be deemed to be income chargeable under the head Income from house property
b) shall not be deemed to be income chargeable under the head Income from house property
c) shall be deemed to be income chargeable under the head Other Sources
94. The amount realized shall be taxable only if assessee is owner of the building. Discuss the
validity of the statement.
a) Valid, the assessee shall be taxable in the owner of the building
b) Invalid, assessee shall be chargeable to tax irrespective of fact whether assessee is owner
of building or not
c) Partly valid
95. If the assessee has received any interest along with unrealized rent, it will be considered to be
income under the head …………
a) other sources b) house property
c) business or profession d) none of the above
96. Municipal taxes shall include

a) House Tax b) Fire Tax
c) Scavenging Tax d) all of the above
97. Deduction from Net annual value shall be allowed under section
a) 24 b) 26 c) 22 d) 23
98. Where property has been acquired or constructed with borrowed capital, the interest payable
on such capital borrowed for the period prior to the previous year in which the property has
been acquired or constructed, shall be deducted in equal installments ……………..
a) over a period of 3 years b) over a period of 4 years
c) over a period of 5 years d) over a period of 10 years
99. Where fresh loan has been raised to repay the original loan. Interest payable on the loan so
raised to repay original loan ……………
a) would not be allowed as a deduction u/s24
b) would also be allowed as a deduction u/s24
c) may be allowed as a deduction u/s 24
100. If any person has only one house or part of house which is self-occupied, gross annual value
of such a house ………………
a) shall not be taken to be Nil
b) shall be taken to be Nil
c) may be taken to be Nil
d) computed normally by comparing FMV, Standard rent, Actual rent
101. When the GAV of the house is taken as nil, municipal taxes paid ………………………
a) shall be allowed as deduction b) shall not be allowed as deduction

Page
VIVEK GABA
c) may be allowed as deduction d) None of the above
102. When the GAV of the house is nil, standard deduction under section 24(a) shall be allowed.
Discuss the validity of the statement.
a) Valid, standard deduction shall be allowed
b) Invalid, standard deduction shall not be allowed as deduction
c) Partly valid, in few cases standard deduction may be allowed
103. When the GAV of the house is nil, interest on capital borrowed shall be allowed as
deduction. is the statement true?
a) True b) False
104. Where a self-occupied property whose GAV is nil is acquired or constructed with capital
borrowed on or after 01.04.1999 and such acquisition or construction is completed within 5
years from end of financial year in which capital was borrowed. What is the maximum
deduction of interest that shall be allowed?
a) ` 1,50,000 b) ` 30,000
c) ` 2,00,000 d) deduction is allowed without any limit
a) When the house is not self-occupied by the assessee
b) When assessee could not occupy house because of employment and had to reside in some
other building not belonging to him
c) Any of the above
106. An assessee has borrowed money for purchase of a house & Interest is payable outside
India. Such interest shall:
a) be allowed as deduction b) Not to be allowed on deduction
c) be allowed as deduction if the tax is deducted at source d) None of the above
107. The share of income of each co-owner of the property computed in accordance with sections
22 to 25 ………… in his total income.
a) shall not be included b) shall be included
c) may be included d) none of the above
108. A house whose municipal value is ` 1,10,000, Fair rent is ` 1,30,000, Standard Rent is `
1,20,000 and municipal taxes paid is ` 1,40,000 (includes arrear of 6 years). The actual rent
for whole year is ` 1,08,000. What would be the NAV?
a) 1,20,000 b) - 20,000 c) -10,000 d) Nil
109. A house was taken on rent by Ravi for ` 12,000 per month who lets out the property
further for a rent of ` 18,000 per month. How would it be taxed in the hands of Ravi?
a) Under head House Property, amount being 50,400
b) Under head Other Sources, amount being ` 72,000
c) Under head PGBP, amount being ` 72,000
d) None of the above since not taxable at all

Page
VIVEK GABA
110. What would be the amount of deduction available u/s24(b) for previous year 2017-18 in case
a) 1,80,000 b) 2,01,600 c) 1,50,000 d) 30,000
111. What would be the amount of deduction available u/s 24(b) for previous year 2017-18 in case
of self-occupied property as per following detail:
a) 1,80,000 b) 2,01,600 c) 1,50,000 d) 30,000
112. What would be the amount of deduction available u/s24(b) for previous year 2017-18 in case
a) 1,08,000 b) 2,01,600 c) 1,50,000 d) 1,44,000
113. Where a let out property is acquired or constructed with capital borrowed. What is the
maximum amount of interest that shall be allowed?
a) ` 1,50,000 b) ` 30,000
c) Nil, no deduction is allowed d) deduction is allowed without any limit
114. Where a let out property is repaired, renewed or reconstructed with capital borrowed. What is
the maximum deduction of interest that shall be allowed?
a) ` 1,50,000 b) ` 30,000
c) deduction is allowed without any limit d) Nil, no deduction is allowed
115. Sameer is engaged in running hotels. During the period, he earned rent of `4,50,000. The
income will be taxable under head
a) House property
b) Other Sources
c) PGBP
d) PGBP or Other Sources, at the option of assesse
116. When is deduction of unrealized rent allowed?

a) If the amount of unrealized rent does not exceed 15 % of rent receivable
b) If the amount of unrealized rent does not exceed 30 % of rent receivable
c) If condition mentioned in Rule 4 is satisfied (d) None of the above

Page
VIVEK GABA
117. A house property was gifted by Ravi to his minor son in 2012. The house property was let
out by his minor son at the rate of ` 15,000 per month. The income will be taxable in the
hands of ……..
a) Ravi will be deemed as owner of the house
b) Income will be computed in the hands of minor son and then clubbed in the income of Ravi
c) Income will be computed in the hands of minor son
118. A house property was gifted by Ravi to his major son in 2012. The house property was let
out by major son at the rate of ` 15,000 per month. The income will be taxable in the hands
of ……..
a) Income will be computed in the hands of major son and then clubbed in the income of Ravi
b) Income will be computed in the hands of major son
c) Ravi will be deemed as owner of the house
119. Ram recovers ` 70,000 as outstanding which was arrear. What amount will be taxable?
(Assume he has no other income)
a) 70,000 b) 49,000 c) Nil d) 21,000
120. V Gifted his house property to his wife and / or minor son in 2009. V has let out the house
property at 5,000 p.m. The Income from such house property will be taxable in the hands of:
a) Mrs. V
b) Mr. V. However, income will be computed first as Mrs. V‖s income and thereafter clubbed in
the income of V;
c) V as he will be treated as deemed owner & liable to pay tax.
121. V has taken a house property on lease for 15 years from N and let out the same to X.
Income from such house property to V shall be taxable as:
a) Income from other sources
b) Income from House property as V is the deemed owner;
c) Income from business or profession
d) Income from capital gains
122. V gifted his house property to his minor married daughter. The income from such house
property shall be taxable in hands of:
a) V as deemed owner b) Income of minor married daughter
c) at the option of assessing officer d) None of the above
123. T is the owner of a superstructure although the land was taken by him on lease. The income
from such House property shall be taxable under the head:
a) Income from other sources b) Income from house property
c) Income from capital gain d) None of the above
124. S has taken a house on rent and sublets the same to G Income from such house property
shall be taxable under the head:
a) Income from House property b) Income from other sources
c) Income from capital gains d) None of the above

Page
VIVEK GABA
125. Municipal valuation of a house is 1,00,000 whereas the fair rent of House property is 1,20,000
and standard rent is 1,10,000. Actual Rent received is 1,40,000. Municipal taxes paid 10%. The
net annual value in this case shall be:
a) 90,000 b) 1,40,000 c) 1,30,000 d) 1,00,000
126. Municipal valuation of a house is 1,00,000 whereas the fair rent of House property is 1,50,000
and standard rent is 1,20,000. Actual Rent received is 1,30,000. Municipal taxes paid for 6
years in advance 1,20,000. The net annual value in this case shall be:
a) 1,10,000 b) 10,000 c) 1,30,000 d) 1,00,000
127. If annual value of the let out property is negative, then tick the deductions which shall be
allowed u/s 24:
a) All deductions b) No deductions
c) Deduction only on account of interest on money borrowed d) None of the above
128. If the property is owned by Co-owners and it is let out, Income from such property shall be:
a) computed separately for each co-owners
b) first computed ignoring Co-ownership and then distributed among Co-owners
c) at the option of the assessing officer
129. If the property is owned by co-owners & it is self-occupied by all Co-owners, the annual value
a) of such House property shall be nil b) for each co-owners shall be nil
c) would be at the option of assessing officer d) None of the above
130. In the above case, interest on money borrowed shall be allowed:

a) To the extent of 30,000 / 2,00,000 as the case may be, for the property as such
b) To each co-owner to the extent of 30,000 / 2,00,000 as the case may be.
c) To each co-owner to the extent of 30,000 / 1,50,000 as the case may be.
131. Unrealized rent is a deduction from:

a) Actual Rent b) Net Annual Value
c) Income from the head House property d) None of the above
132. An Assessee was allowed deduction of unrealized rent to the extent of 40,000 in past although
total unrealized rent was 60,000. He is able to recover from tenant 45,000 during the previous
year on account of such unrealized rent. He shall be liable to pay tax on which amount?
a) 45,000 b) Nil c) 17,500 d) None of the above
133. An assessee borrowed money for purchase of a house & Interest is payable outside India.
Such interest shall:
a) be allowed as deduction
b) not be allowed as deduction
c) be allowed as deduction only if the tax is deducted at source

Page
VIVEK GABA
Answers
1. a) 16. c) 31. a) 46. c) 61. a) 76. c) 91. d) 106. b) 121. b)

2. c) 17. a) 32. a) 47. b) 62. b) 77. a) 92. a) 107. b) 122. b)
3. a) 18. b) 33. a) 48. d) 63. b) 78. c) 93. b) 108. b) 123. b)
4. d) 19. a) 34. c) 49. b) 64. a) 79. a) 94. a) 109. a) 124. c)
5. d) 20. a) 35. d) 50 c) 65. c) 80. a) 95. d) 110. a) 125. b)
6. a) 21. b) 36. b) 51. a) 66. b) 81. a) 96. a) 111. d) 126. c)
7. c) 22. a) 37. b) 52. c) 67. b) 82. b) 97. c) 112. d) 127. b)
8. b) 23. b) 38. a) 53. a) 68. b) 83. a) 98. b) 113. c) 128. b)
9. a) 24. c) 39. c) 54. c) 69. a) 84. c) 99. b) 114. c) 129. b)
10. b) 25. b) 40. a) 55. d) 70. b) 85. a) 100. b) 115. c) 130. a)
11. b) 26.. b) 41. c) 56. c) 71. d) 86. c) 101. b) 116. a) 131. c)
12. c) 27. b) 42. b) 57. c) 72. b) 87. a) 102. a) 117. b) 132. c)
13. b) 28. a) 43. a) 58. a) 73. b) 88. c) 103. c) 118. b)
14. c) 29. b) 44. c) 59. a) 74. b) 89. c) 104. b) 119. c)
15. c) 30. b) 45. b) 60. a) 75. c) 90. b) 105. c) 120. b)

Page
VIVEK GABA
INCOME UNDER HEAD SALARY 5
MEANING OF SALARY
Any remuneration paid by an employer to an employee in consideration of his services is called
salaries. It includes monetary value of those benefits and facilities, which are provided by the
employer and are taxable.
Income: salary includes basic salary, advance salary, fees, commission, bonus, taxable value of
cash allowances, perquisites and retirement benefits.
Section 17gives an inclusive definition of salary which broadly includes:
1. Basic salary 2. Fees, Commission and Bonus 3. Retirement Benefits

4. Taxable value of cash allowances 5. Taxable value of perquisites
ALLOWANCES
These are of three types
A. Taxable Allowances: Dearness allowance, Medical allowance, Servant allowance, Warden

Allowance, Family allowance, City Compensatory allowance etc.
B. Allowances exempt upto specified limit: House rent allowances, Certain Special allowances,
etc.
C. Fully exempted allowances: Foreign allowance, sumptuary allowance to High Court / Supreme
Court Judges, Allowances from UNO.
FULLY TAXABLE ALLOWANCE

a) Servant Allowance a) City Compensatory Allowance
b) Overtime Allowance c) Tiffin / Lunch Allowance
d) Warden or Proctor Allowance e) Fixed Medical Allowance
f) Dearness Allowance and Dearness Pay g) Other allowances
PARTIALLY EXEMPT ALLOWANCE

This category includes allowances which are exempt up to certain limit.
Sec 10(13A) House rent allowance (HRA)

An allowance granted to a person by his employer to meet expense incurred on payment of rent in
respect of residential accommodation occupied by him is exempt from tax to the extent of least of
following:
1. Rent(-)10% of Salary
2. House Rent Allowance actually received by the assessee
3. 50% of salary (If accommodation is situated in Mumbai, Kolkata, Delhi, Chennai) or 40% of
salary (if accommodation is situated in any other place).
If an employee is living in his own house and receiving HRA, it will be fully taxable.

Page
VIVEK GABA
ALLOWANCE FOR MEETING OFFICIAL EXPENDITURE
Special allowance given to employees to meet expenditure incurred exclusively in performance of
official duties is exempt to extent amount received or amount spent whichever is less.. These
include travelling allowance, daily allowance, conveyance allowance, helper allowance & uniform
allowance.
Special allowances to meet personal expenses at the place where duties of his office or
employment of profit are ordinarily performed by him or place where he ordinarily resides or
compensate him for increased cost of living.
These allowances are exempt to the extent received or specified limit whichever is less.
Children Education allowance: extent of ` 100 p.m. per child, max 2 children
Children Hostel allowance: extent of ` 300 p.m. per child, max 2 children.
Transport allowance: exempt up to ` 1600 per month. For blind & orthopedically handicapped
persons, it is exempt up to ` 3200 p.m.(Amended vide Notification no 39/2015, dated 13/4/2015-)
Out of station allowance: Exempt up to 70% of such allowance or ` 6000 pm, whichever is less
FULLY EXEMPT ALLOWANCE

1. Foreign allowance is usually paid by the Govt. to its employees being Indian citizen posted out
of India for rendering services abroad. It is fully exempt from tax.
2. Allowance to High Court and Supreme Court Judges of whatever nature are exempt from tax.
3. Allowances from UNO organization to its employees are fully exempt from tax.
RETIREMENT BENEFITS
@
Sec 10(10) : Gratuity
Covered by pmt. of Gratuity Act Not covered by pmt. of Gratuity Act
Least of following is exempt from tax Least of following is exempt from tax
1) ` 10,00,000 1) ` 10,00,000
2) 15/26 x last drawn salary x completed 2) 1/2 x average last 10 month salary x
year of service or Part of the year in completed year of service
excess of 6 months.
3) Actual Amount 3) Actual Amount
Sec 10(10AA) : Leave Salary
Government employee- wholly exempt
Other than Government employee

Least of following is exempt from tax
1) ` 300,000
2) 10 x salary (Average last 10 months salary)
3) Cash equivalent leave x Average last 10 months salary
4) Actual Amount

Page
VIVEK GABA
@
Sec 10(10C) : Voluntary Retirement scheme
1) a) Last drawn salary x 3 x completed years of service
b) Last drawn salary x remaining months of service, whichever is lower
2) ` 5,00,000
3) Actual Amount Received
whichever is lower is exempt from tax
Exemption under this section is allowed once in lifetime. Where any relief has been allowed to an
assessee u/s89 for any assessment year in respect of any amount received or receivable on his
voluntary retirement or termination of service or voluntary separation, no exemption shall be allowed
to him in relation to such, or any other, assessment year under this section.
Sec 10(10B) : Retrenchment Compensation
Least of following is exempt from tax
1) Amount calculated under Industrial Disputes Act 1947 (15/26 days salary for every completed
year of service)
2) ` 500,000
3) Amount received
@
Sec 10(10A) : PENSION
A. Uncommuted pension is pension periodically received by the employee. It is taxable in the
hands of the both Govt. and Non Govt. Employees.
B. Commuted pensionIt is lump-sum amount taken by commuting the pension or part of pension.
Any commuted pension received by a Govt. employee is wholly exempt from tax.
Commuted pension received by employee other than Govt. employees

Amount received is exempt in the following manner
In receipt of Gratuity In any other case

 1 commuted pension received   1 commuted pension received 
3   100% 2   100%
 commutatio n %   commutatio n % 
Sec 16(ii) : Entertainment allowance
This allowance is first included in gross salary under allowances and then deduction is given only
togovernment employees. Deduction allowed is lower of:
a) ` 5000 b) 1/5 of the Salary c) Actual Amount

Page
VIVEK GABA
RENT FREE ACCOMADATION
Govt. employee: License fee determined by Govt.
Other than Govt. employee
 Accommodation owned by employer
Population Taxable
< 10 Lakhs 7.5% of salary
10 lakh to 25 lakh 10% of salary
> 25 lakhs 15% of salary
 Accommodation Not owned: Actual or 15% of salary, less
 Accommodation in hotel: 24% of salary or actual charges, less (GOVT. + OTHERS)
Not taxable if accommodation for <15 days and on transfer of employee
@
Sec17(2) : SPECIFIED EMPLOYEE
1. Director of the company, or;
2. Employee having 20% or more voting power in the employer company, or;
3. Employee having a salary of more than ` 50,000.
4. Salary means all taxable monetary payments, after deduction u/s 16.
If following perquisites are provided in kind, then they shall be taxable only for employees specified
u/s 17(2)
(1) Attendants (2) Water, gas, electricity
(3) Education (4) Motor Car
TAX FREE PERQUISITES
1. Accommodation provided on transfer of an employee in a hotel for not exceeding 15 days in

aggregate
2. Accommodation provided in a ―remote area‖ to an employee working at a mining site etc.
3. Conveyance facility provided to an employee to cover the journey between office and
residence.
4. Free education to children with the expenditure upto` 1,000. Amount beyond ` 1,000 pm shall
be taxable.
5. Amount spent on training of employees or fees paid for refresher/ management course.
6. Payment of annual premium by employer on accident policy affected by him on his employee.
7. Interest free/ concessional loan of an amount not exceeding ` 20,000. Beyond this amount, it
is taxable as per rate of SBI.
8. Refreshment provided by an employer to all employees during working hours in office
premises.
9. Health club facility/ Sports club facility
10. Computer/ Laptop given to an employee for official/ personal use (which is owned or hired by
the employer)
11. Medical facility upto` 15,000.
12. Telephone facility provided to an employee.
13. Recreational facilities provided to employees.
14. Employer‖s contribution to staff group insurance scheme.
15. Periodicals or journals required for discharge of work.

Page
VIVEK GABA
MOTOR CAR
Owned by Used for Amount taxable

exclusively for NIL taxable
official purpose
exclusively for Running & Maintenance-Actual (if given)
private purpose Chauffeur- Actual (if given)
Owned or Wear & tear 10% p.a. of cost/ hire charges
hired by  Upto 1.6 liters cubic capacity `
employer Employee 600 shall be taxable
and used Partly official Running &  Exceeding 1.6 ltrs cubic capacity
and Partly Maintenanc `900 shall be taxable
private e expense  Upto 1.6 liters cubic capacity `
(Actual expense is borne by Employer 1,800 shall be taxable
is irrelevant)  Exceeding 1.6 ltrs cubic capacity `
2,400 shall be taxable
Add ` 900 if chauffeur (driver) is also provided
Owned or exclusively for NIL taxable
hired by official purpose
employee exclusively for Actual expenditure incurred by employer shall be taxable
and used private purpose
Partly official Total Actual expenditure for official and personal purpose
and Partly Less: 1800 pm /2400 pm
private Less: 900 pm for chauffeur (if any)
(Actual expense Balance: Taxable
is irrelevant) However, if actual expenditure for official purpose is more than
the limits then actual expenditure shall be deducted.
@
Sec 10(11) or 10(12) : Provident Fund
During Job On retirement

Type Employee Employer Interest Payments from fund
n n
cont cont
SPF Taxable Not taxable Not taxable Exempt
Employer contribution- u/h salary
URPF Taxable Not taxable Not taxable interest on same- u/h salary
Employee contribution- not taxable
interest on same- u/h OS
Nothing taxable if:
RPF Taxable In excess of In excess - left after 5 years if job
12% of 9.5% - discontinuance due to reasons beyond
control
- balance to RPF to new employer. old
employer also included in calculating 5 yrs.

Page
VIVEK GABA
QUESTION: Objective questions
1. Which of the following income is taxable under head “income from salary”
a) Salary received by partner of a firm b) Salary received by Member of Parliament
c) Salary of Government officer d) None of the above
2. Pratik obtained interest free loan of ` 20,000 from his employer company for purchasing a two-
wheeler. The market value of interest on such loan is 20% p.a. The lending rate of SBI is
15.5% & that of private sector banks is 16%. The taxable amount of this perquisite will be
computed at the rate of:
a) 20% b) 16% c) 15.5% d) Nil rate
3. Rashi is entitled to get a pension of ` 600 per month from a private company. She gets 3/5 th
of the pension commuted and received ` 36,000. She did not receive gratuity. The taxable
value of commuted value of pension is
a) ` 16,000 b) ` 6,000 c) ` 18,000 d) ` 10,000
4. Swati is an employee of private company. In the previous year she received salary of `
1,80,000and entertainment allowance of ` 12,000. She spent ` 6,000 on entertainment. Under
section 16(ii), she is entitled to deduction of:
a) ` 12,000 b) ` 6,000 c) ` 5,000 d) Nil
Solution: 1 – c), 2 –d), 3 – b), 4 – d), since not a government employee
OBJECTIVE QUESTIONS
1. Salary is chargeable to tax on ……………… basis

a) due basis b) receipt basis
b) due or receipt, whichever is earlier d) due or receipt, whichever is later
2. If S draws salary in advance of April 2018 in March 2018 itself, the same is taxable on receipt
basis and be assessed as income of the P.Y. …………………
3. If S draws salary in advance of April 2018 in March 2018 itself, the same is taxable on receipt
basis and be assessed as income of the assessment year …………………
4. If salary due for March 2018 is received by P later in April 2018, it is chargeable as income of
the P.Y. ……….
5. Every payment by an employer to his employee for service rendered would be taxable as ………….
a) income from salaries b) income from PGBP
c) income from house property d) income from other sources
6. Salary under section 17(1) includes

a) Leave encashment
b) fees, commission, perquisite or profits in lieu of or addition to any salary or wages

Page
VIVEK GABA
c) transferred balance in recognized provident fund to the extent it is taxable
d) all of the above
7. When is control said to exist?

a) payer can direct what has to be done
b) payer can direct when and how it has to be done
c) payer can direct who has to do it and receiver is bound to follow all the instruction
d) all of the above
8. Commission received by Director, when he is not employee of company is taxable under head
a) PGBP b) Other Sources
c) PGBP or Other Sources d) Salary
9. For an income to be charged under head Salaries, the employee must be a full time employee.
Is the statement correct?
a) True b) False, employee may be a part time employee
c) may be d) None of the above
10. Which of the following allowance is Partly Taxable

a) Allowances from UNO
b) House Rent Allowance
c) Allowance granted to Government employees outside India.
d) Fixed Medical Allowance
11. Fixed Medical Allowance is

a) Fully Taxable b) Fully Exempt
c) Partly Taxable d) Partly exempt
12. Conveyance Allowance is given to

a) to meet cost on tour or transfer to meet the ordinary daily charges
b) meet expenditure incurred on conveyance for official duties
c) meet the cost of travel on tour or on transfer
13. An assessee received uniform allowance of ` 1,200. However, the amount spent by him is `
1,000. What amount of exemption can be availed by assessee?
a) ` 1,200 b) ` 1,000 c) ` 600 d) ` 500
14. An assessee received uniform allowance of ` 1,500. However, the amount spent by him is `
2,000. What amount of exemption can be availed by assessee?
a) ` 1,500 b) ` 2,000 c) ` 1,000 d) ` 1,250
15. Children education Allowance received by assessee is exempt upto

a) amount received
b) ` 100 p.m. per child up to a maximum of 2 children
c) Lower of a) and b)
16. An assessee received ` 200 per month for 3 children as children education allowance. What
shall be the amount exempt in his hands for such allowance?
a) ` 7,200 b) ` 3,600 c) ` 2,400 d) Nil

Page
VIVEK GABA
17. An assessee received ` 300 per month for 3 children as Hostel Expenditure allowance. What
shall be the amount exempt in his hands for such allowance?
a) ` 10,800 b) ` 7,200 c) ` 4,800 d) Nil
18. Transport Allowance received by assessee is exempt upto

a) amount received
b) ` 1600 p.m. or ` 3200 p.m. for blind/handicapped employee
19. Allowance allowed to transport employees shall be exempt upto

a) 70% of such allowance b) ` 10,000
c) Lower of a) and b) d) None of the above
20. An assessee, transport employee received allowance allowed to them of ` 20,000. The amount
spent by him is ` 12,000. What amount would be exempt on account of allowance?
a) ` 12,000 b) ` 10,000 c) ` 14,000 d) Nil
21. Raju is in receipt of following allowance.

Transport allowance: ` 1,800 p.m. (amount spent ` 600 p.m.)
Tribal area allowance: ` 500 p.m.
Compute his taxable allowances.
a) ` 2,400 b) ` 3,600 c) ` 6,000 d) Nil
22. Why is HRA given to an employee by him employer?

a) to meet cost on tour or transfer to meet the ordinary daily charges
b) meet expenditure incurred on conveyance for official duties.
c) granted to an employee towards payment of rent for residence of the employee
23. What is the amount of HRA exempt when assessee is residing in a city other than Metro City?
a) HRA actually received
b) Rent paid - 10% of salary for the relevant period
c) 40% of salary for the relevant period
d) Least of above
24. Exemption of HRA received …………… to an assessee who lives in his own house.
a) is available b) is not available
b) shall be available d) None of the above
25. Mr. Arvind has the following receipts from his employer:
Particulars `
(1) Basic pay 3,000 p.m.
(2) Dearness allowance (D.A.) 600 p.m.
(3) Commission 6,000 p.a.
(4) Motor car for personal use (expenditure met by the employer) 500 p.m.
(5) House rent allowance 900 p.m.

Page
VIVEK GABA
Find out the amount of HRA eligible for exemption to him assuming that he paid a rent of `
1,000 p.m. for his accommodation at Kanpur. DA forms part of salary for retirement benefits.
a) ` 7,680 b) ` 10,800 c) ` 17,280 d) Nil
26. Which of the following is specified employee?

a) Director of the company
b) Employee having 15 % or more voting power in the employer company
c) Employee having a salary of more than ` 45,000
d) All of the above

a) Any employee of the company
b) Employee having 15 % or more voting power in the employer company
d) All of the above
28. What is the amount of Rent free accommodation taxable when accommodation has been
provided to employee by government employer?
a) 15% of salary b) 10% of salary
c) licence fees as per Government rules d) None of the above
29. When accommodation is provided by an employer other than Government employer to his
employee in a city where the population exceeds 25 lakh, what amount shall be taxable in the
hands of employee?
c) 7½% of salary d) None of the above
employee in a city where the population is less than 10 lakh, what amount shall be taxable in
the hands of employee?
c) 7½% of salary d) None of the above
31. When accommodation not owned by the employer other than Government employer is provided
to the employee, what amount shall be taxable in the hands of employee?
a) Actual Rent b) 15% of Salary
c) lower of a) and b) d) none of the above
32. For an employee other than Government employee, when RFA given to employee is not owned
by employer, what amount shall be taxable in the hands of employee?
a) Actual Rent or 20 % of Salary, whichever is less
b) Actual Rent or 15 % of Salary, whichever is less
c) Actual Rent or 10 % of Salary, whichever is less
33. When an accommodation has been provided in a hotel by a government employer, what
amount shall be taxable in the hands of employee?
a) 24% of salary b) actual charges
c) least of a) and b) d) licence fees as per Government rules

Page
VIVEK GABA
34. When an accommodation has been provided in a hotel by an employer other than government
employer, what amount shall be taxable in the hands of employee?
a) 24 % of salary or actual charges, whichever is lower
b) 20 % of salary or actual charges, whichever is lower
c) 15 % of salary or actual charges, whichever is lower
35. If furniture is also provided along with RFA, then what amount shall be taxable in the hands of
employee?
a) 10% p.a. of actual cost of furniture b) actual hire charges
c) either of above d) None of the above
36. If commission for the year is ` 24,000 but RFA is given for 6 months, how much commission
shall be included in salary for the purpose of computation of taxable value of RFA?
a) ` 24,000 b) ` 12,000 c) ` 8,000 d) Nil
37. Ram, Finance Manager in ABC Ltd. The company has provided him rent-free unfurnished
accommodation in Mumbai. He gives you the following particulars:
Particulars `
Basic salary ` 6,000 p.m.
Advance salary for April 2017 ` 5,000
Dearness Allowance ` 2,000 p.m. (30% for retirement benefits)
Bonus ` 1,500 p.m.
Even though the company allotted house to him on 01.04.2017, he occupied the same only
from 01.11.2016. Calculate the taxable value of perquisite for A.Y. 2018-19.
a) ` 6,075 b) ` 6,000 c) ` 4,500 d) Nil
38. Ram is Finance Manager in ABC Ltd. The company has provided him rent-free unfurnished
accommodation in Mumbai. He gives you the following particulars:
Particulars `

Bonus ` 1,500 p.m.
from 01.11.2017. He paid ` 500 per month for the said accommodation. Calculate the taxable
value of perquisite for A.Y. 2018-19.
a) ` 3,575 b) ` 3,500 c) ` 2,000 d) Nil
39. Rahul is an employee in a Government company. The company has provided him rent-free
unfurnished accommodation in Mumbai. He gives you the following particulars:
Particulars `
Bonus ` 1,500 p.m.

Page
VIVEK GABA
from 01.11.2017. Calculate the taxable value of perquisite for A.Y. 2018-19. The license fee of
the house is ` 700 per month.
a) ` 6,075 b) ` 6,000 c) ` 4,500 d) ` 3,500
40. If any personal expense of employee has been paid by the employer, what amount shall be
treatment of the amount so paid?
a) exempt in the hands of the employee b) taxable in the hands of the employee
c) No treatment in the hands of the employee d) None of the above
41. Interest on loan granted by the employer to the employee

a) shall have no treatment in hands of employee b) shall be taxable in hands of employee
c)shall notbetaxable in the hands of employee d) None of the above
42. Interest shall be calculated for part of the month. Is the statement correct?
a) Valid, interest shall be calculated for the average month
b) Invalid, interest shall be calculated for whole month for the balance outstanding as on first
day of the month
c) Invalid, interest shall be calculated for whole month for the balance outstanding as on last
day of the month
43. Interest on loan shall not be taxable in which case?

a) Loans as on the last day of the month does not exceed ` 20,000
b) Loan is provided for the treatment of specified disease
c) Any of the above

a) Loans as on the last day of the month does not exceed ` 20,000
b) Loan is provided for the construction of house
c) Any of the above
45. If loan is availed by assessee from Recognised Provident Fund, what shall be taxable in the
hands of the employee
a) not taxable in the hands of employee b) taxable in the hands of employee
c) discretion of Assessing Officer d) None of the above
46. A loan is provided by the employer to his employee, amounting to ` 35,000 (outstanding
balance as on last day). Interest of SBI as on last day of previous year is 15% whereas as on
1stday of previous year is 16%. On what amount shall interest be calculated and at what rate?
a) ` 35,000, 15% b) ` 15,000, 15%
c) ` 35,000, 16% d) ` 15,000, 16%
47. An employer provided his employee a sofa set whose actual cost is ` 70,000. Employee pays
` 2,000 to his employee towards this sofa set. What amount shall be taxable in the hands of
the employee?
a) ` 7,000 b) ` 2,000 c) ` 5,000 d) ` 10,000

Page
VIVEK GABA
48. An employer provided his employee a sofa set which has been taken on rent by the employer
for ` 12,000. Employee pays ` 5,000 to his employee towards this sofa set. What amount shall
be taxable in the hands of the employee?
a) ` 12,000 b) ` 7,000 c) ` 5,000 d) Nil
49. When an asset transferred by the employer to his employee is assets other than computer and
electronic items and Motor Car, what shall be taxable in the hands of the employee?
a) Purchase Price of employer – 50 % of other assets SLM for each incomplete year of usage
b) Purchase Price of employer – 50 % of other assets SLM for each completed year of usage
c) Purchase Price of employer – 20 % of other assets SLM for each completed year of usage
d) Purchase Price of employer - 10% of other assets SLM for each completed year of usage
50. When accommodation and other expense on holiday has been borne by the employer during
the official tour of the employee. The amount so incurred is
a) taxable in the hands of the employee
b) not taxable in the hands of employee
c) may be taxable on the discretion of Assessing Officer
51. If the value of gift in aggregate during the previous year is upto ` 5,000, the same shall
a) taxable as allowance b) taxable as perquisite
c) Not be taxable d) none of the above
52. Tea or snacks provided during office hours to the employee is

a) fully exempt without limit b) fully taxable
c) taxable beyond a limit d) none of the above
53. Free meal provided to the employee is exempt upto ……………..

a) ` 150 per meal b) ` 100 per meal c) ` 50 per meal d) No limit
54. If a free meal of ` 150 is provided to the employee. What amount shall be taxable in the
hands of the employee?
a) ` 150 per meal b) ` 100 per meal c) ` 50 per meal d) Nil
55. If Credit card and club expenditure is incurred for any purpose other than official purpose, what
amount shall be taxable?
a) Nothing is taxable
b) ` 30,000 shall be taxable
c) Actual expenditure incurred by the employer shall be taxable
56. Section 10(5) exempts leave travel concession (LTC) received by employees from their
employers for proceeding to any place in India
a) either on leave b) after retirement from service
c) after termination of his service d) all of the above
57. When the employee performs journey by any mode other than air and the destination is not
connected by rail, what amount shall be exempt from tax?
a) then second class rail fare by the shortest route to the place of destination
b) then first class rail fare by the shortest route to the place of destination

Page
VIVEK GABA
c) then first class rail fare by the longest route to the place of destination
d) then 1st class or deluxe class fare
58. If any hospital or dispensary is maintained by any local authority and the amount is provided to
the employee for treatment in such hospital, the amount so paid shall …………
a) not be exempt b) be partly taxable
c) exempt without any limit d) none of the above
59. Health insurance premium (Accident insurance policy) incurred or reimbursed for insurance on
the health of employee or any member of his family is fully ………………………..
a) Taxable b) exempt without limit
c) exempt upto ` 5,000 d) none of the above
60. An assessee (employee) is provided with gas and electricity by the employer which is produced
by the employer where manufacturing cost is ` 2,000. The amount recovered from the
employee is ` 400. What amount shall be taxable in the hands of the employee?
a) ` 400 b) ` 2000 c) ` 1,600 d) Nil
61. In which of following case should amount spent by the employee on education of children is
taxable?
a) Education facility is owned by the employer and value per child exceed ` 1000 p.m.
b) Free education is provided in any other educational institution by reason of employee being
in employment of that employer and value per child exceed ` 1000 p.m.
c) Any of the above
62. When the motor car is owned by the employee and used by the employee for private purpose.
What amount shall be taxable in the hands of the employee?
a) Actual expenditure incurred by employer shall be taxable
b) Nil
c) Discretion of Assessing Officer
63. When the motor car is owned by the employer and used by the employee for official purpose.
What amount shall be taxable in the hands of the employee?
a) Actual expenditure incurred by employer shall be taxable
b) Nil
c) Discretion of Assessing Officer
64. Commuted pension received by the non-government employee who is also in receipt of
Gratuity. What would be the treatment of such amount for tax purpose?
 1 commuted pension received 
a) 3   100%
 commutatio n %  shall be exempt
b)    100%
2 commutatio n %  shall be exempt
c) Any of the above

Page
VIVEK GABA
65. Commuted pension received by the non-government employee who is not in receipt of gratuity.
What would be the treatment of such amount for tax purpose?
a)
3   100%
 commutatio n %  shall be exempt
b)    100%
2 commutatio n %  shall be exempt
c) Any of the above
66. Ravi retired on 01.10.2017 receiving ` 5,000 p.m. as pension. On 01.02.2018, he commuted
60% of his pension and received ` 3,00,000 as commuted pension. What amount of
uncommuted and commuted pension is taxable if Ravi is Government employee?
a) ` 24,000, Nil b) ` 24,000, ` 3,00,000
c) Nil, ` 3,00,000 d) Nil, Nil
60% of his pension and received ` 3,00,000 as commuted pension and receiving gratuity of `
5,00,000 at the time of retirement. What amount of uncommuted and commuted pension is
taxable if he is a non-government employee?
a) ` 24,000, ` 50,000 b) ` 24,000, ` 1,33,333
c) Nil, ` 1,33,333 d) Nil, ` 50,000
60% of his pension and received ` 3,00,000 as commuted pension and is in receipt of no
gratuity at the time of retirement. What amount of uncommuted and commuted pension is
taxable if he is a non-government employee?
a) ` 24,000, ` 50,000 b) ` 24,000, ` 1,33,333
c) Nil, ` 1,33,333 d) Nil, ` 50,000
69. Section 10(10) of the Income tax Act tells about

a) taxability about gratuity b) taxability about pension
c) taxability about leave encashment d) None of the above
70. Death cum retirement gratuity received by Non-Government employee who is covered by
Payment of Gratuity Act, 1972 ………………
a) ` 10,00,000
b) Gratuity actually received
c) 15 days‖ salary based on last drawn salary for each completed year of service or part
thereof in excess of 6 months
d) Least of above
71. Gratuity received during the period of service ……………………..

a) Partially exempt from tax b) fully exempt from tax
c) fully taxable d) none of the above
72. Where gratuity is received in earlier year from former employer and received from another
employer in later year, the limit of ` 10,00,000 ………. by the amount of gratuity exempt earlier
a) will not be reduced b) may be reduced

Page
VIVEK GABA
c) will be reduced d) None of the above
73. Ramesh who is non-government employee and covered by the Payment of Gratuity Act 1972
retired on 15.06.2017 after completion of 26 years 8 months of service and received gratuity of
` 6,00,000. At the time of retirement his salary was:
Basic Salary : ` 5,000 p.m.
Dearness Allowance : ` 3,000 p.m. (60% of which is for retirement benefits)
Commission : 1% of turnover (turnover in the last 12 months was ` 12,00,000)
Bonus : ` 12,000 p.a.
What amount of gratuity shall be taxable?
a) ` 4,75,385 b) ` 4,98,600 c) Nil d) ` 6,00,000
74. Ramesh who is a government employee retired on 15.06.2017 after completion of 26 years 8
months of service and received gratuity of ` 6,00,000. At the time of retirement his salary was:
Bonus : ` 12,000 p.a.
a) ` 4,75,385 b) ` 4,98,600 c) Nil d) ` 6,00,000
75. Leave salary received at the time of retirement by non-government employee is …………..
a) ` 3,00,000
b) Leave salary actually received
c) 10 months‖ salary (on the basis of average salary of last 10 months)
d) Cash equivalent of unavailed leave salary @ 30 days for every year of service
e) Least of above
76. Where leave salary is received from 2 or more employers in the same year then aggregate
amount of leave salary exempt from tax ……..………..
a) can exceed ` 3,00,000 b) cannot exceed ` 3,00,000
c) cannot exceed ` 5,00,000 d) None of the above
77. Where leave salary is received in earlier year from former employer and received from another
employer in later year, the limit of ` 3,00,000…….. by the amount of leave salary exempt earlier
a) will not be reduced b) may be reduced
c) will be reduced d) None of the above
78. Rohit who is not a government employee retired on 01.12.2017 after 20 years 10 months of
service, receiving leave salary of ` 5,00,000. Other details of his salary income are:
Basic Salary : ` 5,000 p.m. (` 1,000 was increased w.e.f. 01.04.2017)
Commission : ` 500 p.m.
Bonus : ` 1,000 p.m.
Leave availed during service : 480 days
He was entitled to 30 days leave every year. How much amount of leave salary shall be
taxable?
a) Nil b) ` 4,73,600 c) ` 5,00,000 d) None of the above

Page
VIVEK GABA
79. Which section of the Income tax Act provides about exemption of amount received by way of
compensation received on Voluntary Retirement?
a) 10(10) b) 10(10A) c) 10(10AA) d) 10(10C)
80. How much amount received by way Compensation received on Voluntary Retirement is exempt?
a) ` 5,00,000
b) Amount received or receivable
c) For one completed year job done- 3 months‖ salary or total months left after VRS for
normal retirement
d) Least of above
81. Assessee (employee) can avail both exemption under section 10(10C) of compensation on
Voluntary retirement and also relief under section 89(1). Is the statement correct?
a) Assessee can avail both exemption and relief
b) Assessee can avail either exemption under section 10(10C) or relief under section 89(1)
c) On the discretion of Assessing Officer
82. Which section of the Income tax Act provides about exemption of amount received by way
Retrenchment compensation?
a) 10(10) b) 10(10B) c) 10(10AA) d) 10(10C)
83. Section 10(10B) of the Income tax Act provide for
a) taxability about gratuity
b) taxability about amount received by way of retrenchment compensation
c) taxability about leave encashment
84. Which deduction is allowed under section 16?

a) Professional tax b) Entertainment allowance
85. Deduction in respect of entertainment allowance is available to ………………..

a) Government employees b) Non-Government employees
86. What amount of deduction is available for entertainment tax?

a) One-fifth of his basic salary b) ` 5,000
c) Actual entertainment allowance received d) Least of above
87. The maximum exemption under section 10(10) in case of Gratuity is

a) ` 10,00,000 b) ` 3,00,000 c) ` 10,50,000 d) ` 5,00,000
88. The maximum exemption in respect of transport allowance granted to an employee to meet his
expenditure for the purpose of commuting between the place of his residence and the place of
his duty shall be
a) ` 800 per month b) ` 1600 per month
c) ` 700 per month d) ` 900 per month

Page
VIVEK GABA
89. The maximum exemption in respect of transport allowance granted to an handicapped employee
to meet his expenditure for the purpose of commuting between the place of his residence and
the place of his duty shall be
a) ` 1,600 per month b) ` 3,200 per month
c) ` 800 per month d) ` 900 per month
90. Mayank receives ` 50,000 as basic salary from the Government during the financial year 2017-
18 and ` 9,000 by way of entertainment allowance which he spends in full for official purpose.
The allowance of deduction in respect of allowance will be
91. For an employee in receipt of hostel expenditure allowance for his three children, the maximum
annual allowance exempt under section 10(14) is
a) ` 10,800 b) ` 7,200 c) ` 9,600 d) ` 3,600
92. The entertainment allowance received by a Government employee is exempt up to the lower of
the actual entertainment allowance received, 1/5th of basic salary and
a) ` 4,000 b) ` 6,000 c) `5,000. d) Nil
93. Rajesh is provided with a rent free unfurnished accommodation, which is owned by his
employer, XY Pvt. Ltd., in New Delhi. The value of perquisite in the hands of Rajesh is –
a) 20 % of salary b) 15 % of salary
c) 10 % of salary d) 7.5 % of salary
94. The maximum ceiling limit for exemption under section 10(10) in respect of gratuity for
employees covered by the Payment of Gratuity Act, 1972 is –
a) ` 3,50,000 b) ` 10,00,000 c) ` 5,00,000 d) ` 7,00,000
95. The HRA paid to an employee residing in Patna is exempt up to the lower of actual HRA,
excess of rent paid over 10% of salary and –
a) 40 % of salary b) 50 % of salary
c) 60 % of salary d) 70 % of salary
96. Salary of S (` 40,000 per month) becomes due on the last day of the month but is paid on
7th of next month. Also, salary of April, 2018and May, 2018 is received in advance in March,
2018.What will be his gross income for Assessment Year2018-19?
a) ` 5,60,000 b)` 4,80,000 c) ` 4,40,000 d) ` 5,20,000
97. Y received children education allowance of ` 500 pm for his 1 child. Calculate tax able amount
of children education allowance for assessment year 2018-19 if entire amount is spent by him.
a) Nil b) ` 4,800 c) ` 6,000 d) ` 3,600
98. A Ltd. has advanced an interest free loan of ` 5,00,000 to B for purchase of car on 1.5.2015.
B has been repaying loan in installments of` 20,000 p.m. on the1stofnext month. Compute the
value of perquisite on account of interest assuming the interest charged by SBI is 10%p.a.
a) ` 34,833 b) ` 36,667 c) `40,000 d) ` 50,000
99. Employer provides a car (below 1.6ltr.capacity) along with a driver to be used partly for official
and partly for personal purpose. The expenses incurred by company are: running and
maintenance expenses -` 32,000, driver's salary-` 36,000. Tax able value of perquisite is:

Page
VIVEK GABA
a) ` 21,600 b) ` 10,800 c) ` 32,400 d) ` 39,600
100. X retired on 15.4.2016 from a company. He was entitled to a pension of ` 4,000 p.m. At
the time of retirement, he got 75%ofpension commuted &received ` 1,20,000as commuted
pension. Compute the taxable portion of commuted pension if he is entitled to gratuity.
a) ` 66,667 b) ` 53,333 c) ` 1,20,000 d) ` 78,667
101. For an employee in receipt of hostel expenditure allowance for his three children, the
maximum annual allowance exempt under section 10(14) is
a) ` 10,800 b) ` 7,200 c) `9,600 d) ` 3,600
102. R, who is entitled to a salary of ` 10,000 p.m. took an advance of ` 20,000 against the
salary in month of April 2018. The gross salary of R for assessment year 2018-19 shall be:
a) ` 1,40,000 b) ` 1,20,000 c) ` 1,30,000 d) None of the above
103. A is entitled to children education allowance @ ` 80 p.m. per child for 3 children
amounting ` 240 p.m. It will be exempt to the extent of :
a) ` 200 p.m. b) ` 160 p.m. c) ` 240 p.m. d) Nil
104. In which of the following situation is accommodation provided in hotel by the employer not
taxable in the hands of the employee?
a) When accommodation is provided for not more than 15 days
b) on transfer of employee from one place to another
c) both a) and b) together
105. In case of transfer from one place to another, if employee is provided house at new place and
also allowed to retain house at old place, what shall be taxable after 90 days?
a) value of one house with lower value shall be taxable
b) value of one house with higher value shall be taxable
c) average of value of both house shall be taxable
d) value of both the house shall be taxable
106. What is the value taxable in the hands of employee on allotment of equity shares?
a) Fair market value (FMV) of shares on date of allotment - Amount recovered from employee
b) Fair market value (FMV) of the shares on the date of allotment
c) Fair market value (FMV) of shares on date of allotment + Amount recovered from employee
107. When the asset given by the employer is computer or telephone, what amount shall be
taxable in the hands of the employee?
a) Taxable in the hands of employee b) Not taxable in the hands of employee
c) Discretion of Assessing Officer d) None of the above
108. When the motor car is owned by the employee and used by the employee for private and
official purpose. What amount shall be taxable in the hands of the employee?
a) Total Actual expenditure for official and personal purpose - 1800 pm /2400 pm
+ 900 pm for chauffeur (if any)
b) Total Actual expenditure for official and personal purpose + 1800 pm /2400 pm
- 900 pm for chauffeur (if any)

Page
VIVEK GABA
c) Total Actual expenditure for official and personal purpose - 1800 pm /2400 pm
- 900 pm for chauffeur (if any)
d) Total Actual expenditure for official and personal purpose
109. What is the maximum amount upto which leave salary is exempt from tax?
a) ` 5,00,000 b) ` 3,00,000 c) ` 10,00,000 d) upto any limit
110. Which of the following income is taxable under the head ―income from salary‖?
a) Salary received by a partner from firm
b) Salary received by a member of parliament
c) Salary of a government officer
111. Vivek, a resident of Meerut, receives ‖38,000 per annum as basic salary. In addition, he gets
12,000 p.a. as dearness allowance, which does not form part of basic salary, 5% commission
on turnover achieved by him (turnover achieved by him during the relevant previous year is
6,00,000) and 7,000 per annum as HRA. He, however, pays 8,000 per annum as house rent.
The quantum of house rent allowance exempt from tax is;?
a) Nil b) 8,000 c) 7,000 d) 1,200
112. The maximum exemption in respect of transport allowance granted to an employee to meet his
expenditure for the purpose of commuting between the place of his residence and place of his
duty shall be;
a) 600 p.m. b) 700 p.m. c) 1,600 p.m. d) 900 p.m.
113. The maximum exemption in respect of transport allowance granted to blind employee to meet
his expenditure for the purpose of commuting between the place of residence and the place of
his duty shall be
a) 800 p.m. b) 3,200 p.m. c) 300 p.m. d) 100 p.m.
114. Vivek receive 50,000 as basic salary from the government during the financial year 2017-18
and receives 9,000 by way of entertainment allowance which he spends in full for official
purposes. The amount deductible under section 16(ii) in respect of the allowance will be?
a) 5,000 b) 9,000 c) 10,000 d) None of the above
115. The amount of any contribution to an approved superannuation fund by the employer in
respect of the employee is exempt from tax upto?
a) 1,00,000 b) 1,50,000 c) 2,00,000 d) Nil
116. Vivek obtained interest-free loan of ` 20,000 from his employer company for purchasing a two-
wheeler. The market rate of interest on such loan is 20% p.a. The leading rate of SBI is 12.5%
and that of the private sector bank is 16%. The taxable amount of this perquisite will be
computed at the rate of?
a) 20% b) 16% c) 12.5% d) Nil rate
117. The maximum exemption under section 10(10AA) in case of leave encashment is?
a) 3,50,000 b) 3,00,000 c) 10,00,000 d) 5,00,000
118. Service received in lieu of unavailed leave during service shall be;?
a) Fully taxable b) Fully exempted

Page
VIVEK GABA
c) Partially taxable d) None of the above
119. Interest-free loan to an employee, where the amount of loan does not exceed any one of the
following, shall be treated as the tax-free perquisite in all cases under section 17(2);?
a) 10,000 b) 15,000 c) 20,000 d) 25,000
120. Leave encashment received while in service is ……………….?

a) Taxable b) Exempt c) Partly taxable d) None of the above
121. No deduction is allowable from income from salary;?

122. Allowances paid by any employer outside India would be wholly exempted from income tax;?
123. Allowance payable to Central Government employees for serving outside India are fully taxable
as salary?
124. When the asset given by employer is laptop, what amount is taxable in hands of employee?
a) Taxable in the hands of employee b) Not taxable in the hands of employee
125. If assessee (employee) is accompanied by somebody, the expense incurred by employee on

accommodation and any other expense on holiday shall be ……. during official tour and extended
period.
a) Taxable for the whole period i.e. total tour
b) Taxable for the period of official tour and not taxable for extended period
c) Not taxable for the period of official tour and taxable for extended period
d) Not taxable for the whole period i.e. total tour
126. Mayank receives ` 50,000 as basic salary from the Government during the financial year 2017-
18 and ` 9,000 by way of entertainment allowance which he spends in full for official purpose.
The deduction in respect of entertainment allowance will be
a) ` 5,000 b) `9,000 c) ` 10,000 d) None of the above
127. Interest free loan to an employee, where the amount of loan does not exceed any one of the
following shall be treated as tax free perquisites in all cases under section 17(2)
a) ` 10,000 b) ` 15,000 c) ` 20,000 d) ` 25,000
128. When entire amount of leave travel is encashed by employee, how is the amount treated?
a) Partial amount received shall be taxable b) Entire amount received shall be taxable
c) Entire amount received shall be exempt d) None of the above
129. Expenditure incurred or reimbursed on any medical treatment provided to an employee or any
other member of his family is fully exempt without limit, for treatment in any hospital,
dispensary if
a) Hospital is maintained by the employer b) Hospital is maintained by the Government

Page
VIVEK GABA
130. Reimbursement by employer of any amount actually spent by the employee for obtaining his or
his family member‖s treatment in any hospital, nursing home or clinic is …………
a) Exempt upto maximum of ` 15,000 b) fully taxable
c) taxable upto ` 15,000 d) None of the above
131. When Gas, electricity or water is provided by the employer from own sources, what amount
shall be taxable in the hands of the employee?
a) Manufacturing cost per unit plus notional profit is taxable
b) Manufacturing cost per unit is taxable
c) Any of the above
132. When Gas, electricity or water is provided by the employer from an outside agency, what
amount shall be taxable in the hands of the employee?
a) Manufacturing cost per unit is taxable
b) Amount paid to outside agency shall be taxable value
c) Any of the above
133. In case of transfer from one place to another, if employee is provided house at new place and
also allowed to retain house at old place, what amount shall be taxable for the first 90 days?
a) value of one house with lower value shall be taxable
b) value of one house with higher value shall be taxable
c) average of value of both house shall be taxable
d) value of both the house shall be taxable
134. Which of the following statement is true?

a) Where an assessee has been provided with two houses because of transfer of employee,
the value taxable in the hands of employee shall be lower of the value of both the houses
b) Where an assessee has been provided with two houses because of transfer of employee,
the value taxable in the hands of employee shall be higher of the value of both the houses
c) Where an assessee has been provided with two houses because of transfer of employee,
the value taxable shall be value of both the house for the period in excess of 90 days.
135. What interest rate shall be relevant for computing taxable value of interest on loan granted
a) rate charged by RBI on 1st day of relevant previous year
b) rate charged by SBI on 1st day of relevant previous year
c) rate charged by SBI on last day of relevant previous year
d) rate charged by RBI on last day of relevant previous year
136. Interest shall be calculated on the outstanding balance for each loan as on …………
a) the first day of each month b) the last day of each month
c) average balance during the month d) none of the above
employee in a city where population exceeds 10 lakh but upto 25 lakh, what amount shall be
taxable in the hands of employee?

Page
VIVEK GABA
a) 15% of salary b) 10% of salary c) 7½% of salary d) None of the above
138. Which of the following statement is true for an employee other than government employee?
a) When accommodation is owned by the employer and the population of city exceeds 25
lakhs, the amount taxable shall be 20 % of salary
b) When accommodation is owned by the employer and the population of city exceeds 25
c) When accommodation is owned by the employer and the population of city exceeds 25
139. When accommodation is not owned by the employer being other than government employer is
provided to his employee as RFA, the population in which accommodation is located shall be
considered. Discussed the validity of the statement?
a) Valid
b) partly Invalid
c) the population of the city is irrelevant for computation of taxable amount of RFA
140. When an accommodation has been provided in the hotel by the employer for a period of 14
days and on transfer of employee from one place to another. What amount shall be taxable in
hands of employee?
a) 24% of salary b) actual charges c) Lower of a) and b) d) Nil
141. Where gratuity is received from 2 or more employers in the same year then, aggregate amount
of gratuity exempt from tax ……..………..
a) can exceed ` 10,00,000 b) cannot exceed ` 10,00,000
c) cannot exceed ` 15,00,000 d) None of the above
142. Ramesh, a non-government employee who is not covered by the Payment of Gratuity Act 1972
retired on 15.06.2016 after completion of 26 years 8 months of service and received gratuity of
` 6,00,000. At the time of retirement his salary was:
Bonus : ` 12,000 p.a.
a) ` 4,75,385 b) ` 4,98,600 c) Nil d) ` 6,00,000
143. Before an income can become chargeable under the head ―salaries‖, it is vital that there should
exist between the payer and the payee, the relationship of ……… and it is said to exist when ………
a) an employer and an employee, no control exist
b) an employer and an employee, control exist
c) husband and wife, control exist
d) partner and firm, control exist

Page
VIVEK GABA
144. When is control said to exist?
a) payer can direct what has to be done
b) payer can direct when and how it has to be done
c) payer can direct who has to do it and receiver is bound to follow all the instruction
d) all of the above
145. Suman, an actress, is employed in XYZ Films for a monthly remuneration of ` 3 lakh. She
acts in various films produced by various producers. The remuneration for acting in such films
is directly paid to XYZ Films by different producers. The relationship of employee and employer
……………. and the amount is chargeable to tax under head ……………….
a) does not exist, Other Sources b) does not exist, PGBP
c) exist, Salary d) exist, PGBP
146. When salary of April 2018, received in March 2018 has been taxed in assessment year 2018-
19, the same ……….. in salary of assessment year 2019-20
a) shall be included b) may be included
c) cannot be included d) None of the above
147. If salary due for March 2018 is received by P later in April 2018, it is chargeable as income
of the P.Y.
148. If salary due for March 2018 is received by P later in April 2018, it is chargeable as income
of the assessment year
149. Every payment by an employer to his employee for service rendered would be taxable as ………
b) income from salaries b) income from PGBP
c) income from house property d) income from other sources
150. Income from salary includes ………………………
a) monetary payments b) non-monetary facilities
c) Both a) and b) d) none of the above
151. Anand is entitled to get pension of ` 600 per month from a private company. He gets 3/5 th of
pension commuted and gets ` 36,000. He did not receive gratuity. The taxable value of
commuted value of pension is
a) ` 16,000 b) ` 6,000 c) ` 18,000 d) ` 12,000
152. Where any salary is paid in advance, it is assessed in the

a) Year to which it relates b) year of payment
c) either of a) or b) d) exempt from tax
153. Which section defines the meaning of salary?

a) 17(2) b) 17(1) c) 17(3) d) 17(4)
154. Commission received by Director, when he is employee of the company is taxable under head
a) PGBP b) Other Sources c) PGBP or Other Sources d) Salary
155. Commission received by Director, when he is not employee of the company is taxable under
head
a) PGBP b) Other Sources c) PGBP or Other Sources d) Salary

Page
VIVEK GABA
156. Salary, bonus, commission or remuneration by whatever name called due to or received by
partner of a firm ………….. regarded as salary
a) shall be b) shall not be c) may be d) None of the above
157. Salary, bonus, commission or remuneration by whatever name called due to or received by
partner is taxable as income from ………………
a) PGBP b) Other Sources
c) PGBP or Other Sources d) Salary
158. Fixed Medical Allowance is

a) Fully Taxable b) Fully Exempt c) Partly Taxable d) Partly exempt
159. A special allowance (to meet expenses incurred wholly, necessarily and exclusively in
performance of duties of office) is exempt to the extent of ………
a) amount received b) amount received or specified limit whichever is less
c) amount spent d) amount received or amount spent whichever is less
160. How is academic allowance is taxable

a) amount received b) amount received or specified limit whichever is less
c) amount spent d) amount received or amount spent whichever is less
161. Hostel Expenditure allowance received by assessee is exempt upto

a) amount received b) ` 300 p.m. per child up to a maximum of 2 children
c) Lower of a) and b) d) None of the above
162. An assessee received ` 75 per month for 3 children as children education allowance. The
amount spent by him is ` 50 per month. What shall be the amount exempt in his hands for
such allowance?
a) ` 2,700 b) ` 1,800 c) ` 2,400 d) ` 1,200
163. An assessee who is blind receives transport allowance. What amount would be exempt?
a) amount received or ` 800 p.m., whichever is less
b) amount received or ` 1,600 p.m., whichever is high
c) amount received or ` 3,200 p.m., whichever is less
d) amount received or ` 800 p.m., whichever is high
164. Ravi has two sons. He is in receipt of children education allowance of ` 150 p.m. for his elder
son and ` 70 p.m. for his younger son. Both his sons are going to school. Compute his
taxable allowances.
a) Nil b) ` 600 c) ` 240 d) ` 360
165. Salary for the purpose of computation of HRA means

a) Basic salary, dearness allowance
b) Basic salary, commission as a fixed percentage of turnover
c) Basic salary, dearness allowance, if provided in terms of employment and commission as a
fixed percentage of turnover
d) All portions of salary

Page
VIVEK GABA
166. What is the Relevant period for the purpose of Section 10(13A)?
a) period starting from 1st day of previous year
b) period starting from 1st day of month of previous year from when the accommodation was
occupied
c) period during which said accommodation was occupied by assessee during previous year
d) any of the above

a) Director of the company
b) Employee having 20% or more voting power in the employer company
d) All of the above

a) Loans on the first day of the month does not exceed ` 20,000
b) Loan is provided for the treatment of specified disease
c) Any of the above
169. Uncommuted pension It is fully taxable in the hands of …………………….

a) government employee b) non-government employee
c) both a) and b) d) none of the above
170. Rohit, a government employee retired on 01.12.2017 after 20 years 10 months of service,
receiving leave salary of ` 5,00,000. Other details of his salary income are:
Basic Salary : ` 5,000 p.m. (` 1,000 was increased w.e.f. 01.04.2017)
Commission : ` 500 p.m.
Bonus : ` 1,000 p.m.
Leave availed during service : 480 days
He was entitled to 30 days leave every year. How much amount of leave salary shall be
taxable?
a) Nil b) ` 4,73,600
c) ` 5,00,000 d) None of the above
171. What is maximum exemption allowed under section 10(10C) in case of Compensation received
on Voluntary Retirement
a) ` 3,50,000 b) ` 3,00,000
c) ` 10,50,000 d) ` 5,00,000
172. What is maximum exemption allowed under section 10(10AA) in case of leave encashment is
a) ` 3,50,000 b) ` 3,00,000
c) ` 10,50,000 d) ` 5,00,000
173. Swati is an employee in a private company. In the previous year she received salary of
`1,80,000 and entertainment allowance of ` 12,000. She spent ` 6,000 on entertainment. Under
section 16(ii), she is entitled to deduction of
a) ` 12,000 b) ` 6,000 c) ` 5,000 d) Nil

Page
VIVEK GABA
174. Pratham obtained interest free loan of ` 50,000 from his employer company for purchasing
two-wheeler. The market rate of interest on such loan is 20% p.a. The lending rate of SBI is
15.5% and that of the private sector banks is 16%. The taxable amount of perquisite will be
calculated at the rate of
a) 15.5 % b) 20 % c) 16 % d) Nil rate
175. Which of the following income is taxable under the head “Income from salary”
a) Salary received by a partner from firm
b) Salary received by a Member of Parliament
c) Salary of Government officer
176. X is entitled to a basic salary of` 50,000 p.m. and dearness allowance of ` 10,000 p.m.,40%
of which forms part of retirement benefits. He is also entitled to HRA of ` 20,000 pm. He
actually lives with his parents in Mumbai and does not pay any rent. Market rent of that
house is ` 20,000 pm in Mumbai. Calculate the amount of exempt HRA.
a) Nil b) ` 1,75,200 c) ` 64,800 d) ` 2,40,000
177. Mr. A (65years) submits the following information for the Assessment year 2018-19:
Gross salary-` 8,80,000
Income from other sources-` 60,000
Contribution to PPF-` 70,000
Compute the tax liability of A.
a) ` 1,07,120 b) ` 86,500 c) ` 89,100 d) `96,820
178. TATA Ltd. pays a salary ―2,50,000 to his employee Ramesh and undertakes to pay the Income
Tax amounting to 10,500 during the previous year 2017-18 on behalf of Ramesh. The Gross
salary of Ramesh shall be:
a) 2,50,000 b) 2,60,500 c) 2,39,500 d) None of the above
179. Ramesh is employed with VG Ltd., at a salary of 20,000 p.m. As VG Ltd. was in financial
crisis, it paid the salary of Jan. 2018 to March 2018 to Ramesh only in July 2018. The Gross
salary of Ramesh for assessment year 2018-19 shall be:
180. Salary of V is 10,000 p.m. V had taken in advance for the months of April 2018 to June 2018
in march 2018 itself. The Gross Salary of V for assessment year 2018-19 shall be:
a) 2,40,000 b) 1,80,000 c) 1,50,000 d) 1,20,000
181. Salary of V becomes due on 1st of next month and it is paid on 7th of that next month. For
assessment year 2018-19 the salary of V shall be taken from:
a) April 2017 to march 2018 b) March 2017 to February 2018
c) March 2017 to march 2018 d) None of the above
182. An Employee is covered under payment of Gratuity Act, 1972.

(i) Salary for the purpose of calculating 15 days salary for each completed year of service
shall be:
a) Last drawn salary b) Average salary of last 10 months
c) Average salary of last 3 completed years d) None of the above

Page
VIVEK GABA
(ii) Salary for the above purpose shall:
a) Include Dearness Allowance b) Not include Dearness Allowance
c) Include to the extent the terms of employment d) None of the above
(iii) If the employee has completed service of 16 years 6 months and 5 days, the number of
completed year shall be taken as:
a) 16 years b) 17 years
c) 16 years 6 months and 5 days d) None of the above
(iv) If the employee has completed service of 16 years 6 months the completed year shall be
taken as:
a) 16 years b) 17 years
c) 16 years 6 months d) None of the above
183. V worked with a previous employer for 3 years but was not entitled to any gratuity. He worked
with the present Employer for 8 years and 7 months. The completed year of service for
calculating exemption of gratuity shall be taken as:
a) 11 years b) 8 years c) 12 years d) 9 years
184. An Employee availed the exemption of VRS of 1,00,000 in the past. He received from the
second Employer a sum of 2,50,000 as VRS Compensation. He will be entitled to exemption to
the extent of:
a) Nil b) 2,50,000 c) 2,00,000 d) 3,50,000
185. V is entitled to children Education Allowance at 80 p.m. per child for 3 children amounting 240
p.m. it will be exempt to the extent of:
a) 200 p.m. b) 160 p.m. c) 240 p.m. d) 300 p.m.
186. V is entitled to Hostel expenditure Allowance at 600 p.m. for his 3 children amounting 200
p.m. per child it will be exempt to the extent of:
a) 600 p.m. b) 400 p.m. c) 300 p.m. d) None of the above
187. V is entitled to Transport Allowance of 2,000 p.m. for commuting from his residence to office
and back. He spends 600 p.m. The exemption shall be:
a) 1000 p.m. b) 1,600 p.m. c) 600 p.m. d) 400 p.m.
188. V is entitled to 6000 as Medical Allowance. He spends 4000 on his medical treatment and
1000 on the medical treatment of his major son not dependent on him. The exemption shall be:
a) 4,000 b) 5,000 c) Nil d) 6,000
189. Entertainment Allowance in case of Govt. Employee is:

a) fully exempt
b) exempt upto limits mentioned in sec. 16(ii)
c) first included fully in gross salary &thereafter
allowed as deduction from gross salary u/s 16(ii)
d) fully taxable
190. During the PY, the employee was reimbursed 24,000 as medical expenses incurred by him
which includes 7,000 spent in Govt. hospital. The taxable perquisites in this case shall be:
a) 9,000 b) 2,000 c) Nil d) None of the above

Page
VIVEK GABA
191. V owns a house in which he lives. His Employer reimburses to him the electricity bill
amounting to 5,000. It shall be a perquisites for:
a) specified Employee only b) employee other than Specified Employees
192. Employer‖s Contribution to SPF shall be:

a) Fully Exempt b) Exempt upto 12% of salary
c) Exempt upto 10% of salary d) None of the above
193. Interest credited to SPF shall be:

a) Fully Exempt b) Exempt upto 12% p.a.
c) Fully Taxable d) Exempt upto 9.5% p.a.
194. Employer‖s Contribution to RPF shall be:

c) Exempt upto 12% of salary d) None of the above
195. Interest credited to RPF is:

c) Exempt upto 12% of salary d) Exempt upto 9.5% p.a.
196. Employer‖s Contribution to URPF shall be:

a) fully taxable c) fully exempt
c) exempt upto 12% of salary d) Neither exempt nor taxable in the year
of contribution

Page
VIVEK GABA
ANSWERS
1. c) 24. b) 47. c) 70. d) 93. b) 116. d) 139. c) 162. b) (iii) b)

2. b) 25. a) 48. b) 71. c) 94. b) 117. b) 140. d) 163. c) (iv) a)
3. a) 26. a) 49. d) 72. c) 95. a) 118. a) 141. b) 164. b) 183. a)
4. b) 27. c) 50. b) 73. a) 96. a) 119. c) 142. b) 165. c) 184. a)
5. a) 28. c) 51. c) 74. c) 97. b) 120. a) 143. b) 166. c) 185. b)
6. d) 29. a) 52. a) 75. e) 98. b) 121. b) 144. d) 167. d) 186. b)
7. d) 30. c) 53. c) 76. b) 99. c) 122. b) 145. c) 168. b) 187. b)
8. c) 31. c) 54. b) 77. c) 100. a) 123. b) 146. c) 169. c) 188. c)
9. b) 32. b) 55. c) 78. b) 101. b) 124. b) 147. b) 170. a) 189. c)
10. b) 33. c) 56. d) 79. d) 102. a) 125. a) 148. a) 171. d) 190. b)
11. a) 34. a) 57. d) 80. d) 103. b) 126. a) 149. a) 172. b) 191. a)
12. b) 35. c) 58. c) 81 b) 104. c) 127. c) 150. c) 173. d) 192. a)
13. b) 36. b) 59. b) 82 b) 105. d) 128. b) 151. b) 174. a) 193. a)
14. a) 37. a) 60. c) 83. b) 106. a) 129. c) 152. b) 175. c) 194. c)
15. c) 38. a) 61. c) 84. c) 107. b) 130. a) 153. b) 176. a) 195. d)
16. c) 39. d) 62. a) 85. a) 108. c) 131. b) 154. d) 177. d) 196. d)
17. b) 40. b) 63. b) 86. d) 109. b) 132. b) 155. c) 178. b)
18. c) 41. b) 64. a) 87. a) 110. c) 133. a) 156. b) 179. a)
19. c) 42. c) 65. b) 88. b) 111. d) 134. c) 157. a) 180. c)
20. b) 43. c) 66. a) 89. b) 112. c) 135. b) 158. a) 181. b)
21. c) 44. a) 67. b) 90. a) 113. b) 136. b) 159. d) 182.
22. c) 45. a) 68. a) 91. b) 114. a) 137. b) 160. d) (i) a)
23. d) 46. c) 69. a) 92. c) 115. a) 138. c) 161. c) (ii) a)

|Page
VIVEK GABA
CAPITAL GAINS 6
@
Sec 45(1) Charging Section
Income (Profits & arising from

transfer of Capital Asset
Gains)
If all three condition fulfilled, then TAXABLE in the year in which Transfer took place
Exceptions to taxable in year of transfer (Exception to Section 45(1)
a) Sec 45(1A) Capital gain on insurance for damage or destruction of capital

asset
When insurance claim is received on damage or destruction of capital asset, then any money
or FMV of other asset received from insurance company shall be deemed to be sales
consideration for computing capital gain. It shall be taxable in the year of receipt of Insurance
claim.
Note: If no claim is received, no capital gain shall arise and it shall be a capital loss
b) @
Sec 45(2) Capital gain on conversion of capital into stock in trade
Capital Gain shall arise where an assessee converts or treats the capital asset into stock in
trade of his business. Capital gain shall be taxable in the year in which such stock in trade is
sold. FMV on date of conversion shall be deemed as Sales consideration. The amount
recorded in books of account is not relevant.
c) @
Sec 45(5) Capital gain on transfer by way of compulsory acquisition of an
asset
Transfer of capital asset by way of compulsory acquisition of an asset under any law and the
consideration is determined or approved by Central Government, then capital gain shall be
taxable as under:
1. Original: taxable in the year in which 1st received by assessee (even a part thereof)
2. Enhanced: taxable in year in which it is received by the assessee. Nature of capital gain is
same as that of original compensation.
However, if enhanced compensation is received in pursuance of interim order of court,

Tribunal or other authority, the amount shall be taxable in the previous year in which the
final order of such court, Tribunal or other authority is made.
 Period of holding till the date the asset is compulsorily acquired.
 Interest on compensation is taxable under head “Other Sources” after allowing deduction of
50% under section 57

|Page
VIVEK GABA
Sec 155: If compensation reduced, AO shall amend order u/s 154 within 4 years from end of PY
when order reducing compensation passed
@
Sec 2(14)- Capital asset
Capital asset” means
(a) property of any kind held by an assessee, whether or not connected with his business or
profession
(b) any securities held by a Foreign Institutional Investor which has invested in such securities in
accordance with the regulations made under the Securities and Exchange Board of India Act,
1992
But does not include:
i. SIT, consumables, raw material which is used in business(Except Clause (b) mentioned
above)
ii. personal effects (movable property) except
a) jewellery b) archaeological collections
c) drawings d) any work of art
e) sculptures
iii. Rural agricultural land in India. Agricultural land is a capital asset if it is situated
a) agricultural land situated in any area within the jurisdiction of a municipality or
cantonment board having population 10,000 according to the last preceding census,
OR
b) in any area within the distance, measured aerially from local limits of any municipality or
cantonment board referred to in sub-clause (1):
shortest aerial distance from Population according to the last preceding census of
local limits of municipality or which the relevant figures have been published before
cantonment board the first day of the previous year
 2 kilometers  10,000  1,00,000
 6 kilometers  1,00,000  10,00,000
 8 kilometers  10,00,000
For the purpose of clause (b) of, “population” means population as per last preceding census of
which relevant figure have been published before date of previous year.

iv. Gold deposit bonds issued under the scheme 1999 or Deposit certificate issued under the
Gold monetization Scheme, 2015.(Amendment by Finance Act, 2016)

|Page
VIVEK GABA
ANALYSIS OF. CLAUSE (V)
Distance Population according to the last preceding census of which the relevant
measured aerially figures have been published before the first day of the previous year
 10,000 10,001- 1,00,000 1,00,001- 10,00,000 10,00,001-∞
1 km X   
2 km X   
3 km X X  
4 km X X  
5 km X X  
6 km X X  
7 km X X X 
8 km X X X 
Beyond 8 X X X X
X = Not a capital asset

 = It is a capital asset
Analysis of Amendment by Finance Act 2014

Any security held by foreign institutional investor
 invested in such security in accordance with regulations made under Securities and Exchange
Board of India Act, 1992
 would be treated as capital asset only so that
 any income arising from transfer of such security by a Foreign Portfolio Investor (FPI) would be
in the nature of capital gain
@
Sec 2(47): Transfer
1. Sale, exchange, relinquishment 2. Extinguishment of right
3. Conversion of capital asset into stock-in- 4. Redemption of zero coupon bond
trade
5. Possession of immovable property in part 6. Acquire share in co-operative society,
performance u/s 53A of Transfer of Property company, AOP for enjoyment of immoveable
Act property.
7. Redemption of preference shares is transfer
8. “Transfer” includes creating interest in asset whether agreement is in India or outside India
notwithstanding that transfer is flowing from transfer of shares of co. incorporated outside.
Decided Case Laws

a) Land and building are to be considered separately for computation of capital gain.
b) Compensation paid for eviction of hutment dwellers from land is allowed as COI.
c) Exchange of shares is transfer and taxable either as Capital Gain or PGBP
d) Consider population of municipality and not population of any area within the municipality

|Page
VIVEK GABA
Sec 48 Computation of capital gain
Sale consideration (SC) Xxx

Less: Cost of acquisition (COA) Xxx
Less: Cost of improvement (COI) Xxx
Less: Expenditure on transfer Xxx
Income chargeable as “Capital Gains” Xxx
@
First Proviso to sec 48
 In case of assessee being a Non Resident (including foreign company),
 the capital Gain arising from the transfer of shares or debentures in an Indian company
 shall be computed by converting COA, expense and Sale consideration
 into the same foreign currency which was invested initially
 The capital gain so computed shall be reconverted into Indian currency.
 The provisions are also applicable on reinvestment as well.
Note 1:First proviso is mandatory to apply and second proviso is not applicable when first proviso
is applicable and this proviso is applicable on STCG and LTCG
Note 2:Units of mutual fund, govt. bonds are not covered here.
Rule 115A : Method of conversion

Cost of acquisition (COA) average TTBR and TTSR Date of acquisition
Expense and Sale Consideration average TTBR and TTSR Date of transfer
Capital Gain TTBR Date of sale
@
Second Proviso to sec 48
To compute LTCG, take Indexed COA instead of COA and Indexed COI instead of COI
Indexed COA= COA x CII when asset transferred

CII when asset 1st held or 1.4.81, later
Indexed COI= COI x CII when asset transferred
CII when improvement took place
No indexation if first proviso applies.

Focus Area: As per recent decided case law (Manjula J. shah), indexation shall be done from
previous owner.
COST INFLATION INDEX:
Financial Year Cost Inflation Index Financial Year Cost Inflation Index
1981-82 100 1999-00 389
1982-83 109 2000-01 406
1983-84 116 2001-02 100
1984-85 125 2002-03 105
1985-86 133 2003-04 109

|Page
VIVEK GABA
1986-87 140 2004-05 113
1987-88 150 2005-06 117
1988-89 161 2006-07 122
1989-90 172 2007-08 129
1990-91 182 2008-09 137
1991-92 199 2009-10 148
1992-93 223 2010-11 167
1993-94 244 2011-12 184
1994-95 259 2012-13 200
1995-96 281 2013-14 220
1996-97 305
1997-98 331
1998-99 351
Third Proviso to sec 48

No indexation for bonds/debentures except for capital indexed bonds and Sovereign Gold Bonds
issued by RBI.
Fourth Proviso to sec 48

(Added & Amended By FA, 2016 & 2017)
 Assessee is a non-resident
 Gains arises on account of appreciation of rupee against foreign currency
 Gains arises on redemption of Rupee Denominated Bonds (RDBs)
 Prior to Finance Act, 2017 the benefit of 4th Proviso is available only if non-resident
was the original subscriber of RDB. The Finance Act, 2017 has done away with this
condition. The benefit of 4th proviso is available even if non-resident has purchased the
RDB from market. Needless to say, the benefit is also available to the original
subscriber of RDB
 Assessee should be original subscriber of RDB
 Exemption is not available if RDB is transferred before maturity
Suppose, Indian company issues bonds i.e., RDB of 1,00,000 each. Mr. VG Non-resident
applies for bond of 70,00,000 on 1-1-2017 and on 1-1-2017 , the exchange rate is $ 1 = 70.
Mr. VG therefore, remitted $ 1,00,000 to India to subscribe to these bonds. The bonds are
redeemed at par on 2-1-2018 when $ 1 = 63.
Suppose in illustration 11, the bonds are redeemed at a premium of 5,000 i.e., 1,05,000. Now, Mr.
VG get 73,50,000 and if $ 1 = 63 then he remits 1,16,667 to his country. 3,50,000 is taxable as
short-term capital gains in India ( i.e., $5,555). However, $ 11.112 shall not taxable as per
amendment by FA, 2016 since it represents gain on account of appreciation of Rupee.
Suppose in the above two illustrations, the rupee depreciated and on the date of redemption $ 1 =
75. In that case the capital gains shall be computed by applying the first proviso to section 48.

|Page
VIVEK GABA
Suppose, average of TTBR and TTSR on date of purchase = 70 = $ 1
Average of TTBR and TTSR on date of redemption = 75 = $ 1
In first case sale price 70,00,000/75 = $ 93,333
Cost of acquisition = 70,00,000/70 = $ 1,00,000
Short-term capital loss = (6,667)
 In second case, sale price 73,50,000 / 75 = $ 98,000
Cost of acquisition = 70,00,000 / 70 = $ 1,00,000
Short-term capital loss = (2,000)
Fifth Proviso to sec 48

Security transaction tax shall not to be included as part of purchase price and shall not be reduced
from sales consideration.
@
Sec 55 COA and COI
Cost of acquisition (COA)
Acquired Self-
Particulars
(purchased) generated
Goodwill of business, trademark, tenancy rights, stage carriage, Purchase price NIL
loom hours, right to manufacture, right to carry business
COA of other self-generated assets (Goodwill of Profession and spontaneously grown trees) is
indeterminate. No option to take FMV as on 1.4.2001.
Shares/Securities
Kind of share Cost of acquisition Period of holding
Original shares Purchase price Date of purchase/allotment
Right shares Price actually paid Date of allotment
Renouncement of right
-person who renounces Nil Date of offer
-purchaser of right Price paid to person (+) Amount paid to Date of allotment
company
Bonus shares Nil Date of allotment
Option to take FMV as on 1.4.2001 is available.
Other assets: Option to take higher of cost of acquisition or fair market value (FMV) as on
1.4.2001.
Cost of Improvement (COI)

COI means all the capital expenditure incurred on improvement.
Goodwill of business, right to carry on NIL
business, right to manufacture
Other capital asset: COI incurred by previous owner or assessee
COI before 1.4.2001 shall not to be considered

|Page
VIVEK GABA
@
Sec 50C Special Provision for full value of consideration in certain cases
(Amended by Finance Act, 2016)
When Sales Consideration is less than Stamp duty value (SDV) of land and building, SDV shall be
deemed as Sales Consideration for the purpose of computation of capital gain.
Assessee claims SDV exceeds FMV and value is not disputed, AO may refer computation of value
to Valuation Officer
Valuation officer’s value

Exceeds SDV, then SDV is taken as SC Lower than SDV, then Valuation officer‖s value
shall be considered for the purpose of computation
of capital gains.
Focus Area: If date of agreement and date the registration is not same, then the SDV on
date of agreement shall be taken as sale consideration if Whole or part of consideration
should be paid by A/c payee cheque/bank draft or ECS through a bank A/c on or before
the date of agreement. In all other cases, SDV as on date of registration shall be deemed
as sales Price.
Sec 50D Consideration not determinable
Where consideration received cannot be determined, then FMV of the said asset shall be deemed
as consideration received for the purpose of computation of capital gains.
@
Sec 2(42A) Period of Holding
AMENDED BY FINANCE ACT 2014
Gains/Losses arising on transfer of a short-term capital asset are referred to as short-term
capital gains/losses.: Gains/losses arising on the transfer of a long-term capital asset are
referred to as long-term capital asset. “Short-term capital asset" means a capital asset held by
an assessee for immediately preceding the date of its transfer
in the case of or a unit of the Unit Trust of India established under the Unit Trust of India
Act, 1963 or or a zero coupon bond, the provisions of this clause shall have effect as if for
the words "thirty-six months", the words "twelve months" had been substituted.
The Finance Act, 2016 & 2017 provides that in case of on a recognized stock exchange
in India or , the period of holding should be 24 Months of Less to qualify a short-term
capital asset.
Amendment by Finance Act, 2016& 2017 :
Third proviso has been inserted in section 2(42A) with effect from A.Y.2017-18& 18-19 to
provide that a share of a company (not being a share listed in a recognized stock
exchange in India) & Immovable property (Land, Building or Land & Building) would be
treated as a short-term capital asset if it was held by an assessee for not more than 24
months immediately preceding the date of its transfer.
Thus, the period of holding of unlisted shares for being treated as a long-term capital

|Page
VIVEK GABA
asset has been reduced from “more than 36 months” to “more than 24months” from
A.Y.2017-18& 18-19.
@
Section 10(38) Exemption of LTCG on shares
Capital Gain on transfer of long term capital asset, being Equity shares, units of equity oriented
fund or a unit of a business trust and when sale consideration is chargeable to Security
Transaction Tax (STT) shall be exempt from tax.
Sec 112 : Tax rate for Long Term Capital Gain

For all assessee including Non Resident, LTCG shall be taxable @ 20%
For Non Resident (Including company), LTCG on unlisted security shall be taxable @ 10% without
applying first proviso and second proviso.
Benefit of slab is available to Individual resident and HUF. Chapter VIA deductions are not allowed
Proviso to sec 112
LTCG on transfer of listed securities(other than units), zero coupon bonds shall be taxable at
following rate being lower of below mentioned:
a) 20% after indexation; or b) 10% without indexation
However, in respect of capital gain arising on a unit of Mutual Fund specified under section
10(23D) till 10 July, 2014, the above proviso is applicable.
Assessee can have two portfolios, one for stock in trade and other for Capital asset.
@Section 10(37) : Exemption in respect of capital gains in case of urban

agricultural land
Exemption is available if all the below mentioned are satisfied:

 Assessee is an individual or HUF
 transfer is of an agricultural land situated in urban area
 and the land is used for agricultural purposes during the period of 2 year immediately
preceding the date of transfer by HUF or Individual or a parent of the individual
 transfer takes place by compulsory acquisition under any law and the consideration is
determined or approved by Central Government or RBI
 original as well as enhanced compensation are exempt
 Capital gain is exempt irrespective of the fact that they are short term or long term.
SECTION 50CA :
Full value of Consideration in case of UNQUOTED SHARES
 Section 50CA has been made applicable with effect from PY 2017-18 in case of transfer of
unquoted share (i.e unlisted shares). Section 50CA is not applicable in case of transfer of
Listed shares.

|Page
VIVEK GABA
 Section 50CA provides that where the consideration received for transfer of unlisted share
is less than fair market value (FMV), the FMV of such unlisted shares shall be deemed as
the full value of consideration for the purposes of computation of capital gains. The FMV
of unlisted shares shall be calculated in such manner as may be prescribed.
Mr. X transfers 1,000 shares in A Ltd on June 28, 2017 to Mr. Y for a consideration of Rs.
9,40,000 (FMV of shares as on the date of transfer is Rs. 10 lakhs). These shares were
purchased by Mr. X on July 19, 2016 for Rs 7 lakhs. Find out the tax consequences of the
above transaction in the following Two cases:
Shares of A Ltd are not quoted any stock exchange in India. Shares of A Ltd are regularly
quoted on BSE/NSE but MR X has transferred the shares to Mr. Y privately and not through
stock exchanges. Section 50CA is applicable only in case of unlisted shares. In case of Listed
shares, Section 50CA does not apply and the actual consideration received has to be taken
as full value of consideration.
Computation of Capital Gains in the hands of Mr. X:
Particular Case 1 (Unlisted Shares) Case 2 (Listed Shares)

Full value of Consideration 10,00,000 9,40,000
Cost of Acquisition (7,00,000) (7,00,000)
3,00,000 2,40,000
Mr. Y has acquired shares of A Ltd for Rs. 9,40,000 whereas their FMV is Rs. 10,00,000. The
difference of Rs. 60,000 shall be taxable as gift in the hands of Mr. Y u/s 56(2)(x) regardless
of the fact whether shares of A Ltd are listed or not.
Section 45(5A) : Transfer of Capital Asset under Joint Development

Agreement
- Notwithstanding anything contained in sub-section (1),
- where the capital gain arises to an assessee,
- being an individual or a Hindu undivided family,
- from the transfer
- of a capital asset, being land or building or both,
- under a specified agreement,
- the capital gains shall be chargeable to income-tax as income of the previous year in
which the certificate of completion for the whole or part of the project is issued by the
competent authority; and
- for the purposes of section 48, the stamp duty value, on the date of issue of the said
certificate, of his share, being land or building or both in the project, as increased by

|Page
VIVEK GABA
the consideration received in cash, if any, shall be deemed to be the full value of the
consideration received or accruing as a result of the transfer of the capital asset :
that the provisions of this sub-section shall not apply where the assessee and the capital
gains shall be deemed to be the income of the previous year in which such
transfer takes place and the provisions of this Act, other than the provisions of this sub-
section, shall apply for the purpose of determination of full value of consideration received or
accruing as a result of such transfer.
For the purposes of this sub-section, the expression —
means the authority empowered to approve the building plan by or under any law for the time
being in force;
means a registered agreement in which a person owning land or building or both, agrees to
allow another person to develop a real estate project on such land or building or both, in
consideration of a share, being land or building or both in such project, whether with or
without payment of part of the consideration in cash;
means the value adopted or assessed or assessable by any authority of Government for the
purpose of payment of stamp duty in respect of an immovable property being land or building
or both.
Applicability of Section Section 45(5A) applies where an Individual/HUF owning

45(5A) land/Building/Both enters into a registered agreement with a
developer allowing the developer to develop a real estate project on
such land /building/both.
As a consideration for receiving the right to develop the real estate

project, the developer shares a portion of land/building/both in the
project with the Individual / HUF. In some cases, the developer
might also pay some additional consideration in cash over and
above the share in project.
Year of taxability off Capital gains shall be computed in the hands of Individual/HUF in
capital gains the year in which the possession of immovable property is handed
over to the developer for development of a project.
Capital gains so computed shall be considered as income of the

previous year in which the certificate of completion for the whole
or part of the project is issued by the competent authority.
Full value of SDV of Land/Building/Both in the project handed over by the
Consideration developer to Individual/HUF as his share a on the date of issue of
the aforementioned completion certificate
Cash received by the Individual/HUF from the developer, if any.

|Page
VIVEK GABA
The full value of consideration adopted for calculating capital gains
u/s 45(5A) shall be deemed as the cost of acquisition of the share
in the hands of Individual/HUF.
The beneficial provisions stated u/s 45(5A) shall not apply where the assessee transfers his
share in the project to any other person on or before the date of issue of the aforementioned
completion certificate. In such cases, capital gains would be taxable in the year in which
possession of immovable property is handed over to the developer for development of project.
1. ILLUSTRATION OF AMENDMENT:
Mr. X purchased a plot of Land in Cochin during PY 2006-07 for Rs. 50 Lakhs. He entered
into a ―Specified agreement‖ with A Ltd (a developer) on 20th April, 2015 allowing A Ltd the
right to develop a project on such vacant land. Both the parties have adrred that ownership of
60% of the constructed area would belong to Mr X and 40% of the constructed area would be
retained by A Ltd for further sale to various buyers. Upon the signing of this agreement, A Ltd
handed over a cash payment of Rs. 10 lakhs to Mr X immediately.
The project got completed on 15th July, 2017 and the necessary completion certificate was
issued by the appropriate authority on 25th July, 2017. The SDV of 60% of the developed area
given to Mr. X as on 5th July, 2015 was Rs. 60 Lakhs. Compute capital gains in the hands of
Mr. X for different years.
Solution:
- Capital gains shall be computed in the year in which a specified agreement is

entered into between the owner of immovable property and the developer wherein
the possession of immovable property is handed over to the developer fro
development of a project. However, capital gains so computed shall be taxable in
the previous year in which the certificate of completion is issued by the competent
authority. In the present case, capital gains shall be computed in PY 2015-16 (i.e
the year in which possession of the immovable property is handed over to the
developer for development of a project). The cost of acquisition of 40% portiob
shall come out to Rs 20 lakhs (i.e 40% of Rs. 50 Lakhs). As a consideration for
handing over 40% portion of the land, Mr. X has received cash Rs. 10 lakhs and
60% share in the developed project having SDV of Rs. 60 lakhs. Therefore, full
value of consideration shall be Rs. 70 Lakhs.
Computation of Capital Gains (During PY 2015-16) :

Particular Amount
Full value of consideration (As Explained 70,00,0000.00
Above)
Less: ICOA [ 20 lakh x 254/122] (41,63,934.43)
Long-term capital gains 28,36,065.57

|Page
VIVEK GABA
LTCG of Rs. 28,36,065.57 so computed shall be considered as an Income of PY 2017-18 (i.e
the year in which completion certificate has been issued by the competent authority)
SECTION 10(37A)
Any income chargeable under the head "Capital gains" in respect of transfer of a specified
capital asset arising to an assessee, being an individual or a Hindu undivided family, who was
the owner of such specified capital asset as on the 2nd day of June, 2014 and transfers that
specified capital asset under the Land Pooling Scheme (herein referred to as "the scheme")
covered under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and
Implementation) Rules, 2015 made under the provisions of the Andhra Pradesh Capital Region
Development Authority Act, 2014 (Andhra Pradesh Act 11 of 2014) and the rules, regulations
and Schemes made under the said Act.
Explanation.—For the purposes of this clause, "specified capital asset" means,—
(a) the land or building or both owned by the assessee as on the 2nd day of June, 2014
and which has been transferred under the scheme; or
(b) the land pooling ownership certificate issued under the scheme to the assessee in
respect of land or building or both referred to in clause (a); or
(c) the reconstituted plot or land, as the case may be, received by the assessee in lieu of
land or building or both referred to in clause (a) in accordance with the scheme, if
such plot or land, as the case may be, so received is transferred within two years from
the end of the financial year in which the possession of such plot or land was handed
over to him; ]

|Page
VIVEK GABA
Sec 45(3) Capital Gain on transfer of capital asset by Partner/ Member to
Firm/ AOP/BOI
Transfer
Partner/Member Firm/AOP/BOI
Capital asset
Amount recorded in books is sales consideration
Sec 45(4) Capital Gain on transfer of capital asset by way of distribution or

dissolution of Firm/ AOP/BOI or otherwise
Distributes Resident
Firm/AOP/BOI Partner/Member
individual having total
Capital asset on dissolution of firm or
on retirement of partner
Fair market value of capital asset on date of distribution is sales

consideration
Sec 45(2A) Transfer of securities by Depositories

Transfer of shares by depository, income shall be deemed to be of beneficial owner and Cost of
acquisition and period of holding shall be on FIFO basis.
Sec 47 Transaction not regarded as Transfer

i) Distribution on partition
ii) Transfer under gift, will, irrevocable or irrevocable trust
iii) In amalgamation, by amalgamating company to amalgamated company (Indian co)
iv) Transfer of capital asset by holding company to subsidiary company if holding company has
entire share capital of subsidiary company and subsidiary company is an Indian company.
(Capital asset shall not be transferred as stock in trade i.e. if capital asset is transferred as
stock in trade, then the same is taxable and not exempt)
v) Transfer of capital asset by subsidiary company to holding company if holding company has
entire share capital of subsidiary company and holding company is an Indian company.
(Capital asset shall not be transferred as stock in trade i.e. if capital asset is transferred as
stock in trade, then the same is taxable and not exempt)
For (i) to (v)
Sec 49(1): COA of previous owner and COI of previous owner and transferee
Sec 2(42A): POH of previous owner to be considered
CII for the year when asset was first acquired by previous owner. (Manjula J. Shah)
Sec 55: Option to take FMV as on 1.4.81 is available is available
For iv) and v) only
Sec 47A: If before expiry of 8 years, capital asset is converted as stock in trade by transferee
company or holding company cease to hold entire share capital of subsidiary company,
exemption under section 47 is withdrawn, then capital gain is taxable in the hands of transferor
company in the previous year in which transfer took place

|Page
VIVEK GABA
Sec 155: If47A is attracted, Assessing officer shall amend order under section 154 within 4 PY
from end of PY when condition is contravened
Sec 49(3): when 47A attracted COA for transferee shall be price at which asset is transferred.
For i) ii) and iii)

Sec 43C Capital asset transferred as SIT, COA of SIT = COA in hands of transferor + COI by
transferor and transferee + expenditure on such transfer
SUMMARY
Holding to subsy/ subsy to holding
Capital asset as Capital asset
Sec47 + sec49(1) + sec2(42A) + sec55 + sec47A + sec45(2) + sec155 + sec49(3)
Capital asset as stock in trade: Sec 47 exemption not available
Amalgamating company Amalgamated company

Partition of HUF Members
Gift, will, irrevocable trust
Capital asset as Capital asset: Sec 47+ sec 49(1) +sec 2(42A) +sec 55
Capital asset as stock in trade: Sec 47+ sec 43C
x) Bonds, debenture stock or deposit conversion share/debenture of that co.
xi) Bonds u/s 115AC conversion debenture of any company
xiii) Firm converted Company, provided

a) All assets and liabilities of firm become assets and liabilities of company
b) All partners of firm become shareholder of company in proportion of their capital account.
c) Partners do not receive any consideration/benefit other than shares of company.
d) Partners‖ shareholding is not less than 50% of total voting power and their shareholding
continues to be same for a period of 5 years
xiv) Sole proprietary concern converted Company, provided
a) All assets and liabilities of sole proprietary concern become assets and liabilities of
company.
b) Sole proprietor do not receive any consideration/ benefit other than shares of company
c) Sole proprietors‖ shareholding is not less than 50% of total voting power and their
shareholding continues for a period of 5 years.
(viib) any transfer of a capital asset, being a Government Security carrying a periodic payment of
interest, made outside India through an intermediary dealing in settlement of securities, by a
non-resident to another non-resident.
(Inserted by FA 2014)
 Legal heir inherits mortgage property pays debt, amount paid is deemed as COI.
 A mortgage is created by assessee and pays debt thereon. It is not COI for assessee.
 Purchase a property and raises loan on same day, expenses on loan & interest expense is
part of COA.

|Page
VIVEK GABA
TRANSFER OF CO. INTO LLP
xiiib) Transfer of capital asset/ intangible asset by private company, unlisted public company to LLP
or transfer of share held in company by shareholder as a result of conversion into LLP as
per LLP Act
Private Company LLP, provided
a) All assets and liabilities of company become assets and liabilities of LLP.
b) All shareholder before conversion are partner of LLP and capital contribution and profit
sharing ratio is in proportion of their shareholding in company
c) Shareholders do not receive any consideration/ benefit in any form
d) Turnover of preceding 3 financial years does not exceed 60 lakh rupees.
e) No amt. is paid out of balance of accumulated profit in accounts of company for 3 years
from date of conversion.
f) The total value of assets as appearing in the books of account of the company in any of
the three previous years preceding the previous year in which the conversion takes place,
should not exceed 5 crore. (Inserted by Finance Act, 2016)
@
Sec 51 Advance Money Forfeited
Capital asset has been a matter of negotiation earlier and advance/other money received earlier
shall be deducted from cost or FMV as on 1.4.2001 where FMV is taken as COA or from WDV (
in case of depreciable assets) while computing capital gains.
 Other money includes Earnest Money received
 Amt. received for before 1.4.2001 shall be deducted u/s 51.
 Where Advance Money is more than Cost, excess is Capital Receipt, not taxable
However, if such sum of money has been included in total income while computing income
under head Other Sources as per Section 56(2)(ix), the amount shall not be deducted from
 the cost for which the asset was acquired or
 the written down value or
 the fair market value, as the case may be,
in computing the cost of acquisition
Note: Seller defaults in sale of house and for its possession and buyer received compensation from
seller for such default, then it shall be assumed that buyer has relinquished his right to buy
property; amt. so received by buyer is assessable as capital gain. Amount paid by buyer earlier is
taken as cost of acquisition.
@
Sec 50 B SLUMP SALE
Meaning: Transfer of one or more undertaking as a result of lump sum consideration without
values being assigned to assets and liabilities and if any value is assigned, then it is only for
determining the payment for stamp duty.
Section 50B
1. Capital Gain is taxable when slump sale is affected.
2. Nature of capital gain depends on period of holding of undertaking transferred. If undertaking
held for more than 36 months, Capital gain is long term capital gain, else short term capital
gain.

|Page
VIVEK GABA
3. Nothing shall be taxable under head PGBP.
4. COA and COI = Net worth of undertaking.
5. Net Worth= value of total assets (-) value of total liabilities.
6. Revaluation of assets shall not to be considered while computing Net Worth.
7. Benefit of indexation is not available.
8. Value of non-depreciable asset shall be taken at book values.
9. Value of depreciable asset shall be taken at WDV as per 43(6).
10. Transferor can carry forward unabsorbed depreciation and losses.
Decided Case Laws

a) Property which is owned by more than 1 person and other co-owners release their share in
favor of one of the co-owners and is purchased by that co-owner. Such release also fulfills
condition of section 54.
b) Amount invested on purchase of house and then on construction of same house. Exemption
under section 54 is allowed for both.
Circular 743: Amt. devolving in the hands of legal heirs of deceased is not taxable in hands of
legal heirs.
Circular 667: Exemption u/s 54 is available on aggregate cost of land purchased and construction
thereon on the land.
Section 54EC
Where capital gain arises from
transfer of: long-term capital asset
Investment in how much time: within period of 6 months after date of such transfer for a
mimimum period of 3 years
Investment in: Bonds issued by RECI and NHAI
Which assessee: Any assessee
Maximum amount of exemption allowed: to the extent invested (subject to maximum ` 50 lakh)
As per Budget 2014, investment made out of capital gains arising from original asset or assets
shall not exceed ` 50 lakh in year of transfer and subsequent year.
If bond is transferred within 3 years or converted into money, capital gain so exempt will be
taxable as long term capital gain. If assessee takes loan against the bond, it shall be deemed that
they are converted into money.
Exemption of long-term capital gains on investment in notified units of specified fund
[New Section 54EE] (Inserted by Finance Act, 2016)

Effective from: A.Y.2017-18
(i) Objective: For incentivising the start-up ecosystem in India, the 'start-up India Action Plan'
envisages establishment of a Fund of Funds which intends to raise 2,500 crores annually for
four years to finance the start-ups.

|Page
VIVEK GABA
(ii) Exemption of LTCG invested in units of specified fund : In order to achieve this
objective, new section 54EE has been inserted to provide exemption from capital gains tax if
the long term capital gains proceeds are invested by an assessee in units issued before 1
April, 2019 of such fund, as may be notified by the Central Government in this behalf. The
lower of the capital gains or the amount so invested would be exempt under section 54EE.
(iii) Quantum of Exemption:

If amount invested in notified units of Entire capital gains is exempt
specified fund not less than Capital gains
If amount invested in notified units of Capital gains to the extent of cost of amount
specified fund less than Capital gains invested in notified units is exempt
(iv) Time limit for investment: The investment has to be made within 6 months after the date of
transfer.
(v) Ceiling limit for investment in units of the specified fund: The maximum investment in units of
the specified fund in any financial year is ` 50 lakh. Further, the investment made by an assessee
in the units of specified fund out of capital gains arising from the transfer of one or more capital
assets, cannot exceed ` 50 lakh, whether the investment is made in the same financial year or
subsequent financial year or partly in the same financial year and partly in the subsequent financial
year.
vi) Conditions for availing exemption:

a. Investment of LTCG in units of specified funds.
b. Investment within 6 months from the date of transfer.
c. Maximum investment is Rs. 50 lakhs.
d. Units should not be transferred for a period of 3 years.
vii) Consequence of transfer of units before 3 years:Where the units are transferred at any time
within a period of three years from its acquisition, the capital gains, to the extent exempt earlier,
would be chargeable as capital gains in the year of transfer.
viii) Deemed transfer of notified units: Further, if the assessee takes any loan or advance on the
security of such units, he shall be deemed to have transferred such units on the date on which
such loan or advance is taken.

|Page
VIVEK GABA
@
Sec 54GB Capital gain on transfer of residential property
(Amended by Finance Act, 2016)
Eligible Company: all the following condition to be fulfilled
Incorporated in India Engaged in Assesse holds > Company fulfills

If assesse sells property on 30/6/14, business of 50% share capital Micro, Small and
co should be incorporated b/w manufacturing or more than 50% Medium Act 2006
1/4/14 to 31/7/15* (i.e. b/w 1st April an article or voting power after i.e. it is Small or
of PY & due date of furnishing thing subscription in Medium Enterprise
return) shares
*assumed to be due date of return
New asset does not include
2nd hand P&M installed in Office Any P&M which is

Any office Any vehicle
plant and premises and residential already allowed as
appliances
machinery accommodation deduction
ENTIRE PROCEDURE
Subscribe equity Purchase new asset
shares of eligible D Company utilize this amount within 1 year E
company C from date of subscribing equity shares
B Net consideration used F If not purchased within time

before due date u/s 139(1) prescribed 139(1), Transfer the amount
to
T/f of residential house Capital Gain A/c
property (Long term) Scheme G
(in or outside India)
A H Amount deemed to be utilized
Of 5 years for equity shares
as well as asset.
M Purchase cost +
CGAS Amt. I
L Lock in
period
CG exempted u/s 54 (-) J If not utilized within 1 year from the
CG that would have been date of subscription of equity shares
exempted on amount actually

utilized K
|Page
VIVEK GABA
Scope of exemption under section 54GB expanded to cover LTCG on sale of
residential property invested in shares of eligible start-up company:
In order to encourage individuals/HUF to setup a start-up company by selling a residential

property and investing in the shares of such company, section 54GB has been amended to
provide that long term capital gains arising on account of transfer of a residential property
shall not be charged to tax, if:
1) the net consideration is invested in subscription of equity shares of a company which

qualifies to be an eligible start-up on or before the due date of filing return of income
under section 139(1);
2) the individual or HUF holds more than 50% shares of the company or 50%voting rights
after the subscription in shares by such individual or HUF; and
3) such company utilises the amount invested in shares to purchase new plant and machinery
within one year from the date of subscription in equity shares.
Meaning of Eligible Start-ups:

a. Company engaged in eligible business and incorporated during the period 1/4/2016 to
31/3/2019.
b. Total turnover not more than 25 crores in any P.Y. 2016-17 to 2020-21.
c. Holds a certificate of eligible business from the notified IMBC.
Purchase of computers or computer software out of amount invested in shares of an

technology driven start-up permitted:
In case of an eligible start-up, being a technology driven start-up so certified by the notified Inter-
Ministerial Board of Certification (IMBC), the company can also utilise the amount invested in
shares to purchase computers or computer software. This is because computers or computer
software form the core asset base of such technology driven start-ups.
(Other provisions and conditions are same as given in above graph)

|Page
VIVEK GABA
120
121
122
Question: Objective question
1. In Normal case Short term capital asset means a capital asset held by an assessee for not
more than ___ immediately preceding the date of its transfer.
a) 15 months b) 20 months c) 36 months d) 12 months
2. Short term capital loss can be set off from

a) Short term capital gains
b) Both Short term capital gains and Long term capital gains
c) Long term capital gains
d) Any income of the previous year
3. Which of the following is not a personal effect?

a) Mobile for personal use b) Computer for personal use
c) Furniture for personal use d) Jewellery for personal use
4. The cost of improvement of goodwill of business shall be taken as

a) The incurred cost b) the incurred cost after indexation
c) Nil d) the cost incurred by the previous owner
Solution: 1 – c), 2 – b), 3 – d), 4 – c)
OBJECTIVE QUESTIONS
1. As per general rule, capital gain from transfer of capital asset is taxable in which year
a) Previous year in which transfer took place b) assessment year
c) previous year next to year of transfer d) None of the above
2. Which of the following is not a capital asset as per section 2(14)

a) House b) Gold
c) Gold deposit bonds d) None of the above
3. Gold utensils are ………………. and silver utensils are …………………….

a) capital asset, capital asset b) not capital asset, capital asset
c) capital asset, not capital asset d) not capital asset, not capital asset
4. Which of the following movable personal asset is not a capital asset?

a) jewellery b) drawings c) any work of art d) Car
5. As per the contention of Assessing Officer, gold bars, sovereigns etc. used for puja are capital
asset and hence, attracts capital gains. Is the contention of Assessing Officer valid?
a) Valid b) Invalid
c) Partially invalid d) None of the above
6. Agricultural land situated within 2 kilometers from municipality or cantonment board having
population of 90,000
a) is capital asset b) is not a capital asset
c) may be a capital asset d) None of the above

|Page
VIVEK GABA iVidya Academy, Laxmi Nagar, Delhi Ph: 7703880232
population of 1,20,000
a) is not a capital asset b) is capital asset
9. Agricultural land situated beyond 5 kilometers from municipality or cantonment board having
10. “Property” includes any rights in an Indian company, including rights of ……………… or ………………….or
any other rights whatsoever.
a) management b) control
c) both a) and b) d) either a) or b)
11. Which of the following is a transfer as per the provision of section 2(47)?
a) Sale of asset b) extinguishment of right in an asset
c) exchange of asset d) All of the above
12. Any transaction allowing possession of any ………………. to be taken or retained in ……………. of a
contract of the nature referred to in section 53A of the Transfer of Property Act is transfer
a) movable property, whole performance b) immovable property, part performance
c) movable property, part performance c) any property, part performance
13. As per section 48, capital gain shall be computed as

a) Sale consideration – cost of acquisition – cost of improvement + expense on transfer
b) Sale consideration + cost of acquisition – cost of improvement
c) Sale consideration – cost of acquisition + cost of improvement - expense on transfer
d) Sale consideration – cost of acquisition – cost of improvement - expense on transfer
14. As per first proviso to section 48, capital gain on transfer of specified asset shall be computed
by converting:
a) cost of acquisition b) expenses on transfer
c) sale consideration d) All of the above
15. The capital gains so computed in the foreign currency shall be reconverted into …………………..
a) Indian currency b) foreign currency as was initially used in purchase
c) Any currency d) None of the above
16. In computation of capital gain as per first proviso to Section 48, cost of acquisition shall be
converted at ………………………………. as on date of …………………….
a) the rate being average of telegraphic transfer buying and selling rate, date of sale
b) the telegraphic transfer buying, date of acquisition
c) the rate being average of telegraphic transfer buying and selling rate, date of acquisition
d) the telegraphic transfer selling, date of acquisition

|Page
17. In computation of capital gain as per first proviso to section 48, expenses on transfer shall be
converted at ………………………………. as on date of …………………….
a) the rate being average of telegraphic transfer buying and selling rate, date of transfer
b) the telegraphic transfer buying, date of acquisition
d) the telegraphic transfer selling, date of transfer
18. Second Proviso to Section 48 is applicable while computing

a) Only on Short Term Capital Gain b) Only on Long Term Capital Gain
c) Both Short Term and long Term Capital Gain d) None of the above
19. While computing capital gain as per second proviso, cost of improvement shall be
a) Taken as indexed cost of improvement b) Multiplied by 10
c) Multiplied by 100 d) None of the above
20. While computing indexed cost of acquisition, it shall be divided by

a) CII for the year in which asset was held by the assessee
b) CII for the year in which asset was transferred by the assessee
c) CII for the year being 1.4.2001
d) CII for the year being later of a) or c)
21. While computing indexed cost of improvement, it shall be divided by

a) CII for the year in which improvement took place
d) CII for the year being later of a) or c)
22. CII for the previous year 2017-18 is

a) 144 b) 133 c) 100 d) 272
23. STT paid on sale of share or units shall not be …………… from sales price
a) reduced b) added
c) given any treatment d) Either a) or b), depending upon situation
24. When Goodwill of business is acquired, it shall be valued at

a) Nil b) Acquisition cost
25. When Right to manufacture, produce or process any article or thing or Right to carry on any
business is self-generated, it shall be valued at
c) Indeterminate d) None of the above
26. As per which case law, transfer of self-generated goodwill of profession is not chargeable to tax
a) CIT vs. B.C. Srinivasa Setty (SC) b) CIT vs. B.C. Srinivasa Setty (HC)
c) Manjula J. Shah (SC) d) None of the above
27. Right Shares/securities shall be valued at ……………… and period of holding shall be from ……
a) Nil, date of allotment
b) Price actually paid under the right issue, the date of allotment

|Page
c) Price actually paid under the right issue, the first day of previous year
28. The option to take FMV as on 01.04.2001 ………………… in case of shares

a) is not available b) is available
c) may be available d) None of the above
29. Where capital asset is acquired by the assessee or the previous owner before 01.04.2001, cost
of acquisition shall be
a) Cost of acquisition to the assessee or previous owner b) FMV as on 01.04.2001
c) a) or b), at the option of the assessee d) None of the above
30. Where capital asset is acquired by the assessee or the previous owner on or after 01.04.2001
a) FMV of asset as on 01.04.2001
b) Cost of acquisition to the assessee or the previous owner
c) a) or b), at the option of the assessee
31. In case of share held in listed company, short term capital asset means a capital asset held by
an assessee for ………………… immediately preceding the date of its transfer.
a) not more than 36 months b) not more than 12 months
c) not more than 24 months d) None of the above
32. In case of any security listed on a recognised stock exchange, short term capital asset means
capital asset held by an assessee for ……… immediately preceding the date of its transfer.
33. The cost if improvement of which asset shall be taken as nil

a) Goodwill of Business
b) Right to manufacture, produce or process any article or thing
c) Right to carrying on any business
d) All of the above
34. The rate of taxability defined in Section 111A for Short Term Capital Gain is
a) 10 % b) 15 % c) 20 % d) Nil
35. Section 111A is applicable only if ………. is paid on the transaction of sale.
a) STT b) VAT c) tax d) None of the above
36. Benefit of slab rate is not available on short term capital gains under section 111A to
a) resident Individual b) resident HUF
c) on-resident d) None of the above
37. On which of the following transaction is STT chargeable

a) Sale of unlisted equity shares by any holder of shares under an offer for sale to public
included in an IPO and such shares are subsequently listed on recognised stock exchange.
b) Sale of unit of an equity oriented fund through recognized stock exchange.
c) Both a) and b)

|Page
38. Chapter VI-A deduction …………………………. on STCG referred to in section 111A.
a) shall be allowed b) shall not be allowed
c) may be allowed d) None of the above
39. Section 112 is applicable only if transfer of specified assets result in

a) Short Term Capital Gain b) Long Term Capital Gain
c) Any Capital Gain d) All of the above
40. The rate of taxability defined in Section 112 for Long Term Capital Gain is
a) 10 % b) 15 % c) 20 % d) Nil
41. Benefit of slab rate is not available on long term capital gains under section 112 to
c) non-resident d) None of the above
42. Chapter VI-A deduction …………………………. on LTCG referred to in section 112.

a) shall be allowed b) shall not be allowed
c) may be allowed d) None of the above
43. K purchased 2,000 equity shares of ABC Ltd. (a listed company) on 01.04.2015 at ` 20 per
share. He sold all the shares on 01.06.2017 at ` 50 per share and paid securities transaction
tax (STT) on the same. What will be the taxability in hands of K in the year of transfer?
a) taxable @ 10 % b) taxable @ 20 %
c) taxable @ 15 % d) exempt under section 10(38)
44. For claiming exemption u/s 10(37), urban agricultural land is used for ……..by HUF or individual
or a parent of individual during the period of ……… immediately preceding date of transfer.
a) any purpose, three year b) agricultural purpose, three years
c) agricultural purpose, two years d) business purpose, two year
45. Which of following conditions should be satisfied to claim exemption under section 10(37)
(i) Asset being transferred in agricultural land in urban area
(ii) Asset being transferred in agricultural land
(iii) transfer is the one for which consideration is determined or approved by the Central
Government or the RBI.
(iv) Consideration need not be determined by Central Government or RBI
a) (i), (iii) b) (ii), (iii) c) (i), (iv) d) (ii), (iv)
46. Which capital gain has been made exempt under section 10(37)
c) Both Short and long term capital gain d) None of the above
47. A has an agricultural land (costing ` 6 lakh) in Delhi & was used for agricultural purposes
since 01.04.1996 till 01.08.2016 when the Government compulsory acquired this land. A
compensation of ` 10 lakh was settled. The compensation was received by A on 01.07.2017.
Compute the amount of capital gains taxable in the hands of A. Ignore indexation
a) ` 4 lakh as Long Term Capital Gain b) exempt under section 10(36)
c) Exempt under section 10(37) d) None of the above

|Page
48. A has an agricultural land (costing ` 6 lakh) in Delhi & was used for agricultural purposes
since 01.04.1997 till 01.08.2017. He sold the land to his friend of ` 12 Lakh. Compute the
amount of capital gains taxable in the hands of A. Ignore indexation
a) ` 6 lakh as Long Term Capital Gain b) exempt under section 10(36)
c) Exempt under section 10(37) d) None of the above
49. Exemption under section 10(38) is available to

a) All assessee b) all assessee excluding NR
c) Only resident Individual and HUF d) Only resident Individual
50. Exemption under section 10(38) is available only if

a) STT is paid on the transaction
b) The transfer if of an asset being equity shares of the company
c) It is a long term capital gain
d) All of the above
51. Exemption under section 10(38) is available only if

a) STT is paid on the transaction b) VAT is paid on the transaction
c) Tax is paid on the transaction d) None of the above
52. LTCL referred in section 10(38) is ……………… i.e. it ……….. be set-off or carried forward.
a) not a capital loss, can b) capital loss, cannot
c) not a capital loss, cannot d) capital loss, can
53. Which of following shall be considered to decide whether the asset is investment or SIT?
a) Holding period b) objective of investment
c) method of valuation d) All of the above
54. Section 50C is applicable to which capital asset

a) All capital assets b) capital asset being, jewellery
c) land or building or both d) None of the above
55. Amended order shall be passed in how many years & period shall be calculated from which date
a) 3 years, from end of PY in which order reducing value was passed in appeal or revision
b) 4 years, from end of PY in which order reducing value was passed in appeal or revision
c) 3 years, from end of AY in which order reducing value was passed in appeal or revision
d) 4 years, from end of AY in which order reducing value was passed in appeal or revision
56. The period of …………. shall be reckoned from ……… for passing amended order under section 154.
a) 3 years, from end of PY in which order reducing value was passed in appeal or revision
b) 3 years, from end of AY in which order reducing value was passed in appeal or revision
c) 4 years, from end of AY in which order reducing value was passed in appeal or revision
d) 4 years, from end of PY in which order reducing value was passed in appeal or revision
57. Under which circumstance, Section 50D is applicable

a) Consideration not ascertainable b) consideration cannot be determined
c) on discretion of Assessing Officer d) either a) or b)
58. Which section deals about taxability of insurance claims received

a) Section 45(1A) b) Section 45(2) c) Section 45(2) d) Section 45(1)

|Page
59. …………………….. shall be deemed to be sales consideration for computing capital gains u/s45(1A).
a) Money received from insurance company
b) FMV of other assets received from insurance company
c) Any of the above
60. If no claim is received on destruction of capital asset, …………. shall arise

a) capital gain b) no capital gain
c) capital loss having no tax treatment d) none of the above
61. For computing capital gain as per section 45(1A), date of transfer of the capital asset destroyed
should be
a) date of destruction b) date of receipt of insurance claim
c) 30 days after date of destruction d) None of the above
62. What shall be sale consideration of capital asset converted into stock in trade?
a) FMV of asset on date of conversion b) Amount recorded in books of account
c) Average of a) and b) d) None of the above
63. A is the owner of a car. On 01.04.2017, he starts a business of purchase and sale of motor
cars He treats the above car as part of the stock-in-trade of his new business. The car was
acquired for ` 2,00,000 and FMV as on date of conversion is ` 2,50,000. On sale of car, held
as Stock in trade, what amount shall be taxable under head capital gains
a) ` 50,000 b) Nil c) ` 2,50,000 d) None of the above
64. X converts his capital asset (acquired on June 10, 1988 for ` 60,000) into SIT in 10.03.2015.
The fair market value on date of conversion was ` 3,00,000. He subsequently sells stock-in-
trade so converted for `4,00,000 on June 10, 2017. What is date of transfer of asset?
a) June 10, 1988 b) March 10, 2015
c) June 10, 2017 d) None of the above
65. X converts his capital asset (acquired on 10.06.1988 for ` 60,000) into SIT in 10.03.2015. FMV
as on date of conversion was ` 3,00,000. He subsequently sells stock-in-trade so converted for
` 4,00,000 on June 10, 2017. Capital gain shall be taxable in which previous year?
66. X converts his capital asset (acquired on June 10, 1988 for ` 60,000) into SIT in March 10,
2015. FMV as on date of above conversion was ` 3,00,000. He subsequently sells stock-in-
trade so converted for `4,00,000 on June 10, 2017. What shall be taxable under head PGBP?
a) ` 2,40,000 b) ` 3,40,000 c) ` 1,00,000 d) Nil
67. As per section 45(2A), ………… and ……….. of any securities shall be determined on the basis of
first-in-first-out method
a) cost of acquisition, cost of improvement b) Cost of acquisition, period of holding
c) cost of improvement, period of holding d) None of the above
68. What does section 45(3) of Income Tax Act state?

a) Any transfer of capital asset by partner to firm
b) Any transfer of capital asset by member of AOP/ BOI to AOP/BOI
c) Any of the above (d) None of the above

|Page
69. Which section provide that what shall be consideration for computation of capital gains arising
from transfer of a capital asset by a person to a firm in which he is or becomes a partner?
a) Section 45(3) b) Section 45(4)
c) Section 45(2A) d) None of the above
70. Which section provide that what shall be consideration for computation of capital gains in the
hands of the firm arising from transfer of a capital asset by way of distribution of capital assets
on dissolution of firm or otherwise?
a) Section 45(3) b) Section 45(4)
c) Section 45(2A) d) None of the above
71. For claiming exemption u/s 54EC, the amount to the extent of capital gain should be invested
within six months from the date of transfer in:
a) State Bank of India b) Notified securities
c) Notified bonds of the NHAI and RECL d) None of the above
72. When is section 45(5) attracted?

a) Transfer of capital asset by way of compulsory acquisition under any law
b) Transfer where consideration is determined or approved by Central Government or RBI
c) Both a) and b)
73. When is enhanced compensation or part thereof received by the assessee be taxable?
a) year in which enhanced compensation is first received
b) as and when enhanced compensation is received
c) year of compulsory acquisition of asset
74. X, while computing capital gain on enhanced compensation deducted litigation expenses
incurred by him to obtain the enhanced compensation. Assessing Officer contended that
litigation expenses are non-deductible. Is the contention of Assessing Officer valid?
a) Valid b) Invalid
c) Partly valid and invalid d) None of the above
75. What amount of deduction is allowed to an assessee while taxing interest income on
compensation or enhanced compensation?
a) 50 % of interest b) 75 % of interest
c) 25 % of interest d) No deduction is allowed
76. A capital asset which was subject to negotiation and for which advance has been received on
17th July 2014, the advance shall be treated as which of following manner?
a) Taxed under head Other Sources b) Deducted from cost of asset or FMV
c) Any of the above d) No treatment and is capital receipt
77. When advance received for a capital asset which was subject to negotiation and negotiation
did not finalize is taxed under head Other Sources under section 56. When such capital asset
is sold later, the advance so received earlier shall
a) be deducted from cost of asset or FMV or WDV b) have no treatment
c) Any of the above d) none of the above

|Page
78. Where house is sold on 17 September 2014 for `16,00,000 for which advance of ` 2,00,000
was received on 15 May 2013. The asset was purchased for `7,00,000 on 16 May 2012. What
would be treatment of advance so received?
a) be deducted from cost of house
b) have no treatment since taxed under head other sources
c) any of the above
79. Any sum of money, received as an advance or otherwise in the course of negotiations for
transfer of a capital asset whose negotiation did not finalize shall be …………… and not ……………
a) deducted from cost or FMV as on 1.4.2001 or WDV, taxable under head Other Sources
b) taxable under head Other Sources, deducted from cost or FMV as on 1.4.2001 or WDV
c) any of the above
80. Exemption under section 54 is available if

a) Assessee transfers any capital asset irrespective of the fact that asset has been held by
him for how long
b) Assessee transfer a residential house irrespective of the fact that it has been held by him
for how long
c) Assessee transfer a residential house which was held by him for more than 36 months
d) Assessee transfers an agricultural land which was used for agricultural purpose
81. What amount of exemption is available under section 54 when amount invested is more than
capital gains?
a) Amount invested shall be allowed as exemption
b) Whole of the capital gain shall be allowed as exemption
c) Capital gain shall be exempt on proportionate basis
d) Difference between capital gain and amount invested shall be taxable
82. What is amount of exemption available u/s54 when amount invested is less than capital gains?
83. On fulfillment of which condition is exemption under section 54 allowed?

a) The amount is reinvested to purchase residential house property one year before transfer or
two years after transfer
b) The amount is reinvested to construct residential house property within 3 years after transfer
c) Any of the above
d) Both of the above
84. Exemption under section 54 is not allowed if

a) The amount is not reinvested in purchase residential house property one year before
transfer or two years after transfer
b) The amount is reinvested to construct residential house property within 3 years after transfer
c) Any of the above (d) Both of the above
|Page
85. Exemption under section 54B is available to
a) Any Assessee b) Any assessee except Individual and HUF
c) Individual and HUF d) Indian company
86. What is the amount of exemption available under section 54B when amount invested is more
than capital gains?
87. The land so transferred by the assessee was used ……… to avail exemption under section 54B
a) for any purpose for a period of three years prior to date of transfer by him or his parents
b) for agricultural purpose by assessee or his parents for a period of three years prior to date
of transfer
c) for agricultural purpose by assessee or his parents for a period of two years prior to date
of transfer
d) usage of land is irrelevant to claim exemption under section 54B
88. On fulfillment of which condition exemption under section 54B is available?

a) The assessee purchases agricultural land within period of two years from date of transfer
b) The land so purchased is held by the assessee at least for the period of three years from
the date of acquisition
c) Both of the above
89. Exemption under section 54EC is available to

a) Any Assessee b) Any assessee except Individual and HUF
c) Individual and HUF d) Indian company
90. Why is exemption under section 54EC available?

a) Assessee shall invest capital gains in bonds of RECI within 9 months of date of transfer
b) Assessee shall invest capital gains in bonds of NHAI within 6 months of date of transfer
c) Assessee shall invest capital gains in bonds of RECI or NHAI within 6 months of date of
transfer
d) Assessee shall invest capital gains in bonds of RECI or NHAI within 9 months of date of
transfer
91. If the bond of RECI or NHAI is sold within 3 years of acquisition, exempted Capital Gain ….
a) shall be taxable as STCG in the year of transfer
b) may be taxable as LTCG in the year of transfer
c) shall be taxable as LTCG in the year of transfer
92. A owns a house property which was purchased by him on 1.5.1999 for` 23,00,000. The said
property was destroyed by fire on 3.4.2017 and A received a sum of ` 66,00,000 from the
insurance company during the year. The market value of the above property as on 1.4.2001
was ` 24,00,000. Compute the capital gain for the assessment year 2018-19.

|Page
a) 72,000 b) 42,00,000 c) 11,95,000 d) 9,83,000
93. Gift of ` 5,00,000 received on 10 July, 2017 through account payee cheque from a non-
relative regularly assessed to income-tax, is
a) A capital receipt not chargeable to tax
b) Chargeable as income from other sources
c) Chargeable to tax as business income
d) Exempt up to ` 50,000 and balance chargeable to tax as income from other sources
94. Exemption under section 54 is available to

a) All assesses b) Individuals only
c) Individual + HUF d) assessee being company
95. The exemption under section 54 shall be available:

a) to the extent of capital gain invested in the HP
b) proportionate to the net consideration price invested
c) to the extent of amount actually invested
96. For claiming exemption under section 54B the assessee should acquire:
a) Urban agricultural land b) Rural agricultural land
c) Any agricultural land d) In any of the asset
97. Where house is sold on 17 September 2017 for `16,00,000 for which advance of ` 2,00,000
was received on 15 July 2016. The asset was purchased for `7,00,000 on 16 May 2014. What
would be treatment of advance so received?
a) be deducted from cost of house
b) have no treatment since taxed under head other sources
c) any of the above
98. Conversion of capital asset into stock in trade will be taxable as capital gain of previous year
a) In which such conversion took place
b) In which such converted asset is sold or otherwise transferred
c) any of the above
99. Where a partner transfers any capital asset into business of firm ,the sale consideration of such
asset to the partner shall be:
a) Market value of such asset on the date of such transfer
b) Price at which it was recorded in the books of the firm
c) Cost of such asset to the partner
d) Any of the above
100. The first proviso to section 48 is applicable on

a) All assessee b) Non-resident assessee
c) foreign company d) None of the above
101. Brokerage paid on sale of shares ……………………. from the sale consideration.
a) shall be reduced b) may be reduced

|Page
c) shall not be reduced d) shall be added
102. Cost of improvement incurred before 01.04.2001 …………. in all cases.

a) shall be ignored b) shall always be considered
c) may be considered d) Discretion of Assessing Officer
103. On January 31, 2017, Mr. A has transferred self-generated goodwill of his profession for a
consideration of `70,000 & incurred expenses of ` 5,000 for such transfer. You are required to
compute capital gains taxable in hands of Mr. A for the AY 2018-19.
a) 65,000 b) Nil
c) Not chargeable to tax d) None of the above
104. Any securities held by Foreign Institutional Investor which has invested in such securities in
accordance with regulations made under Securities and Exchange Board of India Act,1992 ………
a) may be a stock in trade b) is a capital asset
c) may be a capital asset d) may be capital asset or stock in trade
105. A foreign Institutional Investor held some securities in India as per the guideline of SEBI, the
securities so held is …………. and taxable under head ……………………… at the time of sale.
a) stock in trade, PGBP b) stock in trade, capital gains
c) capital asset, capital gain d) either b) or c)
106. Zero coupon bond is long term capital asset if it is held for
a) 12 months or less b) more than 12 months
c) 12 months or more d) more than 36 months
107. Unit of equity oriented fund is a long term capital asset if it is held for
a) 12 months or less b) more than 36 months
c) 12 months or more d) more than 12 months
108. If an assessee transferred unit other than equity oriented fund on 15 June 2017 after holding
them for 12 months and 1 day, what would be the nature of capital gain?
c) Short or Long Term Capital Gain d) None of the above
109. If an assessee transferred unit other than equity oriented fund on 15 September 2017 after
holding them for 16 months, what would be the nature of capital gain?
c) Short or Long Term Capital Gain d) None of the above
110. Share held in listed company sold on 1st April 2017 which was purchased on 12th April 2015,
the gain would be ……..
a) Short term b) Long term c) Any d) None
111. Share held in unlisted company sold on 1st April 2017 which was purchased on 12th April
2017, the gain would be ……..
a) Short term b) Long term c) Any d) None
112. An assessee sold unit of Unit Trust of India established under UTI Act on 17 th July 2017
which were acquired on 19th July 2016, the units so sold is an
a) Short term capital asset b) Long term capital asset

|Page
113. An assessee sold unit of Unit Trust of India established under UTI Act on 10 th July 2017
which were acquired on 19th July 2015, the units so sold is an
114. Share held in an unlisted company for a period of 13 months 16 days on the date of sale
(10th June 2017), the share so sold is ……….
115. Share held in an unlisted company for a period of 24 months 16 days on the date of sale
being 10th September 2017, the share so sold is ……….
116. A house purchased on 11th May 2016 and sold on 7th July 2017 is a
117. A house purchased on 18th May 2013 and sold on 7th July 2017 is a
118. Unit of equity oriented fund purchased on 10th May 2016 and sold on 17th July 2017, STT
paid on such unit. The unit so sold is ………….. and …………………….
a) Long term capital asset, chargeable to tax @ 20 % u/s 112
b) Long term capital asset, chargeable to tax @ 15 % u/s 111A
c) Long term capital asset, exempt from tax u/s 10(38)
d) Short term capital asset, chargeable to tax @ 15 % u/s 111A
119. Unit of equity oriented fund purchased on 17th May 2016 and sold on 16th May 2017, STT
paid on such unit. The unit so sold is ………….. and …………………….
a) Long term capital asset, chargeable to tax @ 20 % u/s 112
b) Long term capital asset, chargeable to tax @ 15 % u/s 111A
c) Long term capital asset, exempt from tax u/s 10(38)
d) Short term capital asset, chargeable to tax @ 15 % u/s 111A
120. A share of listed company purchased on 17th June 2016 and transferred on 20th October
2017, the share is
121. Ravi entered into an agreement for sale of land as on 1st April 2017 for ` 35,00,000 and
received ` 3,00,000 as advance. Buyer was unable to pay entire amount and Ravi forfeited
amount so received. What would be treatment of advance?
a) shall be deducted from cost or FMV or WDV when the asset will be sold
b) would be taxable under head Other Sources
c) any of the above, on discretion of assessee (d) none of the above

|Page
122. Where a capital asset is compulsory acquired by the Government, original compensation so
received shall be taxable when
a) the compensation or part thereof is received b) the asset is acquired
123. Where a capital asset is compulsory acquired by the Government, enhanced compensation
which is received in pursuance of interim order of the court, it shall be taxable under head
capital gain
a) When enhanced compensation is received
b) of the previous year in which final order of such court is made
c) When enhanced compensation is received even if it is in pursuance of interim order
d) Any of the above
124. An interim order in relation to enhanced compensation was passed by court on 1 May 2014,
amount was also received in pursuance of order. Compensation so received shall be taxable
a) when the amount is received b) when final order of the court is passed
c) any of the above d) none of the above
125. An interim order for giving compensation was passed in 20 July 2016 in pursuance of which
compensation was received. The final order of the court was passed on 7 April 2017. The
amount shall be taxable in which assessment year?
a) 2017-18 b) 2018-19 c) 2016-17 d) 2015-16
126. An interim order for giving compensation was passed in 20 th July 2016 in pursuance of which
compensation was received. The final order of the court was passed on 7 th April 2017. The
amount shall be taxable in which previous year?
a) 2017-18 b) 2018-19 c) 2019-20 d) 2015-16
127. Any transfer of a capital asset, being a Government Security carrying a periodic payment of
interest, made outside India through an intermediary dealing in settlement of securities, by a
non-resident to another non-resident shall
a) be regarded as transfer u/s 2(47) and taxable under head Capital Gains
b) not be regarded as transfer as per section 47 and not taxable under head Capital Gains
c) any of the above
128. Exemption under section 54 is available if investment is made by the assessee in

a) residential house either in India or outside India
b) any number of residential house in India
c) one residential house in India
d) any number of residential house either in India or outside India
129. Exemption under section 54F is available if investment is made by the assessee in
a) one residential house in India
b) residential house either in India or outside India
c) any number of residential house in India
d) any number of residential house either in India or outside India

|Page
130. What does section 45(3) of Income Tax Act state?
a) Any transfer of capital asset by partner to firm
b) Any transfer of capital asset by member of AOP/ BOI to AOP/BOI
c) Any of the above
d) transfer by firm to partner
131. Mr. H has acquired a residential house property in Delhi on 1 April, 2001 for ` 22,00,000
and decided to sell the same on 3 May, 2004 to Mrs. P and an advance of ` 70,000 was
taken from her. The balance money was not paid by Mrs. P and hence, Mr. H has forfeited
the entire advance sum. In April, 2014, he once again entered into negotiations for sale of the
said property to Mr. Y, and received ` 2 lakh as advance, but the transfer did not materialize
and hence, the advance was forfeited. On 3 March 2015, he finally sold house for `95,00,000.
In the meantime, on 4 February, 2015, he had purchased a residential house in Faridabad for
` 28,00,000 and made full payment for the same. However, Mr. H does not possess any legal
title till 31 March, 2015, as such transfer was not registered with the registration authority.
Mr. H had purchased another old house in Madurai on 14th October, 2014 from Mr. X, an
Indian resident, by paying ` 25,00,000 and the purchase were registered with the appropriate
authority. Cost Inflation Index - 2001-02: 426; 2004-05: 480; 2013-14: 939; 2014-15: 1024.
(i) What is the cost of acquisition of house property?
a) 22,00,000 b) 21,30,000 c) 19,30,000 d) 51,20,000
(ii) How much advance shall be adjusted towards cost of acquisition?
a) 2,00,000 b) 2,70,000 c) 70,000 d) nil
(iii) What will be cost of acquisition after adjustment of advance received, if any to be
adjusted?
a) 22,00,000 b) 21,30,000 c) 19,30,000 d) 20,00,000
(iv) What will be the indexed cost of acquisition?
a) 51,20,000 b) 46,95,000 c) 52,88,262 d) 21,30,000
(v) What would be the treatment of advance of 70,000 received in 2004?
a) It shall be taxable under head Other Sources in the year of receipt
b) It shall be taxable under head Other Sources in the year of sale of asset
c) It shall be reduced from cost of acquisition
d) No treatment
(vi) What would be the treatment of advance of 2,00,000 received in 2014?
a) It shall be taxable under head Other Sources in the year of receipt
b) It shall be taxable under head Other Sources in the year of sale of asset
c) It shall be reduced from cost of acquisition
d) No treatment
(vii) Mr. H shall avail exemption of which house in computation of capital gain?
a) Residential house in Faridabad b) Old house in Madurai
c) Both the houses (Faridabad and Madurai) d) None of the above
(viii) The capital gain arising is
a) Long term capital gain b) Short term capital gain

|Page
(ix) What is the amount of capital gain earned from sale of residential house in Delhi?
a) 45,00,000 b) 43,80,000 c) 73,00,000 d) Nil
(x) Mr. H shall avail exemption under section 54 of what amount?
a) 25,00,000 b) 53,00,000 c) 28,00,000 d) Nil
(xi) How much amount of capital gain is taxable?
a) Nil b) 18,80,000 c) 43,80,000 d) 15,80,000
(xii) Capital gain shall be taxable at the rate of ………
a) Normal slab rate b) 30% c) 20% c) 15%
132. Indexation of cost of acquisition is necessary for short term capital gain?
133. Income from transfer of self-generated goodwill of a profession is not chargeable to tax under
head ―capital gains‖?
134. Zero coupon bond shall be treated as ―short term capital asset‖ if held for more than 12
months but not more than 36 months?
a) False b) True c) Partly true d) None of the above
135. Few of the assets meant for personal use are considered as capital asset?
a) True b) False
c) Any of above d) None of above
136. If the shares are held as stock in trade, the income thereon is taxable as income
a) Income under head PGBP b) Income under head Capital gain
c) Income under head Other sources d) chargeable to any head of income
137. The first proviso to section 48 is applicable on transfer of

a) any capital asset b) shares or debentures in an Indian company
c) shares or debentures in any company d) shares or debentures in Foreign company
138. As per first proviso to section 48, Capital Gains on transfer of specified asset shall be
computed by converting into:
a) foreign currency as was initially used in purchase b) any foreign currency
c) US $ d) Any of the above
139. First proviso to section 48 …………… on capital gains arising from every reinvestment thereafter
a) may be applied b) shall not be applied
c) shall be applied d) Any of the above
140. The first proviso to section 48 is applicable when

a) shares or debentures of Indian company is purchased in the foreign currency
b) in case of re-investment
c) either a) or b)
141. While computing indexed cost of acquisition, it shall be multiplied with


|Page
d) CII for the year being later of a) or b)
142. While computing indexed cost of improvement, it shall be multiplied by

b) CII for the year being 1.4.2001
c) CII for the year in which asset is transferred by the assessee
d) CII for the year being later of a) or b)
143. Assessee can apply first proviso and second proviso simultaneously
a) True b) False
c) Depend of the facts of the case d) Discretion of Assessing Officer
144. Second proviso is not applicable

a) where first proviso has been applied b) on bonds/debentures of any company
b) on bonds issued by Government d) All of the above
145. On which of the following transaction is STT chargeable

a) Sale of equity shares of company through recognized stock exchange.
b) Sale of unit of an equity oriented fund through recognized stock exchange.
c) Sale of unit of an equity oriented fund to the Mutual Fund
d) All of the above
146. On which of the following transaction is STT not chargeable

a) Sale of unit of an equity oriented fund to the Mutual Fund
b) Sale of unlisted equity shares by any holder of shares under an offer for sale to public
included in an initial Public offer and such shares are subsequently listed on a recognised
stock exchange.
c) Sale of equity shares of company to relative
147. Section 112 is applicable on

a) All assessee excluding Non-residents b) All assessee including Non residents
c) Non-residents d) All assessee being individual
148. Benefit of slab rate is not available on long term capital gains under section 112 to
a) any assessee excluding resident Individual and HUF b) any assessee
c) non-resident assessee d) None of the above
149. Under section 45(1A), damage or destruction of capital asset shall be result of
a) riot or civil disturbance b) accidental fire
c) action by an enemy d) any of the above
150. Under section 45(1A), damage or destruction of capital asset shall not be result of
a) riot or civil disturbance b) earthquake or other convulsion of nature
c) theft of the asset d) None of the above
151. Under section 45(1A), in case of insurance compensation received on damage or destruction
of capital asset, capital gain shall be taxable in which year
a) year of receipt of insurance claim b) previous year when capital asset is destroyed

|Page
152. Where no claim is received on destruction of asset, the cost of the asset destroyed shall be
a …………. which has ………….
a) Capital loss, tax treatment b) dead loss, no tax treatment
c) Any of the above d) none of the above
153. Capital gains shall ……… where an assessee converts or treats the capital asset as ……… of his
business.
a) arise, fixed asset b) arise, stock in trade
c) not arise, stock in trade d) None of the above
154. As per section 45(2), capital Gain shall be taxable in which year.
a) when stock in trade is sold b) when capital asset is treated as stock in trade
155. Section 45(2) is applicable when

a) capital asset is destroyed b) capital asset is converted as stock in trade
c) capital asset is compulsorily acquired d) None of the above
156. When capital asset is converted into stock in trade, what amount is taxable as capital gain at
the time of sale of asset?
a) Difference between FMV of the asset on the date of conversion and cost of acquisition
b) Difference between amount recorded in books of account and cost of acquisition
c) Difference between sale price of SIT and cost of acquisition
157. When capital asset is converted into stock in trade, what amount is taxable under head
PGBP at the time of sale of asset?
a) Difference between FMV of the asset on the date of conversion and Cost of acquisition
b) Difference between sale price of SIT and amount recorded in books of account
c) Difference between sale price of SIT and FMV of the asset on the date of conversion
158. Capital gains arising from transfer made by depository (being registered owner of securities)
shall deemed to be the income of ………
a) depository b) beneficial owner
159. Which section governs taxability of transfer of securities by Depositories?

a) Section 45(2A) b) Section 45(1A) c) Section 45(1) d) Section 45(2)
160. Capital gains arising from transfer made by depository shall be taxable in which year?
a) when amount is received b) when transfer takes place
a) is not a capital asset b) is capital asset

|Page
162. Agricultural land situated within 7.5 kilometers from municipality or cantonment board having
164. Opening WDV of a block of asset is ` 4,50,000. Few of the asset of the block is sold for
`4,20,000. What would be the treatment?
a) Short term capital loss of ` 30,000
b) Short term capital gain of ` 30,000
c) Remaining WDV of ` 30,000 on which depreciation is to be claimed
d) Short term or long term capital loss of ` 30,000, depending upon period of holding
165. A house property purchased on 1.6.1979 for ` 4,50,000 which was destroyed on 5.06.2013
and the assessee received a sum of ` 57,00,000 from insurance company during PY 2017-18.
The FMV of property as on 1.04.2001 is ` 6,00,000. (CII for 2001-02 = 100, 2012-13 = 200
and 2017-18 = 272)
a) 40,68,000 b) 51,00,000 c) 5,88,000 d) Nil
166. Holding company shall hold …………… so that transfer by holding company to subsidiary company
or subsidiary company to holding company shall not be regarded as transfer
a) 51% share of subsidiary company b) 100 % share of subsidiary company
c) 90 % share of subsidiary company d) any number of share of subsidiary company
167. When shareholder of amalgamating company gets share of amalgamated company in lieu of
shares held by him in amalgamated company, cost of share of amalgamated company ……….
a) shall be market value of shares of amalgamated company as on date of amalgamation
b) shall be market value of shares of amalgamating company as on date of amalgamation
c) shall be the cost of the shares of amalgamating company
d) higher of above
168. Where a capital asset is converted into stock in trade, indexation shall be done
a) till previous year of sale of such converted capital asset
b) till previous year of conversion of capital asset
c) any of the above
d) no indexation shall take place
169. Profits and gains arising from transfer of ……… is taxable under head …..
a) Business asset, other sources b) capital asset, capital gain
c) any asset, capital gain d) asset, PGBP
170. Which is the charging section of capital gains?

a) Section 45 b) Section 45(1) c) Section 45(1A) d) Section 50
171. Stock in trade used for business …......

a) is always a capital asset b) may be a capital asset

|Page
c) is never a capital asset d) None of the above
172. Which of the following movable personal asset is a capital asset?

a) Clothes b) paintings
c) Car d) All of the above
173. ………. means property of any kind held by an assessee whether or not connected with his ………
a) Fixed asset, business b) Capital asset, profession
c) Fixed asset, business or profession d) Capital asset, business or profession
174. Which of the following movable personal asset is not a capital asset?
a) archaeological collections b) drawings
c) sculptures d) Furniture for personal use
175. Agricultural land situated beyond 8 km is not a capital asset. Is the statement valid?
a) Valid b) Invalid
c) Partially invalid d) None of the above
176. Agricultural land situated within 2 kilometers from of municipality or cantonment board having
177. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by Central
Government is …….
178. Which of the following is a capital asset

a) Stock of business b) Car of an Individual
c) Land in Delhi used for agricultural purpose d) Scooter of an Individual
179. Compulsory acquisition of an asset under any law

a) is not a transfer b) is a transfer
c) may be transfer d) None of the above
180. Conversion of capital asset into stock in trade

a) is not a transfer b) is a transfer
c) may be transfer d) None of the above
181. Which of the following is a transfer

a) compulsory acquisition of an asset
b) conversion of capital asset into stock in trade
c) maturity of zero coupon bond
d) All of the above
182. Which section defines the provision of transfer and capital asset?
a) Section 2(42), Section 2(14) b) Section 2(14), Section 2(47)
c) Section 2(42A), Section 2(14) d) Section 2(47), Section 2(14)

|Page
183. Redemption of preference share is not transfer and therefore, does not result in capital gain.
The statement is valid?
a) Invalid b) Valid
c) Depends on the facts d) None of the above
184. Compensation paid for eviction of hutment dwellers from land would be …………….
a) Cost of acquisition b) cost of improvement
c) Not allowed d) either as cost of improvement or acquisition
185. Land & building have to be considered ……. for the purpose of computing the period of holding
a) separately b) together
c) either together or separately d) None of the above
186. The population of the ………….. has to be taken into account and not the population of ……….
within the municipality to see as to whether a land falls under the definition of capital asset.
a) municipality, any area b) any area, municipality
c) municipality, whole area d) whole area, municipality
187. Exchange of shares of one company with shares of another company is ………… and there
…………… shall arise.
a) not transfer, no capital gain b) not transfer, exempt
c) transfer, capital gains d) None of the above
188. Units of Mutual Funds and government bonds …………………. by First Proviso to section 48.
a) are not covered b) shall be covered
c) may be covered d) None of the above
189. First proviso to section 48 is

a) voluntary b) applicable at the option of the assessee
c) mandatory d) applicable at the option of Assessing Officer
190. First proviso to section 48 is applicable

a) Only on Short Term Capital Gain b) Only on Long Term Capital Gain
c) Both Short Term and long Term Capital Gain d) None of the above
191. In computation of capital gain as per first proviso to section 48 sale consideration shall be
converted at …………………. as on date of …………
a) the rate being average of telegraphic transfer buying and selling rate, date of acquisition
b) the telegraphic transfer buying rate, date of transfer
c) the telegraphic transfer selling rate, date of transfer
d) the rate being average of telegraphic transfer buying and selling rate, date of transfer
192. In computation of capital gain as per first proviso to section 48, capital gain shall be
reconverted at …………. as on date of …………
a) the rate being average of telegraphic transfer buying and selling rate, date of transfer
b) the telegraphic transfer buying, date of transfer
d) the telegraphic transfer selling, date of transfer

|Page
193. Second Proviso to Section 48 is applicable on transfer of
a) any long term capital asset b) only house property
c) only shares of Indian company d) any short term capital asset
194. While computing capital gain as per second proviso to section 48, cost of acquisition shall be
a) multiplied by 10 b) taken as indexed cost of acquisition
c) multiplied by 100 d) None of the above
195. Second proviso is not applicable

a) on bonds/ debentures of any company
b) on capital indexed bonds
c) on bonds issued by Government
d) on bonds/debentures of any company and bonds issued by Government
196. STT paid on sale of share or units shall not be …………… sale price of the shares
a) reduced from b) added to
c) given any treatment d) Either a) or b), depending upon situation
197. As per third proviso to section 48, benefit of indexation is not available on
a) bonds/debentures of any company b) bonds issued by Government
198. Section 55 of Income tax Act tells about

a) Cost of acquisition b) Cost of improvement
199. When Trade mark or brand name associated with business is acquired, it shall be valued at
200. When Tenancy rights is acquired, it shall be valued at

201. When Goodwill of profession is self-generated, its value is

c) Indeterminate d) None of the above
202. When Goodwill of business is acquired on 1.4.1999, it shall be valued at

a) FMV as on 1.4.2001 b) Purchase Price
c) higher of a) and b), at the option of assessee d) Nil
203. When Route permits or loom hours is acquired on 1.4.1999, it shall be valued at
a) Purchase Price b) FMV as on 1.4.2001
c) higher of a) and b), at the option of assessee d) Nil
204. Original Shares/securities shall be valued at ……………… and period of holding shall be from ……
a) Nil, date of purchase or allotment
b) Purchase price, first day of previous year
c) Purchase price, the date of purchase or allotment

|Page
205. In case of renouncement of right to subscribe shares/securities, the cost in the hands of the
person who renounces the right shall be ……………… and period of holding shall be from ………….
a) Nil, date of allotment b) Nil, date of offer
c) Purchase price, date of offer d) None of the above
206. In case of renouncement of right to subscribe shares/securities, the cost in the hands of the
purchaser of right shall be ……………… and period of holding shall be from ………….
a) Nil, date of allotment
b) Price actually paid under the right issue, the date of allotment
c) Purchase price, the first day of previous year
d) Price paid to person who renounced the right & amount paid to the company to acquire
right shares, date of allotment
207. Bonus shares/securities shall be valued at ………… when such bonus share have been received
at any time after 1st April, 1981 and period of holding shall be from ………….
a) Purchase price, date of offer b) Nil, date of original shares
c) Nil, date of allotment d) purchase price, date of allotment
208. Brokerage paid on purchasing the share …………….. in the cost.

a) shall not be added b) may be added
c) shall be added d) shall be reduced
209. Generally, short term capital asset means a capital asset held by an assessee for …………
immediately preceding the date of its transfer.
210. If unit of mutual fund is held for 13 months, it should be a ……….. in the hands of the
assessee
a) Short Term Capital asset b) Long Term Capital asset
c) Discretion of assessee d) Depends upon Assessing Officer
211. If a house property is held for 37 months, it should be a ……….. in the hands of the assessee
a) Long Term Capital asset b) Short Term Capital asset
c) Either a) or b) d) Depends upon Assessing Officer
212. Where the capital assets is acquired by the assessee or previous owner, Cost of
improvement means all capital expenditure incurred on improvement by
a) Assessee only
b) previous owner only
c) Both assessee and previous owner
d) None of the above, cost of improvement is always excluded
213. On transfer of which capital asset, section 111A applicable

a) equity share in a company
b) unit of an Equity Oriented Fund
c) unit of a mutual Fund
d) equity share in company or unit of equity oriented fund

|Page
214. Section 111A is applicable only if transfer of specified assets result in
c) any Capital Gain d) All of the above
215. Section 111A is applicable on fulfillment of which conditions:

(i) gains arise from transfer of a short term capital asset
(ii) Asset should be equity share in a company or a unit of an Equity Oriented Fund
(iii) Asset should be equity share in a company or a unit of any mutual Fund
(iv) Transaction is of sale and Securities Transaction Tax (STT) is paid on such sale.
(v) Transaction is of sale and VAT is paid on such sale.
a) (i), (ii) and (v) b) (i), (iii) and (iv)
c) (i), (ii) and (iv) d) (i), (ii),(iii), (iv) and (v)
216. Benefit of slab rate is available on short term capital gains under section 111A to
a) resident Individual and HUF b) any assessee
c) on resident d) Both b) and c)
217. Benefit of slab rate on capital gains under section 111A and section 112 is not available to
which of the following?
c) non-resident d) None of the above
218. Exemption under Section 10(37) is granted to

a) All assessee b) Individual and HUF
c) Individual only d) HUF only
219. Which asset is compulsory acquired for claiming exemption under section 10(37)?
a) Rural agricultural land b) agricultural land in urban area
c) any asset d) any agricultural land
220. By what way shall transfer of asset take place so that assessee is eligible to avail exemption
u/s 10(37)?
a) compulsory acquisition under any law b) sale of asset
c) transfer to a relative d) all of the above
221. Which of following conditions should be satisfied to claim exemption under section 10(37)
(i) Assessee being an individual or HUF
(ii) Asset being transferred in agricultural land in urban area
(iii) Asset being transferred in agricultural land
(iv) Asset is used for agricultural purposes by HUF or individual or parent of the individual
during the period of two years immediately preceding the date of transfer.
(v) transfer takes place by way of compulsory acquisition under any law
a) (i), (iii) b) (i), (iii), (iv) and (iv)
c) (i), (ii) and (iv) d) (i), (ii), (iv) and (v)
222. Capital gains computed with reference to which compensation is exempt u/s 10(37)?
a) Original compensation only b) Enhanced compensation only
c) Both original and enhanced compensation d) None of the above

|Page
223. Only short term capital gain is exempt under section 10(37). Is the statement valid
a) Valid b) Invalid
c) Partly valid d) None of the above
224. Which of the following statement is true

a) Under section 10(37), capital gain on compulsory acquisition of any asset is exempt
b) Under section 10(37), capital gain on compulsory acquisition of agricultural land is exempt
c) Under section 10(37), capital gain on compulsory acquisition of urban agricultural land is
exempt
d) Under section 10(37), capital gain on original compensation on compulsory acquisition of
urban agricultural land is exempt.
225. Arnav has an agricultural land (costing ` 6 lakh) in Delhi used for business purpose since
01.04.1996 till 01.08.2008 when Government compulsory acquired land. Compensation of ` 10
lakh was settled and received by him on 01.07.2014. Compute the amount of capital gains
taxable. Ignore indexation
a) ` 4 lakh taxable as Long Term Capital Gain
b) compensation is taxable in year when asset is compulsory acquired
c) Exempt under section 10(37)
d) compensation is taxable in year when original compensation is received
226. Transfer shall be of which asset so that assessee can claim exemption under section 10(38)
a) any asset b) equity share in a Company
c) unit of an equity oriented fund d) either b) or c)
227. The acquisition of shares/ units sold for which exemption under section 10(38) is availed is
by means of
a) may be through stock exchange b) received as gift
c) transfer from spouse d) Any of the above
228. Exemption under section 10(38) is available when shares are held as
a) Investment b) Stock in trade
c) Either as investment or stock in trade d) None of the above
229. Which of following shall be considered to decide whether the share is an investment or SIT?
a) treatment given in books of account b) Quantum of purchase and sales
c) Ratio between purchase and sale d) All of the above
230. It is possible to have

a) only one portfolio as investment
b) Only one portfolio as stock in trade
c) one portfolio as investment and other as stock in trade
231. When does section 50C of the IT Act comes into force
a) Sales consideration is more than value assessed or assessable by the stamp valuation
authority
b) Sales consideration is less than value assessed or assessable by the stamp valuation
authority

|Page
c) Sales consideration is equal to value assessed or assessable by stamp valuation authority
232. As per section 50C, what shall be deemed as sales consideration of land and building when
actual sales consideration is less than stamp duty value
a) Actual sales consideration b) Fair market value of land and building
c) Stamp duty value of the land and building d) Average of b) and c)
233. As per section 50C, when can Assessing Officer refer the valuation of asset to the Valuation
Officer?
a) Assessee claims that value so assessed or assessable exceeds the FMV of property
b) Assessing Officer believes that value so assessed or assessable is less than the FMV of
property
c) Value is not disputed in an appeal or revision
d) Both a) and c)
234. What shall be value of land/building where value ascertained by Valuation Officer exceeds
stamp duty value
a) Actual sales consideration b) Fair market value of asset
c) Stamp duty value of the asset d) Value ascertained by Valuation officer
235. What shall be value of land/building where value ascertained by Valuation Officer is lower
than the stamp duty value
a) Actual sales consideration b) Fair market value of asset
c) Stamp duty value of the asset d) Value ascertained by Valuation officer
236. Under section 155, in which case Assessing Officer shall amend the order of assessment
a) When SDV under section 50C has been increased in an appeal or revision
b) When SDV under section 50C has been reduced in an appeal or revision
c) When SDV under section 50C has been changed in an appeal or revision
237. At which value shall Assessing Officer pass amended order under section 155
a) Increased value b) Reduced value
c) actual value d) none of the above
238. Section 50D is applicable on

a) All assessee b) Non-resident
c) Individual d) HUF
239. Which value is taken as sales consideration on applicability of Section 50D?

a) fair market value as on date of transfer
b) Stamp duty value
c) Actual sales consideration
d) fair market value as on last day of previous year
240. As per section 50D, fair market value as on which date shall be considered
a) 1st day of previous year b) date of transfer
c) last day of previous year d) date of computation of return

|Page
241. Section 50D is applicable on which capital asset
a) all assets b) jewellery
c) Land or building d) Agricultural land
242. Why shall Assessing Officer refer value of capital asset to Valuation Officer u/s55A?
a) to compute Fair market value b) to compute Stamp duty value
243. Under section 45(1A), damage or destruction of capital asset shall be result of
a) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature
b) riot or civil disturbance
c) accidental fire or explosion
d) any of the above
244. X converts his capital asset (acquired on June 10, 1989 for ` 60,000) into SIT in March 10,
20146. FMV as on date of above conversion was ` 3,00,000. He subsequently sells stock-in-
trade so converted for `4,00,000 on June 10, 2017. What shall be sales consideration for the
purpose of capital gain and what amount of capital gain shall be taxable? (Ignore indexation)
a) Nil, Nil b) ` 4,00,000, ` 3,40,000
c) ` 3,00,000, Nil d) ` 3,00,000, ` 2,40,000
245. Cost of acquisition and period of holding of any securities shall be determined on the basis
of ………….
a) first-in-first-out method b) last-in-first-out method
c) weighted average method d) None of the above
246. What shall be amount of sales consideration as per the provisions of section 45(3)?
a) Amount recorded in the books of account by firm or AOP b) FMV of the asset
c) Average of a) and b) d) None of the above
247. What shall be the sales consideration of capital asset transferred by firm to its partner on
dissolution?
a) Amount recorded in the books of account by firm or AOP
b) FMV of the capital asset as on date of distribution
c) FMV of the capital asset as on last day of previous year
d) Higher of above
248. If capital asset is transferred on retirement of partner by firm or AOP to its partner or
member, section 45(4) shall not be applicable?
a) Valid b) Invalid
249. When firm is dissolved but business of firm is continued by someone, the stock shall not be
valued at …... It shall be valued as per normal accounting practices i.e. ……………
a) market price, market price b) lower of cost or NRV, market price
c) market price, lower of cost or NRV d) None of the above
250. A house purchased by AOP for ` 2,00,000 is transferred by AOP to its member on
dissolution of firm. FMV as on date of transfer (dissolution) is ` 3,00,000. The house is
recorded in books at ` 2,50,000.What will be Sale Consideration?

|Page
a) ` 2,00,000 b) ` 3,00,000 c) ` 2,50,000 d) Nil
251. A land purchased by member for ` 2,50,000 is transferred by partner to firm as capital
contribution. FMV as on date of transfer is ` 3,00,000. The house is recorded in books at
`5,50,000. What will be Sale Consideration?
a) ` 2,50,000 b) `3,00,000 c) ` 5,50,000 d) Nil
252. As per provision of section 45(5), which date shall be deemed to be date of transfer of
capital asset?
a) Date of compulsory acquisition of asset
b) Date on which original compensation is received
c) Date on which enhanced compensation is received
d) Date on which direction given under law or consideration is decided by Central Government
or RBI
253. When shall original compensation or part thereof received by the assessee is taxable?
a) as and when original compensation is received
b) year of compulsory acquisition of asset
c) year in which original compensation is first received
254. What shall be nature of capital gain for enhanced compensation so received by the
assessee?
a) Short Term Capital Gain
b) Nature shall be same as that of original compensation
c) Long Term Capital Gain
d) Any of the above
255. Interest on compensation or enhanced compensation shall be taxable in which year and
which head?
a) year of receipt, Other Sources b) year of receipt, capital gains
c) year of declaration, Other Sources d) Not taxable
256. Exemption u/s 54EC can also be availed for short term capital gain. Discuss the validity of
statement.
a) Valid, Short Term Capital Gain can be claimed exempt under section 54EC
b) Exemption can be availed only for Short Term Capital Gain
c) Invalid, exemption can be availed only for Long Term Capital Gain
d) Exemption can be availed for both long and short term capital gain
257. If the capital gain is not invested in bonds of RECI or NHAI, assessee can deposit the
amount in Capital Gains Deposit A/C Scheme and claim exemption for the mean time and
later invest in bonds. Discuss the validity of statement.
a) Valid, even if the capital gain is deposited to CGAS account, exemption can be claimed
b) Invalid, if capital gain is deposited to CGAS account, exemption u/s 54EC cannot be
claimed
c) Partly valid

|Page
258. On January 31, 2018, Mr. A has transferred self-generated goodwill of his profession for a
consideration of `70,000 & incurred expenses of ` 5,000 for such transfer. You are required to
compute capital gains taxable in hands of Mr. A for the AY 2018-19.
b) 65,000 b) 70,000
c) Not chargeable to tax d) None of the above
259. Mr. Raghav purchased tenancy rights on 1.1.1999 for ` 3,00,000. The same was sold by him
on 2.1.2018 for ` 34 lakh. Fair market value of the tenancy rights as on 1.4.2001 is ` 6 lakh
(i) The tenancy right so sold is which kind of asset?
c) either a) or b) d) None of the above
(ii) What amount shall be indexed to calculate indexed cost of acquisition?
a) 3 lakh b) 6 lakh c) 4.5 lakhs d) None
(iii) What shall be indexed cost of acquisition?
a) 32,43,000 b) 28,17,000 c) 56,34,000 d) 61,44,000
260. Exemption under section 54GB is allowed to which assessee?

a) individual or HUF b) any assessee c) company d) None
261. Which capital gain can be claimed exempt by virtue of section 54GB?
a) Long term capital gains arising from transfer of a residential property in India
b) Long term capital gains arising from transfer of residential property in India or o/s India
c) Long term or Short term capital gains arising from transfer of residential property in India
or outside India
d) Long term capital gains arising from transfer of any asset
262. Which conditions need to be fulfilled by a company to be an eligible company u/s54GB?

(i) A company incorporated at any time
(ii) A company incorporated in the year in which capital gain arised till the date of due date
of return.
(iii) It is engaged in the business of manufacture of article or thing
(iv) Company in which assessee has more than 50% share capital or more than 50 % voting
rights after subscription in shares by the assessee
(v) It is engaged in any business
(vi) Company qualifies to be a small or medium enterprise under Micro, Small and Medium
Enterprises Act, 2006.
(vii) Company may be a small, medium or large size enterprise.
a) (i), (iii), (v) and (vii) b) (ii), (iii), (iv) and (v)
c) (ii), (iii), (iv) and (vi) d) (i), (iv), (v) and (vii)
263. What shall be done by the eligible company under section 54GB?
a) Company has to utilise amount subscribed by assessee by way of equity shares for
purchase of new asset, within 1 year for date of subscription in equity shares
b) If amount is not utilized within 1 year, it shall be deposited in CGAS account before due
date of return of assessee
c) Any of the above

|Page
264. What shall be the cost of new asset in the hands of company under section 54GB?
a) Amount paid to purchase the asset
b) Amount paid to purchase the asset and also amount deposited in CGAS
c) None of the above
d) Any of the above
265. The equity shares held by assessee claiming exemption under section 54GB shall not be
sold or otherwise transferred by him till how much time?
a) 8 b) 6 c) 5 d) 7
266. Amalgamation of a company as per scheme of amalgamation shall not be regarded as

transfer if amalgamated company
a) is a domestic company b) is a foreign company
c) is an Indian company d) Any of the above
267. For which of the following asset assessee shall be allowed to take fair market value as on
1st April 1981 as cost of asset
a) All capital asset
b) All capital asset except depreciable asset, goodwill of business, right of manufacture,
tenancy right, loom hour and route permits
c) All capital asset except depreciable asset and goodwill of business
d) No capital asset
268. What shall be the nature of capital gain when entire block of asset which was held by him
for 40 month has been sold by the assessee?
a) Short Term Capital Gain
b) Long Term Capital Gain
c) not taxable under head Capital gain, so no question of kind of capital gain
269. The capital gain arising where a company purchases its own share is taxable in the hands of
a) shareholder b) company
c) both shareholder and company d) None of the above
270. What amount of exemption is allowed to an assessee under section 54EC?

a) exemption of capital gain invested subject to maximum of ` 50 lakh.
b) proportionate to net consideration price so invested
c) to the extent of capital gain invested
271. Assessee shall invest capital gain within 6 months from date of transfer in which asset to
claim exemption under section 54EC
a) Bond of State Bank of India b) Bonds of NHAI or RECI
c) Residential house d) Government bonds or debenture
272. Where assessee is availing exemption under section 54F, the residential house shall be
purchased in within what time?
a) within 3 years from date of transfer
b) within one year before or 2 years from date of transfer

|Page
c) within 2 years from date of transfer
d) within one year before or 3 years from date of transfer
273. Where assessee is availing exemption under section 54F, the residential house shall be
constructed in within what time?
a) within 3 years from date of transfer
b) within one year before or 2 years from date of transfer
c) within 2 years from date of transfer
d) within one year before or 3 years from date of transfer
274. Option to take FMV as on 1.4.1981 is not applicable in case of

a) Brand name b) Goodwill of business
c) Tenancy rights d) Any of the above
275. A house property purchased on 1.6.1999 for ` 4,50,000 which was destroyed on 5.06.2016 &
the assessee received a sum of ` 67,00,000 from insurance company during PY 2017-18. The
FMV of property as on 1.04.2001 is ` 6,00,000. (CII for 2001-02 = 100 and 2016-17 = 264)
a) 61,00,000 b) 51,16,000 c) 60,00,000 d) Nil
276. Capital gain arising from compulsory acquisition of urban agriculture land is:
a) Taxable b) Exempt
c) Exempt if acquired by RBI or central Government d) None of the above
277. Period of Holding of Bonus shares or any other financial asset allotted without any payment
shall be reckoned from:
a) The date of holding of Original shares / Financial Assets
b) The date of offer of Bonus shares / Financial Assets
c) The date of allotment of such Bonus Shares / Financial Asset
278. Period of holding of Right shares or any other security shall be reckoned from:
a) The date on which the right shares / any other security are offered
b) The date on which the right shares / such securities are applied by the assessee
c) The date of allotment of right shares / such securities
279. Distribution of assets by a company at the time of liquidation shall be regarded as transfer
and subject to capital gain:
a) In the hands of the company
b) In the hands of the shareholders
c) In the hands of both company as well as shareholders
280. Distribution of assets at the time of partial or complete partition of HUF shall:
a) Be regarded as transfer in the hands of HUF for capital gain purposes
b) Be regarded as transfer in the hand of members of HUF
c) Not be regarded as transfer in the hands of HUF
d) Neither regarded as transfer in the hands of HUF nor in the hands of members.

|Page
281. Transfer of capital assets by a Holding company to its Subsidiary company or by a Subsidiary
company to its Holding company shall not be regarded as transfer if the holding company
owns:
a) 90% shares of the Subsidiary Company b) 100% Shares of the Subsidiary Company
c) 51% shares of the Subsidiary Company d) None of the above
282. STT paid by seller of shares and units shall:

a) Be allowed as deduction as expenses of transfer b) Not be allowed as deduction
c) At the option of assessing officer d) None of the above
283. STT paid by purchaser of shares and units shall:

a) Form part of the COA of shares & units b) Not form part of COA of shares & units
c) At the option of assessing officer d) None of the above
284. The assessee is allowed to opt for market value as 1-4-2001 in case of:
a) All Capital Assets
b) All Capital Assets other than Depreciable Assets
c) All Capital Assets other than Depreciable Assets, Goodwill of a business, Right to
manufacture, Tenancy rights, Loom Hours and Route permits.
285. If shares are acquired on conversion of debentures, cost of acquisition of such shares shall be
a) market value of shares on the date of conversion
b) market value of the debentures on the date of conversion
c) cost of acquisition of the debentures
286. If any advance money forfeited on 27-5-2014 by assessee such advance money shall be:
a) deducted from the COA on such asset
b) taxable under the head Income from other source
c) Any of the above
287. Conversion of capital asset into stock in trade will result into capital gain of which PY:
a) In which such conversion took place
b) In which such converted asset is sold or otherwise transferred
c) Any of the above
288. Conversion of personal effect into stock in trade shall:

a) be subject to capital gain b) not be subject to capital gain tax
c) be subject to tax as business Income d) None of the above
289. Where capital Asset is converted into stock in Trade then for the purpose of computation of
capital gain, the full value of consideration shall be:
a) market value of the Asset on the date of sale of asset
b) market Value of asset on the date of conversion of such asset
c) price for which it is sold

|Page
290. Where the capital Asset is converted into stock in trade, the indexation of cost of acquisition
and cost of improvement shall be made:
a) till the previous year of conversion of such capital asset
b) till the previous year in which such asset is sold
c) at the option of assessing officer
291. Where the entire block of the depreciable asset is transferred after 36 months, there will be:
a) Short-term capital gain b) Long-term capital gain
c) Short term capital gain or loss d) Long term capital gain or loss
292. In Case of Compulsory acquisition, If an assessee receives enhanced compensation, then

enhanced compensation is taxable as:
a) STCG / STCL
b) LTCG / LTCL
c) STCG / LTCG depending upon the original capital asset which was compulsory acquired.
293. In case of Compulsory acquisition, if initial compensation or enhanced compensation is

received by legal heir due to death of assessee, then CG shall:
a) Not to be taxable in hands of legal heir
b) Be taxable in hands of legal heir
c) For initial compensation the legal heir will be taxable as Representative Assessee and for
enhanced compensation he shall himself be taxable
294. Where a company purchased its own shares there will be CG to the:
a) Company b) Shareholder
c) Neither of above d) Both of the above
295. Exemption under section 54 is available to:

a) All Assessee b) Individual Only
c) Individual as well as HUF d) None of the above
296. For claiming exemption u/s 54, the assessee should purchase Residential property within:
a) 2 years after the date of transfer
b) 3 years after the date of transfer
c) 1 year before or 2 years after the date of transfer
d) 1 year before & 3 years after the date of transfer
297. The new house purchased or constructed for which exemption was claimed u/s 54, should not
be transferred within 3 years
a) from the date of transfer of original shares
b) from the date of its purchase / construction
c) from the end of the previous year
d) at the option of AO

|Page
298. Where a New house property for which exemption was claimed u/s 54 is transferred within 3
years from the date of its acquisition, then:
a) CG exempt u/s 54 earlier shall be taxable
b) The entire CG on new transfer shall be taxable
c) For the purpose of computation of CG, the cost of acquisition of the said house shall be
reduced by the amount capital gain exempt of CG exempt u/s 54
299. Exemption u/s 54EC shall be available for transfer of:

a) Any long-term Capital asset b) Residential House property
c) Any LTCA other than Residential HP d) None of the above
300. For claiming exemption u/s 54EC, amount to the extent of capital gain should be invested:
a) Within 2 year from the date of transfer
b) Within 3 year from the date of transfer
c) Within six months from the date of transfer
d) Within 6 months of transfer or before due date of filing return of income whichever is earlier

|Page
ANSWERS
1. a) 37. c) 73. b) 109. a) 133. a) 169. b) 205. b) 241. a) 274. d)

2. c) 38. b) 74. b) 110. b) 134. a) 170. b) 206. d) 242. a) 275. b)
3. c) 39. b) 75. a) 111. a) 135. a) 171. c) 207. c) 243. d) 276. c)
4. d) 40. c) 76. a) 112. a) 136. a) 172. b) 208. c) 244. d) 277. c)
5. a) 41. c) 77. b) 113. b) 137. b) 173. d) 209. a) 245. a) 278. b)
6. a) 42. b) 78. a) 114. a) 138. a) 174. d) 210. b) 246. a) 279. b)
7. a) 43. d) 79. b) 115. b) 139. c) 175. a) 211. a) 247. b) 280. d)
8. b) 44. c) 80. c) 116. a) 140. c) 176. b) 212. c) 248. b) 281. b)
9. a) 45. a) 81 b) 117. b) 141. b) 177. b) 213. d) 249. c) 282. b)
10. d) 46. c) 82 a) 118. c) 142. c) 178. c) 214. a) 250. b) 283. b)
11. d) 47. c) 83. c) 119. d) 143. b) 179. b) 215. c) 251. c) 284. c)
12. b) 48. a) 84. a) 120. b) 144. d) 180. b) 216. a) 252. a) 285. c)
13. d) 49. a) 85. c) 121. b) 145. d) 181. d) 217. c) 253. c) 286. b)
14. d) 50. d) 86. b) 122. a) 146. c) 182. d) 218. b) 254. b) 287. b)
15. a) 51. a) 87. c) 123. b) 147. b) 183. a) 219. b) 255. a) 288. b)
16. c) 52. b) 88. c) 124. b) 148. a) 184. b) 220. a) 256. c) 289. b)
17. a) 53. d) 89. a) 125. b) 149. d) 185. a) 221. d) 257. b) 290. a)
18. b) 54. c) 90. c) 126. a) 150. c) 186. a) 222. c) 258. c) 291. c)
19. a) 55. b) 91. c) 127. b) 151. a) 187. c) 223. b) 259. 292. c)
20. d) 56. d) 92. a) 128. c) 152. b) 188. a) 224. c) (i) b) 293. c)
21. a) 57. d) 93. b) 129. a) 153. b) 189. c) 225. d) (ii) a) 294. b)
22. d) 58. a) 94. c) 130. c) 154. a) 190. c) 226. d) (iii) a) 295. c)
23. a) 59. c) 95. a) 131. 155. b) 191. d) 227. d) 260. a) 296. c)
24. b) 60. c) 96. c) (i) a) 156. a) 192. b) 228. a) 261. b) 297. b)
25. a) 61. a) 97. b) (ii) c) 157. c) 193. a) 229. d) 262. c) 298. c)
26. a) 62. a) 98. b) (iii) b) 158. b) 194. b) 230. c) 263. c) 299. a)
27. b) 63. b) 99. b) (iv) a) 159. a) 195. d) 231. b) 264. b) 300. c)
28. b) 64. b) 100. b) (v) c) 160. b) 196. a) 232. c) 265. c)
29. c) 65. c) 101. a) (vi) a) 161. a) 197. c) 233. d) 266. c)
30. b) 66. c) 102. a) (vii) a) 162. b) 198. c) 234. c) 267. b)
31. b) 67. b) 103. c) (viii) a) 163. a) 199. b) 235. d) 268. a)
32. b) 68. c) 104. b) (ix) b) 164. c) 200. b) 236. b) 269. a)
33. d) 69. a) 105. d) (x) c) 165. c) 201. c) 237. b) 270. a)
34. b) 70. b) 106. b) (xi) d) 166. b) 202. b) 238. a) 271. b)
35. a) 71. c) 107. d) (xii) c) 167. c) 203. a) 239. a) 272. b)
36. c) 72. c) 108. a) 132. b) 168. b) 204. c) 240. b) 273. a)

|Page
PROFIT AND GAIN FROM BUSINESS
AND PROFESSION 7
@
Sec 28 Charging section
1. Profits and gains from any business and profession.
2. Profit on sale of import entitlement license.
3. Cash Compensatory Support and Duty Drawback.
4. Any profit on transfer of Duty Entitlement passbook
5. Any profit on transfer of Duty Free Replenishment Certificate
6. Value of any benefit or perquisite arising from any business and profession
7. Sum received under keyman insurance policy.
8. Income derived by trade, professional or similar association for specific services performed for
its members
9. Interest, salary, bonus, commission or remuneration etc., due or received by partner of such
firm subject to section 40(b).
10. Non-compete fees [Business or profession] (sum received for not carrying out any activity) and
sum for not sharing know how except compensation from Government for not producing CFC,
HCFC from Government of India
11. Sum received for transfer/ destruction/ demolition of asset whose cost has been allowed under
section 35AD.
Decided Case Laws
a) Margin money forfeited by bank when constituents fail to pay balance is banks‖ income
b) Income prior to date of incorporation is not income of company

Note: Rental income always taxable as Income from HP even though its assesses‖ business
Sec 29 : PGBP income How Computed

Income under head PGBP shall be computed as per the provisions of sec 30 to 43D

|Page
Sec 30 : Building expenses (Rent, rates, taxes, repair etc.)
Revenue expenditure Capital expenditure
Borne by
Tenant Owner Tenant Owner
Deemed as building
100% allowed in the Added to Cost of
and depreciation is
year when incurred building
allowed on same
Sec 31 Expense relating to Plant, Machinery and furniture
Revenue expenditure Capital expenditure
Borne by
Tenant Owner Tenant Owner
As per Author‖s
100% allowed in the Added to Cost of
opinion -not allowed
year when incurred plant and machinery
Practically, this situation is
not possible
@METHOD OF COMPUTING PROFIT
Particulars Amount(`)
Profit as per Profit and Loss Account xxx
Add: Expense debited to P&L a/c but not allowed u/h PGBP xxx
Less: Expense allowed u/h PGBP but not debited to P&L a/c xxx
Add: Income not credited to P&L a/c but taxable u/h PGBP xxx
Less: Income cr. to P&L a/c but not taxable u/h PGBP xxx
@SEC 32 DEPRECIATION
Depreciation shall be allowed on tangible and intangible asset subject to following condition:
1. Asset is owned1 (wholly or partly) by the assessee and
2. Asset is used# for the purpose of business and profession
Depreciation shall be allowed on WDV on block of asset at prescribed rates.
#
Used means when the asset is actually put to use
Note: Goodwill is an intangible asset and depreciation is allowed on same.
1
Registration of asset is not determinative of ownership; beneficial ownership is to be seen.
|Page
Leased Assets
Lessee---------------can‖t claim depreciation
If Lessor is in
business of leasing, shall claim depreciation not in business of leasing, he shall claim
under head PGPB depreciation under head Other Sources
Hire purchase: Depreciation is allowed to hire purchaser on initial value and interest is allowed
as deduction.
Note 1: Revaluation of assets does not have impact under Income Tax Act and it shall not be
considered for depreciation.
Few Depreciation rates, for others refer book

Particulars Rate of depreciation
Plant and Machinery (general) 15%
Building (general) 10%
Furniture and Fixture 10%
Intangible Assets 25%
Normal depreciation even if asset is less than ` 5000.
@
Proviso to section 32(1)
Depreciation shall be restricted to 50% of depreciation allowed if asset is put to use for less than
180 days in year of acquisition. In other words, restriction shall be applicable only in the year of
acquisition.
Depreciation in respect of Imported Motor Car

Depreciation shall not be allowed in respect of imported motor car acquired before 1 st April, 2001
except when used in business of running it on hire for tourists or used outside India for his
business or profession in another country.
Note: Depreciation shall be allowed in all cases when motor car acquired.
Proviso to section 32(1)

In case of succession or amalgamation or Demerger, depreciation is allowed to predecessor and
successor in the ratio of no. of days for which assets were used by them in the PY when
succession or amalgamation or demerger takes place. Depreciation to be apportioned shall be
computed assuming that succession has not taken place.
@
Sec 32(1)(iia) Additional Depreciation (Amended by FA 2016)
 New plant and machinery except ships and aircraft
 Which has been acquired and installed by the assessee
 engaged in business of manufacture and production of article or thing OR
 in business of generation / Transmission or generation and distribution of power, (Finance
Act 2012)
 then additional depreciation @ 20% of actual cost shall be allowed as deduction.
Amendment by Finance Act, 2015:
 In order to encourage acquisition and installation of plant and machinery for setting up of
manufacturing units in the notified backward areas of the States of Andhra Pradesh, Bihar,

|Page
Telangana and West Bengal, a proviso has been inserted to section 32(1)(iia) to allow higher
additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of
new machinery or plant (other than a ship and aircraft) acquired and installed during the
period between 1st April, 2015 and 31st March, 2020 by a manufacturing undertaking or
enterprise which is set up in the notified backward areas of these specified States on or after
1st April, 2015.
 Such additional depreciation shall be restricted to 17.5% (i.e., 50% of 35%), if the new plant
and machinery acquired is put to use for the purpose of business for less than 180 days in the
year of acquisition and installation.
 The balance 50% of additional depreciation (i.e., 50% of 35%) would, however, be allowed in
the immediately succeeding financial year.
Except on (i.e. no deduction is allowed for the below mentioned)

a) Any second hand P&M (Indian or imported)
b) Any office appliances or transport vehicles
c) Asset whose actual cost is already allowed as deduction.
d) P&M installed in official premises or residential accommodation or guest house
Note 1: Additional depreciation is allowed only in first year in which asset is put to use.
Note 2: Additional depreciation shall be restricted to 10% if asset is used for less than 180 days in
year of acquisition.
Note 3: To remove the discrimination in the matter of allowing additional depreciation on plant or
machinery used for less than 180 days vis-a-vis used for 180 days or more, third proviso to
section 32(1)(ii) has been inserted by Finance Act, 2015 to provide that the balance 50% of the
additional depreciation on new plant or machinery acquired and used for less than 180 days which
has not been allowed in the year of acquisition and installation of such plant or machinery, shall be
allowed in the immediately succeeding previous year.
Note 4: Finance Act 2012 amendment i.e. deduction to assessee in business of business of
generation or generation and distribution of power shall be allowed only if the assessee is following
WDV method under section 32(1)(ii).
Sec 32AD : Investment Allowance (Inserted by FA 2015)

Manufacturing industries set up in the notified backward areas of specified States to be eligible for
a deduction @15% of the actual cost of new plant & machinery acquired and installed during the
previous year, if the following conditions are satisfied by the assessee -
a. The assessee sets up an undertaking or enterprise for manufacture or production of any article
or thing on or after 1st April, 2015 in any backward area notified by the Central Government in
the State of Andhra Pradesh or Bihar or Telangana or West Bengal; and
b. the assessee acquires and installs new plant and machinery for the purposes of the said
undertaking or enterprise during the period between 1st April, 2015 and 31st March, 2020 in
the said backward areas.

|Page
Important Note: Where the assessee is a company, deduction under section 32AD would be
available over and above the existing deduction available under section 32AC, subject to the
satisfaction of conditions there under.
Accordingly, if an undertaking is set up in the notified backward areas in the States of Andhra
Pradesh or Bihar or Telangana or West Bengal by a company, it shall be eligible to claim
deduction under section 32AC as well as under section 32AD, if it fulfills the conditions specified in
section 32AC and the conditions specified under section 32AD.
CONDITIONS
1. Assessee is a company
2. In business of manufacturing or production of article or thing
3. Acquires and installs new asset between 1.4.15 to 31.3.20
No allowance shall be allowed for below mentioned:

a) Any second hand P&M (Indian or imported)
b) Ship or aircraft
c) Asset whose actual cost already allowed as deduction.
d) P&M installed in official premises or residential accommodation or guest house
Lock in period: The asset should be held for a period of 5 years, if sold within 5 years, sales
consideration is taxable u/h PGBP of the year when sold.
However, this restriction shall not apply to the amalgamating or demerged company or the
predecessor in a case of amalgamation or demerger or business reorganization referred to in
section 47(xiii), 47(xiiib) and 47(xiv), within a period of five years from the date of its installation,
but shall continue to apply to the amalgamated company or resulting company or successor, as the
case may be.
Focus Area:
1. Deduction is in addition to depreciation and additional depreciation & investment allowance u/s
32AC.
2. Deduction under section 32AD shall not be reduced from WDV of block of asset.
3. There is no condition that Plant and Machinery should be actually put to use.
4. Deduction is not available for power generating units.
Proviso to section 32(1) shall not be applicable i.e. there shall be no restriction of 50%.
Sec 43(6) Written Down Vale of Block of asset
Particulars Amount(`)
W.D.V at the beginning of the year xxx
Add: Actual cost of assets acquired xxx
Less: Sale consideration on sale of asset xxx
Less: WDV of assets transferred in slump sale* xxx
WDV of block for assessment year xxx
*it shall be restricted to WDV of block of asset.
Note 1: Sale consideration is only value of asset and never FMV of asset received as insurance
claim. Insurance compensation shall be deducted.

|Page
Note 2: Depreciation shall be allowed on stand-by equipment.
@
Sec 50 Provision for computation of CG on depreciable asset
Capital gain is always short term regardless of period of holding.
Capital gain is computed as per section 50 on sale of depreciable asset in either of the following
two cases:
When Sales consideration is more than WDV When block of asset cease to exist
of block of asset (+) cost of asset acquired (+)
expenses incurred on transfer of asset
OR
Sec 43(1) Actual cost
1. Actual cost (AC) means the actual cost reduced by cost met directly or indirectly by any other
person or authority.
2. Test run expenses, interest before commencement of production are part of actual cost.
Sec 38(2) Depreciation on assets not exclusively used for business purpose
Where building, machinery, plant or furniture are not used exclusively for the purpose of business,
then deduction under section 30, 31 and 32 shall be restricted to fair proportionate part which AO
determines having regard to use of such asset for purpose of business or profession.
Sec 32(1)(i) Depreciation for Power generating undertakings

Assesses in business of generation or generation and distribution of power shall have option to
claim depreciation on SLM on each asset or WDV on block of assets.
Section 32(1)(i) provides that depreciation on tangible assets and intangible assets, owned wholly
or partly and used for the purpose of business at prescribed rate and on actual cost of asset on
straight line method of depreciation.
Treatment of asset under head PGBP on its sale

Selling Price is more than WDV Selling Price (-)WDV shall be taxable as
CASE 1
of asset “Balancing Charge”
Selling Price is less than WDV of WDV (-) Selling Price shall be allowed as
CASE 2
asset “Terminal depreciation”
Focus Area:
a) Total depreciation shall not exceed actual cost of asset.
b) Restriction of 50% shall be applicable when asset is put to use for less than 180 days
c) Additional depreciation is not allowed.
Section 50A: If asset on which depreciation is allowed under SLM under section 32(1)(i) is sold
during the previous year, and sale price of such asset exceeds the actual cost of the asset, then
Sale Price – Actual Cost = Short Term Capital Gains
@
Sec 32(2) Set off and carry forward of unabsorbed depreciation
Set off- current year depreciation can be set off against any head of income except salary and
lottery income.

|Page
Carry forward of loss- depreciation to the extent not set off shall be carried forward indefinitely,
even if business is discontinued. It can be carried forward even if return not filed or filed after due
date.
Priority of set off

1. Current year depreciation
2. Bought forward business losses
3. Bought forward depreciation
Depreciation can be carried forward by same assessee. Few exceptions are there. – Firm to
company, proprietorship concern to company, amalgamation, demerger, company to LLP.
@
Sec 43CA Full value of consideration for t/f of assets other than capital
assets (Inserted by FA 2013)
1. Where consideration for transfer of asset (other than cap asset) being land or building or both
is less than Stamp duty value (SDV), then SDV adopted or assessed or assessable shall be
deemed to be full consideration for computation of income u/h PGBP.
2. Assessee claims SDV exceeds FMV and value is not disputed, AO may refer computation of
value to Valuation Officer
Valuation officer’s value

Exceeds SDV, then SDV is taken as Sale Lower than SDV, then Valuation officer‖s
Price value shall be considered
3. In the hands of buyer, purchase price= contracted price.

Focus Area: If date of agreement and date the registration is not same, then the SDV on date
of agreement shall be taken as sale consideration if consideration or part thereof has been
received on or before the date of agreement otherwise than by way of cash. In all other cases,
SDV as on date of registration shall be deemed as sales Price.
Date of t/f Actual SDV on SDV on Full Remark

of land/ Consideration date of date of value of
building agreement registration consider
held as ation
SIT
`in lakhs
1 28.3.2013 130 120 210 130 Section 43CA is not
31.7.2012 31.1.2013 applicable since date of
transfer is before 1/4/2013
2 7.5.2013 90 130 240 130 Stamp duty value on the
(`10 lakhs 1/9/2012 1/5/2013 date of agreement to be
received by adopted as full value of
cheque on consideration.
31/8/2012)
3 29.5.2013 110 150 250 250 Stamp duty value on the
( `10 lakhs 1/9/2012 29/5/2013 date of registration to be

|Page
received by adopted as full value of
cash on consideration.
31/8/2012)
4 31.3.2014 100 120 210 210 Stamp duty value of the
(Full amount 1/5/2013 31/3/2014 date of registration would
received on be the full value of
the date of consideration.
registration)
Sec 35 : Expense on scientific research (Amended by FA, 2016)

The Finance Minister in his Budget Speech, 2015 has indicated that the rate of corporate
tax will be reduced from 30% to 25% over the next four years along with corresponding
phasing out of exemptions and deductions. The Government proposed to implement this
decision in a phased manner.
Accordingly, the following incentives under the Act are to be phased out in the manner
given hereunder:
Phased out limit given under Detail Book of Income Tax & Phased out limits not
relevant for June & December 2017 Students since all limits applicable from
Assessment Year 2018-19.
Following deduction shall be allowed
Sec 35(1)(i)
Revenue expenditure before commencement of business
Salary (excluding perquisite) and raw material expense of 3 year immediately preceding year of
commencement shall be allowed as deduction in year ofcommencement of business.
All the revenue expenses incurred after commencement of business are 100% allowed.
@
Sec 35(1)(ii)
Deduction of an amount of 150% of sum paid to research association (object of undertaking
research allowed) or to a university, college or other institution to be used for research provided
such association/university/college/institution is approved by Central government. (Research not
related to business).
Sec 35(1)(iia)
Deduction of an amount of 100% of sum paid to a company to be used by it for scientific research
for business of assesse. The company should be:
1. registered in India
2. having main object as research and development
3. approved by prescribed authority
Sec 35(1)(iii)
Deduction of an amount of 100% of sum paid to research association, university, college, other
institution or research to be used in social science or statiscal researchprovided such instutution,
college or university is approved by CG.

|Page
Deduction u/s 35(1)(ii) & 35(1)(iii) shall not be denied if approval is withdrawn after making
payment.
Sec 35(1)(iv)
100% deduction for capital expenditure (excluding land) on scientific research related to business
carried on by assessee. Expenditure incured within 3 years immediately preceding commencment of
business shall be allowed as deduction in the year of commencement of business.
General Points
1) Depreciation is not allowed on asset on which deduction is claimed under section 35.
2) It is not necessary that research shall be carried by the assesse himself. Payment to others
shall also be treated as expenditure on research.
3) Loss under section 35 shall be set off and carried forward like depreciation.
4) Composite land and building-deduction of building shall be allowed and deduction of land shall
not be allowed.
Sec 35(2AA) : Higher deduction on payment to scientific persons for Scientific

Research(Amended by FA 2017)
Deduction of an amount of 150% of sum paid to National laboratory, University, IIT, specified
persons approved by prescribed authority with a specific direction that it shall be used for
scientific research under approved research program. Research shall be related to business of
assessee.
Deduction shall not to be denied if approval is withdrawn after making payment.
Provided that the prescribed authority shall, before granting approval, satisfy itself about the
feasibility of carrying out the scientific research and shall submit its report to the principle
chief commissioner or chief commissioner or principle director general or director general in
such form as may be prescribed.
(Added by Finance Act, 2015)
Sec 35(2AB) : In house research (Amended my FA 2017)

Deduction of an amount of 150% of expenditure incurred (excluding cost of land and building) on
scientific research on approved in house research and development facility approved by
prescribed authority. Revenue as well as Capital expenditure is allowed as deduction.
Eligible Assessee: Companies engaged in business of bio-technology or manufacture of article
except those in 11th schedule.
Condition: Company has entered into agreement with prescribed authority for co-operation in such
R&D and for audit of a/c maintained
Cost of land is not allowed
Cost of building is allowed @ 100%
Other capital expenditure (except land and building) is allowed @ 200%.
Revenue expense is allowed @ 200%

|Page
@
Sec 35CCC Expense on agricultural extension project (FA 2016)
Expenditure on agricultural extension project incurred by the assesse as per guideline of Board,
then a deduction of 150% of such expenditure shall be allowed. No deduction of such expense
shall be allowed under any provision of the act.
@
Sec 35CCD Expense on skill development project (FA 2016)
Expenditure on skill development project incurred by the company as per guideline of Board then
a deduction of 150% of such expenditure shall be allowed. No deduction of such expense shall be
allowed under any provision of the act.
Sec 35ABB Telecommunication services

Deduction is allowed from year of commencement of business or payment of license fee, whichever
is later till PY in which license expires.
Sale of part license Sale of whole license

SP is less than Unamortized SP is more than SP is less than Unamortized
cost Unamortized cost cost
Deduction u/s 35ABB will be Least taxable as PGBP Deduction u/s 35ABB will be in
Unamortised fee- SP a) SP - Unamortised fee year of transfer.
Residual period b) deduction allowed till date Unamortised license fee – SP
Focus Area:
a) No further deduction is available in year of transfer or in any subsequent year.
b) Capital gains shall arise if SP is more than actual cost of license.
c) Depreciation is not allowed under section 32.
TAX TREATMENT FOR SPECTRUM FEE [NEW SECTION 35ABA]

Effective from: A.Y.2017-18 (Inserted by Finance Act, 2016)
i) Section 32 allows depreciation in respect of assets including certain intangible assets.
Section 35ABB provides for amortisation of licence fee in case of telecommunication
service.
ii) The Government has newly introduced spectrum fee for auction of airwaves.
iii) In order to resolve the uncertainty in tax treatment of payments in respect of spectrum i.e.,
whether spectrum is an intangible asset and the spectrum fees paid is eligible for
depreciation under section 32 or whether it is in the nature of a 'license to operate
telecommunication business' and eligible for deduction under section 35ABB, new section
35ABA has been inserted to provide for tax treatment of spectrum fee.

|Page
TAX TREATMENT OF SPECTRUM FEE
Transaction Manner of deduction
(1) Acquisition of right to use spectrum
Any capital expenditure Appropriate fraction of the amount of such expenditure
incurred for acquisition of any [1/total number of relevant previous years]
right to use spectrum for
telecommunication services Meaning of relevant previous years:
either before the Case Meaning

commencement of the business Where the spectrum The previous years beginning
or thereafter at any time during fee is actually paid with the P.Y. in which such
any previous year and for before the business commenced and the
which payment has commencement of subsequent P.Y. or P.Y.s
actually been made (actual business to operate during which the spectrum, for
payment of expenditure or telecommunication which the fee is paid, shall be
payable in the
prescribed services in force.
manner) to obtain a right to In any other case The previous years beginning
use spectrum. with the P.Y. in which the

spectrum fee is actually paid
and the subsequent P.Y. or
years during which the
spectrum, for which the fee is
paid, shall be in force.
(2) Transfer of the spectrum
Case 1: Where the proceeds The expenditure remaining unallowed as reduced by
of the transfer are less than the proceeds of transfer shall be allowed in the
the expenditure incurred previous year in which the spectrum has been
remaining unallowed transferred.
Case 2: Where the proceeds The excess amount shall be chargeable to tax as
of the transfer exceed the profits and gains of business in the previous year in
amount of expenditure which the spectrum has been transferred. However,
remaining unallowed the excess should not exceed the difference between
the expenditure incurred to obtain the spectrum and
the amount of expenditure remaining unallowed.
Case 3: Where the proceeds IfNothe spectrum
deduction for is transferred
such in ashall
expenditure previous year in
be allowed
which
of the transfer are not less the the business
previous is no spectrum
year in which longer inis existence,
transferred the
or
than the amount of expenditure taxability
in respectwould
of anyarise in the above
subsequent manner
previous as years.
year or though
incurred remaining unallowed. the business is in existence in that previous year.

|Page
Case 4: Where a part of the Unallowed expenses would be amortised in the
spectrum is transferred (and following manner –
the case is not covered under a) subtracting the proceeds of transfer from the
Case 2 above) expenditure remaining unallowed; and
b) dividing the remainder by the number of relevant
previous years which have not expired at the
beginning of the previous year during which the
licence is transferred.
(3) Transfer of spectrum in a scheme of amalgamation

If the amalgamating company The provisions of section 35ABA will apply to
sells or transfers the spectrum amalgamated company as they would have applied to
to the amalgamated company, amalgamating company as if the latter has not
being an Indian company transferred the spectrum.
under the scheme of The tax treatment in cases 1, 2 & 3 given in (2)
amalgamation above will not apply to the amalgamating company.
(4) Transfer of spectrum in a scheme of demerger
If the demerged company sells The provisions of section 35ABA will apply to
or transfers the spectrum to resulting company as they would have applied to
the resulting company, being demerged company as if the latter has not transferred
an Indian company under the the spectrum.
scheme of demerger The tax treatment in cases 1,2 & 3 given in (2)
above will not apply to the demerged company.
(v) Consequences of failure to comply with the conditions after grant of deduction:
Where, in a previous year, any deduction has been claimed and granted to an assessee
and subsequently, there is failure to comply with any of the provisions of this section,
then–
(1) the deduction shall be deemed to have been wrongly allowed
(2) the Assessing Officer may recompute the total income of the assessee for the said
previous year and make the necessary rectification. This is notwithstanding anything
contained in the Income-tax Act, 1961
(3) the provisions under section 154 for rectification of mistake apparent from the record
would apply. The period of four years would be reckoned from the end of the previous
year in which the failure to comply with the provisions of section 154 takes place
Sec 37(2B) : Payments made to Political Party

1. Expense on advertisement in any souvenir, brochure shall not be allowed as deduction.
2. Donation paid to political party or electoral trust is disallowed but it can be claimed as
deduction u/s 80GGB and 80GGC of chapter VIA.

|Page
@Sec 35D Preliminary expenses
Expenditure before commencement of his business and after commencement for extension or
setting up new unit shall be allowed. Deduction shall be allowed equally over a period of 5 years
when business commences or new unit is set up.
Aggregate expenditure to be allowed as deduction shall not exceed 5% of
a) “cost of project” (Non corporate assessee)
b) capital employed or cost of project at the option of the company
@Sec 35AD Weighted deduction

Business essential for Indian economy
Building & operating Production of fertilizer in a

hospital having 100 new plant or new capacity in housing project under
or more beds existing plant scheme for affordable
Cold chain facility Warehousing facility, storage of agricultural produce housing
100% Deduction Allowed
100% deduction for carrying on specified business
Cross country natural gas, warehousing of sugar beekeeping and

crude, petroleum pipeline Housing project under production of
network for distribution a scheme slum redevelopment honey & beeswax
or rehabilitation
Hotel of 2 star or above category
Setting & operating ICD or
CFS notified under custom act
Two more business have been specified by Finance Act 2014

 business in the nature of laying and operating a slurry pipeline for transportation of iron ore
 business in nature of setting up and operating a semi-conductor wafer fabrication manufacturing
unit, and which is notified by Board in accordance with such guidelines as may be prescribed
The deduction allowed will be 100 %.
(Added by Finance Act 2014)
Expenditure not eligible for deduction- purchase of land, Goodwill and Financial instrument
CONDITIONS
a) New P&M except old machinery which is imported & P&M up to 20% of total P&M can be old.
b) The business is not formed by reconstruction

c) No deduction is allowed under chapter VIA heading C i.e. of 80IA/ 80IB/ 80IC/ 80ID/ 80IE or
Section 10AA if investment allowance under this section is claimed.

|Page
d) Depreciation is not allowed on assets whose deduction is allowed under this section.
e) Loss can be carried forward indefinitely and set off only against profits arising u/s35AD.
f) Asset destroyed or sold, then entire proceeds shall be taxable as PGBP
g) Any asset in respect of which deduction is claimed and allowed under this section shall be
used only for specified business, for period of 8 years beginning with previous year in which
such asset is acquired or constructed.
h) If any asset for which deduction is claimed and allowed under this section is used for purpose
other than the specified business during the period of 8 years, otherwise than by way of a
mode referred in section 28(vii),
 deduction so claimed& allowed in one or more previous years, as reduced by depreciation
allowable in accordance with section 32, as if no deduction under this section was allowed,
 shall be deemed to be the income of the assessee chargeable under head “Profits and
gains of business or profession” of the previous year in which the asset is so used
This is not applicable to company which has become sick industrial company under section 17(1)
of the Sick Industrial Companies Act, 1985, during the period of 8 years.
(Added by Finance Act 2014)
i) Cross country pipeline shall be
a) 1/3rd of total pipeline capacity for natural gas pipeline network
b) 1/4th of total pipeline capacity for petroleum product pipeline network
NEW CLAUSE INSERTED:

(i) Developing OR maintaining and operating OR developing, maintaining and operating a
new infrastructure facility.
a) The eligible assessee should start developing OR operating and maintaining OR
developing, operating and maintaining any infrastructure facility on or after 01-04-2017.
b) "infrastructure facility" means—
(i) a road including toll road, a bridge or a rail system;
(ii) a highway project including housing or other activities being an integral part of the
highway project;
(iii) a water supply project, water treatment system, irrigation project, sanitation and
sewerage system or solid waste management system;
(iv) a port, airport, inland waterway, inland port or navigational channel in the sea;
Important Note:
Upto Assessment year 2017-18, a deduction of 150% of capital expenditure was allowed
for certain specified businesses. From Assessment year 2018-19 deduction is 100% of
capital expenditure for all specified businesses.

|Page
EXPENDITURE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 35AD
1. Expenditure of capital nature shall NOT include any expenditure incurred on:
 Acquisition of any land; or
 Acquisition of goodwill; or
 Acquisition of financial instrument
Therefore, expenditure on acquisition of land, goodwill, and any Financial Instrument is
not eligible for deduction under section 35AD whether such expenditure is incurred before
or after the commencement of business.
2. Any expenditure in respect of which the payment or aggregate of payments made to a

person in a day, otherwise than by an account payee cheque drawn on a bank or an
account payee bank draft or use of electronic clearing system through a bank account,
exceeds Rs. 10,000. [Added by Finance Act, 2107]
Key Points:
i. Expenditure incurred on acquisition of Goodwill or any land or financial instruments is
not to be allowed under section 35AD under any circumstances even if it is pais by
banking channels.
ii. Expenditure incurred on acquisition of other capital assets shall not be allowed under
section 35AD if in respect of such capital expenditure, payments or aggregate of
payments made in a day otherwise than by account payee cheque /draft /banking
channels exceeds Rs. 10,000.
Needless to say that revenue expenditure shall be disallowed under section 40A(3) if payment
/ aggregate payments for such expenditure in a day otherwise than by account payee cheque
/ draft / banking channels exceed Rs. 10,000.
Sec 35 DDA : Expense of VRS

Expenditure for payment of VRS shall be allowed over 5 years from PY when payment is made.
Sec 35DD : amalgamation or demerger expenses

Indian company incurs expenditure for amalgamation or demerger of the company shall be allowed
as deduction over a period of 5 years beginning from year of amalgamation. It is allowed only to
the company which has incurred such expenditure.
@
Sec 36 : Specific Deduction
a) Insurance premium on stocks.
b) Insurance on health of employees paid by any mode other than cash.
c) Bonus or commission paid to employees (other than payable as profits) subject to section 43B.
d) Interest on borrowed capital, if amount of loan has been used for the purpose of business (if
loan is for extension, then interest shall be disallowed)
e) Discount on issue of zero coupon bonds shall be allowed on pro-rata basis.
f) Employer‖s contribution to recognized provident fund, approved superannuation fund, approved
gratuity fund subject to section 43B

|Page
g) Employees‖ contribution is deemed as Income when received and allowed as deduction when
the same is paid on or before due date of fund and also allowed if it is paid by due date of
return.
h) Animal which are held otherwise as SIT died, then Actual cost (-) sale proceeds is allowed as
deduction.
i) Bad debt shall be allowed as deduction when written off in the name of debtor. Assessee
cannot claim deduction until written off.
Sec 41(4): Deduction allowed for bad debts and the same is subsequently received shall be
taxable in hands of assessee even if business is discontinued. Assessee must be same to tax
the same.
j) FA 2013: Bad debts written off to be allowed to extent same is in excess of credit balance in
the provision of bad and doubtful debts made u/s 36(1)(viia) irrespective of whether same
relates to rural advances or urban advances.
k) Revenue expenditure on family planning shall be allowed as deduction only to company and
Capital expenditure incurred by company on family planning shall be allowed as deduction
equally over a period of 5 years.
l) STT paid shall be allowed as deduction, if such income is included in PGBP.
m) FA 2013 introduced Commodities Transaction Tax @ 0.01% which is levied on taxable
commodities transactions entered into recognized association. The same is allowed as
deduction. A taxable commodities transaction is transaction of sale of commodity derivatives for
commodity, except agricultural commodity. CTT paid shall be allowed as deduction.
n) Amount of expenditure incurred by co-operative society for purchase of sugarcane at price fixed
by central government allowable as deduction. (Inserted by Finance Act, 2015)
@Sec 37(1) General clause for deduction

Expenditure other than specifically allowed in section 30 to 36 shall be allowed as deduction
provided
 It is not capital expense or personal expenditure and incurred
 Wholly and exclusively for the purpose of business and profession of assessee.
Example: Salary of employee not being salary of proprietor, Advertisement expense, telephone
expense, expense incurred for training employee etc.
1. Exp. in nature of offence/prohibited in law is disallowed

Amount paid as IT,WT Other Penalty for infraction of law shall be
taxes disallowed.
Tax No Yes
Advance payment No Yes
Provision/Reserve No No Interest paid on loan obtained to
Interest No Yes pay Income tax shall be disallowed.
Penalty No No
Exp. on legal proceedings Yes Yes

|Page
2. Freebees, gifts etc. provided by pharmaceutical industries to medical practitioners/ professional
association is not allowed as expense in the hands of industries and taxable as income in the
hands of medical practitioners/ professional association
Explanation 2 has been added by FA 2014 according to which

 any expenditure incurred by an assessee on the activities relating to corporate social
responsibility referred to in section 135 of the Companies Act, 2013
 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the
business or profession
Hence, expenditure in nature of corporate social responsibility shall not be allowed as expense
under section 37(1).
Sec 40(a)(i) TDS not deducted on payment to NR, expense disallowed

Interest, Royalty, fees, other sum chargeable under Income Tax Act
Paid or payable to Non Resident or Foreign company and tax is deductible on same
TDS has not been deducted OR After deduction, it has not been paid
before due date under section 139(1)
Expenditure shall be disallowed

Note: Expenditure shall be allowed as deduction when tax has been paid in subsequent year.
@Sec 40(a)(ia) TDS not deducted on payment to Resident, expense disallowed

any sum payable to a resident on which tax is deductible at source under Chapter XVII-B
Payable to Resident and tax is deductible on same
TDS has not been deducted OR After deduction, it has not been paid
before due date under section 139(1)
30 % of such expenditure shall be disallowed

Focus Area:
 30 % of such sum shall be allowed in subsequent year when such amount is paid after due
date specified in section 139(1).
 It shall not be considered as default if resident payee has furnished return & included such
amount in his income and paid tax on same
 Deductor has to furnish a certificate to this effect from a CA in the prescribed form.

|Page
 Salary, Non-compete fee and Director sitting fee is not covered in this section i.e. allowed even
if TDS has not been deducted
Illustration of Amendment:
Particulars Prior to After amendment
amendment
Commission payable to a resident in the 100% of the amount is 100% of the amount is
assessment year 2015-16 on which TDS had allowed as deduction in allowed as deduction in
to be deducted. the assessment year the assessment year
2015-16 2015-16
The amount of TDS was deducted and paid
by due date of filing of return (30 September
2015)
Salary payable to resident in assessment year 100% of the amount is 30 % of such sum shall
2015-16 on which TDS had to be deducted. allowed as deduction in be disallowed in AY
the assessment year 2015-16,
The amount of TDS was not deducted and
2015-16 30% of such sum is
also not paid by due date of filing of return
allowed in subsequent
(30 September 2015)
year when TDS is paid
Fees for technical service payable to a 100% of such amount 30 % of such sum shall
resident in the assessment year 2015-16 on is not allowed as be disallowed in
which TDS had to be deducted. deduction in the AY assessment year 2015-
2015-16. 100% of such 16,
The amount of TDS was not deducted and sum is allowed in 30% of such sum is
also not paid by due date of filing of return subsequent year when allowed in subsequent
(30 September 2015) amount is paid year when TDS is paid
Sec 40(a)(iii)
Salary payable outside India to Resident or Non-Resident or within India to Non-Resident and TDS
has not deducted or has not been paid shall be disallowed.
Sec 40(a)(v)
Tax paid on perquisite (exempt u/s10(10CC) by employer shall not be allowed as deduction.
Sec 40(ba) Payment of interest, salary etc. by AOP/BOI to its Members

Interest paid-Interest received = Net to be disallowed
AOP is a member is in individual or representative and interest is paid in representative or
individual capacity shall be allowed as deduction.
Salary is always disallowed.
@
Sec 40(b) Payment of interest, salary, bonus, commission/ remuneration by
firm to its partner
1. Payment of salary, bonus or commission shall be allowed only if it is paid to a working partner.
2. Partnership deed shall specify the amount or lay down the manner of quantifying remuneration,
only then its admissible as deduction

|Page
3. Partnership deed should not provide for remuneration and interest from retrospective effect.
4. The payment of interest shall not exceed @ rate of 12% p.a. simple interest. Interest paid and
interest received cannot be netted off.
5. Remuneration shall not exceed the following amount (any amount in excess shall be disallowed)
Amount of book profits Salary allowed

On first 300,000 book profit or in case of loss Higher of `1,50,000 or 90% of book profit
On balance of book profits At the rate of 60%
Sec 40A(2) Payment to specified persons

Assessing Officer may disallow payment made to relative if in his opinion it is in excess of the fair
market value (FMV). Chapter of Transfer Pricing also applies on these transactions if transaction
value more than 5 crore.
Sec 41(1) Recovery of exp/Remission of liability

Expense or loss which was allowed as deduction & has been subsequently received. Amount so
received shall be deemed as income when received even if business is not in existence. If
successor is continuing business, the amount so received shall be deemed as income of
successor.
Sec 40A(3) and Sec 40A(3A) Payment made otherwise than by acount payee
cheque
1. Payment exceeding ` 10000 or ` 35000 (in case of payment to a transporter engaged in plying,
hiring, transporting etc.) in a single day by a assessee will be allowed as a deduction only when
payment is made by account payee cheque or account payee demand draft.
2. Section 40A(3A): Expense allowed in any prior year and then in subsequent year, the
expense was paid otherwise than by account payee cheque will be taxable in subsequent year.
EXCEPTIONS TO ABOVE
a) Payment is made to bank or financial institution, Government

b) Amount is required to be paid under required law
c) Any payment on a Banking Holiday
d) Payment of gratuity/ retrenchment compensation to an employee or his legal heir upto`50,000
e) Payment in a village not served by a bank
f) Book Adjustment
g) Payment for purchase of agriculture produce, Poultry farm produce, Dairy items, cottage
industry(working without aid of power).
Sec 40A(7) Provision for payment of Gratuity

No deduction shall be allowed of payment of gratuity except when
a) Payment is made towards approved gratuity fund.
b) Payment is made for an of gratuity actually becoming payable.

|Page
Sec 40A(9) Employer’s contn to gratuity fund/ PF/ superannuation fund/ 80CCD
Pension fund
No deduction shall be allowed for setting up or formation of, or as contribution to any fund, trust,
company, AOP/ BOI except when payment is made for
a) An approved gratuity fund, or
b) Recognised provident fund, or
c) Approved superannuation fund, or
d) Pension scheme referred to in section 80CCD.
@Sec 43B Deduction on actual payment basis
Government dues Leave encashment to employee Interest on loan to financial institution

Bonus to employee Employer contribution to PF, GF etc.
Interest on loan
or advance obtained from Bank
The above mentioned is allowed as deduction only when amount is actually paid.
If the amount is paid till due date of return, then it is allowed in same previous year to which it
relates.
@
Sec 44AD PGBP on presumptive basis (Amended by FA, 2016)
Eligible Assessee: Individual, HUFs, partnership firm excluding LLP.
1. It is not applicable to assessee claiming deductions under section 10AA or deduction under any
provision of Chapter VIA under heading “C”.
2. The section is applicable for business having maximum gross turnover/ gross receipts of `1crore
2 crore.
3. 8% of gross turnover/ receipts is deemed as income under head PGBP.
[Provided that this sub-section shall have effect as if for the words "eight per cent", the words
"six per cent" had been substituted, in respect of the amount of total turnover or gross
receipts which is received by an account payee cheque or an account payee bank draft or
use of electronic clearing system through a bank account during the previous year or before
the due date specified in sub-section (1) of section 139 in respect of that previous year.]
4. The assessee paying tax as per this section is exempted from payment of Advance tax and
maintenance of books and accounts.
Further, expenditure in the nature of salary, remuneration, interest etc. paid to the partner as
per section 40(b) shall not be deductible while computing the income under section 44AD
since section 40 does not mandate for allowance of any expenditure; it merely places a
restriction on deduction of amounts, otherwise allowable under section 30 to 38. Therefore, the
proviso to section 44AD(2) has been omitted & In case of non-offering of income as per
section 44AD for five continuous years, eligible assessee cannot opt for section 44AD for the

|Page
next five AYs after the assessment year of first non-option
This section shall not apply to-
a) person carrying on profession as per sec 44AA b) carrying on agency business
c) person earning income in nature of commission/ brokerage
SECTION 44AA
MAINTENANCE OF ACCOUNTS
1. PERSON CARRYING ON
(1) Every person carrying on legal, medical, engineering or architectural profession or the
profession of accountancy or technical consultancy or interior decoration or any other
profession as is notified by the Board in the Official Gazette shall keep and maintain
such books of account and other documents as may enable the Assessing Officer to
compute his total income in accordance with the provisions of this Act.
(2) Every person carrying on business or profession [not being a profession referred to in
sub-section (1)] shall,—
(i) if his income from business or profession exceeds one lakh twenty thousand rupees
or his total sales, turnover or gross receipts, as the case may be, in business or
profession exceed or exceeds ten lakh rupees in any one of the three years
immediately preceding the previous year; or
(ii) where the business or profession is newly set up in any previous year, if his income
from business or profession is likely to exceed one lakh twenty thousand rupees or
his total sales, turnover or gross receipts, as the case may be, in business or
profession are or is likely to exceed ten lakh rupees, during such previous year; or
(iii) where the profits and gains from the business are deemed to be the profits and
gains of the assessee under section 44AE or section 44BB or section 44BBB, as the
case may be, and the assessee has claimed his income to be lower than the profits
or gains so deemed to be the profits and gains of his business, as the case may be,
during such previous year; or
(iv)where the provisions of sub-section (4) of section 44AD are applicable in his case and
his income exceeds the maximum amount which is not chargeable to income-tax in
any previous year,]
keep and maintain such books of account and other documents as may enable the Assessing
Officer to compute his total income in accordance with the provisions of this Act.
Following first and second provisos shall be inserted to sub-section (2) of section 44AA by
the Finance Act, 2017, w.e.f. 1-4-2018 :

|Page
Provided that in the case of a person being an individual or a Hindu undivided family, the
provisions of clause (i) and clause (ii) shall have effect, as if for the words "one lakh twenty
thousand rupees", the words "two lakh fifty thousand rupees" had been substituted :
Provided further that in the case of a person being an individual or a Hindu undivided
family, the provisions of clause (i) and clause (ii) shall have effect, as if for the words "ten
lakh rupees", the words "twenty-five lakh rupees" had been substituted.
(3) The Board may, having regard to the nature of the business or profession carried on by
any class of persons, prescribe, by rules, the books of account and other documents
(including inventories, wherever necessary) to be kept and maintained under sub-section (1)
or sub-section (2), the particulars to be contained therein and the form and the manner in
which and the place at which they shall be kept and maintained.
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules,
the period for which the books of account and other documents to be kept and maintained
under sub-section (1) or sub-section (2) shall be retained.
Section 44ADA Presumptive Taxation Scheme for assessees engaged in

eligible profession
(Inserted by Finance Act, 2016)
Related amendment in section: 44AB Effective from: A.Y. 2017-18
a) Section 44AD provides for a presumptive taxation scheme for eligible persons engaged
in eligible business in order to reduce compliance burden of small tax payers.
b) For reducing the compliance burden of small tax payers having income from profession,
the Finance Act, 2016 has introduced a presumptive taxation regime for professionals.
c) In this regard, new section 44ADA has been inserted in the Income-tax Act, 1961
providing a presumptive taxation scheme for estimating the income of an assessee:
 who is engaged in any profession referred to in section 44AA(1) such as legal,

medical, engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or any other profession as is notified by
the Board in the Official Gazette; and
 whose total gross receipts does not exceed fifty lakh rupees in a previous year, at a
sum equal to 50% of the total gross receipts, or, as the case may be, a sum higher
than the aforesaid sum claimed to have been earned by the assessee.
Meaning of Eligible Assessee:
Eligible Assessees
Resident assessee
engaged in notified Total gross receipts
profession u/s 44AA(1) ≤ ` 50 lakhs

|Page
(i) Under the scheme, the assessee will be deemed to have been allowed the deductions
under section 30 to 38. Accordingly, no further deduction under those sections shall be
allowed.
(ii) Further, the written down value of any asset used for the purpose of the profession of
the assessee will be deemed to have been calculated as if the assessee had claimed
and had actually been allowed the deduction in respect of depreciation for the relevant
assessment years.
(iii) The eligible assessee opting for presumptive taxation scheme will not be required to keep
and maintain books of account under section 44AA(1) and get the accounts audited
and furnish a report of such audit as required under section 44AB in respect of such
income unless the assessee claims that:
a) the profits and gains from the aforesaid profession are lower than the profits and gains
deemed to be his income under section 44ADA(1); and
b) his income exceeds the maximum amount which is not chargeable to income- tax
Consequential amendment has been made in section 44AB requiring every person carrying
on profession to have his accounts audited by an accountant before the specified date
and furnish audit report by that date if such person has claimed lower profits and gains
than the deemed profits under section 44ADA and his income exceeds the basic
exemption limit.
@Sec 44AE Presumptive income(Amended by FA 2014)

This section is applicable to those assessee who do not own more than 10 goods carriage amount
taxable shall be
Type of vehicle Amount taxable
Each goods carriage `7,500 For every month or part of the month
Assessee can declare his income for lower than this limit provided accounts are maintained and
audited.
Deduction of section 30 to 43C shall be deemed to be allowed. However, salary and interest shall
be subject to section 40(b).
Income under section 44AE shall be computed from date of purchase of vehicle and not from the
date they are put to use.
Illustration: An assessee owns a heavy goods vehicle for 9 months and 7 days, medium goods
vehicle for 9 months and light commercial vehicle for 12 months during the previous year. Compute
his income applying the provisions of section 44AE.
Solution:
Prior to amendment After amendment
His profits and gains from the 3 trucks shall be His profits and gains from the 3 trucks shall be
deemed to be deemed to be
` 5,000 × 10 + ` 4,500 × 9 + ` 4,500 × 12 = ` 7,500 × 10 + ` 7,500 × 9 + ` 7,500 × 12 =
` 1,44,500 ` 2 32,500

|Page
@
Sec 44AB Compulsory audit
Audit is compulsory in case of
1. Profession when gross receipts are more than ` 25 50 lakh.
2. Business when gross turnover or total sales are more than ` 1 crore
Provided that this section shall not apply to the person, who declares profits and gains for the
previous year in accordance with the provisions of sub-section (1) of section 44AD and his
total sales, turnover or gross receipts, as the case may be, in business does not exceed
two crore rupees in such previous year:]
3. carrying on the business, if the profits and gains from business are deemed to be the profits
and gains of such person under section 44AE or section 44BB or section 44BBB, as the case
may be, and he has claimed his income to be lower than the profits or gains so deemed to
be the profits and gains of his business
4. carrying on the business, if the profits and gains from the business are deemed to be the
profits and gains of such person under section 44AD or 44ADA and has claimed such income
to be lower than profits and gains so deemed and his income exceeds the maximum amount
which is not chargeable to income-tax in any previous year
The accounts shall be audited before due date and furnished in the prescribed form duly
signed and verified by such accountant
Penalty for non compliance is ` 1,50,000.

|Page
182
Question: Objective type:
1. Naveen contributed a sum of ` 30,000 to an approved institution for research in social science,
which is not related to his business. The amount of deduction eligible u/s35 would be:
a) ` 30,000 b) ` 45,000
c) ` 37,500 d) No deduction as it is unrelated to his business
2. Under the Income tax Act 1961, depreciation on machinery is charged on:
a) purchase price of the machinery b) market price of the machinery
c) written down value of the machinery d) All of the above
3. Under section 44AB, specified date means _______ of the assessment year.
4. Depreciation allowance charged on intangibles (know-how, patent etc.) is @ ____ % of WDV

a) 15% b) 25% c) 20% d) 30%
5. The amount of additional depreciation in respect of new building constructed in financial year
2017-18 at a cost ` 25 lakh for manufacturing garments will be ________.
6. Rate of depreciation charges on fully temporary wooden structure for the AY 2018-19 is:
a) 5% b) 40% c) 100% d) none of the above
Solution: 1 – a), 2 – c), 3 – 30th September, 4 – b), 5 – Nil, 6 – b)
OBJECTIVE QUESTIONS
1. Which of the following income is chargeable to tax under head Profits and gains from business
and profession?
a) Cash Compensatory Support and Duty Drawback
b) Sum received under a keyman insurance policy
2. For an assessee engaged in business and profession, any profit on the transfer of Duty Free
Replenishment Certificate is taxable under head?
a) Salary b) Other Sources
c) Profit and gain from business and profession d) None of the above
3. For an assessee engaged in business and profession, any sum received under an agreement
for not carrying any activity in relation to any business is taxable under head ………….
a) PGBP provided it is not taxable as capital gains b) Other Sources
4. For an assessee engaged in business and profession, any compensation received for not
producing CFC and HCFC from Govt. of India under multilateral fund of Montreal Protocol ……….
a) is taxable under head Other Sources b) is taxable under head PGBP
c) is not taxable under head PGBP d) None of the above

|Page
VIVEK GABA
5. Where assessee received commission and brokerage on the shares subscribed by the public in
IPO, the commission and brokerage …………….
a) shall be taxable as income under head Other Sources
b) shall be taxable as income under head PGBP
c) exempt from tax
e) none of the above
6. Where an assessee, who is a broker received commission and brokerage on the shares which
are not subscribed by public in IPO and subscribed by him on account of underwriting
agreement, the commission and brokerage …………
a) shall be taxable as income under head PGBP
b) shall be reduced from COA of shares subscribed by assessee on account of underwriting
c) shall be exempt from tax
7. Which of the following deduction is allowed to assessee in respect of building?

a) Rent and Revenue expenses on repairs
b) Rent and Insurance premium
c) Rent, Revenue expenses on repairs, insurance premium and municipal taxes
8. Where assessee is owner of building and incurred capital expenditure on building, expenditure
a) shall not be allowed as deduction
b) should be added to the cost of building and depreciation shall be allowed on same
c) shall be allowed wholly in the year in which it is incurred
9. Which of the following deduction is allowed to assessee in respect of Plant & Machinery and
furniture used for the purpose of business and profession?
a) Rent and Revenue expenses on repairs
b) Rent, Revenue expenses on repairs, insurance premium
c) Rent and Insurance premium
10. Where assessee incurred expenditure on replacement of old machinery by new machinery, the
expenditure
a) is not allowed at all
b) is allowable as revenue expenditure
c) is not allowable as revenue expenditure and depreciation shall be allowed
11. When is depreciation allowed as deduction?

a) When the asset is used for the purposes of the business or profession
b) It is owned wholly or partly be the assessee

|Page
VIVEK GABA
12. Goodwill purchased is ………………………………………
a) intangible asset b) tangible asset
c) either of above d) none of the above
13. A lessee, in respect of leased asset …………………..

a) can claim depreciation under head PGBP
b) cannot claim depreciation under head PGBP
c) is allowed to claim depreciation
14. Depreciation is allowed on

a) actual cost b) book value of asset
15. What does plant include?

a) ships, vehicles, books
b) ships, vehicles, books, scientific apparatus, and surgical equipment
c) ships, vehicles, books, scientific apparatus
16. When shall depreciation be restricted to 50% of depreciation allowed?

a) If asset is put to use for less than 180 days in any year
b) If asset is put to use for less than 180 days in year of acquisition
c) If asset is put to use for less than 200 days in year of acquisition
17. An assessee purchased an asset on 21st September 2016 on which rate of depreciation is
20%. The asset was put to use on 2nd April 2016. How much depreciation shall be allowed to
assesseeonsuch asset during the period ended 31st March 2017 and 31st March 2017
a) Nil, 20% b) 20%, 20% c) 10%, Nil d) Nil, 10%
18. An assessee purchased an asset on 21st September 2017 which rate of depreciation is 20%
and put to use on 10th October 2017. How much depreciation shall be allowed to assessee
such asset during the period ending 31st March 2018.
a) Nil b) 20% c) 10% d) any
19. Additional depreciation (Normal Case) is allowed at the rate of

a) 10% b) 15% c) 20 % d) 35 %
20. Additional depreciation shall not be allowed in which of the following case
a) assessee engaged in business of manufacture or production of any article or thing
b) assessee engaged in business of generation or generation or distribution of power
c) any of the above
d) where assessee has purchased a plant and machinery which is already used
21. An assessee purchased imported second hand machinery and contends that additional
depreciation shall be allowed on same. Is the contention of assessee correct?
a) Valid b) Invalid, no additional depreciation shall be allowed
c) partly valid d) None of the above

|Page
VIVEK GABA
22. An assessee purchased office appliances and contends that additional depreciation shall be
allowed on same. Is the contention of assessee correct?
a) Invalid, no additional depreciation shall be allowed b) Valid
23. Additional depreciation is not allowed

a) When assessee is not engaged in business of manufacturing
b) When assessee purchases a second hand machinery
c) When whole of cost of plant is allowed as deduction
d) All of the above
24. When is additional depreciation allowed?

a) first year in which the asset is installed and ready to use
b) any year in which the asset is installed
c) first year in which the asset is put to use
d) any of the above
25. When an asset is put to use for less than 180 days in the year in which it is acquired, what
rate of additional depreciation shall be allowed?
a) 20 % b) 5 % c) 10 % d) Nil
26. When an asset on which depreciation is allowed is transferred and block does not cease to
exist, how should it be treated?
a) Cost of asset shall be reduced from the block of asset
b) Sale proceeds of asset shall be reduced from block of asset
c) Profit shall be computed as per section 50 and chargeable under head capital gain
27. An assessee who has a block of ` 100 lakh of plant and machinery. He sold an asset of the
block for ` 120 lakh, no asset were acquired during the year. On what amount should he
charge the depreciation and what shall be the amount of capital gain.
a) Nil, 10 b) (20), Nil c) 20, Nil d) Nil, 20
28. An assessee who has a block of ` 250 lakh of plant and machinery. He sold the entire block
for ` 170 lakh, an asset of `20 lakh was acquired during the year. On what amount should he
charge the depreciation and what shall be the amount of capital gain.
a) Nil, Nil b) 100, Nil c) Nil, (100) d) Nil, 100
29. An assessee who has a block of 160 lakh of furniture. He sold an asset of the block for 100
lakh, no asset was acquired during the year. On what amount should he charge depreciation
and what shall be the amount of capital gain.
a) Nil, Nil b) 60, Nil c) Nil, (60) d) Nil, 60
30. When an asset has been destroyed in fire and assessee will receive insurance compensation.
The amount of compensation
a) shall not be deducted from WDV
b) shall be deducted from WDV in the year of receipt
c) shall be deducted from WDV even if the same has not been actually received

|Page
VIVEK GABA
31. How can depreciation of the current year set off?
a) from any income under any head b) from income under head PGBP
c) from income of same business of which it relates to d) none of the above
32. Unabsorbed depreciation can be carried forward

a) 8 years b) 4 years c) indefinitely d) Nil
33. Depreciation can be carried forward only if the return is filed. Is the statement correct?
a) The statement is correct
b) The statement is not correct, depreciation can be carried forward even if return is not filed
c) Filing of return is mandatory
34. As per section 38(2), when asset is not used exclusively for the purpose of business, then
deduction ………………
a) shall be restricted to a fair proportionate part
b) may be restricted to a fair proportionate part
c) shall not be restricted to a fair proportionate part and allowed fully
d) shall be restricted to a fair proportionate part thereof which Assessing Officer may
determine having regard to use of such asset for the purposes of business or profession
35. Where assessee is engaged in business of generation/ generation & distribution of power. He
can claim depreciation ………
a) as per straight Line method(SLM) on each asset
b) as per written down value(WDV) method on block of assets
c) assessee has option to claim depreciation either as per a) or b)
36. An assessee engaged in business of generation/ generation and distribution of power claims
depreciation on SLM basis and sales asset. The sale price of asset exceeds WDV of the
asset, what shall be the tax treatment under head PGBP
a) Actual cost – WDV is taxable under head PGBP
b) S.P. – WDV is taxable under head PGBP
c) Least of a) and b)
37. Where an asset is put to use for less than 180 days, then depreciation under section 32(1)(i)
shall be restricted to 50%. Is the statement valid?
a) Valid b) Invalid c) Partly valid d) none of the above
38. Where an assessee who claims depreciation under SLM basis under section 32(1)(i) is sold
during the previous year, and sale price of such asset exceeds actual cost of the asset, then
a) Sale Price – Actual Cost = Short Term Capital Gains
b) Sale Price – Actual Cost = Long Term Capital Gains
c) Sale Price – Actual Cost = Long/ Short Term Capital Gains depending upon holding period
d) Sale Price – Actual Cost = PGBP

|Page
VIVEK GABA
39. Expense incurred prior to commencement of business on scientific revenue expenditure shall
be allowed in how many years which?
a) 4 b) 3 c) 2 d) any number of years
40. Deduction under section 35(1)(ii) is allowed

a) sum paid to a research association having an object the undertaking of scientific research
b) sum paid to association /university /college/ institution approved by Central Government
under section 35(1)(ii)
c) any of the above
41. An assessee paid an amount to a research association having an object the undertaking of
scientific research. The research is related to his business. What amount of deduction shall be
allowed under section 35(1)(ii)
a) 150% of the amount paid
b) Nil, since research is related to the business of the assessee
c) 125% of the amount paid
42. An assessee paid an amount of ` 10,00,000 to a research association having an object the
undertaking of scientific research. The research is not related to his business. What amount of
deduction shall be allowed under section 35(1)(ii)
a) ` 15,00,000 b) Nil c) ` 10,00,000 d) ` 12,50,000
43. Deduction under section 35(1)(iia) is allowed

a) sum paid to a research association having an object the undertaking of scientific research
b) sum paid to university, college, or other approved institution to be used for research in
social science
c) sum paid to company to be used by it for scientific research for the business of assessee
d) any of the above
44. Where an assessee pays any sum to a university, college, or other approved institution to be
used for research in social science or statistical research. The research is not related to his
business. The deduction allowed ………….
a) would be of 125% u/s35(1)(ii) b)would be of 175% u/s35(1)(ii)
c)would be of 150% u/s35(1)(iii) d) would be of 100% u/s35(1)(iii)
45. Capital expenditure incurred prior to commencement of business on scientific research of how
many years is allowed as deduction under section 35(1)(iv)?
a) four years b) three years
c) all years in which expense is incurred d) eight years
46. Deduction of capital expenditure under section 35(1)(iv) is allowed in which year?
a) It is allowed in the year when assessee starts earning profits
b) It is allowed in the year of commencement
c) It is allowed in the year subsequent to year of commencement

|Page
VIVEK GABA
47. If assessee purchases land and building through composite agreement, cost of the land is
…………………. and that of building is ……………………..
a) not allowable as deduction, allowed as deduction u/s 35(1)(iv)
b) allowed as deduction u/s 35(1)(iv), allowed as deduction u/s 35(1)(iv)
c) not allowable as deduction, not allowable as deduction
d) allowed as deduction u/s 35(1)(iv), not allowable as deduction
48. Any expense on advertisement in any souvenir, brochure, tract pamphlet or the like published
by a political party …………………………… under head PGBP.
a) shall be allowed as deduction b) shall not be allowed as deduction
49. Deduction under section 35CCC is allowed in respect of

a) expenditure on agricultural extension project notified by Board
b) expenditure on skill development project notified by the Board
c) any of the above
50. What is the amount of deduction allowed under section 35CCD?

a) 150 % of the expenditure b) 200 % of the expenditure
c)175 % of the expenditure d) 125 % of the expenditure
51. If an amount of ` 1,00,000 is incurred by the assessee on skill development project notified by
the Board, deduction of ……………. is allowed under section
a) ` 1,00,000, 35CCC b) ` 1,50,000, 35CCD
c) ` 1,50,000, 35CCC d) ` 2,00,000, 35CCD
52. Deduction under section 35(2AA) is allowed for an amount equal to

c) 100 % of the expenditure d) 125 % of the expenditure
53. An assessee paid an amount of ` 5,00,000 to IIT for conducting scientific research, what
amount of deduction shall be allowed and under which section?
a) ` 5,00,000, 35CCC b) ` 15,00,000, 35(2AA)
c) ` 7,50,000, 35(2AA) d) ` 10,00,000, 35CCD
54. What is the amount of deduction available under section 35(2AB)?

c)100 % of the expenditure d) 125 % of the expenditure
55. Deduction of expenditure under section 35D is allowed in how many years
a) four successive previous years b) ten successive previous years
c) five successive previous years d) infinite number of years
56. An assessee incurred expense of ` 10,00,000 before setting up his business. The business
commenced on 1st March 2018. Deduction of ……… shall be allowed for previous year 2017-18
a) ` 1,00,000 b) ` 2,00,000 c) ` 1,50,000 d) Nil

|Page
VIVEK GABA
57. Which of the following expense is eligible for deduction under section 35D?
a) Expenditure on preparation of feasibility report and project report
b) Expenditure on market & other survey
c) Any of the above
58. The expenditure to be allowed as deduction under section 35D shall be restricted to …………. in
case of non-corporate assessee
a) 10% of Cost of project b) 5% of Cost of project
c)15% of Cost of project d) 7.5% of Cost of project
case of assessee, being India Company
a) 5% of Cost of project b) 5% of capital employed
c) Any of above, at the option of the assessee d) None of the above
60. Deduction under section 35DD is allowed to

a) Indian Company b) Any Company
c) Any assessee d) Individual and HUF
61. B Ltd. is getting demerged to form a new company, V Ltd. An expense of ` 5,00,000 is
incurred by V Ltd. How much deduction shall be allowed to V Ltd for this year & future year?
a) ` 1,00,000 for this year and subsequent 4 years
b) Nil during this year and future years
c) ` 1,00,000 during this year and nil in future year
d) Nil during this year and ` 1,00,000 in future year
62. An assessee paid VRS as per the scheme of voluntary retirement amounting to ` 6,00,000 on
21st March 2018, how much deduction of same shall be allowed to assessee for the previous
year ending 31st March 2018.
a) ` 6,00,000 b) ` 1,00,000 c) ` 1,20,000 d) ` 1,50,000
63. Deduction under section 35DDA is allowed in relation to

a) expenditure for the purposes of amalgamation or demerger
b) expenditure by way of payment of any sum to an employee in connection with his
voluntary retirement
c) any of the above
64. Deduction under section 35E is allowed to an assessee engaged in

a) Prospection for any mineral like coal, limestone, iron, zinc, gold
b) Extraction of any mineral like coal, limestone, iron, zinc, gold
c) Production of any mineral like coal, limestone, iron, zinc, gold
d) Either of above
65. Deduction under section 35E shall commence from which year
a) in which Prospection, extraction or production commences
b) in which the commercial production has been commenced
c) in which the entity starts earning profit (d) any of the above

|Page
VIVEK GABA
66. Expenditure incurred on building & machinery shall be allowed as deduction under section 35E.
State the validity of the statement?
a) Valid b) Invalid c) partly valid d) None of the above
67. An assessee engaged in production of coal incurred expense of ` 10,00,000 during year of
commercial production and the expense incurred during preceding 4 and 5 years is `25,00,000
and `30,00,000 respectively. On which amount deduction shall be allowed in the year of
commercial production?
a) ` 30,00,000 b) ` 10,00,000 c) ` 40,00,000 d) ` 35,00,000
68. An assessee engaged in production of coal incurred expense of ` 10,00,000 during year of
commercial production and expense incurred during preceding 4 and 5 years is ` 25,00,000
and `30,00,000 respectively. What amount of deduction is allowable in year of commercial
production?
a) ` 3,00,000 b) ` 4,00,000 c) ` 7,00,000 d) ` 3,50,000
69. Which of the following is not allowed as deduction under section 36?
a) Premium paid for insurance of stock
b) premium paid on lives of partner
c) Insurance premium paid by any mode other than cash on health of employees to
insurance company
70. Interest paid in respect of capital borrowed for the purposes of business or profession is
allowed as deduction. State the validity of the statement?
a) valid b) invalid
71. What amount of deduction shall be allowed at the time of death of animal held otherwise than
as stock-in-trade?
a) difference between amount realised on their sale and actual cost of the animals
b) difference between actual cost of the animals and the amount realised on their sale
c) difference between actual cost of the animals and book value of animals
d) difference between actual cost of the animals and market value of animals
72. Expenditure in nature of capital expenditure is allowed as deduction under section 37. Is the
statement correct?
a) valid b) invalid c) partly valid d) None of the above
73. Any expenditure incurred by an assessee for any purpose which is an offence ……………..
a) shall be deemed to be incurred for the purpose of business or profession
b) shall not deemed to be incurred for the purpose of business or profession
c) may be deemed to be incurred for the purpose of business or profession
74. If penalty is in nature of compensation, it is ……… under section 37(1).

a) is allowable as deduction b) is not allowable as deduction

|Page
VIVEK GABA
75. Any interest paid under Wealth-tax Act and Income-tax Act ……………………………..
a) is allowable as deduction b) is not allowable as deduction
76. Demurrage paid to airport authorities …………………………….

a) is allowable as deduction since it is not penalty for infraction of any law
b) is not allowable as deduction since it is penalty for infraction of any law
c) may be allowed as deduction
77. Where interest is paid or payable outside India to NR and taxable in the hands of the recipient
under I.T. Act and tax is to be deducted at source on said payments &same is not deducted
in year of payment. TDS is paid after due date of filing of return. Deduction of interest
a) is allowed as deduction in the year to which it relates
b) is not allowed as deduction in the subsequent year when TDS is paid
c) is allowed as deduction in the subsequent year when the TDS is paid
78. Where any sum chargeable under Income tax Act is paid or payable outside India to foreign
company and taxable in the hands of the recipient under I.T. Act and tax is to be deducted at
source on said payments and the same is not deducted. The amount so paid …………………
a) is allowed as deduction under the Income tax Act in the year of payment
b) is not allowed as deduction under the Income tax Act in the year of payment
c) may be allowed as deduction under the Income tax Act in the year of payment
79. Which of the following statement is false

a) Income tax is not allowed as deduction for computing income under head PGBP
b) Tax paid in foreign country for which relief/credit is available under DTAA u/s90/90A is not
allowed as deduction for computing income under head PGBP
c) Tax paid in foreign country for which credit is available under section 91 is not allowed as
deduction for computing income under head PGBP
80. Which of the following statement is false

a) Income tax is not allowed as deduction for computing income under head PGBP
b) Tax paid in foreign country for which relief/credit is available under DTAA u/s90/90A is not
allowed as deduction for computing income under head PGBP
c) Tax paid in foreign country for which credit is available u/s91 is allowed as deduction for
computing income under head PGBP
81. The maximum penalty for failure to get accounts audited u/s44AB or furnish audit report along
with the return of income is
a) ` 1,25,000 b) ` 1,20,000 c) ` 1,50,000 d) ` 1,00,000

|Page
VIVEK GABA
82. If an asset is put to use for less than ……. days in the previous year, the depreciation is
charged at …..……. of normal rates.
a) 90 days, 75% b) 180 days, 60%
c) 180 days, 50% d) 100 days, 50%
83. M Ltd. purchased goods on credit from N Ltd. on 7 th May 2017 for ` 86,000 for which
payment of ` 15,000 is made in cash on 12th May; ` 30,000 by bearer cheque on 30th May;
&` 41,000 by account payee cheque on 13th June. The amount of disallowance u/s40A(3) is
a) ` 15,000 b) ` 30,000 c) Nil d) ` 86,000
84. A person carrying on business is required to get his accounts audited by a Chartered
Accountant if his gross receipts from business for the previous year exceed
a) ` 1,00,00,000 b) ` 50,00,000 c) ` 40,00,000 d) ` 60,00,000
85. Which of the following income is not chargeable as income of business or profession?
a) Profits and gains of business carried by an assessee during the previous year
b) Income derived by a trade, professional or similar association from specific services
performed for its members
c) Income from sale of house property
d) Salary received by a partner of a firm from the firm in which he is a partner
86. If a new machinery is purchased on 15.4.2017and put to use for the purpose of business on
28.12.2017, depreciation would be allowable at the rate of:
a)7.5 % b) 15 % c) 10 % d) 20 %
87. Financial statement of A on 31.3.2017 reveals that the following expenses were due during
year ended 31.3.2017 but have been paid after31.3.2017:
Employer‖s contribution to provident fund: ` 55,000 (` 25,000 paid on 15.7.2017, ` 10,000 paid
on 31.7.2017and ` 20,000 paid on 15.1.2018)
The due date of filing return is 31.7.2017. What would be the deduction for AY 2017-18?
a)` 55,000 b) ` 35,000 c) ` 10,000 d) ` 45,000
88. M owns the following commercial vehicles:

(i) 2 light commercial vehicles: one for 9 months and two days and the other for12 months
(ii) 2 heavy good vehicles: one for6 months & 25 days and otherfor11 months & 12 days.
(iii) 2 medium goods vehicles: one for6 months and the other for8 months and 15 days
Compute the income from business of Mifheopts for the scheme under section 44AE.
a) ` 3,90,000 b) ` 4,20,000 c) ` 4,05,000 d) ` 3,90,000
89. M owns 2 machineries eligible for depreciation @ 15%.WDV of these machines as on 1.4.2017
was ` 25,000 and` 40,000 respectively. No other asset was acquired in this block during year.
One of these machines was sold during previous year for` 75,000.Compute capital gain.
a) Short term capital gain of ` 10,000
b) Short term capital loss of ` 10,000
c) Long-term capital gain of ` 10,000
d) No capital gain as depreciation would be allowed on one of the machines left with M
90. For an industrial undertaking fulfilling the conditions, additional depreciation in respect of a
machinery costing ` 10 lakh acquired and installed on October 3, 2017 is

|Page
VIVEK GABA
a) `75,000 b) ` 1,50,000 c) ` 1,00,000 d) None of the above
91. An asset which was acquired for ` 5,00,000 was earlier used for scientific research. After the
research was completed, the machinery was brought into the business of the assessee. The
actual cost of the asset for the purpose of inclusion in the block of asset shall be :
a) ` 5,00,000
b) Nil
c) Market value of the asset on the date it was brought into business
92. In case the assessee follows mercantile system of accounting, bonus or commission to the
employee are allowed as deduction on:
a) due basis b) hybrid basis
c) due basis but subject to section 43B d) None of the above
93. Expenditure incurred on purchase of animals to be used by the assessee for the purpose of
carrying on his business& profession is subject to
a) depreciation
b) deduction in the previous year in which animal dies or become permanently useless
c) nil deduction
94. Deduction under section 40(b) shall be allowed on account of salary /remuneration paid to
a) Any partner b) Major partner only
c) Working partner only d) All the partners
95. Remuneration paid to working partner shall be allowed as deduction to a firm

a) In full b) Subject to limits specified in section 40(b)
c) None of these two d) Any of the above
96. Where assessee incurred capital expenditure on the plant & machinery, the expenditure
a) shall not be allowed as deduction
b) shall be allowed wholly in the year in which it is incurred
c) should be added to cost of plant & machinery and depreciation shall be allowed on same
97. Deduction of how much amount is allowed under section 35(1)(i)

a) 100 % b) 150 % c) 125 % d) 175 %
98. Deduction under section 37(1) is not allowed in respect of which of following?
a) Illegal expenditure b) corporate social responsibility expense
c) both of the above d) None of the above

a) Deduction under section 37(1) is allowed in respect of capital expenditure
b) CSR expense as per section 135 is not allowed under section 37(1)
c) Expense in nature of personal expense is allowed under section 37(1)
a) Expense in nature of personal or capital expense is not allowed as deduction u/s 37(1)

|Page
VIVEK GABA
b) Expense in nature of personal or capital expense is allowed as deduction u/s 37(1)
c) Expense on CSR activities is not allowed under section 37(1)
101. Deduction under section 37(1) is allowed on fulfillment of which of the condition?
(i) Expenditure should not be in the nature of expenditure described in sections 30 to 36.
(ii) Expenditure should not bein the nature of capital expenditure or personal expenses
(iii) Expenditure may be in the nature of capital expenditure or personal expenses
(iv) Expenditure may be expended wholly & exclusively for purposes of business/ profession
(v) Expenditure shall be expended wholly & exclusively for purposes of business/ profession
a) (i), (ii) and (v) b) (i), (iii) and (v)
c) (i), (ii) and (iv) d) (i), (ii), (iii) and (v)
102. Where royalty is payable to non-resident and chargeable to tax as per the Income tax Act is
paid without payment of tax as per the time limit u/s 200(1). However, tax is deducted and
payable before due date of filing of return u/s139(1). The amount so paid is allowed in ………
a) year in which tax is paid as tax is not paid as per time limit mentioned in section 200(1)
b) year to which payment relates since tax is paid before due date of filing of return
c) Subsequent year in which tax is paid
103. Royalty is payable to Non-resident in India on 2 September 2017 and chargeable to tax. TDS
is deducted on same and paid before expiry of the time prescribed under section 139(1).
Deduction of amount paid for royalty is allowed in previous year …..
a) 2016-17 b) 2015-16 c) 2017-18 d None
104. Fees for technical service payable to Non-resident outside India on 3 October 2017 and the
same is chargeable to tax. TDS is deducted on same and paid on or before due date
specified in section 139(1) i.e. by 31st July 2018. Deduction of amount for FTS is allowed in
previous year ……….
a) 2017-18 b) 2015-16 c) 2016-17 d) None
105. Any sum chargeable to tax payable to Non-resident outside India which is chargeable to tax
in India. The payment relates to AY 2018-19. TDS is deducted on same and paid on 31
November 2018. The sum shall be allowed as deduction during assessment year?
a) 2017-18 b) 2018-19 c) 2019-20 d) None
106. Which payment payable to resident shall be disallowed if tax is not deducted or deposited by
the payer?
a) any interest, commission or brokerage, rent, royalty, fees for professional services or fees
for technical services
b) amounts payable to a contractor or sub-contractor
c) any interest, commission or brokerage, rent, royalty, fees for professional services or fees
for technical services and amounts payable to a contractor or sub-contractor
d) any sum payable on which tax is deductible at source
107. How much amount shall be disallowed on non-deduction or non-payment of tax where sum is
payable to a resident?
a) 100 % of the amount b) 50 % of the amount

|Page
VIVEK GABA
c) 30 % of the amount d) Any of the above
108. How much amount shall be allowed in subsequent year where tax has not been paid in
previous year as per the due date mentioned in section 139(1) and paid in subsequent year?
a) 100 % of the amount b) 50 % of the amount
c) 30 % of the amount d) Any of the above
109. If an assessee being company invests ` 30 crore to acquire and install new plant and
machinery in Backward area during the previous year 2017-18. He shall be allowed investment
allowance of?
a) ` 3 crore b) `4.5 crore c) Nil d) ` 6 crore
110. Investment allowance under section 32AD is allowed at the rate of?
a) 10 % b) 20 % c) 15 % d) 25 %
111. Investment allowance under section 32AD is allowed to

a) any assessee b) individual and HUF
c) assessee being company d) None of the above
112. Investment allowance under section 32AD is allowed if assessee invests more than ` 25
crore in any previous year which is between?
a) 1.4.14 to 31.3.17 b) 1.4.15 to 31.3.18
c) 1.4.14 to 31.3.16 d) any previous year after 1.4.2014
113. Company can claim investment allowance under section 32AC(1) and 32AC(1A)
simultaneously in a previous year?
a) Yes b) No c) May be d) can‖t say
114. Investment allowance under section 32AC is not allowed on investment in which of the
following by the company?
a) Any second hand P&M (Indian or imported), Ship or aircraft
b) Asset whose actual cost already allowed as deduction and P&M installed in official
premises or residential accommodation or guest house
c) Either of above
d) None of the above i.e. investment in any asset is allowed as allowance
115. Asset for which allowance has been claimed under section 32AC shall be kept by assessee
for how many years?
a) 8 b) 5 c) 3 d) 7
116. Which of the following condition should be satisfied by assessee being company to claim
deduction under section 32AC(1A)?
(i) Company is in business of manufacturing or production of article or thing
(ii) Company may be in any business
(iii) new asset is acquired and installed during any PY beginning from 1.4.14 till 31.3.17
(iv) new asset is acquired and installed during any PY beginning from 1.4.14 till 31.3.18
(v) the amount of investment is more than ` 25 crore in a previous year
(vi) the amount of investment is more than ` 100 crore in a previous year
a) (ii), (iii) and (vi) b) (i), (iii) and (v)
c) (i), (iv), (v) d) (ii), (iv) and (vi)

|Page
VIVEK GABA
117. Which of the following condition should be satisfied by assessee being company to claim
deduction under section 32AC(1)?
(i) Company is in business of manufacturing or production of article or thing
(ii) Company may be in any business
(iii) new asset is acquired and installed between 1.4.13 to 31.3.15
(iv) new asset is acquired and installed during any PY beginning from 1.4.14 till 31.3.18
(v) the amount of investment is more than ` 25 crore in a previous year
(vi) the amount of investment is more than ` 100 crore in a previous year
a) (i), (iii), and (v) b) (ii), (iv) and (v)
c) (ii), (iv) and (vi) d) (i), (iii) and (vi)
118. A company invested 20 crore in P.Y. 2015-16 and 85 crore in P.Y. 2016-17. What amount of
investment allowance is allowed u/s 32AC in PY 2015-16 and PY 2016-17?
a) Nil, 12.75 b) 12.75 , Nil c) 12.75 , 3 d) Nil, Nil
investment allowance is allowed under section 32AC in PY 2015-16 and PY 2016-17?
a) Nil, 13.5 b) 4.5 , 13.50 c) 4.5 , 18 d) Nil, Nil
a) Nil, Nil b) Nil, 9.75 c) 3.75, 6 d) Nil, 3
a) Nil, 3 b) Nil, 12 c) 8, 3 d) 9 , Nil
122. If section 32AC(1) and section 32AC(1A), the amount of 100 crore or 25 crore is seen ……..
a) cumulatively for year for which deduction is allowed
b) cumulatively u/s 32AC(1) but separately for each year u/s 32AC(1A)
c) separately for year for which deduction is allowed
123. Where an assessee claims and is allowed deduction under section 35AD, he shall use the
asset in the specified business for how many years?
a) 8 b) 5 c) 3 d) 7
124. If during the period of 8 years, assessee who claimed deduction u/s 35AD uses the asset for
purpose other than specified business, what amount shall be taxable under head PGBP?
a) deduction so claimed & allowed
b) deduction so claimed & allowed as reduced by depreciation allowable u/s 32
c) either of the above
d) none of the above i.e. nothing is taxable
125. If during the period of 8 years, assessee who claimed deduction u/s 35AD becomes a sick
company and uses asset for purpose other than specified business, what amount shall be
taxable under head PGBP?
a) deduction so claimed & allowed
b) deduction so claimed & allowed as reduced by depreciation allowable u/s 32

|Page
VIVEK GABA
d) nothing is taxable
126. Assessee shall not be allowed which deduction if deduction u/s 35AD is claimed?
a) deduction under chapter VIA heading C c) deduction under section 10AA
127. Where interest is paid or payable outside India to NR and taxable in hands of the recipient
under I.T. Act and tax is to be deducted at source on said payments &same is not deducted
as per the time limit under section 200(1). TDS is paid after due date of filing of return. How
shall the amount be treated for the year to which it relates
b) is not allowed as deduction in the year to which it relates
128. Where interest is paid or payable outside India to NR and taxable in hands of recipient under
I.T. Act and tax is to be deducted at source on said payments &same is not deducted as per
the time limit under section 200(1). TDS is paid after due date of filing of return. How shall
the amount be treated for in the year of payment
b) is not allowed as deduction in the year to which it relates
129. Compute admissible deduction u/s 32AC of A Ltd. for AY 2016-17 and AY 2017-18 where
investment made is 80 crore and 22 crore in each year respectively?
a) Nil, Nil b) 12 , 3.3 c) 12, Nil d) 12, 3.3
investment made is 60 crore and 30crore in each year respectively& under which section?
a) 9, 13.5, 32AC(1A) b) 9, 4.5, 32AC(1A)
c) 9, 13.5, 32AC(1A) d) Nil, 3.3, 32AC(1A)
investment made is 25 crore and 25 crore in each year respectively & under which section?
a) Nil, Nil, None b) Nil, 3.75, 32AC(1A)
c) Nil, 15, 32AC(1A) d) 11.25, 3.75, 32AC(1A)
132. Compute admissible deduction u/s 32AC of G Ltd. for AY 2016-17 and AY 2017-18 where
a) 15.75, Nil, 32AC(1A) b) 15.75, 18, 32AC(1A)
c) Nil, 18, 32AC(1A) d) 15.75, Nil, 32AC(1)
133. Compute admissible deduction u/s 32AC of G Ltd. for AY 2016-17 and AY 2017-18 where
a) 2.25, 2.25, 32AC(1A) b) 15.75, Nil, 32AC(1A)
c) Nil, 4.5, 32AC(1A) d) Nil, Nil, 32AC(1A)
134. Compute admissible deduction u/s 32AC of H Ltd. for AY 2016-17 and AY 2017-18 where

|Page
VIVEK GABA
a) Nil, 4.5 b) 10.5, 15 c) 10.5, 4.5 d) 10.5, Nil
135. Compute admissible deduction u/s 32AC to V Ltd. for AY 2016-17 and AY 2017-18 where
a) Nil, 6 b) Nil, 7.5 c) 1.5, 6 d) 10.5, Nil
136. ABC Ltd., a company having two units – Unit A carries on specified business (u/s35AD) of
setting up and operating warehousing facility for storage of sugar; Unit B carries on non-
specified business of operating warehousing facility for storage of edible oil. Unit A
commenced operations on 1.4.2015 and claimed deduction of ` 100 lakh incurred on
purchase of two buildings for ` 50 lakh each (for operating a warehousing facility for storage
of sugar) u/s 35AD for A.Y. 2016-17. However, in February, 2017, Unit A transferred one of
its buildings to Unit B. What would be tax implication in hands of the company?
a) ` 50,00,000 is taxable in hands of company
b) ` 45,00,000 (` 50,00,000 – depreciation @ 10% for one year) is taxable in hands of
company
c) ` 40,00,000 is taxable in hands of company
d) Nothing is taxable
137. XYZ Ltd. made following payments in the month of March 2018 to residents without
deduction of tax at source. What would be the tax consequence for A.Y.2018-19, assuming
that the resident payees in all the cases mentioned below, have not paid thetax, if any,
which was required to be deducted by XYZ Ltd.?
Particulars Amount in `
(1) Salary to its employees 15,00,000
(2) Non-compete fees to Mr. X 70,000
(3) Directors‖ remuneration 25,000
a) ` 15,95,000 shall be disallowed since tax is not deducted

b) ` 95,000 shall be disallowed since tax is not deducted
c) Nothing shall be disallowed
d) ` 4,78,500 shall be disallowed since tax is not deducted
138. Under the Income tax act, 1961, depreciation on machinery is charged on?
a) Purchase price of the machinery
b) Market price of the machinery
c) Written down value of the machinery
d) All the above
139. Which of the following taxes are allowed as deduction while computing the business income:
a) Wealth tax b) Income Tax c) Sales tax d) None of the above
140. Vivek Ltd. purchased goods on credit from Divya Ltd. on 6thMay, 2017 for 86,000 which is
paid as 15,000 in cash on 11thMay, 2017; 30,000 by a bearer cheque on 31st may, 2017; and
41,000 by an account payee cheque on 16 May, 2017. How much amount shall be disallowed?
a) 15,000 b) 30,000 c) 41,000 d) 86,000

|Page
VIVEK GABA
141. Deduction for bad debt is allowed to an assessee carrying on business in the year in which
the debt is …………….. as bad?
a) Make provision b) Declared
142. Business loss relating to illegal business is ……………. as deduction?

a) Allowable b) Not allowable c) Exempted d) None of the above
143. The amount of additional depreciation in respect of new building constructed in financial year
2014-15 at a cost of 25 lakh for manufacturing garments will be……………..?
a) Nil b) 20% c) 10% d) 15%
144. A person, carrying on profession, has to get his account audited on compulsory basis if his
gross receipts in profession for previous year relevant to assessment year 2017-18 exceeds ……..
a) 15,00,000 b) 25,00,000 c) 1,00,00,000 d) 60,00,000
145. Under section 44AB, specified date means …………….. of the assessment year?
a) 30th September b) 31stjuly c) 30th November d) None of the above
146. Under the income tax act, 1961 the rate of depreciation on intangible assets is ………………?
a) 15% b) 25% c) 10% d) 60%
147. Where a company has incurred a capital expenditure of 1,00,000 towards promoting family
planning amongst employees, …………….. will be allowed as deduction in the current year and the
balance in ……… succeeding years.
a) 20,000, four b) 20,000, five
c) 1,00,000, four d) None of the above
148. Unabsorbed depreciation of any year can be carried forward for set off for an unlimited
period of time?
149. Income by way of winnings from lotteries in the hands of a dealer as business activity is not
chargeable to tax under head ‖PGBP‖?
150. Unabsorbed depreciation can be carried forward for maximum period eight assessment years?
151. Prize given to Suresh by the government of Madhya Pradesh on account of higher crop yield
in an agriculture income?
152. Income from lease of land for grazing of cattle required for an agriculture pursuits is
agriculture income?
153. If plant, machinery and furniture is not used for the purpose of his business or profession,
any expenditure incurred on same
a) may be allowed as deduction from income under head PGPB
b) will not be allowed as deduction from income under head PGPB
c) shall be allowed as deduction from income under head PGPB

|Page
VIVEK GABA
154. AMC Ltd. has set up project for in house research and development facility as approved by
prescribed authority for research of eligible project. The company‖s profit & loss account show
profit of ` 44,00,000 after debiting revenue expense of ` 12,50,000 on in-house research.
Company incurred capital expense of ` 10,00,000 as capital expenditure (including cost of
land purchased for `4,00,000)
a) 13,00,000 b) 25,50,000 c) 31,50,000 d) 19,50,000
155. As per section 40A(2), what kind of expenditure is covered

a) capital expenditure b) revenue expenditure
c) revenue and capital expenditure d) None of the above
156. Calculate what amount is disallowed u/s40(b) where Book profit of the firm is ` 5,00,000.
Remuneration paid to working partner is 3,50,000 and that to non-working partner is 90,000.
a) 3,50,000 b) 90,000 c) 4,40,000 d) Nil
157. How is deduction of capital expenditure on family planning allowed to company?

a) amount incurred in the year in which incurred b) equally over a period of 10 years
c) equally over a period of 5 years d) not allowed as deduction
158. Cash payment of ` 27,000 was made by AB Ltd. against Bill No. 456 to a contractor
engaged in plying of passenger carriage on 29th June 2017. How much amount is disallowed
under section 40A(3)
a) 27,000 b) 20,000 c) Nil d) 7,000
159. Interest, salary, bonus, commission or remuneration, by whatever name called, due to or
received by, a partner of a firm from such firm to the extent allowed u/s40(b) shall be taxable
under head ……………
a) Salary b) Other Sources
c) Profit and gain from business and profession d) None of the above
160. A partner of a firm who receives interest, salary, bonus, commission or remuneration from
firm ………
a) is taxable under head salary
b) is taxable under head PGBP to the extent allowed under section 40(b)
c) is taxable under head PGBP without any limit
d) is taxable under head Other Sources
161. A partner of a firm who receives salary, bonus, or remuneration from firm ………………
a) is taxable under head PGBP to the extent allowed under section 40(b)
b) is taxable under head salary
c) is taxable under head PGBP without any limit
d) is taxable under head Other Sources
162. Where assessee is in the business of renting of immovable property, rental income ………………….
a) is always taxable as Income from House Property
b) is always taxable as Income from PGBP
c) is always taxable as Income from Other Sources

|Page
VIVEK GABA
163. Which section provided deduction of depreciation?
a) section 30 b) section 31
c) section 32 d) section 37
164. Depreciation is allowed in respect of

a) tangible assets only b) intangible assets only
c) tangible and intangible assets d) none of the above
165. A lessor who is in the business of leasing, in respect of leased asset …………………..
c) can claim depreciation under head Other Sources
166. A lessor who is not in the business of leasing, in respect of leased asset …………………
c) can claim depreciation under head Other Sources
167. Depreciation under section 32 is allowed when asset is ready to use. Is the statement
correct?
a) Valid, depreciation is allowed when asset is ready to use
b) Invalid, depreciation is allowed when asset is put to use
c) Any of the above
168. Revaluation of asset shall be considered for the purpose of computing depreciation. Is the
statement correct?
a) Valid, revaluation of asset shall be considered b) Partly valid
c) Invalid, revaluation of asset shall not be considered d) None of the above
169. As per provisions of Income tax Act, it is not mandatory to claim depreciation. Is the
statement correct?
a) Valid, it is not mandatory to claim depreciation
b) Invalid, it is mandatory to claim depreciation
c) Partly valid (d) None of the above
170. Additional depreciation is levied under section
a) section 32 b) section 32(1)(iia)
c) section 32(1)(ii) d) section 32(1)
171. Where business has been succeeded by some other person, the depreciation of the year of
succession
a) Shall be allowed to Predecessor company only
b) Shall be allowed to Successor company only
c) Shall be allowed to both Predecessor and Successor in the ratio of number of days

|Page
VIVEK GABA
172. Depreciation under section 32 during each year shall be charged on
a) Book value of block of asset b) WDV of block of asset
173. When shall amount on sale of asset be chargeable to tax under head Capital Gains
a) When block of asset cease to exist
b) When sale proceeds of asset exceeds WDV of asset and cost of asset acquired and
expenses on transfer
c) Any of the above
174. Which type of capital gain can arise under section 50?
c) depends upon period of holding of block of asset d) None of the above
175. How can unabsorbed depreciation carried forward and set off?
a) from any income under any head
b) from income under head PGBP
c) from income of same business of which it relates to
d) from any income under any head except salary
176. Depreciation can be carried forward even if the business of assessee does not exist. Is the
statement correct?
a) Valid, depreciation can be carried forward even if business of assessee is discontinued
b) Invalid, depreciation can be carried forward only if business exist
c) Any of the above
177. Which expense shall be allowed as deduction in respect of expense incurred on conducting
research prior to commencement of business?
a) expenditure on salary (excluding perquisite) and purchase of material used in research
within the 3 years immediately preceding the year of commencement of business
b) expenditure on salary (excluding perquisite) used in research within the 3 years
immediately preceding the year of commencement of business
c) salary (excluding perquisite) and on purchase of material used in research within the 4
years immediately preceding the year of commencement of business
178. Deduction of how much amount is allowed under section 35(1)(ii)
a) 100 % b) 175 % c) 125 % d) 150 %
179. Deduction of how much amount is allowed under section 35(1)(iia)

a) 125 % b) 150 % c) 100 % d) 175 %
180. Where an amount is paid to a company for conducting research and deduction is allowed
under section 35(1)(iia). The company to whom amount is paid should
a) be registered in India
b) has main object of research and development

|Page
VIVEK GABA
c) be approved by the prescribed authority in the prescribed manner for the purpose of this
clause
d) all of the above
181. When assessee claims deduction under section 35, he ……………………… depreciation on same.
a) may be allowed b) shall be allowed
c) cannot claim d) None of the above
182. Unabsorbed research capital expenditure can be carried forward in the similar manner like
a) any other business loss b) depreciation
c) either of the above d) None of the above
183. Any expense on advertisement in any souvenir, brochure, pamphlet or the like published by a
political party shall not be allowed as deduction under head PGBP. However, it is allowed
under section ………
a) 80GGB and 80GGC b) 80GG
184. An assessee paid an amount of ` 5,00,000 to Congress, the amount so paid is claimed as
expenditure by assessee under head PGBP. Is the intention of assessee correct?
a) Valid b) Invalid
185. What is the amount of deduction allowed under section 35CCC?
c) 150 % of the expenditure d) 125 % of the expenditure
186. Deduction under section 35CCD is allowed in respect of

a) expenditure on agricultural extension project notified by Board
b) expenditure on skill development project notified by the Board
c) any of the above
187. If deduction of any expenditure is claimed under section 35CCC or 35CCD, the
a) deduction may be allowed for such expenditure under any other provisions of the Act
b) deduction shall not be allowed for such expenditure under any other provisions of the Act
c) deduction shall be allowed for such expenditure under any other provisions of the Act
case of non-corporate assessee
a) 5% of Cost of project b) 5% of Capital employed
c) Any of above, at the option of the assessee d) None of the above
189. B Ltd. is getting demerged to form a new company, V Ltd. An expense of ` 5,00,000 is
incurred by B Ltd. how much deduction shall be allowed to B Ltd for this year & future year?
a) B Ltd. shall be allowed deduction of ` 1,00,000 for this year and future years
b) B Ltd. shall be allowed deduction of ` 1,00,000 for this year and no deduction in future
year since B Ltd. does not exist
c) Nil during this year and future year (d) None of the above

|Page
VIVEK GABA
190. Where an assessee incurs any expenditure by way of payment of any sum to an employee
in connection with his voluntary retirement, deduction shall be allowed in how many years?
a) six b) five c) ten d) one
191. Recovery of bad debt is taxable even if the business or profession is not in existence in the
previous year in which recovery is made. State the validity of the statement?
a) Valid b) Invalid
192. What amount of deduction is allowed to firm in respect of revenue expenditure on family
planning?
a) amount incurred b) Nil
c) 150% of amount incurred d) Any of the above
193. What amount of deduction shall be allowed to company in respect of revenue expenditure
incurred on family planning?
a) amount incurred b) Nil
c) 150% of amount incurred d) Any of the above
194. STT paid by the assessee during the previous year on taxable securities transactions entered
into by him in course of his business is allowed as deduction if the securities are held as
capital asset. Is the statement correct?
a) valid b) Invalid
195. STT paid by the assessee during the previous year on the taxable securities transactions
entered into by him in course of his business is allowed as deduction if the securities are held
as Stock in trade?
a) Valid b) Invalid
196. Deduction under section 37(1) is allowed on fulfillment of which of the following condition?
(i) expenditure other than specifically allowed in sections 30 to 36
(ii) expenditure not in the nature of capital expenditure
(iii) expenditure in the nature of personal expenses
(iv) expenditure not in the nature of personal expenses
(v) expenditure may be in the nature of capital expenditure
(vi) wholly and exclusively for the purposes of the business or profession of the assessee
a) (i), (ii), (iii) and (vi) b) (i) and (vi)
c) (i), (ii), (iv) and (vi) d) all of the above
197. Rate of depreciation chargeable on fully temporary wooden structure for assessment year is
a) 5 % b) 10 %
c) 40 % d) None of the above
198. An electricity company charging depreciation on straight line method on each asset
separately, sells one of its machinery in April, 2017 at ` 1,20,000. The WDV of the machinery
at the beginning of the year i.e. on 1st April, 2017 is ` 1,35,000. No new machinery was
purchased during the year. The shortfall of ` 15,000 is treated as

|Page
VIVEK GABA
a) Terminal depreciation b) Short-term capital loss
c) Normal depreciation d) None of the above
199. XYZ Ltd. incurred capital expenditure of ` 1,50,000 on 01.04.2017 for acquisition of patents
and copyrights. Such expenditure is –
a) eligible for deduction in 14 years from A.Y.2017-18
b) eligible for deduction in 5 years from A.Y.2017-18
c) subject to depreciation under section 32
200. Under section 44AE, presumptive taxation is applicable at a particular rate provided the
assessee is the owner of a maximum of certain number of goods carriages. The rate per
month or part of the month relevant for A.Y.2018-19 and the maximum number specified under
the section are –
a) ` 5,000 for a heavy goods carriage and `4,500 for other goods carriages for an assessee
owning not more than 10 goods carriages at any time during the year
b) `3,500 per carriage for an assessee owning not more than 10 goods carriages at the end
of the previous year
c) ` 5,000 for a heavy goods carriage and `4,500 for other goods carriages for an assessee
owning not more than 12 goods carriages at the end of the previous year
d) ` 7,500 for all kind of vehicles
201. In the case of a non-resident engaged in the business of operation of aircraft, the income is
determined under section 44BBA at –
a) 7.5% of freight received in India or outside India for carriage of goods etc. from India and
freight received or deemed to be received in India for carriage of goods etc. from outside
India
b) 5% of freight received in India or outside India for carriage of goods etc. from India and
freight received or deemed to be received in India for carriage of goods etc. from outside
India
c) 5% of freight received in India or outside India for carriage of goods etc. from India and
freight received or deemed to be received outside India for carriage of goods etc. from
outside India
202. The W.D.V. of a block (plant and machinery, rate of depreciation 15%) as on 01.04.2017 is `
3,20,000. A machinery costing ` 50,000 was acquired on 01.09.2017 but put to use on
01.11.2017. During Jan 2 2018, part of this block was sold for `2,00,000. The depreciation for
A.Y.2018-19 would be –
a) `21,750 b) `25,500
c) `21,125 d) None of the above
203. Expenditure incurred on family planning amongst the employees is allowed to

a) any assessee
b) a company assessee
c) an assessee which is a company or cooperative society
d) an assessee who is individual

|Page
VIVEK GABA
204. Which of the following income is not taxable under head PGBP
a) Income from illegal business b) Income from selling lottery tickets
c) Income from speculative business d) Dividend received by stock broker
205. Where an asset has been utilized 70% for the purpose of business and rest for personal
purpose, how much depreciation on such asset is allowed to the assessee?
a) 65 % of total depreciation b) total depreciation
c) 70 % of total depreciation d) Nil since used for personal purpose
206. Half of the normal depreciation is allowed if

a) Asset is acquired during the year
b) Asset is put to use for less than 180 days in the year of acquisition
c) Asset is put to use for less than 180 days in any year
207. Which of the following rate of depreciation is correct?

a) computer software: 20 %
b) motor car running in the business of plying or hiring: 30 %
c) intangible assets: 15 %
d) pollution control equipment: 100 %
208. A new plant of ` 25,00,000 was purchased by ABC Ltd., engaged in the business of
manufacturing. Compute what amount of depreciation is allowed where normal rate of
depreciation is 15%. The plant was purchased on 8 August 2017 and put to use on 31st
September 2017.
a) Normal depreciation @ 15 % and additional depreciation @ 10 %
b) Normal depreciation @ 15 % and additional depreciation @ 20 %
c) Normal depreciation @ 7.5 % and additional depreciation @ 10 %
d) Normal depreciation @ 7.5 % and additional depreciation @210 %
209. Deduction of telecommunication licence is allowed

a) at the rate of 10% b) at the rate of 25%
c)over the life of license d) in the year of payment
210. Calculate the amount of investment allowance allowed under section 32AC where assessee
invested `90 crore in new plant in PY 2015-16 and ` 20 crore in PY 2016-17.
a) PY 2014-15: Nil, PY 2015-16: 3 crore
b) PY 2015-16: Nil, PY 2016-17: 16.5 crore
c) PY 2015-16: 13.5, PY 2016-17: Nil
d) PY 2014-15: Nil, PY 2015-16: Nil
211. Calculate the amount of investment allowance allowed under section 32AC where assessee
invested ` 110 crore in new plant in PY 2015-16 and ` 30 crore in PY 2016-17.
a) PY 2015-16: Nil, PY 2016-17: 4.5 crore b) PY 2014-15: Nil, PY 2015-16: 4.5 crore
c) PY 2015-16: 16.5, PY 2016-17: 4.5 crore d) PY 2014-15: Nil, PY 2015-16: Nil
212. During 3 years immediately preceding the previous year in which business is commenced. X
Ltd. incurred following expenditure

|Page
VIVEK GABA
Cost of land : ` 97,50,000
Cost of building : ` 60,00,000
Cost of material : ` 6,00,000
Staff salary : ` 10,50,000
Electricity charges and rental expense : ` 7,50,000
What amount of deduction is allowed u/s35 in respect of above mentioned expenses?
a) 60,00,000 + 6,00,000 + 7,50,000 = 73,50,000
b) 97,50,000 + 6,00,000 + 10,50,000 =1,14,00,000
c) 60,00,000 + 6,00,000 + 10,50,000 = 76,50,000
d) 60,00,000 +97,50,000 + 10,50,000=1,68,00,000
213. An assessee was allowed deduction of 1,50,000 against 1,80,000 as claimed by the
assessee. During the year assessee recovered 50,000, what amount shall be taxable in the
hands of assessee for the amount so recovered?
a) 20,000 b) 30,000 c) 20,000 d) Nil
214. A firm paid interest on working capital to its non-working partner at the rate of 19 % p.a.
whereas partnership deed allows interest on loan on working capital at the rate of 15 % p.a.
What would be its tax treatment
a) Whole amount is allowed b) Whole amount is disallowed
c) interest @ 4 % is disallowed d) interest at 7 % is disallowed
215. A firm paid remuneration to its non-working partner. What would be tax treatment of
remuneration so paid
a) whole amount is allowed b) 40% amount is disallowed
c) allowed subject to section 40(b) d) Whole amount is disallowed
216. An assessee who is partner of the firm received profit from the firm. The profit so received
a) taxable under head PGBP b) Exempt u/s 10(2A)
c) Fully taxable under head salary d) exempt under section 10(4)
217. Calculate what amount is disallowed u/s40(b) where Loss the firm is ` 5,00,000.
Remuneration paid to working partner is 4,70,000.
a) 4,70,000 b) 1,80,000 c) 80,000 d) 1,50,000
218. The business income of a company is ` 60,000. The income is arrived before claiming
deduction of 90,000 being 1/5 of capital expenditure on family planning. How should balance
30,000 be treated
a) unabsorbed expenditure treated like unabsorbed depreciation b) as business loss
c) Dead loss no tax treatment d) None of the above
219. Where a person is carrying on business, when is books of account required to be

maintained by him
a) if the total income of any one of 3 preceding year exceeds ` 1,20,000
b) if gross turnover or sales of any 3 preceding year exceeds ` 10,00,000
c) if the total income of any one of 3 preceding year exceeds ` 1,50,000
d) if either of a) or b) is satisfied

|Page
VIVEK GABA
220. When is tax audit of an assessee carrying on profession compulsory
a) If the gross sales/ turnover/ receipts exceed 60 lakh
b) if the total income exceeds ` 1,50,000
c) If the gross sales/ turnover/ receipts exceed 1 crore
d) If the gross sales/ turnover/ receipts exceed 25 lakh
221. When is tax audit of an assessee carrying on business compulsory

a) If the gross sales/ turnover/ receipts exceed 1 crore
b) if the total income exceeds ` 1,50,000
c) If the gross sales/ turnover/ receipts exceed 10 crore
d) If the gross sales/ turnover/ receipts exceed 60 lakh
222. Cash payment of ` 60,000 were made by AK Ltd. against Bill No. 2890 to a contractor on
29th June 2017. How much amount is disallowed under section 40A(3)
a) ` 20,000 b) ` 30,000 c) 60,000 d) ` nil
223. Cash payment of ` 58,000 was made by AB Ltd. against Bill No. 2890 of ` 40,000 and bill
no. 2989 of ` 18,000 to a contractor on 29th June 2016. How much amount is disallowed
under section 40A(3)
a) ` 58,000 b) ` 18,000 c) Nil d) ` 40,000
224. Expenditure incurred in carrying out illegal business is

a) not allowed as deduction in any case
b) allowable as deduction, if gross total income is less than ` 5 lakhs
c) allowable as deduction in all cases
d) allowable as deduction, if income from illegal business is offered to tax
225. Deduction under section 40(b) shall be allowed on account of salary/ remuneration paid to:
a) any partner b) major partner only
c) working partner only d) None of the above
226. Salary, Bonus, Commission or Remuneration due to or received by a working partner from
the firm is taxable under the head:
a) Income from Salaries b) Income from Other Sources
c) Profit and Gains of Business or Profession d) None of the above
227. Perquisites received by the assessee during the course of carrying on his business or
profession is taxable under the head:
a) Income from Salaries b) Income from Other Sources
c) Profit and Gains of Business or Profession d) None of the above
228. Under the head PGBP, the method of accounting which an assessee can follow shall be:
a) mercantile system only b) cash system Only
c) at the option of assessee d) hybrid system
229. V, who was carrying on agency business, received a sum of 5,00,000 from his principal for
termination of agency. Compensation Amount so received shall be:
a) Exempt it is a capital receipt b) Fully Taxable under the head PGBP
c) Taxable as Income from other sources d) None of the above

|Page
VIVEK GABA
230. Depreciation is allowed to:
a) The Owner of Asset b) Owner includes beneficial owner of asset
c) Lessee d) None of the above
231. Electricity companies are allowed depreciation on the basis of:

a) Block of asset
b) Each Asset Separately unless the assessee opts for block of asset system in the first
previous year of its commencement
c) Either on Block of asset or Each Asset separately provided the option is exercised in the
first previous year
232. Where the Electricity company charging depreciation on SLM basis on each asset separately,
sells any asset for a price less than the opening WDV the balance amount shall be treated
as:
a) Short term capital loss b) Terminal Depreciation
c) Written down value d) None of the above
233. V Acquired an asset for 5,22,000 which includes 72,000 as excise duty for which the
assessee has claimed CENVAT Credit. The Actual cost of acquisition to be included in the
block of asset shall be:
a) 5,22,000 b) 4,50,000
c) 5,94,000 d) None of the above

|Page
VIVEK GABA
ANSWERS
1. c) 27. d) 53. c) 79. d) 105. c) 131. a) 157. c) 183. a) 209. c)

2. c) 28. c) 54. b) 80. c) 106. d) 132. a) 158. a) 184. b) 210. c)
3. a) 29. b) 55. c) 81. c) 107. c) 133. d) 159. c) 185. c) 211. c)
4. c) 30. c) 56. b) 82. c) 108. c) 134. c) 160. b) 186. b) 212. c)
5. b) 31. a) 57. c) 83. b) 109. b) 135. a) 161. a) 187. b) 213. a)
6. b) 32. c) 58. b) 84. a) 110. c) 136. b) 162. a) 188. a) 214. c)
7. c) 33. b) 59. c) 85. c) 111. c) 137. d) 163. c) 189. a) 215. d)
8. b) 34. d) 60. a) 86. a) 112. a) 138. c) 164. c) 190. b) 216. b)
9. b) 35. c) 61. a) 87. b) 113. b) 139. c) 165. a) 191. a) 217. d)
10. c) 36. b) 62. c) 88. b) 114. c) 140. b) 166. c) 192. b) 218. a)
11. c) 37. a) 63. b) 89. a) 115. b) 141. b) 167. b) 193. a) 219. d)
12. a) 38. a) 64. d) 90. d) 116. b) 142. b) 168. c) 194. b) 220. d)
13. b) 39. b) 65. b) 91. b) 117. d) 143. a) 169. b) 195. a) 221. a)
14. a) 40. c) 66. b) 92. c) 118. a) 144. b) 170. b) 196. c) 222. c)
15. b) 41. a) 67. d) 93. b) 119. b) 145. a) 171. c) 197. c) 223. d)
16. b) 42. a) 68. d) 94. c) 120. a) 146. b) 172. b) 198. a) 224. d)
17. a) 43. c) 69. b) 95. b) 121. d) 147. a) 173. c) 199. c) 225. c)
18. c) 44. d) 70. a) 96. c) 122. b) 148. a) 174. a) 200. d) 226. c)
19. c) 45. b) 71. b) 97. a) 123. a) 149. a) 175. d) 201. b) 227. c)
20. d) 46. b) 72. b) 98. c) 124. b) 150. a) 176. a) 202. a) 228. c)
21. b) 47. a) 73. b) 99. b) 125. d) 151. a) 177. a) 203. b) 229. b)
22. a) 48. b) 74. a) 100. b) 126. c) 152. a) 178. d) 204. d) 230. b)
23. d) 49. a) 75. b) 101. a) 127. b) 153. b) 179. c) 205. c) 231. b)
24. c) 50. a) 76. a) 102. b) 128. c) 154. d) 180. d) 206. b) 232. b)
25. c) 51. b) 77. c) 103. c) 129. c) 155. b) 181. c) 207. d) 233. b)
26. b) 52. b) 78. b) 104. a) 130. b) 156. b) 182. b) 208. b)

|Page
VIVEK GABA
INCOME FROM OTHER
SOURCES 8
Sec 56(1) : Basic of Charge
Income which does not specifically fall under any other four heads of income is taxable under
head Other Sources.
Eg: family pension, fees received by MP/MLA, Guest Lecture salary, income from sub-letting.
Sec 56(2) : Specific Incomes

Following income shall be taxable under head “Other Sources”:
1. Dividend income.
2. Sum received under a Keyman insurance policy including bonus.
3. Interest on securities.
4. Interest on compensation or enhanced compensation on receipt basis.
5. Casual Income (Lotteries, races, card games, gambling etc.) taxable @ 30% u/s 115B.
6. Income from Letting of machinery, plant or furniture along with building.
7. any sum of money received as an advance or otherwise in the course of negotiations for
transfer of a capital asset, if,
(a) such sum is forfeited; and
(b) the negotiations do not result in transfer of such capital asset
Sec 57 : Deductible Expenses
1. Interest any exp. by way of commission or remuneration of such income is deductible.
2. 50% of Interest received on original compensation or enhanced compensation on compulsory
acquisition.
3. Family pension 33.33% of pension or ` 15,000, whichever is less.
4. Income from letting, deduction of repair, insurance and depreciation.
5. Any other exp. incurred wholly and exclusively for earning such income.
Sec 58 : Expenses Not Allowed Deduction

1. Personal expenses 2. Interest paid o/s India on which TDS not deducted.
3. Income Tax or Wealth Tax. 4. Any exp. in connection with lottery, crossword puzzles etc.
5. Expenditure beyond limit specified insection 40A.
However, expenditure incurred for activity of owning and maintaining race horse shall be allowed as
deduction.

|Page
VIVEK GABA
@DIVIDENDS
Corporate Dividend Tax (CDT): Every Indian co. shall pay CDT @ 15 % at the time of payment
of dividend except for dividend u/s 2(22)(e).It shall be levied on gross amount instead of amount
paid net of taxes. (now effective rate of CDT is 20.9248%)
The principle officer of the domestic company and the company shall be liable to pay tax on
distributed profits to credit of the central government within 14 days from the date of –
a) Declaration of any dividend; or
b) Distribution of any dividend; or
c) Payment of any dividend,
whichever is earliest
Sec 10(34): Any income paid by way of dividend (on which CDT has been paid) from Indian co.
is exempt in the hands of shareholder except dividend u/s 2(22)(e).
EXEMPTION UNDER SECTION 10(34) NOT TO APPLY TO DIVIDEND

CHARGEABLE TO TAX IN ACCORDANCE WITH SECTION 115BBDA
Effectivefrom:A.Y.2017-18
1) Section 10(34) exempts dividend received by a shareholder of a domestic company, since
the same is subject to dividend distribution tax (DDT) under section 115-O.
2) Under section115-O, dividends distributed by a domestic company are subject to tax

@15% at the time of distribution in the hands of company declaring dividend. This may
result in vertical in equity amongst the tax payers since dividend distributed to those
shareholders (who receive high dividend) are subject to tax only at the rate of 15%
whereas had such income been taxable in their hands directly, the same would have
been subject to tax at the rate of 30%.
1. To remove this vertical in equity, section 115BBDA has been inserted to provide that any
income by way of aggregate dividend in excess of `10lakh shall be chargeable to tax in
the case of ALL RESIDENT ASSESSEE except:
 Domestic Company
 Institution Referred to in Section 10(23C)
 Religious Trust and charitable trust registered u/s 12AA.
2. This section shall apply where the total dividends received by the specified assessee from all
companies taken together, exceeds Rs. 10 lakhs during the previous year.
3. The amount in excess of 10 lakh shall be taxed at the rate of 10% (plus surcharge and cess)
4. No deduction in respect of any expenditure or allowance or set off of losses shall be allowed
to assessee under any provision of the Act in computing the Income by way of dividends.
5. Dividends shall include deemed dividends except under section 2(22)(e).

|Page
VIVEK GABA
6. It may be noted that company shall also pay CDT under section 115-O on the dividends which
is getting taxed under section 115BBDA in the hands of shareholders.
3) Accordingly, a proviso has been inserted in section 10(34) to provide that the
exemption available there under in respect of dividend received by a share holder
from a domestic company would not apply to income by way of dividend chargeable
to tax under section 115BBDA.
Illustration 7 of Amendment by FA, 2016:

A Ltd., a domestic company, declared dividend of ` 170 lakh for the year F.Y. 2015-16 and
distributed the same on10.7.2016. Mr. X, holding 10% shares in A Ltd., receives dividend of
` 17 lakh in July, 2016. Mr. Y, holding 5% shares in A Ltd., receives dividend of ` 8.50
lakh. Discuss the tax implications in the hands of Mr. X and Mr. Y, assuming that Mr. X
and Mr. Y have not received dividend from any other domestic company during the year.
Solution:
(i) Dividend of ` 170 lakh declared and distributed in the P.Y.2016-17 is subject to dividend
distribution tax in the hands of A Ltd., a domestic company.
(ii) In the hands of Mr. X, dividend received upto `10 lakh would be exempt under
section10(34).` 17lakh,being dividend received in excess of ` 10 lakh, would be
taxable @ 10% as per section 115 BBDA. Such dividend would not be exempt
under section10(34).Therefore, tax payable by Mr. X on dividend of ` 7 lakh under
section115BBDA would be ` 72,100 [i.e.,10% of ` 7 lakh + cess @ 3%].
In the hands of Mr. Y, entire dividend of `8.50 lakh received would be exempt under section
10(34), since only dividend received in excess of ` 10 lakh would be taxable under
section115BBDA.
NEW SECTION 115BBDA

TAX ON CERTAIN DIVIDENDS RECEIVED FROM
DOMESTIC COMPANIES
1. This Section shall apply to ALL RESIDENT ASSESSEE except:
 Domestic Company
 Institution Referred to in Section 10(23C)
 Religious Trust and charitable trust registered u/s 12AA.
2. This section shall apply where the total dividends received by the specified assessee from all
companies taken together, exceeds Rs. 10 lakhs during the previous year.
3. The amount in excess of 10 lakh shall be taxed at the rate of 10% (plus surcharge and cess)
4. No deduction in respect of any expenditure or allowance or set off of losses shall be allowed
to assessee under any provision of the Act in computing the Income by way of dividends.
5. Dividends shall include deemed dividends except under section 2(22)(e).

|Page
VIVEK GABA
6. It may be noted that company shall also pay CDT under section 115-O on the dividends which
is getting taxed under section 115BBDA in the hands of shareholders.

Mr. Vivek invested in shares and received dividend during the year at various dates as under:
Date of receipt Scrip Nature of dividend Amount of Dividend

27-6-2016 GAIL Final 1,75,000
25-8-2016 TCS Final 82,000
12-9-2016 ONGC Final 2,34,000
15-9-2016 BHEL Final 98,000
27-11-2016 CIPLA Interim 2,73,000
2-2-2017 NTPC Interim 1,69,000
To earn the dividend income Mr. Vivek Spend 67,000 during the year. Mr. X also earned the
following incomes:
 Rent received from House located in South Delhi – 6,00,000
 Income from business (computed) – 3,60,000
Compute total tax payable by him for the assessment year 2017-18.
Solution:
Computation of Income and Tax Liability of Mr. Vivek
Assessment Year 2017-18
Particulars Amount Amount
Income under the head House Property
Rent Received 6,00,000
Less: 30% under section 24(a) 1,80,000 4,20,000
Profit and gains of business or profession

3,60,000
Income from other sources
Income from dividends 31,000
Total Income 8,11,000
Tax on dividends@10% (10,31,000 – 10,00,000) 3,100

Tax on other income 81,000
Total Tax 84,100
Add: EC & SHEC @ 3% 2,523
Tax Payable 86,623
i.e.
86,620
Arya Global Shares and Securities Pvt. Ltd., a resident, earned a dividend of 34,56,000 during
the year ended 31-3-2017 from various securities in which the company was trending. Discuss
the tax implication on dividend income.

|Page
VIVEK GABA
Answer:
Since the dividend is received by the company, therefore, section 115BBDA is not applicable.
Total dividend earned by company shall be exempt from tax under section 10(34).
Section : 115BBD
Tax on certain dividends received from foreign companies
(Amended via FA 2015)
Prior to insertion of section 115BBD, dividend received from foreign companies was taxable in the
hands of Indian company @ 30% plus applicable surcharge & Cess. It may be noted that dividend
received from Indian company is exempt from income tax under section 10(34).
Section 115BBD has introduction to provide that where total income of an Indian company includes
any income by way of dividends received from foreign subsidiary company, then such dividends
shall be taxable @ 15% (plus surcharge and cess) on gross amount of dividends. No expenditure
in respect of such dividends shall be allowed under the act.
Foreign subsidiary company means a foreign company in which Indian company holds 26% or
more equity share capital.
@Section 2(22) Deemed Dividend

Dividend include to the extent of accumulated profits whether capitalized or not-
a) Any distribution by a co., if such distribution reduces company‖s assets.
b) Distribution of debenture/deposit certificates to S.H and bonus share to preference shareholders
c) Distribution of accumulated profits on its liquidation immediately before the date of liquidation
except to preference shareholders
d) Distribution of accumulated profits on reduction of share capital except to P.S.H.
Dividend include to the extent of accumulated profits only
e) Any advance/loan by a PRIVATE company to
i) equity shareholders holding not less than 10% VP
or
ii) any concern in which such member is having not less than 20% profit sharing
TAXABILITY OF GIFTS
@SEC 56(2)(X) GIFTS RECEIVED BY INDIVIDUAL/ HUF

Any sum of money or value of property received without consideration/ inadequate consideration
shall be taxable in hands of the recipient, being an individual or HUF.
For ceiling of ` 50000, no.
Nature of asset of transaction to be looked Taxable value
at
Money All transactions of money If aggregate sum exceeds ` 50,000
- Without Consideration
Immovable property Single Transaction Stamp duty value of the property, if
- Without Consideration it exceeds ` 50,000
Immovable property Single Transaction The difference between the stamp
- Inadequate duty value of the property and the

|Page
VIVEK GABA
Consideration* consideration, if it exceeds ` 50,000
Movable property All transactions The aggregate fair market value of
- Without Consideration the property, if it exceeds ` 50,000
Movable property All transactions The difference between aggregate
- Inadequate fair market value &consideration, if it
Consideration exceeds ` 50,000
*Focus Area: (for immovable property) (Amended by Finance Act 2013)

If date of agreement and date the registration is not same, then the SDV on date of agreement
shall be taken as sale consideration if consideration or part thereof has been received on or before
the date of agreement otherwise than by way of cash. In all other cases, SDV as on date of
registration shall be deemed as sales Price.
The property so transferred shall be capital asset in the hands of the receiver.
Section 49(4): When section 56(2)(vii) is attracted in the hands of receiver, then FMV of property
or SDV of property shall be deemed to be cost of acquisition.
“Property” means (only in nature of capital asset)

a) immovable property being land or building or both, b) shares and securities,
c) archaeological collections, d) jewellery,
e) drawings, f) paintings,
g) sculptures, h) any work of art or bullion.
Provided that nothing shall be taxable if gift has been received(Amended by FA, 2016)
a) from any Relative; or b) on occasion of the Marriage of individual; or
c) in contemplation of death of payer; or d) under a will or by way of inheritance; or
e) from any local authority, university, educational institute or institute registered under section
12AA or 10(23C).
f) any shares received by an individual or HUF as a consequence of demerger or
amalgamation of a company or business reorganisation of a cooperative bank shall not be
subject to tax by virtue of the provisions contained in section 56(2)(vii).
Note1:Children of Brother & Sister of the individual are not covered under the definition of relative.
Note 2: Limit of ` 50,000 shall be applicable separately for Money, Movable property & Immovable
Property.
Sec 56(2)(X)
Transfer of shares without consideration/ inadequate consideration attracting 56(2) for firms and
companies.
Sec 56(2)(viib)
Consideration received in excess of FMV of shares (issued at premium) by closely held company.

|Page
VIVEK GABA
PRACTICE QUESTIONS
Question 1: Objective type questions
1. Avinash received an aggregate gift of ` 75,000 on 10th August, 2017 from his three friends.
The amount chargeable to tax in this case should be:
a) ` 50,000 b) ` 75,000 c) ` 25,000 d) Nothing is taxable
2. Is family pension is taxable from other sources

3. Is gift from an unrelated person tax free upto` 50,000
Solution: 1 – b), 2– Yes, 3 - Yes
Question 2: Mrs. Ashok who draws a salary of ` 25,000 p.m. received the following gifts during
the previous year 2017-18:
(i) Gift of jewellery, fair market value of which is ` 3,00,000 on 17.5.2014 from her fiancee.
(ii) Gift of ` 51,000each received from her 4 friends on occasion of her marriage on 21.10.2015.
(iii) Gift of ` 5,00,000 on 16.4.2015 from a friend.
(iv) Gift of ` 60,000on 22.11.2015 from her father‖s brother.
(v) Gift of ` 1,00,000 on 25.11.2015 from her mother's sister.
(vi) Gift of ` 50,000 on 1.12.2015 from her husband's friend.
(vii) Gift of ` 28,000 on 15.12.2015 from her brother‖s father in law.
(viii) Gift of ` 21,000 on 25.12.2015 from her mother's friend
(ix) Gift of ` 1,31,000 from her husband‖s brother.
(x) Scholarship of ` 1,10,000 from a charitable institution registered under section 12AA.
(xi) Gift of `30,000 from her employer
(xii) Gift of immovable property from her friend whose stamp duty value is ` 5,00,000.
Solution:
Particulars Amount (`)
Income under head salary 3,00,000
Salary 25,000 x 12 30,000
Add: cash gift from employer 3,30,000
Income from other sources
I. Gift of Money
(i) Gift received from her 4 friends are exempt as it has been received on the Nil
occasion of marriage.
(ii) Gift from her friends is includable 5,00,000
(iii) Gift from her father‖s brother is exempt. (covered in definition of relative)
(iv) Gift from her mother‖s sister is exempt. (covered in definition of relative)
(v) Gift from her husband's friend is taxable as aggregate sum of money 50,000
received during the year exceeds ` 50,000.
(vi) Gift from her brother‖s father in law is taxable (not covered in definition of 28,000
relative)
(vii) Gift from her mother‖s friend is taxable as aggregate sum of money 21,000
received during the year exceeds ` 50,000.

|Page
VIVEK GABA
(viii) Gift from her husband‖s brother is exempt. (covered in definition of relative)
(ix) Gift from her employer is taxable under head salary
(x) Gift in form of scholarship from a charitable institution registered u/s12AA Exempt
II. Gift of movable property
Gift of jewellery is taxable 3,00,000
III. Gift of immovable property
Gift of immovable property received from her friend 5,00,000
OBJECTIVE QUESTIONS
1. On 30th December Ram gets by gift a commercial flat from elder brother of his father in law
(stamp duty value is ` 25,00,000). The amount chargeable to tax in the hands of Ram is
a) ` 25,00,000 b) ` 24,50,000 c) ` 20,00,000 d) Nil
2. On 5thFebruary 2017, R gets a gift of motor car from his relative M. Fair market value of the
car is ` 3,60,000.The amount taxable u/s 56(2)(vii) is
a) ` 3,60,000 b) ` 3,10,000 c) Nil d) ` 50,000
3. Income from other sources is also known as ……………………………………. head of income.

a) residuary head b) useless head
c) complementary head d) none of the above
4. Guest Lecture salary is taxable under which head of income

a) Other sources b) Salary
c) House property d) Not taxable at all
5. Income from sale of land shall be taxable under head?

a) Other sources b) Capital Gains
c) House property d) None of the above
6. Any income from game involving gambling, betting is known as ……….. and taxable @ …..
a) normal income, Slab rate b) normal income, 30 %
c) casual income, 30% d) Other income, 30%
7. Interest from original compensation shall be taxable under head?

8. Where letting out of buildings is inseparable from the letting out of machinery, plant or
furniture, the income from such letting, such income shall be chargeable under head?
a) Salary b) House Property
b) Other source, if it is not chargeable under head PGBP d) None of the above
9. Income by way of winnings from lotteries, crossword puzzles, races including horse races or
card games and other games of any sort or from gambling or betting of any form would be
taxed at rate of ……………
a) 25 %

|Page
VIVEK GABA
b) 30 % + surcharge, if applicable, + education cess+ secondary & higher education cess
c) 20 %
d) Exempt from tax
10. Casual income is taxable at the rate of

a) 30% b) 25% c) 20% d) 15%
11. Deduction under Chapter VI-A ………….. from casual income.

a) is allowed b) is not allowed
c) may be allowed d) may not be allowed
12. Amount paid on account of any current repairs to the machinery, plant or furniture given on
rent …………… as deduction under head other sources
a) shall not be b) is not allowed c) is allowed as d) None of the above
13. If the income under head Other Sources includes family pension, what is the deduction allowed
from such family pension.
a) 1/3rd of family pension income b) ` 15,000
c) least of a) and b) d) average of a) and b)
14. An assessee received family pension of ` 90,000, what amount is taxable u/h Other Sources?
15. What is the amount of deduction available on interest received from enhanced compensation?
a) 60% of income by way of interest on enhanced compensation
b) 50% of income by way of interest on enhanced compensation
c) 70% of income by way of interest on enhanced compensation
d) Nil
16. What is the amount of deduction available on interest received from compensation?
a) 60% of income by way of interest on compensation
b) 50% of income by way of interest on compensation
c) 70% of income by way of interest on compensation
d) Nil
17. An assessee received interest on compensation amounting to ` 10,00,000. What amount is

taxable under head Other Sources?
a) ` 7,00,000 b) ` 5,00,000 c) ` 3,50,000 d) Nil
18. Any payment taxable in India as salaries, if it is payable outside India unless tax has been
paid thereon or deducted at source…………. allowed as deduction
a) shall be b) may not be c) shall not be d) may be
19. Deemed dividend ……………… taxable on payment basis

a) under section 2(22)(a) to 2(22)(e) is b) under section 2(22)(e) is
c) under section 2(22)(c) is d) never
20. Corporate dividend tax shall be increased by

a) surcharge @10% b) cess @3%

|Page
VIVEK GABA
21. Deduction of dividend or tax shall not be allowed to ……………….
a) company b) shareholder
22. Any income by way of dividend (on which CDT has been paid) from Indian company is ………. in
the hands of shareholder.
a) exempt b) taxable c) taxable @ 30% d) None of the above
23. Dividend from Indian company is exempt under section ………………

a) 10(34) b) 10(35) c) 10(33) d) None
24. The interest on Post Office Savings Bank account would be exempt from tax only upto for an
individual account
a) ` 3,500 b) ` 5,500 c) ` 7,000 d) without limit
25. The interest on Post Office Savings Bank Account would be exempt from tax upto………..for an
joint account
a) ` 5,000 b) ` 11,000 c) ` 7,000 d) without limit
26. The limit of ` 50,000 for computing limit for amount of cash received without consideration has
to be seen for
a) separately for all transaction b) cumulatively for all transaction
27. An immovable property shall be taxable in the hands of recipient if

a) It has been received without consideration and the stamp duty value exceeds` 50,000
b) It has been received for consideration and the difference between stamp duty value and
consideration exceeds ` 50,000
c) Any of the above

a) It has been received without consideration and the stamp duty value exceeds` 50,000
b) It has been received for consideration and the difference between stamp duty value and
c) Any of the above

a) Money received as gift shall be taxable in the hands of recipient it exceeds ` 50,000
b) Stamp duty value of the immovable property if it is given without consideration and the
stamp duty value exceeds ` 45,000
c) Fair market value of the movable property if it is given without consideration and the fair
market value exceeds ` 40,000
30. What shall be amount taxable when an immovable property is transferred for consideration
&difference between consideration &stamp duty value of property transferred exceeds ` 50,000?
a) ` 50,000
b) stamp duty value of the property

|Page
VIVEK GABA
c) difference between consideration and stamp duty value
d) average of a) and b)
31. Movable property transferred without consideration shall be taxable in the hands of recipient if
fair market value of such property exceeds
a) ` 50,000 b) ` 30,000
c) ` 45,000 d) any value irrespective of any limit
32. Movable property shall be taxable in the hands of recipient if

a) It has been received without consideration and the fair market value exceeds ` 50,000
b) It has been received for consideration and the difference between fair market value and
c) Any of the above

a) It has been received without consideration and the fair market value is below ` 50,000
b) It has been received for consideration and the difference between fair market value and
c) Any of the above

a) It has been received without consideration and the fair market value is exceeds` 50,000
b) It has been received for consideration and the difference between consideration and fair
market value is below ` 50,000
c) Any of the above
35. What amount shall be taxable when movable property is transferred for a consideration &
difference b/w fair market value and consideration of property transferred exceeds ` 50,000?
a) ` 50,000
b) stamp duty value of the property
c) difference between fair market value and consideration
d) average of a) and b)
36. In which of the following case, gift received is not taxable?

a) gift received from any relative
b) gift received on the occasion of marriage of the individual
c) received in contemplation of death of the payer or donor
d) All of the above
37. If money is received from any local authority or fund or foundation or university or other
educational institution or hospital or other medical institution, the amount so received shall be
a) taxable b) exempt

|Page
VIVEK GABA
38. Which of the following are relative of an individual for the purpose of section 56(2)(vii).
a) spouse of the individual;
b) brother or sister of the individual and also of the spouse of individual
c) brother or sister of either of the parents of the individual;
d) all of the above
39. Which of the following property is not taxable when transferred without consideration under
section 56(2)(X)?
a) drawings b) paintings c) cars d) sculptures
40. Any work of art or bullion is not a property for purpose of section 56(2)(X). Discuss validity?
a) correct b) incorrect c) partly correct d) None of the above
41. In computation of limit of ` 50,000 for taxability of Immovable property received without
consideration, ……..transaction shall be considered.
a) All transactions b) Single Transaction
42. Mr. Yash has received three gifts from his three friends
(i) ` 55,000 in cash
(ii) Land with market value ` 5,00,000, value for purpose of charging stamp duty ` 4,00,000.
(iii) Jewellery with market value ` 3,00,000
a) ` 7,55,000 b) ` 7,00,000 c) ` 4,55,000 d) ` 3,55,000
43. Abhi received gift of ` 45,000 in cash from his friend. The amount shall be taxable in hands of
a) Abhi b) his friend
c) none of the above d) Any of the above
44. Abhi received gift of ` 50,000 in cash from his friend. The amount shall be taxable in hands of
a) Abhi b) his friend
c) none of the above d) Any of the above
45. Karan has received gift of ` 1,50,000 in cash from his mother‖s sister. The amount shall be
taxable in the hands of
a) Karan b) his mother‖s sister
c) exempt from tax d) Any of the above
46. Ram has received gift of ` 1,50,000 in cash from his Raman, who is his nephew. The amount
a) shall be taxable b) exempt from tax
c) may be taxable d) not included in income
47. Krish has received gift of ` 1,50,000 in cash from his grandfather. The amount
a) shall be taxable b) exempt from tax since amount is received from a relative
48. A watch has been gifted to an individual whose fair market value is ` 1,00,000. The fair
market value of watch is
a) exempt since received from a relative
b) not taxable since watch is not property within the definition of section 56(2)(vii)
c) taxable under head other sources (d) None of the above

|Page
VIVEK GABA
49. A car having fair market value of ` 2,00,000 has been gifted by to Rakesh by his friend. The
fair market value of car shall be
a) exempt since received from a relative
b) taxable under head other sources
c) not taxable since car is not property within the definition of section 56(2)(vii)
50. ABC Pvt. Ltd. gives a loan of ` 5,00,000 to X, who is not a shareholder. X gives the amount
as loan to A, a shareholder in ABC Pvt. Ltd. holding15% shares. In this case, amount taxable
as deemed dividends in the hands of X will be........and that in hands of A will be.............
a) Nil, Nil b) Nil, ` 5,00,000
c) ` 5,00,000, Nil d) ` 5,00,000, ` 5,00,000
51. On 5th February, 2017 Vivek gets a gift of motor car from a relative Sumit. Fair market value
of car is 3,60,000.The amount of taxable in hands of Vivek under section 56(2)(X) is?
a) 3,60,000 b) 3,10,000 c) 50,000 d) Nil
52. On 30th December, 2017 Vivek gets by gift a commercial flat from the elder brother of his
father-in-law (SDV is 25,00,000). The amount chargeable to tax in hands of Raju is?
a) 25,00,000 b) 24,50,000 c) 20,00,000 d) Nil
53. Marriage gift from a non-relative is …………………to tax?

a) Liable b) Not liable c) Depends on gift d) None of the above
54. Rent received by original tenant from sub-tenant is taxable under the head ……………………?
c) Income from salary d) None of the above
55. In the case of income is the nature of family pension, the amount deductible is 33.33% of
such income or …………………. Whichever is less.
a) 15,000 b) 20,000 c) 25,000 d) 30,000
56. What is the maximum amount of deduction allowed from family pension income
a) 15,000 b) 20,000 c) 25,000 d) 33,333
57. The entire amount of winning from lotteries is taxable at a special rate of income tax?
58. Gift from non-relative person is tax free upto 50,000

59. Expenses of purchasing lottery tickets are deducted out of winnings from lottery under head
income from other sources?
60. Family pension is taxable under which of the following head?

c) Income from salaries d) Income from capital gain
61. Money/property received on the occasion of the marriage of individual is taxable under head
other sources?

|Page
VIVEK GABA
62. Casual income is taxable under section
a) 115BB b) 115A c) 115AB d) 115C
63. While computing taxable casual income

a) No expenditure or allowance can be allowed from such income
b) Deduction under Chapter VI-A is not allowed from such income.
c) Both of the above are applicable
64. Benefit on unexhausted slab is ………………. Available while computing casual income.
a) not b) may be available c) shall be available d) None of the above
65. Which section states that deduction of which expenses is allowed from Income from Other
Sources
a) Section 58 b) Section 57
c)Section 56 d) No expense incurred is allowed as deduction
66. Corporate dividend tax is not applicable on dividend distributed under section
a) 2(22)(a) b) 2(22)(e) c) 2(22)(d) d) None of the above

a) It has been received for consideration and the difference between consideration and stamp
duty value exceeds ` 50,000
b) It has been received without consideration and the stamp duty value exceeds ` 30,000
c) Any of the above
68. What amount shall be taxable where movable property is transferred without consideration and
the fair market value of the property transferred is ` 49,950?
a) ` 50,000 b) ` 49,950 c) Nil d) ` 30,000
69. Which of the following is not taxable as income under head other sources?
a) Family pension
b) Casual income
c) director's sitting fee for attending board meetings
d) Rent received for house property including use of plant and machinery, where rent is
separable between rent for house property and rent for use of plant and machinery.
70. What is the rate of TDS in case of lottery prize?

a) 30 % b) 10 %
c) 10 % (+ SC + EC + SHEC) d) 30 % (SC +EC + SHEC)
71. If an assessee earns rent from a sub-tenant in respect to tenanted property let out as a
residence, the said rent is:
a) Exempt under Section 10
b) Taxable under the head income from house property
c) Taxable as business income, as the letting out is a commercial activity
d) Taxable as income from other sources, unless the assessee is in the business of sub-
letting properties on a regular basis

|Page
VIVEK GABA
72. An assessee received dividend from Indian company, at what rate shall tax be payable?
a) slab rate b) exempt under section 10(34)
c) 30% d) exempt under section 10(35)
73. In which of the following case, gift received is not taxable?

a) gift received from any relative
b) gift received under a will or by way of inheritance
c) received in contemplation of death of the payer or donor
d) All of the above
74. Rohit has received gift of ` 1,50,000 in cash from brother of his spouse. The amount
a) shall be taxable b) exempt from tax since amount is received from a relative
75. Money for the purpose of section 56(2)(viii) includes

a) gifts in cash b) gifts in cheque
c) gifts in draft d) All of the above
76. Corporate dividend tax is applicable on

a) final dividend only b) interim dividend
77. An assessee purchased an immovable property having stamp duty value of ` 10,50,000 for `
5,00,000. What amount shall be taxable under head Other Sources?
a) ` 10,50,000 b) ` 5,50,000 c) ` 10,00,000 d) Nil
78. Loan of ` 5,00,000 is given by a closely held company to a shareholder on 4.07.2013. The
shareholding of shareholder is 9% till 31.07.2013 and 3% shares were further purchased on
31.12.2013. What would be the treatment of this amount?
a) The company will pay dividend distribution tax on such amount
b) No tax treatment
c) Such loan shall be deemed as dividend and taxable under head Other Sources
d) Interest on such loan is taxable as perquisite in the hands of shareholder
79. Vishnu received gift of ` 1,50,000 in cash from his brother. The amount taxable in hands of
a) Vishnu b) his brother c) exempt from tax d) Any of the above
80. Kunal received gift of ` 1,50,000 in cash from his father‖s brother. The amount shall be
taxable in the hands of
a) Kunal b) his father‖s brother
c) exempt from tax d) Any of the above
81. Which is the charging section of Income from other sources?

a) Section 56 b) Section 57 c) Section 45 d) Section 58
82. Any Income, profits or gains includible in the total income of an assessee, which cannot be
included under any of the other heads of income, is chargeable under head …………..
a) Income from other sources b) Income from capital gains
c) Income from house property d) none of the above

|Page
VIVEK GABA
83. Family pension is taxable under which head of income
a) Salary b) Other sources
c) House property d) Not taxable at all
84. Income from sub-letting is taxable under which head of income

a) House property b) Salary
c) Other sources d) Not taxable at all
85. Which of the following income is not taxable under head other sources?
a) Dividend income b) Casual income
c)Interest received on compensation d) Rent from letting house property
86. Casual income is taxable @ ……………. under the provision of section …………………..
a) 30%, 115BC b) 30%, 115BB
c) 20%,115BB d) Nil, 115BC
87. Interest from enhanced compensation shall be taxable under head?

88. Income from letting out on hire, machinery, plant or furniture shall be chargeable under head?
a) Salary b) House Property
c) Other source, if not chargeable under head PGBP d) None of the above
89. If the income under head Other sources includes family pension, what is the deduction allowed
from such family pension.
a) 1/3rd of family pension income b) ` 15,000
c) least of a) and b) d) higher of a) and b)
90. Where income includes family pension of ` 90,000, how much amount is amount eligible for
deduction from such income?
a) ` 30,000 b) ` 15,000
c) ` 45,000 d) None of the above
91. An assessee received interest on compensation amounting to ` 7,00,000. What is the amount
taxable under head Other Sources?
a) ` 7,00,000 b) ` 5,00,000 c) ` 3,50,000 d) Nil
92. Corporate dividend tax is not applicable on dividend distributed under section
a) 2(22)(a) b) 2(22)(e) c) 2(22)(d) d) None of the above
93. Every ………, in addition to Income tax is liable to pay tax @ 15 % on dividend (whether Interim
or final).
a) company b) Indian company
c) assessee d) None of the above
94. CDT is …………… even if the company is not paying income tax
a) not payable b) payable
c) partly payable d) None of the above

|Page
VIVEK GABA
95. Any income by way of dividend from Foreign company is ………. in the hands of shareholder.
a) exempt b) may be exempt
c) taxable d) None of the above
96. Income from units of mutual fund is exempt under section ………...
a) 10(34) b) 10(35) c) 10(33) d) 10(15)
97. Dividend under section 2(22)(e) is ………… in the hands of shareholder

a) exempt b) taxable
c) may be exempt d) None of the above
98. Which section exempt interest from securities?

a) 10(34) b) 10(35) c) 10(33) d) 10(15)
99. Gift received by Individual/ HUF is taxable under section

a) 56(2)(viii) b) 56(2)(vii) c) 56(2)(ix) d) 56(2)(vi)
100. Any sum of money received without consideration shall be taxable if it exceeds
a) ` 30,000 b) ` 50,000 c) ` 1,00,000 d) Nil
101. The fair market value of movable property shall be seen as on

a) date of receipt of such movable property
b) date of computation of capital gain on such movable property
c) 1st day of previous year
d) 1st day of month in which movable property is transferred
102. The provisions would apply only to property which is the nature of a capital asset of the
recipient and not …………………. of any business of the recipient.
a) stock-in-trade(SIT) b) raw material
c) consumable stores d) Any of the above
103. Which of the following are relative of HUF for the purpose of section 56(2)(vii).
a) any member of HUF b) adult member of HUF
c) minor member of HUF d) All of the above
104. Which of the following property is taxable under section 56(2)(X)?

a) shares and securities b) jewellery
c) archaeological collections, d) All of the above
105. A car is gifted by an individual to his friend, fair market of car shall be taxable under head
a) Other Sources b) PGBP
c) capital gains d) not taxable under head Other Sources
106. An assessee received ` 2,00,000 on the occasion of his marriage. The amount shall
a) be taxable b) be exempt
c) may be taxable d) None of the above
107. An assessee received an immovable property without consideration having stamp duty value
of `7,50,000. What amount shall be taxable under head Other Sources?
a) ` 7,50,000 b) ` 7,00,000 c) ` 50,000 d) Nil

|Page
VIVEK GABA
108. Gift of ` 5,00,000 received on 10 July, 2017 through account payee cheque from non-relative
is regularly assessed to income-tax as
a) A capital receipt not chargeable to tax
b) Chargeable as other sources
c) Chargeable to tax as business income
d) Exempt up to ` 50,000 and balance chargeable to tax as income from other source
109. R transferred a house property to his wife under an agreement to live a part. Income from
such house property shall be taxable in the hands of:
a) R as deemed owner
b) R. However, it will be first computed as Mrs. R income & there after clubbed in hands of R
c) Mrs. R
110. R gifted a house property to his married minor daughter. The income from such house
property shall be taxable in the hands of:
a) Redeemed owner
b) R. However, it will be first computed as minor daughter‖s income & clubbed in income of R.
c) Income of married minor daughter
111. A has two house properties. Both of them are self-occupied. The annual value of
a) Both house shall be nil b) One house shall be nil
c) No house shall be nil d) none of the above
112. M's property was compulsorily acquired. He received enhanced compensation on 15.11.2017
which includes ` 2,30,000 as interest on such enhanced compensation. Compute taxable
amount of interest.
a) ` 2,30,000 b) Nil c) ` 1,15,000 d) `2,00,000
113. Which of the following dividend is taxable in the hands of shareholder?

a) Dividend distributed by foreign company
b) Dividend distributed by a company in which public is substantially interested
c) Dividend distributed by public company
114. Which of the following deemed dividend is taxable in the hand of shareholder?
a) 2(22)(a) b) 2(22)(d) c) 2(22)(e) d) 2(22)(b)
115. A closely held company gives loan of ` 2,00,000 to a shareholder having 9% equity shares
of voting rights. What would be the treatment of this amount?
a) The company will pay dividend distribution tax on such amount
b) No tax treatment
c) Such loan shall be deemed as dividend and taxable under head Other Sources
d) Interest on such loan is taxable as perquisite in the hands of shareholder.

|Page
VIVEK GABA
116. Where a closely held company gives loan/ advance to a shareholder who has 10 % voting
power in the company, the loan shall be deemed as dividend to the extent of
a) accumulated profits, whether capitalized or not b) not taxable
c) accumulated profits excluding capitalized profits d) none of the above
117. How is interest on securities taxable where assessee does not follow any method of
accounting?
a) due basis b) receipt basis
c) any of the above, at the option of assessee d) None of the above
118. Dividend distribution tax shall be paid in how many days

a) 7 days from date of distribution of dividend
b) 5 of next month in which declared
c) 21 days from date of distribution of dividend
d) 14 days from date of declaration, distribution or payment of dividend, whichever is earlier
119. Dividend paid by an Indian company outside India is:

a) Taxable in India in the hands of the recipient
b) Exempt in the hands of recipient
c) Taxable in the hands of the company and exempt in the hands of the recipient.
120. Casual Income received by the assessee is:

a) Fully Exempt b) Fully Taxable
c) Exempt upto` 5,000 d) None of the above
121. A cricket match organized by the Cricket Control Board of India for the benefit of KapilDev
wherein he received ` 5 lakhs is:
a) Casual Income taxable under other sources
b) Exempt income (because retired from profession)
c) Fully taxable
122. V traced a missing person and was awarded a sum of 1,00,000 although there was no
stipulation to that effect. Such receipt shall be:
a) Casual Income and fully taxable b) Casual income exempt upto 5,000
c) Fully Exempt d) None of the above
123. Dividend received by a Foreign company from a Domestic company is:

a) Exempt u/s 10(34) b) Taxable
c) Partly exempt d) None of the above
124. Family pension received by legal heir of a army personnel who died during operational duties
shall be:
a) Fully Exempt b) Taxable
c) Partly exempt d) None of the above

|Page
VIVEK GABA
ANSWERS
1. a) 17. b) 33. b) 49. c) 65. b) 81. a) 97. b) 113. a)

2. c) 18. c) 34. a) 50. b) 66. b) 82. a) 98. d) 114. c)
3. a) 19. b) 35. c) 51. d) 67. a) 83. b) 99. b) 115. b)
4. a) 20. c) 36. d) 52. a) 68. c) 84. c) 100. b) 116. c)
5. b) 21. c) 37. b) 53. b) 69. d) 85. d) 101. a) 117. a)
6. c) 22. a) 38. d) 54. a) 70. a) 86. b) 102. d) 118. d)
7. a) 23. a) 39. c) 55. a) 71. d) 87. a) 103. a) 119. c)
8. c) 24. a) 40. b) 56. a) 72. b) 88. c) 104. d) 120. b)
9. b) 25. c) 41. b) 57. a) 73. d) 89. c) 105. d) 121. b)
10. a) 26. b) 42. a) 58. a) 74. b) 90. b) 106. b) 122. a)
11. b) 27. c) 43. c) 59. a) 75. d) 91. c) 107. a) 123. a)
12. c) 28. a) 44. c) 60. a) 76. c) 92. b) 108. b) 124. a)
13. c) 29. a) 45. c) 61. b) 77. b) 93. b) 109. c)
14. b) 30. c) 46. a) 62. a) 78. c) 94. b) 110. c)
15. b) 31. a) 47. b) 63. c) 79. c) 95. c) 111. b)
16. b) 32. c) 48. b) 64. a) 80. c) 96. b) 112. c)

|Page
VIVEK GABA
COMPUTATION OF INCOME
FOR THE AY 18-19 9
PARTICULARS AMOUNT (`) AMOUNT (`)
1. Income from salaries

 Income from salary …………………
 Income by way of allowance …………………
 Taxable value of perquisite …………………
Gross Salary ________
Less: Deduction under section 16
 Entertainment allowance …………………
 Professional tax …………………
Taxable income under the head “SALARIES” …………………
2. Income from house property
Adjusted net annual value …………………
Less: Deduction under section 24 …………………
Taxable value under the head “HOUSE PROPERTY” …………………
3. Profits and gains of business or profession
Net profit as per Profit and Loss Account …………………
Add: Amounts which are debited to P&L A/c but are not allowable
as …………………
deductions under the Act
Less: Expenditures which are not debited to P&L A/c but are …………………
allowable as deductions under the Act
Less: Income which are credited to P&L A/c but are exempt under …………………
section 10 to 13A or are taxable under other heads of income
Add: Income which are not credited to P&L A/c but are taxable …………………
under the head “Profits and gain of business or profession”
Taxable income under the head “PROFITS AND GAINS OF …………………
BUSINESS OR PROFESSION”
4. Capital gains
Amount of capital gain …………………
Less: Amount exempt under sections 54, 54B, 54D, 54EC, 54ED,
54F, 54G,54GA, 54GB …………………
Taxable income under the head “CAPITAL GAINS” …………………
5. Income from other sources
Gross income …………………
Less: Deductions under section 57 …………………
Taxable income under the head “INCOME FROM OTHER …………………

|Page
VIVEK GABA
SOURCES”
Total [(1) + (2) + (3) + (4) + (5)] …………………
Less: Adjustment on account of set off and carry forward of losses …………………
Gross Total Income …………………
Less: Deduction under sections 80C to 80U …………………
…………………
Total income or net income liable to tax (rounded off)
…………………
Computation of tax liability*
…………………
Tax on net income
Less: Rebate under section 87A (applicable for assessment year
…………………
2018-19 in the case of resident individual having net income not
…………………
exceeding `3.5 lakh)
…………………
Income tax after rebate under section 87A
…………………
Add: Surcharge
…………………
Tax and Surcharge
…………………
Add: Education cess and secondary and higher education cess
…………………
Less: Rebate under section 86, 89, 90, 90A and 91
…………………
Tax
Less: prepaid taxes
…………………
Tax paid on self-assessment
…………………
Tax deducted or collected at source
Tax paid in advance
…………………
Tax liability (rounded off)
Special tax rates in the below mentioned cases:

Section 111A- STCG on equity shares and equity oriented fund is taxable @ 15%
Section 112- refer chapter Capital gain for the tax rates
Casual income is taxable @ 30%.

|Page
VIVEK GABA
DEDUCTIONS UNDER
CHAPTER VIA 10
@
Sec 80C Deduction in respect of LIC etc.(Amended by FA 2015)
Eligible Assessee: Individual/ HUF
Deduction of the following investments is allowed subject to maximum of ` 1,50,000
a) NSC
b) Repayment of Housing loan borrowed from CG, LIC, bank
c) In FD for 5 yr. of more(Limit increase from 1 lakh to 1.5 lakh)
d) Tuition fees for full time education of any 2 children
e) Employees‖ contn to SPF, RPF, superannuation fund
f) Deposit in PPF in the name of self, spouse or children/ members of HUF(limit increase 1 lakh
to 1.5 lakh)
g) Insurance premium for insurance of self, spouse or children/ members of HUF. Premium shall
not exceed 10% if sum assured, for policy taken before April 2012, 20% of sum assured. FA
2013, 15% if premium is paid for disabled.
h) Subscription to notified security or deposit scheme
i) Bonds issued by National Bank for Agriculture and Rural Development
j) 5 year post office deposit scheme
k) Deferred Annuity, Unit Linked Insurance plan
l) Senior citizen savings deposit scheme
m) Bond issued by NABARD
n) deposit in Sukanya Samriddhi Account Scheme for the welfare of girl child
Example 1: Compute eligible deduction u/s 80C for AY 2018-19 in respect of life insurance premium
paid by Mr. Ganesh during P.Y 2017-18, the details of which are given as follows:
Date of issue of Person insured Actual capital sum Insurance premium

policy Assured paid during 2014-15
21/4/2010 Self 3,00,000 70,000
25/5/2012 Spouse 2,50,000 35,000
20/7/2014 Handicapped son 4,00,000 80,000
(section 80 U disability)
Solution:
Deduction allowed u/s 80C

|Page
VIVEK GABA
Date of Actual Insurance Deduction Remarks
issue of capital sum premium paid u/s 80C for (restricted to
Person insured
policy Assured during 2013-14 AY 2015-16 % of sum
assured)
21/4/2010 Self 3,00,000 70,000 60,000 20%
25/5/2012 Spouse 2,50,000 35,000 25,000 10%
20/7/2013 Handicapped son 4,00,000 80,000 60,000 15%
(sec 80 U disability)
Sec 80CCC Deduction for contribution to certain pension fund

Eligible Assessee: Individual
Payment for annuity plan of LIC or any other insurer for receiving pension from the pension fund.
Sec 80CCD Deduction for contribution to pension scheme of Central
Government
Individual has contributed any amount under a pension scheme (New Pension Scheme) notified by
CG subject to the following limit. For an individual
deriving salary income: 10% of salary deriving other income: 20% of Gross total income
Sec 80CCEMaximum deduction allowed

Deduction u/s 80C, 80CCC, 80CCD(1) is to be restricted to ` 1,50,000.
Section Particulars Ceiling limit

80C Investment in specified instruments 1,50,000
80CCC Contribution to certain pension funds 1,00,0001,50,000
80CCD(1) Contribution to new pension scheme of Government 10% of salary or 20% of
GTI as the case may be
80CCE Aggregate deduction under sections 80C, 80CCC 1,50,000
&80CCD(1)
80CCD(1B) Contribution to NPS notified by the Central Government 50,000
(outside the limit of ` 1,50,000 under section 80CCE)
Sec 80CCG Deduction in respect of investment under Equity Saving scheme

Eligible Assessee: Resident Individual
Amount of deduction is to be extent of 50% of the amount invested in listed equity shares in
accordance with Rajiv Gandhi Equity Savings Scheme 2012 subject to maximum `25,000.
Such deduction can be allowed subject to the following conditions:
a. GTI of assessee shall not exceed ` 12 Lakhs
b. The assessee is a new retail investor
The locking period is 3 year from date of acquisition

|Page
VIVEK GABA
@
Sec 80D Medical Insurance Premium
S. Nature of payment/ expenditure Expenditure on behalf of Deduction Deduction
No. for A.Y. for A.Y.
2015-16 2016-17
A a) Any premium paid, otherwise
Individual self, spouse &
than by way of cash, to ` 15,000 `25,000
dependent child
keep in force an insurance
HUF Family member
on the health
b) Contribution to Central In case any of the above
Government Health Scheme persons is of the age of 60 ` 20,000 `30,000
(CGHS) years or more
c) Preventive health check up +
expenditure resident in India
B a) Any premium paid, otherwise For parents ` 15,000 `25,000
than by way of cash, to
In case any of the above
keep in force an insurance
persons is of the age of 60
on the health ` 20,000 `30,000
years or more
b) Preventive health check up
+ resident in India
Maximum ` 5,000: allowed as deduction for aggregate of preventive health

check up expenditure mentioned in A and B (Subject to overall limit of
`25,000 or ` 30,000, as the case may be)
C Amount paid on account of For self/ spouse/ parents + who NA ` 30,000

medical expenditure is of the age of 80 years or
(vide FA 2015) more + Resident in India + no
payment has been made to
keep in force an insurance on
the health of such person
If individual or any of his family members is a senior citizen or very senior citizen, aggregate
deduction, as specified in (A) & (C) above, cannot exceed ` 30,000.
If one parents is a senior citizen and another is a very senior citizen or both of them are very
senior citizens, the aggregate deduction, as specified in (B) & (C) above, cannot exceed `30,000.
Any contribution made to CG Health Scheme or such other health scheme notified by CG shall
also be allowed as deduction. (Amended by FA 2013).
@
Sec 80DD : Deduction in respect of dependent handicapped
Eligible Assessee: Resident Individual/ HUF (Amended via FA 2015)
Normal deduction at a flat amount of ` 50,000`75,000.
In case of severe disability deduction allowed shall be ` 1,00,000`125,000

|Page
VIVEK GABA
@
Sec 80DDB : Medical Treatment for certain disease or ailment
Eligible Assessee: Resident Individual/ HUF (Amended via FA 2015)
Deduction shall be of amount actually paid or ` 40,000, whichever is less. In case of senior citizen
who is aged 60 years or more, the deduction shall be amount of actually paid or `60,000,
whichever is less.
Section80DDB has been amended to provide for a higher deduction of upto ` 80,000, for the
expenditure incurred in respect of the medical treatment of himself or a dependent, being a “very
senior citizen”.
Deduction allowed shall be reduced by the amount received under mediclaim insurance and also by
the amount which has been paid by the employer.
@
Sec 80U : Deduction for handicapped person
Eligible Assessee: Individual (Amended via FA 2015)
Normal deduction is of ` 50,000`75,000. In case of severe disability deduction shall be `
100,000`1,25,000
Sec 80E : Loan taken for higher education

Any amount paid towards interest on loan borrowed from higher education is allowed as deduction.
Deduction is allowed for maximum period of 8 years starting from year when interest is first paid.
No deduction is allowed after the period of 8 years.
Sec 80EE : Additional Deduction for Interest on Loan borrowed for acquisition
of self-occupied house property by an individual
(Inserted by Finance Act, 2016)
1. Under section 80EE, a deduction of upto 1 lakh in respect of interest paid on loan by
individual for acquisition of a residential house property was allowed for A.Y. 2014-15 and
A.Y. 2015-16.
2. As a step towards achieving the Government‖s aim providing “housing for all” first – home
buyers availing home loans are encouraged, by providing additional deduction under section
80EE from A.Y. 2017-18 in respect of interest on loan taken by an individual for acquisition
for residential house property from any financial institution. The maximum deduction
allowable is 50,000
3. The conditions to be satisfied for availing this deduction are as follows –

i. Value of House should be not more than 50 lakhs
ii. Loan sanctioned is not more than 35 lakhs
iii. The assessee should not own any residential house on the date of sanction of loan
iv. Loan should be sanctioned during the P.Y. 2016-17
4. The benefit of deduction under this section would be available till the repayment of loan
continues.

|Page
VIVEK GABA
@
Sec 80G Deduction to certain fund, Charitable Institutions
If donation >` 2,000 is given, then it must not be in cash, otherwise disallowed.
KINDS
Certain institution where donation allowed is 100% or 50% without qualifying limit
Certain institution where donation allowed is 100% or 50% with qualifying limit
Steps to compute qualifying amount of donation

Step 1: Computed adjusted total Income, which is GTI as reduced by:-
Deduction u/c VI-A (but without deducting deduction under A,B)
Long Term Capital gain sec 112 and Short Term capital gain sec. 111A
Step 2: 10% of Total Income
Step 3: donation is 100% or 50% or 100% or 50% deduction without any limit.
Upto AY 2013-14, deduction was 50% of amt. of donations paid to National Children Fund. Since
National Children Fund is of national importance, 80G has been amended to allow 100% deduction
respect of any sum paid. from AY 2014-15
Important Note:
Scope of section 80G expanded to allow 100% deduction in respect of donation to Swachh Bharat
Kosh, Clean Ganga Fund and National Fund for Control of Drug Abuse [Section 80G]
@
Sec 80GG Rent paid (Amended by FA, 2016)
The assessee should not be in receipt of HRA. Least of following shall be allowed as deduction:
1) Rent (minus) 10% of adjusted gross total income

2) 25% of adjusted gross total income
3) ` 2000 5,000 per month
Where adjusted gross total income = GTI (-) LTCG (-) STCG u/s 111A (-) all deduction u/c VIA
except 80GG.
Sec 80GGA Donation for scientific research, rural development etc.

Eligible Assessee: All assessee not having any Income chargeable under the head “PGBP”
100% of Donation is allowed as deduction
Sec 80GGB Contribution by companies to political Parties

Deduction shall be allowed in respect of contribution given by co. to a political party or electoral
trust.
Deduction shall be allowed only if payment is made otherwise than by way of cash.
Sec 80GGC Contribution by other assessee to political Parties

Eligible Assessee: Any person except local authority and every juridical person
Deduction shall be allowed in respect of contribution given to a political party or electoral trust.
Deduction shall be allowed only if payment is made otherwise than by way of cash.
Sec 80QQB Copyright of book

Eligible Assessee: Individual Resident
Deduction from assignment of copyright of any book (work of literary, artistic or scientific nature
and NOT textbooks for school) and allowed as follows:
a) `3,00,000 or b) actual royalty, whichever is less

|Page
VIVEK GABA
Sec 80RRB Income from inventories
Eligible Assessee: Individual Resident registered as true &first inventor in respect of an invention
under Patents Act.
Deduction is royalty from patents and allowed as follows:
a) `3,00,000 or b) actual royalty, whichever is less
@
Sec 80TTA Deduction for interest on deposits
Eligible Assessee: Individual and HUF
Deduction for interest on deposits (savings accounts incooperative banks and Post office) up to
`10,000.
1. IMPORTANT NOTE:
For Balance Sections Students can refer Vivek Sir Detailed Income Tax Book.
Question: Objective questions:

1. Which of the following is covered u/s 80D of the Income Tax Act
a) Repayment of loan taken for higher education
b) Medical insurance premium
c) Medical treatment of handicapped dependent
d) reimbursement of medical expenses
2. Deduction u/s 80C can be claimed for fixed deposit made in any scheduled bank, if the
minimum period of deposit
3. Deduction available to an individual in respect of maintenance including medical treatment of a

dependent being a person with 80% disability, when amount incurred in this respect is ` 40,000
will be
a) `1,00,000 b) ` 1,25,000 c) ` 50,000 d) None of the above
4. Deduction available u/s 80GG towards rent paid shall not exceed _______ per month.
5. Deduction available u/s 80QQB in respect of royalty income of authors shall not exceed ………..in
a previous year.
6. The amount of deduction u/s 80DD in respect of medical treatment of dependent with 60%
disability will be _____ when no amount is actually spent on treatment by the resident
assessee and the handicapped person does not claim any deduction under section 80U.
Solution: 1 – b), 2 – a), 3 – b), 4 - ` 5,000, 5 - ` 3,00,000, 6 - ` 75,000
OBJECTIVE QUESTIONS
1. Maximum qualifying limit for deduction under section 80C is

a) ` 50,000 b) ` 1,00,000 c) ` 1,10,000 d) ` 1,50,000

|Page
VIVEK GABA
2. Deduction under section 80C is allowed to
c) Individual only d) Assessee, being company
3. What is the maximum amount upto which deduction under section 80C is allowed?
a) ` 1,00,000 b) 20% of Gross Total Income
c) ` 1,50,000 d) No limit is specified
4. For claiming deduction of NSC u/s80C, investment can be made by individual in the name of
a) self b) spouse c) minor children d) Any of the above
5. Investment in fixed deposit for period of ……… with ……… is allowed as deduction u/s80C.
a) 5 years, scheduled bank b) more than 5 years, scheduled bank
c) 5 years or more, scheduled bank d) 5 years or more, non-scheduled bank
6. Investment in fixed deposit for period of …… with scheduled banks is allowed as deduction
under section 80C
a) 5 years b) less than 5 years
c) 5 years or more d) more than 5 years
7. Interest income on fixed deposit shall …..………………. & not qualify for deduction u/s 80C
a) taxable on receipt basis b) taxable on accrual basis
c) not be taxable on accrual basis d) None of the above
8. If house property for which loan has been taken for construction or purchase and deduction is
claimed under section 80Cis transferred before …………….. from end of the ………………. for such
property was taken by him, no deduction shall be allowable in the previous year in which the
house property has been transferred.
a) 8 years, financial year when loan b) 5 years, financial year when loan
c) 5 years, financial year when possession d) 7 years, financial year when possession
9. For claiming deduction of Insurance, it can be taken for the life of

a) self and spouse only
b) self and spouse and dependent children
c) self and spouse and children (dependent/ independent/ married/ unmarried)
d) self and spouse and dependent or independent children
10. For claiming deduction of insurance, premium paid on insurance shall be restricted to ……..
a) 10 % of the sum assured b) 20 % of the sum assured
c) 15 % of the sum assured d) no such restriction is imposed
11. For claiming deduction of insurance where insurance is taken before 1.4.2012, premium paid
on insurance shall be restricted to ……..
12. For claiming deduction of insurance where insurance is taken on the life of person referred in
section 80DDB and 80U after 1.4.2013, premium paid on insurance shall be restricted to ……..

|Page
VIVEK GABA
13. An individual took insurance on 1.5.2013 for the life of his child who is suffering from disability
referred in section 80U, sum assured was ` 4,50,000, the premium paid by him is `90,000.
What amount of deduction shall be allowed to him under section 80C.
a) ` 90,000 b) ` 1,00,000 c) ` 45,000 d) ` 67,500
14. An individual took insurance on 25.3.2013 for the life of his child who is suffering from
disability referred in section 80U, sum assured was 4,50,000, the premium paid by him is
90,000. What amount of deduction shall be allowed to him under section 80C
a) 90,000 b) 1,00,000 c) 45,000 d) 67,500
15. Any payment of insurance (including bonus) received on maturity of insurance policy …………..
a) shall be exempt from tax u/s10(10D) b) shall be exempt from tax u/s10(10C)
c) shall be taxable in the year of receipt d) shall have no treatment
16. Payment of tuition fees in connection with the children of the assessee is allowed when
payment is made to
a) fees to School only
b) fees to School or College
c) fees to School, College or University
d) fees to School, College, University or any Educational Institution in India
17. Payment of tuition fees is allowed for …………….

a) Maximum 3 children b) Maximum 2 children
c) only 1 child d) No limit
18. For deduction of tuition fees of children under section 80C, children may be
a) adopted b) step c) either of two d) Neither of above
19. Subscription to Notified Deposit Schemes of NHB is

a) is allowed as deduction u/s80C b) is not allowed as deduction u/s80C
c) may be allowed as deduction u/s80CCC d) None of the above
20. Investment in equity shares or debentures etc. forming part of an eligible issue
a) is allowed as deduction u/s80C b) shall not allowed as deduction u/s80C
21. Deduction under section 80C is allowed even if the payment is not made by the assessee.
Discuss the validity of statement.
a) Invalid b) valid c) partly valid d) None of the above
22. Premium of ` 15,000 was due on 27.02.2013 but it was paid on 17.04.2013, deduction shall
be allowed in the previous year
a) 2013-14 b) 2012-13 c)2014-15 d) None of the above
23. Mr. Z has income under the head Business/Profession ` 19,90,000.

Investment in NSC ` 50,000
Investment in PPF in name of Mrs. Z ` 5,000
Payment of premium for LIC policy taken in name of dependent father ` 11,000
Compute Total Income for the A.Y. 2018-19.

|Page
VIVEK GABA
a) 18,90,000 b) 19,24,000 c) 19,35,000 d) 19,40,000
24. Mr. A, aged about 61 years, has earned a lottery income of ` 1,20,000 (gross) during the PY
2017-18. He also has a business income of ` 30,000. He invested an amount of ` 10,000 in
Public Provident Fund account and ` 24,000 in National Saving Certificates. What is the total
taxable income of Mr. A for the A.Y.2018-19
a) 1,16,000 b) 1,20,000 c) 14,0,000 d) 1,26,000
25. Deduction under section 80CCC is allowed if the assessee has paid any amount towards any
………… for receiving pension from the pension fund.
a) annuity plan of LIC b) annuity plan of any other insurer
26. The aggregate amount of deductions under section 80C, 80CCC and employee contribution
under section 80CCD shall not, exceed ………………
a) ` 1,00,000 b) ` 1,20,000 c) ` 1,50,000 d) No limit
27. Which of the following condition shall be satisfied to avail deduction under section 80CCG
(i) gross total income does not exceed ` 12 lakhs
(ii) gross total income shall exceed ` 12 lakhs
(iii) assessee acquires listed shares in accordance with a notified scheme
(iv) assessee acquires listed shares
(v) assessee is a new retail investor
(vi) the investment made is locked-in for a period of 3 years from the date of acquisition
a) (i), (iii), (iv) and (v) b) (i), (iii), (v) and (vi)
c) (ii), (iii), (v) and (vi) c) (ii), (iv) and (v)
28. An individual resident assessee has gross total income of ` 9,00,000 and has made investment
in listed shares in accordance with a notified scheme of ` 1,00,000. What amount of deduction
is available under section 80CCG
a) ` 50,000 b) ` 25,000 c) `30,000 d) Nil
29. An individual resident assessee has gross total income of ` 15,00,000 and made investment in
listed shares in accordance with a notified scheme of ` 1,00,000. What is the amount of
deduction available under section 80CCG
a) ` 50,000 b) ` 25,000 c) ` 30,000 d) Nil
30. Deduction under section 80D is allowed to

31. Deduction under section 80D shall be allowed to the extent of

a) 25,000 b) 10,000 c) 20,000 d) no limit
32. If medical insurance is for the life of senior citizen of an age of 60 years or more, deduction
allowed shall be limited to the extent of
a) 15,000 b) 10,000 c) 30,000 d) no limit

|Page
VIVEK GABA
33. Ganesh paid premium of ` 18,000 for health insurance and has incurred expenditure of `3,000
on preventive health checkup. Amount of deduction allowed u/s 80D shall be
a) 16,000 b) 21,000 c) 15,500 d) 20,000
34. Mr. A paid medical insurance premium of ` 27,000 during year to insure health of his father,
aged 63 years, who is not dependent on him. He incurred ` 4,000 by cheque on preventive
health check-up of his father. Compute deduction allowable u/s80D for A.Y. 2018-19.
a) 21,000 b) 30,000 c) 15,000 d) Nil
35. Deduction for Medical Insurance Premium is allowed under section

a) 80D b) 80DD c) 80DDB d) 80C
36. Deduction under section 80DD for a person with disability shall be
a) ` 75,000 b) ` 1,00,000 c) ` 75,000 d) No limit
37. Deduction under section 80DD for a person with severe disability shall be
a) ` 50,000 b) ` 1,25,000 c) ` 75,000 d) No limit
38. Mr. X is a resident individual. He deposits a sum of ` 25,000 with Life Insurance Corporation
every year for maintenance of his handicapped grandfather who is wholly dependent upon him.
The disability is one which comes under the Persons with Disabilities Act, 1995. A copy of
certificate from the medical authority is submitted. Compute the amount of deduction available
under section 80DD for the A.Y. 2018-19.
a) 50,000 b) 25,000 c) 75,000 d) Nil
39. Deduction for medical treatment of dependent with disability is allowed under section
a) 80DD b) 80D c) 80DDB d) 80U
40. Deduction under section 80U for a person with severe disability shall be
a) ` 50,000 b) ` 1,25,000 c) ` 75,000 d) No limit
41. Deduction allowed under section 80DDB shall be

a) lower of `40,000 or amount incurred b) lower of `60,000 or amount incurred
c) higher of `40,000 or amount incurred d) higher of `60,000 or amount incurred
42. Deduction allowed under section 80DDB shall be if the amount has been incurred on the
treatment of senior citizen
a) lower of `40,000 or amount incurred b) lower of `60,000 or amount incurred
c) higher of `40,000 or amount incurred d) higher of `60,000 or amount incurred
43. If amount incurred by assessee for the treatment of specified disease of spouse is ` 37,000. A
claim of ` 10,000 have been received under mediclaim policy. What amount of deduction shall
be allowed to him?
a) ` 37,000 b) ` 40,000 c) ` 60,000 d) ` 27,000
44. Deduction under section 80E is allowed for payment of interest on loan taken by for education
a) self, spouse b) self, spouse or children
c) children d) only for self
45. The deduction u/s 80E is allowed for repayment of interest to the extent of :
a) ` 25,000
b) ` 40,000

|Page
VIVEK GABA
c) Any amount repaid
d) Entire amount of interest paid subject to time limit prescribed
46. Deduction under section 80GG is allowed to

47. Deduction shall be allowed under section 80GG to such individual in case of payment of rent
and deduction shall be higher of below mentioned
a) Rent paid over 10% of the adjusted gross total income b) ` 2,000 p.m.
c) 25% of the adjusted gross total income d) None of the above
48. An assessee, whose adjusted gross total income is ` 46,000, paid house rent at ` 1,200 p.m.
in respect of residential accommodation occupied by him at Mumbai. Compute the deduction
allowable under section 80GG.
a) ` 9,800 b) ` 11,500 c) ` 60,000 d) ` 10,000
49. Deduction under section 80GGA is not allowed if GTI of assessee includes income under head
a) Other sources b) House Property
c) Profits and Gains from business and profession d) None of the above
50. Under section 80GGA, amount must be paid …………… if amount of donation exceeds ` 10,000.
a) in cash b) electronically
c) by any mode other than cash d) None of the above
51. Deduction u/s 80GGB and 80GGC shall be allowed only if sum is contributed by way
a) in cash b) electronically
c) by any mode other than cash d) None of the above
52. Deduction under section 80QQB is allowed for an amount equivalent to

a) ` 3,00,000 b) Actual royalty
c) higher of a) or b) d) least of a) or b)
53. What is the maximum amount upto which deduction of income from assignment of copyright of
any book under section 80QQB is allowed?
a) ` 3,50,000 b) ` 3,00,000 c) ` 5,00,000 d) No limit
54. Deduction under section 80RRB is allowed for

a) income from assignment of copyright of any book
b) income by way of royalty from patents
55. Deduction under section 80TTA is allowed of an amount equivalent to

a) ` 10,000 b) upto ` 10,000 c) upto ` 15,000 d) No limit
56. What is the maximum amount upto which deduction of income from interest received on
deposit is allowed under section 80TTA?
a) 15,000 b) ` 5,000 c) ` 10,000 d) No limit

|Page
VIVEK GABA
57. What is the amount of wage that qualifies for deduction under section 80JJAA in case of an
existing company?
a) Wages paid to workmen in excess of 100 but there should be at least 25 % increase in
workers, as employed on the last day of preceding financial year.
b) Wages paid to workmen in excess of 100 but there should be at least 10 % increase in
c) Wages paid to workmen in excess of 70 but there should be at least 10 % increase in
58. Deduction under section 80IA is available for the period of

a) 100% for any 12 years out of consecutive 20 years
b) 100% for any 10 years out of consecutive 15 years
c) 100% for 5 consecutive Assessment years
d) Any of the above
59. What is the amount of deduction available under section 80IC?

a) 100% to Sikkim, North-eastern states, Himachal Pradesh and Uttranchal
b) 25% to Sikkim, North-eastern states, Himachal Pradesh and Uttranchal
c) 100% to Sikkim or North East region and 25% to Himachal Pradesh and Uttranchal
d) 100% to Sikkim or North East region and 100 % to Himachal Pradesh and Uttranchal for
first 5 year and 25 % or 30% for next 5 years
60. Which of the following are specified areas for the purpose of section 80IE?
a) Sikkim, North-eastern states and Himachal Pradesh b) North-eastern states
c) NCR of Delhi, Faridabad and Gurgaon d) None of the above
61. Which of the following is not specified article for the purpose of section 80IE
a) Tobacco and Pan masala b) Pan masala and Plastic carry bags
c) Tobacco, Pan masala and Plastic carry bags d) Only Tobacco
62. Amount of deduction in case of a person with severe disability under section 80U will be:
a) ` 50,000 b) ` 75,000 c) ` 1,25,000 d) ` 1,50,000
63. For claiming Deduction u/s 80CC, the payment or deposit should be made:
a) Out of any income b) Out of any income chargeable to income tax
c) During current year out of any source d) None of the above
64. First year of deduction shall start from which year for claiming deduction under section 80ID
a) in which it is registered under the relevant act
b) in which it begins to manufacture or produce
c) in which such hotels start functioning or convention centre operating on commercial basis
65. Interest on which of the following deposits is not allowed as deduction under section 80TTA?
a) deposits in savings accounts book b) time deposits
c) deposits in Post office d) all of the above

|Page
VIVEK GABA
66. What is the maximum amount upto which deduction of income from Royalty from patents under
section 80RRB is allowed?
a) ` 3,50,000 b) ` 5,00,000 c) ` 3,00,000 d) No limit
67. The quantum of deduction allowed u/s 80D for parents who is of the age of 60 years or more
shall be limited to ………………
a) ` 15,000 b) ` 30,000 c) ` 30,000 d) No limit
68. The maximum amount of deduction under section 80GG in respect of rent paid is?
a) 2,000 p.m. b) 3,000 p.m. c) 5,000 p.m. d) 10,000 p.m.
69. Deduction available to an individual in respect of interest on saving bank account is?
a) Such interest income
b) 10,000
c) Such interest income or 10,000 whichever is less
d) Such interest income or 10,000 whichever is more
70. The amount of deduction under section 80DD in respect of maintenance including medical
treatment of a dependent with 60% disability will be ……………. When no amount is actually spent
by resident assessee and the handicapped person does not claim any deduction u/s80U.
a) 1,00,000 b) 75,000 c) Nil d) None of the above
71. The balance income after deductions admissible under section 80C to 80U is called…………?
a) Gross total income b) Total income/taxable income
72. Deduction available under section 80QQB in respect of royalty income of authors shall not
exceed…………… in a previous year?
a) 3,00,000 b) Actual amount c) 1,00,000 d) None of the above
73. The aggregate amount of deduction u/s 80C, 80CCC and 80CCD cannot exceed ……………….?
a) 1,00,000 b) 1,50,000 c) 50,000 d) 2,00,000
74. On which of the following income, deduction under section 80C to 80U is not allowed
a) Income earned under section 112 b) Income earned under section 111A
c) Casual Income d) All of the above
75. X has income under head salary ` 90,000, Income from long term capital gains ` 90,000 and
casual income ` 55,000, in this case maximum amount of deductions allowed shall be
a) ` 90,000 b) ` 1,00,000 c) ` 1,80,000 d) ` 70,000
76. Subscription to National Savings Certificates (NSC) issued under Government Savings
Certificates Act 1959 is allowed as deduction under section
a) 80C b) 80CC c) 80CCD d) 80CCE
77. Investment in fixed deposit for period of 5 years or more with ………… is allowed as deduction
under section80C
a) scheduled bank b) non-scheduled bank
c) either of a) or b) d) Rural bank
78. Interest income on fixed deposit …………….

a) is allowed as deduction u/s80C b) is not allowed as deduction u/s80C

|Page
VIVEK GABA
c) is allowed as deduction u/s80CC d) is exempt from tax
79. Repayment of the amount borrowed by the assessee for the purposes of ……… of a residential
house property
a) purchase or repair b) construction or repair
c) purchase or construction d) purchase, construction or repair
80. For claiming deduction of insurance under section 80C, it can be taken for life of ……. by HUF
a) Karta b) any adult member of HUF
c) any of its members d) minor child in HUF
81. An individual took insurance on 1.4.2011 for the life of his spouse where sum assured was
4,00,000, premium paid by him is 90,000. What amount of deduction shall be allowed to him
under section 80C
a) 1,00,000 b) 80,000 c) 90,000 d) 40,000
82. An individual took insurance on 1.4.2013 for the life of his spouse where sum assured was
4,00,000, premium paid by him is 50,000. ……….. shall be allowed to him u/s80C
a) 1,00,000 b) 50,000 c) 40,000 d) 80,000
83. Employees‖ contribution ……………. is allowed as deduction under section 80C.

a) statutory provident fund b) recognised provident fund
c) approved superannuation fund d) either of above
84. Investment in Five Year Post Office Time Deposit Account

a) is allowed as deduction u/s80C b) shall not allowed as deduction u/s80C
85. Interest received Five Year Post Office Time Deposit Account is
a) Taxable b) exempt under section 10
c) allowed as deduction under section 80C d) None of the above
86. Deduction under section 80C shall be allowed ……………… by the assessee
a) even if the amount is not paid b) only if the amount has been actually paid
c) payment of the amount is irrelevant d) None of the above
87. An individual assessee, resident in India, made following investments during PY 2016-17. What
amount of deduction is allowed to him?
Contribution to the public provident fund 40,000
Investment in units of eligible mutual funds 30,000
Insurance premium paid on the life of the spouse (policy taken on 01.04.2011) 25,000
(Assured value ` 1,00,000)
a) 1,00,000 b) 95,000 c) 90,000 d) 80,000
88. Deduction under section 80CCC is allowed to

89. Deduction under section 80CCG is allowed to

c) Individual only d) Resident Individual

|Page
VIVEK GABA
90. Deduction under section 80CCG is allowed in respect of
a) investment made under notified equity saving scheme
b) investment made under equity saving scheme
c) investment made under notified saving scheme
d) any investment
91. The maximum amount of deduction available under section 80CCG is

a) 50% of investment b) ` 25,000
c) lower of a) and b) d) higher of a) and b)
92. When is the deduction under section 80CCG withdrawn

a) assessee without claiming deduction fails to satisfy the above conditions
b) assessee after claiming deduction fails to satisfy the above conditions
c) assessee before claiming deduction fails to satisfy the above conditions
93. When deduction u/s80CCG is withdrawn, the deduction originally allowed shall be deemed
a) income of the assessee of the year in which default is committed
b) income of the assessee of the year in which deduction is withdrawn
c) income of the assessee of the year in which deduction was allowed
d) income of the assessee of the year in which investment is made
94. Deduction under section 80D in respect of individual is allowed if payment is made for
a) for himself, spouse b) for himself only
c) for spouse only d) for himself, spouse & dependent child
95. Deduction under section 80D is allowed to individual if amount is paid for the purpose of
a) medical insurance premium b) preventive health check up
96. Deduction u/s80D in respect of individual is allowed separately if payment is made for …… of
parents
a) medical insurance premium b) preventive health check up
97. Deduction under section 80D is allowed to HUF if amount is paid for the purpose of
b) medical insurance premium b) preventive health check up
98. Preventive health check up shall be paid

a) in cash b) credit card c) any mode except cash d) any mode
99. Medical insurance premium shall be paid

a) in cash b) credit card c) any mode except cash d) any mode
100. Any contribution made to notified by CGshall also be allowed as deduction u/s80D
a) Central Government Health Scheme b) other health scheme like CGHS

|Page
VIVEK GABA
101. The maximum limit of total deduction under section 80D shall remain 25000/30000…………
a) including preventive health check up
b) excluding preventive health check up
c) any of the above
d) amount spent of preventive health checkup is irrelevant
102. Mr. A, 40 years, paid medical insurance premium of ` 12,000 during the P.Y. 2017-18 to
insure his health as well as the health of his spouse. He contributed `2,400 to Central
Government Health Scheme during the year. He incurred `3,000 in cash on preventive health
check-up of himself and his spouse. Compute deduction allowable u/s80D for the A.Y.2018-19.
a) 15,000 b) 17,400 c) 20,000 d) Nil
103. V paid medical insurance premium of ` 17,000 during the year to insure the health of his
father, aged 59 years, who is not dependent on him. He has incurred `4,000 by cheque on
preventive health check-up of his father. Compute the deduction allowable under section 80D
for the A.Y.2018-19.
a) 21,000 b) 20,000 c) 20,000 d) Nil
104. Deduction under section 80DD is allowed to

a) All assessee b) Resident Individual and Resident HUF
c) Individual only d) Individual and Resident HUF
105. Deduction under section 80DD is allowed when expenditure is incurred

a) for the medical treatment of a dependent disabled person
b) for training and rehabilitation of a dependent disabled person
c) deposit of any amount with LIC or any other insurer for the benefit of such dependent
d) any of the above
106. For claiming deduction under section 80D, dependent of individual is

a) spouse and children
b) spouse, children and parents who are dependent on the individual
c) spouse, children, parents, brothers and sisters who are dependent on the individual
d) only individual‖s spouse
107. Deduction under section 80U is allowed to

108. Deduction under section 80U for a person with disability shall be
a) ` 75,000 b) ` 1,00,000 c) ` 75,000 d) No limit
109. Deduction under section 80DDB is allowed to

a) All assessee b) Resident Individual and Resident HUF
c) Individual only d) Individual and Resident HUF
110. Deduction u/s80DDB is allowed to an Individual, if amount is incurred for treatment of disease
of
a) spouse and children
b) spouse, children and parents who are dependent on the individual
c) spouse, children, parents, brothers and sisters who are dependent on the individual

|Page
VIVEK GABA
d) only individual‖s spouse
111. Rajesh incurred ` 37,000 on the treatment of a specified disease of himself. What amount of
deduction shall be allowed to him?
a) ` 37,000 b) ` 40,000 c) ` 60,000 d) Nil
112. Deduction under section 80E is allowed to

113. Deduction for payment of Interest on loan taken for higher education is allowed under section
a) 80C b) 80EE c) 80E d) 80CC
114. Deduction u/s80E is allowed for payment of interest on loan is loan is obtained from?
a) any financial institutions b) any approved charitable institution
c) any of a) and b) d) any person
115. Loan for which deduction if interest is allowed u/s80E should have taken for pursuing ……………
a) higher education b) any education
c) primary education d) secondary education
116. Higher education for the purpose of section 80E means any course of study pursued
a) after passing the Senior Secondary Examination
b) after passing from any school, board or university recognised by the Central Government or
State Government or local authority
c) after passing from any school, board or university recognised by any other authority
authorised by the Central Government or State Government or local authority
d) any of the above
117. Deduction under section 80E is allowed for entire amount of ……………. paid by an individual and
no deduction shall be allowed for ………………
a) repayment of the principal loan amount, interest b) interest, interest
c) interest, repayment of the principal loan amount d) none of the above
118. Deduction u/s80E is allowed for …………. years starting from year when interest is first paid.
a) maximum period of 8 b) maximum period of 7
c) unlimited period of time d) maximum period of 10
119. Deduction u/s 80E is allowed for a maximum period of 8 years starting from year …………….
a) when loan was obtained b) when interest is first paid
nd
c) when interest is paid for 2 time d) maximum period of 8 years is not applicable
120. Ramesh has taken a loan of `2,00,000 from SBI on 01.10.2006 for pursuing MBBS course &
after becoming doctor he paid interest of ` 45,000 on 01.10.2015. What amount of deduction
shall be allowed to him
a) ` 45,000 b) ` 50,000 c) ` 22,500 d) Nil
121. Gross Total Income is arrived after:

a) adding Income under five heads of Income
b) adding Income under five heads of Income excluding losses
c) adding Income under five heads of Income, after applying clubbing provisions and making

|Page
VIVEK GABA
adjustment of set off and carry forward of losses
d) adding Income under five heads of Income, after applying clubbing provisions and making
adjustment of set off and carry forward of losses and after allowing deduction u/s 80C to
80U
122. Deduction under section 80G is allowed to

123. Which the condition shall be fulfilled to avail deduction under section 80G.
a) The donation should be in cash
b) Donation may be in kind
c) The proof of payment is furnished along with return
d) Both a) and c)
124. If donation of more than ………. is given, then it must ……….to avail deduction u/s80G.
a) 15,000, be in cash b) 10,000, must not be in cash
c) 15,000, must not be in cash d) 20,000, must not be in cash
125. Section 80GG of the Income tax Act allows deduction of

a) payment of rent
b) donation to certain funds, Charitable Institutions
c) interest on loan taken for residential house property
d) interest on loan taken for higher education
126. To avail deduction under section 80GG, assessee should ……………….

a) not be getting any house rent allowance by his employer
b) not provided with Rent Free Accommodation by his employer
c) either of above
d) receipt of HRA or RFA is irrelevant
127. Which of the following statement is correct?

a) Assessee can claim deduction under section 80GG even if he has a house in his name
b) Assessee can claim deduction under section 80GG if he is in receipt of House Rent
Allowance from his employer
c) Assessee can claim maximum deduction of `5,000 per month under section 80GG
d) Assessee can claim deduction under section 80GG if the spouse of assessee has house
128. What amount of deduction is allowed under section 80GG to an individual who is paying rent
a) Rent paid over 10% of the adjusted gross total income b) ` 5,000 p.m.
c) 25% of the adjusted gross total income d) Lower of above
129. A‖s wife has house in her name, A wants to claim deduction under section 80GG. Discuss?
a) A may claim deduction u/s80GG b) A shall claim deduction u/s80GG
c) A cannot claim deduction u/s80GG d) None of the above
130. A‖s minor child has house, A wants to claim deduction under section 80GG. Discuss?
a) A cannot claim deduction u/s 80GG b) A shall claim deduction u/s80GG
c) A may claim deduction u/s 80GG d) None of the above

|Page
VIVEK GABA
131. A is in receipt of HRA from his employer, even then he shall be allowed deduction u/s80GG
a) True b) False

a) If assessee has house at any other place which is declared to be self-occupied and paid
rent for the accommodation taken by him for his residence, deduction u/s80GG is allowed
b) Deduction under section 80GG is allowed if assessee is provided with Rent Free
Accommodation by his employer but HRA is not given to him
c) If assessee is member of HUF and HUF has house in its name, assessee shall be
allowed deduction under section 80GG
d) Deduction under section 80GG shall be allowed if assessee is not be getting any house
rent allowance and also not provided with Rent Free Accommodation by his employer.
133. Adjusted Gross Total Income for the purpose of Section 80GG is
a) Gross Total Income – Long term capital gains– All Deduction of section 80C to 80U except
section 80GG
b) Gross Total Income + Long term capital gains – Short term capital gains u/s 111A – All
Deduction of section 80C to 80U except section 80GG
c) Gross Total Income – Long term capital gains – Short term capital gains u/s 111A
d) Gross Total Income – Long term capital gains – Short term capital gains u/s 111A – All
Deduction of section 80C to 80U except section 80GG
134. Deduction u/s80GG can be allowed, even when accommodation has been provided by
employer at ………
a) Free of cost b) concessional rent
135. Deduction under section 80GG can be allowed when
a) assessee is an employee b) assessee is having business/profession
136. Deduction under section 80GGA is allowed to

137. Deduction under section 80GGA is ……………… of sum paid by the assessee
a) 125 % b) 100 % c) 150 % d) 110 %
138. If amount of more than ……… is given u/s80GGA, it shall be paid my any mode other than
cash.
a) ` 10,000 b) ` 5,000 c) ` 20,000 d) ` 1,00,000
139. If amount beyond ` 10,000 is paid in cash by assessee for claiming deduction under section
80GGA, the amount so paid……………
a) shall be allowed b) may be allowed
c) shall be disallowed d) may not be allowed

|Page
VIVEK GABA
140. Deduction under section 80GGA is allowed to
a) any assessee b) Individual and HUF
c) Individual only d) Assessee, being Indian Company
141. What amount of deduction is allowed to Indian company under section 80GGB?
a) 100 % of sum contributed to any political party or an electoral trust
b) 150 % of sum contributed to any political party or an electoral trust
c) 100 % of sum contributed to any political party only
142. Deduction under section 80GGB is allowed to

a) All assessee b) companies only
c) Indian company d) Individual and HUF
143. Deduction shall be allowed u/s 80GGB and 80GGC even if sum contributed by way of cash
a) True b) False
144. Deduction under section 80QQB is provided to

c) Individual Resident only d) Assessee, being company
145. Deduction under section 80QQB is allowed for

146. Deduction under section 80QQB is allowed only if book for which copyright is done is
a) work of literary, artistic or scientific nature b) textbooks for school, guides,
147. Deduction under section 80QQB is allowed only if book for which copyright is done is
a) textbooks for school, guides, commentaries
b) work of literary, artistic or scientific nature
c) newspaper, journal, pamphlets
d) any of the above
148. Deduction under section 80QQB is allowed even if book involved is a textbook for school?
a) True b) False
149. Deduction under section 80RRB is provided to

a) All assessee registered as true &first inventor in respect of an invention under Patents Act
b) Individual Resident registered as true and first inventor in respect of an invention under
Patents Act
c) Company registered as true and first inventor in respect of an invention under Patents Act
d) All assessee irrespective of registration under Patents Act

|Page
VIVEK GABA
150. What amount of deduction is allowed under section 80RRB is
a) ` 3,00,000 b) Actual royalty
c) least of a) or b) d) higher of a) or b)
151. Deduction under section 80TTA is provided to

c) Individual only d) Assessee, being Indian Company
152. Deduction under section 80TTA is allowed for

c) income by way of interest from deposits
153. Interest on which of the following deposits is allowed as deduction under section 80TTA?
a) deposits in savings accounts book b) deposits in cooperative banks
c) deposits in Post office d) any of the above
154. Section 80DDB of the Income tax Act provides for

a) Deduction for medical treatment on specified diseases
b) Medical treatment of dependent with disability
c) Deduction for payment of rent
d) All of the above
155. The quantum of deduction allowed u/s 80D for parents shall be limited to ………………
a) ` 30,000 b) `20,000 c) ` 30,000 d) No limit
156. Deduction under section 80JJAA is provided to

c) Only company d) Assessee, being Indian Company
157. What is permissible deduction under section 80JJAA

a) 30% of the wages paid to any regular workmen
b) 50% of the wages paid to new regular workmen
c) 30% of the wages paid to new regular workmen
d) 50% of the wages paid to any regular workmen
158. Deduction under section 80JJAA is allowed for

a) 5 A/Y‖s starting from the year in which employment is provided
b) 7 A/Y‖s starting from the year in which employment is provided
c) 3 A/Y‖s starting from the year in which employment is provided
d) Only 1 A/Y starting from the year in which employment is provided
159. Deduction under section 80IA is available for

a) Development of infrastructure
b) Development of SEZ
c) Deduction for Manufacturing in specified Areas

|Page
VIVEK GABA
160. Deduction under section 80IA is available to
c) Only company d) Assessee, being Indian Company
161. Deduction under section 80ID is available to

a) Any assessee b) Any industrial undertaking
c) Individual and HUF d) Assessee, being Indian Company
162. Deduction under section 80ID is available for

b) Development of SEZ
c) Operating hotels, building and convention centre in specified area irrespective of date of
construction
d) Operating hotels, building and convention centre in specified area when construction is
between 1.4.2007 to 31.7.2010
163. What amount of deduction available under section 80ID?

a) 100 % for 5 consecutive Assessment years
b) 100 % for 7 consecutive Assessment years
c) 50 % for 5 consecutive Assessment years
d) 100 % for 7 consecutive Assessment years out of 10 years
164. Which of the following are specified areas for the purpose of section 80ID?
a) NCR of Delhi and Faridabad, Gurgaon b) Gautan Budh Nagar, Ghaziabad
c) specified district having world heritage site d) Any of the above
165. Which of the following are specified areas for the purpose of section 80ID?
a) NCR of Delhi and Faridabad, Gurgaon, Gautan Budh Nagar, Ghaziabad
b) specified district having world heritage site
c) NCR of Delhi and Faridabad, Gurgaon, Gautan Budh Nagar, Ghaziabad and specified
district having world heritage site
166. Deduction under section 80IE is available to

a) Any assessee b) Any industrial undertaking
c) Individual and HUF d) Assessee, being Indian Company
167. Deduction under section 80IE is available for

b) Manufacturing of specified articles/ eligible business in specified areas
c) Manufacturing of specified articles/ eligible business in specified areas where manufacturing
is between 1.4.2008 to 1.4.2018
d) Operating hotels, building and convention centre in specified area irrespective of date of
construction
168. Deduction under section 80C to 80U cannot exceed

a) Gross Total Income b) Total Income
c) Income from business or profession d) Income from house property

|Page
VIVEK GABA
169. Aggregate amount of deduction under section 80C, 80CCC and 80CCD cannot exceed
a) ` 1,50,000 b) ` 2,00,000 c) ` 1,00,000 d) Nil
170. A pays (through a mode other than cash) during previous year medical insurance premium as
under:
 ` 28,000 to keep in force an insurance policy on his health and on the health of his wife
and dependent children;
 ` 38,000 to keep in force an insurance policy on the health of his parents where his
father is a senior citizen.
Calculate deduction under section 80D.
a) ` 36,000 b) ` 55,000 c) ` 30,000 d) ` 15,000
171. A pays (through a mode other than cash) during the previous year medical insurance premia
as under:
 ` 19,000 to keep in force an insurance policy on the health of his parents where is father
is senior citizen
a) ` 33,000 b) ` 29,000 c) ` 30,000 d) ` 15,000
172. A pays (through amode other than cash) during the previous year medical insurance premia
as under:
 ` 28,000 to keep in force an insurance policy on the health of his parents where his
father is senior citizen
a) ` 36,000 b) ` 33,000 c) ` 46,000 d) ` 15,000
173. Deduction in respect of contribution to political party will:

a) be allowed in respect of sum paid by way of cash
b) not be allowed if payment made in cash
c) deduction is not allowed whether payment is in cash or not.
d) be allowed if payment made in cash, subject to certain conditions
174. Gross Total Income of A aged 31 years as computed under Income-tax Act for AY 2017-18
is `2,50,000. He deposits ` 20,000 in a PPF account. Compute the tax payable by A
assuming that he has agricultural income of ` 3,50,000.
a) ` 4,120 b) ` 3,090 c) Nil d) ` 1,030
175. Which of the following is covered under section 80D of the Income Tax Act, 1961
a) Repayment of loan taken for higher education
b) Medical treatment of handicapped dependent
c) Medical insurance premium
d) Reimbursement of medical expenses

|Page
VIVEK GABA
176. Deduction u/s80C can be claimed for fixed deposit made in any scheduled if the minimum
period of deposit is
177. The maximum amount of deduction per annum under section 80GG in respect of rent paid is
a) ` 24,000 b) ` 36,000 c) ` 10,000 d) ` 60,000
178. Deduction available to an individual in respect of maintenance including medical treatment of

a dependent being a person with 80 % disability, when amount incurred in respect is ` 40,000
will be
a) ` 50,000 b) ` 40,000
179. Deduction available in respect of royalty income of authors under section 80QQB shall not
exceed ……………. in a previous year
a) ` 2,00,000 b) ` 3,50,000
ANSWERS
1. d) 23. c) 45. d) 67. b) 89. d) 111. a) 133. d) 155. a) 177. d)

2. b) 24. b) 46. c) 68. c) 90. a) 112. c) 134. b) 156. d) 178. c)
3. c) 25. c) 47. d) 69. c) 91. c) 113. c) 135. c) 157. c) 179. c)
4. d) 26. c) 48. a) 70. b) 92. b) 114. c) 136. a) 158. c)
5. c) 27. b) 49. c) 71. b) 93. a) 115. a) 137. b) 159. a)
6. c) 28. b) 50. c) 72. a) 94. d) 116. d) 138. a) 160. d)
7. b) 29. d) 51. c) 73. b) 95. c) 117. c) 139. c) 161. a)
8. c) 30. b) 52. d) 74. d) 96. c) 118. a) 140. a) 162. d)
9. c) 31. a) 53. b) 75. a) 97. c) 119. b) 141. a) 163. a)
10. a) 32. c) 54. b) 76. a) 98. d) 120. a) 142. c) 164. d)
11. b) 33. b) 55. b) 77. a) 99. c) 121. c) 143. b) 165. c)
12. c) 34. b) 56. c) 78. b) 100. c) 122. a) 144. c) 166. b)
13. d) 35. a) 57. b) 79. c) 101. a) 123. d) 145. a) 167. c)
14. c) 36. a) 58. b) 80. c) 102. b) 124. b) 146. a) 168. a)
15. a) 37. b) 59. d) 81. b) 103. c) 125. a) 147. b) 169. a)
16. d) 38. d) 60. b) 82. c) 104. b) 126. c) 148. b) 170. b)
17. b) 39. a) 61. c) 83. d) 105. d) 127. c) 149. b) 171. a)
18. c) 40. b) 62. c) 84. a) 106. c) 128. d) 150. c) 172. c)
19. a) 41. a) 63. b) 85. a) 107. c) 129. c) 151. b) 173. b)
20. a) 42. b) 64. c) 86. b) 108. a) 130. a) 152. c) 174. a)
21. a) 43. d) 65. b) 87. c) 109. b) 131. b) 153. d) 175. c)
22. a) 44. b) 66. c) 88. c) 110. c) 132. d) 154. a) 176. a)

|Page
VIVEK GABA
INCOME EXEMPT FROM
INCOME TAX 11
Difference between exemption and deduction
Income which is exempt u/s 10 or other sections will not be included for computing total income.
While incomes from which deductions are allowable will first be normally included in GTI and
deductions will be allowed
Section 10 : Income not included in Total Income
The various items of income referred in different clauses of section 10 are excluded from total
income of an assessee. These incomes are exempted incomes. Consequently, such income shall
not enter into the computation of taxable income or the rate of tax.
Sec 10(2) share by a member from the income of HUF

1. Any receipt by member of HUF out of family income is exempt.
2. Any remuneration received by member of HUF as a partner/ director in a company in which
the investment is made out of the funds of HUF shall be taxable in hands of HUF.
Sec 10(2A) : Share of income of a partner

It exempts partner‖s share (determined as per Profit sharing ratio) in total income of the firm.
Sec 10(4) : Income on non-resident (External) Account

In case of in individual who is a person resident in India, as defined in FERA (now FEMA), any
income by way of interest on money standing to his credit (External) Account (NRE A/c) in any
bank in India shall be exempt if certain conditions are satisfied.
Sec 10(19A) : Palace of ex-ruler

The annual value of any one palace in occupation of former Rulers would be excluded from their
total income provided such annual value was exempt from income tax before the de-recognition of
Rulers of Indian States and abolition of their privy purses.
Sec 10(23BBH) Exemption to the income of Prasar Bharati

Any income of Prasar Bharati (Broadcasting corporation of India) established u/s 3(1) of the Prasar
Bharati (Broadcasting corporation of India) Act, 1990 shall be exempt from tax.
Sec 10(26AAA) : Income of sikkimese individual

Income of sikkimese individual which accrues or arise to him/ her from any source in the state of
Sikkim or income from dividend/ interest on securities from anywhere in the world (exemption is
not available to sikkimese woman who, on or after April 1, 2008, marries a non sikkimese
individual).
Sec 10(10BC)
It exempts any amount received or receivable as compensation by an individual or his legal heirs
on account of any natural or other disaster.

|Page
VIVEK GABA
Sec 10(10CC) : Income tax paid by employer
It exempts income derived by way of perquisites, not provided by way of monetary payments u/s
17(2) in the hands of employees (an individual).
This applies where tax on non-monetary perquisite is actually paid by the employer, on behalf of
employees.
Sec 10(10D) : Receipts from LIC

Any sum received under life insurance policy, including bonus shall not be included in total income
of the person. Refer Chapter deduction for details.
Amendment by Finance Act 2013:
Explanation 1 to sec 10(10D): Exemption is not available in respect of any sum received by any
person under “keyman insurance policy” assigned to keyman before maturity.
Sec 10(11) & 10(12) : Payment from Provident fund

Following payments are fully exempt
a. Public provident fund
b. Accumulated balance payable to an employee in a RPF/SPF (subject to conditions)
Sec 10(16) : Scholarship granted to meet cost of education

Sec 10(17) Payment to MPs and MLAs
Any daily allowance or constituency allowance received by MLA/ MP shall be exempt.
Sec 10(17A) : Exemption with regard to award or reward of SG or CG

Sec 10(19) Family pension received by widow/ children/ nominated heirs of
members of armed forces
Exemption is available in respect of family pension received by widow or children or nominated
heirs, of members of armed forces (including para-military forces) of the union, where the death of
such member has occurred in course of operational duties.
Sec 10(21) : Income of scientific research association

Sec 10(23DA) Income of a securitisation trust
Any income of a securitisation trust from the activity of securitisation.
Explanation.—For the purposes of this clause,—
(a) “securitisation” shall have the same meaning as assigned to it,—

(i) in clause (r) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of
India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under
the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities
Contracts (Regulation) Act, 1956 (42 of 1956); or
(ii) under the guidelines on securitisation of standard assets issued by the Reserve Bank of
India;
(b) “securitisation trust” shall have the meaning assigned to it in the Explanation below section
115TC

|Page
VIVEK GABA
Sec 10(39) Income from International sporting events
Sec 10A
Manufacturing in free trade zone (FTZ) or electronic hardware technology park (EHTP) or software
technology park (STP)
Exemption is available for 10 consecutive years starting from the year of acquisition.
A/Y 2012-13 is the last year of exemption.
Sec 10AA Unit manufacturing in Special Economic zone (SEZ)

Up to 20% only can be old plant and machinery
Accounts must be audited by CA
Period of exemption:
(i) 100% profit for first 5 years starting from the year of production
(ii) 50% of the profits for next 5 years
(iii) 50% of the profits for another 5 years if amount is credited to reserve fund and used in
specified manner
Sec 10B Manufacturing 100% export oriented units (100% EOU)

Accounts must be audited by CA
A/Y 2012-13 is the last year of exemption.
100% exemption is allowed for 10 years from date of production.
CALCULATION OF AMOUNT IN ALL 3 ABOVE CASES (Section 10A/ 10AA/ 10B)
Profits of business x Export turnover (amount bought in foreign exchange/ total turnover)
Sec 10(45)
The Central Government has notified the following allowances and perquisites: for serving
Chairman or any other member, including retired Chairman or member of the Union Public Service
Commission (UPSC), for the purpose of exemption:
(i) the value of rent free official residence
(ii) the value of conveyance facilities including transport allowance
(iii) the value of leave travel concession.
Sec 10(47) Infrastructure debt fund

Any income of infrastructure debt fund, set up in accordance with the guidelines as may be
prescribed which is notified by the Central government, shall be exempt from tax.
Sec 10(48)
Any income received in India in Indian currency by a foreign company on account of sale of
crude oil to any person in India shall be exempt from tax.
Provided that
(i) receipt of such income in India by the foreign company is pursuant to an agreement or an
arrangement entered into by the Central Government or approved by the Central Government
(ii) having regard to the national interest, the foreign company and the agreement or
arrangement are notified by the Central Government in this behalf
(iii) the foreign company is not engaged in any activity, other than receipt of such income, in
India

|Page
VIVEK GABA
The ambit has now been expanded by Finance Act 2013 so as to exempt income received in
India in Indian currency by a foreign company on account of sale of any other goods or rendering
of services, as may be notified by the Central Government in this behalf.
Sec 10(49) Exemption to National Financial Holdings Company Limited
(FA 2013)
Any income of the National Financial Holdings Company Limited, being a company set up by the
CG, of any previous year relevant to any assessment year commencing on or before the 1st day
of April, 2014.
OBJECTIVE QUESTIONS
1. Any income from HUF received by Member of HUF shall be:

a) Fully Exempt b) Fully taxable
c) Partly Exempt & fully taxable d) None of the above
2. In case of a partner , the share of profits from the firm is:

a) Fully Exempt b) Fully Taxable
c) Partly Exempt & partly Taxable d) None of the above
3. Share of profit of Mr. Vivek who is a partner in M/s Amar & Co. is:
a) Exempt from tax b) Taxable as his business Income
c) Taxable as salary d) Taxable as Income from other sources
4. Scholarship received by a student to meet the cost of education is:

a) Casual Income b) Fully Taxable
c) Fully Exempt d) None of the above
5. A Subsidy received from the Tea Board by a assessee carrying on the business of growing are
manufacturing tea for re-plantation or replacement of tea bushes is:
a) Exempt b) Taxable
c) Party exempt d) None of the above
6. Which of the following income is not exempt under section

a) Share in total income of the firm b) Income from agriculture from Lahore
c) Bonus of life insurance d) Income from mutual funds
7. Which of the following is not agricultural income?

a) income from brick making
b) compensation received from Insurance company on account of loss of crop
c) prize from government on account of higher yield
d) income from agricultural land situated in Pakistan
8. Dividend paid by an Indian company is:

a) taxable in India in the hands of the recipient b) exempt in the hands of recipient
c) partially exempt in the hands of recipient d) None of the above

|Page
VIVEK GABA
9. Income of a foreign company received in India in Indian currency on account of sale of crude
oil or any other notified goods or rendering notified services to any person in India shall be:
a) Taxable in India
b) Exempt provided conditions mentioned in Section 10(47) is satisfied
c) Exempt provided conditions mentioned in Section 10(48) is satisfied
d) 50% of the amount is taxable in India
10. Scholarship received by a student to meet cost of education is

a) Taxable b) a casual income
c) exempt d) exempt upto 10,000
11. Any sum received by an individual as member of HUF from the income of HUF shall be:
a) taxable b) exempt
c) included in the income only for finding rate of tax d) None of the above
12. Daily allowance received by Member of legislative assembly (MLA) is

13. Daily allowance received by Member of Parliament is

14. As per section 10(4), any income by way of interest on any money standing to the credit in
Non Resident (External) Account in any Bank of India is …………. in case of assessee being
Individual
a) taxable b) exempt upto 10,000 c) exempt d) Exempt upto 15,000
15. As per section 10(45), notified allowance or perquisite paid to Chairman or retired chairman or
any member or retired member of Union Public Service Commission shall be ……………. :
a) exempt b) exempt upto 70,000 c) taxable d) exempt upto 50,000
ANSWERS
1. a) 3. a) 5. a) 7. d) 9. c) 11. b) 13. a) 15. a)

2. a) 4. c) 6. a) 8. b) 10. c) 12. a) 14. c)

|Page
VIVEK GABA
CLUBBING OF INCOME
12
Sec 60 transfer of income without transfer of asset
Income from asset transferred without transfer of asset shall be clubbed in the hands of transferor.
Sec 61 Revocable Transfer of Assets

Income arising from the asset transferred shall be clubbed in the hands of transferor.
Sec 62 Irrevocable Transfer of Assets

1. Asset transfer to any person & transferor derives no beneifts from such asset/income during life
time.
2. Income arising from assets shall be taxable in hands of the transfree.
Execption:
a) Income shall be clubbed in hands of transferor, as and when power to revoke arises.
b) Actual Revocation is not Relevant.
@
Sec 64(1)(ii) Remuneration of Spouse
If spouse of individual is receiving salary, commission, fees or any other remuneration from any
concern in which individual is having substantial interest, then such amount shall be included in the
income of individual.
EXCEPTION
1. No clubbing if spouse possesses technical orprofessional qualification and
2. Income is attributable to his or her technical or professional knowledge and experience.
Note: In case both have substantial interest, remuneration will be clubbed in hands of individual
whose income excluding such remuneration is greater.
@
Sec 64(1)(iv) Income from assets transferred to Spouse
When any assets is gifted by an individual to his/her spouse, any inccome from such assets shall
be deemed to be income of transferor (this section applies all assets except house property).
EXCEPTION
(i) If relationship of husband & wife does not exist either at the time of transfer or of accural of
Income
(ii) transfer is under an agreement to live apart.
@
Sec 64(1)(vi) Income from assets transferred to son’s wife without adequate
consideration by father-in- law or mother-in-law
Assets transferred by an individual to son‖s wife without adequate consideration. Income from such
asset shall be clubbed in the hands oftransferor. The relationship must be exist at both time i.e. at
the time of transfer and at the time of accrual.

|Page
VIVEK GABA
Sec 64(1)(vii & viii) Income of individual to include income of AOP to which
assets are transferred for the benefit of spouse & son’s wife
Asset transferred to a person or an AOP (TRUST) without adequate consideration for the
immediate or derrered benefit of his/her spouse or son‖s wife. Income from such asset shall be
clubbed in the hands of the transferor.
@
Sec 64(1A) Income of Minor Child
Income of minor child including minor married daughter shall be clubbed in the total income of
parent whose total income is greater( before including income of child)
EXCEPTION
a) Child covered u/s 80U b) Income from skills etc.
Section 10(32): Parent shall be entitled to an exemption of max ` 1,500 in respect of each minor
child.
Sec 64(2) Conversion into HUF property

If an individual, who is a member of the HUF converts his self-acquired property as the property of
the HUF, then the income derived by HUF from such property shall be included in the income of.
Question: Objective questions

1. Under which of the following circumstances transfers of income is revocable
a) If there is a sale with a condition of repurchase
b) If the transferor has power to change beneficiaries or trustees
c) Both (a) and (b)
d) Neither (a) nor (b)
2. Income which arises to the minor child shall clubbed in the income of his/ her _____
a) Parents b) Siblings c) Friends d) Neighbor
Solution: 1 – c), 2 – a)
OBJECTIVE QUESTIONS
1. Income from asset transferred under revocable transfer shall be taxable in the hands of
a) Transferor b) Transferee
c) Transferor or transferee, whose income is higher d) None of them
2. In case of irrevocable transfer of asset, income from asset transferred shall be clubbed in the
hands of transferor
a) when power to reassume arises b) can never be taxable in hands of transferor
c) always taxable in the hands of transferor d) from the beginning itself
3. A transfer of asset made to a person, transfer is not revocable during the lifetime of the
beneficiary but the income of asset is derived by the transferor. Income from asset shall be
assessed in the hands of
a) Transferor b) Transferee
c) Equally in hands of transferor and transferee d) None of the above

|Page
VIVEK GABA
4. An individual has substantial interest in a concern. The spouse of individual derives salary from
such concern. The amount of salary income shall be clubbed in hands of
a) individual b) spouse
c) equally in hands of individual and spouse d) none of them
5. Mrs. X receives salary from ABC Ltd. Mr. X has substantial interest in ABC Ltd. Mrs. X
possess professional qualification to be eligible for job. Salary so received by Mrs. X shall be
assessed in hands of
a) Mrs. X b) Mr. X c) Both of them d) Any of them
6. When the income of the individual includes ` 20,000 as the income of the minor child in terms
of section 64(1A), taxable income in this respect will be?
a) Nil b) ` 20,000 c) ` 18,500 d) None of the above
7. Mrs. R receives salary of ` 1,00,000 from PQ Ltd., Mr. R receives salary of ` 1,50,000 from
PQ Ltd. Both of them have substantial interest in company. Other Income of Mr. A and Mrs. A
excluding such remuneration is ` 10,00,000 and ` 12,00,000 respectively. Taxable income of
Mr. A and Mrs. A shall be
a) ` 11,50,000, ` 13,50,000 b) ` 11,00,000, ` 13,50,000
c) ` 12,50,000, ` 12,00,000 d) ` 10,00,000, ` 14,50,000
8. Mr. Amit as on 1.10.2012 transferred shares without consideration to his fiancée, Ritika. They
got married on 1.4.2013. Income from share for year the end shall be assessed in hands of
a) Amit b) Ritika
9. Gold funds were transferred by Mr. Rahul to Mrs. Rahul under an agreement to live apart.
Income from gold funds shall be assessed in the hands of
a) Mr. Rahul b) Mrs. Rahul c) Any d) None
10. To apply clubbing provisions under section 64(1)(iv), the relation of husband and wife must
exist at the time of:
a) only at the time of transfer of asset
b) only at the time of accrual of income
c) Both at the time of transfer of asset and accrual of income
d) Shall be at the time of accrual, may be at the time of transfer
11. Section 64(1)(iv) is applicable on all assets except

a) House property b) Share c) Gold d) None of the above
12. Abhi transferred shares of Indian companies to his wife. The shares were sold by his wife and
Capital Gain was earned. The capital gains so computed shall be clubbed in the hands of
Abhi. Is it correct
a) Correct b) Incorrect
c) Clubbing not applicable d) None of the above
13. Gold worth ` 2,00,000 was gifted by Reema to her son‖s wife, Naveena. Gold was sold by
Naveena for ` 5,00,000. Capital Gains shall be taxable in the hands of
a) Naveena b) Reema
c) Equally in hands of a) and b) d) None of the above

|Page
VIVEK GABA
14. Mr. Rajesh formed a trust for the benefit of his wife. The income of trust meant for the benefit
of Mrs. Rajesh shall be assessed in the hands of
a) Mrs. Rajesh b) Mr. Rajesh c) Any d) None
15. Mrs. Sharma has invested ` 5,00,000 in firm. As on 1st April 2014, out of total investment of
`5,00,000, ` 3,00,000 is on account of money given by her husband. During the previous year,
she earned interest of ` 50,000 and profit of ` 50,000. Amount to be clubbed in the income of
Mr. Sharma on account of interest and profit should be
a) Nil, ` 30,000 b) ` 30,000, Nil c) Nil, Nil d) ` 30,000, ` 30,000
16. Assets were transferred by A to an AOP for deferred benefit of his son‖s wife. Amount of
income from assets used for benefit of his daughter in law shall be clubbed in the hands of
a) A b) A‖s wife c) A‖s son‖s wife d) None
17. Income received by minor married daughter shall be assessed in the hands of
a) Married daughter b) her husband
c) parents, whose income is higher d) None of the above
18. When marriage of parents subsist, Income of minor child shall be included in the income of
a) Father
b) Mother
c) Parent, whose income (excluding such income) is higher
d) Parent, whose income (including such income) is higher
19. ` 1,00,000 earned by minor child from manual activity is invested in FDR. He earns ` 10,000
as interest from FDR during the previous year. ` 1,00,000 and ` 10,000 shall be assessed in
the hands of
a) Minor, Minor b) Minor, Parents
c) Parents, Parents d) Parents, Minor
20. Securities worth ` 20,00,000 was transferred by Abhi, member of HUF to HUF. Interest income
of ` 2,00,000 is earned on securities so transferred. Partition of HUF took place. ¼ of
securities were transferred to Abhi, ¼ of securities were transferred to Abhi‖s wife. How much
amount shall be taxable in the hands of Abhi
a) ` 2,00,000 b) ` 50,000 c) ` 1,00,000 d) None
21. Securities worth ` 20,00,000 was transferred by Ravi, member of HUF to HUF. Interest income
of ` 2,00,000 is earned on securities so transferred. Partition of HUF took place. ¼ of
securities were transferred to Ravi, ¼ of securities were transferred to Ravi‖s wife and ¼ were
transferred to his daughter in law. How much amount shall be taxable in the hands of Ravi
a) ` 2,00,000 b) ` 1,50,000 c) ` 1,00,000 d) None
22. When an asset is transferred by member of HUF to HUF. Partition of HUF has taken place. ¼
of property is given to member, ¼ to his wife, ¼ to his minor child and rest to major son.
What amount of income from property shall be clubbed with the income of member
a) ¼ of income b) ½ of income
c) Whole of the income d) ¾ of income

|Page
VIVEK GABA
23. When an asset is transferred by member of HUF to HUF. Partition of HUF has taken place.
Property is given to member, his wife, his minor child and major son. Whose income shall be
clubbed in the income of member
a) Wife‖s share b) minor and major child‖s share
c) his wife and minor child‖s share d) wife, minor and major child‖s share
24. Income of a minor child suffering from any disability of the nature specified in section 80U is
a) to be assessed in the hands of the minor child
b) to be clubbed with the income of that parent whose total income, before including minor‖s
income, is higher
c) completely exempt from tax
d) to be clubbed with the income of that parent whose total income, before including minor‖s
income, is lower
25. Where a member of a HUF has converted or transferred his self-acquired property for
inadequate consideration into joint family property, income arising there from is taxable –
a) as the income of the transferor-member b) in the hands of the HUF
c) in the hands of the karta of the HUF d) None of the above
26. Exemption of certain amount (not exceeding income clubbed) is available u/s10(32), where a
minor‖s income is clubbed with the income of the parent. The maximum exemption available is
a) Upto` 1,200 in respect of each minor child
b) upto` 1,500 in respect of each minor child
c) upto` 2,000 in respect of each minor child
d) upto` 1,000 in respect of each minor child
27. An individual has 3 minor child each having income of ` 2,000. What amount shall be taxable
in the hands of individual?
a) ` 6,000 b) ` 4,000 c) ` 1,500 d) Nil
28. An individual has 3 minor children A, B and C whose income is ` 1,200, ` 2,000 and ` 1,500.
What amount shall be taxable in the hands of individual?
a) ` 4,700 b) Nil c) ` 200 d) ` 500
29. G has 4 minor children: 2 daughters and 2 sons. Annual income of 2 daughters was `7,500
and ` 5,000 and of sons was ` 5,500 and ` 1,250 respectively. The daughter having income
of ` 5,000 is suffering from a disability specified under section 80U. Work out the amount of
income earned by minor children to be clubbed in the hands of G.
a) ` 13,250 b) ` 10,000 c) ` 13,500 d) `9,750
30. Income from asset transferred to spouse will be taxable in the hands of transfer or if:
a) asset has been transferred in pursuance of an agreement to live apart
b) asset was transferred for an adequate consideration
c) asset was transferred before marriage
d) asset was transferred for inadequate consideration
31. In whose total income, the income of minor child is included?

a) Father b) Mother
c) Father and mother both d) Parents whose total income is greater

|Page
VIVEK GABA
32. For the purpose of clubbing of income of the specified person in the income of the individual
under section 64, the word ―income‖ includes ……………….?
a) Loss b) Expenses c) Interest d) Any of the above
33. In case the income of an individual includes any income of his minor child in terms of section
64(1A), such individual shall be entitled to exemption of the amount of such income or
……………….,whichever is less?
a) 1500 b) 2000 c) 1000 d) 500
34. Mr. A gifts cash of 1,00,000 to his brother wife Mrs. B. Mr. B gifts cash of 1,00,000 to Mrs. A.
From the cash gifted to her, Mrs. B invests in a fixed deposit, Income there from is 10,000.
Aforesaid 10,000 will be included in the total income of…………?
a) Mr. B b) Mr. A
c) equally included d) None of the above
35. The income of minor child will always be included in the income of his/her parents?
36. In which following situation, income of minor child shall be clubbed in the income of parents
a) Income of child suffering from disease mentioned in 80U
b) Income earned by child from manual work
c) Income of child from interest on FDR
d) Income earned from an activity involving skill
37. When an asset is transferred by member of HUF to HUF. Partition of HUF took place. ¼ of
property is given to member, ¼ to his wife, ¼ to his minor child and rest to major son. What
amount of income from property shall be taxable in the income of member
a) ¼ of income b) ½ of income c) whole of the income d) ¾ of income
38. Ram has 2 minor child A and B whose income are ` 2,000 and ` 1,200 respectively. B is
suffering from disease mentioned in 80U. What amount shall be taxable in hands of Ram?
a) ` 3,200 b) Nil c) ` 200 d) ` 500
39. Transfer of income without transfer of asset would be taxable in the hands of:
a) Transferor only b) Transferee only
c) either transferor or transferee d) Both transferor and transferee
40. Mrs. Ravi received salary of ` 4,00,000 from a firm where her husband has 16 % profit share.
Mrs. Ravi does not have any qualification or experience. Apart from above amount, the income
of Mrs. Ravi is `3,50,000
a) Mr. Ravi: ` 7,50,000, Mrs. Ravi: Nil b) Mr. Ravi: Nil, Mrs. Ravi: ` 7,50,000
c) Mr. Ravi: ` 4,00,000, Mrs. Ravi: ` 3,50,000 d) None of the above
41. Mr. A gifted cash to his wife who invested the same in her business. She incurred loss in
business. Proportionate loss was set off by Mr. A from his income. Assessing Officer contends
that amount shall not be allowed to be set off. Is the proposition of Assessing Officer valid?
a) Valid b) Invalid c) Party invalid d) None

|Page
VIVEK GABA
42. At the time of fixation of marriage of his son of, Mr. Sharma gifted land to his would be
daughter in law. The marriage was held in the month subsequent to the date of transfer. The
income accruing on land after marriage shall be taxable in the hands of
a) Mr. Sharma b) Daughter in law
c) equally in hands of a) and b) d) None of the above
43. Shares of ABC Ltd. were transferred by Raman to Radhika for ` 1,00,000. Income from shares
so transferred in the hands of
a) Raman b) Radhika c) Both a) and b) d) None
44. Abhi transferred shares of Indian companies to his wife. The shares were sold by his wife and
earned Capital Gains. Capital Gain shall be taxable in the hands of:
a) Abhi b) Abhi‖s wife c) Both a) and b) d) None of the above
45. Transfer of income by A to B without transfer of asset shall be clubbed in the hands of
a) A b) B c) Both A and B d) None of them
46. Rental income of house is transferred to X by Y without transfer of house. Rental income shall
be taxable in the hands of
a) X b) Y c) Any of them d) None of them
47. An individual has 3 minor child each having income of ` 2,000. One of the child is suffering
from disease mentioned in 80U. What amount shall be taxable in the hands of individual?
a) ` 6,000 b) ` 1,000 c) ` 1,500 d) ` 4,000
48. An asset is transferred for the lifetime of beneficiary. Any income arising from transferred asset
shall be taxable in the hands of
a) Transferor b) Transferee c) Any of them d) None of them
49. Which of the following is not revocable transfer

a) when transferor can reassume power over income of the asset
b) if there is any provision through which income can be transferred to transferor
c) when there is no power to assume anyhow during the lifetime of beneficiary/ transferee
d) when transferor can indirectly reassume power over income of asset
50. Transfer of asset, being irrevocable during the lifetime of transferee. After death of transferee
income shall be assessed in hands of
a) transferor b) executor of transferee
c) partially in hands of a) and b) d) None of the above
51. In which of the following case, there is no substantial interest

a) holding 20% voting power of the company
b) holding 20% share of company carrying fixed rate dividend
c) holding30% equity share in company where his share is 10% and that of relative is 20%
d) entitlement of 20% profit in a firm
52. In certain cases, income of other person is included in the income of the assessee. It is
known as
a) Clubbing of income b) Increase in income
c) Addition to income d) Set off of income

|Page
VIVEK GABA
53. Mr. A and Mrs. A hold 10% each equity shares of MNO Ltd. Both of them received salary
from MNO Ltd. The salary shall be assessed in the hands of:
a) Mr. A, is his income is lower than Mrs. A‖s income excluding such remuneration
b) Mrs. A, is her income is higher than Mr. A‖s income including such remuneration
c) Either Mr. A or Mrs. A, whose income is higher than other, excluding such remuneration
d) No clubbing shall be done since they do not have substantial interest
54. Where both husband and wife have substantial interest in a concern and both of them are in
receipt of remuneration, it shall be assessed in the hands of
a) Total income of wife or husband, whose income excluding such income is lower
b) Total income of wife or husband, whose income excluding such income is higher
c) Total income of wife or husband, whose income including such income is higher
d) Total income of wife or husband, whose income including such income is lower
55. Mr. Amit as on 1.10.2013 transferred shares without consideration to his fiancée, Ritika. They
got married on 1.4.2014. Assessing Officer intends that Income from share shall be clubbed in
the hands of Mr. Amit for year ended 31.3.2015. Is contention of Assessing Officer valid.
a) Valid b) invalid c) partly valid d) None of the above
56. Gold funds were transferred by Mr. Rahul to Mrs. Rahul under an agreement to live apart.
Assessing Officer intends that Income from gold funds shall be clubbed in the hands of Mr.
Rahul for year ended 31.3.2014. Is contention of Assessing Officer valid.
a) Valid b) partly valid c) invalid d) None of the above
57. Roshan earns ` 2,50,000 as interest from a firm where he has made a total investment of `
5,00,000 as on first day of previous year. Out of the total investment of ` 5,00,000, ` 3,00,000
is the amount which was gifted to him by his wife, Teena. What is amount that shall be
clubbed in the income of Teena
a) ` 2,50,000 b) ` 1,50,000 c) ` 1,00,000 d) Nil
58. On 1st April, 2014, Mrs. Falguni contributed ` 2,00,000 to her business. Her husband, Tiger
gave her ` 1,00,000 as on 13th April, 2014, which was invested by her in her business. A
profit of ` 1,00,000 was earned by her from the business. The income to be clubbed in hands
of Tiger should be
a) ` 33,333 b) ` 50,000 c) ` 1,00,000 d) Nil
59. Assets were transferred by A to an AOP for immediate benefit of his son‖s wife. Amount of
income from assets used for benefit of his daughter in law shall be clubbed in the hands of
a) A b) A‖s wife c) A‖s son‖s wife d) None
60. Under which of the following, clubbing of income of minor child shall not take place?
a) Income of child suffering from disease mentioned in 80U
b) Income earned from activity involving manual work
c) Income earned from activity involving application of skills and knowledge
d) All of the above
61. When marriage of parents does not subsist, Income of minor child shall be included in the
income of
a) Father b) Mother

|Page
VIVEK GABA
c) Parent who maintains the child d) No clubbing
62. An individual, member of HUF converted his asset into property of HUF. The income of
property shall be taxable in the hands of
a) Transferor i.e. member of HUF b) HUF
c) partly in hands of transferor and HUF d) None of the above
63. A minor child suffering from disability earned ` 2,00,000 from an activity involving skill. The
amount was invested by him to purchase securities. Interest income of ` 30,000 is earned on
same during the same previous year. It shall be taxable in the hands of
a) Minor b) Mother
c) Father d) Parents, whose income is higher
64. A transferred cash to his friend B. B gave cash to Mrs. A. The cash was invested by Mrs. A
in FDR. Interest on FDR shall be taxable in hands of
a) Mrs. A b) Mr. A c) Mr. B d) None of the above
65. Capital gain on assets transferred without adequate consideration by A to his daughter in law
shall be taxable in the hands of
a) A b) daughter in law c) A‖s son d) None
66. Income arising to a minor married daughter is –

a) to be assessed in the hands of the minor married daughter
b) to be clubbed with the income of that parent whose total income, before including minor‖s
income, is higher
c) completely exempt from tax
d) to be clubbed with the income of that parent whose total income, before including minor‖s
income, is lower
67. If converted property of HUF is subsequently partitioned among the members of the family, the
income derived from such converted property as is received by the spouse of the transferor
will be taxable
a) as income of the transferor-member b) as income of the spouse of the transferor
c) as income of the HUF d) as income of Karta of HUF
68. R gifted his house property to his wife in 2000. R has let out the house property @ Rs.5,000
p.m. The income from such house property will be taxable in the hands of :
a) Mrs. R
b) R. However , income will be computed first as Mrs. R‖s income & thereafter clubbed in
income of R
c) R as he will be treated as deemed owner & liable to tax
69. Abhi transferred 10 % debenture of ` 6,00,000 to his brother which is not revocable. Discuss
its taxability
a) Abhi shall pay tax on ` 60,0000
b) Abhi‖s brother shall pay tax on ` 60,0000
c) Abhi‖s brother shall pay tax on ` 6,60,0000

|Page
VIVEK GABA
70. Mrs. Ravi received salary of ` 4,00,000 from a firm where her husband has 24 % profit share.
Mrs. Ravi does not have any qualification or experience. Apart from above amount, the income
of Mrs. Ravi is `3,50,000
a) Mr. Ravi: ` 7,50,000, Mrs. Ravi: Nil b) Mr. Ravi: Nil, Mrs. Ravi: ` 7,50,000
c) Mr. Ravi: ` 4,00,000, Mrs. Ravi: ` 3,50,000 d) None of the above
71. As per section 64(1)(iv), which asset shall be included in the income of individual who
transfers asset to his/ her spouse?
a) any asset b) any asset other than house property
c) any capital asset d) None of the above
72. Arnav sold 2000, 14% debenture of ` 100 each to his wife for ` 90,000. The market value of
debenture as on date of transfer was ` 1,80,000. What amount of interest income is included
in income of Arnav?
a) 28,000 b) 12,600 c) 25,200 d) 14,000
73. If any income of minor child is to be clubbed under section 64, it would be clubbed under
which head?
a) Other Sources b) PGBP
c) House Property d) relevant head to which it belongs
ANSWERS
1. a) 10. c) 19. b) 28. d) 37. d) 46. b) 55. b) 64. b) 73. d)

2. a) 11. a) 20. c) 29. b) 38. d) 47. b) 56. c) 65. a)
3. a) 12. a) 21. b) 30. d) 39. a) 48. a) 57. b) 66. b)
4. a) 13. b) 22. b) 31. d) 40. b) 49. c) 58. d) 67. a)
5. a) 14. b) 23. c) 32. a) 41. b) 50. a) 59. a) 68. c)
6. c) 15. b) 24. a) 33. a) 42. b) 51. b) 60. d) 69. b)
7. d) 16. a) 25. a) 34. a) 43. a) 52. a) 61. c) 70. c)
8. b) 17. c) 26. b) 35 b) 44. a) 53. c) 62. a) 71. b)
9. b) 18. c) 27. c) 36. c) 45 a) 54. b) 63. d) 72. a)

|Page
VIVEK GABA
FILING OF RETURN &
ASSESSMENT PROCEDURE 13
@
Sec 139(1) Return of Income (Amended by FA, 2016)
By Company and Firm Other than company and firm
Mandatory If Total Income* exceeds Exemption limit
*before deduction under chapter VI-A & Section 10(38) as the case may be.
FOURTH PROVISO TO SECTION 139(1)

Every resident and ordinarily resident having –
a. any asset (including financial interest in any entity) located outside India or
b. signing authority in any account located outside India
c. is required to file a return of income in the prescribed form compulsorily,
d. whether or not he has income chargeable to tax
Reason of Deletion of old fourth proviso & Add new fourth & Fifth Proviso to
section 139(1)
Under the existing provisions i.e. as per fourth proviso to section 139(1), a person being a
resident and ordinarily resident, who is not required to furnish the return of income under
section 139(1) and
- who has any asset (including financial interest in any entity) located outside India or
- signing authority in any account outside India.
shall furnish a return of income or loss for the previous year in prescribed form.
As per existing law, the assessee is required to file the return if he has any asset in his name
outside India. Government found that certain certain assesses were holding asset outside India,
not in their names but they were beneficial owner of such assets i.e. assets were held in name
of other persons but assessee was beneficial owner of such assets. (Benami Holder) such
assessee were not required to file the return of Income since assets outside India were not in
their names.
Finance Act, 2015 has deleted the fourth proviso and added new fourth proviso and Fifth
proviso to section 139(1) which provides as under:
FOURTH PROVISO TO SECTION 139(1) :

Provided also that a person, being a resident other than not ordinarily resident in India within
the meaning of section 6, who is not required to furnish a return under this sub-section and
who at any time during the previous year,-
a) holds, as a beneficial owner or otherwise, any asset (including any financial interest in any
entity) located outside India or has signing authority in any account located outside India; or

|Page
VIVEK GABA
b) is a beneficiary of any asset (including any financial interest in any entity) located outside
India, shall furnish, on or before the due date, a return in respect of his Income or loss for
the previous year in such form and verified in such manner and setting forth such other
particulars as may be prescribed.
FIFTH PROVISO TO SECTION 139(1) :

Provided also that nothing contained in the fourth proviso shall apply to an individual, being a
beneficiary of any asset (including any financial interest in any entity) located outside India
where, income, if any, arising from such asset is includible in the income of the person referred
to in clause (a) of that proviso in accordance with the provision of this act.
EXPLANATIONS ADDED BY FINANCE ACT, 2015:

Explanation 4: For the purpose of this section “beneficial owner” in respect of an asset means
an individual who has provided, directly or indirectly, consideration for the asset for immediate
or future benefit, direct or indirect, of himself or any other person.
Explanation 5:For the purpose of this section “beneficiary” in respect of an asset means an
individual who derives benefit from the asset during the previous year and the consideration for
such asset has been provided by any person other than such beneficiary.
Analysis of Amendment:
1. Fourth proviso applies to every resident assessee.
2. However, an Individual /HUF who is beneficial who is a resident but not ordinarily resident
is not required to file the return of Income under the Fourth proviso to section 139(1) even
if holds as beneficial owner any asset located outside India or is beneficiary of any asset
outside India or has financial interest in any entity located outside India or is a signing
authority in any bank account located outside India.
3. Amendment has also been made in section 147 to provide that Income shall be deemed to
have escaped assessment where a person is found to have any asset (including financial
interest in any entity) located outside India.
Sec 139(4A) Charitable and Religious trusts or Institutions

If Total income exceeds Exemption limit (before giving exemption under section 11 & 12)
Sec 139(4B) Political Parties

If Total income exceeds Exemption limit (before giving exemption under section 13A)

|Page
VIVEK GABA
Sec 139(4C) Hospitals, medical institutions, schools, colleges & other specified
institutions referred u/s 10, Authority covered u/s 10(46) & Infrastructure
debt fund u/s 10(47)
If Total income exceeds Exemption limit (before giving exemption under section 10)
Sec 139(4D) University, college and institutions referred to in sec 35(1)(ii) &
sec 35(1)(iii)
If the institution is not required to furnish return under any other provision of Act.
Due date in all above cases as per section 139(1)
Company
30th September of the Assessment
Audit requirement under Income Tax Act or any other law
year
Working partner of firm whose audit is compulsory
Assessee who is required to further report of transfer 30th November of the Assessment
pricing Year
Other Assessee 31st July of the Assessment Year
Penalty
Section Failures Penalty
272A If default is under section 139(4A) or 139(4C) ` 100 per day during which failure
continues
271F In other cases ` 5,000
@
Sec 139(3) Read with Sec 80: Loss Return (Amended by FA, 2016)
Losses under head PGBP and Capital Gain can be carried forward only if loss of return is filed
within due date specified under section 139(1).
Focus Area:
(i) Loss can be set off even if ROI is filed late.
(ii) Loss under head House Property, loss u/s 35AD & unabsorbed depreciation can be carried
forward even if return is filed late.
(iii) Loss of earlier year in which return filed on due date can be carried forward.
@
Sec 139(4) Belated Return (Amended by FA, 2016)
If ROI not filed time allowed u/s 139(1) or 142(1) then it may be furnished:
a) Within 1 year from thebefore the end of b) Before completion of assessment.

relevant Assessment Year; OR
Whichever is EARLIER
@
Sec 139(5) Revised return ( Amended by FA, 2017)
If assessee discovers any omission or wrong statement in ROI field under section 139(1) or belated
return under section 139(4)or under section 142(1) then it may furnished:
c) Within the end of relevant AY; OR d) Before completion of assessment

|Page
VIVEK GABA
Whichever is EARLIER
Note 1: Belated Return canbe Revised.
Note 2: Revised return substitutes the original return and can be revised again.
Sec 139(9) Defective Return (Amended by FA, 2016)

A return is said to be defective if any of the following conditions is not satisfied:-
a) The annexure statement b) Proof of TDS, Advance tax
c) Trading & profit & loss A/c. d) Audit report
e) Statement of income computation
f) Tax together with interest payable as per sec 140A shall be paid on or before due date of
filing of return. (Finance Act 2013)
If AO considers return is defective, AO may initiate the defect and assesseeshould be given an
opportunity to rectify the defect within the period of 15 days, elsereturn shall be treated as invalid.
Sec 139B Tax Return Preparer

1. The CBDT may frame a scheme providing specified persons to furnish their ROI through a TRP
authorized to act as such under the scheme.
2. This scheme is not applicable for a company or in case of compulsory audit.
3. The following are not authorized act as TRP.

 officer of schedule bank  a legal practitioner  a Chartered Accountant
Sec 140A Self-Assessment

In simple words, the payment required to be made u/s140A along with ROI shall be as under:
Income Tax on the returned income A

Add: Interest u/s 234A,234B,234C B
Less: Relief u/s 89/90/90A/91 C
Less: MAT credit u/s 115JAA/AMT u/s 115JD D
Less: TDS/TCS E
Less: Advance Tax F
Amount to be paid by self-assessment u/s 140A A+B-C-D-E-F
Notes: If amount paid by assessee u/s 140A is less than the amount required to be paid u/s
140A, then the amount so paid shall be first adjusted towards the interest aforesaid and balance
towards tax. If assessee fails to pay tax or interest, then assessee shall be deemed as assessee
in default and is liable to pay interest u/s 220 & penalty u/s 221.
Sec 142(1) Notice of Return

If Assessee has not furnished the return of income within the time prescribed u/s 139(1), then the
AO may issue a notice requiring him to furnish the ROI within time specified in notice u/s 142(1)(i).
THE NOTICE U/S 142(1)(i) CAN BE ISSUED EVEN AFTER THE END OF THE RELEVANTAY.
AO can issue notice u/s 142(1)(ii) requiring furnishing of books of accounts by assessee for max 3
years. Notice of such section can be issued whether the assessee has field ROI or not.

|Page
VIVEK GABA
Sec 142(2A) Direction for Special Audit (Amended by FA 2013)
If at any stage of the proceedings before him, the Assessing Officer, having regard to—
a) the nature & complexity of the accounts, or b) doubts about the correctness of accounts, or
c) volume of the accounts, or d) multiplicity of transactions in accounts, or
e) specialized nature of business activity of the assessee,
AND
the interests of the revenue,
is of opinion that it is necessary so to do with the previous approval of the Chief Commissioner or
the Commissioner, direct assessee to get his accounts audited by an accountant and furnish report.
SCN shall be given by AO. If AO issues direction without issuing SCN, assessee- file WRIT
PETITION in HC and HC-quash such direction.
The direction - issued only when the case is pending before AO in an assessment/reassessment.
The direction can be given even if accounts of assessee have been audited under Income Tax
Act& other law.
Sec 143(1) New Scheme of processing of returns

1. 100% Returns - processed u/s 143(1) &tax refundable& payable, Interest, Expenditure
disallowance etc. adjustments in ROI.
2. No revision against intimation u/s 143(1). Intimation & deemed intimation u/s 143(1) - rectified
u/s 154.
3. An appeal- field to CIT(A) against intimation u/s 143(1).
4. The intimation u/s 143(1) is deemed notice u/s 156. Assessee shall pay demand within 30 days,
else – treated as assessee in default.
Notwithstanding anything contained in section 143(1), the processing of a return shall not be
necessary, where a notice of scrutiny has been issued to assessee u/s 143(2).[Section 143(1D)]
@
Sec 143(2) Notice of Scrutiny Assessment
Notice shall be served within 6 months from end of financial year in which ROI filed. If ROI not
filed then notice cannot be issued and hence, assessment u/s 143(3) is not possible.[ROI of 139(1)
& 142(1)]
@
Sec 143(3) Scrutiny Assessment
Assessment under section 143(3) is possible only when if ROI is filed u/s 139(1) or142(1). The AO
can either reduce returned income or assess higher loss u/s 143(3).
Note: If assessee wants to claim deduction which has not been claimed in return, then he can
claim only through revised return.
AO shall not give exemption u/s 10(23C) or u/s 11 & 12 for the previous year in case of a trust or
institution for the previous year in which1stproviso to section 2(15) is applicable i.e.
commercial/business receipts exceeds`25 lakhs whether or not approval has been cancelled u/s
12AA or 10(23C). AO shall disallow exemption u/s 10(23C) or 11 & 12 by operation of law.
Sec 144 Best Judgment Assessment

If any person:
a) Fails to furnish ROI u/s 139(1) or 139(4).
b) Fails to comply with the notice issued under section 142(1)(i) or 142(1)(ii).

|Page
VIVEK GABA
c) Fails to comply with the direction issued under section 142(2A) for audit
d) Fails to comply with the notice issued under section sec 143(2).
Then AO after taking into a/call relevant material gathered - make an assessment - best of his
judgment and determine tax payable by assessee.
Note: AO shall issue SCN before proceedings to best judgement assessment under section 144 but
AO shall not issue SCN if notice u/s 142(1)(i) has already been given.
@
Sec 147 Income escaping assessment/ Reassessment
Where AO -reason to believe - any income taxable for AY - escaped assessment, then he may
subject to sec148 to 153, assess /reassess such income & also any other income which has
escaped assessment and comes to his notice subsequently during course or proceedings under
this section.
The following - deemed to be cases where income has escaped assessment
a) No return& no assessment but TI >ex. c) Person is found to have any asset located
Limit outside India.
b) Return furnished & no assessment and d) Assessee has failed to furnish a report of
assessee has understated income/ claimed transfer pricing in respect of any IT which he
excessive loss. was so required u/s 92E.
Sec 149(1) Time limit for issue of notice under section 148
PARTICULARS TIME LIMIT
If the escaped income is<= 1,00,000 Upto 4 years from the end to relevant AY.
If the escaped income is>= 1,00,000 Beyond 4 years but upto 6 year end of the
Assessment Year
Person has asset located outside India 4 year but not more than 16 years.
Sec 153 Time limit for completion of assessment or reassessment

(Amendment by Finance Act, 2016)
TYPE OF ASSESSMENT TIME LIMIT
Order u/s 143(3) or 144 2 year 21 Monthsfrom end of relevant AY.(18 Month
for AY 2018-19)
Order u/s147 1 year 9 Monthsfrom end of FY in which notice u/s
148 served
Fresh order u/s 143(3)/144/147 due to 1 year 9 Monthsfrom end of FY in which order u/s
order u/s254,263 or 264. 254 is received by CIT or order u/s 263/ 264 passed
by CIT.
OBJECTIVE QUESTIONS
1. Every person, being a company

a) shall not file return b) may not file return
c) shall file return d) may file return

|Page
VIVEK GABA
2. The return of income shall be filed
a) on or before due date b) before due date
c) on due date d) after due date
3. Every resident and ordinarily resident having ……………. is required to file a return of income if
a) any asset located outside India
b) he has financial interest in any entity located outside India
c) signing authority in any account located outside India
d) either of above
4. A return of income is required to be filed by every resident and ordinarily resident if

a) any of his asset located in India
b) he has financial interest in any entity located in India
c) signing authority in any account located outside India
d) either of above
5. Every Non-resident having ……………… is required to file a return of income if

b) he has financial interest in any entity located outside India
c) either of above
6. A company shall file its return of income by

a) 30th September of assessment year b) 30th November of assessment year
c) 30th September of previous year d) 30th November previous year
7. An assessee other than company and person required to submit TP report shall file their return
of income by
a) 30th September of assessment year b) 31st July of assessment year
c) 30th September of previous year d) 31st July of previous year
8. A TP report has to be filed by ABC Ltd. in this case, return of income shall be filed by:
9. The total income of Raman (resident and ordinarily resident) is ` 1,70,000. Raman has asset
located outside India. The filing of return of income
a) Voluntary b) Compulsory
10. Any employee who has filed the return of his income to his employer as per section ………….
shall be deemed to have furnish a ROI …………………
a) Section 139(1A), Section 139(2) b) Section 139(1), Section 139(1A)
c) section 139(1A), Section 139(1) d) None of the above
11. Under section 12A, exemption u/s 11 and 12 is available only if trust/institution gets its account
………. if total income exceeds …………….. ………………... should be submitted
a) maintained, ` 2,00,000, Balance sheet b) audited, `2,50,000, Financial statement
c) audited, `2,50,000, Audit report d) audited, `2,00,000, Financial statement

|Page
VIVEK GABA
12. Which section mandates filing of return of political party?
a) 139(1) b) 139(4C) c) 139(4A) d) 139(4B)
13. Every university, college or other institution referred in ……….., which is not required to furnish its
return of income or loss under any other provision, shall furnish return in every previous year
and shall be deemed to be filed u/s ………….
a) Section 35, section 139(4A) c) Section 35, section 139(4D)
c) Section 35, section 139(1) d) Section 35, section 139(3)
14. ……………… can be carried forward even if the return is not filed up to the due date.
a) unabsorbed depreciation b) loss under head House property
15. Loss can be set off even if the return is filed after the due date. Is the statement correct?
a) Valid b) Invalid
16. For PY 2015-16, H incurred a loss of ` 40,000 u/h PGBP and filed return of loss within due
date. He again incurred loss of ` 50,000 during PY 2016-17. But for this year he did not file
return. In PY 2017-18 he earned income of ` 5,00,000. How much loss can Mr. H carry
forward and set off in this year?
a) 90,000 b) 50,000 c) 40,000 d) Nil
17. If a return is filed after the end of assessment year then penalty of ………. shall be imposed.
a) ` 2,000 b) `2,500 c) ` 5,000 d) Nil
18. Revised return substitutes ……… and shall be deemed to be having been filed on the date on
which original return was filed.
a) Original return b) revised return filed earlier
c) revised return d) None of the above
19. If the AO considers that return is defective, he may intimate the defect to the assessee and
give him …………………
a) opportunity to rectify the defect within 20 days
b) opportunity to rectify the defect within 15 days
c) no opportunity shall be given
20. Within how many days defective return shall be rectified by the assessee
a) 15 b) 20 c) 25 d) 30
21. During the previous year 2017-18, X has income under the head house property `7,00,000. In
this case, his last date of filing of return shall be ………………..
a) 31st July 2018 b) 31st July 2017
c) 30th September 2018 d) 31st July 2016
22. A partnership firm has turnover of `75,00,000 and income under head Business/Profession `
5,00,000 for PY 2017-18. In this case, the last date of filing of return of income shall be ………
c) 30th September 2018 d) No need to file return

|Page
VIVEK GABA
23. For PY 2017-18, X, an assessee shall be allowed to file belated return of income latest upto..…
a) 31.03.2017 b) 31.03.2019 c) 30.09.2018 d) 31.03.2018
24. For the previous year 2017-18, Mr. X has filed original return of income on 01.11.2018 whose
due date of filing of return was 31st July 2018, he can file revised return of income latest upto
a) 31st March 2018 b) 31st March 2019
c) 30th September 2018 d) Return cannot be revised
25. A return of NR company shall be signed by

a) person holding valid power of attorney from such company b) MD

a) TDS/TCS shall be deducted while computing self-assessment tax under section 140A
b) MAT credit u/s 115JAA shall be added while computing self-assessment tax u/s 140A
c) Relief u/s 89/90/90A/91 shall be deducted while computing self-assessment tax u/s 140A
27. If amount paid by the assessee u/s 140A is less than amount required to be paid u/s 140A,
then amount so paid shall be first adjusted towards the ……. aforesaid & balance towards .....
a) Interest, interest b) tax, tax c) interest, tax d) tax, interest
28. If assessee fails to pay tax or interest then assessee shall be deemed to be assessee in
default and pay interest u/s ………… & penalty u/s ………..
a) 220, 221 b) 221,220 c) 220,220 d) 221,221
29. Notice u/s 142(1)(i) can be issued even after ………………………

a) end of relevant previous year b) end of relevant assessment year
c) either of a) or b) d) None of the above
30. Notice u/s 142(1) is issued for

a) to furnish return of income b) to furnish require books of accounts
31. Notice u/s 143(2) shall be served ……………… from the end of the ……………………
a) 12 months, end of the financial year in which ROI is filed
b) 6 months, end of the financial year in which ROI is filed
c) 12 months, beginning of the next financial year in which ROI is filed
d) 6 months, beginning of the next financial year in which ROI is filed
32. Notice u/s 143(2) is issued for

a) Assessment under section 143(3) b) Assessment under section 143(2)
c) Assessment under section 143(3) or 143(2) d) None of the above
33. Best Judgment Assessment is done only if

a) assessee fails to furnish ROI u/s 139(1) or 139(4)
b) assessee fails to comply notice u/s 142(1)(i)
c) either of above

|Page
VIVEK GABA
34. Where AO has …………. that any income chargeable to tax for any assessment year has ………….,
then he may assess or reassess such income under section 147
a) reasons to believe, not escaped assessment
b) no reasons to believe, escaped assessment
c) reasons to believe, escaped assessment
35. If any person has any asset located outside India, notice u/s 147 can be issued beyond ………
but upto………………
a) 4 years, 6 years from end of relevant assessment year
b) 4 years, 16 years from end of relevant assessment year
c) 4 years, 18 years from end of relevant previous year
d) 4 years, 16 years from end of relevant previous year
36. Akash, aged 32 years, has to file a return of income if his total income is in excess of
a) ` 1,50,000 b) `2,00,000 c) `2,50,000 d) None of the above
37. For filing returns of income in respect of various entities, Income-tax Act, 1961 has prescribed
a) Two due dates b) Three due dates
c) Four due dates d) only one due date
38. Where assessment has not been completed, belated income-tax return for assessment year
2018-19 can be filed upto
a) 31-03-2019 b) 31-12-2017 c) 31-03-2018 d) 31-12-2017
39. Due date of furnishing return of income for a working partner of a firm whose accounts are
required to be audited is:
a) 31st July of the assessment year b) 30th September of the assessment year
c) 30th November of the assessment year d) 31st March of the assessment year
40. For the previous year 2017-18, the business income of assessee before providing current year
depreciation of `3,50,000 is 1,50,000. His due date of return was 30-09-2018 but he submitted
the return on 16-12-2018, the assessee in this case:
a) be allowed to carry forward unabsorbed depreciation of `2,00,000
b) not allowed to carry forward unabsorbed depreciation of `2,00,000
c) may be allowed to carry forward unabsorbed depreciation of `2,00,000
41. K finds some mistake in the return of income submitted by him on 05-06-2018 for previous
year 2017-2018, he wishes to revise such return. No assessment has been done in this case.
K can revise such return till:
a) 31-03-2017 b) 31-03-2019 c) 31-03-2018 d) 30-09-2018
42. The notice under section 143(2) must be served within:

a) 6 months from end of the financial year in which ROI is filed
b) 12 months from the due date of filing the return u/s 139(1) or from the date of filing of
return of income
c) 12 months from end of the financial year in which ROI is filed
d) No time limit

|Page
VIVEK GABA
43. Rectification of an order u/s 154 can be made:
a) Within 4 years from the date of receipt of such order by the assessee
b) Within 4 years from the date when the order sought to be amended was passed
c) Within 4 years from the end of FY in which the order sought to be amended was passed
d) Within 7 years from the date when the order sought to be amended was passed
44. Revised return can be filed by

a) Within end of relevant assessment year
b) Before completion of assessment
c) Earlier of a) and b)
d) Belated return is not allowed to be filed
45. A belated return of income can filed at any time before expiry of ……………… from the end of
relevant assessment year?
a) 1 year b) 2 year c) 90 days d) 180 days
46. One is required to obtain a PAN whose total sales turnover or gross receipt is or is likely to
exceed ………..in any previous year?
47. Due date for filing of return of income of an individual (Audit not required) is 31 st July of PY?
48. Return of income once field cannot be revised?

49. A partnership firm incurring loss need not file return of income?
50. TRPs are employees of income tax department?

51. Losses under head “House Property” can be carried forward only if return has been filed under
section 139(1). Is the statement valid?
52. Unabsorbed depreciation can be carried forward even if the return is not filed up to the due
date specified under section 139(1). Is the statement valid?
53. PGBP loss of the year for which return is filed after the due date ……….. but PGBP loss of
earlier years for which return was filed within due date ……………
a) cannot be carried forward, can be carried forward
b) cannot be carried forward, cannot be carried forward
c) can be carried forward, cannot be carried forward
d) can be carried forward, can be carried forward
54. If the return is not furnished within time allowed u/s 139(1) it can be filed
a) Within one year from end of relevant assessment year
b) Before completion of assessment
c) Earlier of a) and b) (d) Belated return is not allowed to be filed

|Page
VIVEK GABA
55. What are the possible consequences of late filing of return of income
a) it cannot be revised b) losses of PGBP and Capital gains cannot be carried forward
56. Which of the following shall be deemed to be case where income has escaped assessment;
a) No return as well as no assessment has been made but Total income is more than
exemption limit
b) Return furnished but no assessment has been made and assessee has understated the
income or has claimed excessive loss.
57. Direction for special audit is given under section

a) 142A b) 142(2A) c) 142(1) d) 143(1)
58. If tax together with interest, payable in accordance with the provisions of self-assessment tax
has not been paid on or before date of furnishing of return, it is a ………… return
a) Original b) belated c) defective d) None of the above
59. An assessee other than company and person required to get audit done or furnish a TP report
shall file return of income by
c) 30th September of previous year d) 31st July of previos year
60. Under what circumstances Assessing Officer can give direction for special audit
a) the nature and complexity of the account b) the interests of the revenue
c) when both of the circumstances are there d) None of the above
61. Assessing Officer ……………………….. before best judgement assessment u/s 144
a) shall not issue show cause notice b) shall issue show cause notice
c) may issue d) None of the above
62. Amount to be paid as self-assessment under section 140A is

a) Income Tax on returned income + Interest u/s 234A,234B,234C + Relief u/s 89/90/90A/91 -
MAT credit u/s 115JAA or AMT u/s 115JD - TDS/TCS + Advance Tax
b) Income Tax on returned income + Interest u/s 234A,234B,234C - Relief u/s 89/90/90A/91 +
MAT credit u/s 115JAA or AMT u/s 115JD + TDS/TCS – Advance Tax
c) Income Tax on returned income + Interest u/s 234A,234B,234C - Relief u/s 89/90/90A/91 -
MAT credit u/s 115JAA or AMT u/s 115JD - TDS/TCS – Advance Tax
d) Income Tax on returned income - Interest u/s 234A,234B,234C - Relief u/s 89/90/90A/91 -
MAT credit u/s 115JAA or AMT u/s 115JD - TDS/TCS + Advance Tax
63. Which of the following shall be added while computing income tax payable
a) Interest u/s 234A, 234B, 234C b) Relief u/s 89/ 90/ 90A/ 91
c) MAT credit u/s 115JAA or AMT u/s 115JD d) None of the above
64. If show cause notice is not given by Assessing Officer before issuing direction for special
audit, assessee
a) can file writ petition b) cannot file writ petition
c) shall not file writ petition d) None of the above

|Page
VIVEK GABA
65. Self-assessment of tax payable is done under section
a) 140A b) 144 b) 139(5) d) 147
66. Every person being firm

a) shall not file return b) may not file return
c) shall file return d) may file return
67. Return of income is filed as per the provision of section

a) 139 b) 139(1) c) 139(3) d) 139(4)
68. Every person, being a person other than a company or a firm shall file his return of income as
per the provision of section 139(1), if his Total income (before deduction under chapter VI A)
exceeds maximum amount not chargeable to tax. Is the statement correct?
a) Correct b) Incorrect
c) Partly correct d) None of the above
69. Every resident and ordinarily resident having ……………. is required to file a return of income if
a) any asset located in India
b) financial interest in any entity located outside India
c) signing authority in any account located in India
d) either of above
70. Every resident and not ordinarily resident having ………… is required to file a return of income if
b) financial interest in any entity located outside India
c) either of above
71. A person other than company whose accounts are required to be audited under this act or any
other law shall file return of income by
72. A working partner of a firm whose accounts are required to be audited shall file its return of
income by
73. An assessee who is required to furnish a report referred to in section 92E i.e. TP report shall
file its return of income by
74. Section 139(1) applies to

a) assessee who is resident b) assessee who is non-resident.
c) assessee, whether resident or non-resident d) None of the above
75. ABC Ltd. has to file its return of income. The return shall be filed by:
a) 30th September of previous year b) 31st July of assessment year
c) 30th September of assessment year d) 30th November previous year

|Page
VIVEK GABA
76. If total income of any research association …………. claiming exemption u/s 10 exceeds …………..
shall furnish return of such income and deemed to be filed u/s 139(1)
a) after, maximum amount not chargeable to tax
b) before, maximum amount not chargeable to tax
c) before, minimum amount chargeable to tax
d) after, minimum amount chargeable to tax
77. If total income of any news agency ……... claiming exemption …... exceeds maximum amount not
chargeable to tax, shall furnish return of such income and deemed to be filed u/s 139(1)
a) before, under section 11 b) after, under section 11
c) before, under section 10 d) after, under section 10
78. Which section mandates filing of return of every university referred under section 35?
a) Section 139(4D) b) Section 139(4A)
c) Section 139(1) d) Section 139(4C)
79. Which section specifies the provision relating to filing of return of loss within due date
a) 139(3A) b) 139(1) c) 139(4A) d) 139(3)
80. Revised return can be filed
e) within 1 year from end of relevant AY b) before completion of
c) earlier of a) and b) d) belated return is not allowed to be filed
81. Revised return can also be revised. Is the statement valid?

a) Valid b) Invalid
82. Which of the following particulars need to be furnished by the assessee in return of income
a) Income exempt from Tax b) Assets of the prescribed nature and value
c) All of the above d) None of the above
83. Which of the following particulars need to be furnished by the assessee in return of income
a) bank Account and Credit Card held by him
b) Expenditure exceeding the fixed limit incurred by him
c) All of the above
84. If annexures, statements and columns in the return are not duly filed in, it is a ……. Return
a) original b) belated
c) defective d) None of the above
85. If proof of TDS, advance tax or self-assessment tax is not attached, it is a ……….. return
a) original b) defective
c) belated d) None of the above
86. If the defective return is not rectified within the time allowed, it is a
a) defective return b) invalid return
c) valid return d) None of the above

|Page
VIVEK GABA
87. ABC Ltd. has loss under the head Business/Profession ` 3,00,000 for previous year 2016-17.
In this case, the company has to file the return latest by ………….
c) 30th September 2017 d) 30th September 2018
88. A partnership firm has turnover of ` 105,00,000 and income from business ` 7,00,000 for the
previous year 2017-18, the last date for filing of return of income shall be …………..
c) 30th September 20178 d) 30th September 2019
89. ABC Ltd. does not have any income for the previous year 2016-17. In this case, company is
not required to file any return of income. Discuss the validity of statement
a) Valid b) Invalid
90. For the previous year 2017-18, Mr. X has filed original return of income on 1 st July 2018, he
can file revised return of income latest upto …………………...
a) 31st March 2019 b) 31st March 2018
c) 30th September 2019 d) Return cannot be revised
91. V has filed original return for previous year 2017-18 on 01.07.2018and revised return on
01.11.2018 and he further wants to revise the return on 01.01.2019. Discuss whether he is
allowed to do so or not.
a) May be
b) No
c) Return can be revised since revised return replaces original return and hence a return cab
be revised again on 1.1.2019
92. In which of the following case, return cannot be filed through TRP.
a) A company b) assessee has to get of compulsory audit done
93. Which of the following persons are not authorized to act as Tax Return Preparer
a) any officer of a scheduled bank with which the assessee maintains a current account or
has other regular dealings or
b) a legal practitioner
c) a Chartered Accountant
d) All of the above
94. The scheme of filing return through TRP shall provide

a) the manner in which Tax Return Preparers shall be authorized
b) educational and other qualifications to be possessed
c) All of the above
95. If the individual is not in India, the return shall be signed by

a) Himself b) duly authorized person

|Page
VIVEK GABA
96. A return of company under liquidation shall be signed by
a) person holding valid power of attorney from such co.
b) liquidator
c) Any of the above
97. A return of Firm shall be signed by

a) managing partner b) any partner, if managing partner not available
98. Return not signed as per section 140 is not …………………. rather ……………
a) defective return, belated return b) original return, belated return
c) defective return, void ab initio d) None of the above
99. Which of the following shall be subtracted while computing income tax payable
a) TDS/TCS b) Relief u/s 89/90/90A/91
c) MAT credit u/s 115JAA or AMT u/s 115JD d) All of the above
100. If amount paid by the assessee u/s 140A is ………… amount required to be paid u/s 140A, then
amount so paid shall be first adjusted towards the interest aforesaid and balance towards tax
a) more than b) less than
c) equal to d) none of the above
101. AO finds a defect in return of income & intimated defect vide letter dated 09.10.2017, which
was received by Mr. Ram on 11.10.2017, What is the date by which Mr. Ram has to rectify
the defect, assuming that Mr. Ram has not applied for extension of time.
a) 24.10.2017 b) 26.10.2017 c) 25.10.2017 d) None of these
102. A Research association eligible for exemption u/s 10(21) is having total income of ` 2,60,000.
State whether filing of income-tax return is mandatory for the assessment year 2018-19
a) not mandatory b) mandatory as per section 139(4A)
c) mandatory as per section 139(4C) d) Income is less than exemption limit
103. A Registered trade union eligible for exemption u/s 10(24) is having following incomes:
Income from house property (computed) ` 60,000
Income from other sources (computed) ` 40,000
State whether filing of income-tax return is mandatory for the assessment year 2018-19.
a) not mandatory b) mandatory as per section 139(4A)
c) mandatory as per section 139(4C) d) Income is less than exemption limit
104. A charitable trust registered under section 12AA, having total income of ` 2,60,000. State
whether filing of income-tax return is mandatory for the assessment year 2018-19.
a) mandatory as per section 139(1) b) Voluntary
c) mandatory as per section 139(4A) d) Income is less than exemption limit
105. A Limited Liability Partnership (LLP) with business loss of ` 1,30,000. State whether filing of
income-tax return is mandatory for the assessment year 2018-19.
a) mandatory as per section 139(1) b) Voluntary
c) Mandatory as per section 139(4A) d) Income is less than exemption limit

|Page
VIVEK GABA
106. Notice u/s 142(1)(i) is issued for
a) to furnish return of income b) to furnish require books of account
107. Notice u/s 142(1)(ii) is issued for

a) to furnish return of income b) to furnish require books of accounts
108. Notice u/s 142(1)(ii) can be issued

a) when return of income is not filed b) When return of income is filed
c) in both the case whether return is filed or not d) None of the above
109. Notice u/s 142(1)(i) can be issued

a) when return of income is not filed b) when return of income is filed
110. Under what circumstances Assessing Officer can give direction for special audit
a) volume of the accounts b) the interests of the revenue
c) when both of the circumstances are there d) None of the above
111. Direction for special audit is given under section with the approval of
a) previous approval of the Chief Commissioner
b) previous approval of the Commissioner
c) either of above
d) no approval is required
112. Notice u/s 143(2) shall be ……… within 6 months from the end of the financial year in which
ROI is filed.
a) issued b) served
c) served or issued d) None of the above
113. Notice u/s 143(2) shall be served within ……. from the end of the financial year in which ROI
is filed.
a) 6 months b) 6 years c) 12 months d) 30 days
114. Notice u/s 143(3) can be issued
a) when return of income is not filed b) when return of income is filed
115. Under section 147, any other income which has …………. and which comes to his notice
subsequently during the course or proceedings is assessed
a) escaped assessment b) not escaped assessment
c) either escaped or not escaped d) None of the above
116. Income escaping assessment is done under section
a) 144 b) 147 c) 143(3) d) 148
117. Notice of Income escaping assessment is issued under section
a) 144 b) 147 c) 143(2) d) 148
118. Which of the following shall be deemed to be case where income has escaped assessment;
a) Person is found to have any asset located outside India.
b) Assessee has failed to furnish a report to transfer pricing in respect of any IT which he
was so required under section 92E.

|Page
VIVEK GABA
119. If the escaped income is less than ` 1,00,000 u/s 147, notice can be issued upto ……………..
a) 4 years from end of relevant assessment year
b) 16 years from end of relevant assessment year
c) 6 years from end of relevant assessment year
d) 4 years from end of relevant previous year
120. If escaped income is more than or equal to ` 1,00,000 u/s 147, notice can be issued beyond
………… but upto …………………
a) 4 years, 8 years from end of relevant assessment year
b) 4 years, 6 years from end of relevant assessment year
c) 4 years, 8 years from end of relevant previous year
d) 4 years, 6 years from end of relevant previous year
121. There can be no rectification order after the expiry ………… from the end of the ……………….
a) 6 years, assessment year when order is passed
b) 4 years, financial year when order is passed
c) 6 years, financial year when order is passed
122. In case of companies deriving loss for any assessment year, filling of return of income within
the due date laid down in Section 139(1) is compulsory
a) only where the Department issues notice to the assessee-company
b) for domestic companies only
c) for foreign companies only
d) for all companies
123. As per Sec.139(1), a company shall have to file return of income:

a) When its total income exceeds ` 5,00,000
b) When its total income exceeds maximum amount which is not chargeable to income tax
c) In all cases irrespective of any income or loss earned by it
124. Time limit for completion of assessment under section 143 or section 144 shall be:
a) Four years from the end of the relevant assessment year
b) 21 months from the end of the relevant assessment year
c) Two years from the end of the month in which the return was so furnished.
d) No time limit for completion of assessment
125. The time limit for completion of assessment/reassessment u/s 147 shall be:
a) 9 months from the end of financial year in which notice u/s 148 was served on the
assessee
b) 1years from the end of the financial year in which notice u/s 148 was served on the
assessee
c) 2years from the end of the financial year in which notice u/s 148 was served on the
assessee

|Page
VIVEK GABA
d) No time limit for completion of assessment
126. Revision u/s 263 is to be done by the commissioner

a) On his own motion
b) On the request of the assessee
c) On the request of the assessing officer
d) On his own motion or on the request of the assessee or the assessing officer
127. The time limit for passing an order of revision under section 263 by the commissioner of
Income-tax, where the same is to give effect to a direction by the High Court is:
a) Two years from the date of direction
b) Three years from the date of direction
c) Two years from the end of the financial year in the direction is given
d) There is no time limit
128. An Individual or HUF having income under head PGBP is required return of income in
a) ITR 6 b) ITR 4 c) ITR 7 d) ITR 5
129. Where a notice is issued under section 142(1), assessee in response to the notice files a
return of loss within the time allowed. In this case, assessee
a) shall be allowed to carry forward loss
b) shall not be allowed to carry forward loss
c) may be allowed to carry forward loss, discretion of Assessing Officer
130. A return of income is submitted by Raghav for the assessment year 2018-19 on 30.6.2015.
Assessment order under section 143(3) is passed on 16.01.2019 which is received by him on
19.01.2019. He wants to revise the return, he can revise the return till which date
a) 15.01.2019 b) 31.3.2020
c) 18.01.2019 d) cannot be revised
131. When shall a non-working partner of a firm file the return of income
a) when his gross total income exceeds maximum amount not chargeable to tax
b) when audit of the firm is compulsory
c) when his taxable income exceeds maximum amount not chargeable to tax
d) always, non-working partner shall always file the return of income irrespective of amount of
income
132. Intimation under section 143(1) cannot be sent after expiry of

a) one year from the end of the financial year in which the return is made
b) four year from the end of the financial year in which the return is made
c) six month from the end of the financial year in which the return is made
d) nine month from the end of the month in which return was furnished
133. Assessment under section 143(3) for AY 2009-10 was completed on 28.12.2011. On
27.01.2016, Assessing Officer notices that income of ` 79,000 has escaped assessment. Within
how much time can Assessing Officer issue notice for assessment under section 147.
a) 31.3.2014 b) 31.3.2015 c) 31.3.2016 d) 31.3.2017

|Page
VIVEK GABA
134. The last date for issue of notice under section 148 is 31.3.2014. Assessing Officer issued the
notice on 31.3.2014 which was received by assessee on 7.04.2014. In this case, notice
a) is a valid notice b) is not a valid notice
c) may be a valid notice d) None of the above
135. Which of the following is true?

a) Assessment under section 147 is possible after assessment under section 143
b) Assessment under section 143 is again possible after assessment under section 143
c) Assessment under section 144 is possible after assessment under section 143
d) None of the above, no reassessment is possible after an assessment
ANSWERS
1. c) 16. c) 31. b) 46. a) 61. b) 76. b) 91. c) 106. a) 121. b)

2. a) 17. c) 32. a) 47. a) 62. c) 77. c) 92. c) 107. b) 122. d)
3. d) 18. a) 33. c) 48. b) 63. a) 78. a) 93. d) 108. c) 123. c)
4. c) 19. b) 34. c) 49. b) 64. a) 79. d) 94. c) 109. a) 124. b)
5. d) 20. a) 35. b) 50. a) 65. a) 80. c) 95. b) 110. c) 125. a)
6. a) 21. a) 36. c) 51. b) 66. c) 81. a) 96. b) 111. c) 126. a)
7. b) 22. a) 37. b) 52. a) 67. a) 82. c) 97. c) 112. b) 127. c)
8. b) 23. b) 38. a) 53. a) 68. a) 83. c) 98. c) 113. a) 128. b)
9. b) 24. b) 39. b) 54. c) 69. b) 84. c) 99. d) 114. b) 129. b)
10. c) 25. a) 40. a) 55. c) 70. c) 85. b) 100. b) 115. a) 130. c)
11. c) 26. b) 41. b) 56. c) 71. a) 86. b) 101. b) 116. b) 131. a)
12. d) 27. c) 42. a) 57. b) 72. a) 87. c) 102. c) 117. d) 132. a)
13. b) 28. a) 43. c) 58. c) 73. b) 88. c) 103. a) 118. c) 133. a)
14. c) 29. b) 44. c) 59. b) 74. c) 89. b) 104. c) 119. a) 134. a)
15. a) 30. c) 45. a) 60. c) 75. c) 90. b) 105. a) 120. b) 135. a)

|Page
VIVEK GABA
@ ADVANCE TAX 14
Sec 207 & 208 Liability for payment of Advance Tax
Advance tax shall be payble in every case where amount of such tax payable by assessee during
year is ` 10,000 or more.
But a resident individual, aged 60 yrs. or more, who does not have any income under head
PGBP shall not be liable to pay advance tax.
Computation of Advance TaxDue Dates for payment of advance tax

Estimated Total income of Current xxx Installment ALL Other than
financial year Date ASSESSEE company
(w.e.f. 1st (upto 31st
June, may, 2016)
2016)
th
Tax on Total Income xxx 15 June >= 15% NA
Less: TDS xxx 15th Sep >=45% >=30%
th
Advance Tax Payable xxx 15 Dec >=75% >=60%
th
15 Mar >=100% >=100%
NOTE: An assessee, who has opted for the scheme of computiong business u/s 44AD on
presumptive basis at the rate 8% of turnover, shall be exempted from payment of advance tax
related to such business.
An eligible assessee, opting for computation of profits or gains of business on presumptive basis in
respect of eligible business referred to in section 44AD/44ADA, shallbe required to pay advance tax
of the whole amount in one instalment on or before the 15thMarch of the financial year.
However, any amount paid by way of advance tax on or before 31 stMarch shall alsobe treated as
advance tax paid during each financial year on or before 15 thMarch.
INTEREST
Sec 234A Sec 234B Sec 234C
For default in furnishing For default in payment of Advance Deferment of advance Tax
return of income Tax
interest @ 1% interest @ 1% interest @ 1%
Return of income Where in any financial year, Where in any financial year the
furnishing after due date anassessee who is liable to pay assessee who is liable to pay
or not furnished, the advance tax under section 208 has advance tax u/s208 has failed
assessee shall be liable failed to pay such tax or the to pay such tax or advance tax
to pay Interest @ 1% of advance tax paid by such paid by the assessee on the
every month or part of a assessee is less than 90% of the current income on or before
month. assessed tax, the assessee shall July/Sep/Dec/march on its short

|Page
VIVEK GABA
be liable to pay interest @1% of fall.
every month or part of month
In case an eligible assessee in respect of the eligible business referred to insection 44AD, who is
liable to pay advance tax under section 208 has failed topay such tax or the advance tax paid by
the assessee on its current income on or before 15thMarch is less than the tax due on the
returned income, then, then assessee shall be liable to pay simple interest at the rate of 1% on
the amountof the shortfall from the tax due on the returned income.
(Amended by FA, 2016)
OBJECTIVE QUESTIONS
1. Advance tax is payable in ………. installments by a non-corporate assessee.

a) 4 b) 2 c) 3 d) 1
2. Advance tax is payable in ………… installments by a corporate assessee.

a) 3 b) 2 c) 4 d) 1
3. Tax shall be payable in advance during any financial year, in accordance with the provisions of
sections 208 to 219, in respect of an assessee‖s …………
a) previous income b) current income c) past income d) future income
4. Obligation to pay advance tax arises in when advance tax payable is …………….
a) ` 10,000 or more b) ` 10,000 or less
c) ` 10,000 d) ` 15,000 or more
5. Advance tax shall not be payable by an individual resident having income like interest, rent,
etc. in India, who
a) does not have any income chargeable u/h Profits and gains of business or profession
b) is of the age of sixty years or more at any time during the previous year
c) Both of them
d) Advance tax shall be payable
6. How shall advance tax be computed?

a) Tax on total income + Tax deducted at source
b) Tax on total income - Tax deducted at source
c) Tax on total income * Tax deducted at source
d) Tax on total income / Tax deducted at source
7. An assessee, who opted for scheme of computing business income u/s 44AD on presumptive
basis at rate of 8% of turnover shall paid ……….. advance tax in respect of such income.
a) subject to b) whole amount in one installment c) Exempt from d) None
8. An assessee has to himself estimate his current income and pay advance tax thereon and
deposit the same. Discuss the validity of the statement.
a) Correct b) Incorrect c) partly correct d) None of the above

|Page
VIVEK GABA
9. For the previous year 2016-17, ABC Ltd. has not paid any advance tax till 10.10.2016 and in
the earlier years the company was assessed in the manner given below:
2013-14 143(3) (Scrutiny Assessment) 7,00,000
2014-15 144 (Best Judgement Assessment) 10,00,000
2015-16 ROI 8,00,000
Assessing Officer shall use which of the income as base for computation of advance tax?
a) 8,00,000 b) 10,00,000 c) 7,00,000 d) Nil
10. Assessee, being company has to pay how much advance tax upto 15th June of Financial Year
a) 15 % b) 45 % c) 30 % d) 60 %
11. Assessee, being company has to pay how much advance tax upto 15 March of Financial Year
a) 75% b) 100% c) 30% d) 45%
12. For the previous year 2016-17, PQR Ltd. has estimated its tax payable to be `2,00,000, what
is the amount of advance tax payable upto 15th December 2016
a) 90,000 b) 30,000 c) 1,50,000 d) 2,00,000
13. For the previous year 2016-17, PQR Ltd. has estimated its tax payable to be ` 2,00,000, what
is the amount of advance tax payable upto 15th September 2016
a) 90,000 b) 30,000 c) 1,50,000 d) 2,00,000
14. For an assessee other than company, how much advance tax is payable upto 15th December
of Financial Year
a) 100 % b) 45 % c) 60 % d) 75 %
15. Sohan estimated his tax payable for previous year 2016-17` 1,00,000, what is the amount of
advance tax payable upto 15th December 2016
a) 30,000 b) 75,000 c) 60,000 d) 1,00,000
16. Sohan estimated his tax payable for previous year 2016-17` 1,00,000, what is the amount of
advance tax payable upto 15th September 2016
a) 45,000 b) 30,000 c) 15,000 d) 1,00,000
17. If the last day for payment of any installment of advance tax is a day on which the receiving
bank is closed, the assessee can make the payment on the …………., and in such cases, the
mandatory interest leviable under sections 234B and 234C would …………….
a) next immediately following working day, would be charged
b) next immediately following working day, would not be charged
c) previous working day, would be charged
d) previous working day, would not be charged
18. Where the assessee does not pay …………. by the due date, he shall be deemed to be an
………………….. in respect of such installment.
a) Last installment, assessee in default b) any installment, assessee in default
c) any installment, not assessee in default d) Last installment, not assessee in default
19. Advance tax is payable by an assessee on his/its total income, which includes ………..
a) capital gains b) casual income
c) both of the above d) None of the income

|Page
VIVEK GABA
20. Where no such installment is due i.e. income is earned after 15th March, the entire tax should
be paid by …………...
a) 15th March b) 31st March c) 31st July d) 15th September
21. What shall be payable by assessee for deferment of advance tax beyond due dates.
a) Interest under section 234A b) Interest under section 234B
c) Interest under section 234C d) None of the above
22. The interest liability u/s 234C would be ………, for a period of ………, for every deferment.
a) 2%, 6 months b) 1%, 1 month c) 1%, 3 months d) 2%, 3 months
23. For the last installment of 15th March, the interest liability u/s234C would be …... for ….
a) 1%, 3 month b) 2%, 1 month c) 1% 1 month d) Nil, nil
24. In case of assessee, if advance tax payable in second installment is …………., no interest under
section 234C shall be payable
a) 36 % b) 36 % or more c) 12 % or more d) none of the above
25. In what case, interest under section 234B is attracted?

a) non-payment of advance tax
b) payment of advance tax of an amount less than 90% of assessed tax
c) either of the case
26. The interest liability under section 234B would be …………….. from 1st April following the financial
year up to the date of determination of income under section 143(1).
a) 1% per month b) 1% per month or part of the month
c) 2% per month or part of the month d) None of the above
27. Assessed tax is the tax calculated on total income less …………….
a) Nil b) tax deducted at source
c) Relief d) None of the above
28. If any person has paid income tax after expiry of the last date of filing of return of income,
interest shall be payable …… for the period subsequent to last date of filing of return of income
a) 12% per annum b) 1% per month or part of the month
c) 1% per month d) 10% per month
29. Advance tax shall be payable during a financial year, only when the amount of such advance
tax payable by the assesse during that year is
a) ` 10,000 or more b) More than 0
c) ` 1,00,000 or more d) ` 10,00,000 or more
30. An individual needs to pay` 1,00,000 as advance tax. By15th December, how much amount
must be paid by the individual:
a) ` 60,000 b) ` 75,000 c) ` 1,00,000 d) Nil
31. It is obligatory for an assessee to pay advance tax where the amount of tax payable is………?
a) 10,000 or more b) More than 10,000
c) Less than 10,000 d) None of the above

|Page
VIVEK GABA
32. Advance tax is payable in ……………. Installments by non-corporate assessee?
a) Three b) Four
c) Any of the above d) None of above
33. …….. of tax is payable as advance tax upto 15th September in previous year by HUF?
a) 30% b) 45% c) 75% d) 60%
34. Every person is liable to pay advance tax?

35. Interest u/s234B is calculated on the amount of difference between the ………. and ………………
a) advance tax paid and assessed tax b) advance tax paid and 90% assessed tax
c) assessed tax and advance tax paid d) None of the above
36. The scheme of advance tax is commonly known as

a) a step towards national building b) pay as you earn
c) earn more pay more d) None of the above
37. The tax deposited on 16th March will be treated as

a) self-assessment tax b) Advance tax but subject to interest
c) advance tax d) None of the above
38. What shall be treatment of advance tax paid by the assessee

a) added to self-assessment tax b) deducted from self-assessment tax
c) no adjustment in self-assessment tax d) None of the above
39. When advance tax is deposited on 16 September instead of 15 September, what would be the
consequences of same
a) interest for one day b) interest for one month
c) no levy of interest d) interest for three month
40. It has been provided that if casual income or capital gain arises ………… of any installment, then,
the entire amount of tax payable on such income should be paid in the ………… of advance tax
which are due.
a) after due date, last installment b) before due date, last installment
c) after due date, remaining installment d) before due date, remaining installment
41. What shall be payable by assessee for deferment of advance tax beyond due dates.
a) Interest b) penalty c) Fine d) None of the above
42. When is Interest under section 234C attracted?

a) fornon-deferment of advance tax beyond due dates
b) for deferment of advance tax beyond due dates
43. The interest u/s234C is to be calculated on difference between ……… up to that date and ……
a) actual tax paid and advance tax payable b) advance tax payable and actual tax paid
c) either of above d) none of the above

|Page
VIVEK GABA
44. In case of assessee, if advance tax payable in first installment is …………., no interest under
section 234C shall be payable
a) 12 % b) 10 % or more c) 12 % or more d) 36% or more
45. Sohan estimated tax payable for previous year 2016-17` 1,00,000, what amount of advance tax
is payable upto 15th March 2017
a) 30,000 b) 60,000 c) 15,000 d) 1,00,000
46. Suman, a non-resident, received ` 18,000 by way of dividend and the company deducted `
2,000 by way of TDS. The amount includible in income is
a) ` 2,000 b) ` 20,000
c) ` 18,000 d) None of the above
47. Officer can send an order asking assessee to pay advance tax. Assessing Officer shall take
……….. income for computation of advance tax
a) income declared by assessee in past year‖s return
b) income computed by him in recent year
c) higher of a) or b)
48. A assessee, being company has to pay how much advance tax upto 15th December of
Financial Year
a) 100 % b) 45 % c) 75 % d) 60 %
49. A assessee, being company has to pay how much advance tax upto 15 th September of
Financial Year
a) 15 % b) 45 % c) 30 % d) 60 %
is the amount of advance tax payable upto 15th June 2016
a) 90,000 b) 30,000 c) 1,50,000 d) 2,00,000
is the amount of advance tax payable upto 15th March 2016
a) 90,000 b) 30,000 c) 1,50,000 d) 2,00,000
52. For an assessee other than company, how much advance tax is payable upto 15 thSeptember
of Financial Year
a) 15 % b) 45 % c) 30 % d) 60 %
53. For an assessee other than company, how much advance tax is payable upto 15March of
Financial Year
a) 100 % b) 45 % c) 75 % d) 60 %
54. The last date of payment of advance tax is

a) 15th March of financial year b) 15th December of financial year
c) 15th September of financial year d) 15th March of assessment year

|Page
VIVEK GABA
ANSWERS
1. a) 7. b) 13. a) 19. c) 25. c) 31. a) 37. b) 43. b) 49. b)

2. c) 8. a) 14. d) 20. b) 26. b) 32. b) 38. b) 44. c) 50. b)
3. b) 9. b) 15. b) 21. c) 27. b) 33. b) 39. d) 45. d) 51. d)
4. a) 10. a) 16. a) 22. c) 28. b) 34. b) 40. c) 46. b) 52. b)
5. c) 11. b) 17. b) 23. c) 29. a) 35. c) 41. a) 47. c) 53. a)
6. b) 12. c) 18. b) 24. b) 30. b) 36. b) 42. b) 48. c) 54. a)

|Page
VIVEK GABA
TAXATION OF CHARITABLE
OR RELIGIOUS TRUSTS 15
SEC 2(15) DEFINITION OF CHARITABLE PURPOSE
Charitable purpose includes relief of poor, education, medical relief, preservation of environment and
monuments, and also includes advancement of any object of general public utility.
First proviso: If in advancement of object, the activity of assesse involves carrying on activity in
form of trade, commerce activity whose total receipts exceed ` 25 lakhs, then it is not a charitable
activity and exemption under section 13 is not available.
Sec 13(8), 10(23C), 143(3) (FA 2012)

Sec 13(8) If object of trust is advancement of object of general public utility and commercial receipt
exceed`25 lakh, exemption u/s 11 & 12 is not available. Cancellation of registration is not required.
Sec 10(23C) If object of trust is advancement of object of general public utility and commercial
receipt exceed `25 lakh, exemption/s 11 & 12 is not available. Even if govt. has not cancelled
approval
Sec 143(3) AO- not give exemption u/s 10(23C) or 11 and 12 if commercial receipt exceed`25
lakh even if approval or registration is not cancelled. It is disallowed by operation of law.
Sec 11 Income from charitable trust

Following shall not be included in total income
 15% of gross receipts
 85% of the income, which is applied for charitable/religious purpose in India
 Corpus donations (voluntary donation-direction to form part of corpus fund)
“Applied for charitable purpose” includes purchase of capital asset, revenue expense, donation to
trust registered u/s 12AA or 10(23C) and repayment of loan taken for purchase of capital asset
If acquisition of asset is treated as application of income, then depreciation on same shall not
be allowed.
If income applied falls short of 85% by reason of
 Amount is not received: file a declaration that it will be applied for such purpose in year of
receipt and succeeding year, if not applied, then taxable in succeeding year of receipt.
 Other reason: declaration that will be applied in next year, if not then income of next year.
Sec 11(2) Exemption when accumulated for specific purpose

85% of income not applied but accumulated or set apart –accumulation not included in total income
if
a) Specified purpose for which accumulated and period for which accumulated, not exceed 5 yrs.
b) Not invested as per section 11(5)
For Classes & Information: 297 | P a g e

VIVEK GABA 300
Sec 11(3) Exemption under section 11(2) withdrawn
a) not used for which accumulated b) cease to be invested as per 11(5)
c) donated to a trust registered d) Not utilized for the purpose specified, during 5 yrs. and
under section 12AA trust immediately following year.
Sec 11(1A) Capital gain deemed to be applied

Capital asset sold and consideration is utilized to purchase another asset, cap gain deemed to be
applied:
 Whole consideration invested, such capital gain
 Part of consideration utilized, CG exempt is cost of new asset – cost of old asset
Sec 13(1): section 11 and 12 not to apply

If amount is used for
 private religious purpose  benefit of particular religion/ caste
 benefit of specifies persons  not invested as per 11(5)
Share of Public sector co and share of depository can also be purchased and considered as
invested as per section 11(5).
Section 13(9): Denial of exemption if return of income is not furnished within

due date of filing of return
(Added by Finance Act, 2015)
Prior to Finance Act, 2015, no time period was prescribed to file the statement to Assessing officer
for claiming exemption under section 11(2). Finance Act, 2015 amends 11(2) provides that it is
mandatory to file statement to Assessing officer under section 11(2) on or before the due date of
filing of return on income. Finance Act, 2015 has overruled the Supreme Court judgement in
Nagpur Hotel Owner‖s Association where in it was held that statement under section 11(2) can be
filed to Assessing officer upto at any time before completion of assessment.
Section 13(9) categorically denies exemption under section 11(2) if:

(i) Statement is not filed under section 11(2) to assessing officer on or before the due date of
filing of return of income; OR
(ii) Return of income is not filed on or before the due date of filing of return of income.
Sec 13(3) Specified persons

 Author or founder  Person making total contribution of >` 50,000
 If author is HUF, member of HUF  Trustee of trust/ manager
 Relative of author, founder  Concern where above have substantial interest
Sec 11(4)
Property of trust includes business undertaking, incidental to objective and separate books are
maintained for such business.
Sec 115BBC & Sec 13(7): ANONYMOUS DONATION

Voluntary contribution from a person where record of identity of contributor taxable @ flat rate of
30% in excess of:

VIVEK GABA 301
5% of total donation or ` 100,000, whichever is higher
Anonymous donation is not taxable if it is received by a wholly religious trust even if name/
address of donors are not there.
Rest of the income shall be taxable at the normal rate and computed by deducting anonymous
donation taxed above from total income.
Illustration of Amendment: ABC Trust received donation amounting to ` 70,00,000 excluding

Anonymous donation which amounted to `20,00,000. Other Income of Trust is `30,00,0000.
Solution:
Prior to Amendment Amount Amount
Anonymous Donation received ` 20,00,000
Less: Higher of
a) 5% of 90,00,000 4,50,000
b) 1,00,000 1,00,000 `4,50,000
Amount of Anonymous donation taxable ` 15,50,000
Taxed at the rate of 30% `4,65,000
Taxability of Other Income
Total income ` 1,20,00,000
Less: Amount of anonymous donation received ` 20,00,000
Taxable Income ` 1,00,00,000
After Amendment
Anonymous Donation received= ` 20,00,000
Less: Lower of
a) 5% of 90,00,000 4,50,000
b) 1,00,000 1,00,000 `4,50,000
Amount of Anonymous donation taxable ` 15,50,000
Taxed at the rate of 30% `4,65,000
Taxability of Other Income
Total income ` 1,20,00,000
Less: Amount of anonymous donation as reduced by lower of
a) or b) i.e. anonymous donation as reduced by deduction
availed or anonymous donation which is taxed. ` 15,50,000
Taxable Income ` 1,04,50,000
OBJECTIVE QUESTIONS
1. Which of the following is not for charitable purpose

a) relief of poor, education b) medical relief, preservation of environment
c) preservation of monuments d) destruction of environment

VIVEK GABA 302
2. If in advancement of any other object of general public utility, it involves carrying out any
activity in the nature of trade, commerce or business and activity irrespective of application of
such income if aggregate receipts exceed ` 25 lakhs in the previous year, it
a) shall be a considered for charitable purpose
b) may be considered for charitable purpose
c) shall not be considered for charitable purpose
3. Which of the following shall be included in the income of charitable trust?

a) 15% of income derived from property i.e. 15% of the Gross receipts)
b) 85% of income derived from property to the extent it is applied for such purpose in India
c) Income from voluntary contribution with specific direction that they shall form part of corpus
of the trust i.e., corpus donations.
4. If purchase of capital asset is treated as ………… for charitable or religious purpose, then
depreciation on the same …………… allowed
a) application of income, shall be allowed b) application of income, may be allowed
c) application of income, shall not be allowed d) non-application of income, shall be allowed
5. If income has not been received during previous year, and assessee submits a declaration to
the AO on or before due date of filing of return, that income shall be applied in the year of
receipt or in the immediately succeeding year. If the amount so declared has not applied in
the year of receipt or in the succeeding year, then the income not applied shall
a) be deemed to be income of the previous year immediately succeeding previous year in
which received
b) be deemed to be income of the succeeding previous year
c) be deemed to be income of the previous year immediately succeeding previous year in
which derived
6. If 85% of the income derived could not be utilized for any reason other than non-receipt of
amount and assessee submits a declaration to the AO on or before the due date of filing of
return that such income shall be applied to such purpose in the immediately following previous
year, then it shall be deemed to be applied in
a) assessment year when income was derived b) previous year when income was derived
c) previous year when income was received d) None of the above
7. During the PY ending 31st March, 2015, a charitable trust earned an income of ` 4,00,000.
Amount applied by trust is `2,00,000. How much amount shall be taxable?
a) ` 3,40,000 b) ` 4,00,000 c) ` 1,40,000 d) Nil
8. As per Section 11(2), where 85% of income is not applied to charitable or religious purposes
in India but is accumulated or set apart either wholly or in part for application to such
purposes in India, such income shall not be included in the total income of the previous year.
For the same, which condition shall be satisfied?
a) A notice in writing is given to the Assessing Officer in the prescribed manner specifying

VIVEK GABA 303
the purpose for accumulation and period for which the income is to be accumulated or set
apart shall be mentioned which should not exceed five years.
b) the money so accumulated or set apart should be invested or deposited in the modes
specified in section 11(5)
d) No condition has been mentioned in the section
9. As per Section 11(2), where 85% of income is not applied to charitable or religious purposes
in India but is accumulated or set apart either wholly or in part for application to such
purposes in India, such income ………. included in the total income of the previous year.
a) shall be b) shall not be
c) may be d) None of the above
10. When income not included in total income as per section 11(2) and is donated to any trust
registered u/s 12AA or any specified institution referred in section 10(23C), it shall be deemed
to be income of
a) previous year when it is applied b) previous year in which it ceases
c) previous year in which the amount is donated d) assessment year when it is applied
11. Every order granting or refusing registration shall be passed ……… from the end of the month in
which the application for registration of trust or institution is received by the Commissioner.
a) within 9 months b) within 6 months
c) within 30 days d) within 12 months
12. Exemption under section 11 and 12 shall not be available if

a) the property is held under a trust for private religious purposes
b) trust has been established for the benefit of any particular religious community or caste
c) any of the above
13. Anonymous donation shall be chargeable to tax at the rate of

a) 20% b) 30% c) 15% d) slab rate
14. Anonymous donation in excess of ………….. shall be chargeable to tax

a) 5% of the total donations received by the assessee b) ` 1 lakh
c) higher of a) and b) d) none of the above
15. Total donation received by assessee is ` 60,00,000. Out of which anonymous donation is of
`20,00,000. What amount of anonymous donation shall be chargeable to tax
a) ` 20,00,000 b) ` 19,00,000 c) ` 17,00,000 d) Nil
16. Income from property held under trust is ` 6 lakh. The voluntary contributions received is` 20
lakh, which includes anonymous donations of ` 4 lakh and corpus donations of ` 5 lakh. The
trust has applied ` 10 lakh to purchase a building on 1.8.2014 for meeting its objective.
(i) How much voluntary contribution shall be taxable at normal rate?
a) 15,00,000 b) 12,00,000 c) 20,00,000 d) 11,00,000
(ii) How much anonymous donation is taxable at the rate of 30%?
a) 4,00,000 b) 3,50,000 c) 3,00,000 d) 2,70,000

VIVEK GABA 304
(iii) What is the total amount that is taxable as per the normal rates?
a) 18,00,000 b) 15,00,000 c) 15,30,000 d) Nil
(iv) How much is 15% which is not taxable without any condition?
b) 2,25,000 b) 2,70,000 c) Nil d) 3,00,000
(v) What is net amount which is taxable excluding anonymous donation?
b) 5,30,000 b) 5,00,000 c) 8,00,000 d) Nil
(vi) How much tax is payable including tax on anonymous donation and education cess and
surcharge?
a) 1,21,000 b) 31,000 c) 1,24,630 d) Nil
(vii) How much tax is payable on anonymous donation?
a) 90,000 b) 31,000 c) 1,20,000 d) Nil
17. If an enterprise has an object of advancement of any other object of general public utility and
involves carrying out any activity in nature of trade, commerce or business and activity whose
aggregate receipts is ` 24 lakhs in the previous year, it
18. If an enterprise has an object of relief of poor and involves carrying out any activity in nature
of trade, commerce or business and activity whose aggregate receipts is ` 24 lakhs in the
previous year, it
19. Applied for charitable or religious purpose includes

a) purchase of capital asset b) revenue expense
c) Both a) and b) d) none of the above
20. Applied for charitable or religious purpose includes

a) Donation to religious/ charitable trust registered u/s 12AA or u/s 10(23C)
b) Repayment of loan taken for purchase of capital assets
c) Both a) and b)
21. If income applied for charitable or religious purpose in India falls short of 85% of the income
derived during that year from property held under trust, then amount shall be deemed to be
applied if
a) if income has not been received during that year, and assessee submits a declaration to
AO on or before due date of filing of return, that income shall be applied in the year of
receipt or in the immediately succeeding year
b) if income has not been received during that year, and assessee submits a declaration to
the AO after due date of filing of return, that income shall be applied in the year of

VIVEK GABA 305
receipt or in the immediately succeeding year
c) if income has not been received during that year, and assessee submits a declaration to
the AO on or after due date of filing of return, that income shall not be applied in the
year of receipt or in the immediately succeeding year
applied if
a) For any reason other than non-receipt of amount, assessee submits a declaration to the
AO after due date of filing of return that such income shall be applied to such purpose in
the immediately following previous year
b) For any reason other than non-receipt of amount, assessee submits a declaration to the
AO after due date of filing of return that such income shall not be applied to such
purpose in the immediately following previous year
c) For any reason other than non-receipt of amount, assessee submits a declaration to the
AO on or before the due date of filing of return that such income shall be applied to such
applied if
a) if income has not been received during that year, and assessee submits a declaration to
the AO on or before the due date of filing of return, that income shall be applied in the
year of receipt or in the immediately succeeding year
b) For any reason other than non-receipt of amount, assessee submits a declaration to the
AO on or before the due date of filing of return that such income shall be applied to such
c) Both a) and b)
24. if income has not been received during that year, and assessee submits a declaration to the
AO on or before the due date of filing of return, that income shall be applied in the year of
receipt or in the immediately succeeding year, then it shall be deemed to be applied in
a) assessment year when income was received
b) previous year when income was derived
c) previous year when income was received
25. For any reason other than non-receipt of amount, assessee submits a declaration to the AO
on or before the due date of filing of return that such income shall be applied to such purpose
in the immediately following previous year. If income is not applied in immediately succeeding
year, then amount not so applied shall be deemed to
a) be deemed to be income of the succeeding previous year
b) be deemed to be income of the previous year immediately succeeding assessment year

VIVEK GABA 306
c) be income of such immediately succeeding previous year.
26. When income not included in total income as per section 11(2) and is applied to purpose other
than purpose for which it has been accumulated or set apart, it shall be deemed as income of
a) previous year when it is applied b) previous year in which it ceases
c) previous year in which the amount is donated d) None of the above
27. When income not included in total income as per section 11(2) ceases to remain invested in
modes specified in section 11(5), it shall be deemed to be income of
a) previous year when it is applied
b) previous year in which it ceases to be invested
c) previous year in which the amount is donated
28. When income not included in total income as per section 11(2) and is not utilised for the
purpose for which it has been accumulated or set apart during the 5 year or in the year
immediately following the expiry, it shall be deemed to be income of
a) previous year immediately following expiry of 5 th year
b) previous year when it is applied
c) previous year in which the amount is donated
29. “Anonymous donation” means any voluntary contribution where the person receiving such
contribution ………… of the identity indicating the name and address of the person making such
contribution and such other particulars as may be prescribed.
a) does maintain record b) does not maintain record
c) either of above d) neither of above
30. Total donation received by assessee is ` 16,00,000. Out of which anonymous donation is of
`7,00,000. What amount of anonymous donation shall be chargeable to tax
a) ` 7,00,000 b) ` 6,00,000 c) ` 6,20,000 d) Nil
31. Anonymous donations received by any trust or institution established for charitable purposes
are taxable under section ……………
a) 115BBA b) 115BBC c) 115BC d) 115BCA
32. Anonymous donations which are taxable u/s 115BBC …… to exemption under section 11 & 12.
a) shall be entitled b) shall not be entitled
c) may be entitled d) None of the above
ANSWERS
1. d) 6. b) 11. b) 16. (v) a) 19. c) 24. b) 29. a)

2. c) 7. c) 12. c) (i) b) (vi) c) 20. c) 25. c) 30. c)
3. d) 8. c) 13. b) (ii) c) (vii) a) 21. a) 26. a) 31. b)
4. c) 9. b) 14. c) (iii) a) 17. a) 22. c) 27. b) 32. b)
5. a) 10. c) 15. c) (iv) b) 18. a) 23. c) 28. a)

VIVEK GABA 307
AGRICULTURE INCOME 16
Sec 2(1A) Agriculture income
Agriculture Income includes
 Rent/revenue from agricultural land  Income from such land by
a) Agriculture,
 Income from building on agricultural land b) processing of agricultural produce
c) sale by cultivator/receiver of rent in kind
Sec 10(1) Exemption

Agriculture income is exempt u/s 10.However, for individuals, HUF, unregistered firms, AOP, BOI
and artificial persons, agriculture income is aggregated with non-agriculture income if
Non-agricultural Agricultural Income

Income > taxable limit exceeds ` 5000
@
Manner of computation
Step 1: Compute net agricultural income. (for eg. an assessee in business of tea, 60% income is
agricultural income).
Step 2: Add agricultural income & non-agricultural income and compute tax on same.
Step 3: Add agricultural income & first slab of tax and compute tax on same.
Step 4: Balance = Step 2 – Step 3.
Step 5: This amount in step 4 is income tax, add education cess and SHEC to the same. The
amount so computed is tax payable.
Question: For the assessment year 2018-19, net agricultural income of Mrs. X (aged 47 years) is `
8,10,000, non-agricultural income is `2,88,300. Mrs. X pays ` 27,000 as life insurance premium for
an assured sum of ` 3,00,000 on the life of her major son, who is not dependent on her and has
his own sources of income. Determine her tax liability.
Solution:
Computation of Total Income of Mrs. X for the assessment year 2018-19
Particulars `
Gross Total Income 2,88,300
Less: Deduction under section 80C 27,000
Income tax will be computed as under:

1. Income tax on ` 10,71,300 1,33,890
(i.e. Agricultural income 8,10,000 + Non Agricultural income ` 2,61,300)

|Page
VIVEK GABA
2. Income tax on ` 10,60,000 (Rebate) 1,30,500
(i.e. Agricultural income 8,10,000 + exemption limit of income of Mrs. X ` 2,50,000)
3. Tax payable (1 - 2) 3,390

Less: Rebate under section 87 2,5,00
Tax payable 890
Education cess and SHEC @ 3% 26.70
Tax liability 916.70
OBJECTIVE QUESTIONS
1. If agricultural income if from outside India, the same is

a) Exempt under section 10(1) b) taxable
c) discretion of Assessing Officer d) depends upon from which country it is earned
2. While determining non-agricultural income when market value of agricultural produce has been
deducted, further deduction of expenditure by the assessee as cultivator or receiver of rent in
kind ……………
a) shall not be allowed b) shall be allowed
c) may be allowed d) may not be allowed
3. X grows sugarcane and uses it for manufacturing sugar in his factory. 30% of sugarcane
produce is sold for ` 10 lakh, and the cost of cultivation of such sugarcane is ` 5 lakh. The
cost of cultivation of balance sugarcane (70%) is ` 14 lakh and the market value of the same
is `22 lakh. After incurring ` 1.5 lakh in the manufacturing process on balance sugarcane, the
sugar was sold for ` 25 lakh. Compute B‖s business income.
a) 1.5 lakh b) 3 lakh c) 2.25 lakh d) None of the above
4. Partial integration of agricultural income with non-agricultural income is applicable on

a) Individuals b) HUF
c)unregistered firms d) All of the above
5. Partial integration of agricultural income with non-agricultural income is not applicable on

a) AOP b) BOI
c) local authority d) All of the above
6. Is partial integration of agricultural income applicable in the following case

The net agricultural income of A is ` 15,000 p.a.
Non-agricultural income of A is ` 2,70,000
a) Applicable b) Not applicable
c) may be applicable d) None of the above

The net agricultural income of ABC Ltd. is ` 1,05,000 p.a.
Non-agricultural income of ABC Ltd. is ` 21,10,000
a) Applicable b) Not applicable
c) may be applicable d) Partial integration is not applicable on company

|Page
VIVEK GABA
8. HUF has income of ` 10,000 from agricultural activity and ` 25,00,000 from non-agricultural
activity. State whether partial integration of agricultural income shall be done
a) Yes b) No c) May be d) None of the above
9. There will be no partial integration of agricultural income with nonagricultural income, if the
non-agricultural income does not exceed:
a) ` 1,00,000 b) `60,000
c) ` 50,000 d) maximum amount not chargeable to tax
10. Agricultural income is :

a) Fully exempt b) Partially exempt
c) Fully taxable d) Not considered as income
a) AOP b) BOI
c) Company d) All of the above
12. Which conditions which need to satisfied for partial integration of agricultural income are
a) The net agricultural income should exceed ` 5,000 p.a.
b) Non-agricultural income should exceed the maximum amount not chargeable to tax
d) No condition to be fulfilled
13. Income from shooting of film in farm house is an agricultural income. Is the statement correct
a) valid b) Invalid
14. There will be no partial integration, if the agricultural income does not exceed:
a) `40,000 b) ` 50,000 c) ` 5,000 d) ` 10,000
15. Which of the following income is not exempt under section 10?
a) Share of total income of firm b) Income from agriculture in Lahore
c) Bonus on life insurance d) Income from mutual funds
16. Literary awards instituted by the central government are exempted from income tax?
17. There is no difference between ―exemption‖ and ―deduction‖?

18. Any rent or revenue derived from land situated ……… and used for agricultural purposes
a) In India b) outside India
c) whether in India or outside India d) in India and neighboring countries
19. Which of the following is not agriculture income

a) Any income derived from land in India through agriculture
b) Any income through the sale of produce raised or received as rent in kind for Indian land
c) Any rent or revenue derived from land situated outside India and used for agricultural
purposes

|Page
VIVEK GABA
20. Any income derived from ………….. grown in nursery shall be deemed to be agricultural income
a) Sapling b) seedling
21. Agricultural income in India is exempt under section

a) 10(1A) b) 10(1) c) 10(34) d) 10(2)
22. If assessee is carrying on agricultural operation as well as non-agricultural operation, what shall
be deducted while computing non-agricultural income
a) market value of any agricultural produce b) cost of any agricultural produce
c) average of market value and cost of agricultural produce d) None of the above
23. Partial integration of agricultural income with non-agricultural income is applicable on

a) Individuals b) artificial persons c) AOP d) All of the above
a) AOP b) co-operative society
c) Individual d) All of the above
a) AOP b) BOI
c) registered firm d) All of the above

a) applicable b) Not applicable

a) applicable b) Not applicable
28. Which of the following steps are applied in chronological order while doing partial integration of
agricultural and non-agricultural income
(i) Add non-agricultural income with net agricultural income. Compute tax on the aggregate
amount.
(ii) Deduct the amount of income tax calculated in step 2 from the income tax calculated in
step 1 i.e. Step 1 – Step 2.
(iii) Add net agricultural income and the maximum exemption limit available to the assessee.
Compute tax on the aggregate amount.
(iv) The sum so arrived at shall be increased by tax on LTCG, Short Term Capital Gain 111A
and casual income and education cess and SHEC @ 3 %.
a) (i), (ii), (iii) and (iv) b) (i), (iv), (iii) and (ii)
c) (i), (iii), (ii) and (iv) d) (iii), (i), (ii) and (iv)

|Page
VIVEK GABA
29. Income from sale of agricultural land is chargeable as ………………
a) capital gains b) Other sources
c) agricultural income d) exempt from tax
30. If the assessee is engaged in the business of growing and manufacturing tea in India ,the
agricultural income in that case shall be:
a) 40 % of the income from such business
b) 60 % of the income from such business
c) market value of the agricultural produce minus expenses on cultivation of such produce
d) 35 % of the income from such business
31. Agricultural income is exempt provided the:

a) Land is situated in India
b) Land is situated in any rural area in India
c) Land is situated whether in India or outside India
d) Land is situated in any urban area in India
32. There will be no partial integration, if the agricultural income does not exceed:
a) `40,000 b) ` 50,000 c) ` 5,000 d) Nil
33. If the assessee is engaged in the business of manufacturing of tea, such income shall be:
a) exempt
b) fully taxable
c) 40 %of such income shall be taxable and the balance 60%shall be exempt
34. If the assesse is engaged in the business of growing and manufacturing rubber, the agricultural
income in that case shall be:
a) 40 %of the income from such business b) 60 % of the income from such business
c) 65 % of the income from such business d) 100 % of the income from such business
35. If the assesse is engaged in the business of growing and curing of coffee, the agricultural
income in that case shall be:
a) 60 %of the income from such business b) 75 % of the income from such business
36. If the assesse is engaged in the business of growing, curing, roasting and grounding coffee,
the agricultural income in that case shall be:
a) 60 % of the income from such business b) 75 % of the income from such business
37. If the assesse is engaged in the business of manufacturing some products other than tea,
rubber or coffee for which he uses his own agricultural produce, then agricultural income in
that case shall be:
a) 40 %of the income from such business of growing and manufacturing the products out of it
b) 60 %of such income
c) market value of such agricultural produce minus the expenses incurred for cultivation of
such agricultural produce

|Page
VIVEK GABA
38. An assessee has incurred`1,20,000 on the cultivationofagriculturalproduce.50% of the produce
has been sold for ` 1,30,000andthebalance50%hasbeenusedbythe assesse for his self-
consumption, the agricultural income in this case shall be:
a) ` 10,000 b) ` 60,000 c) ` 1,20,000 d) ` 70,000
39. Thepartialintegrationofagriculturalincomewithnon-agriculturalincomeisdonein case of:

a) All assessee
b) Any assesse other than who is liable to be taxed at the flat rate of income-tax
c) individual, HUF,AOP or BOI and artificial juridical person
d) companies
40. The partial integration of agricultural income is doneto compute tax on:
a) agricultural income b) non-agricultural income
c) both agricultural and non-agricultural income d) none of the above
41. Which of the following income qualify as “agricultural” income

a) Income from sale of self-grown trees b) Income from poultry farming
c) Income of a buyer of crop rice d) None of the above
42. What will be the tax liability in case of a company having agricultural income of 2,00,000,
expenses relating to agriculture is 50,000 and income from business is 3,00,000.
a) 1,17,420 b) 1,23,600 c) 92,700 d) 10,300
43. What will be the tax liability in case of an individual whose agricultural income is 1,00,000,
a) 10,300 b) 5,000 c) nil d) 8,240
44. What will be tax liability in case of an individual whose agricultural income is 3,00,000,
a) 9,000 b) 9,270 c) 10,300 d) 6,180
45. Which one of the following is true?

a) In case of business of growing and curing coffee, 25 % is business income whereas 75 %
is agricultural income
b) In case of business of growing rubber, 35% is business income whereas 65 % is
agricultural income
c) In case of business of growing and manufacturing tea, 40% is business income whereas
60% is agricultural income
d) All of the above
ANSWERS
1. b) 6. a) 11. c) 16. a) 21. b) 26. b) 31. a) 36. a) 41. d)

2. a) 7. b) 12. c) 17. b) 22. a) 27. b) 32. c) 37. c) 42. c)
3. a) 8. a) 13. b) 18. a) 23. d) 28. c) 33. b) 38. d) 43. c)
4. d) 9. d) 14. c) 19. c) 24. b) 29. a) 34. c) 39. c) 44. d)
5. c) 10. a) 15. b) 20. c) 25. c) 30. a) 35. b) 40. b) 45. d)

|Page
VIVEK GABA
ALTERNATE MINIMUM
TAX (AMT) 17
Applicability (sec 115JC)
All assessee except companies are liable to AMT if tax as per normal provision is less. AMT is not
payable by
a) Individual
b) HUF
c) AOP/BOI
d) Artificial juridical person
If Adjusted Total Income does not exceed `20lakhs
Rate:18.5% (plus surcharge* where adjusted total income is more than` 1 crore)
*Marginal relief can be claimed
Adjusted Total Income
PARTICULARS AMOUNT
Total Income as per normal provisions of IT Act xx
Add: Deduction U/C VIA (heading C except deduction of sec 80P) xx
Add: Deduction u/s 10AA xx
*Add: Investment allowance claimed under section 35AD xxx
Less: Depreciation allowed under section 32 xxx xx
Adjusted Total income Xx
*It has been amended that in computation of Adjusted Total income Investment Allowance
allowed under section 35AD (net of depreciation allowable under section 32) shall be added.
Audit Report
Assessee required to obtain audit report from CA certifying computation & furnished on or before
due date.
AMT CREDIT
AMT credit can be carried forward for 15assessment year and AMT credit = AMT paid – tax
payable as normal provision
It is allowed to be utilized when tax payable as per normal provisionAMT payable
and equal to
tax payable as per normal provision (minus) AMT payable
Other provision like Advance Tax, interest u/s 234A, 234B and 234C shall apply
OBJECTIVE QUESTIONS
1. AMT is applicable on
a) All assessee b) Company
c) All assessee except company d) Individual and HUF

|Page
VIVEK GABA
2. Under what circumstance assessee is liable to pay AMT
a) if tax as per normal provision is less b) if tax as per normal provision is more
c) if tax as per normal provision is in variance d) None of the above
3. AMT is not applicable on

a) Individual whose Adjusted Total Income does not exceed ` 20 lakhs
b) HUF whose Adjusted Total Income does not exceed ` 20 lakhs
c) AOP/BOI whose Adjusted Total Income does not exceed ` 20 lakhs
d) All of the above
4. Surcharge @ …. shall be levied if adjusted total income of individual liable to AMT is ` 1 crore.
a) 5% b) 2% c) 10% d) Nil
5. Deduction u/s 80C to 80GGC, 80U and 80TTA ………. be added back
a) shall b) may c) are not d) None of the above
6. Alternate Minimum Tax is computed the rate of …….. of ……..

a) 18.5 %, taxable income as per Income tax Act
b) 30 %, taxable income as per Income tax Act
c) 18.5 %, Adjusted total income
d) 30 %, Adjusted total income
7. If the amount of tax as per income tax act is 50,000 and AMT is 51,000. The credit of AMT
available is 2,000. What is the amount of tax payable by the assessee and how much credit
shall be carried forward by him
a) 51,000, 2,000 b) 50,000, 1,000 c) 51,000, 3,000 d) 49,000, Nil
8. If amount payable as per normal provision of income tax act is 1,03,000 and as per the
provision of AMT is 73,000. What is the amount payable
a) 1,03,000 b) 73,000 c) 88,000 d) Nil
9. If amount payable as per normal provision of Income tax act is 52,000 and AMT is 47,000.
The AMT credit available with assessee is 15,000. What is the amount payable and the AMT
credit that shall be carried forward?
a) 52,000, 10,000 b) 47,000, 10,000 c) 52,000, 15,000 d) 37,000, Nil
10. What is the maximum amount upto which AMT credit can be utilised.
a) maximum amount of credit available
b) Difference between tax payable as per income tax act and MAT
d) Average of a) and b)
11. Which is the charging section of Alternate Minimum Tax?

a) Section 115JB(1) b) Section 115B(2) c) Section 115JC d) Section 115
12. AMT is applicable on

a) Individual whose Adjusted Total Income is ` 25 lakhs
b) Individual whose Adjusted Total Income does not exceed ` 20 lakhs
c) HUF whose Adjusted Total Income does not exceed ` 20 lakhs

|Page
VIVEK GABA
a) Artificial juridical person whose Adjusted Total Income is ` 21 lakhs
b) AOP whose Adjusted Total Income is ` 27 lakhs
c) BOI whose Adjusted Total Income does not exceed ` 20 lakhs

a) Individual whose Adjusted Total Income does not exceed ` 20 lakhs
b) HUF whose Adjusted Total Income does not exceed ` 20 lakhs
c) Artificial juridical person whose Adjusted Total Income does not exceed ` 20 lakhs
d) All of the above
15. Surcharge at which rate shall be levied if adjusted total income of assessee liable to AMT
exceeds ` 1 crore?
a) 5% b) 2% c) 10% d) Nil
16. How is adjusted total income of assessee liable to AMT computed?

a) Total Income computed as per normal provisions of IT Act + Deduction under chapter VIA
(heading C) + Deduction under section 10AA
b) Total Income computed as per normal provisions of IT Act - Deduction under chapter VIA
(heading C) + Deduction under section 10AA
c) Total Income computed as per normal provisions of IT Act + Deduction under chapter VIA
(heading C including deduction u/s 80P) + Deduction under section 10AA
d) Total Income computed as per normal provisions of IT Act + Deduction under chapter VIA
(heading C except deduction u/s 80P) + Deduction under section 10AA
17. Deduction u/s 80P ………. added back

a) is b) is not c) may be d) may not
18. Assessee will be required to obtain a report from …………. certifying computation of adjusted total
income and AMT
a) Cost Accountant b) Company Secretary
c) Chartered Accountant d) government officer
19. Assessee will be required to obtain a report from Chartered Accountant certifying computation of
……..
a) adjusted total income b) AMT
20. AMT credit shall be allowed to be carried forward and set off up to ……………….
a) 10 years succeeding the year in which credit becomes available
b) 8 succeeding the year in which credit becomes available
c) 8 year in which credit becomes available
d) Infinite number of years
21. If the amount payable as per normal provision of Income tax act is 53,000 and AMT is 70,000.
What is the amount payable and amount of credit available to assessee
a) 53,000, 17,000 b) 70,000, 17,000 c) 53,000, Nil d) 70,000, 10,000

|Page
VIVEK GABA
22. When can assessee utilise AMT credit?
a) when tax payable as per income tax act is less than AMT
b) when AMT is more than tax as per income tax act
c) when tax as per income tax act is more than AMT
d) all of the above
23. What is the amount payable to Government when tax as per normal provision of Income tax
Act is 1,20,000 and as per the provision of AMT is 1,21,000
24. While calculating AMT, how is depreciation treated

a) depreciation as per Income tax Act is allowed
b) depreciation as per Companies Act is allowed
c) higher of a) or b)
d) not allowed at all
25. AMT is based on

a) accounting profit b) total income
c) adjusted Total income d) adjusted Gross Total income
26. AMT applied to a firm only if it has claimed deduction of section 80 H to 80 RRB (except 80P)
or exemption under section 10AA
a) if its ATI does not exceed ` 50,00,000 b) if its ATI does not exceed ` 20,00,000
c) if its ATI exceeds ` 20,00,000 d) always applicable
27. During the previous year 2017-18, Mr.Rohan has income of ` 50,00,000 under head “PGBP”.
Among other business, one of his business is eligible for deduction of 100 % profits under
section 80IA. Profit of such business is ` 24,00,000 which is already included above. Compute
amount payable by him as tax
a) 6,28,300 b) 6,10,000 c) 9,25,000 d) 9,52,750
ANSWERS
1. c) 4. d) 7. c) 10. c) 13. c) 16. d) 19. b) 22. c) 25. c)

2. a) 5. c) 8. a) 11. c) 14. d) 17. b) 20. a) 23. b) 26. c)
3. d) 6. c) 9. b) 12. a) 15. c) 18. c) 21. b) 24. a) 27. d)

|Page
VIVEK GABA
MINIMUM ALTERNATE
TAX (MAT) 18
Sec 115JB(1) Charging Section (Amended by FA, 2016)
For a company, when tax under IT Act as per normal provisions is less than 18.5% of its book
profit, tax is payable on such book profits @ 18.5%(Sub-section (7) has been inserted in section
115JB to provide that in case of a company, being a unit located in International Financial Services
Centre and deriving its income solely in convertible foreign exchange, the minimum alternate tax
shall be chargeable at the rate of 9% instead of 18.5%.)
Surcharge shall also be charged as applicable. Marginal relief shall also be given.
Sec 115JB(2) Preparation of Profit and Loss A/c

Co. shall prepare its P&L A/c as per Part II of Schedule VI of Companies Act, 1956.
FA 2012 provides that electricity, insurance and banking companies shall

- A.Y. 2013-14 & future- as per regulatory act
- A.Y 2012-13 & earlier, option as per Company Act or Regulatory Act
All accounting policies, Accounting Standards, method and rate of depreciation shall be same as in
financial statement laid in AGM.
Explanation of Sec 115JB(1) Computation
Following amount debited to P&L A/c shall be added back:

a. Income tax paid and payable and its provision
b. Amt. carried to any reserve by whatever name (transfer to reserve as per statute as well and
excess provisions)
c. Amt. set aside for meeting liability other than ascertained liabilities (i.e. unascertained liabilities)
d. Provision of loss of subsidiary
e. Dividend paid or proposed
f. Expense relating to any income to which sec 10 (other than 10(38)) or sec 11 or 12 apply
g. Depreciation (including depreciation on revalued assets)
h. deferred tax and its provision
i. diminution in value of asset
j. Amt. standing in revaluation reserve relating to revalued asset on retirement or disposal of
asset, if amount –not credited to P&LA/c.
Following amount are credited to P&L account to be reduced:

i) Amt. withdrawn from any reserve/provision if credited to P&L A/c. only if the reserve was
created by debiting P&L A/c
ii) Income relating to which sec 10 (other than 10(38)) or sec 11 or 12 apply, if credited to P&L
account.
iia) Depreciation debited to P&L a/c (excluding depreciation on revalued assets)
iib) Amt. withdrawn from revaluation reserve and credited to P&L a/c (it shall not exceed amount

|Page
VIVEK GABA
of depreciation on a/c of revaluation of assets)
iii) Loss brought forward or unabsorbed depreciation, whichever is less.
iv) Profit of sick industrial company from when became sick till entire net worth => accumulated
losses.
v) Deferred tax, if any credited to P&L A/c
 Company can carry forward depreciation and losses as it could have had carried forward
normally.
 Where tax is paid as per MAT, provision of Advance Tax are applicable and hence interest u/s
234A, 234B and 234C.
MAT CREDIT
MAT credit can be carried forward for 15 assessment year and MAT credit = tax paid u/s 115JB –
tax payable as normal provision
It is allowed to be utilized when tax payable as per normal provisiontax paid u/s 115JB
and equal to
tax payable as per normal provision (minus) tax paid u/s 115JB
OBJECTIVE QUESTIONS
1. When the tax on total income computed as per …….. is less than …… , such ……. shall be
deemed to be total income
a) Income tax Act, Book Profits, Book Profits
b) Companies Act, Taxable Profits, Profit
c) Income tax Act, 18.5% of Book Profits, Book Profits
d) Companies Act, 18.5% of Taxable Profits, Taxable Profit
2. Surcharge @ ……. shall be levied if book profits of domestic company exceeds` 10 crore.
a) 5% b) 2% c) 10% d) Nil
3. Surcharge @ ……. shall be levied if book profits of foreign company exceeds` 10 crore.
c) 5% b) 2% c) 10% d) Nil
4. What is the maximum amount upto which MAT credit can be utilised
a) maximum amount of credit available
b) Difference between tax payable as per income tax act and MAT
d) Average of a) and b)
5. What is the amount payable to Government, when tax as per normal provision of Income tax
Act is 1,20,000 and as per the provision of MAT is 1,21,000
a) 1,20,000 b) 1,21,000 c) 1,20,500 d) none of the above
6. MAT credit shall be allowed to be carried forward and set off up to ……………….
a) 8 assessment year b) 10 assessment year
c) 8 previous year d) 10 previous year

|Page
VIVEK GABA
7. If the amount of tax as per income tax act is 50,000 and MAT is 51,000. The credit of MAT
available is 2,000. What is the amount of tax payable by the assessee and how much credit
shall be carried forward by him
a) 51,000, 2,000 b) 50,000, 1,000 c) 51,000, 3,000 d) 49,000, Nil
8. If amount payable as per normal provision of Income tax Act is 52,000 and MAT is 47,000.
The MAT credit available with assessee is 15,000. What is the amount payable and the
amount that of MAT credit shall be carried forward?
a) 52,000, 10,000 b) 47,000, 10,000 c) 52,000, 15,000 d) 37,000, Nil
9. If the amount payable as per income tax act is 53,000 and MAT is 70,000. What is the
amount payable and amount of credit available to assessee
a) 53,000, 17,000 b) 70,000, 17,000 c) 53,000, Nil d) 70,000, 10,000
10. If amount payable as per normal provision of income tax act is 1,03,000 and as per the
provision of MAT is 73,000. What is the amount payable
a) 1,03,000 b) 73,000 c) 88,000 d) Nil
11. MAT is applicable on

a) all assesses b) individual c) company d) HUF, AOP
12. When can assessee utilise MAT credit?

a) When tax payable as per income tax act is less than MAT
b) When tax as per income tax act is more than MAT
c) When MAT is more than tax as per income tax act
d) All of the above
13. Which is the charging section of Minimum Alternate Tax?

a) Section 115JB(1) b) Section 115B(2) c) Section 115JCd) Section 115
14. Surcharge @ ……. shall be levied if book profits of domestic company exceeds` 1 crore.
a) 5 % b) 2 % c) 10 % d) Nil
15. Surcharge @ ……. shall be levied if book profits of foreign company exceeds` 1 crore.
a) 5% b) 2% c) 10% d) Nil
16. Minimum Alternate Tax at the rate of …….. of …….. is applicable.

a) 18.5 %, taxable income as per Income tax Act
b) 30 %, taxable income as per Income tax Act
c) 18.5%, Book Profits
d) 30 %, Book Profits
17. The MAT credit available in hands of the company …………. be allowed to the LLP.
a) shall b) may not c) shall not d) may
18. In computation of book profits, which of the following shall be added?

a) Income tax paid or payable b) provision of income tax
c) Wealth tax paid or payable d) Both a) and b)
19. Provision of section 115JB is applicable on

a) company assessee b) all assessee whose total income exceeds ` 1 crore
c) company, LLP and firm d) all assessee irrespective of level of income

|Page
VIVEK GABA
20. Which of the following income is not deducted while computing Book profits for the purpose of
computation of MAT?
a) agriculture income b) Long Term Capital Gain referred in section 10(38)
c) dividend from domestic company d) Short Term Capital Gain referred in section 115A
21. MAT credit can be carried forward for

a) 8 years b) 15 years d) indefinite d) no carry forward
22. While calculating “Book Profit”, which of the following is allowed

a) Depreciation as per Companies act b) Depreciation as per Income tax act
c) Higher of a) and b) d) None of the above
23. ABC company has `30,00,000 profit as per “Profit and Loss Account”
(i) Income tax as per “P&L Account” : ` 3,00,000
(ii) Wealth tax as per “P&L Account” : ` 30,000
(iii) Depreciation as per “P&L Account” : ` 1,40,000
(iv) Long term capital gain on listed equity share (STT paid) : ` 1,60,000
Compute tax payable if depreciation as per Income tax Act is ` 2,00,000
a) 9,60,990 b) 6,28,815 c) 6,10,500 d) 9,33,000
24. As per the following date, find out that income shall be taxable in the hands of
Income : ` 12,00,000
Source of income : Business located outside India which is wholly controlled from
outside India
Place of receipt : Outside India
a) Domestic company b) Foreign company
25. ABC Ltd. (a domestic company) received dividend of ` 7,00,000 from foreign company in which
domestic company holds 26 % shares. At what rate such dividend is taxable
a) taxable at 15 % b) taxable at 30 %
c) taxable at 40 % d) exempt from tax
26. ABC Ltd. (a domestic company) received dividend of ` 7,00,000 from foreign company in which
domestic company holds 24 % shares. At what rate such dividend is taxable
a) taxable at 15 % b) taxable at 30 %
c) taxable at 40 % d) exempt from tax
ANSWERS
1. c) 4. c) 7. c) 10. a) 13. a) 16. c) 19. a) 22. a) 25. a)

2. c) 5. b) 8. b) 11. c) 14. a) 17. c) 20. b) 23. a) 26. b)
3. a) 6. b) 9. b) 12. b) 15. b) 18. d) 21. b) 24. a)

|Page
VIVEK GABA
TAXATION OF AOP/ BOI 19
Sec 40(ba) Payment of interest, salary etc. by AOP/BOI to its Members
Interest paid (-) Interest received = Net to be disallowed
Member in individual/representative and interest paid in representative/individual capacity is allowed.
Salary is always disallowed
Rent is always allowed.
Sec 67A Members share in income of AOP/BOI
Computation is done as follows
Step1: Compute taxable income after disallowing salaries and interest. Let it be ‖x‖
Step2: Reduce taxable income by aggregate of salaries and interest. Let it be ―y‖
Step3: Allocate ―x-y‖ in PSR.
Step4: Amt. allocated in step 3 and salaries is the share of AOP/BOI.
Sec 86 Rebate in respect of members’ share in income of AOP/BOI

If AOP is chargeable to tax at Will share of AOP be Rebate
included in members’ share
Normal Rate Yes Available at average rate of tax
Normal Rate but tax payable is Yes Not available
NIL
MMR/ Higher rate No Does not arise

|Page
VIVEK GABA
323
Illustration- In case AOP has 3 members, Individual A, Indian Co. and Foreign Co. and
commission is paid to foreign co., then tax for AOP shall be computed as
 Foreign co.’s share + commission @ 41.20%  Balance @ 30.9%
OBJECTIVE QUESTIONS
1. Which of the following payment made by AOP to its member shall be allowed as deduction
a) Interest b) salary c) bonus d) rent
2. Which of the following shall not be allowed as deduction for payment made by AOP to its
members
a) commission b) remuneration c) bonus d) all of above
3. A payment of salary made by AOP to a member in individual capacity where he is a member

in representative capacity shall ........ as deduction
a) be allowed b) not be allowed
c) be partly allowed d) none of above
4. A payment of interest by AOP to its member in representative capacity where he is a member

in individual capacity shall .......as deduction
]
5. A payment of interest by AOP to its member in individual capacity where he is a member in

representative capacity shall .......as deduction
6. Rent shall always be. ....... as deduction

a) allowed b) disallowed
c) partly disallowed d) partly allowed
ANSWERS
1. d) 2. d) 3. b) 4. a) 5. a) 6. a)
324
APPEAL 20
The assessee has two alternatives if he is not satisfied with the order passed by the AO
 Appeal – the first appeal against the order of the AO shall in all cases lie with the
Commissioner (Appeals) OR
 Revision – if the appeal is not made within time or it is not preferred, then the assessee
can apply u/s 264 to the CIT for revision of the order of the AO.
POINT TO BE NOTED!!!
1. Judgements by the SUPREME COURT OF INDIA are binding on all courts and tribunals
and assessing authorities.
a. In case of contradictory judgements of the Supreme Court the decisions by the larger
bench shall prevail irrespective of whether it came before or after the said judgement.
b. In case, both the benches are of same size, then the judgement given later shall
prevail.
2. Decision of the High Court will be binding on all the lower authorities, and shall be
enforceable in the relevant state unless it has been overruled by a Supreme Court
judgement on the specific issue.
The decision of the ITAT (Income Tax Appellate Tribunal) shall be binding on all the lower
authorities unless it has been overruled by a higher court of law.

|Page
VIVEK GABA iVidya Academy, Laxmi Nagar, Delhi, Ph: 7703880232
SUPREME
COURT
SEC 262
High Court
Sec 264
Question of law 120 days
ITAT Rectification order passed u/s 254 itself

Sec 254
60 days
Appeal to ITAT for order passed by CIT(A)
And order passed by AO according to
direction given Dispute Resolution Panel
CIT(R) u/s 263
order passed
by AO is Order passed as per
erroneous and Direction of DRP
prejudicial reference to
Dispute
to interest DRP u/s 144C
Resolution
CIT(R) u/s 264
of revenue Panel
on own motion/ Note 1
application of CIT (A)
assessee sec 250
Order passed by CIT
Order passed by
Subordinate
Authorities
30 days
CIT(R) - CIT Revision

Note 1- In the following cases, assessee must be given an opportunity to go before DRP
i) In case of foreign assessee, where there is an increase in income or reduction in losses
ii) In case of others, where increase in income or reduction in losses is due to TP Report

|Page
OBJECTIVE QUESTIONS
1. When an order is passed by Commissioner of Income Tax, it shall be appealed in front of

a) Income tax appellate authority b) Commissioner of Income Tax (Appeal)
c) High Court d) Supreme Court
2. In which of the following case, assessee must be given an opportunity to go before Dispute
Resolution Panel (DRP)
a) In all the cases
b) In case of foreign assessee, where there is an increase in income or reduction in losses
c) In case of assessee other than foreign assessee, where increase in income or reduction in
losses is due to TP Report
d) Both b) and c)
3. Appeal to ITAT can be given against which of the following?

a) against order passed by CIT(A)
b) order passed by AO according to direction given Dispute Resolution Panel
c) order passed by CIT(R) under section 263
d) any of the above
4. Appeal to ITAT shall be given in how many days?

a) 45 b) 60 c) 180 d) 120
5. CIT(R) can pass order under section 263 if

a) order passed by AO is erroneous
b) order passed by AO is prejudicial to interest of revenue
c) order passed by AO is erroneous and prejudicial to interest of revenue
d) on discretion of CIT(R)
6. On which question can appeal to Supreme Court be filed?

a) Question of fact b) Question of law
c) Any of the above d) as per discretion of Supreme Court
7. Within how many days should appeal be filed to High Court?

a) 45 b) 60 c) 180 d) 120
8. CIT(R) can pass order under section 264

a) on his own motion b) application of assessee
c) Either a) or b) d) on discretion of CIT(R)
9. Which the final fact finding authority?
a) CIT (A) b) ITAT c) High court d) Supreme Court
10. On which question can appeal to High Court be filed?

b) Question of fact b) Question of law
c) Any of the above d) as per discretion of High Court

a) Appeal against order of ITAT shall be filed to Supreme Court
b) Appeal against order of ITAT shall be filed to High Court

|Page
c) No appeal against order of ITAT shall be filed
12. Which of the following statement is incorrect?

a) Appeal against order of ITAT shall be filed to High Court on Question of law
b) Appeal against order of High Court shall be filed to Supreme Court
c) Appeal against order of ITAT shall be filed to High Court on Question of fact
d) All of the above
13. Appeal to ITAT cannot be given against which of the following?

a) against order passed by CIT(A)
b) order passed by AO according to direction given Dispute Resolution Panel
c) order passed by CIT(R) under section 264
14. Which is the first appellate authority?

a) Income tax appellate authority b) Commissioner of Income Tax (Appeal)
c) High Court d) Supreme Court
ANSWERS
1. a) 3. d) 5. c) 7. d) 9. b) 11. b) 13. c)
2. d) 4. b) 6. b) 8. c) 10. b) 12. c) 14. b)

|Page
TAX DEDUCTION AT
SOURCE 21
POINT TO BE NOTED
No Tax if payment to govt,RBI,Mutual Funds or any statutory corporation.
1. Deductor has to apply for TAN.
2. Certificate of TDS is given in FORM 16A for other than salary And for salary 16.
3. Sum deducted will be deemed to be income received.
4. Payee shall get credit through TDS certificate.
5. TDS has to be deducted at the time of payment or credit in the books whichever is earlier.
6. TDS shall be deposited within one week from the end of the month in which tax is deducted.
CLARIFICATION REGARDING TDS ON GOODS and SERVICES TAX COMPONENT

COMPRISED OF PAYMENT TO RESIDENTS.
It is clarified that wherever in terms of the agreement / contract between the payer and the
payee, the component of ―GST‖ on ―Services‖ comprised in the amount payable to a resident
is indicated separately, tax shall be deducted at source under chapter XVII-B of the Act on
the payment paid/ payable without including such GST on Services component. GST for
these purposes shall include IGST, CGST, SGST and UTGST.
INTEREST FOR LATE PAYMENT

- If the person liable to deduct tax fails to deduct or pay tax so deducted.
- He shall be liable to pay interest @ 1.5% for every month or part of month.
Interest shall not be charged from a person, who fails to deduct tax on the sum paid to a
resident if such resident
a) Has furnished his ROI;
b) Has including such income for computing income in ROI
c) Has paid tax due on income declared by him in such ROI.
The person is required to furnish a certificate to this effect from a CA.
Due Date of furnishing of TDS return(Amended by FA, 2016)
a) The due dates would be following for quarters ending on
30th June 31th july
30th Sep 31th Oct
31st Dec 31th Jan
st
31 Mar 31th May
b) Penalty of ` 100 per day for not filing return.
@Quoting PAN
It is mandatory for dedutee to furnish his PAN to deductor, otherwise higher of following rates will
be applicable for TDS-
1. the rates precribed in the act or
2. 20%
|Page
@TDS at a rate lower than prescribed
 Assessee - an application to AO for non-deduction of tax (except in case of lottery)
 If AO - satisfied that his application is justified he may give assessee such certificate.
 Once the assessee furnishes - certificate, the person liable to dedut tax deducts no tax.
 It is not permissible - tax deductible u/s 194LC on payment of interest on long term bonds
to non corporate NR and foreign companies.
SECTION 194-IB PAYMENT OF RENT BY CERTAIN INDIVIDUALS OR HINDU
UNDIVIDED FAMILY.
[ADDED BY FINANCE ACT, 2017]
(1) Any person, being an individual or a Hindu undivided family (other than those referred to
in the second proviso to section 194-I), responsible for paying to a resident any income by
way of rent exceeding fifty thousand rupees for a month or part of a month during the
previous year, shall deduct an amount equal to five per cent of such income as income-
tax thereon.
(2) The income-tax referred to in sub-section (1) shall be deducted on such income at the
time of credit of rent, for the last month of the previous year or the last month of tenancy,
if the property is vacated during the year, as the case may be, to the account of the
payee or at the time of payment thereof in cash or by issue of a cheque or draft or by
any other mode, whichever is earlier.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in
accordance with the provisions of this section.
(4) In a case where the tax is required to be deducted as per the provisions of section
206AA, such deduction shall not exceed the amount of rent payable for the last month
of the previous year or the last month of the tenancy, as the case may be.
Explanation.—For the purposes of this section, "rent" means any payment, by whatever name
called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the
use of any land or building or both.]
SECTION 194-IC
PAYMENT UNDER SPECIFIED AGREEMENT.
[Added by Finance Act, 2017]
Notwithstanding anything contained in section 194-IA, any person responsible for paying to a
resident any sum by way of consideration, not being consideration in kind, under the
agreement referred to in sub-section (5A) of section 45, shall at the time of credit of such
sum to the account of the payee or at the time of payment thereof in cash or by issue of a
cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten
per cent of such sum as income-tax thereon.]

|Page
@SECTION 194-IA
TDS on immovable property (except rural agricultural land in India)
Transferee – paying to resident transferor- consideration for immovable property in India or outside
India (except rural agricultural land in India) shall deduct TDS at the time of credit or payment @
1%, if consideration paid/ payable of immovable property is more than ` 50 lakh.
Example 1: Mr. Raman sold his house property in Mumbai as well as his rural agricultural land for
a consideration of ` 60 lakh and ` 15 lakh, respectively to Mr. Vaibhav on 2 Aug 2014. He has
purchased the house property and land in the year 2012 for ` 40 lakh and ` 10 lakh, respectively.
The SDV on the date of transfer i.e. 2.8.2014 is ` 85 lakh and ` 20 lakh for house and land.
Determine tax implication in the hands of Mr. Raman and Vaibhav and TDS implications, if any in
hands of Mr. Vaibhav, assuming both are residents in India.
Answer:
(i) Tax implication in the hands of Mr. Raman
As per section 50C, the SDV of house property (i.e. `85 lakh) would be deemed to be full
value of consideration arising on transfer of property. Therefore, ` 45 lakh (85 - 40) would
be taxable as STCG in A.Y. 2015-16
Since agricultural land is not a capital asset, the gains arising on sale of such land is not
taxable in the hands of Mr. X.
(ii) Tax implication in the hands of Mr. Vaibhav
In case of immovable property received for inadequate consideration, the difference b/s SDV
and actual consideration would be taxable u/s 56(2)(vii), if such difference exceeds ` 50,000.
Therefore, in this case ` 25 lakh (85 – 60) is taxable in hands of Mr. Vaibhav u/s 56(2)(vii).
Since, agricultural land is not a capital asset, section 56(2)(vii) is not attracted on receipt of
land for inadequate consideration, since the definition of “property” includes only capital asset
specified.
(iii) TDS implication in the hands of Mr. Raman
Since sale consideration of house property exceeds ` 50 lakh, Mr. Vaibhav is required to
deduct TDS u/s 194-IA. The tax to be deducted would be ` 60,000 (1% of ` 60 lakh)
TDS provisions are not attracted in respect of transfer of rural agricultural land.
Section : 194 LD
TDS on interest on bonds/ Government securities
Person – making payment shall pay TDS @ 5% (+SC +EC + SHEC) at the time of credit or
payment to Foreign Institutional Investor or a qualified foreign investor.
Lower TDS certificate u/s 197 is not possible.
Section :194DA (Amended by FA, 2016)
TDS at the rate of 2% 1% shall be deducted at the time of payment by any person responsible
for paying to resident any sum under a life insurance policy, including the sum allocated by
way of bonus on such policy, other than amount not includible in total income u/s 10(10D).
No tax shall be deducted where the aggregate payment in the financial year is less than
`1,00,000.
(Inserted by Finance Act 2014)

|Page
AMENDMENT BY FINANCE ACT,
2015 & 2016
1. No TDS on service Tax: As per circular 01/2014 dated 13/01/2014, TDS is not applicable
on service tax part, if service tax is shown separately.
2. TDS at higher rate i.e., 20% has to be deducted if the deductee does not provide PAN to
the deductor.(read detail u/s 206AA)
3. Surcharge on tax:
a) Not deductible/ collectible at source in case of resident individual/ HUF/ Firm/ AOP/
BOI/ Domestic Company in respect of payment of income other than salary.
b) applicable on payment made to non-resident other than company, if payment is in

excess of one crore. (15 %)
c) on salary is applicable if taxable salary is more than one crore @ 15%
d) In the case of Company other than Domestic Company,

i) at the rate of 2% of such tax, where the amount or the aggregate of such
amounts collected and subject to the collection exceeds one crore rupees but
does not exceed ten crore rupees;
ii) at the rate of 5% of such tax, where the amount or the aggregate of such
amounts collected and subject to the collection exceeds ten crore rupees.
Various situations and Surcharge /Cess applicable on TDS/TCS

Payment to Payment Surcharge Cess
Salary (up to 1 crore) No Yes (3%)
Salary (> 1 crore) Yes (15%) Yes (3%)

Resident Non- corporate
Other than salary No No
Corporate Other than salary No No
Salary (up to 1 crore) No Yes (3%)
Non- corporate Salary (> 1 crore) Yes (15%) Yes (3%)
Other than salary up to 1 Crore No Yes (3%)
Non- Corporate Other than salary (> 1 Crore to 10 Yes (2%) Yes (3%)
Resident crore) than salary > 10 Crore
Other Yes (5%) Yes (3%)
4. Deduction of Cess:
a) Education Cess and SHEC is not deductible/ collectible at source in case of resident
Individual/ HUF/ Firm/ AOP/ BOI/ Domestic Company in respect of payment of income
other than salary.
b) Education Cess @ 2% plus secondary & Higher Education Cess @ 1% is deductible at

source in case of non-residents and foreign company.

|Page
5. Section 192:
a) Currently, the person responsible for paying salary has to depend upon the evidence/
particulars furnished by the employee in respect of deductions, exemptions and set-off
of loss claimed. There is neither any guidance regarding the nature of evidence/
particulars to be obtained nor any uniformity in this regard.
b) With a view to rationalise the collection of information and documents by employers, a

new sub-Section (2D) is introduced in Section 192 to provide that the person will be
required to obtain evidence or proof or particulars of prescribed claims including claim
for set-off of loss under the provisions of the Act in the prescribed form and manner.
(Effective from 1st June 2015)
6. Sections 192A and 197A: TDS from premature withdrawal from Employees’
Provident Fund Scheme (EPFS)
a) When an employee participating in a Recognised Provident Fund (RPF) withdraws the

accumulated balance lying to her/his credit in the said RPF account, that amount is not
included in her/his total income and is considered as exempt provided certain conditions
are met.
b) The main condition is that such a person should have rendered continuous service with
that employer for a period of 5 years or more. In case of cessation of employment, if
the employee takes up an employment with another employer and the accumulated
balance in her/ his RPF account is transferred to her/ his RPF account maintained by
such other employer, then also the exemption would be available.
c) It therefore follows that if the above mentioned conditions are not satisfied, the
accumulated balance due to the employee is taxable in the hands of the employee. In
such a case, tax is required to be calculated by re-computing the tax liability of the
years for which the contribution to RPF has been made, by treating the same as
contribution to unrecognised provident fund.
d) The trustees of an RPF are required to deduct tax at source on such accumulated
balance at the time it is paid, as if such withdrawn amount were income chargeable
under the head Salaries. However, often, the trustees did not have the requisite
information to be in a position to compute the TDS correctly. With a view to simplify
the process of deduction in such cases, Section 192A is now inserted to provide that
trustees of RPFs shall, at the time of payment of the accumulated balance due to the
employee, deduct tax at source at the rate of 10%, where the aggregate withdrawal is
` 30,000/- 50,000/- or more.
e) At the same time, if the concerned employee fails to furnish her/his permanent account
number (PAN) to the person responsible for deducting such tax, then tax shall be
deducted at the maximum marginal rate as per Section 206AA. It has also been
provided that tax shall not be deducted if the employee furnishes to the payer a self-

|Page
declaration in the prescribed Form No. 15G/15H, declaring that the tax on her/his
estimated total income of the relevant previous year would be nil.
7. Section 194A: TDS from interest (other than interest on securities)
a) Interest on fixed deposits with banks attracts TDS under Section 194A. An exception to
this was in respect of interest paid by co-operative banks to their members.
b) Now, Section 194A(3)(v) has been amended to expressly provide that payment of
interest on time deposits by a cooperative bank to its members will not be exempt from
withholding tax requirement. Therefore, with effect from 1st June 2015, when interest
paid or credited in excess of the prescribed limit (which is presently ` 10,000/-), tax will
have to be deducted at source by the cooperative bank.
c) The existing provisions that permit a depositor to furnish Form 15G/15H for non-
deduction of tax at source from the interest wherever applicable, will apply to the
interest on deposits with cooperative banks also.
d) The exemption from withholding tax u/s 194A(3)(viia)(b) in respect of payment of

interest on time deposit taken from a cooperative society will continue to be available
to a cooperative bank. Similarly, a primary agricultural society or a primary credit
society or a cooperative land mortgage bank or a cooperative land development bank
shall continue to enjoy the exemption u/s 194A (viia) (a), and will accordingly not be
required to deduct tax at source from interest payment.
e) The definition of the term time deposits under Explanation 1 to Section 194A(3) has
been amended to include recurring deposits within its scope. As a result, now for all
banks, whether cooperative or commercial, interest paid on both time deposits and
recurring deposits will attract the TDS provisions.
f) Interest paid on compensation amount awarded by the Motor Accident Claim Tribunal
has been brought under the ambit of TDS. If the aggregate amount of such a payment
during the financial year exceeds ` 50,000/-, there will be a TDS at the time of
payment of the interest. Consequently, it follows that there would be no requirement to
deduct tax at source at the time of credit of interest.
8. Section 194C: TDS from payments to transporters

a) Currently, payment to transporters carrying on the business of plying, hiring, or, leasing
of goods carriages is not liable to withholding tax if the transporter furnishes her/his
permanent account number to the payer. The intention of having this provision was to
exclude small transporters from the rigours of TDS provisions. But because of the way
the section was drafted, all transporters were excluded from the TDS provisions if they
had a PAN.

|Page
b) With a view to bring back the big transporters back into the TDS fold, from 1st June
2015 onwards, this exemption will be available only to those transporters who own 10
or less goods carriages at any time during the previous year. Such a transporter would
also need to furnish a declaration to that effect to the payer along with the PAN.
c) This exemption is available whether such amount is paid by a person engaged in the
business of transport or otherwise.
9. Obtaining/ quoting tax deduction and collection account number (TAN) relaxed
for certain notified persons–Section 203A
At present, any person who is required to deduct tax at source (other than under Section
194IA) is expected to obtain a TAN and quote that TAN in the challan and the TDS
statement that he is supposed to file. This is a cumbersome requirement– particularly to the
individuals who acquire an immovable property from non- residents. In such cases, for one
time transactions also, the TAN related formalities have to be complied with. In order to
provide relief to such individuals or Hindu undivided families (HUFs) who are not liable for
audit under Section 44AB or for one time transactions such as single transaction of
acquisition of immovable property from non-residents on which tax is deductible under
Section 195, it is to amend Section 203A to the effect that the requirement of obtaining
and quoting of TAN shall not apply to such notified person
(Effective from 1st June, 2015)
10. Section 206C: Processing of TCS returns
a) Section 206CB is introduced to facilitate the processing of TCS (tax collected at source)
statements on the same lines as TDS statements.
b) Section 206CB(1) permits adjustments to the sums collectible to take care of

arithmetical errors or incorrect claims apparent from any information in the TCS
statement filed.
c) Interest, if any, payable on the sum collectible and fee payable u/s 234E are now
chargeable in respect of the TCS. For this purpose, suitable provisions have been
introduced in the Sections 200A and 206CB.
d) The intimation has to be sent before the expiry of one year from the end of the
financial year in which the statement is filed.
e) Section 206C(7) provides for payment of interest if the person responsible for collecting
the tax does not collect the tax or after collecting does not pay it as required under
that Section. At the same time, since an intimation generated under Section 206CB is
deemed to be a notice of demand under Section 156, interest under Section 220(2)
would be payable if the tax collector fails to pay such demand within 30 days of the
service of the notice of demand. This could give rise to a situation where interest is
|Page
charged under both Sections, 220(2) as well as 206C(7). To avoid this, a new sub-
Section (2C) is inserted in the Section 220 to provide that where interest is charged for
any period u/s 206C(7), no interest shall be charged u/s 220(2) of the Act on the same
amount for the same period.
11. Sections 194DA & 194I and 197A: Self-declaration for non-deduction of tax
from life insurance payments
a) Section 194DA provides for deduction of tax at source at the rate of 2% from
payments made under a life insurance policy, if such amount is chargeable to tax and
the amount is not less than ` 1,00,000/-. However, there is no facility for such an
assessee to file a self-declaration under Section 197A to receive the amount without
deduction of tax at source even if she/ he has no tax liability.
b) Section 197A is amended to provided that tax shall not be deducted u/s 194DA if the
recipient of the payment on which tax is deductible furnishes to the payer a self-
declaration in the prescribed Form No. 15G/15H declaring that the tax on his estimated
total income for the relevant previous year would be nil.
12. Section 194LD: Interest on certain bonds and Government securities earned
by FIIs–
a) Presently, interest paid to a foreign institutional investor, qualified foreign investor and
foreign portfolio investor on rupee denominated bonds of an Indian company or a
Government security is taxed at a concessional rate of 5% plus applicable surcharge
and cess. This concession was available for interest payable on or after 1st June 2013
but before 1st July 2015.
b) The concessional rate of tax is to be extended up to 30th June, 2017.
13. TDS by Individual and HUF (Non Audit) case not deductible
An Individual or a HUF whose total sales, gross receipts or turnover from business or
profession carried on by him does not exceeds the monetary limits (` 100,00,000 in case
of business & ` 50,00,000 in case of profession) under section 44AB(a) or section 44AB(b)
or during the immediately preceding financial year shall not be liable to deduct tax u/s
194A, 194C, 194H, 194I & 194J. So, no tax is deductible by HUF/ Individual in first year
of operations of business even if sales/ Fees is more than ` 100/ ` 50 Lakh.

|Page
337
338
339
OBJECTIVE QUESTIONS
1. What shall be the rate of tax at which TDS on salary under section 192 shall be deducted?
a) 30 % b) Average rate of income tax (including cess)
c) 20 % d) Average rate of income tax (excluding cess)
2. What shall be rate at which TDS on interest on securities shall be deducted u/s193?
a) 20 % b) 10 % c) 30 % d) 15 %
3. Who shall be liable to deduct TDS under section 194A?

a) Any person
b) Only companies
c) individual and HUF whose accounts were liable to audit in preceding financial year
d) any person other than individual and HUF whose accounts were not liable to audit in
preceding financial year
4. When Interest upto ` 10,000 is payable by bank. What shall be the rate of TDS u/s194A?
a) 20 % b) 10 % c) 30 % d) Nil
5. Sec 194B of Income tax Act relates to?

a) TDS on Interest other than interest on securities
b) TDS on Interest on securities
c) TDS on Winnings from lotteries or crossword puzzles & Race horses
6. When shall tax not be deducted in case of winning from race horses?
a) When winning from race horses is upto ` 15,000
b) When winning from race horses is upto ` 5,000
c) When winning from race horses is upto ` 10,000
d) TDS shall always be deducted
7. What shall be the rate at which TDS on winnings from lotteries or crossword puzzles & Race
horses be deducted under section 194B?
a) 20 % b) 10 % c) 30 % d) 15 %
8. Who shall not be liable to deduct TDS under section 194C?

a) Any person
b) Only companies
c) Individual and HUF whose accounts were not liable to audit in preceding financial year
d) any person other than individual & HUF whose accounts were not liable to audit in
preceding financial year
9. What is the limit for the amount payable during the entire previous year mentioned under
section 194C upto which TDS shall not be deducted?
a) ` 90,000 b) ` 1,00,000 c) ` 30,000 d) Nil
10. What shall be the rate at which TDS on payment to contractor/sub-contractor be deducted
under section 194C when the payment is made to Individual or HUF?
a) 1 % b) 2 % c) 10 % d) Nil
335 | P a g e
340
11. What shall be the rate at which TDS on insurance commission shall be deducted u/s194D?
a) 20 % b) 5 % c) 30 % d) 15 %
12. What shall be the rate at which TDS on commission on sale of lottery tickets shall be
deducted under section 194G?
a) 20 % b) 5 % c) 30 % d) 15 %
13. What is maximum amount upto which TDS on commission on sale of lottery tickets shall not
be deducted?
a) ` 5,000 b) ` 20,000 c) ` 15,000 d) Nil
14. What is maximum amount upto which TDS on commission or brokerage shall not be
deducted?
a) ` 5,000 b) ` 15,000 c) ` 1,000 d) Nil
15. What shall be the rate of TDS under section 194I on payment of rent of plant and machinery
where rent is paid to any person other than individual or HUF?
a) 1 % b) 2 % c) 10 % d) Nil
16. What is total amount during the previous year upto which TDS on rent under section 194I shall
not be deducted?
a) ` 30,000 b) ` 75,000 c) ` 2,00,000 d) ` 1,80,000
17. What shall be rate of TDS on fees for professional or technical service under section 194J?
a) 20 % b) 10 % c) 30 % d) 15 %
18. What is total amount during the previous year upto which TDS on fees for professional or
technical service shall not be deducted?
a) ` 20,000 b) ` 75,000 c) ` 30,000 d) Nil
19. What shall be rate of TCS on sale of Tendu leaves?

a) 2.5 % b) 5 % c) 1 % d) Nil
20. A person makes payment of ` 35,000 to contractor who is a transport operator. The transport
operator furnishes PAN number. The person making payment shall deduct tax on the amount
so paid. Discuss the validity of the statement.
a) The TDS shall be deducted as per the provisions of section 194C irrespective of the fact
that PAN has been furnished
b) The TDS shall be deducted as per the provisions of section 194J
c) There is no requirement to deduct TDS under section 194C since transport operator has
furnished PAN number
d) TDS is not required to be deducted as the payment does not attract the provision of TDS
21. A person makes payment of ` 35,000 to a contractor who is a transport operator. The
transport operator does not furnish PAN number. The person making payment shall deduct tax
on the amount so paid. Discuss the validity of the statement.
a) The TDS shall be deducted as per the provisions of section 194C since PAN number has
not been furnished
b) The TDS shall be deducted as per the provisions of section 194J
c) There is no requirement to deduct TDS under section 194C
336 | P a g e
341
d) TDS is not required to be deducted as the payment does not attract the provision of TDS
22. Y & Co., engaged in real estate business conducted a lucky dip and gave Maruti car to a
prize winner. TDS shall be deducted under section …………. at the rate of
a) 194B, 10 % b) 194A, 30 % c) 194B, 30 % d) 194G, 20 %
23. ‘Z’ Transport Co. provides transport services to Mr. B & raised bill of `5,00,000 inclusive of
service tax for the service. ‘Z’ Transport Co. does furnishes its PAN to Mr. B. Mr. B is not
liable to tax audit in preceding financial year. Calculate the amount of TDS required to be
deducted by Mr. B.
a) ‘X’ transport Co. does not furnish its PAN to Mr. B, so TDS shall be deducted @ 20% on
the invoice value at the time of payment. TDS of 1,12,360 shall be deducted
b) TDS is not required to be deducted by Mr. B since he is not liable for Tax Audit under
section 44AB in the preceding year.
c) TDS is required to be deducted irrespective of the fact that Mr. B is not liable to tax audit,
TDS of 1,00,000 shall be deducted
d) TDS shall be deducted under section 194J
24. ‘Z’ Transport Co. provides transport services to Mr. B & raised bill of ` 5,00,000 inclusive of
service tax for the service. ‘Z’ Transport Co. furnishes its PAN to Mr. B. Mr. B is liable to tax
audit in preceding financial year. Calculate amount of TDS required to be deducted by Mr. B.
a) Mr. B is liable to Tax Audit in preceding financial year and hence, TDS shall be deducted
@ 20% on invoice value at the time of payment. TDS of 1,12,360 shall be deducted
b) TDS is required to be deducted irrespective of the fact that transport company has
furnished its PAN and hence, TDS of 1,00,000 shall be deducted
c) TDS is not required to be deducted by Transport company has furnished its PAN number
25. Any person responsible for paying to a resident any sum exceeding `2.5 lakh towards
compensation for compulsory acquisition of his urban industrial land under any law has to
deduct income-tax at the rate of
a) 10 % b) 15 % c) 20 % d) Nil
26. In rate of TDS, surcharge or education cess will not included in case of:
a) Resident company b) Non-resident company
27. In rate of TDS on salary, education cess shall be added in case of

a) Resident Company b) resident assessee other than company
c) Non-resident company d) non-resident assessee other than
company
28. Surcharge or education cess shall be added in rate of TDS in case of
a) Foreign company b) Any other assessee it should be non-resident
c) Indian company d) None of the above
29. Submission of PAN is mandatory for
a) deductor/ payer to deductee b) deductee/ payee to deductor
c) company only d) individual only
337 | P a g e
342
30. If PAN is not submitted by assessee than TDS will deducted at the higher of
a) rate specified in ACT or rates in force or 20% b) rate specified in ACT or 20%
c) 20% or 30% d) None of the above
31. No declaration under section 197A shall be …….… unless the person furnishes his……..
a) valid, PAN b) invalid, PAN c) valid, TIN d) valid, PIN
32. If the declaration 197A has become invalid, TDS will be deducted at the rate of
a) 20%
b) 30%
c) Rate specified in ACT or Rates in force or 20%, whichever is lower
d) Rate specified in ACT or Rates in force or 20%, whichever is higher
33. Which of the following statement is TRUE;

a) If PAN not submitted, TDS shall be deducted at higher rate
b) Declaration of 197A is invalid if PAN not submitted
c) No certificate issue under section 197 if no PAN submitted
d) All the above
34. Deductee submitted PAN but it was invalid, then TDS shall deducted at the rate:
a) 20%
b) Rate specified in the section
c) Rate specified in the ACT
d) Rate specified in ACT or Rates in force or 20% whichever is HIGHER
35. TDS shall not be deducted if payment is made to:

a) Government b) Reserve bank of India
c) A mutual fund specified under section 10(23C) d) All the above
36. Certification issue of lower TDS rate given by ……….. after make an application by ……
a) Assessing Officer, Assessee b) Assessee, Assessing Officer
c) CIT, Assessing Officer d) Assessing Officer, CIT
37. The declaration under section 197A cannot given by:

a) Individual b) Company c) Company or firm d) Individual or company
38. Which of the following statement is TRUE:

a) Declaration of section 197A cannot given by company or firm
b) Declaration of section 197A can be given only by senior citizen
c) Both a) or b)
39. After deduction of TDS deductor deposit such TDS to ………. Within specified time;
a) Central Government b) State Government
40. When the …………….. is the government TDS deposited without challan on:
a) Payee, same day b) Payer, 7th of the next month in which TDS deducted
c) Payer, same day d) None of the above
338 | P a g e
343
41. When payer is Government, TDS deposited with challan as on
a) same day b) on or before 7 day from the end of month
th
c) 30 April d) None of the above
42. When the payer is other than Government, TDS of March month shall be deposited upto:
a) 30th April b) 7th April c) same day d) None of the above
43. Which of the following ending date of quarter of the Financial year:
a) 30thJune, 30th September, 31st December, 31st march
b) 15thJune, 15th September, 15th December, 15 march
c) 30thJune, 30th September, 31st December, 30thApril
d) 30thJune, 30th September, 31st December, 15th may
44. Which of the following correct due date for Government for filing TDS returns:
a) 31stJuly, 31stOctober, 31stJanuary, 31thmay
b) 30thJune, 30thSeptember, 31stDecember, 31stmarch
c) 31thJuly, 31st October, 31stJanuary, 31stmarch
45. Which of the following correct due date for other than Government for filing TDS returns:
a) 31stJuly, 31st October, 31st January, 15th may
b) 31thJuly, 31thOctober, 31thJanuary, 31`thmay
c) 15thJuly, 31stOctober, 31stJanuary, 15thmay
d) None of the above.
46. In case of salary TDS certificate issued in:

a) Form 16 b) Form 16A c) Form 15 d) Form 15H
47. Form 16 issued:

a) Annually b) Quarterly c) Half yearly d) Monthly
48. In case of non-salary TDS certificate issued in:

a) Form 16A b) Form 16A c) Form 15 d) Form 15H
49. Form 16A issued once in

a) Month b) year c) Quarter d) Half year
50. Due date of furnishing of TDS certificate in case of salary:

a) 31stMay of the following relevant financial year
b) 15thMay of the following relevant financial year
c) 15 days from the due date of furnishing of TDS return
d) All the above
51. Due date of furnishing of TDS certificate in case of salary:

a) 15days from the due date of furnishing of TDS return
b) 31stMay of the following relevant financial year
c) 15thMay of the following relevant financial year
339 | P a g e
344
52. Form 16A issued by ………….. through ……………….
a) Deductor, TIN website b) Deductee, TIN website
c) Deductor, manually d) Deductee, manually
53. Assessee shall be deemed to assessee in default in which of following cases:

a) If deductor not deduct the whole or any part of the tax
b) If after deduction fails to pay whole or any part of tax
c) If late deduction or late payment
d) Both A and B
54. In case of winnings from horse races, payments exceeding …………… are subject to tax deduction
at source at the rate of ……………..%?
a) 10,000, 30% b) 5,000, 30% c) 5,000, 10% d) 1,000, 10%
55. When prize is given partly cash & partly kind, Income tax is to be deducted only from cash?
56. The Finance Act, 2012 also clarified that interest under section …………. Shall not be levied
where section …………… applies:
a) 200(1), 201(1A) b) 200A, 201(1A)
c) 200(1), 156 d) None of the above
57. Mr. X, resident, is due to receive ` 4.50 lakhs on 31.3.2015, towards maturity proceeds of LIC
policy taken on 1.4.2012, for which sum assured is ` 4 lakhs and annual premium is `
1,25,000. What will be the applicability of provisions for tax deduction at source u/s194DA.
a) Tax is deductible on ` 4,50,000 since annual premium exceeds 10% of sum assured
b) Tax is not deductible on ` 4,50,000 since annual premium does not exceed 20% of sum
assured
c) Tax is not deductible on the amount
58. Mr. Y, a resident, is due to receive ` 2.20 lakhs on 31.3.2015 on LIC policy taken on
1.4.2010, for which the sum assured is ` 2 lakhs and the annual premium is ` 35,000. What
will be the applicability of provisions for tax deduction at source u/s 194DA.
a) Tax is deductible on ` 2,20,000 since annual premium exceeds 10% of sum assured
b) Tax is not deductible on ` 2,20,000 since annual premium does not exceed 20% of sum
assured
c) Tax is deductible on ` 2,20,000 since annual premium exceeds 15% of sum assured
59. Mr. Z, a resident, is due to receive ` 95,000 on 1.10.2014 towards maturity proceeds of LIC
policy taken on 1.10.2010 for which the sum assured is ` 90,000 and the annual premium was
` 19,000. What will be the applicability of provisions for tax deduction at source u/s 194DA.
a) Tax is deductible on ` 95,000 since annual premium exceeds 10% of sum assured
b) Tax is deductible on `95,000 since annual premium does exceeds 20% of sum assured
c) Tax is not deductible on ` 95,000 since amount payable is less than ` 1,00,000
irrespective of amount of sum assured
d) Tax is deductible on `95,000 since annual premium exceeds 15% of sum assured
340 | P a g e
345
60. No deduction of tax at source will be made by a banking company under section 194A with
respect to aggregate amount of interest paid or payable on time deposits during the financial
year 2013-14, if it does not exceed ……………….?
a) 10,000 b) 5,000 c) 20,000 d) None of the above
61. The maximum amount which can be paid without deduction of tax at source from winning from
lotteries is…………?
a) 10,000 b) 5,000 c) 1,000 d) 20,000
62. When is the TDS on salary not required to be deducted?

a) If TI of employee is up to normal exemption limit
b) If TI of employee is beyond normal exemption limit
c) TDS is required to be deducted in all the situations
63. TDS on interest on securities is levied under section …………….

a) 193 b) 192 c) 194A d) 194D
64. When a listed company whose debentures are not listed on stock exchange and interest upto`
5,000 is payable to individual or HUF. What shall be the amount of TDS deducted on same?
a) 20 % b) 10 % c) 30 % d) Nil
65. Where interest on securities is payable by Central or State Government. What shall be the
amount of TDS deducted on same under section 193?
a) 20 % b) 10 % c) 30 % d) Nil
66. What shall be the rate at which TDS on interest other than interest on securities shall be
deducted under section 194A?
a) 20 % b) 10 % c) 30 % d) 15 %
67. When Interest upto` 10,000 is payable by cooperative societies. What shall be rate of TDS
u/s194A?
a) 20 % b) 10 % c) 30 % d) Nil
68. When Interest upto` 10,000 is payable by post office. What shall be rate of TDS under section
194A?
a) 20 % b) 10 % c) 30 % d) Nil
69. When Interest of ` 11,000 is payable by post office. What shall be the rate of TDS under
section 194A?
a) 20 % b) 10 % c) 30 % d) Nil
70. When shall tax not be deducted in case of winning from lotteries?
a) When winning from lottery is upto ` 5,000
b) When winning from lottery is upto ` 10,000
c) When winning from lottery is upto ` 15,000
d) TDS shall always be deducted
341 | P a g e
346
71. Section 194C of the Income tax Act relates to?
a) TDS on Interest on securities
b) TDS on payment to contractor/sub-contractor
c) TDS on Winnings from lotteries or crossword puzzles & Race horses
72. When individual or HUF is paying amount to contractor or sub-contractor for services for their
personal purpose. TDS under section 194C shall be required to be deducted?
a) Yes, TDS u/s194C shall be deducted even though services are availed for personal
purpose
b) No, TDS u/s194C shall not be deducted when services are availed for personal purpose
c) May be required to be deducted
73. What is the limit for single transaction mentioned under section 194C upto which TDS shall not
be deducted?
a) ` 20,000 b) ` 45,000 c) ` 30,000 d) Nil
74. What shall be the rate at which TDS on payment to contractor/sub-contractor be deducted
under section 194C when the payment is made to person other than Individual or HUF?
a) 1 % b) 2 % c) 10 % d) Nil
75. What is maximum amount upto which TDS on insurance commission shall not be deducted?
a) ` 15,000 b) ` 45,000 c) ` 30,000 d) Nil
76. What shall be the rate at which TDS on commission or brokerage shall be deducted u/s194H?
a) 20 % b) 5 % c) 30 % d) 15 %
77. Who shall not be liable to deduct TDS under section 194H?
a) Any person
b) Only companies
c) Individual and HUF whose accounts were not liable to audit in preceding financial year
d) Individual and HUF whose accounts were liable to audit in preceding financial year
78. TDS on Rent shall be deducted under section

a) 194C b) 194I c) 194B d) 194H
79. What shall be the rate of TDS under section 194I on payment of rent of plant and machinery
where rent is paid to individual or HUF?
a) 1 % b) 2 % c) 10 % d) Nil
80. What shall be the rate of TDS under section 194I on payment of rent of plant and machinery?
a) 1 % b) 2 % c) 10 % d) Nil
81. What shall be the rate of TDS under section 194I on payment of rent of land and building or
furniture and fixture where rent is paid to individual or HUF?
a) 15 % b) 2 % c) 10 % d) Nil
furniture and fixture where rent is paid to any person other than individual or HUF?
a) 1 % b) 2 % c) 10 % d) Nil
342 | P a g e
347
furniture and fixture?
a) 1 % b) 2 % c) 10 % d) Nil
84. Who shall not be liable to deduct TDS under section 194I?
a) Any person
b) Individual and HUF whose accounts were not liable to audit in preceding financial year
c) Only companies
d) Individual and HUF whose accounts were liable to audit in preceding financial year
85. X & Co. (Firm) is engaged in wholesale business assigned a contract for construction of its
godown building to Mr. Ravi, a contractor. It paid ` 25,00,000 to Mr. Ravi as contract payment.
The amount being paid by X & Co. attracts provision of TDS under section
a) 194A b) 194J
c) 194C d) TDS is not required to be deducted
86. An AOP having gross receipts of ` 110 lakh during the financial year 2013-14 is not required
to deduct tax at source u/s 194C of Income-tax Act, 1961, on payment made to contractors
during the financial year 2014-15. Discuss the validity of the statement
a) Valid, AOP is not required to deduct tax
b) Invalid, AOP is required to deduct TDS since audit of AOP was compulsory during 2012-13
u/s 44AB
c) Invalid, AOP is required to deduct TDS since audit of AOP was compulsory during 2012-13
u/s 44
87. ‘X’ Transport Co. provides transport services to Mr. B who sends goods to Mr. C from Delhi to
Chennai. ‘X’ raised a bill of ` 5,00,000 plus service tax for the service in the name of Mr. B.
‘X’ Transport Co. does not furnishes its PAN to Mr. B. Mr. B is liable to tax audit in preceding
financial year. State whether TDS has to be deducted and what shall be the amount of TDS.
a) ‘X’ transport Co. does not furnish its PAN to Mr. B, So TDS shall be deducted @ 20% on
the invoice value at the time of payment. TDS of 1,12,360 shall be deducted
b) ‘X’ transport Co. does not furnish its PAN to Mr. B, So TDS shall be deducted @ 20%.
TDS of 1,00,000 shall be deducted
c) No TDS is required to be deducted irrespective of the fact that Mr. B is liable to tax audit
88. Insurance Company paid ` 45,000 as Insurance Commission to its agent Harish. Which of the
following TDS implication will apply?
a) Insurance company must deduct tax at source @ 10% under section 194C
b) TDS on insurance commission is required to be deducted under section 194D since
amount payable is `45,000 which is above ` 15,000
c) TDS on insurance commission is not required to be deducted under section 194D since
amount payable is `45,000 which is below ` 75,000
343 | P a g e
348
89. Insurance Company paid ` 13,000 as Insurance Commission to its agent Ramesh. Which of
the following TDS implication will apply?
a) Insurance company must deduct tax at source @ 10% under section 194C
b) TDS on insurance commission is not required to be deducted under section 194D since
amount payable is ` 13,000 which is below ` 15,000
c) TDS on insurance commission is required to be under section 194D deducted irrespective
of the amount of commission payable
90. The turnover of manufacture & wholesale trade business of Avinash during the financial year
2013-14 is ` 115 lakh. Rent of `2,00,000 is paid by him. Which of the following TDS
implication would be applicable on such payment?
a) TDS is required to be deducted under section under section 194H
b) TDS is not required to be deducted under section 194I irrespective of amount of payment
c) TDS is not required to be deducted since payer was not liable to audit in preceding
financial year
d) TDS is required to be deducted u/s194I since amount of rent payable is above `1,80,000
91. The turnover of manufacture business of Ramesh during the financial year 2012-13 is ` 90
lakh. Rent of ` 2,50,000 is paid by him. Which of the following TDS implication would be
applicable on such payment?
a) TDS is required to be deducted under section under section 194H
b) TDS is required to be deducted under section 194I since amount of rent payable is above
`1,80,000
c) TDS is required to be deducted under section 194I irrespective of amount of payment
d) TDS is not required to be deducted since payer was not liable to audit in preceding
financial year
92. Deduction of tax in respect of salary will be made in respect of

a) Tax b) Tax + Surcharge (if any) + EC
c) Tax + Surcharge (if any) + EC + SHEC d) Tax + Surcharge (if any)
93. No tax shall be deducted on interest payable by bank if

a) Such interest does not exceed ` 20,000 b) Such interest does not exceed ` 30,000
c) Such interest does not exceed ` 10,000 d) tax shall always be deducted
94. When is tax deducted in case of payment of salary

a) at the time of accrual of salary b) at the time of payment of salary
c) credit or payment, whichever is earlier d) at the end of the previous year
95. When tax is to be deducted on salary, salary shall be rounded off to

a) nearest 10 b) nearest 100 c) nearest 1 d) not rounded off
96. Raman won a horse race and entitled to a prize of ` 12,00,000. The race club shall deduct
how much tax on such payment
a) 3,70,800 b) 2,47,200 c) 3,60,000 d) Nil
344 | P a g e
349
97. An advertising contract has been given by a company to another company for ` 2,40,000. The
amount is paid on 2 August 2013. How much tax shall be deducted by the company
a) 4,800 b) 4,944 c) 2,720 d) 2,400
98. Who issues certificate of lower deduction of TDS

a) Assessee himself b) concerned Assessing Officer
c) concerned CIT d) Any of the above
99. Who shall issue self-declaration under section 197A

a) Assessee himself b) concerned Assessing Officer
c) concerned CIT d) Any of the above
ANSWERS
1. b) 12. b) 23. b) 34. d) 45. b) 56. a) 67. d) 78. b) 89. b)

2. b) 13. c) 24. c) 35. d) 46. a) 57. a) 68. d) 79. b) 90. d)
3. d) 14. a) 25. a) 36. a) 47. a) 58. b) 69. b) 80. b) 91. d)
4. d) 15. b) 26. a) 37. c) 48. b) 59. c) 70. b) 81. c) 92. c)
5. c) 16. d) 27. b) 38. c) 49. c) 60. a) 71. b) 82. c) 93. c)
6. c) 17. b) 28. a) 39. a) 50. a) 61. a) 72. b) 83. c) 94. b)
7. c) 18. c) 29. b) 40. c) 51. a) 62. a) 73. c) 84. b) 95. a)
8. c) 19. b) 30. a) 41. b) 52. a) 63. a) 74. b) 85. c) 96. c)
9. b) 20. c) 31. b) 42. a) 53. d) 64. d) 75. a) 86. b) 97. a)
10. a) 21. a) 32. d) 43. a) 54. a) 65. d) 76. b) 87. a) 98. b)
11. b) 22. c) 33. d) 44. a) 55. b) 66. b) 77. c) 88. b) 99. a)
345 | P a g e
350
351
Focus Area:
1. Other losses cannot be set off against lottery income etc.
2. A loss of an assessment year shall be set off against income, if any of the next year. If the
same is not set off, then it is dead loss, not allowed to be carried forward. Eg. Loss in
Assessment Year 2016-17 of ` 1,20,000 shall be set off against income of ` 1,50,000 of the
AY 2017-18. If not, `1,20,000 shall not be allowed to be carried forward and set off against
income in the AY 2018-19.
3. Priority of Set off

a) Current year depreciation
b) Brought forward losses
c) Loss to be set off against income of same source of same head
d) Loss to be set off against the income of different source of same head.
e) Loss can be set off against income of other heads.
4. Where assessee is engaged principally in the business of trading in shares, it shall not be
deemed to be speculative business (Amended by Finance Act 2014)
OBJECTIVE QUESTIONS
1. Loss under head Salary can be set off from income under head
a) Capital Gains b) Profit & Gain of Business or Profession
c) House Property d) Loss is not possible under Salary head
2. Loss under head House property can be set off from income under head
a) Profit & Gain of Business or Profession b) House property
c) Capital Gains d) any head
3. Loss under head House property can be carried forward for next ….. assessment year
a) 8 b) 4 c) Indefinite d) 0
4. Loss from owning & maintenance of race horses can be carried forward for next ….. AY
5. Speculative Loss can be set off from income from

a) speculative business b) capital gains
c) other sources d) owning & maintaining horse races
6. Speculative Loss can be carried forward and set off from income from
a) speculative business b) capital gains
c) house property d) owning & maintaining horse races
7. Speculative Loss can be carried forward for

a) next 8 assessment year b) next 4 assessment year
c) indefinite period d) Cannot be carried forward
8. Losses from specified business u/s 35 AD can be carried forward for


|Page
9. Losses from business other than speculative, owning and maintaining race horses and specified
business under section 35AD can be carried forward for
10. Losses from business other than speculative, owning and maintaining race horses and specified
business under section 35AD can be set off from income
a) any business b) capital gain
c) any source or any head except income from salary d) house property
11. Long term capital Loss can be set off from income from
a) long term capital asset b) short term capital asset
c) long term or short term capital asset d) any head
12. Long term Capital Loss can be carried forward and set off from income from
13. Long term Capital Loss can be carried forward for

14. Short term Capital Loss can be set off from income from
15. Short term Capital Loss can be carried forward for

16. Loss from other sources can be carried forward for

17. Compute the taxable income of Mr. A for the A.Y.2017-18.

Income from salary 4,00,000
Loss from self-occupied property (-) 70,000
a) 4,00,000 b) 3,30,000 c) 3,65,000 d) Nil
18. During the P.Y. 2017-18, Mr. C has following income and brought forward losses:
Short term capital gains on sale of shares 1,50,000
Long term capital loss of A.Y. 2016-17 (96,000)
Short term capital loss of A.Y. 2017-18 (37,000)
What is the capital gain taxable in the hands of Mr. C and how much loss can be carried
forward for the A.Y.2018-19?
a) 1,13,000, Nil b) 17,000, Nil c) 1,13,000, 96,000 d) 54,000, 37,000

|Page
19. During the P.Y. 2017-18, Mr. C has following income and brought forward losses:
Long term capital gain 1,75,000
Long term capital loss of A.Y. 2016-17 (96,000)
Short term capital loss of A.Y. 2017-18 (37,000)
What is the capital gain taxable in the hands of Mr. C and how much loss can be carried
forward for the A.Y. 2018-19?
a) 79,000, 37,000 b) 1,38,000, 96,000 c) 42,000, Nil d) Nil, Nil
20. What is the taxable income and losses to be carried forward of Mr. E for the A.Y. 2018-19?
Income from speculation business 60,000
Loss from non-speculation business (40,000)
Short term capital gain 80,000
Long term capital loss of A.Y.2015-16 (30,000)
a) ` 70,000, Nil b) ` 1,10,000, `40,000
c) ` 1,00,000, `30,000 d) ` 1,00,000, `40,000
21. Compute the total income and losses to be carried forward of Mr. Rahul for the AY 2018-19.
Loss from profession 1,05,000
Capital loss on the sale of property-short term 55,000
Capital gains on sale of shares-long term 2,05,000
Winnings from lotteries 1,00,000
Loss from horse races in Mumbai 40,000
a) 2,50,000, 1,45,000 b) 1,05,000, Nil
c) 1,45,000, 40,000 d) 3,05,000, 2,00,000
22. According to section 80, no loss which has not been determined in pursuance of a return filed
in accordance with provisions of section 139(3), shall be carried forward. The exceptions are
a) Only loss under the head “Capital Gains” under section 74.
b) Loss under head “Capital Gains” and unabsorbed depreciation carried forward u/s 32(2)
c) Loss from house property and unabsorbed depreciation carried forward u/s 32(2).
23. Section 70 enables set off of losses under one source of income against income from any
other source under the same head. The exceptions to this section are –
a) Loss under head “Capital Gains”, loss from speculative business and loss from activity of
owning and maintaining race horses
b) Long-term capital loss, loss from speculative business, loss from business specified under
section 35AD and loss from the activity of owning and maintaining race horses
c) Short-term capital loss, loss from business specified under section 35AD and loss from
speculative business
24. Mr. A incurred short-term capital loss of `10,000 on sale of shares through the National Stock
Exchange. Such loss can be set-off –
a) only against short-term capital gains b) against both short &long-term capital gains
c) against any head of income. d) None of the above

|Page
25. Loss from house property can be carried forward and set off in subsequent 8 assessment year
a) only if return of loss is filed within due date
b) only if return of loss is filed after due date
c) It does not matter when return is filed
d) Carry forward of loss from house property is not allowed at all.
26. Long term capital loss can be set off from which of the following
a) Short term capital gain only b) Long-term capital gain only
c) Income from business or profession d) Income from salary
27. Loss from owning and maintenance of race horses can be carried forward and set off from
income from
a) owning & maintaining horse races b) House property
c) Capital gains d) any income from any head
28. Losses from specified business u/s 35AD can be set off from income from
a) specified business u/s 35AD b) any business
c) capital gains d) cannot be set off
29. Speculative business losses can be c/f for ………….. assessment year, immediately succeeding the
assessment year for which the loss was first computed?
a) Four b) Eight c) Unlimited d) None of the above
30. The first item in order of priority of set off between unabsorbed depreciation, capital expenditure
on scientific research, current year depreciation, and brought forwarded business loss is?
a) Unabsorbed depreciation capital expenditure on scientific research
b) Current year depreciation
c) Brought forwarded business loss
d) Any of the above
31. Speculative business losses can be C/F for ………….. assessment year, immediately succeeding
the assessment year for which the loss was first computed?
32. Unabsorbed part of the loss from house property can be C/F and set-off with in subsequent
…….. years?
33. Speculative losses may be set-off against non-speculative profits?

34. Loss on account of owing and maintaining race horses can be carried forward upto?
a) Eight b) Unlimited c) Four d) None of the above
35. Loss in speculative as well as non-speculative business can be C/F to a maximum 4

consecutive assessment years immediately succeeding the assessment year for which loss was
first compute?

|Page
36. Short Term Capital Loss can be set off from
c) Both Short Term and Long Term Capital Gain d) Any income of the previous year
37. Loss under head Salary can be carried forward and set off from income under head
a) Capital Gains b) Profit & Gain of Business or Profession
c) House Property d) Loss is not possible under Salary head
38. Loss under head House property can be carried forward and set off from income under head
a) Profit & Gain of Business or Profession b) House property
c) Capital Gains d) any head
39. Loss from owning and maintenance of race horses can be set off from income from
a) owning and maintenance of race horses b) Capital Gain
c) House Property d) Any head.
40. Losses from specified business u/s 35 AD can be carried forward and set off from income from
a) specified business u/s 35 AD b) any business
c) capital gains d) cannot be set off
41. Losses from business other than speculative and specified business under section 35AD can be
set off from income from
a) business b) capital gains
c) any source or any head except income from salary d) any head
42. Short term Capital Loss can be carried forward and set off from income from
a) long term capital gain b) short term capital gain
c) long term or short term capital gain d) any head
43. Loss from other sources can be set off from income from
a) Capital Gains b) House property
c) any head d) none of the above
44. In a case where the business is succeeded by inheritance, and the legal heirs constitute
themselves as a partnership firm, then
a) the partnership firm can carry forward and set-off the loss of the predecessor
b) the partnership firm cannot carry forward and set-off the loss of the predecessor
c) the loss of the predecessor can be carried forward and set-off only by the individual
partners in proportion to the share of profits of the firm
45. Long term capital loss can be set off from which of the following:
a) Short term capital gain only b) Long term capital gain only
c) Income from business or profession d) Income from salary
46. Business loss of an amalgamating company shall be:

a) carried forward and set off in the hands of amalgamated company unconditionally
b) carried forward & set off in hands of amalgamated company subject to certain conditions
c) not be carried forward
d) allowed to be carried forward only by amalgamating company
|Page
47. Loss from speculation business of a particular assessment year can be set off in same AY
from:
a) Profit and gains from any business
b) Profit and gains from any business other than speculation business
c) Income of speculation business
d) Income under any head
48. Loss from derivative trading in shares carried on in a recognized stock exchange is
a) a loss from speculative business b) a loss from non-speculative business
49. Loss from derivative trading in shares carried on in a recognized stock exchange can be set off
a) from the income from speculative business b) from the income of non-speculative business
c) Both a) and b) d) from income under any head
50. Loss from derivative trading in shares carried on in a recognized stock exchange can carried
forward for
a) 4 years b) 8 years c) 10 years d) infinite
51. Loss from derivative trading in commodity exchange is

a) a loss from speculative business b) a loss from non-speculative business
52. Loss of a closely held company cannot be carried forward and set off unless on the last day of
the previous year in which the loss was incurred and last day of previous year such loss was
set off, if
a) at least 50 % of shares are beneficially held by the same persons
b) at least 40 % of shares are beneficially held by the same persons
c) at least 51 % of shares are beneficially held by the same persons
d) at least 90 % of shares are beneficially held by the same persons
53. In case of amalgamation, if condition mentioned in section 72A is satisfied, the amalgamated
company is allowed to carry forward the business loss & unabsorbed depreciation of
amalgamated company for:
a) 8 years
b) fresh 8 years for business loss and indefinitely for unabsorbed depreciation
c) Indefinitely
d) balance number of years
ANSWERS
1. d) 7. b) 13. a) 19. c) 25. c) 31. a) 37. d) 43. c) 49. c)

2. d) 8. c) 14. c) 20. c) 26. b) 32. b) 38. b) 44. a) 50. b)
3. a) 9. a) 15. a) 21. c) 27. a) 33. a) 39. a) 45. b) 51. a)
4. b) 10. c) 16. d) 22. c) 28. a) 34. c) 40. a) 46. b) 52. c)
5. a) 11. a) 17. b) 23. b) 29. a) 35. b) 41. c) 47. c) 53. b)
6. a) 12. a) 18. c) 24. b) 30. b) 36. c) 42. c) 48. b)

|Page
DISPUTE RESOLUTION
PANEL 23
Section 144C: Reference to Dispute Resolution Panel
1. The Assessing Officer while making assessment under section 143(3)/ 147/ 153A is bound to
follow the procedure of forwarding draft assessment order referred in section 144C to the
assessee for reference to Dispute Resolution Panel in the following cases:
(a) In case of a foreign company: If Assessing Officer wants to increase the returned income/
decrease losses of a foreign company, then he is bound to follow procedure laid down in
section 144C. It is not necessary that variation should be on account of order of
Transfer Pricing Officer (TPO).
(b) In case of an assessee other than a foreign company: The AO is bound to follow
procedure laid down in section 144C only if variation in total income arises on account of
order of TPO passes u/s 92CA. If there is no addition on account of order of TPO, then
AO cannot follow the procedure laid in section 144C.
2. The AO shall forward a draft of the proposed assessment u/s 143(3)/ 147/ 153A to the eligible
assessee if he proposes to make any variation in returned income/loss which is prejudicial to
the assessee and on receipt of the draft order, the assessee shall within 30 days of the
receipt by him of the draft order
(i) file his acceptance of the variations to the Assessing Officer; or
(ii) file his objection to the variations with DRP and Assessing Officer
3. If no objection is received within above period of 30 days, the Assessing Officer shall
complete the assessment on the basis of the draft order.
4. Notwithstanding the time limits for making the assessment/ reassessment mentioned in section
153 or section 153B, the AO shall complete the assessment on the basis of draft order within
one month from the end of the month in which:
(a) acceptance of the assessee is received; or
(b) period of 30 days for filing the objections expires and no objections are received from the
assesse
5. The DRP shall in a case where any objection is filed by the assessee to the draft order, issue
directions for the guidance of the Assessing Officer to enable him to complete the assessment.
However, such direction shall not be issued after 9 months from the end of the month in
which the draft order is forwarded to the assessee.
6. The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the
draft order so, however, that it shall not set aside any proposed variation or issue any
direction under sub-section (5) for further enquiry and passing of the assessment order.
Explanation: For the removal of doubts, it is hereby declared that the power of the DRP to
enhance the variation shall include and shall be deemed always to have included the power to

|Page
consider any matter arising out of the assessment proceedings relating to the draft order,
notwithstanding that such matter was raised or not by the eligible assessee.
(Added by Finance Act 2012, w.r.e.f. 1.4.2009)
7. Every direction issued by DRP shall be binding on the Assessing Officer.
8. Notwithstanding the time limits given in section 153/153B, the Assessing Officer, on receipt of
the direction of DRP shall complete the assessment within 1 month from the end of the month
in which such directions are received from DRP.
Section 253 : (Amendment by Finance Act 2012)
(2A) The Principal Commissioner or Commissioner may, if he objects to any direction issued by
the Dispute Resolution Panel under section 144C(5) in pursuance of which the Assessing
Officer has passed an order completing the assessment or reassessment, direct the
Assessing Officer to appeal to the Appellate Tribunal against the order
(3A) Every appeal under sub-section (2A) shall be filed within 60 days of the date on which the
order sought to be appealed against is passed by the Assessing Officer in pursuance of the
directions of the Dispute Resolution Panel.
(4) The Assessing Officer or the assessee, as the case may be, on receipt of notice that an
appeal against the order of the AO in pursuance of directions of the DRP has been filed by
the other party, may, notwithstanding that he has not appealed against such order or any
part thereof, file a memorandum of cross-objections to the ITAT within 30 days of the receipt
of notice. The memorandum of cross-objections shall be in prescribed form and shall be
disposed of by ITAT as if it were an appeal before it.
Appeal filed to ITAT by Appeal filed to ITAT by Assessee

Department Order of ITAT shall send a notice to the
ITAT shall send a notice to the Assessing Officer Department informing that an
assessee informing him that an in pursuance of appeal has been filed by Assessee
appeal has been filed by directions of DRP (Copy of Appeal enclosed)
Department (Copy of Appeal
enclosed)
ITAT
DEPARTMENT MAY file a
ASSEESSEE MAY file a
Memorandum of cross objection
Memorandum of cross objection
to ITAT
to ITAT
- within 30 days
- within 30 days
- in Form 36A
- in Form 36A

|Page
SETTLEMENT COMMISSION 24
Application can be filed before ITSC if following conditions are satisfied:
a) Additional amount of income tax exceeds ` 50,00,000 in case of applicant and ` 10,00,000 in case of
related applicants in case of search and seizure and ` 10,00,000 in other cases.
b) Case is pending before Assessing Officer only in assessment proceeding under section 143(3)/ 144.
For filing Application, Assessee shall pay additional amount of Income tax and
interest on or before the date of making application.
Assessee should also send copy of application to AO on the date of making application.
On receipt of application, ITSC shall within 7 days from the date of receipt of application, issue a
notice to the applicant as to why application be admitted.
Within 14 days of date of filing of application, ITSC has to decide whether to admit the
application or reject the same.
If no order is passed within 14 days, the application is deemed to be admitted.
After admission of application, ITSC within 30 days of filing of application shall call for a report from CIT.
CIT shall submit report within 30 days of receipt of communication.
If report is received on time then on the basis of If report is not received from CIT within
such report, ITSC may declare the application prescribed time, ITSC shall proceed without
invalid. the report.
Such order shall be passed within 15 days of
receipt of report, after giving an opportunity of
being heard to the applicant.
If application is declared invalid, proceedings shall If application is allowed to be proceeded.

abate on last day of the month in which application
was declared invalid.
AND proceeding shall revive before the respective ITSC may call for records from CIT and direct the CIT
income tax authority as if no application was made. for further inquiry and investigation, as ITSC may
deem necessary.

|Page
CIT shall furnish the report within 90 days of receipt
of communication from ITSC.
ITSC may also proceed without such report, if such

report is not received within 90 days.
After examining the records and the report by CIT,

and after giving an opportunity of being heard, an
order shall be passed under section 245D(4) within
18 months from the end of the month in which
application is made.
If settlement order is not passed within the

prescribed time limit proceedings shall abate after
expiry of 18 months as aforesaid.
AND proceedings shall revive before the respective
income tax authority as if no application is made.
Objective Question:
1) Application for settlement cannot made if –
a) Scrutiny notice is issued u/s 143(2)
b) Income escaping assessemnt notice is issued u/s 148
c) Search assessment notice is issued u/s 153A
2) Settlement commission shall pass final order within __________ months from the end of the
months in which application for settlement was made -
a) 6 months b) 12 months
c) 18 months d) 24 Months
ANSWERS
1. b) 2. c)

|Page
ADVANCE RULING 25
Section 245N: Definitions
(a) “Advance Ruling” means - (b) “Applicant” means

any person who is
(i) Determination by the Authority in relation to transaction which has Non-resident
been undertaken or proposed to be undertaken by a NR applicant
and such determination shall include the determination of any
question of law or question of fact specified in the application.
(ii) Determination by the Authority in relation to the tax liability of a Resident
NR arising out of a transaction which has been undertaken or
proposed to be undertaken by a Resident applicant with such NR
and such determination shall include the determination of any
question of law or question of fact specified in the application.
(iia) Determination by the Authority in relation to the tax liability of a resident falling within
resident applicant, arising out of a transaction which has been any such class or
undertaken or is proposed to be undertaken by such applicant category of persons as
and such determination shall include the determination of any the Central
question of law or question of fact specified in the application. Government may, by
notification in Official
Gazette
(iii) A determination by the Authority in respect of an issue relating to Public sector company
computation of total income which is pending before any income- (PSU)
tax authority or the Appellate Tribunal and such determination or
decision shall include the determination or decision of any question
of law or fact relating specified in the application
(iv) A determination or decision by the Authority whether an is referred to (a)(iv)
arrangement, which is proposed to be undertaken by any person [Section 245N(b)(iiia)]
being a resident or a non-resident, is an impermissible avoidance
arrangement as referred to in Chapter X-A or not
Section 245Q: Application for Advance Ruling
Step 1: Make an application in such form and manner as may be prescribed stating the
question on which the advance ruling is sought.
Step 2: Application shall be made in quadruplicate and accompanied by a fee of ` ten 10,000

|Page
or such fee as may be prescribed in this behalf, whichever is higher.
Step 3: Applicant may withdraw an application within 30 days from date of the application.
Section 245R: Procedure on Receipt of Application
Step 1: On receipt of an application, AAR shall forward a copy to Principal Commissioner or

Commissioner and, if necessary, call upon him to furnish the relevant records
Provided that where any records have been called by AAR, such records shall, as soon
as possible, be returned to the Principal Commissioner or Commissioner.
Step 2: The Authority may, after examining application and records called for, by order, either
allow or reject the application. However, Authority shall not allow the application in the
following three cases:
 With regard to NR & R Question Question in the application
applicant, when the question raised in the relates to a transaction which
raised in the application is application is designed prima facie for the
pending before any ITA, ITAT or involves avoidance of tax
COURT on the date of determination
application. (can be pending later of FMV of
on) any property This restriction shall not be
 With regard to PSUs, when applicable for the PSUs and
issue is pending before any also for applicant falling in
COURT section 245N(b)(iiia)
Opportunity of being heard shall be given to applicant before order of rejection of

application. Reason for rejection shall be given in the order
Copy of order shall be sent to the applicant and to the CIT.
Step 3: After allowing application and after examining information placed by the applicant or
obtained by the authority, AAR pronounces its Advance Ruling on the question specified
in the application.
Step 4: On request of applicant, AAR shall, before pronouncing its Advance Ruling, provide an
opportunity of being heard either in person or through a duly authorized representative.
Step 5: A copy of Advance Ruling pronounced by AAR shall be sent to applicant and CIT.
AAR shall pronounce Advance Ruling within 6 months from the date of receipt of application.
Section 245RR: Appellate authority not to proceed in certain cases

No Income Tax Authority or ITAT shall proceed to decide any issue in respect of which an
application has been made by the APPLICANT. It shall wait for the decision of AAR.
Section 245S: Applicability of advance ruling
(1) The advance ruling pronounced by the AAR shall be binding only—
(a) on the applicant who had sought it
(b) in respect of the transaction in relation to which the ruling had been sought; and

|Page
(c) AO, CIT, CIT(A) in respect of applicant i.e. it is not binding on ITAT
(2) The advance ruling shall be binding unless there is a change in law or facts on the basis of
which the advance ruling has been pronounced.
Section 245T: Advance ruling to be void in certain circumstances
Where AAR finds that an advance ruling has been obtained by the applicant by fraud or
misrepresentation of facts, it may, by order, declare such ruling to be void ab initio and all the
provisions of this Act shall apply as if such advance ruling had never been made.
A copy of order shall be sent to the applicant and Principal Commissioner or Commissioner.
OBJECTIVE QUESTIONS
1. When can resident applicant sought Advance Ruling?

a) determination of tax liability of non- resident b) determination of tax liability of resident
c) Both a) and b) d) for any issue
2. Who is an eligible to become Chairman of AAR?
a) retired judge of High Court
b) pass out of Indian legal service (ILS) exam
c) retired judge of Supreme Court
d) pass out of Indian Revenue service (IRS) exam
3. How much fees is to be paid while making application for AAR?
a) 2,500 b) 5,000 c) 10,000 d) Nil
4. When can application made to AAR can be withdrawn
a) cannot be withdrawn
b) within 7 days from date of making application
c) within 21 days from date of making application
d) within 30 days from date of making application
5. When can non resident applicant sought Advance Ruling
a) for transaction which has already been done by the non resident
b) for transaction already undertaken or proposed to be undertaken by applicant non resident
c) non resident cannot apply for any thing
d) for transaction proposed to be undertaken by applicant non resident
ANSWERS
1. a) 2. c) 3. c) 4. d) 5. b)

|Page
TAX PLANNING AND
MANAGEMEN 26
Distinction between Tax Evasion, Tax Avoidance and Tax Planning
Basis Tax Evasion Tax Avoidance Tax Planning

Meaning The illegal way of reducing tax An exercise by Way of reducing tax
liability by deliberately which the assessee liability by taking full
suppressing the income or sale legally takes advantages provided by
or by increasing expenses, etc., advantages of the Act through
which results in reduction of loopholes in the tax exemptions, deductions,
total income of the assessee. laws. rebates and relief.
Characteristics Illegal and objectionable, both in Immoral in nature Moral in nature and
script and moral and bends the law follow the provision of
without breaking it. law within the moral
framework.
Aim To reduce tax liability by To minimize the tax To reduce tax liability
applying unfair means liability by applying by applying script and
script of law only moral of law
Practice Concealment of tax Hedging of tax Saving of tax
Approach Concerned with the past and Futuristic but short Futuristic and positive
applied after the liability of tax term in nature in nature. The planning
has arisen. It is done with is made today to avail
negative approach to avail benefits in future.
benefits by killing the moral of
law.
Legal It overrules the law. It uses loopholes in It uses the benefits of
implication the law. law.
Advantages Generally, not leads to Advantages arises in Advantages arises in
advantage but causes penalty short run long run
and prosecution
Objective Questions:
1) Tax Planning is :
a) Unlawful b) Unethical
c) Not within the framework of law d) None of the above
2) Mr. Vivek deposit 1,50,000 in PPF A/c to claim deduction under section 80C. It is –
a) Tax planning b) Tax evasion
|Page
c) Tax management d) Tax avoidance
3) The basis objectives of tax planning is –

a) Reduction of tax liability b) Minimization of litigation
c) Productive investment d) All the above
]
4) Permissive tax planning is –

a) Objective of tax planning b) Area of tax planning
c) Type of tax planning d) None of the above
ANSWERS
1. d) 2. a) 3. d) 4. c)

|Page
DOUBLE TAXATION
AVOIDANCE AGREEMENT 27
Sec 90 Agreement with Foreign Countries
 Agreement for
1. Relief for tax paid under IT act and tax paid in that country
2. Avoidance of double taxation of income
3. Exchange of information to know cases of tax avoidance
4. Recovery of income tax under this act & corresponding law
Effect of DTAA
i) Taxable only in one country ii) If taxed in both, relief in another country.
 Provision of DTAA or Income tax Act, whichever is more beneficial to assessee is more
applicable.
 If a term used but not defined and same has been defined later, then it shall be deemed to be
defined from beginning.
 Assessee, not a resident and DTAA applies on him, then no benefit shall be given unless a
certificate of him being a resident in any country outside is obtained by him from Govt. of that
country/ specified territory. (Amended by FA 2013).
@
Sec 91 Countries with which no agreement exist
Where there is no DTAA with a country and income arises o/s India and tax is paid in foreign
country and also in India, deduction of lower of following shall be allowed:
a) Tax on total income in India x Such doubly taxed income
Total income in India
b) Tax paid in foreign country x Such doubly taxed income
Total income assessed in foreign country
Doubly taxed income shall be after allowing expenses and deduction.
OBJECTIVE QUESTIONS
1. Foreign income of a person generally becomes liable to tax in two countries, the country in
which income is ………. and the country in which the person is …………….
a) earned, Resident b) received, citizen
c) earned, Citizen d) None of the above
2. Unilateral relief is provided by government in case:

a) where no agreement exist b) where agreement exist
b) Either a) or b) d) None of the above

|Page
VIVEK GABA
a) Under exemption method income is taxed in one of the two countries
b) Under tax credit method income is taxable in both the countries but tax paid in one
country shall be allowed as credit from tax payable in other country.
c) Bilateral relief given where agreement exists with other countries
d) All the above
4. If a foreign company received dividend from Indian company and as per DTAA dividend is
taxable @ 15% and under Income tax Act, 1961 it is exempt u/s 10(34). What would be tax
treatment in the hands of company?
a) Taxable @ 15% b) Exempt u/s 10(34) of Income tax Act, 1961
b) Taxable @ 7.5% d) None of the above

a) Income tax rate shall not be increased by surcharge and education cess
b) DTAA rate shall not be increased by surcharge and education cess
c) In case of conflict between income tax and DTAA, DTAA will always prevail
6. Kalpesh Kumar, a resident individual, is musician deriving income of `75,000 from concerts
performed outside India. Tax of ` 10,000 was deducted at source in the country where
concerts were performed. India does not have any double tax avoidance agreement with that
country. His income in India amounted to ` 2,25,000. Compute tax liability of Kalpesh Kumar
for AY 2015-16 assuming he deposited `10,000 in Public Provident Fund & paid medical
insurance premium in respect of his father, aged 65 years, `20,000. Calculate tax payable in
India.
a) ` 3,270 b) nil c) `5,150 d) ` 10,000
7. Any term defined later than it shall be effective from which date:
a) from date of agreement b) from the date when it is defined
c) from the relevant previous d) any date
8. When rate as per Income tax for a transaction is 15% whereas as per DTAA is 20%. Which
rate of tax shall be applicable
a) 20% b) 15% c) 17.5% d) Nil
9. Which of the following type of relief is provided by the government

a) Bilateral relief b) Unilateral relief
10. Which of the following method are part of Bilateral relief:

a) Tax credit method b) Tax exemption method
c) Both a) and b d) None of the above
11. Under Section 90, the Central Government may enter into agreement with the Government of
other country for which of the following reasons:
a) For granting relief b) For avoidance of double taxation
c) For exchange of information d) All the above.

|Page
VIVEK GABA
12. If transaction falls under Income tax Act and DTAA then what would be the treatment of such
transaction
a) Apply whichever is more beneficial to the assessee
b) Income tax Act
c) DTAA
d) Any of them as per discretion of Assessing Officer
13. If any term used earlier but defined later then it shall be deemed that it was effective from:
a) the date when agreement was entered
b) date when the term was defined
c) the date whichever more beneficial to assessee
14. An assessee, not being resident to whom DTAA applies shall not be entitled to claim any relief
under such agreement unless a being certificate of …………………
a) Resident b) Citizenship c) Origin d) All the above
15. If income is earned in a country with which no agreement exists, relief is provided under:
a) Section 90 b) Section 90A c) Section 91 d) All the above
16. Most of the Indian treaties are based on which model?

a) OECD model b) U.N. model
c) mixture of two models d) either a) or c)
17. Most of the Indian treaties are based on which model?

a) OECD model b) U.N. model
ANSWERS
1. a) 3. d) 5. b) 7. a) 9. c) 11. d) 13. a) 15. c) 17. a)

2. a) 4. b) 6. b) 8. b) 10. c) 12. a) 14. a) 16. a)

|Page
VIVEK GABA
TRANSFER PRICING 28
@
Sec 92: Charging section
 International transaction- income and expense on ALP and allocation of expense also on ALP.
 Specified Domestic transaction- expenditure having regard to ALP
 Provision shall not apply when in computation of Income, allowance of expenditure; allocation
of cost reduces income or increases loss.
@
Sec 92A Associated Enterprise
1) A B 8) A B
 26% of voting power, Supply of  90% of raw material
A and B are associated A and B are associated
2) A 9) A B
 26% >26% of voting power Goods sold by A to B, B influencing price
B C implying that price has been fixed by
B and C are associated buyer.
3) A B A and B are associated
Loan  51% of book value of total asset 10) A B
A and B are associated An individual controlling both enterprises,
4) A B or the other is being controlled by his
Guarantee  10% of total borrowing relative
5) A B 11) A B
 Appointment of ½ of BOD/governing body A is controlled by HUF &B is controlled
or 1 or more executive director of B by A by member of HUF or relative of member,
6) Appointment of ½ of BOD or 1 or more 12) A B
executive director by A in B and C A is controlled by Firm, AOP/BOI, B has
B and C are associated > 10% interest in firm, AOP/BOI
7) A B A & B are associated
Wholly dependent on another for use of
know-how, patent,
A & B are associated
@
Sec 92B International transaction
“International transaction” means a transaction between two or more associated enterprises, either
or both of whom are non-residents.
1) Sale, purchase and transfer of tangible 2) Sale, purchase and transfer of intangible
property property
3) Providing service 4) Capital financing

|Page
VIVEK GABA
5) Other transaction having impact on profit, 6) Business restructuring whether impacting
income, loss and assets profit, income, loss and assets or not
TRANSACTION BETWEEN UNRELATED PERSON:

Transaction between enterprise with a person other than an associated enterprise shall be deemed
to be an international transaction if
a) There is a prior agreement between other person and the associated enterprise; or
b) The terms of relevant transaction are determined between such unrelated person and
associated enterprise.
where the enterprise or associated enterprise or both of them are non-residents irrespective of
the fact whether such other person is a non- resident or not
A (India) Associated B (UK) Associated

Shares of B
enterprise Enterprise
B holds 40%
Transaction b/w A and C

C (Japan) Unrelated Party
In the example above, agreement between B and C determining terms of transaction between A
and C. Hence, it is an international transaction.
ANALYSIS OF AMENDMENT BY FA 2014
A (India) Associated B (UK) Associated

Shares of B
enterprise B holds 40% Enterprise
Transaction b/w A and D D (India) Unrelated Party
In the example above, agreement between B and D determining terms of transaction between A
and C. Hence, it is an international transaction.
Sec 92BA Specific domestic transaction (FA 2012)
Following transactions, if the aggregate of transaction exceed a sum of 5 crore 20 Crore.
 Sec 40A(2) – expense for which payment has been made or is to be made to specified
persons, AO disallow excessive value having regard to FMV
Transfer of goods & services

 Other Business
Eligible Business*
Transfer not as per market value of goods & services

* Eligible business = business referred in sec 80IA, 80IB, 80IAB, 80IC, 80ID, 80IE & 10AA.

|Page
VIVEK GABA
Transaction
 Assessee’s Other business of
Eligible business* Transaction produces more than ordinary other assessee
profits to assesse
* Eligible business = business referred in sec 80IA, 80IB, 80IAB, 80IC, 80ID, 80IE & 10AA.
@
SEC 92C COMPUTATION OF ALP
 Comparable uncontrolled price (CUP) method

Step 1: determine price for comparable uncontrolled transaction
Step 2: Adjust the price for functional transaction
Step 3:Adjusted price= ALP
 Resale price maintenance

Step 1: Determine the price at which property purchased has been sold
Step 2: The price shall then be reduced by normal gross profit in comparable controlled
transaction or take GP for purchase and resale to unrelated person
Step 3: Reduce the amt. computed by Insurance, freight and custom duty
Step 4: Adjust the amt. for functional differences
Step 5:Adjusted price= ALP
 Cost Plus Method

Step 1: Determine direct & indirect cost of property transferred
Step 2: Determine the normal GP markup for t/f of goods to unrelated enterprise.
Step 3: Adjust the GP markup for functional differences
Step 4: Cost as per step 1 shall be increased by adjusted profit mark up
Step 5: Adjusted price= ALP
Most appropriate method

 If there is more than one ALP computed, then take arithmetical mean.
 Variation up to 3% of actual transaction price is allowed between actual price and ALP.
DETERMINATION OF ALP BY AO
AO determine ALP when:
 Price is not determined as per the provisions of section 92C.
 Data is not reliable.
 Documents are not maintained as per sec 92D.
 Assessee has not furnished documents required to be furnished under section 92D.
ALP taken as actual income, no deduction under section 10AA, income of other enterprise shall
not be recomputed.
Sec 92CA Reference to TPO(Amendment by FA, 2016)

1. Refer to TPO with prior approval of CIT
2. TPO- serve a notice to assessee to produce data on specified date

|Page
VIVEK GABA
3. TPO- also find ALP of those transaction- which is not referred to him but came to his notice
subsequently (applicable only for international transaction)
4. TPO can find ALP of transaction which is not reported in TP Report (International transaction)
Order determining ALP may be made at any time before 60 days prior to date on which the
period of limitation u/s 153/ 153B expires. (where assessment proceedings are stayed by any
court or where a reference for exchange of information has been made by the competent
authority under an agreement referred to in section 90 or 90A, the time available to the
Transfer Pricing Officer for making an order after excluding the time for which assessment
proceedings were stayed or the time taken for receipt of information, as the case may be,
is less than 60 days, then such remaining period shall be extended to 60 days.)
5. TPO can rectify mistake apparent from record u/s 154 and the amended order shall be
forwarded to AO to amend order of assessment.
6. Transfer Pricing Officer for determining Arm’s Length price may exercise:
 Power of summon under section 131
 Power to call information under section 133
 Power of survey under section 133A
Sec 92D Maintenance & keeping of information & documents entering into
international transaction
Every person entering into international transaction
 Keep and maintain information and document.
 However, this is not applicable in case aggregate value of international transaction does not
exceed ` 1 crore.
 The documents shall be kept for 8 years from the end of the relevant Assessment Year.
 If AO or CIT(A) may require assessee to furnish documents within 30 days from receipt of
notice. The period may further be extended by a period of 30 days (i.e. maximum period
allowed is 60 days).

|Page
VIVEK GABA
@
Sec 92CC Advance Pricing Agreement (APA)
a) Application for entering into APA
Assesse CBDT
e c) b)
Cannot be for more Only for International d) May define

than 5 years Transaction
e) f)
OR
APA is binding on ALP Method of computation of ALP

a) AO and he cannot file appeal (may be other than specified)
b) CIT and he cannot open case u/s 263
c) Assessee
g) overrule sec 92C & 92CA
AO has to follow Cannot refer case to TPO for 5
method defined in years, follow method specified in
APA (section 92C) APA (section 92CA)
 Return is filed by assessee but not as per APA, he shall file modified return within 3 months
from end of month when agreement has been entered.
 filed modified return but assessment u/s 143(3) is pending, time increase for 1 year
The Advance Pricing Agreement entered into for future transaction may also be applied for
international transactions undertaken during any period not exceeding four previous years preceding
the previous year in which agreement is entered. It shall apply in accordance with the condition,
procedure and manner, as may be prescribed.
@
Sec 92CD Effect of APA
a) Return to be filed as per APA, sec 139 has been overruled by Section 92CD.
b) If assessee is not satisfied with the order passed by AO u/s 92CD(3), he can file an appeal
to CIT(A)
c) APA not binding if there is change of law/ facts of agreement.
PRACTICE QUESTIONS
Question 1: The international transaction was carried out at `145. The following arm’s length prices
have been determined by the most appropriate method:
Price 1: `180 Price 2: `170
Price 3: `140 Price 4: `130

|Page
VIVEK GABA
Arithmetical Mean = `180 + `170 + `140 + `130 = ` 155
4
3% of actual transaction price = `4.35
Since difference between arithmetical mean of arm’s length prices and price at which actual
transaction was undertaken exceeds 3% of the price at which actual transaction was undertaken,
the arm’s length price shall be taken to be `155.
Note: However, if the above transaction is an import transaction made by the Indian assessee then
by applying arm’s length price, Indian Income shall decrease & therefore, chapter of transfer pricing
shall not apply.
Question 2: Unilever U.S.A. holds 30% shares in Hindustan Lever, an Indian company. Hindustan
Lever manufactures compact disc writers and sells them to Unilever and Tatas Ltd. During the year
Hindustan Lever supplied 10,000 CD writers to Unilever at a price of `2,000 per unit and 100 CD
writers to Tatas at a price of `3,000 per unit. The transactions of Hindustan Lever with Unilever
and TATAs are comparable subject to the following differences:
(i) While sale to Unilever is at FOB, sale to TATAs is at CIF. The freight and insurance paid
by Unilever for each unit is `550.
(ii) The sales to TATAs are backed by a free warranty for 6 months whereas sales to
Unilever are not backed by such warranty. The estimated cost of warranty execution may
be taken as `250.
(iii) Since Unilever places a larger order, Hindustan Lever has offered a quantity discount of
`20 per unit to Unilever.
Solution:
The arm’s length price in respect of CE writers sold to Unilever shall be determined in comparison
of the price at which goods are sold to TATAs, after adjusting for the above differences. Thus, the
arm’s length price for the transaction between Hindustan Lever and TATAs works out to:
Sales Price per unit of the CD writer sold to TATAs `3,000

Less: Differences to be adjusted for:
(i) on account of freight and insurance charges `550
(ii) on account of cost to warranty `250
(iii) on account of bulk order discount `20 `820
Arm’s Length Price for CD writers sold to Unilever `2,180
Price charged from Unilever 10,000 units X 2,000 `2,00,00,000
Arm’s Length Price for 10,000 units 10,000 units X 2,180 `2,18,00,000
Therefore, the income of Hindustan Lever shall be increased by `18,00,000
OBJECTIVE QUESTIONS
1. Transfer pricing Law apply on:

a) International transaction b) Certain Specified domestic transaction

|Page
VIVEK GABA
2. Which of the following statement is True:
a) Any Income arising from international transaction shall be computed having regard to ALP
b) Any Income &expenses arising from international transaction shall be computed having
regard to ALP
c) Any Income, expenses & Interest arising from international transaction shall be computed
having regard to ALP
3. Transfer pricing Law shall not apply where after application of ALP:
a) Income reduces or loss increases b) Income increases or loss increases
c) Income increases or loss decreases d) Income reduces or loss decreases
4. For International Transaction which of the followings conditions satisfied:

a) It must be a transaction between two or more associated enterprises
b) At least one of the both party must be NR.
c) Both a) and b)
5. If both the associated enterprises are NR, then chapter of Transfer pricing shall apply only if:
a) Income of one of NR is assessable under Indian income tax Act
b) Income of one of NR is assessable under Foreign Income tax Act
c) Income of one of NR is assessable under Income tax Act of both countries
6. Transaction between unrelated persons deemed as International Transaction if following

conditions are satisfied:
a) There exists a prior agreement b/w such other persons and the AE or the terms of the
transactions are determined b/w such unrelated persons and the AE.
b) There exists a prior agreement b/w such other persons and the AE and the terms of the
transactions are determined b/w such unrelated persons and the AE.
c) Either a) or b)
7. Specified domestic transaction defined under;

a) Section 92A b) Section 92B c) Section 92BA d) Section 92CA
8. In following transaction are specified domestic transaction:

a) 40A(2)(b) b) 80A(6) c) 80IA(8) d) All the above.
9. The provision of transfer pricing is applicable on SDT only when if transaction value:
a) 5 crores or more b) More than 20 crores
c) Less than 5 crores d) None of above
10. Arm’s length price is also known as:

a) Market price b) Cost price
c) Selling price d) Either a) or b)
11. For computation of arm’s length price ……………. methods prescribed by the government.
a) Six b) Five c) Two d) Seven

|Page
VIVEK GABA
12. Out of the six methods …………………….. shall be adopted for computation of ALP:
a) Any method b) Most appropriate method
c) Resale price method d) None of the above
13. If more than one price is determined by the most appropriated method then ALP shall be
taken on the basis of:
a) FIFO b) LIFO
c) Arithmetical mean d) Any of the above
14. In between ALP and transaction value:

a) 3% variation allowed b) 7% variation allowed
c) No variation allowed d) Depends on transaction
15. Method of computation of Arm’s length pricing is defined under:

a) Section 92 b) Section 92C c) Section 92BA d) Section 92B
16. Three percent variation is allowed for:

a) Only international transaction b) Only SDT
17. Before determination of ALP by Assessing Officer, opportunity of being heard is

a) Mandatory b) Voluntarily c) Not required d) None of the above
18. Assessing Officer with the ………… may refer the calculation of ALP to TPO:
a) prior approval of CIT b) approval of CIT
c) prior approval of C.G d) prior approval of S.G
19. TPO can also find ALP on those ………………. which were not referred to him and came to his
notice subsequently.
a) International transaction b) Specified domestic transaction
20. The order of determining the arm’s length price by TPO may be made at any time ………………….
prior to the date which expire under section 153 or 153B.
a) before 60 days b) after 60 days
c) 60 days d) None of the above
21. TPO has power .............. for determining ALP:

a) To summon under section 131 b) To call information under section 133
c) To survey under section 133A d) All the above.
22. Reference to Transfer pricing officer is given under

a) Section 92CA b) Section 92C c) Section 92A d) Section 92B
23. For maintaining information and document of international transaction, aggregate value of
international transaction should be:
a) More than 1 crores b) 1 crore or more
c) Less than 1 crore d) None the above.
24. Information and document are required to be kept for …………… from the end of relevant ………….
a) 8 years, assessment year b) 8 years, previous year
c) 8 years, calendar year d) None the above

|Page
VIVEK GABA
25. The Assessing Officer or..…….. may require any assessee to furnish document and information
within a period of …………… from the date of receipt of notice in this regard:
a) CIT(A), 30 days b) CIT, 20 days c) C.G, 30 days d) S.G, 30 days
26. Documents when required to be submitted by Assessee within 30 days from date of receipt of
notice when requirement by Assessing Officer can be extended by further period of ……
a) Max 30 days b) Min 30 days
c) Max 1 month d) None of the above
27. Report of transfer pricing shall be furnished:

a) on or before 30th November of PY b) on or before 30th November of AY
c) on or after 30th November of AY d) on or after 30th November of PY
28. Maintenance, keeping of information and document is defined under

a) Section 92D b) Section 92F c) Section 92E d) Section 92BA
29. Section 92CC and 92CD have been inserted by:

a) Finance Act, 2011 b) Finance Act, 2013 c) Finance Act, 2012 d) Finance Act, 2010
30. Advance pricing agreement provisions are applicable on;
31. In Advance pricing agreement CBDT may determine:

a) ALP or specify manner b) Only ALP
c) Only specify Manner d) None of the above
32. APA can be valid for maximum:

a) 5 consecutive assessment year b) 5 consecutive previous year
c) 5 consecutive calendar year d) None of the above
33. If assessee has already filed a return u/s 139, then also he shall file modified return within
a) 3 months b) 30 days c) 2 months d) 120 days
34. In APA time limit of assessment/ reassessment shall be increased by:

a) 1 year b) 2 year c) 120 days d) 90 days
35. If income had increase after applying transfer pricing provision, penalty shall be levied under
section ………… at the rate of……….
a) 271(c), max 100% of the amount sought to be evaded
b) 271BA, min 100% of the amount sought to be evaded
c) 271(1)(c), min 100% of the amount sought to be evaded
d) None the above
36. Penalty for failure to furnish information or document as required under section 92D(3) shall be
levied under section …………. at the rate of………..
a) 271(1)(c), 2% of value of each IT, SDT b) 271AA, 2% of value of each IT, SDT
c) 271AA, 2% of value of each IT only d) 271G, 2% of value of each IT, SDT
37. When two or more associated enterprise enter into an agreement for allocation of …………..,
allocated expense shall be determined having regard to ………………………
a) Cost or expense, transaction price b) Income, arm’s length price

|Page
VIVEK GABA
b) Cost or expense, arm’s length price d) Income, transaction price
38. When shall the provision of section 92 is not applicable?

a) Decrease in loss or income b) Increase in loss or income
c) Increase in loss or decrease in income d) decrease in loss or increase in income
39. A Ltd. sold goods to its associated enterprise B Ltd., Germany. After making adjustment of
transfer pricing, income of A Ltd. changed to 20,00,000 from 22,00,000. The income of A Ltd.
shall be:
40. If A Ltd., India holds 26% voting power of B Inc., UK (income taxable in India) and 27%
equity share of C Ltd., India. Which of the following is associated enterprise
a) A Ltd and B Inc. b) A Ltd. and C Ltd.
c) B Inc. and C d) All of the above
41. Charging section of transfer pricing is

a) Section 92 b) Section 92B c) Section 92C d) Section 92CA
42. International transaction is defined under:

a) Section 92A b) Section 92B c) Section 92C d) Section 92D
43. If both or all the enterprises executing the transaction are residents, this transaction is an
International transaction:
44. In International transaction covers the followings transactions:

a) Purchase, sale, transfer, or lease of tangible property
b) Provision of service
c) Purchase, sale, transfer, or lease of Intangible property
d) All of the above.
45. Associated enterprises defined under:

a) Section 92 b) Section 92A c) Section 92B d) None of above.
46. To be associated enterprises, one enterprises holds ……… voting power in the other enterprises:
a) 26% b) 26% or more c) More than 26% d) 25% or more
47. In the following transactions which one is not an associated enterprises:

a) one enterprise guarantees less than 10% of the total borrowings of the other enterprise
b) a loan advanced by one enterprise to the other enterprise constitutes not less than 51% of
the book value of the total assets of the other enterprise
c) more than ½ of board of directors or members of governing board, or one or more
executive directors or executive members of the governing board of one enterprise, are
appointed by other enterprise
d) one enterprise holds, directly or indirectly, shares carrying not less than twenty-six % of
the voting power in the other enterprise
48. Which of the following value will be used to check the threshold limit 5 crores:
a) Book value i.e. transaction value b) Fair market value i.e. ALP
c) Written down value d) None of the above

|Page
VIVEK GABA
49. The price of goods or services would ordinarily fetch in the open market is called:
a) Fair market value b) Book value
c) Written down value d) All the above
50. Arm’s length price has to decided strictly in accordance with:

a) Wealth tax Act, 1957 b) Transfer pricing rules
c) Sale & purchase price d) None of the above
51. Most appropriate method is decided on the basis of:

a) Nature of transaction b) Class of transaction
c) Class or associated person d) All the above
52. The variation of three percent shall be multiplication of:

a) Transaction price/value b) ALP c) Cost price d) Selling price
53. Method of computation of Arm’s length price is defined under:

a) Rule 10A b) Rule 10B c) Rule 10BA d) Rule 10C
54. After determination of income according to ALP, no deduction shall be allowed under ……. on
increased income
a) Section 10AA or under chapter VI-A b) Section 10 or under chapter VI-A
c) Section 80C or chapter VI-A d) Section 10AA or chapter VI-C
55. TPO can find ALP on those ………. which are not reported in transfer pricing report but came to
his notice subsequently
c) Both a) or b) d) None of the above
56. TPO can rectify any mistake apparent from the record in his order under ………… within ……………..
a) Section 154, within 4 year b) Section 155, within 4 year
c) Section 154 within 5 year d) Section 154, within 60days
57. Which of the following statement is true;

a) Assessing Officer is bound to follow the price determined by TPO
b) Assessing Officer is not bound to follow the price determined by TPO
c) Assessing Officer shall follow any one method even if ALP is computed by TPO
d) None of the above.
58. Power of board to make safe harbor rules is defined under;

a) Section 92CB b) Section 92C c) Section 92CA d) Section 92B
59. Provision that report from a CA shall be obtained is defined under:

a) Section 92E b) Section 92C c) Section 92A d) Section 92CA
60. Advance pricing agreement is an agreement between …………….. and ……………..

a) Assessee, CBDT b) Assessee, CIT(A)
c) Person, CBDT d) Assessee, CIT
61. Method specified by CBDT in Advance Pricing Agreement:

a) May not be different from six method b) May be different from six method
c) Always different from six method d) None of the above

|Page
VIVEK GABA
62. Which section are overruled by the provision of APA
a) Section 92C b) Section 92CA c) Section 139 d) All the above
63. APA shall be binding on:

a) Assessee b) CIT c) Assessing officer d) All the above
64. The advance pricing agreement shall be binding in following cases:

a) There is change in law b) Change in facts of agreement
65. Penalty u/s 271AA @ 2% on value of each international transaction or SDT shall be levied
because of:
a) Failure to keep and maintain document
b) Failure to report such transaction which he is required
c) Failure to maintain or furnish correct information or document
d) All the above
66. Penalty for failure to furnish report from Chartered Accountant under section ……….. shall be of
an amount ……….
a) 271B, 1 lakh b) 271(1)(c), 1 lakh c) 271AA, 1 lakh d) 271BA, 1 lakh
67. Under which of the following two enterprise are not associated enterprise:
a) Guarantee by A Ltd. of 10% of Total borrowing of B Ltd.
b) Executive director of B Ltd. appointed by A Ltd.
c) A Ltd. has 25% voting power in B Ltd.
d) Goods sold by A Ltd. to B Ltd. where the price is B Ltd. governs the price of goods
68. If A Ltd., India holds 26% voting power of B Inc., UK and 27% equity share of C Ltd., India.
Which of the following is associated enterprise
a) A Ltd and B Inc. b) A Ltd. and C Ltd.
c) B Inc. and C d) All of the above
69. Where by using most appropriate method, ALP being ` 1,100, ` 1,300 and ` 1,800 have been
determined. What would be the final ALP
a) ` 1,100 b) ` 1,300 c) ` 1,800 d) ` 1,400
Answers
1. c) 9. b) 17. a) 25. a) 33. a) 41. a) 49. a) 57. a) 65. d)

2. c) 10. a) 18. a) 26. a) 34. a) 42. b) 50. b) 58. a) 66. d)
3. a) 11. a) 19. a) 27. b) 35. c) 43. b) 51. d) 59. a) 67. c)
4. c) 12. b) 20. a) 28. a) 36. d) 44. d) 52. a) 60. a) 68. d)
5. a) 13. c) 21. d) 29. c) 37. b) 45. b) 53. b) 61. b) 69 d)
6. a) 14. a) 22. a) 30. a) 38. c) 46. b) 54. a) 62. d)
7. c) 15. b) 23. a) 31. a) 39. b) 47. a) 55. a) 63. d)
8. d) 16. c) 24. a) 32. b) 40. d) 48. a) 56. a) 64. c)

|Page
VIVEK GABA

Vivek Gaba Tax Scanner PDF

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Vivek Gaba Tax Scanner PDF

Hochgeladen von

Copyright:

Verfügbare Formate

TAX SCAN-NER

The law stated in this book is as amended

Practical Problems are solved as per the

Exclusively for CS-EXECUTIVE Students

Email: cavgtax@gmail.com, vivekgaba92@gmail.com

©Allrights reserved. No part of this book may be reproduced or distributed in any

All disputes are subject to Delhi jurisdiction only.

(My Visible God)

Every bit and piece of my work is dedicated to every sleepless

KEY FEATURES OF THE BOOK

Success is not the key to happiness. Happiness is

A tax (from the latin taxo) is mandatory financial charge / levy

ARTICLE 265: Taxes not to be imposed saved by Authority of Law

 Considering above constitutional provision, tax can be defined as “compulsory exaction

 Primary aim is to raise revenue to fund governance of nation.

3. LEVY OF TAX & POWER TO ENACT LAW PROVIDED BY CONSTITUTION:

Subject to the provision of this Constitution

ARTICLE 246: Subject-matter of laws made by Parliament and by legislature

(1) Notwithstanding anything in clauses (2) and (3),

(3) Subject to clause (1) and (2),

List III: Concurrent

India 97. Any other matter

applicability of law Whole of State (SG)

Particular Direct Taxes Indirect Taxes

Indirect Taxation is gaining popularity due to psychological reasons.

 Psychology with direct taxes: It is psychologically very difficult

 The Constitution lays down the basic structure of

 It establishes the main organs of government- the executive,

 The constitution not only defines the powers of each organ

 It regulates the relationship between the different organs and

GOVERNMENT THE PEOPLE

LEGISLATIVE Make Laws

EXECUTIVE Enforces Laws

JUDICIARY Interprets Laws

4. UNIQUENESS OF OUR CONSTITUTION

 It is the LONGEST WRITTEN CONSTITUTION OF ANY INDEPENDENT NATION in the

 Dr. B. R. Ambedkar was the Architect of Indian Constitution.

TWO Important Dates in Indian History:

Structure Of Government: 3 Organs

LEGISLATIVE ORGAN EXECUTIVEORGAN JUDICIARYORGAN

(Central Parliament President Court

(State Level) Legislative Assembly Governor Court

4. [A] STRUCTURE OF PARLIAMENT (LEGISLATIVE BODY)

Lok Sabha Rajya Sabha

Head (Prime Minister) Others

Minister of External Affairs

Minister of Finance Minister of Home Affairs

6. [C] STRUCTURE OF JUDICIARY (JUDICIAL BODY)

Discussed later in detail

Significant amendment made by the Constitution (101st

7. Article 366 (12A):

3. Petroleum & petroleum products would subject to GST.

5. Taxes on entertainments and amusements to extent levied and collected by a

GST Council Consists of the following:

Council to be guided by need for:

Council to make recommendations on:

Legislative Relations (Distribution of Legislative Powers

Question: Why does introduction of GST require a Constitutional Amendment?

ARTICLE 246-A: Special provision with respect to GOODS AND

With respect to GST, following articles have been overruled:

Article 279A(5) covers following 5 goods:

ARTICLE 248: Residuary powers of Legislature

ARTICLE 254: Inconsistency between laws made by parliament and