Corporate Taxation Planning

Vaishali Damani

MukeshKumar

Mikir Patel

Mohit Vyas

Question
Mrs. Saraswati aged about 66 years is a Finance

Manager of M/S. Laxmi & Co. Pvt. Ltd, based at Calcutta. She is in continuous service since 1965 and recieves the following salary and perks from the company during the year ending 31.03.2013:
Basic salary (50000 x 12) = Rs 60000 D.A (20000 x 12) = Rs 240000 (forms parts of pay for

retirement benefits) Bonus- 2 months basic salary Commission- 0.1% of the turnover of the company. Turnover for F.Y 2012-13 was Rs 15 Crore.

 Contribution of the employer and employee to

the recognized provident fund Account Rs 300000 Each. Interest credited to Recognized Provident Fund at 9.5% - Rs 60000 Rent free unfurnised accomodation provided by the company for which the company pays a rent of Rs 70000 per annum. Entertainment Allowance- Rs 30000 Hostel allowance for three children Rs 5000 each.

 She makes the following payments and investments:

Premium paid to insure the life of her major son

Rs 15000 Medical Insurance premium for self- Rs 6000, Spouse- Rs 6000. Donation to a public charitable institution registered under 80G Rs 200000, through cheque. LIC Pension Fund- Rs 12000 Determine the tax liability for Assessment Year 2013-14

Solution:
Particulars RS RS 6,00,000 2,40000 1,00,000 1,50,000

Income from Salary:

Basic Salary Dearness Allowance Bonus Commission (Calculated as percentage of turnover)

Entertainment Allowance
Childrens hostel Allowance Less: Exemption (Rs 300 x 12 x 2) Interest credited to recognised provident fund account (exempt) Rent free unfurnished accomodation (W.K-1) Excess Contribution to PF by employer (W.K-2) 15,000 7200

30,000
7,800 70,000 1,81,200

Gross Salary

13,79,000

Particulars Less: Deduction Under section 80C Life insurance premium paid for insurance of major son

Rs

Rs

15,000

Contribution to recognized provident

fund Deduction under section 80CCC in respect of LIC pension fund

3,00,000
12000 3,27,000

Deduction limited to Rs 1,00,000 as per section 80 CCE Deduction Under section 80 D Total income before deduction under section 80G Deduction Under section 80G: 50% of Rs 1,26,700 (10% total income)(W.K-3) Total income

1,00,000 12000 12,67,000

63,350 12,03,650

Particulars Tax on total income Add: Education cess @2% Add: Secondary and higher education cess @1% Total tax liability

Rs

Rs 1,91,095 3,822 1,911 1,96,828

Working Notes:
1. Value of rent free unfurnished accommodation
Particulars Basic Salary Dearness Allowance Bonus Commission @0.1% of turnover Entertainment Allowance Childrens hostel Allowance Gross Salary 15% of salary Actual rent paid by the company Rs 6,00,000 2,40,000 1,00,000 1,50,000 30,000 7,800 11,27,800 1,69,170 70,000

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 2) Employers contribution to P.F in excess of 12% of

salary. Employers contribution Rs 3,00,000 Less: 12% of basic salary, dearness allowance & commission 12% of Rs9,90,000 Rs 1,18,800 Rs 1,81,200

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 3) As per amendment made by Finance Act,2012, no

deduction shall be allowed under section 80G in respect of any sum exceeding Rs 10,000 unless such sum is paid by any mode other than cash. Here, since the donation of Rs 2,00,000 is made by cheque, the same is allowed.

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