Ans.

1) (a) Income Exempted From Tax u/s 10: (Ch 1) Under Sec10 of income tax act the following incomes are exempt from tax: 1. Agricultural income [Sec 10(1)]: Income from agricultural land situated within India is exempted from tax. By virtue of [sec 2(1A)] the expression agriculture income means: 1. Any rent or revenue derived from land, which is situated in India and is used for agriculture purpose, 2. Rent or revenue should be derived from land (may be in cash or kind). The land should be in India.

3.

The land should be for agriculture purpose. Any income derived from such land by agricultural operations including processing of the agriculture produce, raised or received as rent-in- kind so as to render it fit for the market or sale of such produce. Income attributable to a farmhouse subject to certain conditions, The building should be occupied by a cultivator (as a landlord or tenant). He should be in immediate vicinity of agriculture land.

The building is used as a dwelling house or as a store house or other out building.

2.

The land is assessed to land revenue or local rates or alternatively the land is situated outside urban areas i.e. any area which is comprised within the municipality jurisdiction having a population of not less than 10,000 persons or within 8 kms from the limits of any such municipality. If the above conditions are satisfied then, income from a farm building is exempt from tax. Special provisions in respect for newly established undertaking [Sec 10(A)] Eligibility: Any undertaking which satisfy the following conditions is eligible to get deduction: 1. It must begin manufacture or production in free trade zone. 2. It should not be formed by splitting/ reconstruction of business. 3. It should not be formed by transfer of old machinery. (Second hand imported and 20%). 4. Sale consideration should be remitted to India in convertible foreign exchange. 5. Books of account should be audited. 6. Return of income should be submitted on Time. Amount of deduction: The deduction under sec. 10A is as under Export turnover Profit of the business Total turnover of the business of the undertaking carried on by the undertaking Export turnover: It means the consideration in respect of export by the undertaking of articles or things or computer software received in or bought in India by the assessee in convertible foreign exchange within the prescribed period. Period of deduction: The assessee can claim deduction for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce. The aforesaid deduction is not available to any undertaking from the assessment year 2010-11. Special provisions: In case of an undertaking, which begins to manufacture or produce things or computer software between 1April 2002 to March 31 2005 in any special economic zone, is available as follows for 10 assessment years: First 5 years 100% of profit derived from the export of such articles or things or computer software (First 5 consecutive years). Next 2 years 50% of such profits and gains in deductible. Next 3 years a further deduction is available to the extent of 50% of the profit provided an equivalent amount is created as Special Economic Zone re-investment Allowance Reserve.

3.

Charitable and religious trusts and institutions: Income of a charitable trust is exempt according to the provisions of section 11, 12 and 13. The trust should be one established in accordance with law and its objects should fall within the definition of the term charitable purpose. Here the charitable purpose includes relief to the poor, education, medical relief and the advancement of any other object of general utility. Income of the trust: Income means the real income, which has been received by the assessee. The amount deducted as tax at source cannot be considered as income for this purpose. Depreciation should be allowed while computing income for this purpose. Voluntary contribution or donations are deemed to be a part of income derived from property held under trust.

If a voluntary contribution is made with a specific direction than it shall form a part of the corpus of the trust and not deemed as the income of the trust. Accumulation of income: The trust or institution may accumulate or set apart either the whole or part of its income for future application for such purposes. Such income so accumulated will not form the income of the trust. Forfeiture of exemption: If the benefits of any amenities or services are derived by any specified persons as per section 13 then the exemption given to trust stand forfeited. The following incomes do not qualify for exemption: 1. 2. 3. 4. 4. Income for private religious purposes only. Income for the benefit of particular religious community. Income for the benefit of interested persons. Funds not invested in specified securities/deposits.

Share income of HUF [Sec 10(2)]: Any sum received by an individual as a member of a Hindu Undivided Family either out of income of the family or out of income of estate belonging to family is exempt from tax. Share of profit from partnership firm [Sec10 (2A)]: Share of profit received by partners from a firm in which they are partners is not taxable in the hands of partners. Gratuity [Sec 10(10)]: Gratuity received by an employee from employer is exempted from tax subject to the following conditions a) b) For Govt. employee/ semi govt. employee amount of gratuity received is fully exempt. For employees covered under Payment of Gratuity Act 1972, a. 15 days average wages for every one completed year of service or part thereof in excess of 6 months or b. actual amount received or c. Rs.3, 50,000. For other employees who have more than 5 years service, a. months salary for every completed year of service b. actual amount received

5. 6.

c)

c. 7. 8. 9. 10. 11. 12. 13. 14.

Rs.3, 50,000.

Pension and leave salary [Sec 10(10A)] Leave encashment HRA Commuted pension Income of a mutual fund Dividend Income from a domestic company Income of religious institutions pension and leave salary earned by the employee is exempted from tax. Retrenchment compensation [Sec 10(10B)]: Compensation received by workmen at the time of retrenchment is exempt from tax to the extent of the lower of the following: a) b) c) an amount calculated in accordance with the provisions of [Sec. 25 F (b)] of the Industrial Disputes Act 1947. maximum notified by the govt. (Rs.5, 00, 000). actual amount received. 12 year national savings annuity certificate Post office cash certificate (5 years) National Plan certificate (10 years) National Plan savings certificate Post office national savings certificate Post office savings bank accounts

15.

Interest on the following is exempt from tax: a) b) c) d) e) f)

16. 17. 18.

Education scholarship [Sec 10(16)]: Scholarship granted to meet the cost of education is exempt from tax. Awards [Sec 10(17A)]: Any award instituted by central or state govt. or by anybody and approved by the govt., whether paid in cash or in kind are exempt from tax. Pension to gallantry award winners [Sec10 (18)]: Pension and family pension to the members of defense forces who have been awarded the Param Vir Chakra, Maha Vir Chakra and Vir Chakra is exempt. Family pension: Family pension received by family members of armed forces, when the member of armed force dies during service. Formers rulers of Indian states [Sec 10(19A)]: Annual value of any one palace in the occupation of a former ruler is exempt from tax. Income of pension fund [Sec 23(AAB)]: Any income of a fund set up by the LIC of India under a pension scheme to which contribution is made by any person for receiving pension from such fund, and which is approved by the controller of insurance is exempted from tax. Income of a trade union [Sec 10(23D)]: Any income chargeable under the heads income from house property and income from other sources of a trade union is exempt from tax.

19. 20. 21.

22.

23.

Income of minor [Sec 10(32)]: If income of a minor child is included in the income of a parent u/s 64(1A) such individual is entitled to exemption of Rs.1500 in respect of each minor child or such income whichever is less.

b) Gross Total Income: (Ch 3) As per Section 14 of the I-T Act, income of a person is computed under five headssalaries, income from house property, profits and gains of business or profession, capital gains and income from other sources. The aggregate income under these heads is termed as gross total income. In other words, gross total income means total income computed in accordance with the provisions of the Act before making any deduction under Sections 80CCC to 80U.
Income from salary Income from house property Income from business or profession Income from capital gains Income from other sources Gross total income xxxx xxxx xxxx xxxx xxxx xxxx

Salaries Income from salaries is computed in accordance with the provisions of section 15 to 17 of the Act. 'Salary' means all remuneration paid or due under the contract of employment. It includes wages, annuity, pension, gratuity, fees, commission, perquisites, profits in lieu of or in addition to any salary or wages, any advance of salary, leave salary encashment or any other payment by the employer for services rendered. In order to be taxable under the head 'Salaries', it is necessary that there is a relationship of employer and employee between the payer and the receiver. It is for this reason remuneration received as a partner is not taxable as 'salary'.

Income from house property Income from house property is computed in the hands of the owner in accordance with the provisions of sections 22 to 27 of the Act. It is determined with reference to its 'annual value', i.e. the sum for which the property might reasonably be let from year to year. However, where any property is tenanted and the annual rent received or receivable by the owner is in excess of the sum for which the property might reasonably be expected to be let from year to year, the actual annual rent received or receivable is taken as the annual value of the property. From the annual value of a house property in the occupation of a tenant, taxes levied by any local authority in respect of the property to the extent such taxes are borne by the owner are deductible on actual payment basis to arrive at the 'net annual value'. Where the property consists of a house or a part of a house which is in the occupation of the owner for his own residence, its annual value is

taken as Nil. But if such a property is let out during any part of the previous year, its annual value is taken proportionately. Further, where the owner has only one residential house and the house cannot be actually occupied by reason of the 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, its annual value is taken to be nil provided the house is not actually let out and no other benefit is derived by the owner from it. Profits and gains of business or profession Income from business or profession is computed in accordance with the provisions of sections 28 to 44D of the Act. The expression 'business or profession' includes any trade commerce or manufacture or vocation. Apart from income from any of these activities the income chargeable under this head includes the following receipts as well:i. ii. iii. iv. v. vi. Compensation received for the termination or for modifications in terms and conditions of any managing agency agreement. Income of trade, professional and similar associations from specific services performed for its members. Value of any benefit or perquisite arising from any business or profession. Profit on sale of a replenishment license, cash assistance or refund of duty drawback granted to the exporters. Any interest, salary, bonus, commission or remuneration due to or received by a partner of a firm from such firm. Any sum received under a keyman insurance policy including bonus on such policy.

Capital Gains Sections 45 to 55A deal with the provisions relating to computation of income from capital gains. Gains arising from the transfer of a capital asset are either short-term or long-term depending upon the period for which the assets giving rise to capital gains were held by the tax payer. A gain is short term if the asset was held for a period upto 36 months. In the case of share of a company, listed security, unit of Unit Trust of India or of any other specified mutual fund, this period is 12 months. All other gains i.e. those arising from assets held for more than this period are called 'Long-term capital gains'. Income from other sources Sections 56 to 59 deal with the provisions for computation of income under the head 'income from other sources'. This is a residuary head covering all incomes which do not specifically fall .under any of the heads mentioned earlier. Some of the types of income which are assessable under this head are mentioned below:i. ii. Dividends or income from units of mutual fund. Interest including 'interest on securities' if it is not taxable under the head 'Profits and gains of business or profession'.

iii.

iv.

Income such as a. Ground rent or rent received or sub-letting a property. b. Winning from lotteries, cross-word puzzles, races including horse races, card games or from gambling or betting etc. c. Income from hiring of machinery, plant or furniture unless such a hiring is the business of the taxpayer. Family pension.

Ans. 2) (Ch 2) GROSS ANNUAL VALUE [ Sec. 23(1)] The Gross Annual Value (GAV) the current value, the actual rent (whether received or receivable) or the fair rental value, whichever is highest or which the property might be expected to attract on the open market in ideal circumstances where there is neither a glut nor a shortage of accommodation. Gross Annual Value is determined as follows Step 1 Step 2 Step 3 Step 4 Step 5 Find out reasonable expected rent of the property Find out Rent actually received or receivable after excluding unrealized rent but before deducting loss due to vacancy which shall be calculated as below Find out which one is higher amount computed in Step 1 & Step 2 Find out Loss because of Vacancy Step 3 minus Step 4 is Gross Annual Value

Step-1: Find out reasonable expected Rent of the Property: The reasonable expected Rent under will be computed on the basis of 3 factors, namely--a. Municipal Rental Value (MRV) : For collecting Municipal Taxes, Local Authorities i.e. Municipal Corporation / Committee etc. conducts a periodical survey of the house properties in their local limits. On the basis of such survey the Rental Value are fixed which serves as the basis for levying tax. The Rental Value so fixed is called Municipal Rental Value ( M.R.V.). b. Fair Rental Value ( FRV ) : Fair Rent of the Property can be determined on the basis of Rent fetched by a similar property in the same or similar locality. It is based on the principle that Rent prevailing in same locality for similar sized property is almost the same . Such Rental Value is called Fair Rental Value ( F.R.V.) c. Standard Rent of the Property (SR) : Standard Rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act. If other words, if a

property is covered under this Rent Control Act, its reasonable expected Rent cannot exceed the standard Rent fixed or determined under the Rent Control Act. The higher of (MRV) and (FRV), subject to maximum of (SR) is reasonable expected Rent. Step-2: Find out Rent actually received or receivable : Find out Rent actually received or receivable after excluding unrealized rent but before deducting loss due to vacancy which shall be calculated as below : Rent of the previous year ( or that part of the previous year) for which the property is available for letting out Less : Unrealized Rent of a few conditions are satisfied Rent received / receivable before deducting Loss due to Vacancy Xxxx xxxx Xxxx

The following points should be noted --1. Loss due to vacancy shall not be deducted. 2. Occupiers or tenants share of municipal tax realized from the tenant cannot be added to Actual Rent received or receivable. 3. If the tenant has undertaken to bear the cost of repairs, the amount spent by the tenant cannot be added to rent received or receivable. 4. A non-refundable security will be added in rent received or receivable on pro rata basis. 5. A refundable security cannot be included in rent received or receivable. 6. Advance rent cannot be rent received / receivable of the year of receipt. 7. Commission paid by the owner of a property to a broker for rental income is not deductible

Ans. 3) (Ch 1) (a) Capital Expenditure and Revenue Expenditure Capital Expenditure Revenue Expenditure 1. Expenses are shown in the debit side of 1. These assets are shown at the asset the P&L a/c. side of the balance sheet. 2. Expenditure is used for maintenance of 2. Expenditure for the purchase and
asset.

3.

4. 5. 6. 7. 8.

installation of asset. The benefits will flow or enjoyed by the organisation for more than one year.Ex: Plant and Machinery. Asset is purchased for utilisation in business. Depreciation is considered for the life of the asset. It is generally heavy in nature. It is associated with property right belonging to the entity. Capital expenditure is transferable, i.e., it can be disposed of and transferred from money or moneys worth.

3. The benefits for the expenditure will flow or enjoyed by the organisation for the current year only. Ex: Salaries, printing and stationary, etc.. 4. Goods are purchased with intention to sell. 5. There is no need of depreciation. 6. It is modest in volume. 7. In revenue expenditure there is no such right. 8. Revenue expenditure is not transferable.

B) Capital Receipts and Revenue Receipts (Ch 1) Capital Receipts

1. Receipts derived from activities which are not part of the normal trading activities of the business. 2. Appears as capital or liabilities in the Balance Sheet 3. Capital receipt is the amount received from the sale of assets, shares and debentures. 4. Capital receipt is of non-recurring nature 5. Main items of capital receipt are capital and loan, which affect financial position of the business. 6. Capital receipt is shown on the liabilities side of the balance sheet. 7. Examples: receipts of cash brought in by partners, shareholders, debenture holders and bank loans

Revenue Recepits 1. Receipts related to NORMAL 2. 3.

ACTIVITIES of the business Credited as revenue to Trading and Profit & Loss Account Revenue receipt is the amount received from the sale of goods and services. Revenue receipt is of recurring nature. Main items of revenue receipt are sale of merchandise, discount and commission, which affect operating results of the business. Revenue receipt is shown on the credit side of the trading and profit and loss accounts. Examples: receipts from sales of goods and services, rent, commission and interest on bank deposits received by the business.

4. 5.

6.

7.

Ans. 4) (a) Assessment Year: ( Ch 1) Income from a particular financial year is assessed for income tax in the following year. The financial year in which this assessment takes place is called the Assessment Year (AY). Assessment year means the period of twelve months commencing on the 1st day of April every year. Thus, for the current tax season, we would be filing the income tax returns for the Financial Year 07-08 (or FY 07-08), and since it would be assessed in the year 2008-2009, the Assessment Year is 08-09 (or, AY 08-09). The term "Assessment Year" is normally used specifically for Income Tax (IT). (b) Tax Deducted at Source (T.D.S): (Ch 4) TDS is one of the modes of collection of taxes, by which a certain percentage of amounts are deducted by a person at the time of making/crediting certain specific nature of payment to the other person and deducted amount is remitted to the Government account. It is similar to "pay as you earn" scheme also known as Withholding Tax in many other countries, one of the countries is USA. The concept of TDS envisages the principle of "pay as you earn". It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. It ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expands the tax net.

In simple terms, TDS is the tax getting deducted from the person receiving the amount (Employee/Deductee) by the person paying such amount (Employer/Deductor). This is applicable for certain types of payments, as applicable under the Act[1]. In the process of TDS, deduction of tax is effected at the source when income arises or accrues. Hence where any specified type of income arises or accrues to any one, the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income-tax and pay only the balance amount to the recipient of such income. The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt, within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment. Income from several sources is subjected to tax deduction at source. Presently this concept of TDS is also used as an instrument in enlarging the tax base. Some of such income subjected to TDS are salary, interest, dividend, interest on securities, winnings from lottery, horse races, commission and brokerage, rent, fees for professional and technical services, payments to nonresidents etc. It is always considered as an Advance tax which is paid to the government.

Who shall deduct tax at source? Every person responsible for making payment of nature covered by TDS provisions of Income Tax Act shall be responsible to deduct tax. These persons are mainly: - Principal Officer of a company for TDS purpose including the employer in case of private employment or an employee making payment on behalf of the employer. - DDO (Drawing & Disbursing Officer), In case of Govt. Office any officer designated as such. - In the case of "interest on securities" other than payments made by or on behalf of the Central govt. or the State Government, it is the local authority, corporation or company, including the Principal Officer thereof. Such person is called Deductor while the person from whom the tax is deducted is called Deductee. Tax must be deducted at the time of payment in cash or cheque or credit to the payee's account whichever is earlier. Credit to payable account or suspense account is also considered to be credit to payee's account and TDS must be made at the time of such credit.

c) Short Term Capital Gain (Ch 2)

The gain one realizes by closing a position one has held for less than one year. For example, if one buys a stock or bond and sells it five months later for more than what one paid, the gain is considered a short-term capital gain. The government wishes to encourage long-term investment and, as such, short-term capital gains are usually not entitled to preferential treatment for tax purposes; that is, they are taxed at a higher rate than gains from long-term investments. Short-term capital gains are investments that are held for less than 12 months and are sold. Short-term capital gains are common with active traders and are taxed in a higher bracket. Short-term capital gains Formula Remember this formula is applicable to securities that have a holding period of less than 12 months. Short-term capital gains = Purchase Value - Current Asset Value
A short-term capital gain usually results in a higher tax rate than a long-term gain.

d) Powers of Commissioners: (Ch 5) Powers and Functions of the Commissioner of Income Tax: 1) Change in method of accounting [32(4)] The Commissioner may allow a change in method of accounting, if the CIT is satisfied that the change is necessary to clearly reflect the person's income chargeable to tax under the head "Income from Business". 2) Change in stock valuation method [35(6)]: The Commissioner may allow a person to change its stock valuation method. 3) Allowability of Special Tax year [74(3)] : The Commissioner may allow a person to use special tax year, only if the person has shown a compelling need to use special tax year. 4) Allowability of Normal Tax Year [74(4)]: The Commissioner may allow a person to use normal tax year instead of special tax year, only if the person has shown a compelling need to use normal tax year. 5) Imposition of conditions regarding tax year [74(5)]: The Commissioner may impose certain conditions while permitting a person to use a special tax year or normal tax year. 6) Withdrawal of permission to use a specific tax year: The Commissioner may withdraw the permission granted to a person in respect of using the specific tax year (special tax year or normal tax year), after providing the opportunity of being heard.

7) Transactions between associates [108(1)] : The Commissioner may, in respect of any transaction between associates, distribute apportionate or allocate income, deduction or tax credits. 8) Unexplained income or assets [111]: The Commissioner may charge to tax the value of any unexplained income or asset and determine the value if it has been declared less than the fair market value (FMV). 9) Issuance of notice for filing of return [114(3) and (4)] : The Commissioner may issue a notice to a person for filing a return. 10) Issuance of notice to furnish Wealth Statement [116(1)]: The Commissioner may issue a notice to any person to furnish a wealth statement. 11) for Extension of time [119] The Commissioner may grant the applicant an extension of time furnishing the return, certificate, or statement etc.

12) Best judgment assessment [121]: If the tax payer has not furnished required return or any other document, the Commissioner may make best judgment assessment order. 13) Amended assessment order [122] : The Commissioner may amend an original assessment order by making necessary alterations or additions. 14) Recovery of tax from defaulting tax payer [138]: The Commissioner may take all necessary and appropriate actions for recovery of tax from a defaulting taxpayer 15) Recovery of tax from other person on behalf of taxpayer [140] : The Commissioner may recover the tax from a person who holds money on behalf of the defaulting taxpayer 16) Power to enter and search premises [175] : The Commissioner may enter in any business premises of the taxpayer within his jurisdiction to perform any task which is deemed fit for the Income Tax Ordinance, 2001. 17) Power to select a person for audit [177] : The Commissioner may select a person for audit of his income tax affairs. 18) Imposition of penalties [Part-X of Chapter-X)]: The Commissioner may impose penalties for different defaults discussed under Part-X of Chapter-X of the Income Tax Ordinance, 2001. 19) Imposition of additional tax [205] : The Commissioner may impose additional tax if the tax payer fails to pay the tax by due date 20) Appointment of subordinates [208(2)]]: The Commissioner may appoint of his any subordinate authority by the approval of the FBR.

21) Delegation of powers: The Commissioner may delegate to any Taxation Officer all or any of its powers or functions, other than the powers of delegation. 22) Appointment of expert [222] : The Commissioner may appoint any expert for the purposes of audit or valuation etc. 23) Recognition / approval of funds: The Commissioner may recognize the provident fund, superannuation fund and gratuity fund etc. under the Income Tax Ordinance, 2001. 24) Supervision of subordinate authorities: The CIT supervises the functions, duties and jurisdiction of its subordinate authorities.

e) Deduction u/s 80C: (Ch 3) When we invest in these we could save tax. It could be residential house property, medical insurance policy etc. If the house is ready for occupation then from that year itself investment in residential house property which is for self-occupation can get you tax deduction in according to section 80C which allows the deduction of Rs. 1 lakh even if you are repaying housing loan to bank, financial institution or employer etc. Invest in pension plan which can enable you to be entitled for a combined deduction under section 80C and also section 80CCC for up to Rs. 1 lakh only. Various other popular areas of investment that could be opted by tax payers to avail deductions under the section 80C of Income Tax Act, 1961 are premium payment of life insurance, payment to public provident fund, payment of tuition fee for the purpose of childs education, investment in NSC bonds, investment in National Saving Scheme (NSS) bonds, investment in ELSS and also housing loan repayment. Therefore you could choose from all these options of investment along with pension plan investment and achieve the target of total investment summing up to Rs. 1 lakh. This is the maximum amount that you could try to contribute by the investment option to obtain tax benefit. Making investments even in bank fixed deposits belonging to any scheduled bank with a maturity period of at least 5 years is eligible to entitle your investment to be claimed for deduction u/s 80C. The chance to avail deduction under section 80C by paying tuition fee for the educational purposes of children is limited only to the payment for two children. This deduction is applicable to any two children of the tax payer. It is to be noticed that when both husband and wife are earning members of the family then they are entitled for a separate limit of two children each. This would mean that they would be capable to be entitled for deduction of tax by paying for tuition fees of 2 children each. This deduction is not applicable when the child is attending a part time or distance education course. It is intended for only full time courses. Even fees for private tuition or coaching classes are not eligible for deduction u/s 80C. The educational institution in which the children attend their full time course should be located only in India though it could be affiliated to a foreign

institution. Pre-nursery, play school and nursery class fees are interesting eligible for deduction u/s 80C but donations paid or late fees, term fees, transport charges etc are not eligible. There is no necessity that the child be a legal child. Even an unmarried person can claim deduction u/s 80C if he has children. Adopted children are also eligible to claim deduction u/s 80C as there is also no necessity to be biological parent of the child. f) Slabs for Income Tax (Senior Citizens): Income Tax Slabs for Financial Year 2011 - 2012 The changes are more on the extreme ends viz. basic tax limit and for senior citizens. For senior citizen the exemption limit has been increased from Rs. 2,40,000 to Rs. 2,50,000/For senior citizen the qualifying age reduced from 65 years to 60 years. Another major change is introducing a high new tax slab for senior citizens of over 80 years in age (Super Seniors) who will not be required to pay taxes for income upto Rs 5,00,000

Senior Citizen above 60 years in age Income Tax Rate Upto Rs 2,50,000 Nil Rs 2,50,001 to Rs 5,00,000 10% Rs 5,00,001 to Rs 8,00,000 20% Rs 8,00,001 and above 30% Senior Citizen Above 80 Years in age Income Tax Rate Upto Rs 5,00,000 Nil Rs 5,00,001 to Rs 8,00,000 20% Rs 8,00,001 and above 30%

Ans. 5) (Ch 2) Basic Salary (15000*12) DA(F.P) (4000*12) Bonus Entertainment Allowance Employers Contribution to R.P.F 15% Salary = Less 12 % of Exemption Interest on R.P.F 13 % Less 9.5% Interest Exempted Taxable Value of Concessional Rent Medical Bill Servant (4000*12) Car(no log book provided) Gas , Electricity, Water Bills Gross Income Deduction : (1) Entertainment Allowance 12,000 (2) Professional Tax 2,500 Taxable Income 390635 14,500 = 34200 27360 39000 3705 35295 23000 Nil 48000 Nil 12,000 405135 6840 1,80,000 48,000 40,000 12,000

Ans. 6) (Ch 2) Net Profit as per P&L A/c Add: Proprietor Salary Add: Depreciation Add: Donation Add: General Expenses for Gift Add: Sales Tax not paid Add: Construction of Canteen Add: R.D.D 12,500 25,000 10,500 5,850 2,500 15,700 2,500 74,550 74,550 2,32,550 Less: Interest on Govt. Securities Depreciation Gift from friend Income from business Income From other Sources: Interest on Security Gift from Friend 23075 12000 210550 23,075 22,000 12,000 57,075 175475 1,58,000

Statement of Gross Total Income for the Assessment Year 2010 Less: Deduction u/s 80(L) on Interest on F.D (limit 10000) 13075 Less: Deduction u/s 80 (G) on Donation (50%) Taxable Income 5250 192225 1,92,225

Ans. 7) (Ch 2) Gross Income Less: Deduction PT Income From Salary Income from business and Profession 3,05,300 2,700 3,02,600

Remuneration Royalty

4,000 16,300 20,300

Income from House Property: Gross Annual Value (60000-10000) 50000 Less: Municipal Taxes NAV Deduction u/s 24 Standard Deduction (30% of NAV) Interest on Loan 13200 15000 28200 Income from other sources: Interest on Securities 4000 6,600 15,800 6000 44,000

Interest on Deposit in Reliance Company 2,600

Gross total income Less: Deduction u/s 80 (G) Taxable Income Income tax paid Less: Deduction u/s 80(C) Tuition Fees PF Medical Insurance Deposited in PPF 50,000 11,000 15,500 10,000 2,500

3,45,300

3,42,800

Interest on Security Interest On Reliance Company

4000 2600 93,100

Total Taxable Income Tax Payable Add: Education Cess @2% Secondary and Higher Education Cess @1% Total Income Tax Payable Rounded off to

2,49,700 5970 119.4 59.7 6149.1 6150

Income Tax Paid Refund

7000 850