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(Includes Important Questions solving on Advance Tax, TDS and full tax liability calculation with
special rates of taxes for resident and non-resident assessee. Also includes guidance on how to
handle MCQ’s in exam.)
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Miss Charlie, an American national got married to Mr Radhey of India in USA and came to India for the first
time on 16.03 of preceding previous year. She remained in India up till 19.9 and left for USA on 20.9 She
returned to India again on 27.03 While in India, she had purchased a show room in Mumbai on 01.05., which
was leased out to a company on a rent of 20,000 p.m. from 1.05. She had taken loan from a bank for purchase
of this show room on which bank had charged interest of 97,500 up to 31.03.
She had received the following gifts from her relatives and friends during the year:
She owned a piece of land acquired 8 years before in Hyderabad which was sold during the year and profit on
sale of the land computed as per capital gains chapter is 30,000.
She has professional fees income of Rs. 5000 earned and received in Canada.
1. Determine her residential status and compute the total income chargeable to tax along with the amount
of tax payable.
2. Would your answer be different if she would have been staying in India during whole of previous year.
3. What if she stays in India for every year for 160 days since last 15 years.
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 2
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 3
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 4
Dr Niranjana, a resident individual, aged 60 years is running a clinic. Her Income and Expenditure Account
for the year is as under:
Expenditure Income
To Medicine consumed 35,38,400 By Consultation and Medical charges 58,85,850
To Staff salary 13,80,000 By Income-tax refund 5,450
(Principal 5,000 interest 450)
To Clinic consumables 1,10,000 By Dividend from units of UTI 10,500
To Rent paid 90,000 By Winning from game show in TV 35,000
(net of TDS 15,000)
To Administrative expenses 2,55,000 By Rent 27,000
To Amount paid to scientific 1,50,000
research association approved
under section 35
Net Profit 440,400
Total 59,63,800 Total 59,63,800
i. Rent paid includes 30,000 paid by cheque towards rent for her residential house in Surat.
ii. Clinic equipment’s are :
Opening WD.V 5,00,000
7.12 Acquired (cost) by cheque 2,00,000
iii. Rent received relates to property situated at Surat. Gross Annual Value 27,000. The municipal tax of
2,000. paid in December, has been included in “administrative expenses’
iv. She received salary of 7,500 p.m. from Full Cure Hospital” which has not been included in the
“consultation and medical charges”
v. Dr Niranjana availed a loan of 5,50,000 from a bank for higher education of her daughter She repaid
principal of 1,00,000, and interest thereon 55,000 during the year.
vi. She paid 1,00,000 as tuition fee (not in the nature of development fees/donation) to the university for
full time education of her daughter
vii. An amount of 28,000 has also been paid by cheque on 27 March, for her medical insurance premium.
viii. LTCG on listed shares Rs. 2,00,000 (computed as per provisions of income tax) is directly transferred
to capital account.
ix. For the security of clinic she has acquired a Rottweiler Dog for 120,000. The amount is capitalised in
books of accounts.
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 5
(i) From the above, compute the total income and tax liability of Dr. Niranjana.
(ii) Salary paid includes Amount of 900,000 paid as salary to Dr. Raja (Assistant doctor in clinic). Dr
Raja has informed about his other incomes and losses. Professional loss is 20000, house property
(net) loss is 30000 and Interest income is 12000. He has invested in LIC policy with annual premium
of 5,000. Tax deducted is 5,000 on his property income. You are required to compute the tax
deductible out of payments made to Dr. Raja.
Solution :-
(All questions are solved as per the assessment year of this book, however in some of the
questions there is reference to earlier year say for PY 2006-07, this is only for illustrative
purposes. Answers are solved as per provisions, limits, % of laws, deductions of the
assessment year only.)
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 6
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 7
Ms. Purvi aged 55 years, is a Chartered Accountant in practice. She maintains her accounts on cash basis. Her
Income and Expenditure account for the year reads as follows:
Expenditure Income
Fees earned:
Salary to staff 15,50,000 Audit 27,88,000
Stipend to articled assistants 1,37,000 Taxation services 12,70,000
Incentive to articled assistants 13,000 Consultancy 15,40,300
Office rent for 12 months paid to 12,24,000 Dividend on shares of Indian 10,524
ABC limited companies (Gross)
Printing and stationery 12,22,000 Income from UTI 7,600
Meeting, seminar and Conference 31,600 Rent received from residential flat 85,600
let out
Purchase of car 80,000 Honorarium received from various 15,800
institutions for valuation of answer
papers and other incomes.
Repair, maintenance and petrol of 4,000
car
Travelling expenses 5,25,000
Municipal tax paid in respect of 3,000
house property
Net Profit 9,28,224
Total 57,17,824 Total 57,17,824
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 8
Other Information:
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 10
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 11
Mr Y carries on his own business. His turnover in the business is 60 lakhs during the preceding financial year.
An analysis of his trading and profit & loss for the year revealed the following information:
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 13
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 14
Mr Rajiv, aged 50 years, a resident individual and practicing Chartered Accountant, furnishes you the receipts
and payments account.
Receipts Payments
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 16
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 17
Due date of filing return for Mr.B is July however he has filed his return of income on 5th August.
He has paid one instalment of advance tax on 12th of September Rs. 20,500.
Compute his total income, tax liability, late fees and interest if any.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 18
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 19
From the following details, compute the total income of Siddhant of Delhi age 52 and he visits Singapore every
year for 60 days to meet his family friends.
Siddhant purchased a flat in a co-operative housing society in Delhi for 4,75,000 in April. 2011, which was
financed by a loan from Life Insurance Corporation of India of 1,60,000 ( 15% interest, his own savings of
65,000 and a deposit from a nationalized bank for 2,50,000 to whom this flat was given on lease for ten years.
The rent payable by the bank was 3,500 per month.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 21
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 22
Ramdin working as Manager (Sales) with Frozen Foods Ltd., provides the following information for the year:
Basic Salary 15,000 p.m.
DA (50% of it is meant for retirement benefits) 12,000 p.m.
Commission as a percentage of turnover of the Company 0.5 %
Turnover of the Company 50 lacs
Bonus 50,000
Gratuity 30,000
Own Contribution to R.P.F - 30,000
Employer’s contribution to R.P.F - 20% of basic salary
Interest credited in the R.P.F account @ 15% p.a. - 15,000
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 23
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 24
a) Mr. X retired on 31.12. at the age of 58, after putting in 25 years and 9 months of service, from a private
company at Mumbai.
b) He was paid a salary of 25,000 p.m. and house rent allowance of 6,000 p.m. He paid rent of 6,500 p.m.
during his tenure of service.
c) On retirement, he was paid a gratuity of 3,50,000. He was not covered by the payment of Gratuity Act.
His average salary in this regard may be taken as 24,500. Mr. X had not received any other gratuity at
any point of time earlier, other than this gratuity.
d) He had accumulated leave of 15 days per annum during the period of his service; this was encashed by
Mr X at the time of his retirement. A sum of 3,15,000 was received by him in this regard. His average
salary may be taken as 24,500. Employer allowed 30 days leave per annum.
e) After retirement, he ventured into textile business and incurred a loss of 80,000.
f) Mr X has invested 62,500 in public provident fund and 37,500 in National Savings Certificates.
g) Income from winning from horse races 45,000.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 25
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 26
Rosy and Mary are sisters, born and brought up at Mumbai. Rosy got married in 1982 and settled at Canada
since 1982. Mary got married and settled in Mumbai Both of them are below 60 years. The following are the
details of their income for the previous year.
Rosy Mary
Age attained in PY 65 years 68 years
Pension received from State Government - 10,000
(net computed as per provision of salary chapter)
Pension received from Canadian Government 20,000 -
Long-term capital gain on sale of land at Mumbai 1,00,000 50,000
Short-term capital gain on sale of shares of Indian listed companies in 20,000 300,000
respect of which STT was paid
Life Insurance Corporation 10,000
Premium paid to Canadian life insurance at Canada 40,000 -
Mediclaim policy premium paid - 25,000
Investment in PPF - 20,000
Rent received in respect of house property at Mumbai 60,000 30,000
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 27
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 28
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 29
Mr Rajesh is serving in a public limited company as General Manager (Finance). His total emoluments for the
year are as follows:
Basic Salary - 5,40,000
HRA (Computed) - 1,80,000
Transport allowance - 22,000
Apart from the above, his employer has sold the following assets to him on 1 January,:
(i) Laptop computer for 20,000 (Acquired in September, of last year for 1,20,000)
(ii) Car 1800 cc for 3,20,000 (purchased in 2 years back for 8,50,000)
He also owns a residential house, let out for a monthly rent of 15,000. The fair rental value of the property for
the let out period is 1,50,000. The house was self occupied by him from 1st January to 31 March. He has taken
a loan from bank of 20 lacs for the construction of the property, and has repaid 1,05,000 including interest
40,000).
During the year Mr Rajesh sold shares of different Indian companies on 14 April,:
Sale proceeds were subject to brokerage of 0.1% and securities transaction tax of 0.125% on the gross
consideration. He received income tax refund of 5,750 (including interest 750) relating to the assessment year
2016-17.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 31
Mr. Ashok owns a property consisting of two blocks of identical size. The first block is used for business
purposes. The other block has been let out from 1.4. to his cousin for 10,000 p.m. The cost of construction of
each block is 5 lacs (fully met from bank loan), rate of interest on bank loon is 10% p.a. The construction was
completed on 01.04. During the year, he had to pay penal interest of 2,000 in respect of each block on account
of delayed payments to the bank for the borrowings. The normal interest paid by him in respect of each block
was 42,000. Principal repayment for each block was 23,000 made at the end of the year An identical block in
the same neighbourhood fetches a rent of 15,000 per month. Municipal tax paid in respect of each black was
12,000.
The income computed in respect of business prior to adjustment towards depreciation on any asset is 2,20,000.
Depreciation on equipment’s used for business is 30,000.
On 23.3, he sold shares of B Ltd., a listed share in BSE for 2,30,000. The share had been purchased 10 months
back for 1,80,000. Securities transaction tax at sale paid may be taken as Rs. 220.
Brought forward business loss of a business is 80,000. This loss has been determined in pursuance of a return
of income filed in time and the current year is the seventh year
You are required to compute the total income. The various heads of income should be properly shown, Ignore
the interest on bank loan for the period prior to 1.4., as the bank had waived the same.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 32
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 33
Mr Venus Aged 65 years resident in India provides the following details for the previous year
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 34
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 35
Mr. Madan aged 69 years resident in India has furnished the following details for the calculating tax liability.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 36
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 37
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 38
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 39
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 40
X Ltd. has two units — one engaged in manufacture of computer hardware and the other involved in developing
software. As a restructuring drive, the company has decided to sell its software unit as a going concern byway
of slump sale for Rs. 385 lakh to a new company called S Ltd., in which it holds 74 per cent equity shares.
The balance sheet of X Ltd. as on March 31, being the date on which software unit has been transferred, is given
hereunder -
1. The Software unit is in existence since May 2011. Fixed assets of software unit include land which was
purchased at Rs. 40 lakh in the year 2008 and revalued atRs. 60 lakh as on March 31, 2015.
2. Fixed assets of software unit mirrored at Rs. 140 lakh (Rs. 200 lakh minus land value Rs. 60 lakh) is
written down value of depreciable assets as per books of account. However, the written down value of
these assets under section 43(6) is Rs. 90 lakh.
Ascertain the tax liability, which would arise from slump sale to S Ltd. What would be your advice as a tax
consultant to make the restructuring plan of the company more tax-savvy, without changing the amount of sale
consideration?
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 41
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 42
R received a house in may, 2010 by way of Gift from Mr. G who had purchased the same in April, 1979 for Rs.
12,00,000. The cost of improvements incurred by G were Rs. 2,55,000 in March, 2000 and Rs. 3,40,000 in
November, 2008. The fair market value of the house as on 1-4-2001 was Rs. 9,14,000. Before this house was
gifted to R, G had received an advance of Rs. 3,00,000 in March, 2006 towards sale of this house from S but
the sale did not materialize and the advance was forfeited by G. the house was sold and registered by R on 12th
March PY for Rs. 38,00,000 when the stamp duty value is 48,00,000. However advance money of 125,000 for
the house was taken in cash on 1st December PY when the stamp duty value was 44,00,000. Assessee claimed
before the officer that stamp duty value was excessive and unreasonable and matter was referred to valuation
officer by officer, who value the house at 49,00,000. Ascertain the capital gains chargeable to tax.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 43
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 44
During the previous year ending on March 31, X sells the following :
On July 31, (being the due date of furnishing return of income), X deposits Rs. 1,00,000 under section 54B for
claiming exemption in future by purchasing agriculture land 3 situated in jurisdiction of municipality having
population of 5000 persons by withdrawing from the deposit account, Rs. 70,000 till January 9 of assessment
year. Agricultural land 3 is sold for 75,000 in just 2 months after its acquisition.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 45
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 46
X Ltd. located within the corporation limits decided in December-PY to shift its industrial undertaking to non-
urban area. The company sold some of the assets and acquired new assets in the process of shifting. The relevant
details are as follows:
(Rs. In lakhs)
Particulars Land Bldg. P/M Fur.
(i) Sale proceeds (Sale effected in March,-PY) 8 18 16 3
(ii) Indexed cost acquisition 4 10 12 2
(iii) Cost of acquisition in terms of section 50 1 4 5 2
(iv) Cost of new assets purchased in specified time
limit for the purpose of business in the new 4 7 17 2
place
During the process of shifting X Ltd has incurred transportation, uninstallation and re-installation expense on
shifting of some of its old plant and machinery to new location, amount 50,000 Rs.
Compute the capital gains of R Ltd.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 47
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 48
Mrs. X, resident woman, transfers a house property (received without consideration from her husband in 1991)
on January 16,. On the said transaction she earns a long-term capital gain of Rs. 1,01,50,000. She invests a sum
of Rs. 50,00,000 in capital gains bonds specified in section 54EC on January 5 out of the advance monies
received on account of transfer,. She further invests a sum of Rs. 50,00,000 in the same bonds after 3 months of
the first investment in bonds. She has raised Funds of 40,00,000 on the security of above bonds of Value
50,00,000 in the month of March of next year. Her other income for year is Rs. 46,000. Discuss the tax
consequence of the above transactions.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 49
S constructed his house on a plot of land acquired by him in Kolkata. The house has two floors of equal size.
He started construction of the house on 1st April of Last year and completed construction on 30th June of
Previous Year. He occupied the ground floor on 1st July and let out the first floor at a rent of 20,000 per month
on the same date. However, the tenant vacated the first floor on 31st January and S occupied the entire house
from 1st February.
Other information
Fair rent of each floor - 1,20,000 per annum
Municipal value of each floor - 80,000 per annum
Municipal tax paid - 10,000
Repair expenses - 5,000
S obtained a housing loan of 15 lacs at interest of 10% per annum on 1st July of Last Year.
He did not repay any part of the loan till the end of the previous year.
Standard rent of each floor is 25,000 per month
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 50
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 51
X and Y are co-owners of two houses with equal share of both the houses. While the first house is used by them
for their residence, the second house is let to a tenant at a monthly rent of 2,500. The other relevant particulars
of the houses are as follows:
House 1 House 2
Construction completed on 30.06.2005 31.03.2007
Municipal Tax @ 10% 2,000 2,500
Insurance Premium 2,500 2,500
Interest on loan 10,000 9,000
Compute income from house property of X and Y for the relevant assessment year.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 52
Mr A, a dealer in shares, received the following without consideration during year from his friend Mr B, -
Mr. A purchased from his friend Mr. C who is also a dealer in shares, 1000 shares of X Ltd. 400 each on 1 9
June PY, the fair market value of which was 600 each on that date. Mr. A sold these shares in the course of his
business on 23 June PY.
Further on 1 November PY, Mr. A took possession of property (building) booked by him two years back at 20
lakh. The stamp duty value of the property was 32 lakh and on the date of booking was 23 lakh. He had paid 1
lakh by account payee cheque as down payment on the date of booking.
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 53
X is a foreign citizen (not being a person of Indian origin). During the financial year 2010-11, he comes to India
for 85 days. Determine his residential status for the assessment year 2011-12 on the assumption during financial
years 1996-97 to 2010-11, he was present in India as follows:
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 54
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 55
D is the karta of a Hindu undivided family, and the control and management of the family is wholly situated in
India. On 30 April, 2016 D went to Bangladesh for business purposes and did not return till 31st March, 2017.
D did not go out of India any time before. What would be the residential status of the Hindu undivided family
and Mr. D for the assessment year 2017-2018 ?
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 56
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 57
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 58
Mr Kalpesh Sanghavi furnishes return of his total income on 1 August of assessment year (due date under Sec.
139(1) is 31 July). He is assessed on 15 December of assessment year. He furnishes the following particulars of
his income-tax liability.
Particulars Rs
(i) Income tax as per return
37,260
(includes income tax Rs. 1050 on casual income which was earned on 10-December of PY)
(ii) Income tax as per assessment 48,450
(iii) Tax deduced at source (actual)
2,450
(includes TDS of Rs. 1,000 on casual income which was earned on 10-December of PY)
(iv) Instalment’s of advance tax:
15.9.PY 13,000
15.12.PY 4,000
15.3.PY 8,000
31.3.PY 5,000
(v) Payment of self-assessment tax on 01.08.AY 10,000
Solution :-
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 59
C.A. Kalpesh Sanghavi CA IPCC – Income Tax - Revision Classes | R . 60