M.K. GUPTA TAX CLASSES PH: 9212011367/ 9811429230 www.mkguptacaclasses.com e-mail id:
[email protected]
INTRODUCTION (DIRECT TAX / INDIRECT TAX)
29-30
COMPUTATION OF TOTAL INCOME AND TAX LIABILITY
31-88
TAXABILITY OF GIFT
89-101
ADVANCE PAYMENT OF TAX
102-117
RESIDENTIAL STATUS & SCOPE OF TOTAL INCOME
118-164
INCOME UNDER THE HEAD HOUSE PROPERTY
165-235
DEDUCTION FROM GROSS TOTAL INCOME
236-304
Including EXAMINATION QUESTIONS
CA. R.N. JALAN
CA IPCC MAY-2013/ NOV-2013 P.Y. – 2012-13 A.Y. – 2013-14 F. A. – 2012
2
`200/-
SYLLABUS IPCC Paper 4: Taxation (One paper — Three hours – 100 Marks) Level of Knowledge: Working knowledge Objectives: (a) To gain knowledge of the provisions of Income-tax law relating to the topics mentioned in the contents below and (b) To gain ability to solve simple problems concerning assessees with the status of ‘Individual’; and covering the areas mentioned in the contents below.
Contents: Part I: Income-tax (50 Marks) 1. Important definitions in the Income-tax Act, 1961 2. Basis of charge; Rates of taxes applicable for different types of assessees 3. Concepts of previous year and assessment year 4. Residential status and scope of total income; Income deemed to be received / deemed to accrue or arise in India 5. Incomes which do not form part of total income 6. Heads of income and the provisions governing computation of income under different heads 7. Income of other persons included in assessee’s total income 8. Aggregation of income; Set-off or carry forward and set-off of losses 9. Deductions from gross total income 10. Computation of total income and tax payable; Rebates and reliefs 11. Provisions concerning advance tax and tax deducted at source 12. Provisions for filing of return of income. Part II: Service Tax (25 Marks) and VAT (25 Marks) Objective: To gain knowledge of the provisions of service tax as mentioned below and basic concepts of Value added tax (VAT) in India. Service Tax (25 Marks) Contents: 1. Service tax – Concepts and general principles 2. Charge of service tax and taxable services 3. Valuation of taxable services 4. Payment of service tax and filing of returns Individual services covered in the syllabus (i) Consulting Engineer Section 65(105)(g) (ii) Mandap Keeper Section 65(105)(m) (iii) Practicing Chartered Accountants Services Section 65(105)(s) (iv) Scientific and Technical Consultancy Section 65(105)(za) (v) Commercial Training or Coaching Section 65(105)(zzc) (vi) Technical Testing and Analysis Section 65(105)(zzh) (vii) Business Exhibition Section 65(105)(zzo) (viii) Information Technology Software Section 65(105)(zzzze) VAT (25 Marks) 5. VAT – Concepts and general Principles 6. Calculation of VAT Liability including input Tax Credits 7. Small Dealers and Composition Scheme 8. VAT Procedures. Note: If new legislations are enacted in place of the existing legislations the syllabus will accordingly include the corresponding provisions of such new legislations in the place of the existing legislations with
3 effect from the date to be notified by the Institute. Students shall not be examined with reference to any particular State VAT Law. M.K. GUPTA CA CLASSES IS NOW NO.1 IN CA-CPT ALSO AND THE CLASSES ARE BEING TAKEN BY NEHA JALAN AND VAIBHAV JALAN, DAUGHTER AND SON IN LAW OF M.K. GUPTA SIR
CA – CPT RESULT 2011 S. No. Name 1 ANUSHMA JINDAL
Roll No. 213718
Marks 180
Percentage 90
2
DEEPANSH GUPTA
213699
178
89
3
ANKIT BANSAL (1)
211634
177
88.5
4
NEERAV SINGHAL
212849
177
88.5
5
ANKUR DHAMIJA
213054
172
86
6
SHIVANGI GOYAL
211772
172
86
7
NAVNEET SARAF
213169
171
85.5
8
RADHIKA MANGLA
213807
171
85.5
9
ROHAN MAAKAN
210558
171
85.5
10
AASHISH GOEL (2)
213748
169
84.5
11
ENAKSHI GUPTA
212865
168
84
12
TUSHAR JAIN
211807
168
84
13
AMAN DUGGAL
213026
167
83.5
14
SARTHAK KATHURIA
213776
167
83.5
15
HARSHIT GUPTA
213586
166
83
16
LAVI CHANANA
202186
166
83
17
NISHA TOMAR
212874
165
82.5
18
RISHABH HASIJA
212681
165
82.5
19
SANYAM GOEL
212350
165
82.5
20
NEHA BANSAL (1)
202753
164
82
21
AYUSH GOEL
211621
163
81.5
22
SHREYA GUPTA
213564
163
81.5
23
SHUBHAM GOYAL
213321
163
81.5
24
SHRENUJ JALAN
201474
162
81
25
MUKESH MADAAN
211529
161
80.5
26
AAKASH KALRA
201397
161
80.5
27
ANUJ AGGARWAL
202374
161
80.5
28
HETAL
202486
161
80.5
29
ANKIT AGGARWAL (1)
213370
160
80
30
KARAN GARG
213565
159
79.5
4 31
PRIYANKA SACHDEVA
S. No. Name
211871
159
79.5
Roll No.
Marks
Percentage
32
SAGAR PUNSHI
209287
159
79.5
33
ARUSHI GUPTA
212458
158
79
34
DIKSHA GARG
212982
158
79
35
ADEEP MEHROTRA
201285
158
79
36
POOJA GUPTA
209255
158
79
37
AMAN SHRIDHAR
211780
157
78.5
38
ANSHU KARNANI
212223
157
78.5
39
RISHABH GUPTA (2)
212858
157
78.5
40
SURBHI GUPTA (1)
211827
157
78.5
41
GOVIND RAI GARG
212321
157
78.5
42
NANCY AGGARWAL
213705
157
78.5
43
ROHIT KUMAR MITTAL
212911
157
78.5
44
DEEPAK MISHRA
201935
157
78.5
45
AKSHIT MONGA
212478
155
77.5
46
ASHNEET SINGH BANWAIT
212313
155
77.5
47
GOURAV GUPTA
213712
155
77.5
48
ANMOL TELTIA
213614
153
76.5
49
CHINMAY JAISINGHANI
212528
153
76.5
50
DEVYANI MOHTA
211708
153
76.5
51
AAYUSH DHAMIJA
213057
152
76
52
PRIYANKA KATARIA
212838
152
76
53
SHRIYANSH PARAKH
212556
152
76
54
RAGHAV GUPTA
201179
152
76
55
MOHIT GUPTA
202104
152
76
56
ANCHIT JAIN
212240
151
75.5
57
KRISHAN GOYAL
211995
151
75.5
58
MOHIT GHAI
212339
151
75.5
59
PAYAL AGGARWAL (2)
201379
151
75.5
60
VASHVI JAIN
202476
151
75.5
61
ABHISHEK JAIN (2)
212964
150
75
62
ADITYA BANSAL
212586
150
75
63
NIDHI AGGARWAL
212354
149
74.5
64
SHIVANGI KUMRA
230464
149
74.5
65
TRIPTI JAIN
212487
149
74.5
5
S. No. Name 66 AAKRITI CHAUHAN
Roll No. 201907
Marks 149
Percentage 74.5
67
PARSHANT BANSAL
212254
148
74
68
SHIVANI GARG
212301
148
74
69
VARUN VOHRA
202890
148
74
70
SAURABH CHHABRA
210242
148
74
71
JYOTI AGGARWAL
212091
147
73.5
72
SAGAR GOEL
212726
147
73.5
73
ROHIT GUPTA
202252
147
73.5
74
NISHA
212067
146
73
75
NISHANT GARG
213178
146
73
76
PARIDHI JAJODIA
212554
146
73
77
AKANKSHA GUPTA
211956
146
73
78
DHAVAL KHANNA
201519
146
73
79
NIKHIL DHINGRA
202546
146
73
80
NEHA MITTAL
213006
145
72.5
81
PRASHANT SINGH
202650
145
72.5
82
VISHAL AGGARWAL
208084
145
72.5
83
INAKSHI KOHLI
213386
144
72
84
ISHANI GUPTA
212013
144
72
85
ABHINAV MAAKAN
213794
144
72
86
NISCHAY AGGARWAL
202136
144
72
87
HUNNY MUNJAL
204745
144
72
88
VAIBHAV MARWAH
213562
143
71.5
89
NAVISHA CHOUDHARY
211824
143
71.5
90
KRITI SOOD
201748
143
71.5
91
ALISHA SHARMA
202534
143
71.5
92
AAYUSH JAIN
213046
142
71
93
AKSHAY KAPOOR
213484
142
71
94
GARIMA BANSAL
213654
142
71
95
MADHUR SHARDA
211719
142
71
96
SWATI MONGIA
213341
142
71
97
RAJU KUMAR
201287
142
71
98
ADITYA GARG
213093
141
70.5
99
ANISH GUPTA
213619
141
70.5
HIMANSHU UTREJA
212471
141
70.5
100
6
F EEDBACK A BOUT CA – CPT C LASSES ( FROM PARENTS OF STUDENTS AND ALSO FROM STUDENTS ) FATHER OF SHALEEN PANDYA Respected Sir/Madam I recall a very important saying “MOTIVATION CAN MOVE MOUNTAINS”. I believe that your classes not only helped the students to get high marks but helped even to those who were Doubtful to adopt “Chartered Accountancy” as a profession and making them clear in “ONE ATTEMPT”. The real effort, motivation and dedication lies there. My child Shaleen was otherwise a sincere boy but was in need of exactly this type of motivation which was provided by your institute. The major methods which I appreciated are Showing motivational movies of successful leaders. Conducting Sunday tests exactly in “CPT – Examination” like atmosphere thus preparing students for the final exam. Mixing study with entertainment and enjoyment. Evenly distribution of course in entire period, instead of being slow in the beginning and fast in the end. Closing my pen, I once again thank both of you for educating students with utmost sincerity, determination, hard work and commitment and making them successful in CA – CPT. Wishing you all the best in all your endeavour in future too. MR. BHOLA NATH CHAUHAN & MRS. SAVITA CHAUHAN [PARENTS OF AAKRITI] Firstly Congratulations for your highly radiant result. Neha Mam & Vaibhav Sir, you are the best teacher and by your hard work and efforts, my daughter, Aakriti Chauhan, easily able to complete the first stage of CA course. You both have fulfilled your all commitments which you have made at the time of registration to your institute. You have completed more than 20,000 questions by which my child was able to increase her speed helped her to clear her CPT with full confidence. MR. RAJEEV MEHTA [PARENTS OF JAGRIT MEHTA] Thanks to M.K.GUPTA CLASSES for making our child ‘JAGRIT MEHTA’ more confident, competent and sincere towards his studies. Because of your sincere efforts and guidance, he was able to come out with flying colours. Thanking you a lot and Best wishes for your good future. FROM: MRS. KAVITA & MR. NEERAJ KOHLI [PARENTS OF GUNJAN KOHLI] M.K.GUPTA INSTITUTE is considered as one of the most reputed Institutes which provide a strong platform to the students who have the goal to become CA. We strongly believe that this learning Centre played a crucial role in making GUNJAN achieves her goals by helping her in every possible way….. The Institute has a team of excellent professionals who have been very compassionate and understanding. They have made her feel like she have opted for one to one training course program as they provided full attention to every student even in such a huge class. The evaluation of a student is considered to be the prime focus of this Institute, as the test were organized on weekly basis and the outcome of which were projected to us thereafter, and parents were also informed before a considerable amount of time so that they can keep an eye on their child so that they can make them devote maximum time on studies. The time that she spent in this institute is always intriguing as even in regular class continuous appraisals in the form of rewards were given to students on the basis of their performance plus the ambience created in the institute is very comfortable for the students to concentrate in their studies. MAY THIS SUCCESS INCREASES DAY BY DAY FOR YOU INSTUTE…….. THANKS FOR EVERYTHING PARENTS OF RIMI DAS MK GUPTA Institute is an eminent institute for preparation of CA exams. It has laid down a strong foundation stone for my daughter. She is no longer scared of studying CA. The way Vaibhav Sir and Neha
7 Mam teach student is praise worthy. Story telling sessions by Neha Mam were really encouraging for my daughter. She has gained a lot more in addition to apt knowledge. Both Neha Mam and Vaibhav Sir are awesome teacher. We feel proud that our daughter studied at MK GUPTA Institute. SUMAN BANSAL (MOTHER OF PRERNA BANSAL) Dear Neha Mam and Vaibhav Sir, my daughter Prerna Bansal have a dream of becoming a CA but before coming to your Institute, she was little bit afraid, but you gave her such a platform that now she is 100% sure for her IPCC and FINAL. I want that Vaibhav Sir and Neha Mam, you live happy always and keep encouraging, motivating and promoting the students like this way GOD BLESS AND THANK YOU MR. AJAY RAWAT [PARENTS OF NISHCHINT RAWAT] Dear Sir, with great pride, I can say that your guidance and motivations helped my son to clear his CPT exam and now he knows what he wants to do in his life. I really appreciate the methodology adopted by your Institute in imparting CPT coaching to your students. MR. RAJENDER GUPTA & MRS. SANGEETA GUPTA [PARENTS OF SHRUTI GUPTA] M.K.GUPTA INSTITUTE has laid down a strong foundation stone for my daughter. The way you teach students is praise worthy. You combine encouragement, motivation and discipline perfectly. I really liked that you conducted tests weekly exactly in CPT – Examination like atmosphere thus preparing students for the final exam. I really wish your Institute all the best in your entire endeavour in future too. PARENTS OF DEEPTI GUPTA Respected Mr. Vaibhav Jalan and Mrs. Neha Jalan, with your immense efforts, my daughter has easily cleared her CPT Exam even she was from Science Stream. Your teaching pattern is so creative that students without taking any tension can clear the exam. MR. R.B.GUPTA & MRS. RITU GUPTA [PARENTS OF ASHISH GUPTA] M.K.GUPTA Classes is an excellent centre for preparation for CPT. We think, just to attend the classes in M.K.GUPTA CLASSES is a guarantee to success. MOTHER OF SWATI Respected Mr. & Mrs. Jalan, I am Swati’s mother and just wanted to bring to your attention that not only me but even my whole big family are very satisfied with your classes. You both put in a lot of efforts with Swati and I have noticed a huge change in my daughter which I attribute mainly to you both Mr. & Mrs. Jalan and you both have changed the negative thoughts into positive thoughts by all means i.e. either by classes, presentation, lectures, etc. Whenever we were worried about anything related to Swati or her study, you both had given an open attitude fill with confidence and support. You both perfectly combine encouragement, discipline and a sense of curiosity in her. At last not the least you are one of those silent workers who works round the clock with such a large base of people and still be smiling and courteous as ever. MR. V.K.KHOSLA & MRS. SAROJ KHOSLA [PARENTS OF GEETIKA KHOSLA] We strongly believe that M.K.GUPTA Classes had served and will continue to serve as a partner in our daughter’s professional career path and always committed for providing an unmatchable quality of education in the field of Chartered Accountancy. PARENTS OF KARAN CHHABRA When we sent our child to M.K.GUPTA CA CLASSES, we were not very much sure of our decision but as time flow and the training went on, we realized the potential being put in by the staff of this Institute. The way they educate and groom their students is something that could hardly be seen in any other Institute. We are extremely thankful to each member of the teaching faculty of M.K.GUPTA CA CLASSES for imbibing values in our child and giving him professional guidance.
8 ANUSHMA JINDAL Vaibhav Sir & Neha Mam are awesome teachers ! The way they teach, nothing seems tough. The best part of their teaching are the test series which help to throw light on our weak areas and definitely the cash prizes and chocolates! Mam & Sir are the role models for me and inspire me to work hard and be good human being at the same time. The atmosphere in the class was always friendly yet disciplined. The administration & the staff is also good. The time I spent here was remarkable and unforgettable. I will always remember my “CPT journey”. Thank you Mam ! Thank you Sir ! for your immense support, guidance, love and blessings! AAKASH KALRA M.K.GUPTA CLASSES is not only a coaching centre for me but a second home where loving teachers showed me the right path to fulfill my dreams. Within this short span, I have become a big fan for their tireless efforts, love, confidence and conviviality, who inspired me to achieve the milestones in CPT. I will never forget when they patted my back when I excelled, they landed helping hand whenever I tumbled, they provided me the inner strength to keep going on, they aroused my confidence to tread the ways new & unknown, like a friend they stood by me all the time, like a mentor they acquainted me with right & wrong. I shall never be able to pay for their sincere efforts, unmatchable guidance and support. They are just like my parents. With sincere thanks, I wish a good luck for this institution and who so ever is a part of it. A good luck to all. POOJA GUPTA First of all, I would like to thank Vaibhav Sir and Neha Mam for the guidance, support and encouragement without which it would have not been possible for me to achieve such milestone. The study material provided by them was in itself so exhaustive that you do not need to think about any other book. The spiritual / Inspirational video footage not only motivated us or boosted our morale but also inspired us to be a good human being in our life. Vaibhav Sir and Neha Mam are really superb. They are the best teachers I have ever had. Thank a Bunch! HETAL Dear Vaibhav Sir & Neha Mam, I really respect you a lot!! Your way of teaching is awesome. You made us understand each and every concept clear and very well. Your motivation through chocolates and cash prizes was brilliant. Frequent test series was really effective. It helped me to improve myself better and better to achieve my goal. Mam your Food for thought is unforgettable. Mam & Sir you have built a great confidence in me that I have cleared my CPT confidently. You both are inspiration for me and you look good together. I really loved to be a student of this Institute. Thanks a lot!!! LAVI CHANANA Neha Mam & Vaibhav Sir, Thank you sooooooo much. You are the bestest teacher ever. You are very hardworking and nicest teacher for CPT and always encourage us to do even more better. Your motivational ways like chocolates, cash prizes and Ranking system is the bestest thing. It creates competitive power among students and helpful in scoring better than last time. I feel that I am very lucky that I joined M.K.GUPTA CA CLASSES for my CPT preparation. Dear Mam & Sir, Hope you will get all the happiness in your life. Love you both. :-) VIJENDER AGGARWAL Neha Mam & Vaibhav Sir are the two of the most dedicated persons I have ever met. Their style of teaching is absolutely perfect for a student who has just come out of 10 + 2. Both of them work extremely hard to help us shape our mind and attitude that is required to enter and be successful in a profession like CA. The best thing about the coaching is the ‘WEEKLY ASSESSMENT TESTS’ conducted in the same manner as held by ICAI. The whole procedure is so systematically designed that the results are sent via SMS on the same day, thus providing us an opportunity to start overcoming our weakness immediately. Moreover, attractive cash prizes and other incentives create a healthy competitive environment in the class which helps
9 us to fasten our speed and efficiency. I was surprised to see how wonderfully these people can combine studies with entertainment. Neha Mam’s ‘Food for Thought’ is an amazing endeavour by her to improve us as a person and honestly, I have never come across better human beings like them in my entire life. A message to all : “COME AND HAVE A TIME THAT YOU WILL CHERISH THROUGHT YOUR LIFE” SAKSHI SALUJA Dear sir & mam, I successfully cleared my CPT and from the bottom of my heart, me & my parents really thank both of you. You really taught us well. All the MOCK TESTs and everyday assignments which seem to be a danger sign to me actually the real path of this journey because of which only I cleared my CPT. My overall experience here is so great that I can’t even express in words. Everything I have experienced here, the happiness while studying, all the fun, I pray to GOD that may ‘OUR INSTITUTE’ flourish like this always and every aspiring CA starts his journey from M.K.GUPTA CLASSES. Love you Ma’am & Sir NISHCHINT RAWAT Dear Sir and Madam, at the outset, I would like to thank both of you for helping me in achieving my first goal of clearing CPT Exam. Both of you not only encouraged us but also motivated us to reach our goal. It was really an enriching experience to study in M.K.GUPTA Classes, which made my concepts so clear and kept me focused throughout my preparation for CPT Exam. RINKI GUPTA M.K.GUPTA CA INSTITUTE is just awesome. You are the best. I am in love with this Institute. I completely feel its not just an Institute but a family & I don’t want to be separated from this family. PALLAVI JAIN It was a nice experience. Story sessions were good. A bit of recreational sessions like quiz and puzzles were also worth appreciation. Chocolates used to encourage us a lot. Your management and administration was FANTASTIC.
DEEPANSH Experience at MK GUPTA CLASSES was OUT OF THE WORLD. Firstly, the Quality. Both Mam and Sir took care to clear each and every concept in optimum clarity, without us asking to. The speed of your teaching and the way of your teaching is perfectly optimized according to the length of the syllabus and time given. Secondly, the level of your concern. You took each and every problem in a positive manner whether it was academic or personal. I was really touched by your counseling at various matters. Thirdly, the words of wisdom you give us. Sir and Mam, more than what you taught us about CPT, I remember what you taught us about life. Short stories told by sir and Neha Mam’s Food for Thought were the great source of wisdom and inspiration. These two months have been an enriching experience, I will remember it forever. SANYA VIJ M.K.GUPTA CA CLASSES is a place which can change the words IMPOSSIBLE to I M POSSIBLE. This Institute has made me a better person both personally as well professionally. Neha Ma’am and Vaibhav Sir are two people who can bring drastic change in a person. I have cleared CPT because of their teaching and blessings. I have achieved success just because of Neha Mam and Vaibhav Sir who are like an inspiration. I truly owe my success and happiness to them. A HEARTFELT THANK YOU TO M.K.GUPTA CA CLASSES
10 SONIA GULATI Sir and Mam, you are the best. I have never found teachers like you. Everyday of the class was a new day for me. Every morning, I was excited to come here and study. This was the first time in my life, when study attracted me and I love to study. All my Thanks goes to you Sir and Mam. SAKSHI I am not buttering or exaggerating but both of you are doing an awesome job. You have knit everybody in a family and you teach us as our own children. You treat us like your own kids, teach us like our own parents so there is no chance of any mistake. You give us the best and I really hope if we could live up to your expectations. You both are A TRUE SOURCE OF INSPIRATION. The best part about both of you is that you never complain about anything. You are very humble and polite. Each action, move, words of yours is a teaching in itself. You actually make us feel like we are a part of an ever-growing, never lasting family. NASEEM AHMED KHAN Truly speaking I was very afraid of CA studies. But after I joined M.K.Gupta Classes, I have no fear about Accounts, Maths, law and economics. Their teaching style has made me confident. “Teacher is one who burn himself but light the others.” I like their teaching style very much because each and every concept taught by them were very much clear to me and the way of teaching is also very nice. Their motivation time to time, brings a lot of changes in my academic performance and sincerity. I give full credit of my success to Vaibhav Sir and Neha mam. SUMEDHA RANI AGGARWAL I had a nice and wonderful experience studying with such a large group of students. The students were really very good and actually I learnt a lot from their queries. Moreover the facilities provided in the class were also good. Separate water bottles were provided to each student, fully AC classes. Test series are very helpful. They are conducted very seriously and on the same CPT pattern which is not being done in any other institute. Your test series are actually fantastic. It was an awesome experience of two months and I am going to miss it a lot!!!! NIKITA AGARWAL Never seen such an Institute. Infact it is far better than our expectation. The slogan “Not an Institute but a family” has been really implied in a fantastic way. Its great that you take care of our needs. We refer this Institute as a “FIVE STAR INSTITUTE” in front of our friends. GURNEET KAUR The atmosphere at MK GUPTA CLASSES was very motivating. Definitely when you see so many meritorious students and excellent guidance under one roof, one is motivated to perform one’s best. The test series gave me an idea about the pattern of the main exam. It helped me a lot while tackling the main paper. RACHIT ARORA Never seen such teachers. Mam and Sir, you look great when you are standing together. Everyday of the class was a new day for me. Every morning I was excited to come here and study. This was the first time in my life when study attracted me and I love to study.. All my thanks goes to you sir and mam.. Thanks a lot !!!!!!! KARAN CHHABRA M.K.GUPTA CA CLASSES is an institution par – excellence. Studying here is an altogether a different experience. Students here not only get academic guidance but also the training to face this whole world with full confidence. Teachers take special care to mould the minds of the students and channalize their talents.
11 Skillful expertise of the teaching faculty promises to shape the future of the modern society. Mam, I will really miss your Food for Thought. LOKESH MALHOTRA M.K.GUPTA CA CLASSES have been very influential in reshaping my focus towards education. They don’t preach us to be a bookworms. Instead they understand that children, today, need everything, from guidance and motivation to amusement and entertainment. Earlier, my focus was to cram the facts quickly before the exams and score good marks. But after I joined this institute, I realized the importance of understanding the concepts. The teachers here are very sincere and hardworking that a true faith on their reflected path will enable you to succeed. The teaching style, the assignments given and the test series conducted are self sufficient for CPT preparation. And, the icing on the cake is the chocolates, prizes and the trophies which offer a lot of incentive to work hard. MAHAK SHARMA Simply Superb. Never felt we are not at home. Sir and Mam were our parents who guided us the best. DEVYANI JAIN Awesome experience. I really enjoyed these few months. I hadn’t expected them to be so good. Perfect class timings with best brains studying in it. Above all both the teachers were energetic and full of life always, with good humour and encouraging nature, humble, friendly and confident. Simply the best. AJAY KESWANI Sir and Mam you are the best. I have never found teachers like you. They way you deal with the students is great. You are the one who give your 100%. You always taught us you have been teaching your younger brother and sister. PRATEEK BOHRA The two and a half months teaching by vaibhav Sir and Neha mam proved to be very fruitful for me. Through my hard work and their teaching and guidance I was able to secure 141 in CPT and I was very satisfied with my marks. Vaibhav Sir, is by far the best teacher I have encountered. His funny jokes, experiences and specially teaching law was all that inspired me. Also the thorough professionalism of MK GUPTA CLASSES moved me to great extent. The test series and its result the same day was liked by my family too. I would wish good luck to the entire MK GUPTA team and I hope they are able to produce future CA’s in a huge numbers.!! SANJAY SHARMA If I have passed out CPT exam, then its maximum credit goes to both of you. I think for success, four elements are necessary. These are – Desire, Direction, Dedication and discipline. And we got all four of them from you. AYUSH AGGARWAL I feel that I was lucky that I joined MK Gupta Classes for CPT as within a very short duration I could complete my course of CPT with the expert coaching classes of Vaibhav Jalan Sir and Neha Mam. Their mock test really helped me and gave me the required confidence to appear in the CPT exam. NAINA AND CHARU We really enjoyed my 2 months journey with you. You are so hard working and nice teachers. Vaibhav sir, your way of teaching law by such a sweet – sweet examples is too good. Truly in law class we enjoyed a lot. We didn’t realized when we studied. You taught us so nicely and playfully.
12 And Neha Mam, your chocolate giving way was too cute and nice. The way you made us learn economics data was also very nice. Mam your way of giving moral, by story I liked the most. It was superb. In short I want to say mam and sir you are simply the best. SWATI JAIN I think all the classes were systematically planned & implemented and everything was taught in such a friendly and sincere manner that one can easily grab everything itself in class. I don’t think so there is any need for improvement. While studying here I think one could feel the atmosphere of his home because here focus is given not only on study but apart from that one could easily learn with fun, enjoyment and enthusiasm. I think when I saw the CPT exam paper I felt most of the questions were typically same which were already discussed in class and mock test. KUMARI SHIKKHA MISHRA The uniqueness of this institute is that it changed a “Loser into a Go-getter”. Neha Mam’s confidence in me and Vaibhav Sir’s command in his subject were the greatest inspiration for me. “If you say that Teaching is neither a business nor a profession for us rather it is a passion for doing something good, great and unique in the field of teaching.” You really mean it. No institute could have celebrated the “SUCCESS PARTY BEFORE RESULTS”. I respect you Sir and Mam from the deepest core of my heart. Both of you are my Aim. “SUCCESS ALONG WITH HUMBLENESS IS THE DEFINITION OF RESPECTED VAIBHAV SIR AND NEHA MAM.” Thank you so Much. GUNJAN Sir and Mam, you are simply the best with full fledged knowledge on each aspect whether it may be personal matters of the student. Sir is best because he teaches us with full concepts. He never makes us mug up any aspects. Mam is also best because firstly her smile is good which takes away all our tension regarding studies and secondly she is really helpful & Mam your chocolates are the best prize for us. A suggestion to the institute is that please switch off AC even during summers because there are more ACs than required. “Bacho ko cold ho jaata hai.” Thank u Sir and Mam for all your help. EAST OR WEST M.K. GUPTA CLASSES ARE THE BEST. KRITI GUPTA I really enjoyed these two months and they are memorable. I got attracted to test series and the cash prizes. Thanks for being so frank with us and for providing a good exposure of CA profession. RISHAB SANCHETI It’s really a great pleasure to be with Vaibhav Sir & Neha Mam. They are simply the great teachers whom I ever met in my life. The best thing about Vaibhav sir is that he motivates the students in such a way that he/she can’t think to do anything else except suggested by Sir. For Neha Mam it is her support and caliber which derives a student to focus on their studies. Both of them are not only good teachers but also they are great human beings. They work together in a group like parents for students and are doing a great job. So keep doing nice job. Carry on. JYOTI ANAND My personal experience with you was the best. Your follow up and administration was no doubt excellent. I liked your attitude towards students. Both of you always encouraged the students to give their best with proper support and guidance. I would like to thank you for providing us the best study material. NAVYA MALHOTRA It was indeed our pleasure that we got the opportunity to have ourself enrolled in M.K.GUPTA CLASSES. I can never ever forget in my life the moments spent here. The efforts of mam and sir were outstanding and I’ll miss them always.
13 SHRYANS JAIN I am highly obliged to M.K.GUPTA CLASSES and dedicate my achievement to them. They focus on concepts rather than meaningless cramming. Vaibhav sir and Neha mam are best teachers for CA-CPT and M.K.GUPTA CLASSES is the best institute for CPT. DEEPIKA I am a reserve person and do not talk much but my two personal meetings with you were an eye opener. Now I am seriously thinking about myself, my future and for the better and soon want it to become the Best. I am seriously very thankful to mam and sir for everything, building my morale, my confidence. Thank you very much. This change in my life, I am welcoming it with a smile and will try to focus on it. Thank you very much. Love you both!!! GARIMA KHOSLA At M.K.GUPTA INSTITIUTE, the time I spent will be the Bestest part of my life. I really enjoyed and first time I get to know that study can be done with lots of Fun! Just wanna say that “My CA – CPT cleared with so much fun and with so much ease that can not be possible with any other Institute. I consider myself lucky to be a part of M.K.GUPTA INSTITUTE – A Family !!!! MOHIT KATHPALIA The overall experience was outstanding with Sir & Mam. Vaibhav Sir started us with the scratch and cleared our basic understanding of each topic. Neha mam is very supportive, especially story telling sessions and those videos which automatically built in us self confidence and self belief that we can do it. Yes, this is the place you can trust. MANUJ AGGARWAL My father is a Chartered Accountant and he advised me to join M.K.GUPTA CA CLASSES AND I AM REALLY BLESSED TO FOLLOW HIS ADVICE. Due to expertise coaching and guidance, I managed to secure 80% marks in CPT. Notes provided by them were very precise and clear. Classes were very enjoyable and environment was great. Vaibhav Sir & Neha Mam were very understanding and way they taught us didn’t allowed me to be ambiguous at any point of time. It was my pleasure to be a part of M.K.GUPTA CA CLASSES. ABHISHEK JAIN My experience with M.K.GUPTA CA CLASSES was tremendous. I learnt a lot and secured good marks just because of Neha Mam & Vaibhav Sir. The way of teaching here is different with frequent & systematic test series & motivations like chocolates & cheques helped us to solve more & more questions quickly. At last I want to thank Vaibhav Sir & Neha Mam for making CPT so much easier. PANKAJ AGGARWAL Vaibhav Sir & Neha Mam are not only very good teachers but an awesome persons. They are very pure at heart and very dedicated teachers who inspires students to focus on their goals and excel in life. The most important thing which I liked the most was that they not only focus on bookish knowledge but also inculcate moral values in students so that they become good human being. Their values will always stay with me. Thank you for your guidance and support. RAVI Definitely, Vaibhav Sir & Neha Mam are the best teacher for CA-CPT. Their knowledge & way to teach is absolutely unmatchable. Their conceptual knowledge about the subjects are outstanding. At M.K.GUPTA CA CLASSES, I felt very comfortable with my studies. No Doubt, Study becomes more interesting here. I am really happy that I became a part of this precious Institute. I thank you both because your efforts have made me able to score good marks in my CPT exam.
14 NIHARIKA GUPTA I would like to express my sincere thanks to Vaibhav Sir & Neha Mam for their efforts which resulted in my success in CPT exams. Without such wonderful teachers this achievement wouldn’t have been possible. Regular tests & motivation helped us come out with flying colours in CPT exam. ROHAN KHARBANDA I would convey my heart full thanks to Vaibhav Sir & Neha Mam for their expert guidance. They taught us in such a manner as if we were having a play. Apart from their style of teaching, what suits most of us is that they relate the topic with day to day examples. Also they gave us an experience as to how we can become a CA with good qualities. NAVDEEP SINGH SETHI Well, M.K.GUPTA CA CLASSES is not an ordinary Coaching Institute. It is a family consisting of Neha Mam, Vaibhav Sir, Santosh Bhaiya, many friends and a very helpful administration staff. They have very good motivation techniques by providing cash prizes, trophies and appreciation. The faculty never hesitates in helping any student with his doubts. I secured 150 and I don’t have words to express the happiness which I saw on my proud parents’ face. In the end, I will miss you all. Love you sir and Mam. GUNJAN AGARWAL It was an honour for me to be a part of your Institute. Love, care & respect are the three things which makes your Institute unique. Few lines for you ‘ Once I know you.. Often I miss you.. Always will I care for you.. Never will I forget you.. B’coz I know I will never again gonna have a teacher like you.. Love you both.
15 FEEDBACK FROM STUDENTS OF CA-IPCC/PCC 1. VIJENDER AGGARWAL NOV-2010 (Roll No.174639) All India Topper in CA-IPCC A person who possesses such vast knowledge in the field of taxation, that we people can only dream of, is none other than M. K. Gupta Sir. He possesses the rare ability to teach this procedural subject with utmost ease, enabling his students to grasp all the provisions without any confusion. The quality of study material provided is such that a good study of it helped me score 92 marks. The variety and complexity of practical problems covered in the books are not available anywhere else. One can find many places where taxation is being taught but it is hardly possible to find a better place where tax laws are combined with their practical applicability to ensure that all concepts are crystal clear. Sir is extremely generous. Money-making doesn’t appear to be his priority and it is clearly reflected in his classes, where the infrastructure and administration stands second to none and students are awarded handsome cash-prizes not only in classes but also in tests, which are regularly conducted. Thanking Sir for all what he has done would be an insult since it was only his efforts that helped me reach this position. Sir, its your success. The relationship between us started in CPT only and continued in IPCC and I hope it will continue forever. 2. PRACHI JAIN MAY-2010 (Roll No.66312) All India Topper in CA-PCC M. K. Gupta Sir is an outstanding teacher. He is not only a good teacher but a good person by heart. His way of teaching is excellent. There are many provisions in tax but Sir repeats every provision atleast two times. This helps in understanding those provisions easily. His books are very good. Everything from theory to PRACTICAL ILLUSTRATION, EXAMINATION QUESTIONS and BARE ACT is covered in his books. Sir’s staff and management is also very good. Everything is handled in a systematic manner and on time. Overall it was a good experience. Thanks Sir !! :3. SAHIL AGGARWAL NOV-2011 (Roll No.271741) 4th RANK The material provided by the Sir in the class as well as in books is self sufficient for the exams. M.K. Gupta Sir’s knowledge about the subject is excellent. Moreover, his down-to-earth nature make him the best tax teacher one could get. 4. MAYANK AGARWAL JUNE-2009 (Roll No. 35586) 4th RANK Sir has always been very motivating and his guidance has helped me to excel in the exams. Sir has an immense knowledge of the subject and has always been available to answer our queries. Thank you Sir! 5. SAHIL ARORA NOV-2011(Roll No.215712) 6th RANK My opinion towards M.K. Gupta Sir is very good. His enthusiasm in class has amazed me a lot. There are many provisions in the subject but Sir repeats them atleast twice which is of immense help. Also, the explanation of topic with a relevant practical example clears all the queries. M.K. Gupta Sir’s books along with notes cover easily the entire syllabus and the notes prove really helpful one day before the exam. OVERALL A GREAT EXPERIENCE! 6. NIKETA SABOO MAY-2011(Roll No.52328) 6th RANK I think M.K. Gupta Sir is an outstanding Teacher. He has excellent knowledge of the subject. With his skills and knowledge, he has made Tax subject very easy to understand and really interesting. I would recommend every aspiring CA, to take guidance from Sir. It will really be helpful. Thank you Sir, for guiding us throughout. It was a wonderful experience. 7. ANU GOEL NOV-2011 (Roll No.288966) 7th RANK The experience with M.K. Gupta Tax Classes was really amazing!! Sir is full of knowledge and experience. He repeats every provision and concept behind it in detail. I have personally never seen him in a hurry to finish the course. His very motive is to make sure the student understand the provisions fully! The book has large number of practical illustrations, which further helps to understand the subject! Thank you Sir!!! 8. MADHAV BANKA NOV-2011(Roll No.233313) 8th RANK M.K. Gupta Sir is one of the best teacher in my life and he is the best teacher of taxation in whole India. He has a vast knowledge in the field of taxation which helped me a lot to get such good marks and he inspired
16 me to get rank. Because of him, I developed great interest in tax due to which I am going to choose my career in field of taxation. For this I am very thankful to the Sir. 9. RAJAT GUPTA NOV-2011(Roll No.408691) 9th RANK th I got 9 rank by scoring great marks in all six subject but the biggest credit for my achievement goes to M.K. Gupta Sir. His way of appreciating the students is excellent. Books given by M.K. Gupta Sir is so easy and understandable. In CA market M.K. Gupta Sir is the only name which helps the students in all areas whether in studies or in motivating the students. Thank you Sir. 10. NEVAID AGGARWAL NOV-2010(Roll No.178788) 10th RANK My opinion towards Sir is very good. His enthusiasm in class amazed me a lot. His indepth knowledge of the subject along with detailed books was of immense help. He is by far the best tax teacher one can go for guidance. 11. RUCHIKA ARORA MAY-2008 (Roll No. 62449) 13th RANK M.K. Gupta Sir has vast knowledge about the subject and is every ready to help their students to touch the heights of their career. I owe a great deal of my success to Sir and this institute and considers myself to be fortunate of being the part of this institute. M.K. GUPTA SIR ROCKS !! 12. ASHISH SABOO JUNE-2009 (Roll No. 47977) 13th RANK As a teacher, M.K. Gupta Sir is just like a sea of knowledge and you get each and every thing from very beginning to end from him. Sir is really a nice person. He gives each and everything to his student. Coaching is excellent and the book is complete. If a student read Sir’s notebook + book and get Sir’s knowledge he will sureshot get very good marks. 13. GARIMA MADAN MAY-2010 (Roll No.57619) 13th RANK No one can replace M. K. Gupta Sir. His way of teaching is unique in this world. The environment of classrooms is well maintained. The facilities provided were upto the mark. There is no need to refer any other book if you are studying M. K. Gupta Sir’s notes and study material. Be honest towards your studies and Sir will show you the way of success. 14. KESHAV GOEL NOV-2011 (Roll No.234597) 14th RANK A complete package. A good teacher with good teaching skills making you learn and practice a lot in the class itself. His notes are excellent both for the exams and future. He also provides a lot of knowledge for the other issues as well. Thank you Sir! Thanks a lot for your help and support. 15. ADITI AGARWAL NOV-2011 (Roll No.298278) 15th RANK M.K. Gupta Sir is a great teacher having an exceptionally well knowledge about the subject. He teaches every concept in very detailed manners and the notes provided are sufficient for preparation during exam. 16. HARSH KUMAR GARG NOV-2011 (Roll No.207614) 15th RANK The notes of M.K. Gupta Sir was very useful for my preparation. I give the credit of my success to Sir. Also, the study material and the motivational words of Sir was very useful. 17. SANDIP AGARWAL MAY-2010 (Roll No. 53610) 15th RANK A man who has achieved all the levels of satisfaction and is here just to serve the society with his knowledge and aura. He is the man with the ability to produce rank holders with most ease. His book is more than enough for scoring heavily. 18. REEMA NOV-2010 (Roll No.174999) 15th RANK I think, M. K. Gupta Sir is one of the best teacher in Taxation. For me, taxation becomes so much easy just because I have studied from M.K. Gupta Sir. It’s a life time achievement for me that I have studied from M.K. Gupta Sir. Thanks a lot to Sir, you are great. 19. SACHIN GUPTA MAY-2008 (Roll No. 29304) 16th RANK EXCELLENT COACHING ! EXCELLENT KNOWLEDGE ! EXCELLENT BOOK ! EXCELLENT WAY OF TAKING UP QUERIES ! The way of teaching of Sir is very nice. He makes each and every thing so easy that we can learn it in the class room itself. The notes and books provided by Sir are excellent. There is no need to consult any book and in my opinion M.K. Gupta Sir is the best teacher of income tax in world.
17 20. SUMAN RANI NOV-2008 (Roll No. 21180) 16th RANK He is the best teacher and having excellent practical knowledge. He is very cooperative and boosts the confidence level of the students. No teacher can be compared with him because he is the best. He is also a superb person as a human being and understands the problems of students and solves them. I am very Thankful to him and even words are not sufficient to express his gratitude. 21. RIDHI NARULA NOV-2009 (Roll No. 60965) 16th RANK Coaching provided by M. K. Gupta Sir is very good and knowledge of teacher is very good. Excellent Teacher, Fabulous personality and Marvellous Guide – these are the apt words to describe M.K. Gupta Sir. He taught me how beautiful the studying is. His knowledge of the subject is outstanding. 22. ANIL KUMAR MALI NOV-2010 (Roll No. 53101) 16th RANK Broadly Speaking, M. K. Gupta Sir knowledge, experience and CA oriented approach is far beyond other teachers. He is very much excellent in his concept. Thanking you and my colleagues and seniors namely Amit, Ankit, Manoj, My C.A. & Akshay Sir. Thanking you again. If you want to get Rank, do what your teacher and your mind vis-à-vis your heart guides. Really! 23. RAM DAS SONAWALA MAY-2011 (Roll No.45919) 16th RANK First of all Thank You Very Much Sir for your support, it helped me to take a rank. You are a good teacher. Your method of teaching and your never ending knowledge, become very useful for me to get the good marks in taxation. Overall I am fully satisfied with your teaching. 24. CHARU SINGHAL JUNE-2009 (Roll No. 46941) 17th RANK M.K. Gupta Sir is the best teacher for Tax. He is a very nice person. He is always there to help the students. His class notes and book are self sufficient to score good marks in Tax. I admire him not only as a teacher but also as a guide and as a person. Thank you Sir. 25. VARUN LAKRA NOV-2008 (Roll No. 69351) 18th RANK In my view, M.K. Gupta Sir is the best teacher for Income Tax for PCC. He is a brilliant teacher. The study material provided was excellent with perfect examples. Lastly, it is hard work and support of our teacher which has helped me to get 18th Rank in PCC. THANK YOU SIR!! REGARDS 26. AMAN JAIN NOV-2011 (Roll No.233247) 19th RANK “The mediocre teacher tells. The Good Teacher explains. The superior teacher demonstrates & The Great teacher inspires.” M.K. Gupta Sir is really a great teacher. His unmatchable style of teaching coupled with Sir’s peace & calm nature of dealing with students & handling their queries is really excellent. The reason behind my excellence in taxation entirely goes to M.K. Gupta Sir. The notes & books provided is more than enough & exhaustive. It was really a great experience & memorable period of my life. Thanks a lot Sir! 27. ARPIT BANSAL NOV-2011 (Roll No.222713) 20th RANK You know you are in the right place when you are taking coaching from M.K. Gupta Sir. M.K. Gupta Sir’s vast knowledge and amazing conceptual clarity goes a long way in helping you understanding Taxation in great detail. Thank You Sir for teaching me!! 28. ANSHIKA GUPTA NOV-2010 (Roll No.175016) 20th RANK M. K. Gupta Sir is very good teacher and he has a “Treasure of Knowledge”. His teaching style is excellent and I will pray to God for giving successful life/future to M.K. Gupta Sir. Books contain all the necessary materials. The Institute is also very nice and the staff is very co-operative in nature and finally I wish to pay “Thanks” to Sir and his staff for their excellent teaching and co-operative behaviour. Thanks!!! 29. ANKIT GOLASH JUNE-2009 (Roll No. 47738) 21st RANK Guidance given by Sir was excellent. Notes are excellent, your concepts are very good. As far as your book is concerned, it is a complete package in itself, covering all the peculiar questions! Thanks for all your support and guidance! Thanks a lot !
18 30. RAHUL JAIN JUNE-2009 (Roll No. 47597) 22nd RANK M.K. Gupta is the best teacher for Taxation. M.K. Gupta Sir has vast knowledge about the subject and is ready to help their students to touch the heights of their Career. He has always been encouraging and without his support, I would not have been able to score a rank. Thank you Sir. 31. MANOJ NARWAL MAY-2011 (Roll No.53612) 23rd RANK First of all I would like to say “THANKS” thousand times to M. K. Gupta Sir. I owe my success to him. He is a complete package for every CA aspirant for “Taxation”. I think Sir should be called as “Tax Guru”. I have joined this coaching in order to achieve a rank and Sir made it possible. Sir boosted our morale from time to time, gave us the confidence needed to aim the Rank. Sir handled our queries both, in and after the class, so well that we do not need to worry about it at home. Teaching style of Sir is fabulous and Sir himself is a very great personality. In last, please bless me Sir. Thanking you. 32. M. SRINIDHI NOV-2011 (Roll No.220746) 25th RANK M.K. Gupta Sir teaches tax to all his students in the easiest possible way so that the concepts are clear to every student in the class. He not only teaches us but also makes us learn in the class itself. So attending the class completes the preparation then & there. The material provided is another important plus. Thank You Sir. Your teaching has indeed made TAXATION –a favourite subject of mine. 33. ROUNAK AGARWAL NOV-2011 (Roll No.236372) 25th RANK No words can describe our teacher (“M.K. Gupta Sir”), if anyone wants to be under good hands of taxation, you are where you should be. The teacher, the centre were all amazing. The performance of students itself speaks about the teacher and the coaching. What was taught in the classes was more than enough for a rank. 34. CHHAVI MEHTA MAY-2010 (Roll No.56911) 25th RANK Income tax coaching were very helpful in my preparation for the exams. Study material is very well organized. The practice questions clarified the concept beautifully. I thank M. K. Gupta Sir for helping me score so well in taxation which helped my overall score in the PCC examination. My warm regards and a heart full ‘Thank You’ to you Sir. 35. NISHANT GUPTA NOV-2010 (Roll No.173038) 25th RANK Excellent coaching for income tax with detailed notes, with supporting examples on each point. The excellent query handling procedure undertaken here helps immensely. 36. DHRUV AGGARWAL NOV-2008 (Roll No. 66185) 26th RANK Well what should I say about M.K. GUPTA Sir, he is a mobile encyclopedia in Taxation. He has vast and exhaustive knowledge about Taxation which he always tries to pass on to the students. You can’t forget Sir’s sense of humor. He is one of the most dedicated teachers I have ever seen. Extremely punctual unlike us!! I truly dedicate my achievements to Sir. 37. MADHUR AGGARWAL NOV-2009 (Roll No. 53009) 26th RANK Sir made Tax look a simple subject. Classes were full of fun and the book is very comprehensive yet easy to study. Feel lucky to have chosen M. K. Gupta Sir as my Tax teacher!! His coaching is very good, knowledge is excellent and queries taken are excellent. 38. BRIJESH AGGARWAL MAY-2010 (Roll No. 59234) 26th RANK The best tax faculty in India. Thanks to M.K. Gupta Sir, and his staff for providing me such environment which help me get such marks. 39. HIMANSHU GUPTA NOV-2009 (Roll No. 55960) 27th RANK In my knowledge till date I have not seen such a brilliant teacher full with enthusiasm, energy & vast pool of knowledge & experience. His nature is very good. The way Sir attends our queries is just fantastic. Material given by Sir is more than enough. U don’t need to refer any other book. He is the best teacher for Taxation.
19 40. SAMEER ROUSHAN MAY-2011 (Roll No.192754) 27th RANK I was simply enthralled by M.K. Gupta Sir’s way of teaching. The conceptual clarity is awesome. The study material is comprehensive and the management is excellent. Overall, it was a life changing experience and the dedication of Sir cannot be ever forgotten. Thank you very much Sir!! 41. NITIN KUMAR JAIN JUNE-2009 (Roll No. 47826) 28th RANK There is no match of M.K. Gupta Sir his knowledge is so vast that is beyond our thinking. The topic wise modules provided by Sir covers each & everything that one requires to get good marks in taxation. The atmosphere of the class is so great that I was proud to be a student of M.K. Gupta Sir, also Sir’s personality always inspire the students and motivate them. Thank you Sir. 42. KUSHAL ARORA NOV-2010(Roll No.36718) 29th RANK M. K. Gupta Sir is a very knowledgeable person and he has a very unique style of teaching which keeps the students glued to the explanations. The coaching staff is friendly and co-operative. The book covers all the aspects required for the exams. It is detailed and exhaustive. 43. SANTOSH GIRI NOV-2011 (Roll No.227904) 30th RANK M.K. Gupta Sir is the best teacher in taxation. Best faculty and good study material. 44. ABHISHEK JAIN MAY-2011 (Roll No.184085) 30th RANK M.K. Gupta Sir is not only a brilliant teacher, but also extremely helpful person. His simplicity and style of teaching makes him different from other teachers. Thank you Sir for all your efforts, that you have given for ordinary students like me to make us shine like stars. 45. VARUN V KALE MAY-2011 (Roll No.182349) 31st RANK My experience as an student of M.K. Gupta Sir has been wonderful. Sir not only explains the provisions of the Act but also the reason behind those provisions. Sir has amazing ways of taking queries from his students where students can ask their doubts during the class or after the class or even by message service. I feel that the way Sir motivates his students in the form of incentives is amazing. Sir is very particular regarding time which I feel adds to his greatness as a teacher. 46. ROHIT MURMURIA NOV-2011 (Roll No. 216642) 31st RANK M.K. Gupta Sir is wizard of taxation. He is really brilliant. He makes conceptual clearance of every provision to provide us insightful knowledge of tax. 47. ABHISHEK BATRA NOV–2011 (Roll No.407692) 32nd RANK Sir is very motivating and the class notes given by him in classes are very good and knowledgeable for the exam purposes. It is advised for every student that just go through the books and class notes of Sir. They are much sufficient for scoring better in exams. 48. ARUN SETIA NOV-2008 (Roll No. 21201) 32nd RANK I think M.K. Gupta Sir is best faculty I have ever seen. He is having a tremendous knowledge & command in taxation. The way he carries his class is unbelievable. After coming to his class, I always get encouraged from him. Thanks to Sir, for being so nice to us. 49. HELINA MALANI MAY-2011 (Roll No.47662) 32nd RANK I am grateful to the institute and M.K. Gupta Sir for his excellent teaching and knowledge which he has shared with students like me. Thank You Sir!! 50. SAHIL CHADHA MAY-2011 (Roll No.183569) 32nd RANK M.K. Gupta Sir is one of the best teachers that we have in this CA profession. His calm & composed explanations make the student understand the concept in depth. His query resolving techniques are beyond comparison and also he try to exhibit positive energy among the students which is commendable. Their study material and notes are more than sufficient. I would like to thank and congratulate Sir for my 32nd Rank. Thank You Sir. 51. KUNAL MENDIRATTA MAY-2011 (Roll No.48976) 32nd RANK I am extremely grateful to M.K. Gupta Sir for helping me in getting good marks in tax and for raising my hopes of my passing CA Exam. Further to add more, the books that Sir offered to us contained all the relevant questions that we are asked in CA examination.
20 52. MONISHA PRUTHI JUNE-2009 (Roll No. 48005) 33rd RANK The motivation provided by our dear Sir led me into the path where I never felt down. There was always a hand on us who guided towards the correct path. Moreover, the knowledge provided by M.K. Gupta Sir is unbeatable and more than sufficient. I really respect him for the whole life and thanks him for whatever I am today. 53. VASUDHA ARORA MAY-2010 (Roll No.57857) 33rd RANK M. K. Gupta Sir is a very good teacher. His way of teaching every single topic in a detailed way is one thing that I like the most. With this it builds up a lot of confidence & clarity in mind relating to concept of the topic concerned. 54. NUPUR JAIN NOV-2009 (Roll No. 63265) 34th RANK M. K. Gupta Sir is a brilliant teacher. Not only that, he is a very good human being and is always there to help the students. He has always motivated me and has been a source of inspiration. The coaching classes suited me really well. The way Sir handle the queries is worth appreciation. I truly owe my success to M. K. Gupta Sir! Thank you So much Sir for your continuous guidance and support. Thank you! 55. NEHA AGGARWAL NOV-2010 (Roll No.151847) 34th RANK In IPCC, tax seems to be the toughest but when you are trained under M. K. Gupta Sir, the fact becomes a myth. The classes are made so spontaneously interesting that no point can be missed out. Incentives given by the Sir are a boost to study hard and brings in the sense of competitiveness among students. The study material and the notes given by Sir are enough to score excellent marks in exams. Thank you Sir for your blessings. 56. MOHIT SABOO NOV-2011 (Roll No.233293) 35th RANK M.K. Gupta Sir has excellent teaching skills. I sincerely thank Sir for his guidance. M.K. Gupta Sir’s simple and easy approach towards every topic makes the subject easier to understand. The study material that is provided has all the concepts covered. Overall it was a very good experience. 57. QURICA AGARWAL NOV-2011 (Roll No.200078) 35th RANK Mere words cannot explain my gratitude towards our honourable teacher M.K. Gupta Sir. The study material is the ultimate one. The way of his teaching is really commendable. He enhanced our practical knowledge immensely. Thank You Sir. 58. PITAM GOEL NOV-2008 (Roll No. 66077) 35th RANK The book given by M.K. GUPTA Sir is more than enough to score good marks. It was due to the hard work and due efforts of M.K. GUPTA Sir that I am able to score good marks in PCE. Thanks a lot Sir for your cooperation and sincerity. KEEP ROCKING!! 59. HIMANSHU KUMAR MAY-2011 (Roll No.47698) 35th RANK He is very good teacher. He is very helpful. He is always motivating students by providing gifts. 60. NIHARIKA GUPTA NOV-2011 (Roll No.222611) 36th RANK Every aspect was taken care by M.K. Gupta Sir from books to class interaction. The style of teaching was very good and easily understandable. Queries were always solved on the spot without delay. I was very satisfied by the coaching as it helped me to improve my capability and the classes provided a very nurturing environment. Coaching was excellent. 61. ANAND GUTGUTIA MAY-2010(Roll No.65223) 36th RANK It was great overall experience and evoked interest in tax. I always looked forward to my tax classes. 62. PRIYA SINGHAL NOV-2009 (Roll No. 39736) 37th RANK In my view, M. K. Gupta Sir is a fabulous teacher. His knowledge regarding the subject is ultimate. He is very devoted & frank to the student. We can ask any number of doubts in the class or after the class without any hesitation. Most important things I liked about him – (1) He calls the student on stage to solve the question that help to boost the confidence in student (2) His view of encouraging students by providing various incentives/rewards. About books, I can say his books are very good covering whole syllabus & written in very easy language.
21 63. RAHUL YADAV NOV-2009 (Roll No. 52981) 37th RANK M.K. Gupta Sir is simply a Tax Guru. His knowledge about his subject is complete. The way he teach us is very simple & short. You need not read any other books. Even the classroom notes are enough to score good marks. His coaching is excellent, knowledge is excellent and queries taken are excellent. 64. AARUSHI GARG MAY-2010 (Roll No. 66027) 37th RANK M. K. Gupta Sir is a vast reservoir of knowledge. His style of teaching is good with a combination of excellent and very helpful notes. Books provided by M. K. Gupta Sir are sufficient in themselves to help any student achieve a good rank. Heartiest Thanks to M. K. Gupta Sir !!! 65. LOKESH AGGARWAL NOV-2010 (Roll No.189271) 37th RANK Sir, is excellent in each & every area of taxation. His knowledge and teaching style is superb. When I started my tax classes from him, I find this subject easiest among all subjects. Really Sir, U r awesome. All I can say is east or west, M.K. Gupta Sir is the best. 66. DHWANI SEHGAL NOV-2010 (Roll No.174543) 37th RANK M. K. Gupta Sir is intelligent, jolly and knows the subject very well. The classes were enriching since he linked the law with our day-to-day lives explaining the reason exactly why the law was enacted. This gave us a deep knowledge of the subject and clear understanding. The book has a good variety of questions, easy language and case laws. 67. VIRENDRA DAYAMA MAY-2011 (Roll No.45423) 37th RANK Best thing about M.K. Gupta Sir is that, he repeats every provision at least two times, which helps a lot. He is very knowledgeable person and keeps the class environment, students friendly. He has sound knowledge of the subject. The Books are very good and student does not require anything else for preparation. Thank you Sir, for your motivation and being an inspiration to us. Thank You Sir. 68. PRABIN BARAL NOV-2011(Roll No.22849) 38th RANK Conceptual clarity is the most remarkable feat of M.K. Gupta Sir. His notes are magnificent and books are self-sufficient. 69. KIRTI ANEJA NOV-2009 (Roll No. 51444) 38th RANK Excellent teacher with excellent knowledge. His way of teaching is very good. What I liked about M. K. Gupta Sir is that he thinks from the point of view of students. His book is just great and was sufficient for getting good marks in taxation. His book has a variety of questions. Thanx a lot Sir. 70. AASHISH GUPTA NOV-2009 (Roll No. 53088) 38th RANK It’s been an honor to be a student of M. K. Gupta Sir. He is a superb teacher and has a very vast knowledge of the subject. He is one of the best teacher I have come across my life till date. Sir Thank you very much and I owe a part of my success to you. His coaching is excellent, knowledge is excellent and queries taken are excellent. 71. BABITA MITTAL NOV-2009 (Roll No. 52776) 38th RANK M. K. Gupta Sir is the best teacher in tax, very helping and give due care to every student individually. He has the answer for every query. I respect him a lot. His coaching is very good, knowledge is very good and queries taken are excellent. 72. RISHABH KUMAR GUPTA NOV-2010 (Roll No.174748) 38th RANK M. K. Gupta Sir is a very brilliant teacher. He has got a very positive attitude and he keeps motivating his students to perform well and clearing their queries in a timely manner as well. The books provided by Sir are also very good containing very good questions as well. Wish he could teach me in CA finals also. Thank you Sir for all your guidance to achieve such a result. 73. AAYUSHI KATYAL NOV-2011 (Roll No.271628) 39th RANK M.K. Gupta Sir is the best tax teacher and taking his classes has always been an exciting affair. His knowledge about tax and especially the way things are handled practically has been quite enlightening. He has made the most feared subject(usually), the most fun filled and easy. Thank You so much Sir and I wish everyone has an opportunity to sit in your class. The book, notes and all the management is done very properly and in a smooth manner. All in all, the best way to study tax.
22 74. SUMEDHA RANI AGGARWAL NOV-2011(Roll No.222716) 39th RANK M.K. Gupta Sir made Tax look a simple subject, despite of the fact that Tax is the most difficult & complicated subject in IPCC having number of provisions. He made all the concepts crystal clear by explaining each concept atleast twice. Even the CA’s employed by Sir for solving the doubts and guiding the students were very helpful. All I could say is that it was an amazing experience to study at M.K. Gupta Classes. The relationship between us started in CPT with Vaibhav Sir & Neha Mam, it continued in IPCC with M.K. Gupta Sir & I hope it will last long forever. 75. PIYUSH GUPTA NOV-2008 (Roll No. 65203) 39th RANK Sir is excellent in his way of teaching and revision, 100% coverage of his syllabus, personal attention, flexible timings student friendly attitude are some of the attributes of these classes. 76. VANDANA KAUSHIK JUNE-2009 (Roll No. 48100) 39th RANK M. K. Gupta Sir is a best teacher. His way of teaching is very good & makes us to learn the subject very easily. His knowledge about the subject is ultimate. 77. SUMANT GUPTA NOV-2009 (Roll No. 50053) 39th RANK I think he is the best person in the job. His excellence in Taxation and his friendly relations with students and his coolness and calmness and further encouragement to his students, just lifts off the burden of the course. I thank Sir for being there and helping me to achieve this feat in my life. 78. MEGHA ARORA NOV-2009 (Roll No. 52763) 39th RANK M. K. Gupta Sir has always been a support to all the students while their teaching sessions. He has always boosted our morale to achieve great heights and great score not only in taxation but also in every other subject. He laid equal importance to both theory and practical which helps the students to apply whatever they are studying in their practical training. At the end I would like to thank him for being such a good teacher and a friend. 79. SUNNY GIRDHAR NOV-2010 (Roll No.60524) 39th RANK Coaching by Sir gave me an insight into practical aspects of taxation with the help of which I was able to co-relate my studies with practical training i.e. articleship. Also study material provided was good and compact enough to be revised in exams. I thanks Sir for providing me such guidance. 80. VAIBHAV AGGARWAL NOV-2010 (Roll No.56278) 39th RANK M. K. Gupta Sir is the lifeline of PCC Tax. A teacher with abundant knowledge. In serious terms, a perfect Tax Guru. 81. VARAD V KALE MAY-2011 (Roll No.182310) 39th RANK My experience of being a student here at M.K. Gupta Tax Classes has been an unforgettable one. I had attended the batch (Monday-Sunday) with little hopes of understanding the tax laws in such a small time frame. But the manner in which Sir taught gradually made me realize that I was wrong. Sir taught each and every provision in a manner that a person who listens carefully in the class would understand it 75%-80% then and there. Sir’s technique of taking up doubts is also amazing. Cash incentives for answering classroom questions correctly quicker than anyone else improves speed, fosters sense of competition and also attracts one to listen to what is being taught so that he/she would get a chance to earn that incentive. Thank you Sir for everything. 82. JYOTI GOYAL JUNE-2009 (Roll No. 46348) 40th RANK In my opinion M. K. Gupta Sir is one of the best teacher. His method of teaching is excellent specially the repetition of sections again and again in the class. His way of taking up queries is unmatchable. He makes the Tax concept crystal clear among the students through well explained examples. All students of PCC are blessed with such a good teacher. Thank to you Sir because of you Tax has been very easy subject for me. 83. ANKIT GOEL NOV-2010 (Roll No.156437) 40th RANK M. K. Gupta Sir is an excellent faculty in tax and his books are very nice and way of taking queries is very nice. Every aspect of tax is covered in his books. Overall it was a very good experience.
23 84. SONIA AGGARWAL NOV-2008(Roll No. 69153) 41st RANK Sir is a pool of knowledge, the only thing you need is to learn us how to swim & gain as much as you can. The book given by Sir covers the whole module. The overall environment of class is very good for studies. 85. RISHU GOYAL MAY-2010(Roll No. 57632) 41st RANK Book is the Best, Teacher is the Best, queries are taken in the Best way by Sir. You appear before me as god and only because of you I was able to secure/got rank. Thank You Sir. 86. MOHIT GOEL NOV-2010 (Roll No.49010) 41st RANK M. K. Gupta Sir is the best teacher for tax according to me. The journey is more appropriate word for me rather than studying tax with him. What he gives in tax is commendable and uncomparable for me. Rather than making students preparing for studies, he tells them what it is and gives them a broad view of how the provisions come into effect and their applications. If you want to enrich yourself with tax knowledge M. K. Gupta Sir is best. Thank You Sir for giving me the pearls of wisdom from the sea of your knowledge. 87. KHUSHBOO TEKCHANDANI NOV-2011 (Roll No.270637) 42nd RANK I had an excellent time in the coaching. I learnt a lot even the things which are not covered in the course. M.K. Gupta Sir has a vast knowledge in all fields and specially taxation. The material provided by the center was extremely useful. The Bare Text helped in clearing all the concepts. I would like to thank Sir for giving me such an immense experience and knowledge. The tests which were hold regularly were also helpful in studying the subject. Thank you Sir!!! 88. PIYUSH SHARMA NOV-2010 (Roll No.174793) 42nd RANK The classes were excellently managed. Sir repeats all the sections atleast two times, which helps a lot. M.K. Gupta Sir is best for Tax. Thanks Sir. 89. MANISHA JINDAL NOV-2011 (Roll No.225454) 43rd RANK M.K. Gupta Sir teaches very well. Most importantly, he focuses on practical application of tax provisions which makes understanding of the provisions very easier. Also his books are very good and are in easy language. Thank You Sir!! 90. MEGHA AGARWAL NOV-2011 (ROLL NO.267518) 43rd RANK Going to Sir’s coaching was the best part of the day. Sir’s style of teaching is just fabulous. Sir is very punctual and the staff is so cooperative and adjusting. The books covered all the provisions successfully. 91. MOHIT GARG NOV-2008 (Roll No. 65676) 43rd RANK M.K. Gupta Sir’s approach is not short term but long term. He not only wants a child to clear but also wants him/her to excel in the field of taxation by providing his knowledge. His approach of calling students to solve questions on board has worked to a great extent. 92. KISHAN KUMAR NOV-2010(Roll No.179153) 43rd RANK Studying taxation with M. K. Gupta Sir is truly a fun and an enriching experience. His simplicity, manner of conducting class and query session is indeed gratifying and awesome. However, the best thing is the emphasis on practical questions which is indispensable for securing decent marks. The notes given during the class by Sir is excellent and covers entire syllabus in a precise & crisp manner which is very helpful especially during the examination time. Finally, a heartfull thanks to you Sir. You really rock!!! 93. TRIPTI GUPTA JUNE-2009 (Roll No. 47936) 44th RANK Sir is really a very good teacher. His knowledge about tax is great. The way he links practical life with theory life is really very good. The study modules provided by Sir is more than sufficient with full knowledge of course and easy language. Sir has really cooperated with us. I really want to thank him for his contribution in my life. Thanks Sir!! 94. KANHAIYA MITTAL MAY-2010(Roll No. 57773) 44th RANK M. K. Gupta Sir is a very good teacher. We did not require to refer any other book. Sir’s notes were more than sufficient. He is a very qualified teacher and his teaching skills are unmatchable. 95. ABHISHEK SACHDEVA NOV-2011(Roll No.228089) 45th RANK M.K. Gupta Sir is one the most knowledgeable person I have ever met. Books provided by them are best and so is the coaching. M.K. Gupta Sir motivates each & every student by giving the rewards.
24 I would like to thank Sir from the bottom of my heart. THANK YOU SIR!!! 96. SAHIL MANGLA MAY-2010(Roll No.58598) 46th RANK The books given by Sir and the knowledge provided in the classes is uncomparable and more than sufficient. I thank M. K. Gupta Sir, whole heartedly for the knowledge he provided by his sincere efforts. 97. MAHESH AGGARWAL MAY-2011 (Roll No.52164) 46th RANK WELL, PERSONALLY I am a big admirer of M. K. Gupta Sir. He is truly the BEST TEACHER and his teaching is the best of all, I have ever experienced, His way of imparting knowledge and clarifying subject is so good that students gain complete knowledge without much personal efforts. I would call M. K. Gupta Sir classes not only teaching but a full training programme for students. Teaching is not a business for Sir, rather it is more of social welfare that he is doing by giving brilliant minds full of knowledge to the society. He motivates students by excellent means and enhance their knowledge to another level. I must say class notes are more than sufficient to get good marks. I heartily dedicate my achievement to Sir. Highly grateful to you Sir. Thank you so much. 98. AKHIL SEHGAL NOV-2011 (Roll No.211527) 46th RANK M.K. Gupta Sir teaches the course very brightly. Really Sir, you are the god in the industry of teaching. Sir you are the best. 99. AMAN MITTAL NOV-2011 (Roll No.274222) 47th RANK In my opinion, no teacher can teach the tax better than the M.K. Gupta Sir. He is very good by heart. He teaches in such a manner that no student can face problems. 100. ROUNAK SAWARIA NOV-2011 (Roll No.236371) 47th RANK M.K. Gupta Sir has a very deep knowledge about the subject and his practical approach towards the subject helps understand the concepts very easily. M.K. Gupta Sir repeats every section atleast twice and makes us learn them in the class itself. The notes provided in the class are more than enough for IPCC and the questions in his book ranges from simple problems to difficult ones. Last but not the least, M.K. Gupta Sir is very kind hearted and generous person and he is so hardworking which is highly motivational for all of us. 101. PANCHANAN AGGARWAL NOV-2009 (Roll No. 52360) 47th RANK In my personal opinion, he is a very good teacher and also very friendly in nature while teaching. He always give the right way to success. His coaching is excellent, knowledge is excellent and queries taken up are excellent. 102. DEVENDER PANDEY NOV-2009 (Roll No. 60647) 47th RANK The best thing about M. K. Gupta Sir is that he explains each and everything related to the topic. Class notes are sufficient for getting good marks. His coaching is excellent, knowledge is excellent and queries taken up are excellent. 103. ASHISH JAIN NOV-2009 (Roll No. 53180) 47th RANK I think M. K. Gupta Sir should be greeted with the title of “Tax Guru”. His knowledge about the subject is outstanding and matchless. The method of teaching is unique. The material provided by the Sir is a package in itself. The style of taking up the query is excellent. I suggest every CA aspirant to join M. K. Gupta Sir classes. Sir put enough efforts for the success of students. Once you join Tax classes of Sir leave everything on him and just concentrate in the class & have belief in him. 104. PANKAJ BANSAL NOV-2009 (Roll No. 52640) 47th RANK Knowledge coupled with experience make M. K. Gupta Sir a great teacher. He is down to earth man who always guided and encouraged us to achieve the success. Book is quite good involving plenty of questions with solutions which helped me out very much. His coaching is excellent, knowledge is excellent and queries taken up are excellent. 105. PIYUSH BORANIA NOV-2009 (Roll No.40193) 47th RANK M. K. Gupta Sir is the best teacher for availing tax coaching. Sir responds to queries in an excellent manner. The incentive scheme of Sir for encouraging students is awesome. The study material of M. K. Gupta Sir is excellent and the problems in the books are very comprehensive.
25 106. NITIN KUMAR NOV-2010 (Roll No.184364) 47th RANK M. K. Gupta Sir is very knowledgeable person. He has vast experience of teaching. His book is very helpful and covers all concepts. 107. SIDDHARTH JAIN NOV-2010 (Roll No.183051) 47th RANK Sir’s knowledge was excellent, his motivation in class did wonders, it was always interesting because Sir made class very interesting. I really enjoyed the practical questions in class, especially his notes that he made us write in class. The book was helpful, especially the service tax/vat book, I enjoyed the summarized portion of service tax. Overall an excellent experience! 108. CHETAN MALIK MAY-2011(Roll No.47892) 47th RANK The teacher is really good. It was a really good experience. Books are the best and so as the coaching provided by the Sir. 109. VIVEK SUGANDH NOV-2011 (Roll No.222907) 48th RANK M.K. Gupta Sir, in my opinion is a vast storehouse of knowledge in the field of taxation. He, apart from being a great teacher is also an awesome human being. His coaching classes provides a great amount of competitive environment and I feel myself blessed to be his student. 110. AMANDEEP SINGH BHATIA NOV-2008 (Roll No. 66060) 48th RANK M.K. Gupta Sir is a good teacher. He knows each and every aspect of TAXATION and also gives his precious knowledge to students. He is very helpful teacher. He is always ready to solve the problems of every student. I must say that I just got rank because of Sir. He motivates every student to study hard. 111. NIMISHA SARDA NOV-2011(Roll No.271629) 49th RANK M.K. Gupta Sir is an awesome teacher. The way he explains us the subject, it is not just understandable but becomes so interesting. Not just this, M.K. Gupta Sir’s incentives also show how much he wants his students to excel. There comes a lot of confusion regarding completeness of syllabus, especially of indirect tax, but when it comes to Sir’s notes and books combined- there remains not a single doubt. Thank You so much Sir. 112. SHIVAM MARWAH NOV-2011(Roll No. 406941) 49th RANK M.K. Gupta Sir is an amazing teacher having excellent knowledge of the subject. He is always ready to solve queries. His techniques of motivating students uncomparable. M.K. Gupta Sir is Best. Study material is excellent. Examples are very good in the books. Thank you. 113. KESHAV BHARDWAJ NOV-2011 (Roll No.421167) 50th RANK M.K. Gupta Tax Classes are a perfect blend of studies as well as innovation and skill development. One can not only gain in academic arena but studying grooms personality and professional attitude. Talking about M.K. Gupta Sir, he is not only a good teacher but also a good motivator. The apt and appropriate presentation of the relevant question and answer have helped a lot in reaching a new height of success. Great teacher, Great human being. Thanks a lot Sir. Thank You so much. 114. PANKAJ GULATI NOV-2009 (Roll No. 52267) 50th RANK The knowledge given by Sir is excellent. M.K. Gupta Sir motivates each and every student by giving them various rewards. He is available all time to solve the Queries of the students. The books provided by Sir are enough to score good marks. Thank you Sir. 115. HEENA GUPTA MAY-2010 (Roll No.53424) 50th RANK The M. K. Gupta Sir classes were fabulous. The way Sir mixes classroom knowledge with practical work is unexplainable. Knowledge of Sir is incomparable. The study environment of his classes was so comfortable that I was able to concentrate in classes. I would like to thank Sir from the bottom of my heart for his kind contribution in my studies. Thank you Sir.
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APJ Abdul Kalam This eminent scientist and engineer has also served as the 11th President of India from the period 2002 to 2007. APJ Abdul Kalam is a man of vision, who is always full of ideas aimed at the development of the country. He firmly believes that India needs to play a more assertive role in international relations. Apart from being a notable scientist and engineer, Dr APJ Abdul Kalam served as the 11th President of India from the period 2002 to 2007. He is a man of vision, who is always full of ideas aimed at the development of the country and is also often also referred to as the Missile Man of India. People loved and respected Dr APJ Abdul Kalam so much during his tenure as President that was popularly called the People's President. Read more about the biography of Dr APJ Abdul Kalam here. APJ Abdul Kalam was born on 15 October 1931 at the South Indian state of Tamil Nadu and received honorary doctorates from about 30 universities globally. In the year 1981, the Government of India presented him the nation's highest civilian honor, the Padma Bhushan and then again, the Padma Vibhushan in 1990 and the Bharat Ratna in 1997. Before Kalam, there have been only two presidents - Sarvepalli Radhakrishnan and Zakir Hussain - to have received the Bharat Ratna before bring appointed to the highest office in India. Read on about the life history of Dr APJ Abdul Kalam, who's also the first scientist and bachelor to occupy the seat of the Rashtrapati Bhavan. His perspectives on important topics have been enunciated by him in the book 'India 2020'. It highlights the action plans that will help develop the country into a knowledge superpower by the time 2020. One thing for which he received ample kudos is his unambiguous statement that India needs to play a more assertive role in international relations. And Dr APJ Abdul Kalam regards his work on India's nuclear weapons program as a way to assert India's place as a future superpower. Even during his tenure as President, APJ Kalam took avid interest in the spheres of India's science and technology. He has even put forward a project plan for establishing bioimplants. He is also an ardent advocate of open source software over proprietary solutions to churn out more profits in the field of information technology in India.
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MANMOHAN SINGH Manmohan Singh, best known as ' father of Indian Reforms', has emerged as the Congress party's frontrunner, the 14th Prime Minister of India and also the first Sikh to have reached the country's top legislative position. Hailed to be the cleanest man in Indian politics, he was Former Finance Minister and author of the post-1991 economic reforms. He was Born to Mr Gurmukh Singh and Mrs. Amrit Kaur on September 26, 1932 in a small village Gah (West Punjab), now in Pakistan. A brilliant student, Manmohan Singh secured top marks in almost all the major examinations he wrote. After his Masters in Economics from Amritsar's Hindu College under Punjab University he won scholarships to Cambridge and Oxford, earning a doctorate with a thesis on the critical role of exports and free trade in India's economy. Manmohan Singh won the prestigious Adam Smith prize in 1956 from Cambridge University. The following year, he returned to India as a university lecturer and for the next nine years remained at Punjab University before being posted for international duty with UNCTAD (United Nations Conference on Trade and Development). He then joined the Delhi School of Economics as a professor. Two years later, his academic career was cut short and he joined the government to serve in various capacities.
28 Singh held several positions throughout the 1980s and early 1990s. He served as Economic advisor to the finance ministry in the late 70s, Deputy Chairman of Planning Commission and Chairman of University Grants Commission in 1980s and early 1990's and as the Governor of the Reserve Bank of India from 1982 to 1985 etc. An academician, he was discovered by former prime minister Shri. P.V Narasimha Rao. Rao offered him the finance ministry in 1991 under the Congress Government, and the chance to rescue a sickly economy threatened by an acute balance of payments crisis. During his stint as the finance minister (1991-1996), the suave, soft-spoken Sikh guided India out of financial trouble and put the country on course to becoming an economic power by opening up the economy to foreign investment and slashing trade barriers.
E. Sreedharan Metro Man of India Elattuvalapilan Sreedharan is famous for the completion of both the Konkan Railway and Delhi Metro Rail projects within the given budget and well on time. He is amongst the top leading celebrities in the Project Management sector and is popularly known as the 'Metro Man of India' for his outstanding role in constructing the Delhi Metro Rail. He possesses effective leadership skills and has been called the architect of the Konkan Railway Project. He is a modest personality who finishes work with complete devotion and zeal. When it comes to the performance of a task, he is focused and determined to achieve. In spite of crossing the age of seventy, he is still active and endowed with strong will power. When a bridge that was a part of the Delhi Metro collapsed, E. Sreedharan put down his papers, but Shiela Dixit, the Chief Minister of Delhi rejected his resignation letter and he remained the Managing Director of Delhi Metro Rail Corporation. E. Sreedharan was born on 12th June, 1932 in the Palakkad district of Kerala. His family hails from Karukaputhoor, Palakkad district, Kerala. He completed his studies at the Basel Evangelical Mission Higher Secondary School and then went to the Victoria College in Palghat. He later on completed his Civil Engineering from the Government Engineering College, Kakinada (known as JNTU). He married a woman named Radha and the couple together had four children.
29 E. Sreedharan started his career as a Probationary Assistant Engineer in the Southern Railways. He also worked at the Bombay Port Trust as a trainee for one year. In 1963, E. Sreedharan was put in-charge of the rebuilding of the Pamban Bridge, because a tidal wave carried away the part of the bridge that connected Rameshwaram with Tamil Nadu. He completed the construction of the bridge in only forty-six days though he was given six months to do the same. This achievement was admired quite a lot. He was the Managing Director and Chairman of the Cochin Ship Yard and he was the one who commissioned Rani Padmini, the first ship built by the yard. He was also connected with India's first Metro Rail project in Kolkata. In 1981, he started working as the Chief Engineer in the Southern Railways and worked with the same for seven years. In 1987, he became the General Manager of the Southern Railways. In 1989, E. Sreedharan became a member of the Railway Board. However, in 1990 he retired from the Indian Railways and in the same year the Government of India made him the Chairman and Managing Director of Konkan Railways. Under his supervision the first important project of Build-Operate-Transfer (BOT) in India was completed. The entire project enclosed an area of 760 km with 93 tunnels and 150 bridges. In 1997, E. Sreedharan was made the Managing Director of the Delhi Metro Rail Corporation and the project was completed well in time. It thus became a milestone in the history of the Indian Railways. E. Sreedharan received the Railway Minister's Award in 1963. In 2001, he was honored with the Padma Shri by the Government of India and in 2002 he received the award for the Man of the Year by the Times of India and the Shri Om Prakash Bhasin Award for professional excellence in engineering. In 2003, he was given the title of one of Asia's Heroes by the TIME magazine and was given the All India Management Association Award for Public Service Excellence. He received the Confederation of Indian Industry Juror's Award for leadership in Infrastructure Development (2002-03). E. Sreedharan has also been honored with the Chevalier de la Legion d'Honneur (Knight of the Legion of Honor). It is the most prestigious award that a civilian can receive from the Government of France. In 2008, he was honored with the Padma Vibhushan by the Government of India and in 2009 he received a D.Litt. from the Rajasthan Technical University and a Doctor of Philosophy degree (Honoriscausa) from IIT Roorkee.
ARUN SARIN
Born: October 21, 1954 Achievement: CEO of global mobile telecommunications company Vodafone Group Plc. Arun Sarin is the Chief Executive Officer of the British based global mobile telecommunications company Vodafone Group Plc. He is one of the few Indians to head a global multi national company. Arun Sarin was born on October 21, 1954 at Panchmari, Madya Pradesh. His father was an army officer and Arun Sarin did his schooling from military boarding school in Bangalore. After schooling, Arun Sareen
30 joined IIT Kharagpur and graduated in 1975. In 1977, he did his MS in Engineering from University of California, Berkeley and subsequently did his MBA from the same university in 1978. Arun Sarin started his professional career in 1978 as an environmental analyst for a Washington, D.C., consulting firm. In 1981, he joined Natomas in California as a corporate development manager. Arun Sarin entered telecom industry in 1984, when he joined Pacific Telesis Group in San Francisco. At Pacific Telesis Group, Arun worked closely with Sam Ginn, the legendary telecommunications entrepreneur. He worked with Pacific Telesis in various professional and executive positions for 10 years, and was later appointed vice president of corporate strategy. Arun Sarin left Pacific Telesis in 1994 when it split its mobile and paging businesses. In 1995, Arun Sarin followed his mentor Sam Ginn to a newly formed wireless-communications company, AirTouch Communications. He was President and Chief Operating Officer of AirTouch from February 1997 to June 1999. In 1999, AirTouch and Vodafone, a large British wireless communications company joined hands to create Vodafone-AirTouch. Arun Sarin was made chief executive of the newly formed corporate entity. In April 2000, Arun Sarin resigned from Vodafone-AirTouch and took the CEO position at InfoSpace, an Internet infrastructure company based in Bellevue, Washington. As CEO Arun Sarin led the merger of InfoSpace and Go2Net, a consumer-portal company, for approximately $4 billion in a stock swap. After an eight-month tenure at InfoSpace, Arun Sarin resigned. In July 2001, he joined Accel Partners and Kohlberg Kravis Roberts (KKR) to lead a new telecommunications venture called Accel-KKR Telecom. After an eighteen month stint at Accel-KKR Telecom Arun Sarin resigned and on July 30, 2003 he was installed as the CEO of Vodafone.
AZIM HASHAM PREMJI
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Founder of Wipro Limited Azim Hasham Premji, founder of Wipro Limited, India's biggest and most competitive IT company based in Bangalore, was born on July 24th 1945 in Bombay. Premji was forced to leave his studies in computer science from Stanford University, California, USA at the age of 21 to take over the family business of vegetable oils when his father M.H. Premji, suddenly passed away in 1966. He has since after a gap of over thirty years completed his degree in Electrical Engineering. The Amalner-based vanaspathi manufacturing company, the Western India Vegetable Product later became Wipro Products Ltd, Wipro Technologies and Wipro Corporation. Under Premji's leadership Wipro embarked on an ambitious phase of expansion and diversification. The Company began manufacturing light bulbs with General Electric and other consumer products including soaps, baby care products, shampoos, powder etc. In 1975, Wipro Fluid Power business unit manufacturing hydraulic cylinders and truck tippers was started. But Premji's ambitions did not stop there. In the 1980s Wipro entered the IT field, taking advantage of the expulsion of IBM from the Indian market in 1975. Thus, Wipro became involved in manufacturing computer hardware, software development and related items, under a special license from Sentinel. As a result, the $1.5 million company in hydrogenated cooking fats grew within a few years to a $662 million diversified, integrated corporation in services, medical systems, technology products and consumer items with offices worldwide. The company's IT division became the world’s first to win SEI CMM level 5 and PCMM Level 5 (People Capability Maturity Model) certification, the latest in quality standards. A large percentage of the company's revenues are generated by the IT division. Wipro works with leading global companies, such as Alcatel, Nokia, Cisco and Nortel and has a joint venture in Medical Systems with General Electric company. Premji's story of success and prominence clearly shows how determination and perseverance, when coupled with knowledge, clear vision and proper planning, enable one to reach the peak of success and leadership. A straight forward person, he doesn't believe in resorting to bribery or corruption to get things done and associates quality with integrity. He is an absolute workaholic and according to him work is the only way to success and survival in a competitive environment. A tough employer, he expects his employees to be competent and will not tolerate lies or deception from anyone. Azim Hasham Premji finds himself in the Forbes Billionaire List 2000, placed in 41st position with a wealth of $ 6.4 billion. Over the years, Azim Premji has been privileged with many honors and accolades. He was chosen as the Business India's 'Businessman of the Year 2000', He was named by Fortune (August 2003) as one of the 25 most powerful business leaders outside the US, Forbes (March 2003) listed him as one of ten people globally, Business Week featured (October 2003) him on their cover with the sobriquet 'India's tech king'. The Indian Institute of Technology, Roorkee and the Manipal Academy of Higher Education have both conferred honorary doctorates on him. He is also a member of the Prime Minister's Advisory Committee for Information Technology in India. In the year 2001, Premji established Azim Premji Foundation, a not-for-profit organization with a vision of influencing the lives of millions of children in India by facilitating the universalisation of elementary education. The foundation works closely with the state governments of Karnataka, Andhra Pradesh, Madhya Pradesh etc and the programs cover over 5000 rural schools. Premji contributes the financial resources for the foundation. Personally, Premji is known for his humility and helping mentality. Easily one of the richest men in the world, he always travels in economy class. One of his favorite recreational activity is hiking. He leads a quiet life with his wife Yasmin Premji who had worked for 'Inside Outside' (editorial) in Mumbai and his two sons in a simple, but elegant villa in Bangalore. The elder son, Rishad, works in the USA for GE and the
32 younger one, Tariq, has co-founded a dotcom and works from Bangalore. Mr. Premji who holds 78% stakes in the company does not believe in naming one of his sons as his successor just for the norms.
33
G. E. VEERABHADRAPPA
PRESIDENT OF ITAT •
Born on 27th July, 1951.
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Educational Qualifications are B. Com, C.A.
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Appointed as Accountant Member on 16.08.1990 at Indore.
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Elevated as Vice President on 07.01.2005 and posted at Mumbai.
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Elevated as President on officiating basis on 14.10.2011.
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Previous Postings: Indore (1990-91), Mumbai (1991-96), Chennai (1996-01), Bangalore (2001-05) as Accountant Member, Mumbai (2005-08) and New Delhi (2008-11) as Vice President.
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Prior to his appointment in ITAT, practised as Chartered Accountant for 15 years, at Bellary, Karnataka .
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Due to retire on 26th July, 2013.
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DEEPAK PAREKH Born On: 18th October, 1944 Career: Chairman of HDFC Deepak Parekh is the Chairman of HDFC (Housing Development Finance Corporation, which is a top mortgage finance company. Besides being the Chairman, he is also the unofficial crisis consultant of the Indian Government. He, with his hard work and intelligence developed HDFC into the huge financial multinational firm that it is today. He also served Satyam Computer Services as an independent director from 11th January to 17th July, 2009. He believes in hard work, great zeal and perfection. According to him, it is very important to stick on to moral values and ethics, only then can one become a great businessman. Following immoral methods will lead only to the loss of reputation. If a person's reputation is gone it is very difficult to get it back. Read on to know more about Deepak Parekh, a prominent Banker and a well-known expert of finance in India. Early Life Deepak Parekh was born on 18th October, 1944 in India. He pursued his Bachelor of Commerce degree from the Sydenham College of Bombay University and acquired a Financial Chartered Accountant degree from England and Wales. At present, he lives in Mumbai. Career Mr. Parekh started his career as a chartered accountant in Ernst & Young Management Consultancy Services in New York. When he came to back to India, he worked with Grindlays Bank and Chase Manhattan Bank as the assistant representative for South Asia. In 1978, he joined HDFC and was promoted as the Managing Director in 1985 and thus became the Chairman in 1993. Besides this, in 1997, he became the Non-
35 Executive Chairman of IDFC (Infrastructure Development Finance Company Ltd.) which is a Government enterprise for projects of infrastructure. He also served as the Non-Executive Chairman of Glaxo India Ltd. till 2008 and is the Chairman of Burroughs Wellcome (India) Ltd. and worked on the Board of Castrol India Limited, Hindustan Unilever (since 1997), Siemens Ltd, Mahindra & Mahindra (since 1990) and Indian Hotels Company (since 2000). He is a member of the proactive advisory board of the world's biggest student determined organization AIESEC India. Along with this, he has also been a part of several Committees made by Indian Government. In 1964, he was made the Chairman of the high level of expert committee which was formed to suggest the ideas for the growth of the Unit Scheme. He was appointed the Chairman of the Advisory Group for Securities Market Regulation by the Reserve Bank of India. Later on, he became the Chairman of the National Thermal Power Corporation Ltd. He has served the Singapore Telecommunications Ltd. as a Non-Executive Independent Director, has been a Director of WNS Global Services Pvt. Ltd. and a Director of Steel Authority of India Ltd., Airports Authority of India and Lafarge India Pvt. Ltd. He serves the Exide Industries Ltd. as an Alternate Director and as a Director of IndoGerman Chamber Of Commerce. Awards and Accolades Deepak Parekh was honored as the Businessman of the Year 1996 by Business India. He was also given the JRD Tata Corporate Leadership Award by All India Management Association (AIMA) and was the first to receive the Qimpro Platinum Award. Mr. Parekh was the youngest man to get the respected Corporate Award for the Life Time Achievement by the Economic Times. He was also honored with the Padma Bhushan in 2006 and in 2009 he attended the state dinner at the White House hosted by US President Barack Obama in honor of the Indian Prime Minister Manmohan Singh. Besides this, he received the Outstanding Business Leader Award from CNBC-TV18. In 2010, for his input to the finance and accountancy profession from many years, the Institute of Chartered Accountants in England and Wales honored him with an
Outstanding Achievement Award.
DHIRUBHAI AMBANI Born: December 28, 1932 Died: July 6, 2002 Achievements: Dhiru Bhai Ambani built India's largest private sector company. Created an equity cult in the Indian capital market. Reliance is the first Indian company to feature in Forbes 500 list Dhirubhai Ambani was the most enterprising Indian entrepreneur. His life journey is reminiscent of the rags to riches story. He is remembered as the one who rewrote Indian corporate history and built a truly global corporate group.
36 Dhirubhai Ambani alias Dhirajlal Hirachand Ambani was born on December 28, 1932, at Chorwad, Gujarat, into a Modh family. His father was a school teacher. Dhirubhai Ambani started his entrepreneurial career by selling "bhajias" to pilgrims in Mount Girnar over the weekends. After doing his matriculation at the age of 16, Dhirubhai moved to Aden, Yemen. He worked there as a gasstation attendant, and as a clerk in an oil company. He returned to India in 1958 with Rs 50,000 and set up a textile trading company. Assisted by his two sons, Mukesh and Anil, Dhiru Bhai Ambani built India's largest private sector company, Reliance India Limited, from a scratch. Over time his business has diversified into a core specialisation in petrochemicals with additional interests in telecommunications, information technology, energy, power, retail, textiles, infrastructure services, capital markets, and logistics. Dhirubhai Ambani is credited with shaping India's equity culture, attracting millions of retail investors in a market till then dominated by financial institutions. Dhirubhai revolutionised capital markets. From nothing, he generated billions of rupees in wealth for those who put their trust in his companies. His efforts helped create an 'equity cult' in the Indian capital market. With innovative instruments like the convertible debenture, Reliance quickly became a favorite of the stock market in the 1980s. In 1992, Reliance became the first Indian company to raise money in global markets, its high credit-taking in international markets limited only by India's sovereign rating. Reliance also became the first Indian company to feature in Forbes 500 list. Dhirubhai Ambani was named the Indian Entrepreneur of the 20th Century by the Federation of Indian Chambers of Commerce and Industry (FICCI). A poll conducted by The Times of India in 2000 voted him "greatest creator of wealth in the century". Dhirubhai Ambani died on July 6, 2002, at Mumbai.
37
INDRA NOOYI
Achievements: CEO of PepsiCo; Ranked No.4 on Forbes magazine's annual survey of the 100 most powerful women in the world. Indra Nooyi is the newly appointed CEO of PepsiCo-the world's second-largest soft drink maker. She joins the select band of women who head Fortune 500 companies. Presently, there are only 10 Fortune 500 companies that are run by women, and Indra Nooyi is the 11th to break into the top echelons of power. Prior to becoming CEO, Indra Nooyi was President, Chief Financial Officer and a member of the Board of Directors of PepsiCo Inc. Indra Nooyi spent her childhood in Chennai. Her father worked at the State Bank of Hyderabad and her grandfather was a district judge. She did her BSc. in Chemistry from Madras Christian College and subsequently earned a Master's Degree in Finance and Marketing from IIM Calcutta. Indra Nooyi also holds a Master's Degree in Public and Private management from the Yale School of Management. Before joining PepsiCo in 1994, Indra Nooyi was Senior Vice President of Strategy and Strategic Marketing for Asea Brown Boveri, and Vice President and Director of Corporate Strategy and Planning at Motorola. She also had stints at Mettur Beardsell and Johnson & Johnson. At PepsiCo, Indra Nooyi played key roles in the Tricon spin-off, the purchase of Tropicana, the public offering of Pepsi Cola bottling group and the merger with Quaker Foods. Indra Nooyi has been ranked No.4 on Forbes magazine's annual survey of the 100 most powerful women in the world.
38
J.R.D. TATA Industrialist, 4th Chairman of TATA Industries Jehangir Ratanji Dadabhoy Tata, was born on July 29, 1904 in Paris. He was the second child of Mr Ratanji Dadabhoy Tata. He spent much of his childhood in France since his mother was French. In 1922, Tata returned to India to join the family business. He inherited most of his grandfather Jamshedji's industrial empire but first became a pioneer in aviation. He had a great personality with a charm and style of his own. After his father's death in 1926, Tata became the director of the Board of Tata Sons Ltd. Eventually in 1938, he became the chairman of the company. Under his leadership Tata Sons expanded into one of the largest industrial empire in the country- from ironworks and steelworks into chemicals, hotels, engineering and lot of other industries. In 1945, Tata Steel promoted the Tata Engineering and Locomotive Company (TELCO) with an objective to produce locomotives for the Indian Railways. Today Telco has emerged as the country’s largest Commercial Vehicle producer.
39 JRD Tata was the first Indian pilot to qualify for a British private license. He founded Tata Airlines in 1932 and by 1953, it developed and came to be known as Indian Airlines. Till 1978, Tata was the Chairman of the Indian Airlines and Air India. Tata was an early advocate of family planning and he created the Family Planning Foundation in 1971. His innovations in India's fledgling hotel and tourist industry as well as his contributions to scientific and technical research and corporate management gained public recognition from the Indian Government. He was honoured by India's highest civilian award, Bharat Ratna in 1991 and United Nations Population Award in 1992. In 1991, at the age of 87, Tata retired from Tata Sons. He passed away on November 29, 1993.
P. CHIDAMBARAM Born On: September 16, 1945 Born In: Kanadukathan, Sivaganga District, Tamil Nadu, India Career: Lawyer Popularly known as PC by the Indian press, P. Chidambaram is a person who practiced law, worked in High and Supreme Courts and started off his political career as a Congressman. As far as the country of India goes; he brought about a huge change in the commercial and financial setup of India. If at all India has been doing well for quite some time and competes at a global level, a part of the credit can go to P. Chidambaram. With his policies and expertise, it would be safe to say that he lead from the front, without failing to inspire. By profession, P. Chidambaram is a lawyer, but he is most famous for the roles he played in active politics.
40 Go ahead and read on to know more about P. Chidambaram, one of those few politicians who to this very day knows what they are doing and are concerned about the welfare of the country they lead. Early Life Born on September 16, 1945 to Palaniappa Chettiar and Lakshmi Achi, P. spent his childhood in the village of Kanadukathan in Sivaganga District of Tamil Nadu state, India. He hails from a family of Nagarathar or Nattukotai Chettiars. He studied at the Presidency College, Chennai, and graduated with a Bachelor of Science degree and then received his Bachelor of Law degree from the Law College of the University of Madras, Chennai. He later went to the Harvard Business School where he finished a Master of Business Administration (MBA) degree. He also holds a post graduate degree from the Loyola College, Chennai. Apart from studies, P. Chidambaram was also interested in playing tennis, badminton and chess. Career In 1968, P. Chidambaram married Nalini, a successful lawyer in her own right. In 1969, he enrolled as an advocate in the Madras High Court and established a successful law firm. He was also designated as a senior advocate in 1984. He has chambers in Delhi and Chennai and practices in the Supreme Court and in various High Courts in India. He has also appeared in a number of arbitration proceedings, both in India and abroad. Very few know that Mr. P Chidambaram, the US educated votary of free enterprise and unbridled economic reforms used to be a hard-core leftist arguing in favor of the command economy in the late 1960s. He was elected to the Parliament from the Sivaganga constituency in Tamil Nadu in 1984 and became a Deputy Minister under the then Prime Minister Rajiv Gandhi. Later he held the commerce and finance portfolios in various governments. In the elections held in 2004, United Progressive Alliance formed the Government and P. Chidambaram once again became the Finance Minister. In 2008, he moved to the home portfolio. As the Home Minister he has initiated steps to bring various agencies that are responsible for law and order together and work in a cohesive manner. Contribution P. Chidambaram.s main contribution to the society as a whole materialized during the budget of 2008; his move to waive off farmers. debts played a role in boosting aggregate demand in the Indian economy, thereby effectively insulating India from the impact of recession. His contribution to the finance and commerce sector of our country is immense. In the "dream-budget" for 1996-97, he brought discipline in government spending and launched an ambitious tax reform program to tackle an unwieldy fiscal deficit.
41
RAMESHWAR THAKUR
GOVERNOR OF MP Shri Rameshwar Thakur (born 28 July 1927 in Village Thakur Gangti, Godda District, Jharkhand), a senior Indian National Congress politician and former union minister of India, is the former Governor of Madhya Pradesh from 2009 to 2011 and a former Governor of Orissa from 2004 to 2006, Andhra Pradesh from 2006 to 2007 and Karnataka from 2007 to 2009. He is a chartered accountant. He was also President of the Institute of Chartered Accountants of India from 1966 to 1967. Thakur was sworn-in as the 15th Governor of Karnataka on August 21, 2007. Thakur in his capacity as governor has been accused of favouritism to his parent party, Congress.The interim report of the Lokayukta(Anti-corruption unit of karnataka) stated that Mr. Dharam Singh who is also from Congress, as Chief Minister allowed lifting of iron ore from farmland illegally, causing a huge loss to the State's exchequer. The report had recommended for recovery of Rs. 36 crore from Mr. Dharam Singh for causing loss to the exchequer.However, before demitting the office, the then Governor Rameshwar Thakur absolved Singh of all charges. He served as President of the Bharat Scouts and Guides from November 1998 to November 2001, and again after November 2004. He was transferred to Governor Madhya Pradesh for the remainder of his gubernatorial term on June 24, 2009. Thakur took over from Dr. Balram Jakhar on the expiry of the latter's term on June 30. He left office on September 7, 2011.
Introduction
42
INTRODUCTION “It was only for the good of his subjects that he collected taxes from them, just as the Sun draws moisture from the Earth to give it back a thousand fold” – – Kalidas in Raghuvansh
DIRECT TAXES (Income Tax / Wealth Tax)
INDIRECT TAXES (Central Excise Duty/Service Tax/ Custom Duty/VAT) Direct Tax / Indirect Tax If incidence of tax is borne by the person who is making payment of tax, such tax is called Direct Tax e.g. Income Tax or Wealth Tax but if incidence is borne by one person and payment is made by some other person, it is called Indirect Tax like Central Excise Duty, Service Tax, Custom Duty and Sales Tax. Income Tax and Wealth Tax are levied and collected by Central Government and are monitored by Central Board of Direct Taxes. Central Excise Duty, Custom Duty and Service Tax are levied and collected by Central Govt. and are regulated by Central Board of Excise and Custom. Sales Tax also called Value Added Tax is levied and collected by State Government and it is regulated by Acts of individual States. E.g. in case of Delhi the relevant Act is Delhi Value Added Tax Act, 2004 Central Board of Direct Taxes (CBDT) and Central Board of Excise and Custom (CBEC) work under Department of Revenue of Finance Ministry. Value Added Tax system is applicable only in indirect taxes. At IPCC level there will be one paper of Taxation and there will be 50 marks for Direct Tax and 50 Marks for Indirect Tax At CA-FINAL level, there will be 2 papers of Taxation Direct Tax 100 Marks (Income Tax – 90 Marks/Wealth Tax – 10 Marks) Indirect Tax 100 Marks (Service Tax + VAT – 40 Marks / Excise – 40 Marks / Custom – 20 Marks) Income Tax in India Income tax was introduced in India for the first time in 1860, by Sir James Wilsons in order to meet the losses because of the Mutiny of 1857.
Introduction
43
In 1886, a separate Income Tax Act was passed. In 1918, a new Income Tax Act was passed and it was replaced by a new Act which was passed in 1922. This Act remained in force up to the assessment year 1961-62. The Income Tax Act of 1922 had become very complicated on account of innumerable amendments. Hence a new Act was passed by the Parliament in 1961. The Income Tax Act, 1961 has been brought into force with effect from 1st April, 1962. It applies to the whole of India (including Jammu and Kashmir). Since 1962 several amendments have been made in the Income Tax Act. It has, therefore, become very complicated both for the administering authorities and the tax-payers. Sources of Income-Tax Law Income Tax Act, 1961 The levy of income-tax in India is regulated by the Income-tax Act, 1961. This Act is effective from 1st April 1962. The Act contains 298 sections and XIV schedules. The Income Tax Act is amended every year through Finance Act. The Finance Act Every year the Finance Minister presents the Budget to the Parliament. It is divided into different parts. (i)
Part A of the budget speech contains the proposed policies of the Government in fiscal areas.
(ii)
Part B of the budget speech contains the detailed tax proposals.
After the Finance Bill is passed by the Parliament and the assent of the President is obtained, it becomes the Finance Act. Income-Tax Rules, 1962 The administration of direct taxes is regulated by the Central Board of Direct Taxes (CBDT). Section 295 of the Income-tax Act empowers the Board to make rules. For the proper administration of the Income-tax Act, the CBDT frames rules from time to time. These rules are collectively called Income-tax Rules, 1962. Circulars and Notifications Circulars are issued by the Board from time to time to deal with certain specific problems and to clarify doubts regarding the scope and meaning of the provisions. These circulars are issued for the guidance of the officers and/or assessees. The department is bound by the circulars, but the assessee can challenge it in the Court of Law if it is not in accordance with the law. Case Law It is not possible for Parliament to conceive and provide for all possible issues that may arise in the implementation of any Act. Hence in case of question of law, the judiciary will hear the disputes between the assessee and the department and give decisions on various issues. The decisions given by various High Courts will apply in the respective states, but the decision given by the Supreme Court shall be applicable throughout the country.
Computation of Total Income And Tax Liability
44
COMPUTATION OF TOTAL INCOME AND TAX LIABILITY Question 1: Write a note on Computation of Total Income. Answer: Computation of Total Income Whether a particular income shall be taxed or not shall depend on the residential status and the type of income. Residential status infact explains connection of the person with the country and types of income explains the connection of the income with the country. If the person donot have any connection and also the incomes do not have any connection with the country, the income shall not be taxable but if either the person or the income has any connection, the income is taxable. If the income is taxable, it will be further divided into five different categories of income which are called heads of income i.e. if the income is received from the employer, it will be considered to be income under the head salary; if the income is in connection with letting out of house property, income is taxable under the head house property; if the income is from any business or profession, it is taxable under the head profits and gains of business/profession; if any capital asset (gold, land, house etc) has been transferred, income is taxable under the head capital gains; if there is any other income like interest or winnings from a lottery etc, it is covered under the head other sources. Income shall be computed under each head i.e. expenses incurred shall be deducted from the gross receipt as per the provisions of the relevant head. Income computed under each head shall be added up to compute the gross total income. Certain concessions are allowed from the gross total income which are called deduction from gross total income under section 80C to 80U. After permitting the deductions, remaining income is called total income. Computation of total income can be shown mathematically in the manner given below: Total Income of an assessee shall be computed in the following steps: Compute the income of the assessee under all the five heads, permitting exemption/deductions of each head. ` (i) Income from Salaries (Section 15 to 17) ……….. (ii) Income from House Property (Section 22 to 27) ……….. (iii) Profits and gains of Business or Profession (Section 28 to 44DB) ……….. (iv) Capital Gains (Section 45 to 55A) ……….. (v) Income from Other Sources (Section 56 to 59) ……….. Gross Total Income ……….. _______ Deductions from gross total income [Section 80C to 80U] ……….. _______ Total Income ……….. _______ Total Income shall be rounded off u/s 288A in the multiples of 10 and for this purpose, any paisa shall be ignored and if the last digit is 5 or more, it will be rounded off to the higher multiple otherwise it will be rounded off to the lower multiple. ………..
Computation of Total Income And Tax Liability
45 _______
Question 2: Write a note on Computation of Tax Liability. Answer: Computation of Tax Liability Tax liability of an individual, Hindu Undivided Family, association of persons, body of individual shall be computed in the manner given below: 1. Divide Total Income into four parts – (i) Long term capital gains Section 112 Long term capital gains shall be taxed @ 20% (ii) Short term capital gains on the transfer of equity shares or units of an equity oriented fund Section 111A Such capital gains shall be taxable @ 15% (iii) Casual Income As per section 115BB, casual income shall be taxable @ 30%. As per section 2(24), casual income means any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. Lottery includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called. Card game and other game of any sort includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game. (iv) Any other income Any other income is taxable at slab rates as per the relevant Finance Act (Finance Act 2012) and are as given below: • Resident individual of the age of 60 years or more at any time upto the end of relevant previous year but less than eighty years If total income is upto `2,50,000 NIL On next `2,50,000 10% On next `5,00,000 20% On Balance amount 30% • Resident individual of the age of 80 years or more at any time upto the end of relevant previous year If total income is upto `5,00,000 NIL On next `5,00,000 20% On Balance amount 30% • Any Individual, Hindu Undivided Family, Association of Persons, Body of Individual or artificial Juridical Person Income shall be taxable at the slab rates given below: If total Income upto `2,00,000 NIL On next `3,00,000 10% On next `5,00,000 20% On Balance amount 30% (The purpose of slab rates is to tax the income of poor person at lower rate)
Computation of Total Income And Tax Liability
46
2. Primary Education Cess and Secondary and Higher Education Cess Primary Education Cess (PEC) shall be charged @ 2% and Secondary and Higher Education Cess (SHEC) @ 1% of income tax. Rounding off of Tax Section 288B Any amount payable, and the amount of refund due, shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paise shall be ignored and thereafter if such amount is not a multiple of ten, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple of ten and if the last figure is less than five the amount shall be reduced to the next lower amount which is a multiple of ten. Capital Gains If any capital asset has been transferred like land, building, gold, shares etc. profit shall be called capital gains and if the asset has been transferred within a period of three years, capital gains shall be short term and shall be taxable at the normal rate and otherwise it will be long term capital gain and shall be taxable @ 20%. In case of shares or units of mutual fund etc., period of three years shall be taken as one year. If any person has transferred equity shares or units of equity oriented mutual funds and has paid securities transaction tax, in such cases long term capital gain shall be exempt from income tax under section 10(38) but short term capital gains shall be covered under section 111A and shall be taxable @ 15%. Equity oriented mutual fund means such mutual funds in which more than 65% of the total proceeds have been invested in the equity shares of the domestic company. Illustration 1: Compute tax liability in the following cases for the assessment year 2013-14. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii)
Mr. X (resident) has total income of `12,00,000 Mr. X (non-resident) has total income of `12,00,000 Mrs. X (resident) has total income of `12,00,000 Mrs. X (non-resident) has total income of `12,00,000 Mr. X (resident), aged 60 years has total income of `12,00,000 Mrs. X (resident), aged 60 years has total income of `12,00,000 Mr. X (non-resident), aged 60 years has total income of `12,00,000 Mrs. X (non-resident), aged 60 years has total income of `12,00,000 Mr. X (resident), aged 80 years has total income of `12,00,000 Mrs. X (resident), aged 80 years has total income of `12,00,000 Mr. X (non-resident), aged 80 years has total income of `12,00,000 Mrs. X (non-resident), aged 80 years has total income of `12,00,000
Solution: (i) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700 (ii) Computation of Tax Liability
` 12,00,000 1,90,000 3,800 1,900
Computation of Total Income And Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700 (iii) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700 (iv) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700 (v) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,90,550 (vi) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,90,550 (vii) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700 (viii) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
47 12,00,000 1,90,000 3,800 1,900
12,00,000 1,90,000 3,800 1,900
12,00,000 1,90,000 3,800 1,900
12,00,000 1,85,000 3,700 1,850
12,00,000 1,85,000 3,700 1,850
12,00,000 1,90,000 3,800 1,900
12,00,000 1,90,000 3,800 1,900
Computation of Total Income And Tax Liability
48
1,95,700 (ix) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,64,800
12,00,000 1,60,000 3,200 1,600
(x) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,64,800
12,00,000 1,60,000 3,200 1,600
(xi) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700
12,00,000 1,90,000 3,800 1,900
(xii) Computation of Tax Liability Total Income Tax on `12,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,95,700
12,00,000 1,90,000 3,800 1,900
` 5,35,000 2,45,000 30,000 1,10,000 25,000 55,000
Illustration 2(A): Mr. X has income asunder: • Income under the head salary • Income under the head house property • Income under the head business/profession • Long term capital gains • Short term capital gains • Casual Income (winnings of lottery) Deductions allowed under section 80C to 80U
25,000
Compute his tax liability for the assessment year 2013-14. Solution: Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Business/Profession Income under the head Capital gains
`
` 5,35,000 2,45,000 30,000
Computation of Total Income And Tax Liability Long term capital gains Short term capital gains Income under the head Other Sources (Casual income) Gross Total Income Less: Deductions u/s 80C to 80U Total Income Computation of Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,34,415 Rounded off u/s 288B Illustration 2 (B): Presume the assessee is Mrs. X. Solution: Total Income Computation of Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,34,415 Rounded off u/s 288B Illustration 2 (C): Presume the assessee is Mr. X, aged 60 years. Solution: Total Income Computation of Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,29,265 Rounded off u/s 288B Illustration 2 (D): Presume the assessee is Mr. X, aged 80 years. Solution: Total Income Computation of Tax Liability
49 1,10,000 25,000
1,35,000 55,000 10,00,000 25,000 9,75,000 22,000 16,500 92,000 1,30,500 2,610 1,305 1,34,420 ` 9,75,000 22,000 16,500 92,000 1,30,500 2,610 1,305 1,34,420 ` 9,75,000 22,000 16,500 87,000 1,25,500 2,510 1,255 1,29,270 ` 9,75,000
Computation of Total Income And Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,03,515 Rounded off u/s 288B Illustration 2 (E): Presume the assessee is Mrs. X (non-resident). Solution: Total Income Computation of Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,34,415 Rounded off u/s 288B Illustration 2 (F): Presume the assessee is Mr. X (non-resident) aged 60 years. Solution: Total Income Computation of Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,34,415 Rounded off u/s 288B Illustration 2 (G): Presume the assessee is Mr. X (non-resident) aged 80 years. Solution: Total Income Computation of Tax Liability Tax on Long term capital gains `1,10,000 @ 20% u/s 112 Tax on Casual Income `55,000 @ 30% u/s 115BB Tax on Normal income `8,10,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,34,415
50 22,000 16,500 62,000 1,00,500 2,010 1,005 1,03,520 ` 9,75,000 22,000 16,500 92,000 1,30,500 2,610 1,305 1,34,420 ` 9,75,000 22,000 16,500 92,000 1,30,500 2,610 1,305 1,34,420 ` 9,75,000 22,000 16,500 92,000 1,30,500 2,610 1,305
Computation of Total Income And Tax Liability Rounded off u/s 288B
51 1,34,420
Question 3: Write a note on special provision in case of Resident Individual and Resident Hindu Undivided Family. Answer: Special provision in case of Resident Individual and resident Hindu Undivided Family In case of a resident individual or resident Hindu Undivided Family if total income excluding long term capital gains and short term capital gain covered under section 111A and casual income is below the amount which is exempt from income tax (i.e. 2,00,000/2,50,000/5,00,000), in such cases deficiency in the exemption shall be allowed from long term capital gains or short term capital gain under section 111A as the case may be. Example Mr. X has long term capital gains of `1,40,000 and his income from house property is `70,000. In this case, his tax liability shall be `2,060.[(1,40,000 – 1,30,000) x 20% + (10,000 x 20%) x 3%] Since in the given case normal income (house property) is less than `2,00,000, the deficiency of `1,30,000 has been deducted from long term capital gains and remaining amount of `10,000 has been taxed @ 20%. The purpose is to give exemption of `2,00,000 / 2,50,000 / 5,00,000 to the persons who have normal income less than `2,00,000 / 2,50,000 / 5,00,000. If the assessee is non-resident individual or non-resident Hindu Undivided Family, the above provisions shall not apply i.e. if the normal income is less than `2,00,000, deficiency shall not be allowed from long term capital gains or short term capital gain under section 111A. Example If in the above case the assessee is non-resident, his tax liability shall be 1,40,000 x 20% + (1,40,000 x 20%) x 3% = `28,840 i.e. deficiency has not been allowed from long term capital gain. Example Similarly, if Mr. X is resident individual has short term capital gains covered under section 111A amounting to `5,00,000, in this case, his tax liability shall be (5,00,000 – 2,00,000) x 15% + (3,00,000 x 15%) x 3% = `46,350. If the assessee is non-resident individual or HUF, in that case, no such deficiency shall be allowed and accordingly tax liability shall be 5,00,000 x 15% + (5,00,000 x 15%) x 3% = `77,250. Illustration 3: Compute tax liability for the assessment year 2013-14 in the following situations: (i) Mr. X is resident in India and has income under the head house property `40,000 and income under the head salary `30,000 and long term capital gains `4,80,000. (ii) Presume in the above situation the assessee is Mrs. X. (iii) Presume in the above situation the assessee is Mrs. X and she is aged about 70 years. (iv) Presume in the above situation the assessee is Mr. X and he is aged about 70 years. (v) Presume in the above situation the assessee is Mrs. X and she is aged about 85 years. (vi) Presume in the above situation the assessee is Mr. X and he is aged about 85 years. (vii) Presume in all the above situations, the assessee is non-resident in India. Solution: (i) Computation of Total Income Income under the head Salary
` 30,000
Computation of Total Income And Tax Liability Income under the head House Property Income under the head Capital Gains (LTCG) Gross Total Income Less: Deduction u/s 80C to 80U Total
52 40,000 4,80,000 5,50,000 Nil Income
5,50,000 Computation of Tax Liability Tax on LTCG `3,50,000 (4,80,000 – 1,30,000) @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 72,100 (ii) Total Income Computation of Tax Liability Tax on LTCG `3,50,000 (4,80,000 –1,30,000) @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (iii) Total Income Computation of Tax Liability Tax on LTCG `3,00,000 (4,80,000 – 1,80,000) @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (iv) Total Income Computation of Tax Liability Tax on LTCG `3,00,000 (4,80,000 – 1,80,000) @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (v) Total Income Computation of Tax Liability
70,000 Nil 70,000 1,400 700
5,50,000 70,000 Nil 70,000 1,400 700 72,100 5,50,000 60,000 Nil 60,000 1,200 600 61,800 5,50,000 60,000 Nil 60,000 1,200 600 61,800 5,50,000
Computation of Total Income And Tax Liability Tax on LTCG `50,000 (4,80,000 – 4,30,000) @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (vi) Total Income Computation of Tax Liability Tax on LTCG `50,000 (4,80,000 – 4,30,000) @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (vi) In situation (i) Total Income Computation of Tax Liability Tax on LTCG `4,80,000 @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability In situation (ii) Total Income Computation of Tax Liability Tax on LTCG `4,80,000 @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability In situation (iii) Total Income Computation of Tax Liability Tax on LTCG `4,80,000 @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
53 10,000 Nil 10,000 200 100 10,300 5,50,000 10,000 Nil 10,000 200 100 10,300
5,50,000
96,000 Nil 96,000 1,920 960 98,880 5,50,000 96,000 Nil 96,000 1,920 960 98,880 5,50,000 96,000 Nil 96,000 1,920 960 98,880
Computation of Total Income And Tax Liability In situation (iv) Total Income Computation of Tax Liability Tax on LTCG `4,80,000 @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability In situation (v) Total Income Computation of Tax Liability Tax on LTCG `4,80,000 @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability In situation (vi) Total Income Computation of Tax Liability Tax on LTCG `4,80,000 @ 20% u/s 112 Tax on `70,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
54 5,50,000 96,000 Nil 96,000 1,920 960 98,880 5,50,000 96,000 Nil 96,000 1,920 960 98,880
5,50,000 96,000 Nil 96,000 1,920 960 98,880
Deductions under section 80C to 80U shall not be allowed from Long Term Capital Gain, Short Term Capital Gains covered under Section 111A or Casual Income Deduction under section 80C to 80U shall not be allowed from long term capital gains, short term capital gains under section 111A or casual income. Example Mr. X has income under the head house property `25,000 and long term capital gains `2,20,000 and deductions allowed under section 80C to 80U are `2,62,000. In this case, tax liability shall be `4,120. In the given case normal income is `25,000 hence deduction allowed under section 80C to 80U is `25,000 because deduction under section 80C to 80U cannot exceed the amount of the normal income. Accordingly normal income shall be nil and deficiency of `2,00,000 shall be allowed from the long term capital gains and remaining long term capital gains of `20,000 shall be taxed @ 20% plus education cess @ 2% plus SHEC @1% and tax liability shall be `4,120 Illustration 4: Compute tax liability for the assessment year 2013-14 in the following situations: (i) Mr. X is resident in India and his incomes are as follows: (a) Income under the head Salary `1,20,000
Computation of Total Income And Tax Liability
55
(b) Income under the head House Property `60,000 (c) Long term capital gains `2,20,000 (d) Short term capital gain under section 111A `1,10,000 (e) Casual Income `90,000 (f) Deduction under section 80C to 80U `2,00,000 . (ii) Presume in the above situation the assessee is Mrs. X. (iii) Presume in the above situation the assessee is Mrs. X and she is aged about 70 years. (iv) Presume in the above situation the assessee is Mr. X and he is aged about 70 years. (v) Presume in the above situation the assessee is Mrs. X and she is aged about 83 years. (vi) Presume in the above situation the assessee is Mr. X and he is aged about 83 years. (vii) Presume in the above situation the assessee is Mr. X and he is aged about 70 years and he is nonresident. (viii) Presume in the above situation the assessee is Mr. X and he is aged about 83 years old and he is nonresident. Solution: (i) Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Capital Gains Long term capital gains Short term capital gains u/s 111A Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on LTCG `20,000 (2,20,000 – 2,00,000) @ 20% u/s 112 Tax on STCG `1,10,000 @ 15% u/s 111A Tax on Casual income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 48,925 Rounded off u/s 288B (ii) Total Income Computation of Tax Liability Tax on LTCG `20,000 (2,20,000 – 2,00,000) @ 20% u/s 112 Tax on STCG `1,10,000 @ 15% u/s 111A Tax on Casual income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 48,925
`
` 1,20,000 60,000
2,20,000 1,10,000
3,30,000 90,000 6,00,000 1,80,000 4,20,000 4,000 16,500 27,000 Nil 47,500 950 475 48,930 4,20,000 4,000 16,500 27,000 Nil 47,500 950 475
Computation of Total Income And Tax Liability Rounded off u/s 288B (iii) Total Income Computation of Tax Liability Tax on LTCG (2,20,000 – 2,20,000) @ 20% u/s 112 Tax on STCG `80,000 (1,10,000 – 30,000) @ 15% u/s 111A Tax on Casual Income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 40,170 (iv) Total Income Computation of Tax Liability Tax on LTCG (2,20,000 – 2,20,000) @ 20% u/s 112 Tax on STCG `80,000 (1,10,000 – 30,000) @ 15% u/s 111A Tax on Casual Income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 40,170 (v) Total Income Computation of Tax Liability Tax on LTCG (2,20,000 – 2,20,000) @ 20% u/s 112 Tax on STCG (1,10,000 – 1,10,000) @ 15% u/s 111A Tax on Casual Income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 27,810 (vi) Total Income Computation of Tax Liability Tax on LTCG (2,20,000 – 2,20,000) @ 20% u/s 112 Tax on STCG (1,10,000 – 1,10,000) @ 15% u/s 111A Tax on Casual Income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess
56 48,930 4,20,000 Nil 12,000 27,000 Nil 39,000 780 390
4,20,000 Nil 12,000 27,000 Nil 39,000 780 390
4,20,000 Nil Nil 27,000 Nil 27,000 540 270
4,20,000 Nil Nil 27,000 Nil 27,000
Computation of Total Income And Tax Liability Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 27,810 (vii) Total Income Computation of Tax Liability Tax on LTCG `2,20,000 @ 20% u/s 112 Tax on STCG `1,10,000 @ 15% u/s 111A Tax on Casual income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 90,125 Rounded off u/s 288B (viii) Total Income Computation of Tax Liability Tax on LTCG `2,20,000 @ 20% u/s 112 Tax on STCG `1,10,000 @ 15% u/s 111A Tax on Casual income `90,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 90,125 Rounded off u/s 288B
57 540 270
4,20,000 44,000 16,500 27,000 Nil 87,500 1,750 875 90,130 4,20,000 44,000 16,500 27,000 Nil 87,500 1,750 875 90,130
Question 4: Write a note on taxability of income of Partnership Firm and Domestic Company. Answer: Taxability of income of Partnership Firm and Domestic Company 1. Partnership firm Long term capital gains are taxable @ 20%, STCG u/s 111A shall be taxable @ 15% and casual income @ 30% and other incomes are also taxable @ 30%. Education cess is applicable @ 2% and SHEC is applicable @ 1% 2. Domestic Company Long term capital gains are taxable @ 20%, STCG u/s 111A shall be taxable @ 15% and casual income @ 30% and other incomes are also taxable @ 30%. Surcharge shall be applicable @ 5% provided total income is exceeding `100 lakhs. Education cess is applicable @ 2% and SHEC is applicable @ 1% 3. Foreign Company
Computation of Total Income And Tax Liability
58
Long term capital gains are taxable @ 20%, STCG u/s 111A shall be taxable @ 15% and casual income @ 30% and other incomes are also taxable @ 40%. Surcharge shall be applicable @ 2% provided total income is exceeding `100 lakhs. Education cess is applicable @ 2% and SHEC is applicable @ 1% Illustration 5 (A): Compute tax liability of ABC Ltd. a domestic company in the following situations: (i) The company has income under the head Business/Profession `50,000. (ii) The company has income under the head Business/Profession `1,00,000. (iii) The company has income under the head Business/Profession `500,00,000. (iv) The company has income under the head Business/Profession `100,00,000. (v) The company has long term capital gains of `50,000. (vi) The company has long term capital gains of `200,00,000. (vii) The company has long term capital gains of `5,00,000. (viii) The company has long term capital gains of `10,20,000. (ix) The company has income being casual income `250,00,000. Solution: (i) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `50,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 15,450 (ii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `1,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,900 (iii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `500,00,000 @ 30% Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 162,22,500 (iv) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `100,00,000 @ 30% Add: Education cess @ 2%
` 50,000 50,000 15,000 300 150
1,00,000 1,00,000 30,000 600 300
500,00,000 500,00,000 150,00,000 7,50,000 3,15,000 1,57,500
100,00,000 100,00,000 30,00,000 60,000
Computation of Total Income And Tax Liability Add: SHEC @ 1% Tax Liability 30,90,000 (v) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `50,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 10,300 (vi) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `200,00,000 @ 20% Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 43,26,000 (vii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `5,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,03,000 (viii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `10,20,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,10,120 (ix) Computation of Tax Liability Income under the head Other Sources (Casual income) Total Income Tax on `250,00,000 @ 30% Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 81,11,250 Illustration 5(B): Presume in all the above situations the assessee is a partnership firm . Solution:
59 30,000
50,000 50,000 10,000 200 100
200,00,000 200,00,000 40,00,000 2,00,000 84,000 42,000
5,00,000 5,00,000 1,00,000 2,000 1,000
10,20,000 10,20,000 2,04,000 4,080 2,040
250,00,000 250,00,000 75,00,000 3,75,000 1,57,500 78,750
`
Computation of Total Income And Tax Liability (i) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `50,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 15,450 (ii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `1,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,900 (iii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `500,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 154,50,000 (iv) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `100,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,90,000 (v) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `50,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 10,300 (vi) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `200,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
60 50,000 50,000 15,000 300 150
1,00,000 1,00,000 30,000 600 300
500,00,000 500,00,000 150,00,000 3,00,000 1,50,000
100,00,000 100,00,000 30,00,000 60,000 30,000
50,000 50,000 10,000 200 100
200,00,000 200,00,000 40,00,000 80,000 40,000
Computation of Total Income And Tax Liability
61
41,20,000 (vii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `5,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,03,000 (viii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `10,20,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,10,120 (ix) Computation of Tax Liability Income under the head Other Sources (Casual income) Total Income Tax on `250,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 77,25,000
5,00,000 5,00,000 1,00,000 2,000 1,000
10,20,000 10,20,000 2,04,000 4,080 2,040
250,00,000 250,00,000 75,00,000 1,50,000 75,000
Illustration 5(C): Presume in all the above situations the assessee is a foreign company. Solution: (i) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `50,000 @ 40% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 20,600 (ii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `1,00,000 @ 40% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 41,200
(iii) Computation of Tax Liability
` 50,000 50,000 20,000 400 200
1,00,000 1,00,000 40,000 800 400
Computation of Total Income And Tax Liability Income under the head Business/Profession Total Income Tax on `500,00,000 @ 40% Add: Surcharge @ 2% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 210,12,000 (iv) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `100,00,000 @ 40% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 41,20,000 (v) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `50,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 10,300 (vi) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `200,00,000 @ 20% Add: Surcharge @ 2% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 42,02,400 (vii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `5,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,03,000 (viii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `10,20,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
62 500,00,000 500,00,000 200,00,000 4,00,000 4,08,000 2,04,000
100,00,000 100,00,000 40,00,000 80,000 40,000
50,000 50,000 10,000 200 100
200,00,000 200,00,000 40,00,000 80,000 81,600 40,800
5,00,000 5,00,000 1,00,000 2,000 1,000
10,20,000 10,20,000 2,04,000 4,080 2,040
Computation of Total Income And Tax Liability
63
2,10,120 (ix) Computation of Tax Liability Income under the head Other Sources (Casual income) Total Income Tax on `250,00,000 @ 30% Add: Surcharge @ 2% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 78,79,500
250,00,000 250,00,000 75,00,000 1,50,000 1,53,000 76,500
Illustration 6: Surender Nath (HUF) has incomes as given below: 1. Income under the head Business/Profession `5,00,000 2. Income under the head House Property `3,00,000 3. Long term capital gains `4,00,000 4. Short term capital gains under section 111A `3,00,000 5. Casual Income `2,00,000 6. Deductions allowed under section 80C to 80U `35,000 Compute tax liability of HUF for the assessment year 2013-14. Solution: ` Computation of Total Income Income under the head Business/Profession Income under the head House Property Income under the head Capital Gains Long term capital gains Short term capital gains u/s 111A Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on LTCG `4,00,000 @ 20% u/s 112 Tax on STCG `3,00,000 @ 15% u/s 111A Tax on Casual income `2,00,000 @ 30% u/s 115BB Tax on `7,65,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,76,040.00 Meaning of Person Section 2(31) “Person” includes— (i) an individual, (ii) a Hindu undivided family, (iii) a company,
` 5,00,000.00 3,00,000.00 4,00,000 3,00,000
7,00,000.00 2,00,000.00 17,00,000.00 35,000.00 16,65,000.00 80,000.00 45,000.00 60,000.00 83,000.00 2,68,000.00 5,360.00 2,680.00
Computation of Total Income And Tax Liability
64
(iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains. Question [V. Imp.]: Discuss Partial Integration of Agricultural Income? Or Discuss Indirect Taxing of Agricultural Income? Or Under the Constitution, the power to levy a tax on agricultural income vests in the States. However, Parliament has also levied a tax on such income. Explain how this has been achieved? Answer: Agricultural Income Section 10(1) Under section 10(1), any agricultural income in India is fully exempt from income tax but if the agricultural income is from outside India, it is chargeable to tax. Indirect taxing of agricultural income or partial integration of agricultural income (Under the constitution, the power to levy a tax on agricultural income vests in the states. However, parliament has also levied a tax on such income. Explain how this has been achieved?) If any person has agricultural income as well as non-agricultural income, his tax liability shall be computed in the manner given below: 1. Compute tax on the total of agricultural income and non- agricultural income considering it to be total income of the assessee. 2. Compute tax on exemption limit (`2,00,000 / 2,50,000 / 5,00,000) and agricultural income considering it to be total income. 3. Deduct tax computed under Step 2 from Step 1 and apply education cess. 4. Long term capital gain, casual income and short term capital gain u/s 111A shall not be taken into consideration for the purpose of partial integration 5. If Agricultural income is upto `5,000, or non-agricultural income is upto the limit not chargeable to tax (`2,00,000/2,50,000/5,00,000), partial integration is not applicable. 6. Partial integration is not applicable in case of a partnership firm or a company. Illustration 7: (a) Mr. X, aged 68 years, has income under the head House Property `3,25,000, agricultural income of `1,00,000, Long term capital gain amounting to `45,000 and casual income `35,000. He is eligible for deduction under section 80C `20,000. Compute tax liability of Mr. X for assessment year 2013-14. Solution: Computation of Total Income
`
Computation of Total Income And Tax Liability
65
Income under the head House Property Income under the head Capital Gains (Long term capital gain) Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C Total Income Agricultural Income
3,25,000 45,000 35,000 4,05,000 20,000 3,85,000 1,00,000
Computation of Tax Liability Step 1. Tax on (agricultural + non-agricultural income) i.e. Tax on 4,05,000/- at slab rates Step 2. Tax on (`2,50,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `45,000 @ 20% u/s 112 Tax on casual income `35,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 25,750
15,500 10,000 5,500 9,000 10,500 25,000 500 250
(b) Presume in the above question, Mr. X is Non Resident. Solution: Computation of Total Income Income under the head House Property Income under the head Capital Gains (LTCG) Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C Total Income Agricultural Income Computation of Tax Liability Step 1. Tax on (agricultural + non-agricultural income) i.e. Tax on 4,05,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `45,000 @ 20% u/s 112 Tax on casual income `35,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,900
` 3,25,000 45,000 35,000 4,05,000 20,000 3,85,000 1,00,000
20,500 10,000 10,500 9,000 10,500 30,000 600 300
(c) Presume in the above question, Mr. X is resident and do not have any income from house property. Solution: ` There will be no partial integration. Computation of Total Income Income under the head Capital Gains (LTCG) Income under the head Other Sources (casual income) Gross Total Income
45,000 35,000 80,000
Computation of Total Income And Tax Liability Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability Tax on long term capital gain (`45,000- 45,000) Tax on casual income `35,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 10,815 Rounded u/s 288B
66 NIL 80,000 1,00,000 NIL 10,500 10,500 210 105 10,820
Illustration 8: Mrs. X has income asunder – Income under the head Salary Income under the head Capital Gains Long term capital gain Short term capital gain Income under the head Other Sources (lottery) Agricultural income Deduction allowed under section 80C to 80U
1,55,000 27,000 59,000 7,000 1,05,000 7,000
Compute her tax liability for the assessment year 2013-14 in two situations – (i) She is resident (ii) She is non-resident. Solution: (i) She is resident Computation of Total Income Income under the head Salary Income under the head Capital Gains Long term capital gain Short term capital gain Income under the head Other Sources (lottery) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Step 1. Tax on (agricultural + non agricultural income) i.e. Tax on ` 3,12,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from tax at Step 1 Tax on long term capital gain `27,000 @ 20% u/s 112 Tax on casual income `7,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 8,446
` 1,55,000 27,000 59,000 7,000 2,48,000 7,000 2,41,000 1,05,000
11,200 10,500 700 5,400 2,100 8,200 164 82
Computation of Total Income And Tax Liability
67
Rounded off u/s 288B (ii) She is non-resident Computation of Total Income Income under the head Salary Income under the head Capital Gains Long term capital gain Short term capital gain Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Step 1. Tax on (agricultural + non agricultural income) i.e. Tax on ` 3,12,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from tax at Step 1 Tax on long term capital gain `27,000 @ 20% u/s 112 Tax on casual income `7,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 8,446 Rounded off u/s 288B
8,450
1,55,000 27,000 59,000 7,000 2,48,000 7,000 2,41,000 1,05,000
11,200 10,500 700 5,400 2,100 8,200 164 82 8,450
Illustration 9: Mr. X has agricultural income of `4,900 and non-agricultural income of `2,15,000. Compute his tax liability for the assessment year 2013-14. Solution: Agricultural Income Non Agricultural income
` 4,900 2,15,000
In this case, Agricultural income is upto `5000/-, thereby, partial integration shall not be applicable. Computation of Tax Liability Tax on `2,15,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,545 Rounded off u/s 288B
1,500 30 15 1,550
Illustration 10: Mr. X has agricultural income of `5,00,000 and non-agricultural income of `2,00,000. Compute his tax liability for the assessment year 2013-14. Solution: His tax liability shall be nil, since his non-agricultural income is `2,00,000 and partial integration is not applicable.
Computation of Total Income And Tax Liability
68
Illustration 11: Mr. X (aged 70 years) has agricultural income of `3,80,000 and non-agricultural income of `2,40,000. Compute his tax liability for the assessment year 2013-14. Solution: His tax liability shall be nil, since his non-agricultural income is `2,40,000 and partial integration is not applicable. Illustration 12: (a) Mrs. X has agricultural income of `1,00,000, income under the head salary amounting to ` 2,55,000, long term capital gain of `10,00,000 and casual income of `1,00,000 (winnings of a game show on TV). Compute her tax liability for the assessment year 2013-14. Her date of birth is 02.04.1952. Solution: Computation of Total Income Income under the head Salary Income under the head Capital Gains (LTCG) Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability Step 1. Tax on (agricultural + non agricultural income) i.e. Tax on ` 3,55,000/- at slab rates Step 2. Tax on (`2,50,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain of `10,00,000 @ 20% u/s 112 Tax on casual income `1,00,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,37,415.00 Rounded off u/s 288B
` 2,55,000.00 10,00,000.00 1,00,000.00 13,55,000.00 Nil 13,55,000.00 1,00,000.00
10,500.00 10,000.00 500.00 2,00,000.00 30,000.00 2,30,500.00 4,610.00 2,305.00 2,37,420.00
Note: 1. Casual income shall include all the activities as per section 2(24)(ix). (b) Presume in the above question, her date of birth is 01.04.1953. Solution: Computation of Total Income Income under the head Salary Income under the head Capital Gains (LTCG) Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability
` 2,55,000 10,00,000 1,00,000 13,55,000 Nil 13,55,000 1,00,000
Computation of Total Income And Tax Liability Step 1. Tax on (agricultural + non agricultural income) i.e. Tax on ` 3,55,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `10,00,000 @ 20% u/s 112 Tax on casual income `1,00,000 @ 30% u/s 115BB Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,42,565 Rounded off u/s 288B
69 15,500 10,000 5,500 2,00,000 30,000 2,35,500 4,710 2,355 2,42,570
Taxability of Dividends Dividend income from the domestic company shall be exempt from tax in the hands of the shareholder as per section 10(34). (however dividends from a foreign company shall continue to be taxed in the hands of the shareholder.) As per section 115O, 115P, 115Q, the domestic company has to pay additional income tax @ 15% + surcharge @ 5% + education cess @ 2% + SHEC @ 1% and such additional income tax has to be paid maximum within 14 days from the date of declaration or distribution whichever is earlier. Example ABC Ltd. is a domestic company and has total income `80,00,000. It has declared the dividends of `10,00,000 and one of the shareholders Mr. Mohit Bhatia gets dividends of `25,000. In this case, tax liability of the company and Mr. Mohit Bhatia shall be: ` Total Income 80,00,000.00 Income tax @ 30% 24,00,000.00 Add: EC @ 3% 72,000.00 Tax Liability 24,72,000.00 Amount of Dividend Additional Income Tax @ 15% Add: Surcharge @ 5% Add: EC @ 3% Additional Income Tax Rounded off
10,00,000.00 1,50,000.00 7,500.00 4,725.00 1,62,225.00 1,62,230.00
Tax liability of Mr. Mohit Bhatia shall be nil. The company has to pay surcharge on additional income tax in every case even if total income is less than `100,00,000 Meaning of domestic company As per section 2(22A), Domestic Company means an Indian company, or any other company which, has made the prescribed arrangements for the declaration and payment, within India, of the Dividend income. Meaning of prescribed arrangements for declaration and payment of dividends within India Rule 27 A company shall be considered to have made prescribed arrangements if it has complied with the following conditions:
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70
1) The share-register of the company for the shareholders shall be regularly maintained at its principal place of business within India in respect of any assessment year from a date not later than 1st April of such year. 2) The AGM for passing the accounts and for declaring the dividends shall be held only at a place within India. 3) The dividends declared, shall be payable only within India to all shareholders. Illustration 13(A): ABC Ltd., a domestic company has current profits of `150 lakhs and the company has distributed dividends of `55 lakhs. Mr. X, one of the shareholder has received dividend of `7,00,000. Compute income tax liability of the company and that of shareholder. Calculate additional income tax payable by the company also. Solution: Tax liability and additional tax liability of the company shall be as given below: Profit before tax Income tax on `150,00,000 @ 30% Surcharge @ 5% Education cess @ 2% SHEC @ 1% Income tax liability Dividend Additional income tax @ 15% of `55 lakhs Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Additional income tax Rounded off u/s 288B
` 150,00,000.00 45,00,000.00 2,25,000.00 94,500.00 47,250.00 48,66,750.00 55,00,000.00 8,25,000.00 41,250.00 17,325.00 8,662.50 8,92,237.50 8,92,240.00
Tax liability of the shareholder shall be nil. Illustration 13(B): Presume in the above case the company is the foreign company. Solution : Tax liability and additional tax liability of the company shall be as given below: Profit before tax Income tax on `150,00,000 @ 40% Surcharge @ 2% Education cess @ 2% SHEC @ 1% Income tax liability
` 150,00,000.00 60,00,000.00 1,20,000.00 1,22,400.00 61,200.00 63,03,600.00
Additional income tax of the foreign company shall be nil. Tax liability of the shareholder shall be as given below: Dividend from foreign company Tax on `7,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
7,00,000.00 70,000.00 1,400.00 700.00 72,100.00
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71
Interest or dividend income from UTI or Mutual funds Section 10(35) If any person has received any interest or dividend from the UTI or Mutual Fund notified under section 10(23D), such income is exempt from income tax. If UTI or Mutual Funds have distributed any interest or dividend, as per section 115R, 115S, 115T UTI or Mutual Funds, have to pay additional income tax (Corporate dividend tax) at the rate of 12.5% plus surcharge @ 5% plus education cess @ 2% plus SHEC @ 1%, if the amount is distributed to individual or Hindu Undivided Family. If amount is distributed to any other person, rate shall be 30% plus surcharge @ 5% plus education cess @ 2% plus SHEC @ 1%.
PRACTICE PROBLEMS TOTAL PROBLEMS 15 Problem 1. Compute tax liability in the following cases for the assessment year 2013-14: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii)
Mr. X (resident) has total income of `18,50,000 Mr. X (non-resident) has total income of `18,50,000 Mrs. X (resident) has total income of `18,50,000 Mrs. X (non-resident) has total income of `18,50,000 Mr. X (resident), aged 65 years has total income of `18,50,000 Mrs. X (resident), aged 65 years has total income of `18,50,000 Mr. X (non-resident), aged 65 years has total income of `18,50,000 Mrs. X (non-resident), aged 65 years has total income of `18,50,000 Mr. X (resident), aged 85 years has total income of `18,50,000 Mrs. X (resident), aged 85 years has total income of `18,50,000 Mr. X (non-resident), aged 85 years has total income of `18,50,000 Mrs. X (non-resident), aged 85 years has total income of `18,50,000
Answer = (i) Tax Liability: `3,96,550; (ii) `3,96,550; (iii) `3,96,550; (iv) `3,96,550; (v) `391,400; (vi) `3,91,400; (vii) `3,96,550; (viii) `3,96,550; (ix) `3,65,650; (x) `3,65,650; (xi) `3,96,550; (xii) `3,96,550 Problem 2. Mr. X has income asunder: • • • • • •
Income under the head salary Income under the head house property Income under the head business/profession Long term capital gains Short term capital gains Casual income (winnings of lottery) Deductions allowed under section 80C to 80U Compute his tax liability for the assessment year 2013-14.
Answer = Tax Liability: `1,20,000 (b) Presume the assessee is Mrs. X.
` 2,40,000 1,55,000 3,30,000 1,20,000 35,000 65,000 45,000
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72
Answer = Tax Liability: `1,20,000 (c) Presume the assessee is Mr. X, aged 65 years. Answer = Tax Liability: `1,14,850 (d) Presume the assessee is Mrs. X (non-resident). Answer = Tax Liability: `1,20,000 (e) Presume the assessee is Mr. X (non-resident) aged 65 years. Answer = Tax Liability: `1,20,000 (f) Presume the assessee is Mr. X, aged 85 years. Answer = Tax Liability: `89,100 (g) Presume the assessee is Mr. X (non-resident) aged 85 years. Answer = Tax Liability: `1,20,000 Problem 3. Compute tax liability for the assessment year 2013-14 in the following situations: (i) Mr. X is resident in India and has income under the head house property `50,000 and income under the head salary `30,000 and long term capital gains `8,00,000. (ii) Presume in the above situation the assessee is Mrs. X. (iii) Presume in the above situation the assessee is Mrs. X and she is aged about 70 years. (iv) Presume in the above situation the assessee is Mr. X and he is aged about 70 years. (v) Presume in the above situation the assessee is Mrs. X and she is aged about 87 years. (vi) Presume in the above situation the assessee is Mr. X and he is aged about 87 years. (vii) Presume in all the above situations, the assessee is non-resident in India. Answer = (i) `1,40,080; (ii) `1,40,080; (iii) `1,29,780; (iv) `1,29,780; (v) `78,280; (vi) `78,280; (vii) Situation (i): `1,64,800; Situation (ii): `1,64,800; Situation (iii): `1,64,800; Situation (iv): `1,64,800; (v): `1,64,800; Situation (vi): `1,64,800 Problem 4. Compute tax liability for the assessment year 2013-14 in the following situations: (i) Mr. X is resident in India and his incomes are as follows: (a) Income under the head Salary `90,000 (b) Income under the head House Property `60,000 (c) Long term capital gains `2,30,000 (d) Short term capital gain under section 111A `2,40,000 (e) Casual Income `70,000
Computation of Total Income And Tax Liability
73
(f) Deduction under section 80C to 80U `2,00,000 . (ii) Presume in the above situation the assessee is Mrs. X. (iii) Presume in the above situation the assessee is Mrs. X and she is aged about 70 years. (iv) Presume in the above situation the assessee is Mr. X and he is aged about 70 years. (v) Presume in the above situation the assessee is Mr. X and he is aged about 70 years old and he is nonresident. (vi) Presume in the above situation the assessee is Mrs. X and she is aged about 82 years. (vii) Presume in the above situation the assessee is Mr. X and he is aged about 82 years. (viii) Presume in the above situation the assessee is Mr. X and he is aged about 82 years old and he is nonresident. Answer = (i) `64,890; (ii) `64,890; (iii) `55,620; (iv) `55,620; (v) `1,06,090; (vi) `21,630; (vii) `21,630; (viii) `1,06,090 Problem 5. Compute tax liability of ABC Ltd. a domestic company in the following situations for assessment year 2013-14: (i) The company has income under the head Business/Profession `70,000. (ii) The company has income under the head Business/Profession `150,00,000. (iii) The company has income under the head Business/Profession `6,00,000. (iv) The company has income under the head Business/Profession `10,30,000. (v) The company has long term capital gains of `700,00,000. (vi) The company has long term capital gains of `1,50,000. (vii) The company has long term capital gains of `6,00,000. (viii) The company has long term capital gains of `10,30,000. (ix) The company has casual income `400,00,000. Answer = (i) Tax Liability: `21,630; (ii) `48,66,750; (iii) `1,85,400; (iv) `3,18,270; (v) `151,41,000; (vi) `30,900; (vii) `1,23,600; (viii) `2,12,180; (ix) `129,78,000 (b) Presume all the above situations the company is a foreign company. Answer = (i) Tax Liability: `28,840; (ii) `63,03,600; (iii) `2,47,200; (iv) `4,24,360; (v) `147,08,400; (vi) `30,900; (vii) `1,23,600; (viii) `2,12,180; (ix) `126,07,200 Problem 6. Gagan Das (HUF) has incomes as given below:
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74
1. Income under the head Business/Profession `6,00,000 2. Income under the head House Property `4,00,000 3. Long term capital gains `4,50,000 4. Short term capital gains under section 111A `3,50,000 5. Casual Income `3,50,000 6. Deductions allowed under section 80C to 80U `1,25,000 Compute tax liability of HUF for the assessment year 2013-14. Answer = Tax Liability: `3,63,080 Problem 7. Compute tax liability in the following situations for assessment year 2013-14: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi)
Mr. X has total income `15,00,000. Mrs. X has total income of `15,00,000. Mrs. X a non-resident has total income of `15,00,000. Mr. X aged 65 years has total income of `15,00,000. Mr. X aged 65 years a non-resident has total income of `15,00,000. Mrs. X aged 65 years has total income of `15,00,000. Mrs. X aged 65 years a non-resident has total income of `15,00,000. Mr. X aged 88 years has total income of `15,00,000. Mr. X aged 88 years a non-resident has total income of `15,00,000. Mrs. X aged 88 years has total income of `15,00,000. Mrs. X aged 88 years a non-resident has total income of `15,00,000.
Answer = (i) `2,88,400; (ii) `2,88,400; (iii) `2,88,400; (iv) `2,83,250; (v) `2,88,400; (vi) `2,83,250; (vii) `2,88,400; (viii) `2,57,500; (ix) `2,88,400; (x) `2,57,500; (xi) `2,88,400 Problem 8. Compute tax liability in the following situations: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix)
Mrs. X has income under the head House Property `8,42,324. Mr. X has income under the head Business Profession `14,42,336. Mr. X aged 66 years has long term capital gains `11,35,335. Mr. X has long term capital gains of `13,35,334.90. Mrs. X has short term capital gains under section 111A `10,20,335. Mrs. X, non-resident, has long term capital gains `5,40,337. Mr. X, non-resident, aged about 66 years has winning of a lottery `7,20,000. Mr. X aged 86 years has long term capital gains `15,65,385. Mr. X, non-resident, aged about 90 years has winning of a lottery `10,20,000.
Answer = (i) `1,01,420; (ii) `2,70,580; (iii) `1,82,380; (iv) `2,33,880; (v) `1,26,740; (vi) `1,11,310; (vii) `2,22,480; (viii) `2,19,470; (ix) `3,15,180 Problem 9. Mr. X has income under the head salary `3,00,000 and income under the head house property `16,00,000 and long term capital gain `1,00,000 and agricultural income `4,00,000. Deductions allowed under section
Computation of Total Income And Tax Liability
75
80C to 80U `60,000. Compute his income and tax liability for Assessment Year 2013-14. Answer = Total Income: `19,40,000; Tax Liability: `4,86,160 (b) Presume assessee is Mrs. X and is aged 64 years. Answer = Total Income: `19,40,000; Tax Liability: `4,75,860 Problem 10. Mr. X has income under the head house property `3,00,000 and long term capital gain `5,00,000 and agricultural income `3,00,000. Deductions under section 80C to 80U `1,00,000. Compute his income and tax liability for Assessment Year 2013-14. Answer = Total Income: `7,00,000; Tax Liability: `1,03,000 (b) Presume Mr. X is aged 82 years Answer = Total Income: `7,00,000; Tax Liability: `41,200 Problem 11. Mrs. X has casual income `5,00,000 and short term capital gain under section 111A `7,00,000 and agricultural income `3,00,000. Compute her tax liability for Assessment Year 2013-14. Answer = Tax Liability: `2,31,750 (b) Presume she is non-resident and is aged 63 years. Answer = Tax Liability: `2,62,650 Problem 12. Mr. X has agricultural income `10,00,000 and income from business `12,00,000 and casual income `5,00,000 and he has completed the age of 80 years on 31.03.2013. Compute his tax liability Assessment Year 2013-14. Answer = Tax Liability: `3,70,800 (b) Presume he has completed 80 years on 01.04.2013. Answer = Tax Liability: `4,48,050 Problem 13. Mrs. X has income as given below : Income under the head Salary Income under the head House Property Short Term Capital Gain 50,000 Short Term Capital Gain111A
` 2,00,000 1,00,000 2,00,000
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76
Long Term Capital Gain Casual Income
1,50,000 70,000
Deduction u/s 80C to 80U Agricultural Income
1,10,000 5,00,000
Compute her Tax Liability for the A.Y.2013-14 Answer = Tax Liability: `91,670 (b) Presume in above she is aged 81 years. Answer = Tax Liability: `35,540 (c) Presume in (a) above she is Non Resident and deduction u/s 80C-80U is `3,00,000. Answer = Tax Liability: `83,430 Problem 14. Mrs. X has income under the head house property `2,00,000 and long term capital gain `10,00,000 and agricultural income `7,00,000. Deduction under section 80C to 80U `60,000. Compute her income and tax liability for Assessment Year 2013-14. Answer = Total Income: `11,40,000; Tax Liability: `1,93,640 (b) Presume Mrs. X is aged 79 years and income under the head house property is `10,00,000 Answer = Total Income: `19,40,000; Tax Liability: `4,14,060 Problem 15. ABC Ltd., a domestic company has total income of `500,00,000 and company has distributed dividend of `65,00,000 and one of the shareholder Mr. X has received dividend of `5,00,000. Compute tax liability and additional tax liability of the company and also that of the shareholder. Answer = Income tax liability `162,22,500 and additional income tax liability `10,54,460. Tax liability of shareholder is Nil. (b) Presume that ABC Ltd. is a foreign company. Answer = Income tax liability `210,12,000 and additional income tax liability is nil. Tax liability of shareholder `30,900.
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77
SOLUTIONS TO
PRACTICE PROBLEMS Solution 1: (i) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550 (ii) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550 (iii) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550 (iv) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2%
` 18,50,000 3,85,000 7,700 3,850
18,50,000 3,85,000 7,700 3,850
18,50,000 3,85,000 7,700 3,850
18,50,000 3,85,000 7,700
Computation of Total Income And Tax Liability Add: SHEC @ 1% Tax Liability 3,96,550 (v) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,91,400 (vi) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,91,400 (vii) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550 (viii) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550 (ix) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,65,650 (x) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,65,650 (xi) Computation of Tax Liability Total Income
78 3,850
18,50,000 3,80,000 7,600 3,800
18,50,000 3,80,000 7,600 3,800
18,50,000 3,85,000 7,700 3,850
18,50,000 3,85,000 7,700 3,850
18,50,000 3,55,000 7,100 3,550
18,50,000 3,55,000 7,100 3,550
18,50,000
Computation of Total Income And Tax Liability
79
Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550
3,85,000 7,700 3,850
(xii) Computation of Tax Liability Total Income Tax on `18,50,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,96,550 Solution 2: Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Business/Profession Income under the head Capital gains Long term capital gains Short term capital gains Income under the head Other Sources (Casual Income) Gross Total Income Less: Deductions u/s 80C to 80U Total Income Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,19,995 Rounded off u/s 288B
18,50,000 3,85,000 7,700 3,850
`
` 2,40,000 1,55,000 3,30,000
1,20,000 35,000
1,55,000 65,000 9,45,000 45,000 9,00,000 24,000 19,500 73,000 1,16,500 2,330 1,165 1,20,000
Solution 2(b): Total Income Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,19,995 Rounded off u/s 288B
` 9,00,000
Solution 2(c): Total Income
` 9,00,000
24,000 19,500 73,000 1,16,500 2,330 1,165 1,20,000
Computation of Total Income And Tax Liability Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,14,845 Rounded off u/s 288B Solution 2(d): Total Income Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,19,995 Rounded off u/s 288B
Solution 2(e): Total Income Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,19,995 Rounded off u/s 288B Solution 2(f): Total Income Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1%
80 24,000 19,500 68,000 1,11,500 2,230 1,115 1,14,850 ` 9,00,000 24,000 19,500 73,000 1,16,500 2,330 1,165 1,20,000
` 9,00,000 24,000 19,500 73,000 1,16,500 2,330 1,165 1,20,000 ` 9,00,000 24,000 19,500 43,000 86,500 1,730 865
Computation of Total Income And Tax Liability Tax Liability 89,095 Rounded off u/s 288B Solution 2(g): Total Income Computation of Tax Liability Tax on Long term capital gains `1,20,000 @ 20% u/s 112 Tax on Casual Income `65,000 @ 30% u/s 115BB Tax on Normal income `7,15,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,19,995 Rounded off u/s 288B
81
89,100 ` 9,00,000 24,000 19,500 73,000 1,16,500 2,330 1,165 1,20,000 `
Solution 3: (i) Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Capital Gains (LTCG) Gross Total Income Less: Deduction u/s 80C to 80U Total Income
30,000 50,000 8,00,000 8,80,000 Nil 8,80,000
Computation of Tax Liability Tax on LTCG `6,80,000 (8,00,000 – 1,20,000) @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,36,000 Nil 1,36,000 2,720 1,360 1,40,080
(ii) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `6,80,000 (8,00,000 – 1,20,000) @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,36,000 Nil 1,36,000 2,720 1,300 1,40,080
(iii) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `6,30,000 (8,00,000 – 1,70,000) @ 20% u/s 112 Tax on `80,000 at slab rate
1,26,000 Nil
Computation of Total Income And Tax Liability Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
82 1,26,000 2,520 1,260 1,29,780
(iv) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `6,30,000 (8,00,000 – 1,70,000) @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,26,000 Nil 1,26,000 2,520 1,260 1,29,780
(v) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `3,80,000 (8,00,000 – 4,20,000) @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (vi) Total Income Computation of Tax Liability Tax on LTCG `3,80,000 (8,00,000 – 4,20,000) @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
76,000 Nil 76,000 1,520 760 78,280 8,80,000 76,000 Nil 76,000 1,520 760 78,280
(vii)In situation (i) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `8,00,000 @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,60,000 Nil 1,60,000 3,200 1,600 1,64,800
In situation (ii) Total Income
8,80,000
Computation of Tax Liability
Computation of Total Income And Tax Liability Tax on LTCG `8,00,000 @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
83 1,60,000 Nil 1,60,000 3,200 1,600 1,64,800
In situation (iii) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `8,00,000 @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,60,000 Nil 1,60,000 3,200 1,600 1,64,800
In situation (iv) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `8,00,000 @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,60,000 Nil 1,60,000 3,200 1,600 1,64,800
In situation (v) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `8,00,000 @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,60,000 Nil 1,60,000 3,200 1,600 1,64,800
In situation (vi) Total Income
8,80,000
Computation of Tax Liability Tax on LTCG `8,00,000 @ 20% u/s 112 Tax on `80,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,60,000 Nil 1,60,000 3,200 1,600 1,64,800
Solution 4:
Computation of Total Income And Tax Liability (i) Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Capital Gains Long term capital gains Short term capital gains u/s 111A Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on LTCG `30,000 (2,30,000 – 2,00,000) @ 20% u/s 112 Tax on STCG `2,40,000 @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 64,890 (ii) Total Income Computation of Tax Liability Tax on LTCG `30,000 (2,30,000 – 2,00,000) @ 20% u/s 112 Tax on STCG `2,40,000 @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 64,890 (iii) Total Income Computation of Tax Liability Tax on LTCG (2,30,000 – 2,30,000) @ 20% u/s 112 Tax on STCG `2,20,000 (2,40,000 – 20,000) @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 55,620 (iv) Total Income
84
90,000 60,000 2,30,000 2,40,000
4,70,000 70,000 6,90,000 1,50,000 5,40,000 6,000 36,000 21,000 Nil 63,000 1,260 630
5,40,000 6,000 36,000 21,000 Nil 63,000 1,260 630
5,40,000 Nil 33,000 21,000 Nil 54,000 1,080 540
5,40,000
Computation of Total Income And Tax Liability Computation of Tax Liability Tax on LTCG (2,30,000 – 2,30,000) @ 20% u/s 112 Tax on STCG `2,20,000 (2,40,000 – 20,000) @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 55,620 (v) Total Income Computation of Tax Liability Tax on LTCG `2,30,000 @ 20% u/s 112 Tax on STCG `2,40,000 @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,06,090 (vi) Total Income Computation of Tax Liability Tax on LTCG (2,30,000 – 2,30,000) @ 20% u/s 112 Tax on STCG (2,40,000 – 2,40,000) @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 21,630 (vii) Total Income Computation of Tax Liability Tax on LTCG (2,30,000 – 2,30,000) @ 20% u/s 112 Tax on STCG (2,40,000 – 2,40,000) @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 21,630
85
Nil 33,000 21,000 Nil 54,000 1,080 540
5,40,000 46,000 36,000 21,000 Nil 1,03,000 2,060 1,030
5,40,000 Nil Nil 21,000 Nil 21,000 420 210
5,40,000 Nil Nil 21,000 Nil 21,000 420 210
Computation of Total Income And Tax Liability (viii) Total Income Computation of Tax Liability Tax on LTCG `2,30,000 @ 20% u/s 112 Tax on STCG `2,40,000 @ 15% u/s 111A Tax on Casual Income `70,000 @ 30% u/s 115BB Tax on normal income at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,06,090 Solution 5: (i) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `70,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 21,630 (ii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `150,00,000 @ 30% Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 48,66,750 (iii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `6,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,85,400 (iv) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `10,30,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,18,270
86
5,40,000 46,000 36,000 21,000 Nil 1,03,000 2,060 1,030
` 70,000 70,000 21,000 420 210
150,00,000 150,00,000 45,00,000 2,25,000 94,500 47,250
6,00,000 6,00,000 1,80,000 3,600 1,800
10,30,000 10,30,000 3,09,000 6,180 3,090
Computation of Total Income And Tax Liability (v) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `700,00,000 @ 20% Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 151,41,000 (vi) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `1,50,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,900 (vii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `6,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,23,600 (viii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `10,30,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,12,180 (ix) Computation of Tax Liability Income under the head Other Sources (Casual Income) Total Income Tax on `400,00,000 @ 30% Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 129,78,000
Solution 5(b): (i) Computation of Tax Liability Income under the head Business/Profession Total Income
87 700,00,000 700,00,000 140,00,000 7,00,000 2,94,000 1,47,000
1,50,000 1,50,000 30,000 600 300
6,00,000 6,00,000 1,20,000 2,400 1,200
10,30,000 10,30,000 2,06,000 4,120 2,060
400,00,000 400,00,000 120,00,000 6,00,000 2,52,000 1,26,000
` 70,000 70,000
Computation of Total Income And Tax Liability Tax on `70,000 @ 40% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 28,840 (ii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `150,00,000 @ 40% Add: Surcharge @ 2% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 63,03,600 (iii) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `6,00,000 @ 40% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,47,200 (iv) Computation of Tax Liability Income under the head Business/Profession Total Income Tax on `10,30,000 @ 40% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 4,24,360 (v) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `700,00,000 @ 20% Add: Surcharge @ 2% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 147,08,400 (vi) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `1,50,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,900
88 28,000 560 280
150,00,000 150,00,000 60,00,000 1,20,000 1,22,400 61,200
6,00,000 6,00,000 2,40,000 4,800 2,400
10,30,000 10,30,000 4,12,000 8,240 4,120
700,00,000 700,00,000 140,00,000 2,80,000 2,85,600 1,42,800
1,50,000 1,50,000 30,000 600 300
Computation of Total Income And Tax Liability (vii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `6,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,23,600
6,00,000 6,00,000 1,20,000 2,400 1,200
(viii) Computation of Tax Liability Income under the head Capital Gains (long term capital gains) Total Income Tax on `10,30,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,12,180
10,30,000 10,30,000 2,06,000 4,120 2,060
(ix) Computation of Tax Liability Income under the head Other Sources (Casual Income) Total Income Tax on `400,00,000 @ 30% Add: Surcharge @ 2% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 126,07,200 Solution 6: Computation of Total Income Income under the head Business/Profession Income under the head House Property Income under the head Capital Gains Long term capital gains Short term capital gains u/s 111A Income under the head Other Sources (Casual Income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on LTCG `4,50,000 @ 20% u/s 112 Tax on STCG `3,50,000 @ 15% u/s 111A Tax on Casual income `3,50,000 @ 30% u/s 115BB Tax on `8,75,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,63,075.00 Rounded off u/s 288B Solution 7:
89
400,00,000 400,00,000 120,00,000 2,40,000 2,44,800 1,22,400
` 6,00,000.00 4,00,000.00 4,50,000 3,50,000
8,00,000.00 3,50,000.00 21,50,000.00 1,25,000.00 20,25,000.00 90,000.00 52,500.00 1,05,000.00 1,05,000.00 3,52,500.00 7,050.00 3,525.00 3,63,080.00
Computation of Total Income And Tax Liability (i) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,88,400 (ii) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,88,400 (iii) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,88,400 (iv) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,83,250 (v) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,88,400 (vi) Total Income
90 ` 15,00,000 2,80,000 5,600 2,800
15,00,000 2,80,000 5,600 2,800
15,00,000 2,80,000 5,600 2,800
15,00,000 2,75,000 5,500 2,750
15,00,000 2,80,000 5,600 2,800
15,00,000
Computation of Total Income And Tax Liability Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,83,250 (vii) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,88,400 (viii) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,57,500 (ix) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,88,400 (x) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,57,500 (xi) Total Income Computation of Tax Liability Tax on `15,00,000 at slab rate Add: Education cess @ 2%
91 2,75,000 5,500 2,750
15,00,000 2,80,000 5,600 2,800
15,00,000 2,50,000 5,000 2,500
15,00,000 2,80,000 5,600 2,800
15,00,000 2,50,000 5,000 2,500
15,00,000 2,80,000 5,600
Computation of Total Income And Tax Liability Add: SHEC @ 1% Tax Liability 2,88,400 Solution 8: (i) Income under the head House Property Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `8,42,320 slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,01,417.92 Rounded off u/s 288B (ii) Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `14,42,340 slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,70,583.06 Rounded off u/s 288B (iii) Income under the head Capital Gains (LTCG) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `8,85,340 (11,35,340 – 2,50,000) @ 20% u/s 112 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,82,380.04 Rounded off u/s 288B (iv) Income under the head Capital Gains (LTCG)
92 2,800
` 8,42,324.00 8,42,324.00 Nil 8,42,324.00 8,42,320.00
98,464.00 1,969.28 984.64 1,01,420.00 14,42,336.00 14,42,336.00 Nil 14,42,336.00 14,42,340.00 2,62,702.00 5,254.04 2,627.02 2,70,580.00 11,35,335.00 11,35,335.00 Nil 11,35,335.00 11,35,340.00 1,77,068.00 3,541.36 1,770.68 1,82,380.00 13,35,334.90
Computation of Total Income And Tax Liability
93
Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A
13,35,334.90 Nil 13,35,334.90 13,35,330.00
Computation of Tax Liability Tax on `11,35,330 (13,35,330 – 2,00,000) @ 20% u/s 112 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,33,877.98 Rounded off u/s 288B
2,27,066.00 4,541.32 2,270.66 2,33,880.00
(v) Income under the head Capital Gains (STCG) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `8,20,340 1,23,051.00 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,26,742.53 Rounded off u/s 288B
(10,20,340
10,20,335.00 10,20,335.00 Nil 10,20,335.00 10,20,340.00
–
2,00,000)
(vi) Income under the head Capital Gains (LTCG) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `5,40,340 @ 20% u/s 112 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 1,11,310.04 Rounded off u/s 288B
@
15%
u/s
111A 2,461.02 1,230.51
1,26,740.00 5,40,337.00 5,40,337.00 Nil 5,40,337.00 5,40,340.00 1,08,068.00 2,161.36 1,080.68 1,11,310.00
(vii) Income under the head Other Sources (winning from lottery) Gross Total Income Less: Deduction u/s 80C to 80U Total Income
7,20,000.00 7,20,000.00 Nil 7,20,000.00
Computation of Tax Liability Tax on `7,20,000 @ 30% u/s 115BB
2,16,000.00
Computation of Total Income And Tax Liability Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,22,480.00 (viii) Income under the head Capital Gains (LTCG) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `10,65,390 (15,65,390 – 5,00,000) @ 20% u/s 112 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,19,470.34 Rounded off u/s 288B (ix) Income under the head Other Sources (winning from lottery) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on `10,20,000 @ 30% u/s 115BB Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,15,180.00
94 4,320.00 2,160.00
15,65,385.00 15,65,385.00 Nil 15,65,385.00 15,65,390.00 2,13,078.00 4,261.56 2,130.78 2,19,470.00 10,20,000.00 10,20,000.00 Nil 10,20,000.00 3,06,000.00 6,120.00 3,060.00
Solution 9: Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Capital Gains (Long term capital gains) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income
` 3,00,000 16,00,000 1,00,000 20,00,000 60,000 19,40,000 4,00,000
Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 22,40,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `1,00,000 @ 20% u/s 112 Tax before education cess Add: Education cess @ 2%
5,02,000 50,000 4,52,000 20,000 4,72,000 9,440
Computation of Total Income And Tax Liability Add: SHEC @ 1% Tax Liability
95 4,720 4,86,160
Solution 9(b): Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Capital Gains (Long term capital gains) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income
` 3,00,000 16,00,000 1,00,000 20,00,000 60,000 19,40,000 4,00,000
Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 22,40,000/- at slab rates Step 2. Tax on (`2,50,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `1,00,000 @ 20% u/s 112 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
4,97,000 55,000 4,42,000 20,000 4,62,000 9,240 4,620 4,75,860
Solution 10: Computation of Total Income Income under the head House Property Income under the head Capital gains (long term capital gains) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income
` 3,00,000 5,00,000 8,00,000 1,00,000 7,00,000 3,00,000
Computation of Tax Liability Tax on normal income `2,00,000 at slab rate Tax on long term capital gain `5,00,000 @ 20% u/s 112 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
Nil 1,00,000 1,00,000 2,000 1,000 1,03,000
Solution 10(b): Computation of Total Income Income under the head House Property Income under the head Capital gains (long term capital gains) Gross Total Income
` 3,00,000 5,00,000 8,00,000
Computation of Total Income And Tax Liability Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Tax on normal income `2,00,000 at slab rate Tax on long term capital gain `2,00,000 (`5,00,000 – `3,00,000) @ 20% u/s 112 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
96 1,00,000 7,00,000 3,00,000 Nil 40,000 40,000 800 400 41,200
Note: If non-agricultural income is upto the limit not chargeable to tax (`2,00,000/2,50,000/5,00,000), partial integration is not applicable. Solution 11: Computation of Total Income Income under the head Other Sources (Casual income) Income under the head Capital gains (STCG u/s 111A) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Tax on STCG `5,00,000 (`7,00,000 – 2,00,000) @ 15% u/s 111A Tax on casual income `5,00,000 @ 30% Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
` 5,00,000 7,00,000 12,00,000 Nil 12,00,000 3,00,000 75,000 1,50,000 2,25,000 4,500 2,250 2,31,750
Note: On Long term capital gain, casual income and short term capital gain u/s 111A partial integration shall not be applicable. Solution 11(b): Computation of Total Income Income under the head Other Sources (Casual income) Income under the head Capital gains (STCG u/s 111A) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Tax on STCG `7,00,000 @ 15% u/s 111A Tax on casual income `5,00,000 @ 30% Tax before education cess Add: Education cess @ 2%
` 5,00,000 7,00,000 12,00,000 Nil 12,00,000 3,00,000 1,05,000 1,50,000 2,55,000 5,100
Computation of Total Income And Tax Liability Add: SHEC @ 1% Tax Liability
97 2,550 2,62,650
Note: On Long term capital gain, casual income and short term capital gain u/s 111A partial integration shall not be applicable. Solution 12(a): Computation of Total Income Income under the head Business/Profession Income under the head Other Sources (Casual income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 22,00,000/- at slab rates Step 2. Tax on (`5,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on casual income `5,00,000 @ 30% Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
` 12,00,000 5,00,000 17,00,000 Nil 17,00,000 10,00,000
4,60,000 2,50,000 2,10,000 1,50,000 3,60,000 7,200 3,600 3,70,800
Solution 12(b): Computation of Total Income Income under the head Business/Profession Income under the head Other Sources (Casual income) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 22,00,000/- at slab rates Step 2. Tax on (`2,50,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on casual income `5,00,000 @ 30% Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Solution 13: Computation of Total Income
` 12,00,000 5,00,000 17,00,000 Nil 17,00,000 10,00,000
4,85,000 2,00,000 2,85,000 1,50,000 4,35,000 8,700 4,350 4,48,050
Computation of Total Income And Tax Liability Income under the head Salary Income under the head House Property Income under the head Capital Gains Short Term Capital Gain 50,000 Short Term Capital Gain111A Long Term Capital Gain 1,50,000 Income under the head Capital Gains Casual Income 70,000 Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 7,40,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `1,50,000 @ 20% u/s 112 Tax on short term capital gain `2,00,000 @ 15% u/s 111A Tax on casual income `70,000 @ 30% Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
98 ` 2,00,000 1,00,000
2,00,000 4,00,000 7,70,000 1,10,000 6,60,000 5,00,000
78,000 70,000 8,000 30,000 30,000 21,000 89,000 1,780 890 91,670
Solution 13(b): Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Captial Gains Short Term Capital Gain 50,000 Short Term Capital Gain111A Long Term Capital Gain 1,50,000 Income under the head Capital Gains Casual Income 70,000 Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability Tax on normal income `2,40,000 at slab rate Tax on long term capital gain Nil (`1,50,000-150000) @ 20% u/s 112
` 2,00,000 1,00,000
2,00,000 4,00,000 7,70,000 1,10,000 6,60,000 5,00,000 Nil Nil
Computation of Total Income And Tax Liability Tax on short term capital gain ` 90,000(`2,00,000-`1,10,000) @ 15% u/s 111A Tax on casual income `70,000 @ 30% Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
99 13,500 21,000 34,500 690 345 35,535 35,540
Note: If non-agricultural income is upto the limit not chargeable to tax (`2,00,000/ 2,50,000/5,00,000), partial integration is not applicable. Solution 13(c): Computation of Total Income Income under the head Salary Income under the head House Property Income under the head Capital Gains Short Term Capital Gain 50,000 Short Term Capital Gain111A Long Term Capital Gain 1,50,000 Income under the head Capital Gains Casual Income 70,000 Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability Tax on normal income `50,000 at slab rate Tax on long term capital gain `1,50,000 @ 20% u/s 112 Tax on short term capital gain `2,00,000 @ 15% u/s 111A Tax on casual income `70,000 @ 30% Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
` 2,00,000 1,00,000
2,00,000 4,00,000 7,70,000 3,00,000 4,70,000 5,00,000 Nil 30,000 30,000 21,000 81,000 1,620 810 83,430
Note: If non-agricultural income is upto the limit not chargeable to tax (`2,00,000/ 2,50,000/5,00,000), partial integration is not applicable. Solution 14: Computation of Total Income Income under the head House Property Income under the head capital gains (long term capital gains) Gross Total Income Less: Deduction u/s 80C to 80U Total Income
` 2,00,000 10,00,000 12,00,000 60,000 11,40,000
Computation of Total Income And Tax Liability
100
Agricultural income
7,00,000
Computation of Tax Liability Tax on normal income `1,40,000 at slab rate Tax on long term capital gain `9,40,000 (`10,00,000 – `60,000) @ 20% u/s 112 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
Nil 1,88,000 1,88,000 3,760 1,880 1,93,640
Note: If non-agricultural income is upto the limit not chargeable to tax (`2,00,000/ 2,50,000/5,00,000), partial integration is not applicable. Solution 14(b): Computation of Total Income Income under the head House Property Income under the head capital gains (long term capital gains) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural income Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 16,40,000/- at slab rates Step 2. Tax on (`2,50,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Tax on long term capital gain `10,00,000 @ 20% u/s 112 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Solution 15: Tax liability and additional tax liability of the company shall be as given below: Profit before tax Income tax on `500,00,000 @ 30 % Surcharge @ 5% Education cess @ 2% SHEC @ 1% Income tax liability Dividend Additional income tax @ 15% of `65 lakhs Add: Surcharge @ 5% Add: Education cess @ 2% Add: SHEC @ 1% Additional income tax Rounded off u/s 288B Tax liability of the shareholder shall be nil.
` 10,00,000 10,00,000 20,00,000 60,000 19,40,000 7,00,000
3,17,000 1,15,000 2,02,000 2,00,000 4,02,000 8,040 4,020 4,14,060
` 500,00,000.00 150,00,000.00 7,50,000.00 3,15,000.00 1,57,500.00 162,22,500.00 65,00,000.00 9,75,000.00 48,750.00 20,475.00 10,237.50 10,54,462.50 10,54,460.00
Computation of Total Income And Tax Liability Solution15(b): Tax liability and additional tax liability of the company shall be as given below: Profit before tax Income tax on `500,00,000 @ 40% Surcharge @ 2% Education cess @ 2% SHEC @ 1% Income tax liability
101 ` 500,00,000.00 200,00,000.00 4,00,000.00 4,08,000.00 2,04,000.00 210,12,000.00
Additional income tax of the foreign company is nil. Tax liability of the shareholder shall be as given below: Dividend from foreign company Tax on `5,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
5,00,000.00 30,000.00 600.00 300.00 30,900.00
EXAMINATION QUESTIONS PCC NOV – 2011 Question 7 (4 Marks) Discuss the taxability of agricultural income under the Income Tax Act, 1961. How will income be computed where an individual derives agricultural and non-agricultural income? Answer: Under section 10(1), any agricultural income in India is fully exempt from income tax but if the agricultural income is from outside India, it is chargeable to tax. Indirect taxing of agricultural income or partial integration of agricultural income (Under the constitution, the power to levy a tax on agricultural income vests in the states. However, parliament has also levied a tax on such income. Explain how this has been achieved?) If any person has agricultural income as well as non-agricultural income, his tax liability shall be computed in the manner given below: 1. Compute tax on the total of agricultural income and non- agricultural income considering it to be total
Computation of Total Income And Tax Liability
102
income of the assessee. 2. Compute tax on exemption limit (`2,00,000 / 2,50,000 / 5,00,000) and agricultural income considering it to be total income. 3. Deduct tax computed under Step 2 from Step 1 and apply education cess. 4. Long term capital gain, casual income and short term capital gain u/s 111A shall not be taken into consideration for the purpose of partial integration 5. If Agricultural income is upto `5,000, or non-agricultural income is upto the limit not chargeable to tax (`2,00,000/2,50,000/5,00,000), partial integration is not applicable. 6. Partial integration is not applicable in case of a partnership firm or a company.
PCC MAY – 2007 Question 3 (9 Marks) The broad break-up of tax and allied details of Mrs. Rinku, born on 31st March, 1953 are as under: ` Long-term capital gains on sale of house 2,00,000 Short-term capital gains on sale of shares in B Ltd. (STT paid) 30,000 Prize winning from a T.V. show 20,000 Business income 2,40,000 Net agricultural income 4,40,000 Deduction allowed under section 80C to 80U 60,000 Compute the tax payable by Mrs. Rinku for the assessment year 2013-14. Answer. Computation of Total Income Business Income Long term capital gain on sale of house Short-term capital gains on sale of shares in B Ltd. (STT paid) Casual Income (Prize winning from a T.V. show) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of tax payable by Mrs. Rinku for the A.Y. 2013-14 Particulars (i) Tax on long-term capital gain of `1,30,000 (2,00,000 – 70,000) @ 20% (ii) Tax on short term capital gain of `30,000 @ 15% (iii) Tax on winnings of `20,000 from a T.V. show @ 30% (iv) Tax on balance income of `1,80,000 Deficiency of `70,000 has been allowed from LTCG Amount of tax before EC Add: Education cess @ 2% Less: SHEC @ 1% Tax payable by Mrs. Rinku Rounded off u/s 288B
(Modified) 2,40,000 2,00,000 30,000 20,000 4,90,000 60,000 4,30,000 ` 26,000 4,500 6,000 Nil 36,500 730 365 37,595 37,600
(i) Mrs. Rinku has completed 60 years of age on 31st March, 2013 i.e. she has completed the age of 60 years on the last day of the previous year.
Computation of Total Income And Tax Liability
103
Therefore, she is entitled to the higher basic exemption limit of `2,50,000. (ii) Partial integration is not applicable because her non-agricultural income is not exceeding the exemption limit of `2,50,000. (b) Presume income from business is `5,00,000. Computation of Gross Total Income Business Income Long term capital gain on sale of house Short-term capital gains on sale of shares in B Ltd. (STT paid) Casual Income (Prize winning from a T.V. show) Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of tax payable by Mrs. Rinku for the A.Y. 2013-14 Particulars (i) Tax on long-term capital gain of `2,00,000 @ 20% (ii) Tax on short term capital gain of `30,000 @ 15% (iii) Tax on winnings of `20,000 from a T.V. show @ 30% (iv) Tax on balance income of `4,40,000 Partial integration 1. Tax on 4,40,000 + 4,40,000 = 8,80,000 2. Tax on 2,50,000 + 4,40,000 = 6,90,000 Tax at step no.1 minus tax at step no.2 Amount of tax before EC Add: Education cess @ 2% Less: SHEC @ 1% Tax payable by Mrs. Rinku Rounded off u/s 288B
5,00,000 2,00,000 30,000 20,000 7,50,000 60,000 6,90,000 ` 40,000 4,500 6,000 1,01,000 63,000 38,000 88,500 1,770 885 91,155 91,160
Mrs. Rinku has completed 60 years of age on 31st March, 2013 i.e. she has completed the age of 60 years on the last day of the previous year. Therefore, she is entitled to the higher basic exemption limit of `2,50,000.
PE-II MAY – 2006 Question 2 (6 Marks) (a) The total income of Mrs. Z computed for the assessment year 2013-14 is `2,80,000, which includes the following: ` Long-term capital gains 30,000 Winnings from lotteries 20,000 Short-term capital gains covered by Sec. 111A 10,000 Agricultural income earned by her was `50,000. Compute the tax payable by Mrs. Z.
(Modified)
Solution: Computation of tax payable by Mrs. Z for the A.Y. 2013-14 Tax on Agricultural income and Non-agricultural income
` 7,000
Computation of Total Income And Tax Liability (`50,000 + `2,20,000 = 2,70,000) Tax on Basic exemption limit and agricultural income (`2,00,000 + `50,000 = 2,50,000) Tax on normal income (7,000 – 5,000) Tax on long-term capital gain of `30,000 @ 20% Tax on lottery income of `20,000 @ 30% Tax on short-term capital gain covered u/s 111A @ 15% of `10,000 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax payable by Mrs. Z Rounded off u/s 288B
104 5,000 2,000 6,000 6,000 1,500 15,500 310 155 15,965 15,970
Taxability of Gift
105
TAXABILITY OF GIFT SECTION 56 If any individual or HUF has received gift in cash and the aggregate value of one or more gifts received during the year from all the persons is exceeding `50,000, in that case entire amount is taxable under the head Other Sources but if the aggregate amount is upto `50,000, entire amount is exempt. W.e.f 01.10.2009, the gifts received in kind shall also be taxable in the manner given below: (i) In case of immovable property, if the value of immovable property for the purpose of charging stamp duty is upto `50,000, it will be exempt and if it is exceeding `50,000, entire amount is taxable. (ii) In case of any other gift in kind like jewellery etc., if the aggregate market value is upto `50,000, it is exempt but if it is exceeding `50,000, entire amount is taxable. If the goods have been sold for a value less than the market value, in that case, difference amount shall be taxable as gift provided it is exceeding `50,000. If any person is selling stock-in-trade for a value less than the market value, in that case it will not be taxable as gift. In all the above cases the gift shall be exempt if it has been received from any of the following persons: (a) from any relative or (b) on the occasion of the marriage of the individual or (c) under a will or by way of inheritance or (d) in contemplation of death of the payer or (e) from any local authority as defined in the Explanation to clause (20) of section 10 or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10 or (g) from any trust or institution registered under section 12AA. “Relative” means – (1) in case of an individual— (i) spouse of the individual. (ii) brother or sister of the individual. (iii) brother or sister of the spouse of the individual. (iv) brother or sister of either of the parents of the individual.
Taxability of Gift
106
(v) any lineal ascendant or descendant of the individual. (vi) any lineal ascendant or descendant of the spouse of the individual. (vii) spouse of the person referred to in clause (ii) to (vi). (2) in case of a Hindu undivided family, any member thereof. The gift in kind shall include (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; or (ix) bullion If individual or HUF has received gift of any other property, it will not be taxable e.g. motor car or plant and machinery or a watch or a mobile phone etc. “Stamp duty value” means the value adopted by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property. Example (i) Mr. X has received three gifts from his three friends (a) `55,000 in cash (b) Land with market value `5,00,000 but the value for the purpose of charging stamp duty `4,00,000. (c) Jewellery with market value `3,00,000 In this case, taxable amount shall be 55,000 + 4,00,000 + 3,00,000 = 7,55,000 (ii) Mr. Hitesh Kumar has received gift of `50,000 in cash from his friend, in this case it will not be considered to be his income. (iii) Mr. Vicky Jain has received gift of `1,50,000 in cash from his brother, in this case it will not be considered to be his income. (iv) Mr. Kamal Sapra has received gift of `1,50,000 in cash from his mother’s sister, in this case it will not be considered to be his income. (v) Mr. Akash Choudhary has received gift of `1,50,000 in cash from his father’s brother, in this case it will not be considered to be his income.
Taxability of Gift
107
(vi) Mr. Saket Mittal has received gift of `1,50,000 in cash from his cousin, in this case it will be chargeable to tax. (vii) Mr. Vikram Bajaj has received gift of `1,50,000 in cash from brother of his spouse, in this case it will not be considered to be his income. (viii) Mr. Harsh Arora has received gift of `1,50,000 in cash from his grand father, in this case it will not be considered to be his income. (ix) Mr. Amanpreet Singh has received gift of `1,50,000 in cash from spouse of his brother, in this case it will not be considered to be his income. (x) Mr. Amit Bhaskar has received gift of `1,50,000 in cash from husband of his sister, in this case it will not be considered to be his income. (xi) Mr. Sunil Dua has received gift of `1,50,000 in cash from sister of his brother’s wife, in this case it will be considered to be his income. (xii) Mr. Akhilesh Kumar has received gift of `1,50,000 in cash from the sister of his spouse, in this case it will not be considered to be his income. (xiii) Mr. Suresh Yadav has received gift of `5,000 in cash on his birthday from each of his eleven friends, in this case it will be considered to be his income because the total amount is exceeding `50,000. (xiv) Mr. Ram Singh has received gift of `1,50,000 in kind from his friend, in this case it will be considered to be his income. (xv) Mr. Naresh Kumar has received gift of `1,50,000 in cash from his friend on the occasion of his marriage, in this case it will not be considered to be his income. (xvi) Mr. Ajay Narula has received gift of `75,000 in cash and `75,000 in kind from his fiancee, in this case gift in cash will be considered to be his income and the gift in kind shall also be considered to be his income. Gifts to the Employees Section 17(2)(viii) Rule 3(7)(iv) Gift given by the employer in kind upto `5,000 in aggregate during a particular year is exempt and excess over it is taxable. If the employer has given any voucher or token in lieu of which such gift may be received, it will also be exempt in the similar manner. Gifts in cash or gifts convertible into cash i.e. gift cheques etc. shall be fully chargeable to tax. Gifts or Perquisites from Clients Section 28 The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. If any person has received any gift or perquisite or benefit either in cash or in kind from any of his clients, it will be considered to be business receipt and shall be taken into consideration while computing income under the head business/profession. Example ABC Ltd. has engaged one Advocate with regard to its legal proceedings. The company has provided him facilities of free travelling, boarding/lodging and has incurred `25,000, it will be considered to be professional receipt of the Advocate.
Taxability of Gift
108
Scholarship Section 10(16) Any scholarship received by a person for meeting the cost of education shall be exempt from income tax. Award/ Reward Section 10(17A) Any award or reward whether in cash or in kind instituted by the Central Government or the State Government shall be exempt from income tax. Similarly any private award or reward shall be exempt from income tax if approved by the Central Government.
Taxability of Gift
109
PRACTICE PROBLEMS TOTAL PROBLEMS 4 Problem 1. Discuss taxability in the following cases: (i)
Mr. Jeevan Chauhan has received gift of ` 50,000 in cash from his friend.
(ii)
Mr. Sudhanshu Mittal has received gift of ` 2,50,000 in cash from his brother.
(iii) Mr. Vishal Jain has received gift of ` 2,50,000 in cash from his mother’s sister. (iv) Mr. Druv Goel has received gift of ` 2,50,000 in cash from his father’s brother. (v)
Mr. Nimit Aggarwal has received gift of ` 2,50,000 in cash from his cousin.
(vi) Mr. Naveen Jain has received gift of ` 2,50,000 in cash from brother of his spouse. (vii) Mr. Sachin Bhatia has received gift of ` 2,50,000 in cash from his grand father. (viii) Mr. Sunny Arora has received gift of ` 2,50,000 in cash from spouse of his brother. (ix) Mr. Ritesh Bansal has received gift of ` 2,50,000 in cash from husband of his sister. (x)
Mr. Mohit Singh has received gift of ` 2,50,000 in cash from sister of his brother’s wife.
(xi) Mr. Rahul Kumar has received gift of ` 2,50,000 in cash from the sister of his spouse. (xii) Mr. Hunny Jindal has received gift of `6,000 in cash on his birthday from each of his eleven friends. (xiii)
Mr. Satbeer Singh has received gift of ` 2,50,000 in kind from his friend.
(xiv) Mr. Ashok Kumar has received gift of `2,50,000 in cash from his friend on the occasion of his marriage. (xv) Mr. Mukesh Verma has received gift of `1,00,000 in cash and `1,00,000 in kind from his fiancée. Problem 2. Mr. Tarun Gulati submits the particulars for the previous year 2012-13 as given below: 1. He has received a gift of `27,000 from one of his friend on 01.09.2012. 2. He has received a gift of `11,000 on 01.10.2012 from his wife Mrs. Tanya Gulati. 3. He has received a gift of `29,000 from his step daughter on 01.01.2013. 4. He has received a gift of `27,000 from grand mother of Mrs. Tanya Gulati on 07.01.2013. 5. He has received a gift of `20,000 in kind from his employer on 01.03.2013. 6. He has received gold as gift from his friend on 01.12.2012 with value `2,00,000.
Taxability of Gift
110
7. He has received `27,000 as gift from his maternal aunt (mother’s sister) on 10.12.2012. 8. He has received dividend of `2,00,000 from a domestic company on 31.03.2013. 9. He has received two gifts of `30,000 each from his neighbours on 01.06.2012. Compute his tax liability for assessment year 2013-14. Answer = Tax Liability: `10,510 Problem 3. Mr. X received gift in cash `3,00,000 from son of his father’s brother and gift of `1,00,000 in cash from brother of father of Mrs. X. He has agricultural income `5,00,000. Compute his tax liability for Assessment Year 2013-14. Answer = Tax Liability: `41,200 (b) He is aged 81 years. Answer = Tax Liability: Nil (c) He is non-resident and he has completed age of 80 years as on 31.03.2013. Answer = Tax Liability: `41,200 Problem 4. Mr. X is received jewellery valued `5,00,000 from brother of his grand father and his agricultural income is `1,00,000. Compute his income and tax liability for Assessment Year 2013-14. Answer = Total Income: `5,00,000; Tax Liability: `41,200 Problem 5. Following gifts are received by Mrs. Sweety, who is carrying on jewellery business, during the previous year 2012-13: (i) On the occasion of her marriage on 07.09.2012, she has received `1,20,000 as gift out of which `85,000 are from relatives and balance from friends. (ii) On 03.10.2012, she has received cash gift of `2,50,000 from cousin of her mother. (iii) A mobile phone worth `15,000 is gifted by her friend on 21.09.2012. (iv) She gets a cash gift of `2,40,000 from the elder brother of her husband's grandfather on 10.12.2012. (v) She has received a cash gift of `6,00,000 from her friend on 27.01.2013. (vi) She has received bullion, the fair market value of which was `4,75,000 on her birthday,19.01.2013.
Taxability of Gift
111
Mrs. Sweety purchased from her friend, who is also carrying jewellery business, jewellery at ` 2,50,000 on 25.01.2013, the fair market value of which was `5,00,000 on that date. Further, on 02.03.2013, Mrs. Sweety purchased a building at `20,00,000 from her friend. The Stamp duty value of the building as on 02.03.2013 was `25,00,000. Compute total income and tax liability of Mrs. Sweety for A.Y.2013-14. Answer = Total Income: `15,65,000; Tax Liability: `3,08,490
Taxability of Gift
112
SOLUTIONS TO
PRACTICE PROBLEMS Solution 1: (i) Mr. Jeevan Chauhan has received gift of `50,000 in cash from his friend, in this case it will not be considered to be his income. (ii) Mr. Sudhanshu Mittal has received gift of `2,50,000 in cash from his brother, in this case it will not be considered to be his income. (iii) Mr. Vishal Jain has received gift of ` 2,50,000 in cash from his mother’s sister, in this case it will not be considered to be his income. (iv) Mr. Druv Goel has received gift of `2,50,000 in cash from his father’s brother, in this case it will not be considered to be his income. (v) Mr. Nimit Aggarwal has received gift of `2,50,000 in cash from his cousin, in this case it will be chargeable to tax. (vi) Mr. Naveen Jain has received gift of `2,50,000 in cash from brother of his spouse, in this case it will not be considered to be his income. (vii) Mr. Sachin Bhatia has received gift of `2,50,000 in cash from his grand father, in this case it will not be considered to be his income. (viii) Mr. Sunny Arora has received gift of `2,50,000 in cash from spouse of his brother, in this case it will not be considered to be his income. (ix) Mr. Ritesh Bansal has received gift of `2,50,000 in cash from husband of his sister, in this case it will not be considered to be his income. (x) Mr. Mohit Singh has received gift of `2,50,000 in cash from sister of his brother’s wife, in this case it will be considered to be his income. (xi) Mr. Rahul Kumar has received gift of `2,50,000 in cash from the sister of his spouse, in this case it will not be considered to be his income. (xii) Mr. Hunny Jindal has received gift of `6,000 in cash on his birthday from each of his eleven friends, in this case it will be considered to be his income because the total amount is exceeding `50,000. (xiii) Mr. Satbeer Singh has received gift of `2,50,000 in kind from his friend, in this case it will be considered to be his income. (xiv) Mr. Ashok Kumar has received gift of `2,50,000 in cash from his friend on the occasion of his
Taxability of Gift
113
marriage, in this case it will not be considered to be his income. (xv) Mr. Mukesh Verma has received gift of `1,00,000 in cash and `1,00,000 in kind from his fiancee, in this case gift in cash will be considered to be his income and the gift in kind shall also be considered to be his income. Solution 2: Computation of income under the head Salary Gift in kind from his employer (20,000 – 5,000) Income under the head Salary Computation of income under the head Other Sources Gift received from friend Gifts received from neighbours Gift received from friend in kind Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of tax liability Tax on `3,02,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
` 15,000.00 15,000.00 27,000.00 60,000.00 2,00,000.00 2,87,000.00 3,02,000.00 Nil 3,02,000.00 10,200.00 204.00 102.00 10,506.00 10,510.00
Note: Dividend received by Mr. Tarun Gulati from domestic company is exempt u/s 10(34). Solution 3:
`
Computation of income under the head Other Sources Gift received from son of his father’s brother Gift received from bother of father’s of Mrs. X Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income
3,00,000 1,00,000 4,00,000 4,00,000 Nil 4,00,000 5,00,000
Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 9,00,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,10,000 70,000 40,000 800 400 41,200
Solution 3(b): Total Income Agricultural Income Tax Liability
4,00,000 5,00,000 Nil
Taxability of Gift
114
Note: If non-agricultural income is upto the limit not chargeable to tax (`2,00,000/ 2,50,000/5,00,000), partial integration is not applicable. Solution 3(c): Total Income Agricultural Income
4,00,000 5,00,000
Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 9,00,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
1,10,000 70,000 40,000 800 400 41,200
Solution 4: Computation of income under the head Other Sources Gift in kind from brother of his grand father Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 6,00,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Solution 5: Computation of Total Income of Mrs. Sweety for the A.Y. 2013-14 Gift received on the occasion of marriage are exempt Cash gift received from cousin of Mrs. Sweety’s mother is taxable under section 56 (Cousin of Mrs. Sweety’s mother is not a relative) Mobile phone gifted by her friend is not taxable since it is not included in the definition of “property” under section 56
` 5,00,000 5,00,000 5,00,000 Nil 5,00,000 1,00,000
50,000 10,000 40,000 800 400 41,200
` -2,50,000
--
Cash gift received from elder brother of husband’s grandfather is taxable (Brother of husband’s grandfather is not a relative)
2,40,000
Cash gift from friend is taxable
6,00,000
Since bullion is included in the definition of property, therefore, when bullion is
Taxability of Gift received without consideration, the same is taxable, since the aggregate fair market value exceeds `50,000
115 4,75,000
Difference of `2.5 lakh in the value of jewellery purchased from her friend, is not taxable as it represents the stock-in-trade of Mrs. Sweety. Since Mrs. Sweety is carrying jewellery business and it has been mentioned that the jewellery were subsequently sold in the course of his business, such jewellery represent the stock-in-trade of Mrs. Sweety.
Nil
The immovable property purchased for inadequate consideration is outside the Scope of section 56. Therefore the difference of `5,00,000 between stamp duty value and purchase price of building is not taxable
Nil
Income under the head Other Sources
15,65,000
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
15,65,000 Nil 15,65,000
Computation of Tax Liability Tax on ` 15,65,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
2,99,500 5,990 2,995 3,08,485 3,08,490
Taxability of Gift
116
EXAMINATION QUESTIONS PCC MAY – 2012 Question 1 (1 Marks) State whether the following are chargeable to tax and the amount liable to tax. A sum of `1,20,000 was received as gift from non-relatives by Raj on the occasion of the marriage of his son Pravin. Answer: As per section 56, if any gift has been received on the occasion of marriage, it will be exempt from income tax but if gift has been received by the parents of the person getting married, such gift shall be taxable hence in this case gift received by Mr. Raj is taxable because marriage is that of his son Pravin.
IPCC MAY – 2011 Question 7 (4 Marks) The following details have been furnished by Mrs. Hemali, pertaining to the year ended 31.03.2013: (i) Cash gift of `51,000 received from her friend on the occasion of her “Shastiaptha Poorthi”, a wedding function celebrated on her husband completing 60 years of age. This was also her 25th wedding anniversary. (ii) On the above occasion, a diamond necklace worth `2 lacs was presented by her sister living in Dubai. (iii) When she celebrated her daughter’s wedding on 21.02.2013, her friend assigned in Mrs. Hemali’s favour, a fixed deposit held by the said friend in a scheduled bank; the value of the fixed deposit and the accrued interest on the said date was `51,000. Compute the income, if any, assessable as income from other sources. Answer: (i) Any sum of money received by an individual on the occasion of the marriage of the individual is exempt. This provision is, however, not applicable to a cash gift received during a wedding function celebrated on completion of 60 years of age. The gift of `51,000 received from a non-relative is, therefore, chargeable to tax under section 56 in the hands of Mrs. Hemali. (ii) The provisions of section 56 are not attracted in respect of any sum of money or property received from a relative. Thus, the gift of diamond necklace received from her sister is not taxable under section 56, even though jewellery falls within the definition of “property”. (iii) To be exempt from applicability of section 56, the property should be received on the occasion of the marriage of the individual, not that of the individual’s son or daughter. Therefore, this exemption provision is not attracted in this case. Any sum of money received without consideration by an individual is chargeable to tax under section 56, if the aggregate value exceeds `50,000 in a year. “Sum of money” has, however, not been defined under section 56. Therefore, there are two possible views in respect of the value of fixed deposit assigned in favour of Mrs. Hemali –
Taxability of Gift
117
(1)The first view is that fixed deposit does not fall within the meaning of “sum of money” and therefore, the provisions of section 56 are not attracted. Fixed deposit is also not included in the definition of “property”. (2) However, another possible view is that fixed deposit assigned in favour of Mrs. Hemali falls within the meaning of “sum of money” received. Income assessable as “Income from other sources” If the first view is taken, the total amount chargeable to tax as “Income from other sources” would be `51,000, being cash gift received from a friend on her Shastiaptha Poorthi. As per the second view, the provisions of section 56 would be attracted in respect of the fixed deposit assigned and the “Income from other sources” of Mrs. Hemali would be `1,02,000 (`51,000 + `51,000).
PE-II NOV – 2008 Question 2 (6 Marks) Check the taxability of the following gifts received by Mrs. Rashmi during the previous year 2012-13 and compute the taxable income from gifts for Assessment Year 2013-14: (i) On the occasion of her marriage on 14.08.2012, she has received `90,000 as gift out of which `70,000 are from relatives and balance from friends. (ii) On 12.09.2012, she has received gift of `18,000 from cousin of her mother. (iii) A cell phone of `21,000 is gifted by her employer on 15.08.2012. (iv) She gets a gift of `25,000 from the elder brother of her husband's grandfather on 25.10.2012. (v) She has received a gift of `2,000 from her friend on 14.04.2012.
(Modified)
Answer: Computation of taxable income of Mrs. Rashmi from gifts for A.Y. 2013-14 Particulars Taxable amount Reason for taxability or ` otherwise of each gift • Relatives and friends Nil Gifts received on the occasion of marriage are not taxable. •
Cousin of Mrs. Rashmi’s mother
18,000
Cousin of Mrs. Rashmi’s
mother is not a relative. Hence, the gift is taxable. •
Elder brother of husband’s grandfather grandfather is
25,000
Brother of husband’s
not a relative. Hence, the gift is taxable. •
Friend
Aggregate value of gifts
2,000
Gift from friend is taxable.
45,000
Since the aggregate value of gifts received by Mrs. Rashmi during the previous year 2012-13 does not exceed `50,000, the same is not chargeable to tax under section 56 of the Income-Tax Act, 1961.
Taxability of Gift
118
Gift received from the employer in kind upto `5,000 is exempt from income tax but excess over it is taxable hence in this case taxable amount of gift shall be `16,000 (21,000 – 5,000) and it will be taxable under the head Salary.
PE-II MAY – 2008 Question 3 Choose the correct answer with reference to the provisions of the Income-tax Act, 1961 :
(1 Marks)
Rakesh received `70,000 from his friend on the occasion of his birthday. (a) The entire amount of `70,000 is taxable (b) `25,000 is taxable (c) The entire amount is exempt (d) None of the above. Answer: (a) The entire amount of `70,000 is taxable.
PE-II MAY – 2005 Question 1
(1 Marks)
Gift of `5,00,000 received on 10 th July, 2012 through account payee cheque from a non-relative regularly assessed to income-tax, is (a) A capital receipt not chargeable to tax (b) Chargeable to tax as income from other sources (c) Chargeable to tax as business income (d) Exempt upto `50,000 and balance chargeable to tax as income from other sources. Answer: (b) Chargeable to tax as income from other sources
Advance Payment of Tax
119
ADVANCE PAYMENT OF TAX OR
PAY AS YOU EARN SCHEME SECTION 207 TO 219 Liability for payment of advance tax Section 207 Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219, in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year. Advance tax shall not be payable by an individual resident in India, who— (a) does not have any income chargeable under the head “Profits and gains of business or profession”; and (b) is of the age of sixty years or more at any time during the previous year. As per section 208, every person in whose case tax payable (tax payable = tax liability - TDS) during the year is `10,000 or more, has to estimate his tax payable and it is to be paid in the manner given under section 211 and for this purpose various assessee shall be divided into two categories as given below – 1. Company assessee A company assessee has to pay advance tax in the manner given below: Upto 15th June of Financial Year
not less than 15% of tax payable
Upto 15th September of Financial Year
not less than 45% of tax payable
Upto 15th December of Financial Year
not less than 75% of tax payable
Upto 15th March of Financial Year
100% of tax payable
Example For the previous year 2012-13, ABC Ltd. has estimated its tax payable to be `2,00,000, in this case advance tax shall be paid by the company as given below: Upto 15.06.2012
30,000
Upto 15.09.2012
90,000
Upto 15.12.2012
1,50,000
Upto 15.03.2013
2,00,000
2. Any other assessee Any other assessee has to pay advance tax in the manner given below:
Advance Payment of Tax Upto 15th September of Financial Year
not less than 30% of tax payable
Upto 15th December of Financial Year
not less than 60% of tax payable
Upto 15th March of Financial Year
100% of tax payable
120
Example Mr. Raj Kumar has estimated his tax payable for previous year 2012-13 `1,00,000, in this case he should pay advance tax in the manner given below: Upto 15.09.2012
30,000
Upto 15.12.2012
60,000
Upto 15.03.2013
1,00,000
Interest for deferment of advance tax Section 234C If any person has failed to pay advance tax, such person has to pay interest under section 234C at a rate of 1% per month for a period of 3 months on the amount of default but for the last installment interest is to be paid only for one month. If the advance tax paid by the company upto 15th June is 12% of the tax payable and upto 15th Sept, it is 36% of the tax payable, in such cases no interest shall be charged for default in such instalment. Illustration 1: ABC Ltd. has estimated its tax payable to be `1,00,000 and the company has paid advance tax as given below: 15.06.2012
15,000
15.09.2012
45,000
15.12.2012
75,000
15.03.2013
1,00,000
However, the company has computed its tax payable to be `1,80,000 at the time of filing the return of income. Compute interest payable by the company under section 234C Solution: Installments if tax payable is `1,80,000 ` 15.06.2012
27,000 –
15,000 = 12,000 x 1% x 3 =
15.09.2012
81,000 –
45,000 = 36,000 x 1% x 3 = 1,080
15.12.2012
1,35,000 –
75,000 = 60,000 x 1% x 3 = 1,800
15.03.2013
1,80,000 – 1,00,000 = 80,000 x 1% x 1 =
Total Interest Payable
360
800 4,040
The interest so computed has to be paid at the time of self assessment i.e. at the time of filing the return of income. The amount of tax payable should be paid as advance tax and if there is any deficiency, it should be
Advance Payment of Tax
121
paid upto 31st March of that particular previous year otherwise assessee has to pay interest under section 234B also and if tax is paid after the last date of filing the return of income, assessee has to pay interest under section 234A also. Illustration 2: Mr. Pradeep Chauhan has estimated his tax liability to be `1,35,000 and has paid advance tax accordingly but subsequently his tax liability was found to be `1,90,000, in this case, interest payable by him under section 234C shall be ` 15.09.2012 57,000 – 40,500 = 16,500 x 1% x 3 = 495 15.12.2012
1,14,000 –
15.03.2013
1,90,000 – 1,35,000 = 55,000 x 1% x 1 = 550
Total Interest Payable
81,000 = 33,000 x 1% x 3 = 990
2,035
Interest for payment of income tax after expiry of relevant previous year Section 234B If any person has paid income tax after expiry of the relevant previous year, in such cases interest is payable @ 1% p.m. or part of the month for the period starting from 1 st April of assessment year upto the date of payment, provided advance tax paid is less than 90% of the tax liability i.e. if the advance tax paid is 90% or more, interest under section 234B shall not be payable. e.g. If for the previous year 2012-13, income tax paid upto 31.03.2013 is `2,00,000 but actual tax liability is `3,00,000 and difference amount of `1,00,000 has been paid on 10.07.2013, in this case interest payable under section 234B shall be 1,00,000 x 1% x 4 = `4,000 Interest for payment of income tax after expiry of the last date of filing the return of income Section 234A If any person has paid income tax after expiry of the last date of filing of return of income, interest shall be payable @ 1% p.m. or part of the month for the period subsequent to the last date of filing of return of income. E.g. If in the above case, income tax of `1,00,000 has been paid on 10.12.2013 and last date of filing of return of income is 30.09.2013, in this case interest payable under section 234A shall be 1,00,000 x 1% x 3 = `3,000 Also the assessee has to pay interest under section 234B and interest payable under section 234B shall be 1,00,000 x 1% x 9 = `9,000 Illustration 3: ABC Ltd. has tax liability of `7,00,000 for the previous year 2012-13 and the company has not paid any advance tax and entire tax amount was paid by the company on 31.12.2013. In this case, interest shall be calculated in the manner given below: 1. Interest in case of default/non-payment of advance tax section 234C ` Default in instalment payable on 15.06.2012 1,05,000 x 1% x 3 = 3,150 Default in instalment payable on 15.09.2012 3,15,000 x 1% x 3 = 9,450 Default in instalment payable on 15.12.2012 5,25,000 x 1% x 3 = 15,750 Default in instalment payable on 15.03.2013 7,00,000 x 1% x 1 = 7,000 Total interest payable
35,350
Advance Payment of Tax
122
2. Interest in case of payment of tax after the end of relevant previous year section 234B 7,00,000 x 1% x 9 = 63,000 3. Interest in case of payment of tax after the last date of filing of return of income section 234A 7,00,000 x 1% x 3 = 21,000 Total Interest Payable 1,19,350 Interest on Refunds Section 244A If any assessee is eligible for refund, he will be allowed interest @ 0.5% per month or part of the month from the 1st April of the assessment year upto the date on which the refund is granted however no interest is payable if the amount of refund is less than 10% of the tax liability. Example For the previous year 2012-13, ABC Ltd. has paid advance tax of `5,00,000 but actual tax liability of the company is `3,00,000 and a refund of `2,00,000 was granted on 10.07.2013, in this case interest payable to the assessee shall be 2,00,000 x 0.5% x 4 = `4,000 If in the above case actual tax liability is `4,80,000, no interest is payable because the amount of refund is less than 10% of the tax liability. Under-estimation with regard to Capital Gains/ Casual Income Section 234C If any person has not paid advance tax or has defaulted in payment of advance tax because of not estimating or because of under-estimating any capital gain or any income covered under section 2(24)(ix) i.e. casual income, no interest shall be payable under section 234C provided assessee has paid the tax correctly in the subsequent installment after accrual of such income. Example For the previous year 2012-13 ABC Ltd. has estimated its tax payable to be `1,00,000 and has paid the installment on 15.06.2012 and 15.09.2012 accordingly, but subsequently the company had long term capital gain of `1,00,000 on 01.10.2012 and it was not estimated by the company, in this case, if additional tax liability of `20,000 including EC has been paid by the company in the subsequent installments in the prescribed manner, in that case, no interest shall be charged under section 234C for the default in the earlier installments. Rounding off for the purpose of calculating Interest Rule 119A As per rule 119A, the principal amount shall be rounded off in the multiples of `100 and for this purpose any fraction of `100 shall be ignored. E.g. `1,60,275 shall be rounded off as 1,60,200. Illustration 4: Mr. X has paid advance tax as given below: Upto September 15, 2012
`45,000
Upto December 15, 2012
`95,000
He has not estimated any capital gain but he had long term capital gains of `3,00,000 on 01.01.2013. He has paid advance tax upto 15th March 2013 `1,70,000. His actual income other than capital gains was found to be `11,00,000. He has filed return of income on 10.12.2013 and has paid difference of the tax on 10.12.2013.
Advance Payment of Tax
123
Last date for filing of return is 31.07.2013. Compute interest payable under section 234A, 234B and 234C. Solution: Computation of Tax Liability ` 11,00,000 3,00,000 14,00,000 1,60,000 60,000 4,400 2,200 2,26,600 1,64,800)
Normal Income Long term capital gains Total Income Tax on `11,00,000 at slab rate Tax on `3,00,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (Tax liability excluding capital gains `11,00,000 at slab rate + EC @ 3%
Interest under section 234C Since capital gains arises on 1st January 2013, installments for 15th September and 15th December shall be checked without including tax on capital gain and shall be as given below:
Upto September 15, 2012 (1,64,800 x 30%) Upto December 15, 2012 (1,64,800 x 60%)
Amount payable as advance tax ` 49,440
Amount actually paid by way of advance tax ` 45,000
98,880
95,000
Shortfall
Interest
` 4,440 (4,400 x 1% x 3) 3,880 (3,800 x 1% x 3)
` 132 114
Installment for 15th March shall be including tax on capital gains and is as given below:
Upto March 15, 2013 (2,26,600 x 100%)
Amount payable as advance tax ` 2,26,600
Amount actually paid by way of advance tax ` 1,70,000
Shortfall
Interest
` 56,600 (56,600 x 1% x 1)
` 566
Interest liability under section 234C
` 812
Interest under section 234B 56,600 x 1% x 9 (56,600 x 1% x 9)
`5,094
Interest under section 234A 56,600 x 1% x 5 (56,600 x 1% x 5)
`2,830
Illustration 5: A firm made the following payments of advance tax during the financial year 2012-13: Upto September 15, 2012
` 8,25,000
Upto December 15, 2012
16,64,000
Advance Payment of Tax
124
Upto March 15, 2013
26,23,000
The income returned by the firm is `88,00,000 under the head “profits and gains of business or profession” and `9,50,000 by way of long term capital gains on sale of a property effected on December 1, 2012. What is the interest payable by the assessee under section 234B and section 234C for assessment year 2013-14? Assume that the return of income was filed on 30.09.2013 i.e. the due date and tax was fully paid on self assessment. Solution: Computation of Tax Liability ` 88,00,000 9,50,000 97,50,000 26,40,000 1,90,000 56,600 28,300 29,14,900 27,19,200)
Business income Long term capital gains Net Income Tax on `88,00,000 @ 30% Tax on `9,50,000 @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (Tax liability excluding capital gains `88,00,000 x 30% + EC@ 3%
Interest under section 234C Since capital gains arises on 1st December 2012, installment for 15th September shall be checked without including tax on capital gain and shall be as given below:
Upto September 15, 2012 (27,19,200 x 30%)
Amount payable as advance tax ` 8,15,760
Amount actually paid by way of advance tax ` 8,25,000
Shortfall
Interest
` Nil
` Nil
Installments for 15th December and 15th March shall be including tax on capital gains and is as given below:
Upto December 15, 2012 (29,14,900 x 60%) Upto March 15, 2013 (29,14,900 x 100%)
Amount payable as advance tax ` 17,48,940
Amount actually paid by way of advance tax ` 16,64,000
29,14,900
26,23,000
Interest liability under section 234C Interest under section 234B 2,91,900 x 1% x 6
Shortfall
Interest
` 84,940 (84,900 x 1% x 3 month) 2,91,900 (2,91,900 x 1% x 1month)
` 2,547 2,919
`5,466 `17,514
Powers of the Assessing Officer to direct a person to pay Advance Tax Section 209, 210 If any person has been assessed through regular assessments and such person has not paid any advance tax, in such cases Assessing officer may issue a notice (Form No. 28) to such a person to pay advance tax but such orders can be passed maximum upto last day of February of that year.
Advance Payment of Tax
125
Under section 2(40), Regular Assessment includes (i) Scrutiny Assessment 143(3) (ii) Best Judgment Assessment 144. If the Assessing officer has issued a notice for payment of advance tax, the income to be taken into consideration shall be the income of the latest previous year in which the assessee was assessed through regular assessment but if any return of income has been filed by the assessee subsequently and income reported is higher than the assessed income, in such cases income reported by the assessee shall be taken into consideration. Example For the previous year 2012-13, ABC Ltd. has not paid any advance tax till 10.10.2012 and in the earlier years the company was assessed in the manner given below: 2009-10 2010-11 2011-12
143(3) (Scrutiny Assessment) 144 (Best Judgement Assessment) ROI
7,00,000 10,00,000 8,00,000
In this case Assessing officer shall have the powers to give notice to the assessee and its estimated income shall be considered to be `10,00,000. If any assessee has received a notice in form no. 28 but he finds that his tax liability shall be less than the amount computed by the Assessing Officer, in that case he can give a reply in form no. 28A and can pay tax as per his own estimate. As per section 218, if any assessee does not pay, any instalment of the advance tax that he is required to pay by an order of the Assessing Officer and does not send to the Assessing Officer an intimation (form no. 28A) or does not pay on the basis of his estimate of his current income the advance tax payable by him, he shall be deemed to be an assessee in default and penalty may be imposed equal to the amount of income tax which he was required to pay. Illustration 6: (a) ABC Ltd. has estimated its tax liability for assessment year 2013-14 `4,40,000 and has paid advance tax accordingly but actual tax liability was found to be `10,00,000. The company has paid balance amount on 02.01.2014. Compute interest payable under section 234A, 234B, and 234C. Solution: Tax payable is `4,40,000 15.06.2012 66,000 15.09.2012 1,98,000 15.12.2012 3,30,000 15.03.2013 4,40,000 Interest in case of default/non-payment of advance tax section 234C Installments if tax payable is `10,00,000 ` 15.06.2012 1,50,000 – 66,000 = 84,000 x 1% x 3 = 2,520 15.09.2012 4,50,000 – 1,98,000 = 2,52,000 x 1% x 3 = 7,560 15.12.2012 7,50,000 – 3,30,000 = 4,20,000 x 1% x 3 = 12,600 15.03.2013 10,00,000 – 4,40,000 = 5,60,000 x 1% x 1 = 5,600 Total interest payable u/s 234C 28,280
Advance Payment of Tax Interest in case of payment of tax after the end of the relevant previous year section 234B 10,00,000 – 4,40,000 = 5,60,000 5,60,000 x 1% x 10 = Interest in case of payment of tax after the last date of filing of return of income section 234A 5,60,000 x 1% x 4 = Total interest payable (28,280 + 56,000 + 22,400)
126 ` 56,000 ` 22,400 1,06,680
(b) Presume in the above question actual tax liability is `5,00,000. Solution: Interest in case of default/non-payment of advance tax section 234C Installments if tax payable is `5,00,000 15.06.2012 75,000 – 66,000 = 9,000 234C is Nil, because advance tax payable is 12% or more. 15.09.2012 2,25,000 – 1,98,000 = 27,000 234C is Nil, because advance tax payable is 36% or more. 15.12.2012 3,75,000 – 3,30,000 = 45,000 x 1% x 3 = `1,350 15.03.2013 5,00,000 – 4,40,000 = 60,000 x 1% x 1 = ` 600 Total interest payable u/s 234C `1,950 Interest in case of payment of tax after the end of the relevant previous year section 234B ` 5,00,000 – 4,40,000 = 60,000 60,000 x 1% x 10 =
6,000
Interest in case of payment of tax after the last date of filing of return of income section 234A 60,000 x 1% x 4 = Total interest payable (1,950 + 6,000 + 2,400)
` 2,400 10,350
(c) Presume in the above question actual tax liability is `4,60,000. Solution: Interest in case of default/non-payment of advance tax section 234C Installments if tax payable is `4,60,000 15.06.2012 69,000 – 66,000 = 3,000 234C is Nil, because advance tax payable is 12% or more. 15.09.2012 2,07,000 – 1,98,000 = 9,000 234C is Nil, because advance tax payable is 36% or more. 15.12.2012 3,45,000 – 3,30,000 = 15,000 x 1% x 3 = `450 15.03.2013 4,60,000 – 4,40,000 = 20,000 x 1% x 1 = `200 Total interest payable u/s 234C `650 Interest in case of payment of tax after the end of the relevant previous year section 234B It is exempt because advance tax paid is 90% or more of actual tax. Interest in case of payment of tax after the last date of filing of return of income section 234A 20,000 x 1% x 4 = Total interest payable (650 + 800)
` 800 1,450
Advance Payment of Tax
127
(d) Presume in the above question actual tax liability is `3,80,000 and return of income was filed on 01.06.2013 and refund was granted on 10.07.2013. Solution: Interest in case of default/non-payment of advance tax section 234C Interest in case of payment of tax after the end of the relevant previous year section 234B Interest in case of payment of tax after the last date of filing of return of income section 234A Interest refund under section 244A (60,000 x 0.5% x 4)
` Nil Nil Nil 1,200
Advance Payment of Tax
128
PRACTICE PROBLEMS TOTAL PROBLEMS 3 Problem 1. Mr. X has incomes as given below: 1. Income under the head house property `15,00,000 2. Gift of a painting from a friend with market value `2,00,000 3. Gift of shares and securities from Mrs. X valued `3,00,000 4. Agricultural income `3,00,000 He has paid advance tax as given below: Upto 15th Sept 2012 Upto 15th Dec 2012 Upto 15th March 2013
`30,000 `50,000 `60,000
Balance amount of tax was paid on 10th Sept 2013. Compute his tax liability for the Assessment Year 2013-14 and also interest under section 234A, 234B and 234C. Answer = Tax Liability: `4,12,000; Interest under section 234A: `7,040; Interest under section 234B: `21,120; Interest under section 234C: `12,244 Problem 2. XY Partnership Firm has income as given below: 1. Income under the head Business/Profession `20,00,000 (Turnover of the firm is `60,00,000) 2. Income under the head House Property `7,00,000 The firm has paid advance tax as given below: Upto 15th June 2012 Upto 15th Sept 2012 Upto 15th Dec 2012 Upto 15th March 2013
` 20,000 ` 30,000 ` 80,000 `1,00,000
Balance amount of tax was paid on 10th Dec 2013. Compute tax liability for the Assessment Year 2013-14 and also interest under section 234A, 234B and 234C. Answer = Tax Liability: `8,34,300; Interest under section 234A: `36,715; Interest under section 234B: `66,087; Interest under section 234C: `26,564 (b) Presume the assessee is ABC Ltd. an Indian company. Answer = Tax Liability: `8,34,300; Interest under section 234A: `22,029; Interest under section 234B: `66,087; Interest under section 234C: `37,229
Advance Payment of Tax
129
Problem 3. Mrs. X has income under the head house property `18,00,000 and she has received gift of `3,00,000 in cash from her husband’s sister and `1,00,000 from her sister’s husband and `1,20,000 from sister of her mother in law. She has agricultural income of `4,00,000. She has paid advance tax as given below: Upto 15th Sept 2012 Upto 15th Dec 2012 Upto 15th March 2013
` 30,000 ` 80,000 `1,00,000
Balance amount of tax was paid on 10th Dec 2013. Compute her tax liability for the Assessment Year 2013-14 and also interest under section 234A, 234B and 234C. Answer = Tax Liability: `4,90,280; Interest under section 234A: `19,510; Interest under section 234B: `35,118; Interest under section 234C: `13,835
Advance Payment of Tax
130
SOLUTIONS TO
PRACTICE PROBLEMS Solution 1: ` Computation of Total Income Income under the head House Property Income under the head Other Sources Gift in kind received from a friend Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income
15,00,000 2,00,000 17,00,000 Nil 17,00,000 3,00,000
Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 20,00,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Amount payable as advance tax ` 1,23,600
Amount actually paid by way of advance tax ` 30,000
Upto 15th Dec, 2012 (4,12,000 x 60%)
2,47,200
50,000
Upto 15th March, 2013 (4,12,000 x 100%)
4,12,000
60,000
th
Upto 15 Sept, 2012 (4,12,000 x 30%)
4,30,000 30,000 4,00,000 8,000 4,000 4,12,000 Shortfall ` 93,600 (93,600 x 1% x 3 month) 1,97,200 (1,97,200 x 1% x 3 month) 3,52,000 (3,52,000 x 1% x 1 month)
Interest ` 2,808 5,916 3,520
Interest liability under section 234C
`12,244
Interest under section 234B 3,52,000 x 1% x 6
`21,120
Interest under section 234A 3,52,000 x 1% x 2 7,040
`
Advance Payment of Tax
131
Solution 2: ` Computation of Total Income Income under the head Business/Profession Income under the head House Property Gross Total Income Less: Deduction u/s 80C to 80U Total Income
20,00,000 7,00,000 27,00,000 Nil 27,00,000
Computation of Tax Liability Tax on `27,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
8,10,000 16,200 8,100 8,34,300
Amount payable as advance tax ` 2,50,290
Amount actually paid by way of advance tax ` 30,000
Upto 15th Dec, 2012 (8,34,300 x 60%)
5,00,580
80,000
Upto March 15, 2013 (8,34,300 x 100%)
8,34,300
1,00,000
th
Upto 15 Sept, 2012 (8,34,300 x 30%)
Shortfall ` 2,20,290 (2,20,200 x 1% x 3 month) 4,20,580 (4,20,500 x 1% x 3 month) 7,34,300 (7,34,300 x 1% x 1month)
Interest ` 6,606 12,615 7,343
Interest liability under section 234C
`26,564
Interest under section 234B 7,34,300 x 1% x 9
`66,087
Interest under section 234A 7,34,300 x 1% x 5
`36,715
Solution 2(b): ` 27,00,000
Total Income Computation of Tax Liability Tax on `27,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
th
Upto 15 June 2012 (8,34,300 x 15%)
Amount payable as advance tax ` 1,25,145
8,10,000 16,200 8,100 8,34,300 Amount actually paid by way of advance tax ` 20,000
Shortfall ` 1,05,145 (1,05,100 x 1%
Interest ` 3,153
Advance Payment of Tax th
Upto 15 Sept, 2012 (8,34,300 x 45%)
3,75,435
30,000
Upto 15th Dec, 2012 (8,34,300 x 75%)
6,25,725
80,000
Upto 15th March, 2013 (8,34,300 x 100%)
8,34,300
1,00,000
132 x 3) 3,45,435 (3,45,400 x 1% x 3 month) 5,45,725 (5,45,700 x 1% x 3 month) 7,34,300 (7,34,300 x 1% x 1 month)
10,362 16,371 7,343
Interest liability under section 234C
`37,229
Interest under section 234B 7,34,300 x 1% x 9
`66,087
Interest under section 234A 7,34,300 x 1% x 3
`22,029
Solution 3:
`
Computation of Total Income Income under the head House Property Income under the head Other Sources Gift received from sister of her mother in law Gross Total Income Less: Deduction u/s 80C to 80U Total Income Agricultural Income
18,00,000 1,20,000 19,20,000 Nil 19,20,000 4,00,000
Computation of Tax Liability Step 1. Tax on (agricultural income + non agricultural income) i.e. Tax on ` 23,20,000/- at slab rates Step 2. Tax on (`2,00,000 + agricultural income) at slab rates Step 3. Deduct Tax at Step 2 from Tax at Step 1 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Amount payable as advance tax ` 1,47,084
Amount actually paid by way of advance tax ` 30,000
Upto 15th Dec, 2012 (4,90,280 x 60%)
2,94,168
80,000
Upto 15th March, 2013 (4,90,280 x 100%)
4,90,280
1,00,000
th
Upto 15 Sept, 2012 (4,90,280 x 30%)
Interest liability under section 234C
5,26,000 50,000 4,76,000 9,520 4,760 4,90,280 Shortfall ` 1,17,084 (1,17,000 x 1% x 3 month) 2,14,168 (2,14,100 x 1% x 3 month) 3,90,280 (3,90,200 x 1% x 1 month)
Interest ` 3,510 6,423 3,902
`13,835
Advance Payment of Tax
133
Interest under section 234B 3,90,200 x 1% x 9
`35,118
Interest under section 234A 3,90,200 x 1% x 5
`19,510
EXAMINATION QUESTIONS PCC NOV – 2009 Question 5 (4 Marks) Interest is chargeable under section 234A for delay or default in furnishing return of income. Discuss briefly. Answer. Interest for default in furnishing return of Income (Section 234A) If any person has not paid the amount of income tax till the last date of filing the return of income, such person has to pay interest under section 234A @ 1% per month or part of the month for the period of delay beyond the last date of filing the return of income. The assessee has to pay interest under section 234B also for the same period. As per the language of the Act, interest shall be charged for delay in filing the return of income but as per decision of Delhi High Court in Dr. Prannoy Roy v. CIT (2001), interest shall be charged only if there was delay in payment of income tax i.e. if income tax has been paid till the last date of filing of return of income but return was filed after the last date, no interest should be charged under section 234A. Facts of the case of Dr. Prannoy Roy v. CIT The petitioner had earned substantial capital gains for the assessment year 1995-96 for which the return was due to be filed on 31-10-1995. However, taxes due were paid on 25-9-1995, i.e., before the due date of filing of the return, but the return was filed on 29-9-1996, i.e., after a delay of about 11 months. Interest had been charged under the provisions of section 234A. As per the Judgement of the High Court interest was deleted.
PCC JUNE – 2009 Question 5 Enlist the installments of advance tax and due dates thereon in case of companies. Answer. Advance tax shall be payable by companies as per the following schedule of installments: Companies - four installments Due date of installment Amount payable On or before the 15th June Not less than 15% of tax payable On or before the 15th September
Not less than 45% of tax payable
On before the 15th December
Not less than 75% of tax payable
On before the 15th March
The whole amount of tax payable
(4 Marks)
PCC MAY – 2008 Question 5
(4 x 2 = 8 Marks)
Advance Payment of Tax
134
(a) Briefly discuss about the interest chargeable under Section 234A for delay or default in furnishing return of income. (b) What are the due dates of instalments and the quantum of advance tax payable by companies? Answer 5(a). Refer to Answer given in PCC NOV – 2009 Question No.5 Answer 5(b). Refer to Answer given in PCC JUNE – 2009 Question No.5
PCC NOV – 2007 Question 5 (4 Marks) Briefly discuss the provisions relating to payment of advance tax on income arising from capital gains and casual income. Answer. Advance tax is payable by an assessee on his/its total income, which includes capital gains and casual income like income from lotteries, crossword puzzles, etc. Since it is not possible for the assessee to estimate his capital gains, or income from lotteries etc. it has been provided that if any such income arises after the due date for any installment, then, the entire amount of the tax payable (after considering tax deducted at source) on such capital gains or casual income should be paid in the remaining installments of advance tax, which are due. Where no such installment is due, the entire tax should be paid by 31st March of the relevant financial year. No interest liability on late payment would arise if the entire tax liability is so paid.
Residential Status & Scope of Total Income
135
RESIDENTIAL STATUS &
SCOPE OF TOTAL INCOME SECTION 5 TO 9 PARTICULARS
SECTIONS
Scope of total income/incidence of tax 5 Residence in India 6 Rules for determining the residential status of an individual 6(1), 6(6)(a) Rules for determining the residential status of an Hindu Undivided Family/Firm/ 6(2), 6(6)(b) Association of person/Body of individual Rules for determining the residential status of a company 6(3) Rules for determining the residential status of any other person 6(4) Incomes deemed to be received 7 Income deemed to accrue or arise in India 9 ‘Person’ defined 2(31)
THEORY QUESTION Q1 [Imp.] Write a note on determination of residential status of an individual. Q2. Write a note on determination of residential status of a Hindu Undivided Family. Q3: Write a note on determination of Residential Status of a Firm/ Association of Persons/Body of Individual. Q4. Write a note on determination of residential status of a Company. Q5. Briefly discuss the provisions relating to determination of residential status of any person other than individual, Hindu Undivided Family, Company, Firm, Association of Persons or Body of Individual. Q6. [V. Imp.] Write short note on income deemed to accrue or arise in India. Q7. Explain income received in India. Q8. Explain income deemed to be received in India. Q9. Explain taxability of income accruing/arising abroad and also received abroad. Q10. [V. Imp.] Write a note on scope of total income. Or Write a note on tax incidence in case of different status.
Residential Status & Scope of Total Income
136
Question 1 [Imp.]: Write a note on determination of Residential Status of an Individual. Answer: Determination of Residential Status Section 6 Whether a particular income shall be taxed in India or not will depend on the residential status of the person and the type of income i.e. in order to determine tax incidence, there is a need to determine the residential status and also the type of income. Residential status in fact explains the relationship of the assessee with the country and helps in determining the scope of total income. Residential status of an individual Section 6(1) Residential status of an assessee is determined on year to year basis and it may differ from year to year. An individual is said to be resident in India in any previous year, if he complies with at least one of the following two basic conditions: (a) He is in India in that year for a period amounting in all to 182 days or more or (b) He is in India in that year for a period amounting in all to 60 days or more and also for 365 days or more during four years preceding the relevant previous year. It is not compulsory that stay should be continuous rather total stay during the year should be 182 days or 60 days as the case may be. If an individual do not comply with any of the basic conditions mentioned above, he will be considered to be non-resident as per section 2(30). If the timings of arrival and departure are not given, the day of departure as well as arrival shall be considered to be the day of stay in India. Example Mr. Ravi Ghai came to India for first time on 01.10.2012 and left India on 31.03.2013, in this case, his stay in India shall be considered to be of 182 days and he will be considered to be resident in India. [31 + 30 + 31 + 31 + 28 + 31 = 182] Stay in territorial waters If any person has stayed in Indian territorial waters, it will be considered to be stay in India. Territorial waters extend upto 12 nautical miles from the base line on the coast of India and include any bay, gulf, harbour, creek or tidal river. (1 nautical mile = 1.1515 miles = 1.852 Kms). Sovereignty of India extends to the territorial waters and to the seabed and subsoil underlying and the air space over the waters. Special Category In case of individuals covered in the special category, they will be considered to be resident in India if during the relevant previous year, they stay in India for a period of 182 days or more. The persons covered in this category are: 1. An individual, being a citizen of India, who leaves India in any previous year for the purpose of employment outside India. Example Mr. Dharmender Kumar, is a citizen of India, and he has left India for first time on 01.09.2012 for taking up an employment outside India. Mr. Dharmender Kumar will be covered under special category and his residential status shall be non-resident.
Residential Status & Scope of Total Income
137
If any person has any business or profession in India and he has left India in connection with such business or profession, he will not be covered in special category. Example Mr. Sumit Vats a citizen of India has one business in India and he has left India in connection with such business for the first time on 01.09.2012. In this case, his residential status shall be resident and ordinarily resident. If any person has employment in India but he is transferred outside India. In that case, he will be covered under special category. Example Mr. Sultan Sharma is employed in Punjab National Bank and is posted at Delhi branch. The employer has transferred him to the London branch, in this case, he will be covered under special category. Employment shall include even any business or profession also. 2. An individual, being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship. 3. In the case of an individual, being a citizen of India, or a person of Indian origin, who, being outside India, comes on a visit to India in any previous year. Person of Indian origin Explanation to Section 115C(e) A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India. Grand parents shall include the parents of mother also. Meaning of “Not Ordinarily Resident” individual (NOR) Section 6(6)(a) An individual shall be considered to be not ordinarily resident in India in any previous year if such person has complied with at least one of the conditions given below: 1. He is non-resident in India in at least nine years out of ten previous years preceding that previous year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. (In other words, an individual shall be considered to be ordinarily resident in India in any previous year if such person is resident in India in at least 2 out of 10 previous years immediately preceding the relevant previous year and he was during the seven previous years preceding that year been in India for a period of 730 days or more). Illustration 1: Determine residential status of Mr. Atulya Singhal for the assessment year 2013-14, who stays in India during various financial years asunder: Previous Years 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08
Stay 100 200 91 90 89 87
2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00
91 90 88 89 86 87 89
Residential Status & Scope of Total Income 2006-07
82
1998-99
138
90
Solution: Years 2012-13 2011-12 2010-11 2009-10 2008-09
Status Resident Resident Non-resident Non-resident Non-resident
2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
Non-resident Non-resident Non-resident Non-resident Non-resident Non-resident
(a) He is non-resident in 9 out of 10 previous years preceding the previous year 2012-13. (b) Total stay in 7 years preceding the previous year 2012-13 is 730 days. Since the assessee is able to comply with at least one of the condition of Section 6(6)(a) as listed below, he will be considered to be NOR. 1. He is non-resident in India in at least nine years out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Illustration 2: Determine residential status of Mr. Mukesh Srivasta for the assessment year 2013-14, who stays in India during various financial years asunder: Previous Years 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07
Stay 75 197 94 89 90 89 91
2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99
80 91 86 85 89 72 69 92
Solution: Years 2012-13 2011-12 2010-11 2009-10 2008-09
Status Resident Resident Non-resident Non-resident Non-resident
2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
Non-resident Non-resident Non-resident Non-resident Non-resident Non-resident
(a) He is non-resident in 9 out of 10 previous years preceding the previous year 2012-13. (b) Total stay in 7 years preceding the previous year 2012-13 is 730 days. Since the assessee is able to comply with at least one of the condition of section 6(6)(a), he will be considered to be NOR.
Residential Status & Scope of Total Income
139
Illustration 3: Mr. Smith an American citizen has come to India for the first time on 10.07.2008, as an employee of a multinational company. The particulars of his arrival and departure are as given below: Date of arrival 10.07.2008 07.02.2009 27.11.2009 24.10.2010 10.09.2011 20.12.2012 Not yet returned
Date of departure 07.08.2008 27.03.2009 07.01.2010 31.12.2010 02.01.2012 13.02.2013
Determine his residential status for previous year 2008-09 to 2012-13. Solution: Previous Year 2008-09 {July – 22, August – 7, February – 22, March – 27} Days of stay in India are 78, so Mr. Smith is non-resident. Previous Year 2009-10 {November – 4, December – 31, January – 7} Days of stay in India are 42, so Mr. Smith is non-resident. Previous Year 2010-11 {October – 8, November – 30, December – 31} Days of stay in India are 69, so Mr. Smith is non-resident. Previous Year 2011-12 {September – 21, October –31, November – 30, December – 31, January – 2} Days of stay in India are 115, so Mr. Smith is non-resident. Previous Year 2012-13 {December – 12, January – 31, February – 13} Days of stay in India are 56, so Mr. Smith is non-resident. Illustration 4: Mr. Rajeev Arora an American citizen has come to India for the first time on 01.07.2009 as an executive of a multinational company. His employer has allowed him to visit USA every year and for this purpose he will be leaving India every year on 1st November and shall come back on 31st December, besides that he has visited Hong Kong on several occasions in connection with the official work, because he is looking after the employer’s operations in Hong Kong also, with details asunder: Date of leaving India 10.09.2009 07.02.2010 11.07.2010 10.02.2011 11.02.2012
Date of arriving in India 30.09.2009 08.05.2010 21.10.2010 23.07.2011 12.06.2012
Residential Status & Scope of Total Income 01.02.2013
140
10.04.2013
Determine his residential status for the previous years 2009-10 to 2012-13. Solution: Previous Year 2009-10 {July – 31, August – 31, September – 11, October – 31, November – 1, December – 1, January – 31, February – 7} Days of stay in India are 144 so Mr. Rajeev Arora is non-resident. Previous Year 2010-11 {May – 24, June – 30, July – 11, October – 11, November – 1, December – 1, January – 31, February – 10} Days of stay in India are 119 so he is non-resident. Previous Year 2011-12 {July – 9, August – 31, September – 30, October – 31, November – 1, December – 1, January – 31, February – 11} Days of stay in India are 145 so he is non-resident. Previous Year 2012-13 {June – 19, July – 31, August – 31, September – 30, October – 31, November – 1, December – 1, January – 31, February – 1} Days of stay in India are 176. During the preceding 4 years, his stay is for 365 days or more so he is resident. His stay during 7 years is 729 days or less, hence he is resident but not ordinarily resident. Illustration 5: Mr. Lokesh Vermani and Mrs. Lokesh Vermani are settled outside India and they came to India on 15.10.2012 on a visit for 7 months. Both of them are Indian citizens. In the earlier years they were in India as follows: Year 2011 – 2012 2010 – 2011 2009 – 2010 2008 – 2009
Mr. Lokesh Vermani 235 Days 330 Days Nil 118 Days
Mrs. Lokesh Vermani 365 Days 30 Days 28 Days 120 Days
Find out the residential status of Mr. Lokesh Vermani and Mrs. Lokesh Vermani for the assessment year 2013-14. Solution: Both are NR for the assessment year 2013-14 Stay of Lokesh Vermani in India Previous Year 2012-13 {17 + 30 + 31 + 31 + 28 + 31}
168 Days
Stay of Mrs. Lokesh Vermani in India Previous Year 2012-13
168 Days
Residential Status & Scope of Total Income
141
{17 + 30 + 31 + 31 + 28 + 31} Since they are covered in special category they will be resident only if their stay in India in relevant previous year is 182 days or more, hence they are non–resident. Illustration 6: On 01.06.2010 Mr. Zeen, a Malaysian citizen leaves India after stay of 10 years. During the financial year 2011-12 he comes to India for a period of 46 days. Later, he returns to India for one year on 10.10.2012. Determine Zeen’s residential status for the assessment year 2013-14. Solution: No. of days of stay in India 2012-13 {22 + 30 + 31 + 31 + 28 + 31}
173 Days
2011-12
46 Days
2010-11 {30 + 31 + 1}
62 Days
2009-10
365 Days
2008-09
365 Days
2007-08
366 Days
2006-07
365 Days
2005-06
365 Days
2004-05
365 Days
2003-04
366 Days
2002-03
365 Days
The person is resident and ordinarily resident. Mr. Zeen was in India for 60 days in 2012-13 and for 365 days or more in the 4 years immediately preceding the relevant previous year and he does not satisfy even a single condition of section 6(6)(a). Question 2: Write a note on determination of Residential Status of a Hindu Undivided Family. Answer: Residential status of a Hindu Undivided Family Section 6(2) A Hindu Undivided Family is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India i.e. if the control and management is in India either partly or completely, they are considered to be resident in India. In case of Hindu Undivided Family, since the control and management of the Hindu Undivided Family is in the hands of its Karta, hence the place of stay of Karta shall be considered to be the place of control and management of the Hindu Undivided Family.
Residential Status & Scope of Total Income
142
Example Karta of one Hindu Undivided Family is in USA throughout the year, the Hindu Undivided Family shall be considered to be non-resident. However, if Karta has come to India for a few days and has participated in control and management of the Hindu Undivided Family, it shall be considered to be resident. Karta for this purpose shall be considered to be the de-facto (actual Karta) i.e. if Karta has delegated his powers to any other member, such other member shall be considered to be the de-facto Karta. Example Karta of one Hindu Undivided Family is 97 years old and accordingly he has delegated his power to the next senior most male member. In this case, such member shall be de-facto Karta and the place of stay of such de-facto Karta shall be taken into consideration. CIT v. Nandlal Gandalal [1960] (SC). The control and management i.e. the head and brain means the de-facto control and management and not merely the right or power to control and manage. Meaning of not ordinarily resident Hindu Undivided Family Section 6(6)(b) An Hindu Undivided Family shall be considered to be not ordinarily resident if its manager has complied with at least one of the conditions given below: 1. He is non resident in India in nine out of ten previous years preceding the relevant previous year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Question 3: Write a note on determination of Residential Status of a Firm/ Association of Persons/Body of Individual. Answer: Residential status of a Firm/Association of Persons/Body of Individual Section 6(2) A Firm/Association of Persons/Body of Individual is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India i.e. if the control and management is in India either partly or completely, they are considered to be resident in India. Example There is a partnership firm Kansal Brothers where Mr. Amit Kansal is a working partner and Mr. Vijay Kansal is non-working partner. Mr. Amit Kansal is out of India. Mr. Vijay Kansal is in India throughout the year. In this case, partnership firm shall be considered to be non-resident but if Mr. Amit Kansal has come to India for a few days, the firm shall be considered to be resident. Similarly, if Mr. Amit Kansal is out of India but he has appointed one manager in India for control and management of the firm, the firm shall be considered to be resident. Question: Karta of one Hindu Undivided Family is non-resident in his individual capacity but the Hindu Undivided Family is resident. Discuss. Answer: The above statement is correct. Example If the Karta of Hindu Undivided Family is in India for 35 days, in this case, Karta shall be non-resident in his individual capacity, but Hindu Undivided Family shall be resident because the control is partly in India.
Residential Status & Scope of Total Income
143
Question: Karta of one Hindu Undivided Family comes to India every year for minimum 30 days and maximum 100 days. Determine the residential status of Hindu Undivided Family. Answer: Hindu Undivided Family is resident since the Karta has come to India for 30 days and also stay of Karta during 7 years shall be 729 days or less, hence Hindu Undivided Family shall be resident but not ordinarily resident. Illustration 7: Karta of one Hindu Undivided Family comes to India every year for minimum 60 days and maximum 91 days. Determine residential status of the Hindu Undivided Family and also that of the Karta for the assessment year 2013-14. Solution: Hindu Undivided Family is resident since the Karta has come to India for at least 60 days but the stay of Karta during seven years can be maximum 637 days hence Hindu Undivided Family shall be considered to be resident but not ordinarily resident. Karta in his individual capacity is non-resident because he cannot comply with even one of the two basic conditions. Illustration 8: One Hindu Undivided Family is being managed partly from Mumbai and partly from Nepal. Dheeraj Singh (a foreign citizen), Karta of Hindu Undivided Family, comes on a visit to India every year since 1981 in month of April for 105 days. Determine residential status of the Hindu Undivided Family and also that of the Karta in his individual capacity for the assessment year 2013-14. Solution: For the previous year 2012-13, the control and management of the affairs of Hindu Undivided Family is being partly managed from India. Hence Hindu Undivided Family is resident but Mr. Dheeraj Singh cannot comply with any of the conditions of section 6(6)(b), hence Hindu Undivided Family is resident and ordinarily resident. Karta shall be considered to be resident and ordinarily resident because his stay during 7 years is 735 days. Also, he will not be non-resident in nine years out of ten years preceding the relevant previous year. Question 4: Write a note on determination of Residential Status of a Company. Answer: Residential Status of a Company Section 6(3) A company is said to be resident in India in any previous year, if— (i) It is an Indian company or (ii) during that year, the control and management of its affairs is situated wholly in India. Example If Pepsi Foods Ltd. is incorporated in USA and during the year 20 meetings of the Board of Directors were held. Out of which 19 were in India and one in USA. In this case, the company shall be non-resident. But if all the meetings were held in India, the company shall be considered to be resident. In case of a company, control and management lies in the meeting of the board of directors. There is no concept of ROR and NOR in case of persons other than individual and Hindu Undivided Family.
Residential Status & Scope of Total Income
144
Illustration 9: Wipro Ltd. an Indian company has most of its business outside India. Determine its residential status. Solution: An Indian company shall always be considered to be resident in India. Illustration 10: Afcon Infrastructure Ltd. is a Japanese company, but it is being controlled from India. Determine its residential status for the assessment year 2013-14. Solution: Foreign company shall be resident in India only if its control and management is wholly in India. Hence, Afcon infrastructure Ltd. is resident company. Illustration 11: Bista Ltd., a foreign company, has made prescribed arrangements for declaration and payment of dividend within India in accordance with section 194. Bista Ltd. carries on majority of its operations and decision making activities from Calcutta and Assam but some part of operational activities and few decisions are being taken from the place at which registered office of Bista Ltd. is located, i.e. Dhaka. Determine its residential status for the assessment year 2013-14. Solution: Bista Ltd. is neither an Indian company nor its control and management is wholly situated in India. Bista Ltd. is, therefore, non–resident in India for the assessment year 2013-14. Question 5: Briefly discuss the provisions relating to determination of residential status of any person other than Individual, Hindu Undivided Family, Company, Firm, Association of Persons or Body of Individual. Answer: Residential status of any other person Section 6(4) Any person other than individual/Hindu Undivided Family/company/firm/Association of Persons/Body of Individual is said to be resident in India in any previous year in every case, except where during that year the control and management of its affairs is situated wholly outside India. Persons covered under section 6(4) shall be: 1. a local authority 2. every artificial juridical person. 2(31) “Person” includes— 1. an individual, 2. a Hindu Undivided Family, 3. a company, 4. a firm, 5. an association of persons or a body of individuals, whether incorporated or not, 6. a local authority, and 7. every artificial juridical person, not covered above. Explanation: An association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed with the object of deriving income.
Residential Status & Scope of Total Income
145
TYPES OF INCOME/SCOPE OF TOTAL INCOME Question 6 [V. Imp.]: Write short note on income deemed to accrue or arise in India. Answer: Income deemed to accrue or arise in India Section 9 The following incomes shall be deemed to accrue or arise in India: — All incomes accruing or arising, whether directly or indirectly, through or from any business connection in India, or from any property in India, or from any asset or source of income in India, or through the transfer of a capital asset situated in India, i.e. if the source of income is in India, income shall be accruing/arising in India. If the source is partly in India and partly outside India, income shall be accruing/arising in India only to the extent the source is in India. Example Mr. Bhaskar Ramamurthi is employed in Punjab National Bank and is posted in Delhi branch on the remuneration of `25,000 p.m. In this case, his income shall be deemed to be accruing/arising in India but if he is transferred to the London branch w.e.f 01.01.2013, his income accruing/arising in India shall be `2,25,000 i.e. salary upto 31.12.2012 and the income which is accruing/arising abroad shall be `75,000 (i.e. salary from 01.01.2013 to 31.03.2013) Business connection If any person has business in India as well as outside India, it will be called business connection and in case of such business, the income of the business deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. Determination of income in the case of non-residents Rule 10 In any case in which the Assessing Officer is of opinion that the actual amount of the income accruing or arising to any non-resident person whether directly or indirectly, from any business connection in India or from any property in India or from any asset or source of income in India or from any money lent at interest cannot be definitely ascertained, the amount of such income for the purposes of assessment to income-tax may be calculated:— (i) at such percentage of the turnover as the Assessing Officer may consider to be reasonable, or (ii) on any amount which bears the same proportion to the total profits and gains of the business of such person, as the receipts so accruing or arising bear to the total receipts of the business or (iii) in such other manner as the Assessing Officer may deem suitable. “Business connection” shall also include any business activity carried out through a person who acting on behalf of the non-resident,— (a) habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, but if his activities are limited to the purchase of goods or merchandise for the non-resident, it will not be considered to be business connection. (b) habitually maintains in India a stock of goods from which he regularly delivers goods on behalf of the non-resident or (c) habitually secures orders in India, for the non-resident.
Residential Status & Scope of Total Income
146
There is no business connection in the following three cases: (i) In the case of a non-resident, no income shall be deemed to accrue or arise in India to him from operations which are confined to the purchase of goods in India for the purpose of export. Example Mr. Ashok Jhunjhunwala a non-resident has one shop in New York for selling Indian readymade garments and all these garment are purchased from India. In this case, there is no business connection. However, if assessee is carrying out any other activity in India, it will be considered to be business connection. Example If in the above case the assessee has manufacturing unit in India, it will be considered to be a business connection. (ii) In the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him from activities which are confined to the collection of news and views in India for transmission out of India. (iii) In the case of a non-resident, being: (a) an individual who is not a citizen of India or (b) a firm which does not have any partner who is a citizen of India or who is resident in India or (c) a company which does not have any shareholder who is a citizen of India or who is resident in India. No income shall be deemed to accrue or arise in India to such individual, firm or company from operations which are confined to the shooting of any cinematograph film in India. Barendra Prasad Ray v. ITO [1981] 129 ITR 295 (SC) The expression ‘business’ does not necessarily mean only trade or manufacture rather it will include profession, vocation and calling. In the context in which the expression ‘business connection’ is used in section 9(1), there is no warrant for giving a restricted meaning to it excluding ‘professional’ connection, from its scope. Income shall also be deemed to be accruing/arising in India in the following cases: 1. Income which falls under the head “Salaries”, if it is earned in India. Salary income payable for the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India. 2. Income chargeable under the head “Salaries” payable by the Government to a citizen of India for services outside India. Example Mr. Anil Prabhakar is citizen of India and is an IFS. He is posted in Indian embassy in USA, in this case, his salary income shall be accruing/arising in India. (However under section 10(7), allowances and perquisites to such person are exempt from tax.) 3. A dividend paid by an Indian company outside India. (However, dividends received from a domestic company shall be exempt from income tax in the hands of the shareholder under section 10(34), but the domestic company has to pay additional income tax @ 15% plus surcharge @ 5% plus education cess @ 2% plus SHEC @ 1% , as per section 115O.) 4. Income by way of interest payable by— (a) the Government
Residential Status & Scope of Total Income
147
Example If Central Government has taken a loan from an agency in USA, equivalent to Indian `1,000 lakh @ 10%, in this case, interest of `100 lakhs paid by the Government to such agency shall be considered to be the income of such agency accruing/arising in India. (b) a person who is a resident, except where the interest is payable in respect of any moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. Example ABC Ltd. an Indian company has taken a loan from an agency in USA and the amount was utilised in USA. In this case, interest income shall be accruing/arising in USA. (c) a person who is a non-resident, where the interest is payable in respect of any moneys borrowed and used, for the purposes of a business or profession carried on by such person in India. Example Z Ltd. a non-resident company has taken a loan from outside India and loan amount was utilised in India in house property. In this case, interest income shall be accruing/arising abroad. 5. Income by way of royalty payable by— (a) the Government or (b) a person who is a resident or non-resident, except where the royalty is payable in respect of any right etc. utilised for the purposes of making or earning any income from any source outside India. 6. Income by way of fees for technical services payable by— (a) the Government or (b) a person who is a resident or non-resident, except where the fees are payable in respect of services utilised outside India for the purposes of earning any income from any source outside India. Fees for Technical Services means any consideration for the rendering of Managerial, Technical or Consultancy Services. 7. If any person is holding shares of any Indian company, any capital gain on transfer of such shares shall be considered to be income accruing/arising in India even if shares were sold outside India. If any income is accruing and arising in India relating to royalty or technical fees etc., it will be taxable in India in case of non-resident even if the non-resident do not have any Territorial Nexus with India i.e. such non-resident do not have a residence or place of business or business connection in India and also the nonresident has not rendered services in India. An asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. (the amendment is to overrule the judgement in Vodafone case).
Residential Status & Scope of Total Income
148
Question 7: Explain income received in India. Answer: Income received in India As per section 5, if any income has been received in India, such income is taxable in all the three status i.e. resident and ordinarily resident, resident but not ordinarily resident and Non-resident. Income shall be considered to be received in India, if income has been received directly from its source, in India. Example Mr. Ravi Puliani has one house in USA and rent has been received directly in India. It will be considered to be income received in India and it is chargeable to tax in case of all the three status, but if Mr. Ravi Puliani has one bank account with Bank of America, New York and rent has been deposited in that account and subsequently the bank has transferred the amount to Mr. Ravi Puliani in India, it will be considered to be income received outside India, because income has already been received outside India and subsequently it was remitted to India. Similarly, if Mr. Ravi Puliani has income from agriculture in Nepal and it was deposited in the branch of an Indian bank in Nepal, subsequently the amount was remitted in India, it will be considered to be income received outside India. Question 8: Explain income deemed to be received in India. Answer: Income deemed to be received in India Section 7 As per section 5, if any income is deemed to be received in India, it will be taxable in all the three status i.e. resident and ordinarily resident, resident but not ordinarily resident and Non-resident. As per section 7, the following incomes shall be deemed to be received: (i) Employer’s contribution to recognised provident fund in excess of 12% of retirement benefit salary. (ii) Interest on employee’s and employer’s contribution in excess of 9.5% p.a. If the provident fund account is maintained in India, the above incomes shall be deemed to be received in India and are chargeable to tax in case of all the three status i.e. resident and ordinarily resident, resident but not ordinarily resident, Non-resident. Illustration 12: Mrs. X is a citizen of India and is employed in ABC Ltd. in India and is getting salary of `50,000 p.m. and she was transferred out of India w.e.f 01.09.2012 and for this purpose she left India on 01.09.2012 for the first time and she visited India from 27.12.2012 to 07.01.2013 and her salary for the month of Dec’ 2012 was received in India. Employer and employee both have contributed @ 13% (each) of salary to the recognized provident fund and during the year interest of `50,000 was credited to the recognized provident fund @ 10% p.a. Compute her total income and tax liability in India for assessment year 2013-14. (b) Presume she was transferred w.e.f 01.11.2012 and she left India on 01.11.2012 for the first time. Solution: In this case, Mrs. X is covered in special category and her stay in India is less than 182 days hence she will be non-resident and her incomes taxable in India shall be ` Income accruing/arising in India 2,50,000.00
Residential Status & Scope of Total Income 50,000 x 5 Income received in India 50,000 x 1 Income deemed to be received in India Employer contribution (50,000 x 12) x 1% (13% - 12%)
149 50,000.00
6,000.00
Interest in excess of 9.5% 50,000 /10% x 0.5% = 2,500 Interest on employer contribution 2,500 /2 (Interest on employee contribution i.e. `1,250 shall be taxable under the head Other Sources) Gross Salary Income under the head Salary Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C Contribution to recognized provident fund (50,000 x 12) x 13% Total Income Computation of Tax Liability Tax on `2,30,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
1,250.00
3,07,250.00 3,07,250.00 1,250.00 3,08,500.00 78,000.00 2,30,500.00 3,050.00 61.00 30.50 3,141.50 3,140.00
Solution (b): In this case, Mrs. X is covered in special category and her stay in India is more than 182 days hence she will be ROR and her incomes taxable in India shall be ` Income accruing/arising in India 3,50,000.00 50,000 x 7 Income received in India 50,000.00 50,000 x 1 Income accruing/arising abroad / received abroad 2,00,000.00 50,000 x 4 Income deemed to be received in India Employer contribution (50,000 x 12) x 1% (13% - 12%)
6,000.00
Interest in excess of 9.5% 50,000 /10% x 0.5% = 2,500 Interest on employer contribution 2,500 /2 (Interest on employee contribution i.e. `1,250 shall be taxable under the head Other Sources)
1,250.00
Residential Status & Scope of Total Income Gross Salary Income under the head Salary Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C Contribution to recognized provident fund (50,000 x 12) x 13% Total Income Computation of Tax Liability Tax on `5,30,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
150 6,07,250.00 6,07,250.00 1,250.00 6,08,500.00 78,000.00 5,30,500.00 36,100.00 722.00 361.00 37,183.00 37,180.00
Question 9: Explain taxability of income accruing/ arising abroad and also received abroad. Answer: Income accruing/arising abroad and received abroad As per section 5, if any income is accruing/arising abroad and is also received abroad, such income shall be exempt in case of non-resident and in case of not ordinarily resident. But resident and ordinarily resident has to pay tax on such income in India. If there is any income from a business which is outside India but is controlled from India, income shall be taxable in case of resident and ordinarily resident and also in case of not ordinarily resident but non-resident shall be exempt. Similarly, if the income is from a profession which was set up in India, income shall be taxable in case of resident and ordinarily resident and also in case of not ordinarily resident but non-resident shall be exempt. Profession set up in India means that it was originally setup in India and subsequently there was an expansion outside India. Any past untaxed profits shall not be considered to be the income of the current year in any status i.e. ROR, NOR, NR. Example Mr. Rohit Solanki had income of `3,00,000 in the year 2009-10 but he has not disclosed the income. It was detected in the previous year 2012-13. In this case, it will not be considered to be income of 2012-13 in any status, rather it will be considered to be income of the year 2009-10. Question 10 [V. Imp.]: Write a note on scope of Total Income. or Write a note on tax incidence in case of different status. Answer: Scope of Total Income Section 5 Resident and ordinarily resident Section 5(1) The total income of any previous year of a person who is a resident and ordinarily resident includes all income from whatever source derived, which— 1. is received or is deemed to be received in India in such year by such person. 2. accrues or arises or is deemed to accrue or arise to him in India during such year. 3. accrues or arises to him outside India during such year.
Residential Status & Scope of Total Income
151
Resident but not ordinarily resident Section 5(1) The total income of any previous year of a person who is a resident and not ordinarily resident includes the following incomes: 1. Income which is received or is deemed to be received in India in such year by such person or 2. Income which accrues or arises or is deemed to accrue or arise to him in India during such year or 3. The income which accrues or arises to him outside India, if it is derived from a business controlled in or a profession set up in India. Non- resident Section 5(2) The total income of any previous year of a person who is a non-resident includes all income from whatever source derived which— 1. is received or is deemed to be received in India in such year by such person or 2. accrues or arises or is deemed to accrue or arise to him in India during such year. Tax Incidence/Scope of Total Income Type of Income 1. Income received in India 2. Income deemed to be received in India 3. Income which accrues or arises or is deemed to accrue or arise to the assessee in India in the previous year 4. Income which accrues or arises to the assessee outside India and is also received outside India 5. Income which accrues or arises to the assessee outside India and is also received outside India but it is either from a business controlled from India or from a profession set up in India 6. Past untaxed income (earned and received abroad) remitted to India in previous year
ROR Taxable Taxable Taxable
Residential Status NOR NR Taxable Taxable Taxable Taxable Taxable Taxable
Taxable
Not Taxable
Not Taxable
Taxable
Taxable
Not Taxable
Not Taxable
Not Taxable
Not Taxable
Illustration 13: Mr. Akash Tanwar has income asunder: 1.
He has income from a business in Germany amounting to `3,00,000 and half of it was received in India.
2.
He has 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.
3.
He has a business in Bombay and entire income of `3,00,000 was received in UK.
4.
He has one house property in Ghaziabad and income of `5,00,000 was received in UK.
5.
He has received salary income of `5,00,000 (computed) in India and half of the services were rendered in UK and half in India.
(Presume all the above incomes are computed incomes)
Residential Status & Scope of Total Income
152
Compute his income presuming that he is NOR, NR and ROR. Solution:
1. Income received in India Income accruing/arising abroad and received abroad 2. Income accruing/arising abroad and received abroad 3. Income accruing/arising in India 4. Income accruing/arising in India 5. Income received in India Total
ROR 1,50,000 1,50,000 1,00,000 3,00,000 5,00,000 5,00,000 17,00,000
NOR 1,50,000 xxxxx xxxxx 3,00,000 5,00,000 5,00,000 14,50,000
NR 1,50,000 xxxxx xxxxx 3,00,000 5,00,000 5,00,000 14,50,000
Illustration 14: Mr. Nishant Khurana earns the following income during the financial year 2012-13: ` 60,000
(1)
Income from house property in London, received in India
(2)
Profits from business in Japan and managed from there (received in Japan)
(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
9,00,000
(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 2011-12 brought into India in 2012-13
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, resident but not ordinarily resident, non-resident in India during the financial year 2012-13.
Residential Status & Scope of Total Income
153
Solution:
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10 ) (11 ) (12 ) (13 ) (14 ) (15 )
Income received in India Income accruing/arising and received outside India Income received in India Income accruing in India but exempt under section 10(34) Income accruing/arising and received outside India, but business controlled from India Income accruing/arising in India Income accruing/arising in India Income accruing/arising in India Income accruing/arising and received outside India Income accruing/arising in India
ROR 60,000 9,00,000 30,000 — 3,00,000
NOR 60,000 — 30,000 — 3,00,000
NR 60,000 — 30,000 — —
7,00,000 2,00,000 50,000 20,000 8,000
7,00,000 2,00,000 50,000 — 8,000
7,00,000 2,00,000 50,000 — 8,000
Past untaxed profits
—
—
—
Income accruing/arising in India
80,000
80,000
80,000
Income received in India
20,000
20,000
20,000
Income accruing/arising in India
60,000
60,000
60,000
1,00,000
—
—
25,28,000
15,08,000
Income accruing/arising and received outside India Total Income
12,08,000
Illustration 15: Lensel Optics Pvt. Ltd., an Indian company has an income of `30 lakhs from a business in India. This company has a business income of `12 lakhs from outside India. Out of which 7 lakhs were received in India and balance outside India. Compute tax liability of the Indian company for the assessment year 2013-14. Solution: Income from business in India Income from outside India Income under the head Business/Profession Gross Total Income Less: Deductions u/s 80C to 80U Total Income Computation of Tax Liability Tax on `42,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 12,97,800
` 30,00,000 12,00,000 42,00,000 42,00,000 Nil 42,00,000 12,60,000 25,200 12,600
Note: Indian company is always considered to be resident in India and its incomes even earned and received outside India shall be chargeable to tax in India.
Residential Status & Scope of Total Income
154
Illustration 16: Cisco Systems partnership firm has an income of `3 lakhs in India and income accruing/arising abroad and also received abroad `23 lakhs. It consists of two partners. Mr. Tajender Singh who is an active partner, is staying outside India throughout the year. Mr. Virender Singh is a dormant partner and is staying in India throughout the year. Compute tax liability of the partnership firm in India for the assessment year 2013-14. (b) Also compute tax liability of the firm if Mr. Virender Singh is also an active partner. `
Solution: (a) Partnership firm is non-resident Income from business/profession in India Gross Total Income Less: Deduction u/s 80C to 80U Total Income Tax @ 30% + Education cess @ 2% + SHEC @ 1%
3,00,000 3,00,000 Nil 3,00,000 92,700
(b) Partnership firm is resident Income from business/profession Gross Total Income Less: Deduction u/s 80C to 80U Total Income Tax @ 30% + Education cess @ 2% + SHEC @ 1%
26,00,000 26,00,000 Nil 26,00,000 8,03,400
Illustration 17: Ashish had following income during the previous year ended 31st March, 2013:
`
(1) Salary received in India for three months (being computed income)
25,000
(2) Income from house property in India
18,000
(3) Interest on savings bank deposit in SBI, in India
4,000
(4) Amount brought into India out of the past-untaxed profits earned in Germany
20,500
(5) Income from business in Bangladesh, being controlled from India
12,542
(6) Dividends received in Belgium from French companies, out of which `2,500 were remitted to India
23,150
You are required to compute his gross total income for the assessment year 2013-14, if he is a (a) resident and ordinarily resident; (b) not ordinarily resident; and (c) non-resident. Presume all the above income is computed income. Solution:
(1) Salary received in India
ROR 25,000
NOR 25,000
NR 25,000
Residential Status & Scope of Total Income • Taxable on receipt basis (2) Income from house property in India • Income accruing/arising in India (3) Interest on savings bank deposit in SBI, in India • Income accruing/arising in India (4) Past untaxed profits brought in India • Not an income of the previous year 2012-13 hence not taxable (5) Income from business in Bangladesh being controlled from India • Not taxable in case of non resident (6) Dividend received in Belgium • Income accrued & received outside India Gross Total Income
155
18,000
18,000
18,000
4,000
4,000
4,000
—
—
—
12,542 12,542
—
23,150
—
—
82,692
59,542
47,000
Illustration 18: Hemant Kumar, a foreign citizen (not being a person of Indian origin) came to India for the first time on 2nd December, 2012 for a visit of 210 days. Hemant Kumar had the following income during the previous year ended 31st March, 2013: ` (1) Salary (computed) received in India for three months
1,00,000
(2) Income from house property in London (received there)
2,75,200
(3) Amount brought into India out of the past-untaxed profits earned in Germany
80,000
(4) Income from agriculture in Sri Lanka, received and invested there
12,300
(5) Income from business in Nepal, being controlled from India
35,000
(6) Income from house property in USA received in USA (`76,000 is used in Canada for meeting the educational expenses of Hemant’s daughter and ` 10,000 is later on remitted in India)
86,000
You are required to compute his total income for the assessment year 2013-14. Solution: Hemant Kumar is a foreign citizen. He was in India during the previous year 2012-13 for 120 (30 + 31 + 28 + 31) days. Thus, he does not satisfy the first condition of 182 days. The second condition is also not satisfied as Hemant Kumar came to India for first time during the previous year 2012-13. Hemant Kumar is therefore non–resident in India. The total income of Hemant Kumar for the assessment year 2013-14 will be: ` (1) Salary (computed) received in India for three months • Taxable on receipt basis
1,00,000
(2) Income from house property in London (received there) • Not taxable as income is accruing & arising outside India and is also received outside India
—
(3) Amount brought in India out of the past untaxed-profits earned in Germany • Not taxable as it is not income
—
Residential Status & Scope of Total Income
156
(4) Income from agriculture in Sri Lanka being invested there • Income accrued and received outside India
—
(5) Income from business in Nepal, being controlled from India • Not taxable in the case of non- resident
—
(6) Income from house property in USA received in USA (` 76,000 is used in Canada or meeting the educational expenses of Hemant’s daughter and ` 10,000 is later on received in India) • Income accrued and received outside India
—
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
1,00,000 Nil 1,00,000
Illustration 19: Mr. Vineet Tyagi earns the following incomes during the financial year 2012-13.
`
(1) Profits from a business in Japan, controlled from India, (half of the profits received in India)
40,000
(2) Income from property in Bombay, received in UK
70,000
(3) Income from a property in USA, received there but subsequently remitted to India
2,00,000
(4) Income from property in USA, received there (`50,000 remitted in India)
80,000
(5) Salary received in India for services rendered in USA
50,000
(6) Income from profession in Paris, which was set up in India, received in Paris
80,000
(7) Interest from deposit with an Indian company, received in Japan
9,000
(8) Income from profession in Bombay received in Paris
30,000
(9) Profits of business in Iran, deposited in a bank there, business controlled from India (out of `4,00,000, ` 1,00,000 is remitted in India) (10) Interest on German development bonds, half of which is received in India
4,00,000 10,000
(11) Income from property in Canada, one-fifth is received in India 50,000 (Presume all the above incomes are computed income i.e. all the exemptions and deductions have already been allowed) Determine the gross total income of Mr. Vineet Tyagi if he is (i) resident and ordinarily resident, (ii) resident but not ordinarily resident, (iii) non-resident in India during the financial year 2012-13. Solution:
(1) Income accruing/arising outside India from a business controlled in India, half of the income received in India (2) Income accruing/arising in India
ROR 40,000
NOR 40,000
NR 20,000
70,000
70,000
70,000
Residential Status & Scope of Total Income (3) Income accruing/arising outside India and received outside India (4) Income accruing/arising outside India and received outside India (5) Income received in India (6) Income accruing/arising and received outside India, but profession set up in India (7) Income accruing/arising in India (8) Income accruing/arising in India (9) Income accruing/arising outside India and received outside India, but business controlled from India (10) Income accruing/arising outside India, half received outside India and half in India (11) Income accruing/arising outside India, 4/5th received outside India and 1/5th in India Gross Total Income
157 2,00,000 80,000 50,000 80,000
— — 50,000 80,000
— — 50,000 —
9,000 30,000 4,00,0 00 10,000
9,000 30,000
9,000 30,000
4,00,000 5,000
— 5,000
50,000
10,000
10,000
10,19,000
6,94,000
1,94,000
Residential Status & Scope of Total Income
158
PRACTICE PROBLEMS TOTAL PROBLEMS 24 Problem 1 TO 10 Determine residential status of Mr. Naresh Jindal for the assessment year 2013-14, who stays in India during various financial years asunder: Previous 1 2 3 4 5 6 7 8 9 10 Years 2012-13 65 183 181 69 300 70 72 95 180 93 2011-12 91 90 87 110 97 99 94 92 91 90 2010-11 190 78 98 91 103 104 101 100 99 80 2009-10 89 120 189 196 110 98 97 96 95 90 2008-09 87 91 92 93 94 95 94 93 92 100 2007-08 86 99 92 95 99 100 101 100 99 90 2006-07 84 66 93 94 366 210 209 208 207 80 2005-06 105 210 91 93 — 0 91 92 91 90 2004-05 110 110 92 92 362 300 200 100 — 100 2003-04 112 94 93 91 10 99 88 77 66 110 2002-03 100 96 91 90 310 100 99 92 94 120 2001-02 91 199 90 89 210 92 94 96 98 130 2000-01 94 81 89 8 92 80 70 60 50 100 1999-00 97 82 88 87 88 55 65 75 85 80 1998-99 99 83 87 86 84 40 50 60 70 60 Answer = (1) ROR; (2) ROR; (3) ROR; (4) ROR; (5) ROR; (6) NOR; (7) ROR; (8) ROR; (9) ROR; (10) NR Problem 11. Mr. Andrew, a citizen of USA, has come to India for the first time on 01.07.2008. The particulars of his arrival and departure are as given below: Date of arrival 01.07.2008 27.03.2009 10.09.2009 01.01.2011 01.02.2012 11.02.2013 Determine his residential status for various years. Answer = 2008-09 – Non-Resident (NR)
Date of departure 11.12.2008 21.07.2009 01.03.2010 23.09.2011 01.07.2012 ——
Residential Status & Scope of Total Income
159
2009-10 – Resident but not ordinarily resident (NOR) 2010-11 – Resident but not ordinarily resident (NOR) 2011-12 – Resident but not ordinarily resident (NOR) 2012-13– Resident and ordinarily resident (ROR) Problem 12. Mr. Daniel, a citizen of U.K., has come to India for the first time on 01.07.2008. The particulars of his arrival and departure are as given below: Date of arrival 01.07.2008 01.01.2009 11.07.2009 10.02.2010 01.01.2011 11.03.2012 27.03.2013
Date of departure 07.09.2008 08.03.2009 20.09.2009 09.05.2010 20.05.2011 21.06.2012 ——
Determine his residential status for various years. Answer = 2008-09 – Non-Resident (NR) 2009-10 – Non-Resident (NR) 2010-11 – Non-Resident (NR) 2011-12 – Resident but not ordinarily resident (NOR) 2012-13 – Resident but not ordinarily resident (NOR) Problem 13. Mr. Manmohan Sharma goes out of India every year for 274 days. Determine his residential status for the previous year 2012-13. Answer = Resident but not ordinarily resident (NOR) Problem 14. Mr. Rishab Patil, a citizen of Japan, has come to India for the first time on 01.10.2012 for 200 days. Determine his residential status for the assessment year 2013-14. Answer = Resident but not ordinarily resident (NOR) Problem 15. Mr. Matthew, a citizen of U.K. came to India for the first time on 01.07.2002 in connection with his employment. He left India on 01.11.2011 for taking up a job in USA. He again came to India on 01.01.2013 on a visit and left India on 01.03.2013. Determine his residential status for the assessment year 2013-14. Answer = Resident and ordinarily resident (ROR) Problem 16. Mr. Vikas Bedi, a citizen of India, is employed in Soliton Technologies, an Indian company. His employer has transferred him to his branch in Japan. Mr. Vikas Bedi left India on 29.09.2012 for his new posting in Japan.
Residential Status & Scope of Total Income
160
Determine his residential status for the assessment year 2013-14. Prior to this, Mr. Vikas Bedi was posted outside India for 11 months in the previous year 2007-08 and for 10.5 months in the year 2003-04. Answer = Resident and ordinarily resident (ROR) Problem 17. Mr. Sameer Khanna, a German citizen, came to India on 23.05.2011 and left India on 30.05.2012. Determine his residential status for the assessment year 2012-13, 2013-14. Answer =
Assessment Year 2012-13: Resident but not ordinarily resident (NOR) Assessment Year 2013-14: Non- Resident (NR)
Problem 18. Dr. Reddy’s Labs is an Indian company and has borrowed funds from bank of America, New York for investing it in one of its projects in USA. In this case, interest paid by Dr. Reddy’s Labs to bank of America shall be accruing/arising __________. Answer = Outside India Problem 19. Calculate taxable income of an individual on the basis of the following informations, for the assessment year 2013-14, if he is: (a) Ordinarily Resident (b) Not Ordinarily Resident; and (c) Non-Resident (i) Profit from business in Japan received in India. (ii) Income from agriculture in Pakistan – it is all spent on the education of children there (iii) Income accrued in India but received in England (iv) Income from house property in Pakistan deposited in a bank there
` 10,000 5,000 10,000 2,000
(v) Profits of business in America deposited in a bank there. This business is controlled from India 50,000 (vi) Profits earned from business in Meerut
12,000
(vii) Past untaxed foreign income brought into India during the previous year
10,000
(Presume that all the incomes are computed incomes) Answer:
Taxable Income: Resident and ordinarily resident (ROR): `89,000; Resident but not ordinarily resident (NOR) : `82,000; Non-Resident (NR) : `32,000
Residential Status & Scope of Total Income
161
Problem 20. Mr. Abhishek earns the following income during the previous year 2012-13. Compute his gross total income for assessment year 2013-14 if he is (i) resident and ordinarily resident. (ii) resident but not ordinarily resident. (iii) non-resident. (1)
Income from agricultural land in Bhutan received there and remitted to India later on
` 40,000
(2)
Dividend from foreign company, received in India
50,000
(3)
Pension for service rendered in India, but received in Paris
15,000
(4)
Past untaxed profits of 2011-12 brought into India in 2012-13
50,000
(5)
Profits from business in Paris, deposited in bank there
1,00,000
(6)
Profits from business in Canada, controlled from India, profits received there
1,75,000
(7)
Interest on saving bank deposit in Punjab National Bank, in India
20,000
(8)
Capital gain on sale of a house in Delhi, amount received in Paris
2,00,000
Answer:
Resident and ordinarily resident (ROR) : `6,00,000 Resident but not ordinarily resident (NOR) : `4,60,000 Non-Resident (NR) : `2,85,000
Problem 21. Mr. Brij Mohan earns the following income during the previous year 2012-13. Compute his total income for assessment year 2013-14 if he is (i) resident and ordinarily resident. (ii) resident but not ordinarily resident. (iii) non-resident.
`
(1)
Dividend from an Indian company, received in Japan
60,000
(2)
Profit on sale of machinery in India, but received in Japan
1,20,000
(3)
Profits from business in Bombay, managed from Japan
2,25,000
(4)
Profits from business in Japan, managed from there, received there
1,45,000
(5)
Income from house property in India
1,50,000
Residential Status & Scope of Total Income
162
(6)
Income from property in Japan and received there
(7)
Income from agriculture in Japan being invested there
75,000
(8)
Fees for technical services rendered in India but received in Japan
65,000
(9)
Interest on Government securities accrued in India but received in Japan
80,000
(10) Interest on Japan Government securities, received in India
1,50,000
40,000
(Presume that all the incomes are computed incomes) Answer:
Resident and ordinarily resident (ROR) : `10,50,000 Resident but not ordinarily resident (NOR) : `6,80,000 Non-Resident (NR) : `6,80,000
Problem 22. Mr. Ashish Bhatia earns the following incomes during the financial year 2012-13.
`
(1)
Profits from a business in Japan, controlled from India, half of the profits received in India
60,000
(2)
Income from agriculture in Nepal, brought to India
10,000
(3)
Income u/h house property in Bombay, received in UK
1,70,000
(4)
Income u/h house property in USA, received there but subsequently remitted to India
2,20,000
(5)
Income u/h house property in USA, received there (`50,000 remitted in India)
1,00,000
(6)
Salary received in India for services rendered in USA
60,000
(7)
Income from profession in Paris, which was set up in India, received in Paris
90,000
(8)
Interest from deposit with an Indian company, received in Japan
19,000
(9)
Income from profession in Bombay received in Paris
39,000
(10) Profits of business in Iran, deposited in a bank there, business controlled from India (out of `4,80,000, ` 1,00,000 is remitted in India)
4,80,000
(11) Interest on German development bonds, half of which is received in India
12,000
(12) Income under the head house property in Canada, one-fifth is received in India
50,000
(Presume all the above incomes are computed income i.e. all the exemptions and deductions have already been allowed) Determine the gross total income of Mr. Ashish Bhatia if he is (i) resident and ordinarily resident, (ii) resident but not ordinarily resident,
Residential Status & Scope of Total Income
163
(iii) non-resident in India during the financial year 2012-13. Answer: Resident and ordinarily resident (ROR): `13,10,000 Resident but not ordinarily resident (NOR) : `9,34,000 Non-Resident (NR) : `3,34,000 Problem 23. Mr. X is a citizen of India and is employed in ABC Ltd and is getting a salary of `60,000 p.m. He purchased one building in India on 1st May, 2012 for `10,00,000 and its market value is `22,00,000 and value for the purpose of charging stamp duty is `13,00,000. He purchased gold for `8,00,000 and its market value is `11,00,000. He was transferred out of India w.e.f. 1st Sept, 2012 and he left India on 1st Sept,2012 and one of his friend gifted him one colour TV on this occasion, market value `1,00,000. He has gone out of India in earlier years also. P.Y. 2011-12 P.Y. 2010-11
100 days 200 days
He visited India from 01.02.2013 to 14.02.2013 and salary for January, 2013 was received in India. He has taken a loan from outside India on 01.01.2013 and amount was invested in shares of Indian Company and received dividend of `30,000 outside India. He has purchased one house property in USA in December 2012 and sold in March 2013 and there were short term capital gain of `6,00,000 and the amount was received in USA. Compute his tax liability for the A.Y.2013-14. Answer: Tax Liability: `63,860 Problem 24. Mrs. X is employed in ABC Ltd in India and she is an American citizen and is getting a salary of `2,00,000 p.m. She purchased shares of a foreign Company on 01.07.2012 and received dividend of `3,00,000 on 01.08.2012 in India and again dividend of `2,00,000 on 01.03.2013 in USA. She received gift of one painting in India from her friend on 01.07.2012 and its market value is `49,000 and she also received gift in cash of `49,000 from the same friend and gift of immovable property with value for the purpose of charging stamp duty is `51,000 from the same friend. She purchased UK Development bond and interest equivalent of `2,00,000 was received in USA. She visited USA for 182 days during P.Y.2012-13.In the earlier year her stay in India was P.Y. 2011-12 P.Y. 2010-11 P.Y. 2009-10 P.Y. 2008-09 P.Y. 2007-08 P.Y. 2006-07 P.Y. 2005-06
110 days 120 days 300 days 182 days 185 days 200 days 300 days
Compute her tax liability in India for the A.Y. 2013-14. Answer: Tax Liability: `7,98,560
Residential Status & Scope of Total Income
164
SOLUTIONS TO
PRACTICE PROBLEMS Solution 1: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Non-Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Resident 2004-05 Resident 2003-04 Resident 2002-03 Resident Total stay in 7 years preceding the relevant previous year is 732 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 2: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Resident 2004-05 Resident 2003-04 Resident 2002-03 Resident Total stay in 7 years preceding the relevant previous year is 754 days.
Residential Status & Scope of Total Income
165
Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 3: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Resident 2004-05 Non-Resident 2003-04 Non-Resident 2002-03 Non-Resident Total stay in 7 years preceding the relevant previous year is 742 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 4: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Non-Resident 2004-05 Non-Resident 2003-04 Non-Resident 2002-03 Non-Resident Total stay in 7 years preceding the relevant previous year is 772 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or
Residential Status & Scope of Total Income
166
less. Solution 5: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Non-Resident 2004-05 Resident 2003-04 Non-Resident 2002-03 Resident Total stay in 7 years preceding the relevant previous year is 869 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 6: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Non-Resident 2004-05 Resident 2003-04 Non-Resident 2002-03 Non-Resident Total stay in 7 years preceding the relevant previous year is 706 days. Since the assessee is able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be NOR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 7: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident
Residential Status & Scope of Total Income 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
167
Resident Resident Resident Resident Resident Non-Resident Non-Resident
Total stay in 7 years preceding the relevant previous year is 787 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 8: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Resident 2006-07 Resident 2005-06 Resident 2004-05 Non-Resident 2003-04 Non-Resident 2002-03 Non-Resident Total stay in 7 years preceding the relevant previous year is 781 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 9: 2012-13 Resident 2011-12 Resident 2010-11 Resident 2009-10 Resident 2008-09 Resident 2007-08 Non-Resident 2006-07 Resident 2005-06 Non-Resident 2004-05 Non-Resident 2003-04 Non-Resident 2002-03 Non-Resident
Residential Status & Scope of Total Income
168
Total stay in 7 years preceding the relevant previous year is 774 days. Since the assessee is not able to comply with any of the conditions of section 6(6)(a), as listed below, he will be considered to be ROR. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Solution 10: Mr. Naresh Jindal is in India for 60 days or more in 2012-13 but for less than 365 days in 4 years immediately preceding 2012-13, so he is non-resident in 2012-13. Solution 11: Stay of Mr. Andrew in various years is as given below. In 2008-09 {July – 31, August – 31, September – 30, October – 31, November – 30, December – 11, March – 5} Days of stay in India are 169, so Mr. Andrew is non-resident. In 2009-10 {April – 30, May – 31, June – 30, July – 21, September – 21, October – 31, November – 30, December – 31, January – 31, February – 28, March – 1} Days of stay in India are 285. So, he is resident and also he is non-resident in at least 9 years out of 10 years preceding the relevant previous year, hence he is NOR. In 2010-11 {January – 31, February – 28, March – 31} Days of stay in India are 90. So, he is resident and also he is non-resident in at least 9 years out of 10 years preceding the relevant previous year, hence he is NOR. In 2011-12 {April – 30, May – 31, June – 30, July – 31, August – 31, September – 23, February – 29, March – 31} Days of stay in India are 236. So, he is resident and also his stay during seven years preceding the relevant previous year is 729 days or less, hence he is NOR. In 2012-13 {April – 30, May – 31, June – 30, July – 1, February – 18, March – 31} Days of stay in India are 141 and during the previous 4 years his stay is for 365 days or more so he is resident and also he is ROR because he is not able to fulfil any of the conditions of section 6(6)(a). i.e. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Hence he is ROR .
Residential Status & Scope of Total Income
169
Solution 12: In 2008-09 {July – 31, August – 31, September – 7, January – 31, February – 28, March – 8} Days of stay in India are 136, so Mr. Daniel is non-resident. In 2009-10 {July – 21, August – 31, September – 20, February – 19, March – 31} Days of stay in India are 122, so, he is non-resident. In 2010-11 {April – 30, May – 9, January – 31, February – 28, March – 31} Days of stay in India are 129, so, he is non-resident. In 2011-12 {April – 30, May – 20, March – 21} Days of stay in India are 71 and also he stays for 365 days or more during 4 years preceding the relevant previous year and also he is able to comply with at least one the conditions of section 6(6)(a) as given below. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Hence he is NOR. In 2012-13 {April – 30, May – 31, June – 21, March – 5} Days of stay in India are 87 and during the previous 4 years his stay is more than 365 days. So he is resident but not ordinarily resident because he is able to fulfill at least one of the two condition given u/s 6(6)(a). Solution 13: Since he is out of India every year for 274 days so his days of stay in India are – In 2012-13
91 Days
In 2011-12
92 Days
In 2010-11
91 Days
In 2009-10
91 Days
In 2008-09
91 Days
So his stay in India during the seven years immediately preceding the relevant previous year shall be 729 days or less, so he is resident but not ordinarily resident.
Residential Status & Scope of Total Income
170
Solution 14: Days of stay in India in 2012-13 are 182. {October – 31, November – 30, December – 31, January – 31, February – 28, March – 31} So he is resident and also he will be able to comply with at least one of the conditions of section 6(6)(a) as given below. 1. He is non resident in India in at least nine out of ten previous years preceding that year. or 2. He has during the seven previous years preceding that year been in India for a period of 729 days or less. Hence he is NOR. Solution 15: His days of stay in India are as under – In 2002-03 274 days {July – 31, August – 31, September – 30, October – 31, November – 30, December – 31, January – 31, February – 28, March – 31} In 2003-04
366
In 2004-05
365
In 2005-06
365
In 2006-07
365
In 2007-08
366
In 2008-09
365
In 2009-10
365
In 2010-11
365
In 2011-12 215 {April – 30, May – 31, June – 30, July – 31, August – 31, September – 30, October – 31, November – 1} In 2012-13 60 {January – 31, February – 28, March – 1} He is resident in 2012-13 but he is not able to comply with any of the conditions of section 6(6)(a) hence he is resident and ordinarily resident. Solution 16: His days of stay in India during 2012-13 are 182. {April – 30, May – 31, June – 30, July – 31, August – 31, September – 29} So Mr. Vikas Bedi is resident in previous year 2012-13 and also he is not able to comply with any of the conditions of section 6(6)(a) hence he will be considered to be ROR.
Residential Status & Scope of Total Income
171
Solution 17: His days of stay in India in year 2011-12 are 314. {May – 9, June – 30, July – 31, August – 31, September – 30, October – 31, November – 30, December – 31, January – 31, February – 29, March – 31} So he is resident and he is also able to comply with one of the condition of section 6(6)(a) hence he will be considered to be resident but not ordinarily resident. His days of stay in India in 2012-13 are 60. {April – 30 and May – 30} So he is non–resident in the year 2012-13. Solution 18: It will be accruing arising abroad because if any loan has been taken by a person resident in India from outside India then interest income shall be accruing arising in India only if such resident has utilised the loan amount in India. Solution 19: Particulars (i) Income accruing/arising outside India but received in India (ii) Income accruing/arising outside India and also received abroad. (iii) Income accruing/arising in India (iv) Income accruing/arising outside India and also received abroad. (v) Income accruing/arising outside India and also received outside India but from a business controlled from India (vi) Income accruing/arising in India (vii) Past profits Total
ROR 10,000 5,000 10,000 2,000 50,000
NOR 10,000 -------10,000 -------50,000
NR 10,000 -------10,000 ---------------
12,000 -------89,000
12,000 ------82,000
12,000 -------32,000
Solution 20: Particulars (1) Income accruing/arising outside India and received outside India (2) Income received in India (3) Income accruing/arising in India (4) Past profits (5) Income accruing/arising and received outside India (6) Income accruing/arising and received outside India, but business controlled from India (7) Income deemed to be accruing/ arising in India (8) Income deemed to be accruing/ arising in India Gross Total Income
ROR 40,000 50,000 15,000 ------1,00,000 1,75,000
NOR ------50,000 15,000 ------------1,75,000
NR ------50,000 15,000 -------------------
20,000 2,00,000 6,00,000
20,000 2,00,000 4,60,000
20,000 2,00,000 2,85,000
ROR -------1,20,000
NOR -------1,20,000
NR -------1,20,000
Solution 21: Particulars (1) Income accruing/arising in India but exempt u/s 10(34) (2) Income accruing /arising in India
Residential Status & Scope of Total Income (3) Income accruing/arising in India (4) Income accruing/arising and received outside India (5) Income accruing/arising in India (6) Income accruing/arising outside India and received outside India (7) Income accruing/arising outside India and received outside India (8) Income accruing/arising in India (9) Income accruing/arising in India (10) Income received in India Total
172 2,25,000 1,45,000 1,50,000 1,50,000 75,000 65,000 80,000 40,000 10,50,000
2,25,000 ------1,50,000 ------------65,000 80,000 40,000 6,80,000
2,25,000 ------1,50,000 ------------65,000 80,000 40,000 6,80,000
ROR 60,000
NOR 60,000
NR 30,000
10,000 1,70,000 2,20,000 1,00,000 60,000 90,000
-----1,70,000 ----------60,000 90,000
-----1,70,000 ----------60,000 ------
19,000 39,000 4,80,000
19,000 39,000 4,80,000
19,000 39,000 ------
12,000
6,000
6,000
50,000
10,000
10,000
13,10,000 9,34,000
3,34,000
Solution 22:
(1) Income accruing/arising outside India from a business controlled in India, half of the income received in India (2) Income accruing/arising outside India and received outside India (3) Income accruing/arising in India (4) Income accruing/arising outside India and received outside India (5) Income accruing/arising outside India and received outside India (6) Income received in India (7) Income accruing/arising and received outside India, but profession set up in India (8) Income accruing/arising in India (9) Income accruing/arising in India (10) Income accruing/arising outside India and received outside India, but business controlled from India (11) Income accruing/arising outside India, half received outside India and half in India (12) Income accruing/arising outside India, 4/5th received outside India and 1/5th in India Gross Total Income
Solution 23: Since Mr. X is covered in special category and will be resident only if his stay in India in relevant previous year is 182 days or more, hence Mr. X is a non–resident as his stay in India is less than 182 days and his income taxable in India shall be ` Income accruing/arising in India 3,00,000.00 (60,000 x 5) Income received in India 60,000.00 (60,000 x 1) Gross Salary 3,60,000.00 Income under the head Salary 3,60,000.00 Income under the head Other Sources Gift of gold (`11,00,000 – `8,00,000) Gross Total Income Less: Deduction u/s 80C Total Income Computation of Tax Liability
3,00,000.00 6,60,000.00 Nil 6,60,000.00
Residential Status & Scope of Total Income Tax on `6,60,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
173 62,000.00 1,240.00 620.00 63,860.00
Note: STCG is received in USA as not taxable in India as the assessee is a non-resident. Solution 24: In this case, Mrs. X stays in India for more than 182 days during the previous year 2012-13 hence she will be ROR and her incomes taxable in India shall be ` Income accruing/arising in India 24,00,000.00 (2,00,000 x 12) Gross Salary 24,00,000.00 Income under the head Salary 24,00,000.00 Income under the head Other Sources Dividend from foreign company (Received in India) Gift from friend (immovable property) Dividend from foreign company (Received in USA) Interest from UK Development bond (Received in USA) Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C Total Income Computation of Tax Liability Tax on `31,51,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
3,00,000.00 51,000.00 2,00,000.00 2,00,000.00 7,51,000.00 31,51,000.00 Nil 31,51,000.00 7,75,300.00 15,506.00 7,753.00 7,98,559.00 7,98,560.00
Residential Status & Scope of Total Income
174
EXAMINATION QUESTIONS PCC MAY – 2012 Question 2 (12 Marks) Mr. Ramesh & Mr. Suresh are brothers and they earned the following incomes during the financial year 2012-13. Mr. Ramesh settled in Canada in the year 1996 and Mr. Suresh settled in Delhi. Compute the total income for the assessment year 2013-14 Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9.
Particulars
Mr. Ramesh
Interest on Canada Development Bond, (only 50% of interest received in India) Dividend from British company received in London Profit from a business in Nagpur, but managed directly from London Short term capital gain on sale of shares of an Indian company received in India Income from a business in Chennai Fees for technical services rendered in India, but received in Canada Interest on fixed bank deposit in UCO Bank, Delhi Agricultural income from a land situated in Andhra Pradesh Income under the head house property at Bhopal
Mr. Suresh
35,000
40,000
28,000 1,00,000
20,000 1,40,000
60,000
90,000
80,000 1,00,000
70,000 -----
7,000 55,000 1,00,000
12,000 45,000 60,000 (Modified)
Answer: Computation of Total Income of Mr. Ramesh and Mr. Suresh for the A.Y. 2013-14 Sl. Particulars No. 1. Interest on Canada Development Bond, (only 50% of interest received in India) 2. Dividend from British company received in London 3. Profit from a business in Nagpur, but managed directly from London 4. Short term capital gain on sale of shares of an Indian company received in India 5. Income from a business in Chennai 6. Fees for technical services rendered in India, but received in Canada 7. Interest on savings bank deposit in UCO Bank, Delhi 8. Agricultural income from a land situated in Andhra Pradesh 9. Income under the head house property at Bhopal Total Income
Mr. Ramesh Mr. Suresh Non-Resident ROR 17,500 40,000 ---1,00,000 60,000
20,000 1,40,000 90,000
80,000 1,00,000 7,000 -----1,00,000 4,64,500
70,000 ----12,000 -----60,000 4,32,000
Notes: 1. Dividend received from British company in London, by a non-resident assessee is not taxable income, while the same received by an ROR assessee is taxable and is not exempt under section 10(34) of Income Tax Act, 1961.
Residential Status & Scope of Total Income
175
3. Agricultural income from a land situated in Andhra Pradesh(in India), is exempted under section 10(1) of Income tax Act, 1961 in case of both non-resident and resident assessee.
Question 3 (4 Marks) Discuss the correctness or otherwise of the statement – “Income deemed to accrue or arise in India to a nonresident by way of interest, royalty and fees for technical services is to be taxed irrespective of territorial nexus”. Answer: As per section 9, if any income is accruing and arising in India relating to royalty or technical fees etc., it will be taxable in India in case of non-resident even if the non-resident do not have any Territorial Nexus with India i.e. such non-resident do not have a residence or place of business or business connection in India and also the non-resident has not rendered services in India. E.g. If Suzuki Incorporation of Japan a nonresident company has provided technical know-how in India to Maruti Udyog Limited, an Indian company in Gurgaon and has received `300,00,000, in this case, such income is deemed to be accruing/arising in India and is taxable in India even if Suzuki Incorporation do not have any Territorial Nexus with India i.e. the company do not have place of residence or place of business in India.
IPCC NOV – 2011 Question 6 (4 Marks) Brett Lee, an Australian cricket player visits India for 100 days in every financial year. This has been his practice for the past 10 financial years. Find out his residential status for the assessment year 2013-2014. Answer: An individual is said to be resident in India in any previous year, if he complies with at least one of the following conditions:(a) He is in India in that year for a period amounting in all to 182 days or more, or (b) He is in India in that year for a period amounting in all to 60 days or more and also for 365 days or more during four years preceding the relevant previous year. Since, Brett Lee has complied with the second condition hence he is resident. Further more, an individual shall be considered to be not ordinarily resident in India in case his stay in India is 729 days or less during preceding seven years or he is non-resident in atleast 9 years during preceding 10 years. Since stay of Brett Lee during preceding seven years is 700 days. Hence, he is NOR.
PCC NOV – 2011 Question 5 (5 Marks) Mr. David a Government employee serving in the Ministry of External Affairs left India for the first time on 31.03.2012 due to his transfer of high Commission of Canada. He did not visit any time during previous year 2012-13. He has received the following income for the Financial Year 2012-13. ` (i) Salary 5,00,000 (ii) Interest on fixed deposit from bank in India
1,00,000
(iii) Income from agriculture in Pakistan
2,00,000
Residential Status & Scope of Total Income (iv) Income from house property in Pakistan
176 2,50,000
Compute his gross total income for Assessment Year 2013-14. (Modified) Answer: Mr. David is a non-resident in the previous year 2012-13 as he doesn’t come to India during the year. Computation of Gross total income of Mr. David for A.Y. 2013-14 ` Income under the head Salary Salary income {Taxable as it is deemed to be earned in India u/s 9} 5,00,000 Income under the head Salary 5,00,000 Income under the head Other Sources Interest on FDR Income from agriculture in Pakistan (assumed to be received outside India) Income under the head Other Sources
1,00,000 Nil 1,00,000
Income under the head House Property Income from house property in Pakistan (assumed to be received outside India) Gross Total Income
Nil 6,00,000
IPCC MAY – 2011 Question 2 (4 Marks) Miss Vivitha paid a sum of 5000 USD to Mr. Kulasekhara, a management consultant practicing in Colombo, specializing in project financing. The payment was made in Colombo. Mr. Kulasekhara is a non-resident. The consultancy related to a project in India with possible Ceylonese collaboration. Is this payment chargeable to tax in India in the hands of Mr. Kulasekhara, since the services were used in India? Answer: A non-resident is chargeable to tax in respect of income received outside India only if such income accrues or arises or is deemed to accrue or arise to him in India. The income deemed to accrue or arise in India under section 9 comprises, inter alia, income by way of fees for technical services, which includes any consideration for rendering of any managerial, technical or consultancy services. Therefore, payment to a management consultant relating to project financing is covered within the scope of “fees for technical services”. Income by way of fees for technical services, from services utilized in India would be deemed to accrue or arise in India in case of a non-resident and be included in his total income, whether or not such services were rendered in India. In the instant case, since the services were utilized in India, the payment received by Mr. Kulasekhara, a non-resident, in Colombo is chargeable to tax in his hands in India, as it is deemed to accrue or arise in India. (inter alia means in addition to)
PCC NOV – 2010 Question 1 (5 Marks) Mr. Ram an Indian citizen left India on 22.09.2012 for the first time to work as an officer of a company in Germany.
Residential Status & Scope of Total Income
177
Determine the residential status of Ram for the assessment year 2013-14 and explain the conditions to be fulfilled for the same under the Income-tax Act, 1961. (Modified) Answer. Under section 6(1), an individual is said to be resident in India in any previous year if he satisfies any one of the following conditions – (i) He has been in India during the previous year for a total period of 182 days or more, or (ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for atleast 60 days in the previous year. In the case of Indian citizens leaving India for employment, the period of stay during the previous year must be 182 days instead of 60 days given in (ii) above. During the previous year 2012-13, Mr. Ram, an Indian citizen, was in India for 175 days only (i.e. 30 + 31 + 30 + 31 + 31 + 22 days). Thereafter, he left India for employment purposes. Since he does not satisfy the minimum criteria of 182 days, he is a non-resident for the A.Y. 2013-14.
IPCC MAY – 2010 Question 3 (10 Marks) From the following particulars of Income furnished by Mr. Anirudh pertaining to the year ended 31.03.2013, compute the total income for the assessment year 2013-14, if he is: (i) Resident and ordinary resident; (ii) Resident but not ordinary resident; (iii) Non-resident: Particulars (a) Profit on sale of shares in Indian Company received in Germany
Amount (`) 15,000
(b) Dividend from a Japanese Company received in Japan
10,000
(c) Income from business in London deposited in a bank in London, later on remitted to India through approved banking channels
75,000
(d) Dividend from RP Ltd., an Indian Company
6,000
(e) Agricultural income from lands in Gujarat 25,000 Answer. (Modified) Computation of total income of Mr. Anirudh for the A.Y. 2013-14 Particulars Resident & Resident but Nonordinarily not ordinarily Resident resident resident a) Profit on sale of shares of an Indian company, received in 15,000 15,000 15,000 Germany b) Dividend from a Japanese company, received in Japan.
10,000
-
-
c) Income from business in London deposited in a bank in London
75,000
-
-
d) Dividend from RP Ltd., an Indian Company [See Note (i) below]
-
-
-
Residential Status & Scope of Total Income
178
e) Agricultural income from land in Gujarat [See Note (ii) below] TOTAL INCOME
-
-
-
1,00,000
15,000
15,000
Notes (i) Dividend from Indian company is exempt under section 10(34) (ii) Agricultural income is exempt under section 10(1).
PCC MAY – 2010 Question 1 (2 Marks each) Answer the following with reasons having regard to the provisions of the Income-Tax Act, 1961 for the Assessment Year 2013-14: (i) State the Scope of total income in the case of an individual, whose residential status is ‘non-resident’ with reference to section 5(2) of the Act. (ii) Mr. X a citizen of India received salary from the Government of India for the services rendered outside India. Is the salary income chargeable to tax? Answer. (i) The scope of total income of a non-resident as per section 5(2) includes following incomes: (i) any income which is received or is deemed to be received in India during the relevant previous year by or on behalf of such person; or (ii) any income which accrues or arises or is deemed to accrue or arise to him in India during the relevant previous year. (ii) As per Section 9, salaries payable by the Government to a citizen of India for services rendered outside India is deemed to accrue or arise in India. Hence, salary received by Mr. X, a citizen of India, from the Government of India for services rendered outside India is chargeable to tax under the head ‘Salaries’.
PCC NOV – 2009 Question 4 (7 Marks) Determine the taxability of income of US based company Heli Ltd., in India on entering following transactions during the financial year 2012-13: (i) `5 lacs received from an Indian domestic company for providing technical know how in India. (ii) `6 lacs from an Indian firm for conducting the feasibility study for the new project in Finland. (iii) `4 lacs from a non-resident for use of patent for a business in India. (iv) `8 lacs from a non-resident Indian for use of know how for a business in Singapore. (v) `10 lacs for supply of manuals and designs for the business to be established in Singapore. Explain the rate of tax applicable on taxable income for US based company, Heli Ltd., in India. (Modified) Answer. A non resident is chargeable to tax in India in respect of following incomes:
Residential Status & Scope of Total Income
179
(i) Income received or deemed to be received in India. (ii) Income accruing or arising or deemed to accrue or arise in India. In view of the above provisions, taxability of income is determined in following manner: S. No. Transaction details (i) Amount received from an Indian domestic company for providing technical know how in India is taxable in India
Amount (`) 5 Lacs
(ii)
Conducting the feasibility study for the new project in Finland for the Indian firm is not taxable in India as it is for the business outside India.
Nil
(iii)
Money received from a non resident for use of patent for a business in India is taxable in India
4 Lacs
(iv)
Money received from a non resident Indian for use of know-how for a business in Singapore is for the business outside India, therefore not taxable in India. Payment received for supply of manuals and designs for the business to be established in Singapore is not taxable in India.
Nil
(v)
Total Income in India
Nil 9 Lacs
The basic normal rate applicable for the US based company who is a foreign company is 40% In case the taxable income is more than 1 crore in the previous year, the surcharge @ 2% is applicable. The education cess, Secondary and Higher education cess is payable @ 3%.
PCC JUNE – 2009 Question 1 (2 MARKS) State with reason, whether the following statements are True or False: Mr. X, Karta of HUF, claims that the HUF is non-resident as the business of HUF is transacted from UK and all the policy decisions are taken there. Answer. True, A HUF is considered to be a non-resident where the control and management of its affairs are situated wholly outside India. In the given case, since all the policy decisions of HUF are taken from UK, the HUF is a non-resident.
PE-II NOV – 2009 Question 1 (10 Marks) Mr. Rakesh and Mr. Anish are brothers and they earned the following incomes during the financial year 2012-13. Mr. Rakesh settled in U.K. in the year 1975 and Mr. Anish settled in Surat. Compute the total income for the Assessment Year 2013-14. Sr. No. 1.
Particulars Mr. Rakesh Mr. Anish Interest on U.K. development bonds, 50% of interest received in 25,000 20,000 India
2.
Dividend from British Company received in London
3.
Profit from a business in Mumbai, but managed directly from London
8,000
10,000
10,000
12,000
Residential Status & Scope of Total Income
180
4.
Profit on sale of shares of an Indian company received in India
50,000
80,000
5.
Income from a business in Delhi
20,000
20,000
6.
Fees for technical services rendered in India, but received in London
7.
Interest on fixed deposit in SBI, Bangalore
8. 9.
1,00,000
-
5,000
15,000
Agricultural income from a land situated in Rajasthan
25,000
25,000
Income under the head House Property at Bangalore
50,400
33,600
Mr. Rakesh Non-Resident 12,500
Mr. Anish ROR 20,000
-
10,000
Answer: Computation of total income of Mr. Rakesh and Mr. Anish for the A.Y. 2013-14 Sl. Particulars No. 1. Interest on U.K. Development Bonds 2.
Dividend from British Company received in London
3.
Profit from a business in Mumbai but managed directly from London
10,000
12,000
4.
Profit on sale of shares of an Indian company received in India
50,000
80,000
5.
Income from a business in Delhi
20,000
20,000
6.
Fees for technical services rendered in India but received in London
1,00,000
-
7.
Interest on fixed Deposit in SBI Bangalore
5,000
15,000
8.
Agricultural income from a land in Rajasthan [(Exempt u/s.10(1)]
-
-
9.
Income under the head House property at Bangalore
50,400
33,600
2,47,900
1,90,600
Total Income
Notes: 1. Dividend received from British company in London, by a non-resident assessee is not taxable income, while the same received by an ROR assessee is taxable and is not exempt under section 10(34) of Income Tax Act, 1961. 2. Agricultural income from a land situated in the State of Rajasthan, is exempted under section 10(1) of Income tax Act, 1961 in case of both non-resident and resident assessee.
PE-II MAY – 2008 Question 3 Choose the correct answer with reference to the provisions of the Income-tax Act, 1961: Income accruing in Japan and received there is taxable in India in the case of –
(1 Marks)
Residential Status & Scope of Total Income
181
(a) Resident and ordinarily resident only (b) Both resident and ordinarily resident and resident but not ordinarily resident (c) Both resident and non-resident (d) Non-resident Answer: (a) Resident and ordinarily resident only
PCC MAY – 2007 Question 1 (2 Marks) State with reasons, whether the following statements are true or false, with regard to the provisions of the Income-tax Act, 1961: Only individuals and HUFs can be resident, but not ordinarily resident in India; firms can be either a resident or non-resident. Answer. True: A person is said to be “not-ordinarily resident” in India if he satisfies either of the conditions given in sub-section (6) of section 6. This sub-section relates to only individuals and Hindu Undivided Families. Therefore, only individuals and Hindu undivided families can be resident, but not ordinarily resident in India. All other classes of assessees can be either a resident or non-resident for the purpose of income-tax. A firm can, therefore, either be a resident or non-resident.
PE-II MAY – 2006 Question 2 (4 Marks) Mr. A, left for USA on 01.05.2012. He has not visited India thereafter. Mr. A borrows money from his friend Mr. B, who left India one week before Mr. A's departure, to the extent of `10 lakhs and buys shares in X Ltd., an Indian company. Discuss the taxability of the interest charged @10% in B's hands where the same has been received in New York. Answer: Stay of Mr. A and Mr. B during the previous year 2012-13 is less than 60 days hence both of them are nonresidents as per section 6(1). As per section 9, if any non-resident has taken loan from outside India and the loan was utilised in India in any source other than business or profession, interest received by the person who has given the loan shall not be considered to be accruing/arising in India and is not taxable in India. In the given case, loan amount was invested in the shares of an Indian company hence interest received by Mr. B shall not be considered to be income accruing/arising in India.
PE-II NOV – 2002 Question 3
(3 Marks)
In the year 2012-2013 (Previous year), a sailor has remained on ship for a private company owning ocean going ships as follows: (1) Outside the territorial waters of India for 183 days. (2) Inside the territorial waters of India for 182 days. Is he considered to be resident or not for the Assessment Year 2013-14 (Previous Year 2012-2013). Comment. Answer: An individual is treated as a resident in India in any previous year if he fulfills atleast one of the following two conditions laid down in section 6(1): (a) He is in India for a period or periods amounting to 182 days or more in that year; or
Residential Status & Scope of Total Income
182
(b) In the preceding four years, he has been India for 365 days or more, and has been in India for 60 days or more in that year. In the given case, period of stay in India is 182 days. Therefore, the sailor is treated as a resident in India for the assessment year.
PE-II MAY – 1998 Question 2 (9 Marks) Mr. Nixon, an American citizen, is appointed by a multi-national company to its branch in New Delhi in 2009. Mr. Nixon has never been to India before this appointment. He arrives in Bombay on 15th April, 2009 and joins the New Delhi office on 20 th April, 2009. His wife and children join him in India on 20 th October, 2009. The company allotted him a leased residence for purposes of his stay. This residence is occupied by him from the beginning of October, 2009. On 10th February, 2010, he is transferred by his employer, on deputation basis, to be the Regional Chief of his employer’s operations in South East Asia having headquarters in Hongkong. He leaves New Delhi on 11th February and arrives in Hongkong on 12th February, 2010. Mr. Nixon leaves behind his wife and children in India till 14th August, 2011, when they leave along with him for Hongkong. Mr. Nixon had come to India earlier on 15th June, 2011, on two months’ leave. The members of the family occupied the residence till date of departure to Hongkong. At the end of the period of deputation, Mr. Nixon is reposted to India and joins the New Delhi office of his employer as Chief of Indian operations on 2nd February, 2013. In what residential status Mr. Nixon will be assessable, for the various years, to income tax in India? Answer: The period of stay of Mr. Nixon for various years is given below: P.Y. 2009-10/ A.Y. 2010-11
Period of stay
303 days
(April – 16, May -31, June – 30, July – 31, August – 31, September – 30, October – 31, November – 30, December – 31, January – 31, February – 11) P.Y. 2010-11/ A.Y. 2011-12
Period of stay
Nil
P.Y. 2011-12/ A.Y. 2012-13
Period of stay
61 days
Period of stay
58 days
(June – 16, July – 31, August – 14) P.Y. 2012-13/ A.Y. 2013-14 (February – 27, March – 31) Under section 6(1) of the Act, an individual is said to be resident in India in any previous year if he satisfies one of the following basic conditions: (i) is in India in the previous year for a period of 182 days or more ; (ii) is in India for a period of 60 days or more in the previous year and 365 days or more during the four years preceding the previous year. A person will be considered to be ‘not ordinarily resident’ if he satisfies any of the following two conditions viz;
Residential Status & Scope of Total Income
183
(i) he has been a non resident in India in 9 out of 10 previous years preceding the relevant previous year ; or (ii) he has been in India for a period of 729 days or less in 7 previous years preceding the relevant previous year. Maintenance of a residence in India or the stay of the wife and children in India are not relevant for determining the residential status of Mr. Nixon. In the above background, Mr. Nixon’s case will be decided as under: (i) P.Y. 2009-10/A.Y. 2010-11: has been in India for 303 days. He will be a resident under the basic conditions. Since his stay in seven years preceding the relevant previous year is Nil i.e. 729 days or less, hence he will be NOR (ii) P.Y. 2010-11/A. Y. 2011-12: has not been in India at all ; though his wife and children continue to reside in New Delhi, he will be a non-resident for this year. (iii) P.Y. 2011-12/A.Y. 2012-13: has been in India for 61 days. He satisfies one limit of the basic condition but having been in India for a period amounting to 303 days only in the four previous years preceding this year and not 365 days, he will be non-resident for this year. (iv) P.Y. 2012-13/A.Y. 2013-14: has been in India for 58 days, he will be non-resident.
Income Under The Head House Property
184
INCOME UNDER THE HEAD
HOUSE PROPERTY SECTION 22 TO 27 PARTICULARS Income from house property—Chargeability and meaning of house property Annual value— House let out throughout the year/partly let out/partly vacant/vacant throughout the year One house which is self-occupied House partly self-occupied/partly let out, may or may not be vacant More than one house which are self-occupied Municipal tax Treatment of unrealised rent Deductions from annual value – - Statutory deduction Interest on capital borrowed Interest when not deductible from “Income from House Property” Unrealised rent realised subsequently Arrears of rent Property owned by co-owners Deemed ownership Unrealised rent
SECTIONS 22 23(1) 23(2) 23(3) 23(4) Proviso to sec 23(1) Explanation to 23(1) 24(a) 24(b) 25 25AA 25B 26 27 Rule 4
THEORY QUESTIONS Q1. [Imp.] Write a note on incomes chargeable to tax under the head House Property. Or Explain the meaning of the term ‘House Property’. Q2. [V. Imp.]: Write a note on computation of annual value, in case of a house let out throughout the year. Q3. Write a note on computation of annual value, in case of (i) A house which is partly let out and partly vacant or (ii) A house vacant throughout the year. Q4 [V. Imp.] Write a note on Set Off and Carry Forward of Losses under the head House Property. Q5. [V. Imp] Discuss the treatment of unrealised rent and its recovery in subsequent years. Q6. [V. Imp] Write a note on deduction under section 24(b). Q7. How is income from self occupied property or property meant for owner occupation, but remaining partly or wholly unoccupied, computed? Q8.Write a note on computation of income of more than one house which are self-occupied. Q9.Write a note on computation of income in case of a house property which is in business or profession of the assessee. Q10: Write a note on partly self-occupied and partly let out house.
Income Under The Head House Property
185
Q11. Write a note on computation of income of a house property which is divided into different portions. Q12. Write a note on composite rent. Q13. Discuss the tax liability in respect of arrears of rent. Q14. Write a note on taxability of the income from subletting of house property. Q15. How the property owned by co-owners is taxed? Q16. [V. Imp.] Ownership is the criterion for assessment of income from property under section 22. However, there are instances in which the income from property is assessable in the hands of an assessee, who is not the legal owner thereof. Enumerate these cases. or It is only the owner of the house property who is liable to pay income tax in respect of income from house property, but there are certain exceptions to this general rule. List the circumstances under which a person will be a deemed owner of house property under the Income Tax Act? Q17. Discuss the circumstances where a person has the income under the head house property without any house property in his hands?
Question 1 [Imp.]: Write a note on incomes chargeable to tax under the head House Property.
Income Under The Head House Property
186
Or Explain the meaning of the term ‘House Property’. Answer: Chargeability of income under the head House Property Section 22 Income from letting out of house property is chargeable to tax under the head House Property If the income is from sale or purchase of house property, it will be taxable under the head Capital Gains, however if the sale or purchase is part of a business, income is taxable under the head Business/Profession. Meaning of house property The term house property shall include not only the buildings but also the lands appurtenant thereto i.e. the term house property shall include even any open land which is part and parcel of the building. Example Mr. Bhagawan Priyadarshi has one big house and it 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. In this case, entire rental income is taxable under the head house property. Further, house property includes all types of house properties i.e. residential houses, shops, godowns, cinema building, workshop building, hotel buildings etc. Income from letting out of land If any person has let out only land, which is not essential part of any building, income is taxable under the head other sources. Example Mr. Saurabh has one big piece of land which is let out for arranging exhibitions or for the purpose of marriage parties etc., rent received or receivable is taxable under the head other sources. Income from business of letting out house property If any person is holding house property as stock-in-trade for the purpose of letting out, income shall be taxable under the head house property, even if it is his business. Example ABC Ltd. is holding 500 flats for the purpose of letting out, income shall be taxable under the head house property. Income from hotel business/paying guest accommodation/warehouse If any person has any hotel building which has been let out, income from such hotel building shall be taxable under the head house property but if he is running the hotel business or he is running the business of providing paying guest accommodation, income shall be taxable under the head Business/Profession. Similarly, if he is engaged in the business of warehousing, income is taxable under the head Business/Profession. Computation of Income under the head House Property Gross Annual Value (GAV) (Fair Rent or Municipal Valuation whichever is higher but it cannot exceed standard rent and the rent so computed is called expected rent. Expected rent shall be compared with rent received or receivable and higher of the two shall be the gross annual value.) Less: Taxes paid by owner to local authority Net Annual Value (NAV) Less: Deduction allowed under section 24 - Statutory deduction @ 30% of NAV [Section 24(a)] - Interest on borrowed capital [Section 24(b)] Income under the head “House Property”
`…………….
`….…………. `….….……… `……..……… `……………. `……………..
Income Under The Head House Property
187
In order to compute income under the head house property, the house properties shall be divided into five categories – • CATEGORY I Houses which are let out throughout the year
Sec 23(1)(a)/(b)
• CATEGORY II Houses which are partly let out and partly vacant or houses lying vacant throughout the year Sec 23(1)(c) . • CATEGORY III Self occupied house property (a) One house, which is self occupied throughout the year or unoccupied property. Sec 23(2). (b) More than one house which is self occupied Sec 23(4). (c) House property in the business or profession of the assessee Sec 22 • CATEGORY IV Houses which are partly let out and partly self occupied and may or may not be vacant
Sec 23(3).
• CATEGORY V House property which is divided into different portions. Question 2 [V. Imp.]: Write a note on computation of Annual Value, in case of a House Let Out throughout the year. Answer: Computation of annual value, in case of a house let out throughout the year Section 23(1)(a), (b) Annual value shall be computed in two steps: • Gross Annual Value • Net Annual Value (Gross Annual Value minus Municipal Taxes) Gross Annual Value Section 23(1)(a), 23(1)(b) Gross annual value means the reasonable rental value of a house. It is computed with the help of 4 rents. 1. Fair rent i.e. the rent of similar types of buildings in the same locality. 2. Municipal valuation i.e. rental value determined by the municipality for the purpose of charging municipal tax. 3. Standard rent i.e. the highest possible rent as per Rent Control Act. 4. Rent received or receivable Gross annual value shall be computed in the manner given below: 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. Example If Fair rent is `15,000 p.m. and Municipal valuation is `16,000 p.m. and Standard rent is `15,500 p.m., expected rent shall be `15,500 p.m. If in the above case, rent received or receivable is `17,000 p.m., Gross Annual Value shall be `17,000 p.m.
Income Under The Head House Property
188
Illustration 1: Mr. X has one house property which is let out @ `80,000 p.m. Fair rent ` 90,000 p.m., Municipal Valuation `70,000 p.m., Standard Rent `81,000 p.m. Municipal tax paid `60,000 and interest paid on loan for construction of house property is ` 50,000. Compute his Income Tax Liability for A.Y 2013-14. Solution: Computation of income under the head House Property Gross Annual Value Working Note: (a) Fair Rent (90,000 x 12) (b) Municipal Value (70,000 x 12) (c) Higher of (a) or (b) (d) Standard Rent (81,000 x 12) (e) Expected Rent {Lower of c or d} 9,72,000 (f) Rent received /receivable (80,000 x 12) GAV shall be higher of (e) or (f) Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
` 9,72,000.00 ` 10,80,000 8,40,000 10,80,000 9,72,000 9,60,000 9,72,000 60,000.00 9,12,000.00 2,73,600.00 50,000.00 5,88,400.00
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
5,88,400.00 NIL 5,88,400.00
Computation of Tax Liability Tax on `5,88,400 at slab rate Add: EC @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
47,680.00 953.60 476.80 49,110.40 49,110.00
Illustration 2: Mrs. X has let out one House property @ `62,000 p.m., Municipal Valuation `72,000 p.m., Fair Rent `90,000 p.m., Standard Rent `1,00,000 p.m., Municipal Tax paid `40,000 and Interest on loan taken for construction `60,000 She has completed the age of 60 years on 01.04.2013. Compute Income Tax Liability for the A.Y 2013-14. Solution: ` Computation of income under the head House Property Gross Annual Value Working Note: (a) Fair Rent (90,000 x 12) (b) Municipal Value (72,000 x 12) (c) Higher of (a) or (b) (d) Standard Rent (1,00,000 x 12) (e) Expected Rent {Lower of c or d} (f) Rent received /receivable (62,000 x 12)
10,80,000.00 ` 10,80,000 8,64,000 10,80,000 12,00,000 10,80,000 7,44,000
Income Under The Head House Property GAV shall be higher of (e) or (f) Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from house property
189 10,80,000 40,000.00 10,40,000.00 3,12,000.00 60,000.00 6,68,000.00
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
6,68,000.00 NIL 6,68,000.00
Computation of Tax Liability Tax on `6,68,000 at slab rate Add: EC @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
63,600.00 1,272.00 636.00 65,508.00 65,510.00
Question 3: Write a note on computation of Annual Value, in case of (i) A House which is Partly Let Out and Partly Vacant or (ii) A House Vacant throughout the year. Answer: House lying vacant for some period/vacant throughout the year Section 23(1)(c) If the house is partly let out and partly vacant, in such cases expected rent shall be computed for 12 months but while computing rent received /receivable, rent for the period for which the house was vacant shall be excluded and GAV shall be higher of expected rent and rent received/receivable but if the rent received/receivable is less than the expected rent owing to vacancy, in that case rent received/receivable shall be gross annual value. e.g. If expected rent is `20,000 p.m. and rent received/receivable is `15,000 p.m. and there is vacancy for 5 months, in this case GAV shall be the expected rent because even if there was no vacancy, still rent received/receivable was less than expected rent. If in this case rent received/receivable is `25,000 p.m. and it is vacant for 5 months, gross annual value shall be the rent received/receivable because if there was no vacancy, rent R/R would have been higher than expected rent accordingly in the given case, R/R is lower than expected rent owing to vacancy. If the house is vacant throughout the year, its GAV shall be nil. Illustration 3: Compute gross annual value in the following cases for the assessment year 2013-14: Particulars Situation 1 Fair Rent (p.m.) 9,000 Municipal Valuation (p.m.) 10,000 Standard Rent (p.m.) 12,000 Rent received/ receivable (p.m.) 7,000 Vacancy 1 month Solution: Situation 1 Computation of Gross Annual Value (a) Fair Rent (9,000 x 12) (b) Municipal Valuation (10,000 x 12)
Situation 2 13,000 9,000 11,000 11,500 1 month
Situation 3 12,000 9,000 7,000 20,000 2 month
Situation 4 16,000 18,000 16,000 16,500 2 months ` 1,08,000 1,20,000
Income Under The Head House Property (c) Higher of (a) or (b) (d) Standard 1,44,000 (12,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (7,000 x 11) If there was no vacancy, in that case rent received/receivable would have been `84,000 and It was still less than expected rent, therefore GAV shall be expected rent. Gross Annual Value Situation 2 Computation of Gross Annual Value (a) Fair Rent (13,000 x 12) (b) Municipal Valuation (9,000 x 12) (c) Higher of (a) or (b) (d) Standard 1,32,000 (11,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (11,500 x 11) In this case, if there was no vacancy, rent received/receivable would have been `1,38,000 hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent received/receivable. Gross Annual Value Situation 3 Computation of Gross Annual Value (a) Fair Rent (12,000 x 12) (b) Municipal Valuation (9,000 x 12) (c) Higher of (a) or (b) (d) Standard 84,000 (7,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (20,000 x 10) In this case, rent R/R is higher than the expected rent, GAV shall be Rent R/R Gross Annual Value Situation 4 Computation of Gross Annual Value (a) Fair Rent (16,000 x 12) (b) Municipal Valuation (18,000 x 12) (c) Higher of (a) or (b) (d)
190 1,20,000 Rent 1,20,000 77,000
1,20,000 ` 1,56,000 1,08,000 1,56,000 Rent 1,32,000 1,26,500
1,26,500 ` 1,44,000 1,08,000 1,44,000 Rent 84,000 2,00,000 2,00,000 ` 1,92,000 2,16,000
Standard
2,16,000 Rent
Income Under The Head House Property 1,92,000 (16,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (16,500 x 10) In this case, if there was no vacancy, rent received/receivable would have been `1,98,000 hence rent received/receivable is lower in this case owing to vacancy, therefore GAV shall be the rent received/receivable. Gross Annual Value
191
1,92,000 1,65,000
1,65,000
Question 4 [V. Imp.]: Write a note on Set Off and Carry Forward of Losses under the head House Property. Answer: As per section 70, if any person has loss from any house property, such loss can be set off from income of any other house property and it is called inter-source adjustment or intra-head adjustment. E.g. Mr. X has two houses: there is loss of `34,000 from one house and income of `80,000 from the other house, in this case, loss of one source (house) can be set off from income of the other source (house). As per section 71, unadjusted loss can be set off from incomes of other heads but as per section 58(4), such loss can not be set off from casual income and it is called inter-head adjustment. E.g. Mr. X has loss from house property `3,00,000 and income from business/profession `5,00,000, in this case, loss is allowed to be set off but if he has any casual income, loss can not be set off from casual income. As per section 71B, unadjusted loss is allowed to be carried forward to the subsequent years but for a maximum period of 8 years starting from the year subsequent to the year in which the loss was incurred and in the subsequent years, loss can be set off only from income under the head house property. E.g. Mr. X has incurred loss under the head house property in the previous year 2012-13/assessment year 2013-14 and it could not be set off in the same year, it can be carried forward upto Previous Year 2020-21/Assessment Year 2021-22 (as shown below) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Previous year 2013-14 Previous year 2014-15 Previous year 2015-16 Previous year 2016-17 Previous year 2017-18 Previous year 2018-19 Previous year 2019-20 Previous year 2020-21
Assessment Year 2014-15 Assessment Year 2015-16 Assessment Year 2016-17 Assessment Year 2017-18 Assessment Year 2018-19 Assessment Year 2019-20 Assessment Year 2020-21 Assessment Year 2021-22
E.g. Mr. X has loss under the head house property of the previous year 2004-05/assessment year 2005-06 `5,00,000 and income under the head house property `5,00,000 in previous year 2012-13/assessment year 2013-14, in this case, loss shall be allowed to be set off because it will be allowed to be carried forward upto a period of 8 years starting from Previous Year 2005-06/Assessment Year 2006-07 and is as shown below: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Previous year 2005-06 Previous year 2006-07 Previous year 2007-08 Previous year 2008-09 Previous year 2009-10 Previous year 2010-11 Previous year 2011-12 Previous year 2012-13
Assessment Year 2006-07 Assessment Year 2007-08 Assessment Year 2008-09 Assessment Year 2009-10 Assessment Year 2010-11 Assessment Year 2011-12 Assessment Year 2012-13 Assessment Year 2013-14
Income Under The Head House Property
192
If the loss can be set off, it has to be set off compulsorily i.e. it is not voluntary. E.g. Mr. X has loss under the head house property `1,80,000 in previous year 2012-13/assessment year 2013-14 and income under the head business/profession `1,80,000 in the same year, in this case loss has to be set off. Question 5 [V. Imp.]: Discuss the treatment of Unrealised Rent and its recovery in subsequent years. Answer: Unrealised Rent [Explanation to Section 23(1) read with Rule 4] • While computing gross annual value of a let out property, the unrealized rent is to be deducted from actual rent received or receivable. • The unrealized rent is deductible only on the fulfilment of the conditions prescribed under Rule 4. Rule 4 – Unrealised rent means the rent which the owner cannot realize. It shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where,— (a) the tenancy is bonafide. (b) the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property. (c) the defaulting tenant is not in occupation of any other property of the assessee. (d) the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless. Section 25AA – Where the assessee cannot realise rent from a property let to a tenant and subsequently the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head “Income from house property” and accordingly charged to incometax as the income of that previous year in which such rent is realised whether or not the assessee is the owner of that property in that previous year. If the assessee has incurred any expenditure on recovery, it will not be allowed to be deducted. If the assessee has received any interest, it will be considered to be income under the head other sources. • Original Text Unrealised rent received subsequently to be charged to income-tax Section 25AA Where the assessee cannot realise rent from a property let to a tenant and subsequently the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is realised whether or not the assessee is the owner of that property in that previous year. Illustration 4: Compute gross annual value in the following cases for the assessment year 2013-14: Particulars Situation 1 Situation 2 Situation 3 Situation 4 Fair Rent (p.m.) 11,000 13,000 14,000 16,000 Municipal Valuation (p.m.) 12,000 11,000 9,000 18,000 Standard Rent (p.m.) 13,000 12,000 8,000 17,000 Rent received/ receivable (p.m.) 8,000 12,500 21,000 17,000 Vacancy 2 months 1 month 3 month Unrealised rent 1 month 3 month 1 month Solution: Situation 1 Computation of Gross Annual Value (a) Fair Rent (11,000 x 12) (b) Municipal Valuation (12,000 x 12)
` 1,32,000 1,44,000
Income Under The Head House Property (c) Higher of (a) or (b) (d) 1,56,000 (13,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (8,000 x 11) GAV = Higher of (e) or (f) Gross Annual Value
Standard
1,44,000 Rent 1,44,000 88,000 1,44,000 1,44,000
Situation 2 Computation of Gross Annual Value (a) Fair Rent (13,000 x 12) (b) Municipal Valuation (11,000 x 12) (c) Higher of (a) or (b) (d) Standard 1,44,000 (12,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (12,500 x 10) In this case, if there was no vacancy, rent received/receivable would have been `1,50,000 hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent received/receivable. Gross Annual Value Situation 3 Computation of Gross Annual Value (a) Fair Rent (14,000 x 12) (b) Municipal Valuation (9,000 x 12) (c) Higher of (a) or (b) (d) Standard 96,000 (8,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (21,000 x 8) In this case, rent R/R is higher than the expected rent, GAV shall be Rent R/R Gross Annual Value Situation 4 Computation of Gross Annual Value (a) Fair Rent (16,000 x 12) (b) Municipal Valuation (18,000 x 12) (c) Higher of (a) or (b) (d) 2,04,000
193
` 1,56,000 1,32,000 1,56,000 Rent 1,44,000 1,25,000
1,25,000 ` 1,68,000 1,08,000 1,68,000 Rent 96,000 1,68,000 1,68,000 ` 1,92,000 2,16,000
Standard
2,16,000 Rent
Income Under The Head House Property (17,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (17,000 x 8) If there was no vacancy, in that case rent received/receivable would have been `1,87,000 and It was still less than expected rent, therefore GAV shall be expected rent. Gross Annual Value
194 2,04,000 1,36,000
2,04,000
Illustration 5: Mr. X has let out one house property to Mr. Y @ ` 80,000 p.m. Fair rent `90,000 p.m. Municipal valuation `80,000 p.m. and Standard rent of the house `76,000 p.m. The house remained vacant for 2 months and there was unrealised rent for 3 months. Mr. X has paid municipal tax of `60,000 and interest on loan for construction of house property is `69,000. Compute his Income Tax Liability for A.Y.2013-14. Solution: ` Computation of income under the head house property Gross Annual Value Working Note: ` (a) Fair Rent (90,000 x 12) 10,80,000 (b) Municipal Valuation (80,000 x 12) 9,60,000 (c) Higher of (a) or (b) 10,80,000 (d) Standard Rent (76,000 x 12) 9,12,000 (e) Expected Rent {Lower of (c) or (d)} 9,12,000 (f) Rent received /receivable (80,000 x 7) 5,60,000 If there was no vacancy, in that case rent received receivable would have been `7,20,000 and it was still less than expected rent ,therefore GAV shall be expected rent GAV 9,12,000 Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
9,12,000.00
60,000.00 8,52,000.00 2,55,600.00 69,000.00 5,27,400.00
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
5,27,400.00 NIL 5,27,400.00
Computation of Tax Liability Tax on ` 5,27,400 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
35,480.00 709.60 354.80 36,544.40 36,540.00
Question: Write a note on deductibility of Municipal Taxes. Answer: Deductibility of Municipal Taxes Proviso to Section 23(1) Every local authority (municipality) is authorised to charge a tax from the owner of the houses (in order to meet the cost of maintaining the city or town) and such tax is called municipal tax, such tax shall be allowed to be deducted from gross annual value while computing net annual value. If the municipal tax is due but not
Income Under The Head House Property
195
paid, in that case deduction is not allowed. Example During the previous year 2012-13 municipality has levied taxes `20,000, but the assessee has paid `15,000. In this case, amount allowed to be deducted is `15,000. In the next year, 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. In this case, amount allowed to be deducted shall be `55,000. If the municipal tax has been paid by the tenant, it will not be allowed to be deducted. Municipal taxes shall include – 1. House Tax 2. Water Tax 3. Fire Tax 4. Scavenging Tax 5. Sewerage Tax 6. Education Cess 7. General Tax etc. • State Education Cess is not a municipal tax because it is payable to the State Government. Question: Whether there can be negative NAV. Discuss. Answer: Whether there can be negative Net Annual Value If municipal taxes paid are more than the amount of Gross Annual Value, there can be negative Net Annual Value and in such cases, no deduction is allowed under section 24(a), however, deduction under section 24(b) is allowed and accordingly there can be loss under the head house property and such loss can be set off from any income under any head except casual income. Example Mr. Mukesh has let out one house property for `4,000 p.m. and has paid municipal taxes of `52,000 relating to the earlier ten years. Interest on the capital borrowed for construction of house is `1,20,000. In this case, he has loss under the head house property amounting to `1,24,000 and this loss can be set off from any income under any head except casual income. It can be carried forward as per provisions of section 71B. • Deductions from net annual value Section 24 1. Statutory deduction or standard deduction Section 24(a) 2. Deduction for interest on the capital borrowed Section 24(b) Question: Write a note on deduction under section 24(a) i.e. Statutory Deduction/ Standard Deduction. Answer: Statutory Deduction or Standard Deduction Section 24(a) Under section 24(a), every assessee shall be allowed a notional expenditure equal to thirty per cent of the net annual value of the house for the various expenditures incurred by him. Actual expenditure incurred by the assessee shall not be taken into consideration. Example Net annual value of one house is `3,00,000 and actual expenditure incurred on repairs are `75,000, deduction allowed under section 24(a) shall be `90,000. Question 6 [V. Imp.]: Write a note on deduction under section 24(b). Answer:
Income Under The Head House Property
196
Deduction for interest on the capital borrowed Section 24(b) Under section 24(b), where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital, shall be allowed to be deducted while computing income under the head house property. Only simple interest is allowed. Further it is allowed on due basis (i.e. deduction is allowed even if the interest has not been paid). Interest for pre-construction period Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, shall also be deducted in equal instalments for the said previous year and for each of the four immediately succeeding previous years. Example If a house has been constructed on 01.07.2012 by taking a loan on 01.11.2008, pre-construction period shall be from 01.11.2008 to 31.03.2012 i.e. the period prior to the previous year in which the house was purchased or constructed. Fresh loan raised to repay original loan Where a fresh loan has been raised to repay the original loan and the second borrowing has really been used merely to repay the original loan and this fact is proved to the satisfaction of the Assessing Officer, the interest paid on the second loan would also be allowed as a deduction under section 24. [CBDT Circular No. 28 dt. 20.08.1969.] Amounts not deductible from income from house property Section 25 Notwithstanding anything contained in section 24, any interest chargeable under this Act which is payable outside India on which tax has not been paid or deducted, in respect of which there is no person in India who may be treated his an agent shall not be deducted in computing the income chargeable under the head “Income from house property”. Illustration 6: Compute interest allowed under section 24(b) in the following cases for assessment year 2013-14. Situations A B C D E Date of loan 01.07.2009 01.07.2010 01.07.2010 01.04.2011 01.03.2012 Amount of loan 6,00,000 6,00,000 6,00,000 6,00,000 6,00,000 Rate of interest 6% 6% 6% 6% 6% Date of completion/ 31.03.2012 31.03.2011 01.01.2012 01.07.2012 01.04.2012 Date of purchase Date of repayment 01.04.2010 01.04.2013 01.01.2013 01.12.2012 Nil Solution: Situation A Computation of interest allowed under section 24(b) Current period interest Pre-construction period interest From 01.07.2009 to 31.03.2011 (but interest will be calculated upto 31.03.2010 because the loan has been repaid on 01.04.2010) 6,00,000 x 6% x 9/12 = 27,000 Installment = 27,000/5 = 5,400 Total interest allowed Situation B Computation of interest allowed under section 24(b) Current period interest
` Nil
5,400
Income Under The Head House Property
197
From 01.04.2012 to 31.03.2013 6,00,000 x 6% = 36,000 Pre-construction period interest Since there is no pre-construction period hence interest is nil Total interest allowed
36,000
Situation C Computation of interest allowed under section 24(b) Current period interest From 01.04.2012 to 31.12.2012 6,00,000 x 6% x 9/12 = 27,000 Pre-construction period interest From 01.07.2010 to 31.03.2011 6,00,000 x 6% x 9/12 = 27,000 Installment = 27,000/5 = 5,400 Total interest allowed [27,000 + 5,400]
32,400
Situation D Computation of interest allowed under section 24(b) Current period interest From 01.04.2012 to 30.11.2012 6,00,000 x 6% x 8/12 = 24,000 Pre-construction period interest From 01.04.2011 to 31.03.2012 6,00,000 x 6% = 36,000 Installment = 36,000/5 = 7,200 Total interest allowed [24,000 + 7,200]
31,200
Situation E Computation of interest allowed under section 24(b) Current period interest From 01.04.2012 to 31.03.2013 6,00,000 x 6% = 36,000 Pre-construction period interest From 01.03.2012 to 31.03.2012 6,00,000 x 6% x 1/12 = 3,000 Installment = 3,000/5 = 600 Total interest allowed [36,000 + 600]
36,600
Illustration 7: Mr. Shivang Gautam took a loan of `5,00,000 on 01.10.2009 @ 10% p.a. for construction of house which was completed on 31.03.2013. Compute interest on capital borrowed for the previous year 2012-13. Solution: Pre construction period interest From 01.10.2009 to 31.03.2012 = 5,00,000 x 10% x 30/12 = `1,25,000 Installment = `1,25,000/5 = `25,000 Current year interest From 01.04.2012 to 31.03.2013 = 5,00,000 x 10% = `50,000 Total Interest = `25,000 + `50,000 = `75,000
Income Under The Head House Property
198
Illustration 8: Mr. X has taken a loan of `15,00,000 on 01.07.2008 @ 12% p.a. for construction of one house which was completed on 01.05.2012 and was let out @ `60,000 p.m. w.e.f 01.07.2012 and Fair rent is `70,000 p.m. and the assessee has paid municipal tax of `30,000 in P.Y. 2012-13 and the assessee has repaid the loan amount in annual instalment of `1,00,000 starting from 01.01.2011. Compute his income tax liability for the assessment year 2013-14.
Solution: ` Computation of income under the head House Property Gross Annual Value Working Note: ` (a) Fair Rent (70,000 x 11) 7,70,000 (b) Expected Rent 7,70,000 (c) Rent received /receivable (60,000 x 9) 5,40,000 If there was no vacancy, in that case rent received receivable would have been `6,60,000 and it was still less than expected rent ,therefore GAV shall be expected rent GAV 7,70,000 Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: ` Current period Interest From 01.04.2012 to 31.03.2013 (13,00,000 x 12% x 9/12) + (12,00,000 x 12% x 3 /12) = 1,53,000 Pre construction period interest From 01.07.2008 to 31.03.2012 15,00,000 x 12% x 30/12 = 4,50,000 14,00,000 x 12% x 12/12 = 1,68,000 13,00,000 x 12% x 3/12 = 39,000 Instalment = 6,57,000 / 5 = 1,31,400 Total Interest = `1,53,000 + `1,31,400= 2,84,400
7,70,000.00
30,000.00 7,40,000.00 2,22,000.00 2,84,400.00
Income under the head house property
2,33,600.00
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
2,33,600.00 Nil 2,33,600.00
Computation of Tax Liability Tax on normal income `2,33,600 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
3,360.00 67.20 33.60 3,460.80 3,460.00
Illustration 9: Mr. Vikas Kumar has constructed one house on 01.09.2012 and it was let out @ `50,000 p.m. and municipal taxes paid are `35,000. The house was constructed after taking a loan from outside India and interest allowed under section 24(b) is `2,10,000, but the assessee has not deducted tax at source.
Income Under The Head House Property
199
Compute assessee’s tax liability for assessment year 2013-14. Solution: Gross Annual Value (50,000 x 7) Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property Computation of Tax Liability Tax on `2,20,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,111.50 Rounded off u/s 288B
` 3,50,000.00 35,000.00 3,15,000.00 94,500.00 Nil 2,20,500.00 2,050.00 41.00 20.50 2,110.00
Illustration 10: Presume in the above question, the person who has given the loan has one agent in India as per section 163. Compute tax liability for the assessment year 2013-14. Solution: ` Gross Annual Value (50,000 x 7) 3,50,000 Less: Municipal Taxes 35,000 Net Annual Value 3,15,000 Less: 30% of NAV u/s 24(a) 94,500 Less: Interest on capital borrowed u/s 24(b) 2,10,000 Income under the head House Property 10,500 Tax Liability Nil Illustration 11: Presume in the above question, the assessee has deducted tax at source. Compute tax liability for the assessment year 2013-14. Solution: Gross Annual Value (50,000 x 7) Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property Tax Liability Nil
` 3,50,000 35,000 3,15,000 94,500 2,10,000 10,500
Question 7: How is income from self occupied property or property meant for owner occupation, but remaining partly or wholly unoccupied, computed? Answer: Income from Self Occupied Property Section 23(2)(a) If any person has only one house or part of a house which is self occupied, gross annual value of such a house shall be taken to be nil. The municipal taxes shall not be allowed to be deducted and also no deduction is allowed under section 24(a). However interest on capital borrowed under section 24(b) shall be allowed but maximum upto the extent of ` 30,000 and accordingly there can be loss under the head house property. If any person has taken any loan w.e.f. 01.04.1999 onwards for purchase or construction of the house,
Income Under The Head House Property
200
interest shall be allowed upto `1,50,000, however he must complete the construction or purchase maximum within three years from the end of the financial year in which the loan was taken and also he must submit a certificate from the person from whom loan has been taken, certifying the amount of interest. [If the loan is taken for repairs, renovation, reconstruction, addition, alteration etc, interest shall be allowed upto `30,000 instead of `1,50,000] Income from wholly unoccupied property Section 23(2)(b) Where the property consists of a house or part of a house which cannot actually be occupied by the owner 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, the annual value of such house or part of the house shall be taken to be nil. Illustration 12(a): Mr. Vivek Kumar has taken a loan of `5,00,000 on 01.10.1998 @ 10% p.a. for construction of a house which was completed on 01.10.2011 and the house remained self-occupied throughout the previous year 2012-13. The assessee has income under the head salary `3,00,000. Compute tax liability for assessment year 2013-14. Solution: ` Net Annual Value Nil Less: Interest on capital borrowed u/s 24(b) (30,000) Working Note: ` Current period Interest From 01.04.2012 to 31.03.2013 5,00,000 x 10% = 50,000 Pre construction period interest From 01.10.1998 to 31.03.2011 5,00,000 x 10% x 150/12 = 6,25,000 Instalment = 6,25,000 / 5 = 1,25,000 Total Interest = `50,000 + `1,25000 = 1,75,000 Subject to maximum `30,000 Loss under the head House Property (30,000) Income under the head Salary 3,00,000 Gross Total Income 2,70,000 Less: Deduction u/s 80C to 80U Nil Total Income 2,70,000 Computation of Tax Liability Tax on `2,70,000 at slab rate 7,000 Add: Education cess @ 2% 140 Add: SHEC @ 1% 70 Tax Liability 7,210 Illustration 12(b): Presume in above question, the loan was taken on 01.10.2008. The assessee has submitted a certificate confirming the amount of interest. Solution: ` Net Annual Value Nil Less: Interest on capital borrowed u/s 24(b) (75,000) Working Note: ` Current period Interest From 01.04.2012 to 31.03.2013 5,00,000 x 10% = 50,000 Pre construction period interest
Income Under The Head House Property From 01.10.2008 to 31.03.2011 5,00,000 x 10% x 30/12 = Instalment = 1,25,000 / 5 = Total Interest = `50,000 + `25,000 = Loss under the head House Property Income under the head Salary Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on `2,25,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,575 Rounded off u/s 288B
201
1,25,000 25,000 75,000 (75,000) 3,00,000 2,25,000 Nil 2,25,000 2,500 50 25 2,580
Question 8: Write a note on computation of income of more than one house which are self-occupied. Answer: Income of more than one house which are Self-Occupied Section 23(4) Where the property consists of more than one house which are self occupied, as per section 23(4)(a), the provisions of section 23(2) shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf. Under section 23(4)(b), the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option shall be determined under section 23(1), as if such house or houses had been let out. The assessee shall be allowed deduction in the normal manner. Illustration 13: Mr. Vineet Kathuria has 3 houses which are self occupied and the details of these houses is as under. Particulars House I House II House III (In `) (In `) (In `) Fair rent 1,10,000 1,20,000 1,23,000 Municipal valuation 1,24,000 1,18,000 1,12,000 Standard rent 1,10,000 1,35,000 1,29,000 Municipal taxes paid 10,000 8,000 9,000 Interest on capital borrowed on 32,000 39,000 28,000 01.04.2007 and all the necessary conditions are complied with to avail higher amount of interest. Repair charges 10,000 3,000 8,000 Date of completion of house 01.10.2009 01.10.2009 01.10.2009 Compute income under the head house property. Solution: Option I ` House I is Self Occupied Loss (32,000) House II is deemed to be Let Out Gross Annual Value 1,20,000 Working Note: `
Income Under The Head House Property (a) Fair rent (b) Municipal valuation (c) Higher of (a) or (b) (d) Standard rent (e) Expected rent {Lower of (c) or (d)} GAV = Expected rent Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income House III is deemed to be Let Out Gross Annual Value Working Note: (a) Fair rent (b) Municipal valuation (c) Higher of (a) or (b) (d) Standard rent (e) Expected rent {Lower of (c) or (d)} GAV = Expected rent Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income Income under Option I [(32,000) + 39,400 + 51,800] Option II House I is deemed to be Let Out Gross Annual Value Working Note: (a) Fair rent (b) Municipal valuation (c) Higher of (a) or (b) (d) Standard rent (e) Expected rent {Lower of (c) or (d)} GAV = Expected rent Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income House II is Self Occupied Loss House III is deemed to be Let Out Income Income under Option II [38,000 + (39,000) + 51,800] Option III House I is deemed to be Let Out Income House II is deemed to be Let Out
202 1,20,000 1,18,000 1,20,000 1,35,000 1,20,000 1,20,000 8,000 1,12,000 33,600 39,000 39,400 1,23,000 ` 1,23,000 1,12,000 1,23,000 1,29,000 1,23,000 1,23,000 9,000 1,14,000 34,200 28,000 51,800 59,200
1,10,000 ` 1,10,000 1,24,000 1,24,000 1,10,000 1,10,000 1,10,000 10,000 1,00,000 30,000 32,000 38,000 (39,000) 51,800 50,800
38,000
Income Under The Head House Property Income House III is Self Occupied Loss Income under Option III [38,000 + 39,400 + (28,000)] Third Option is the best Income under the head House Property
203 39,400 (28,000) 49,400 49,400
Question 9: Write a note on computation of income in case of a house property which is in business or profession of the assessee. Answer: House property owned by the assessee and used for own business/profession Section 22 If any person owns any house property and it is being used by him in his own business/profession, income of such building shall not be computed under the head house property rather income shall be computed under the head business/profession and for this purpose, while computing the income under the head business/profession, no rent shall be allowed to be debited to the profit & loss account in connection with such building. The income of business or profession shall get increased to that extent and all the expenses of the house property shall be debited to the profit and loss account and deduction under section 24(a) is not allowed rather actual expenditure shall be debited to the profit and loss account. Such expenditure may be municipal tax, repairs, depreciation, land revenue, ground rent etc. Question 10: Write a note on partly self-occupied and partly let out house. Answer: Partly Self-Occupied and Partly Let Out House and may or may not be vacant Section 23(3) If any house is partly let out and partly self occupied, its income shall be computed in the similar manner as in case of a let out house. However, while computing rent received/receivable, rent for the period for which the house was self occupied shall not be included. Example Mr. Nikhil has one house which is let out @ `10,000 p.m. and municipal valuation is `12,000 p.m. Fair rent of the house is `13,000 p.m. The house was vacant for one month and self occupied for one month, in this case gross annual value shall be computed in the manner given below: ` Gross Annual Value 1,56,000 Working Note: ` (a) Fair Rent (13,000 x 12) 1,56,000 (b) Municipal Valuation (12,000 x 12) 1,44,000 (c) Higher of (a) or (b) 1,56,000 (d) Expected rent 1,56,000 (e) Rent Received/Receivable (10,000 x 10) 1,00,000 If there was no vacancy, in that case rent received/receivable would have been `1,10,000 and it was still less than expected rent, therefore GAV shall be expected rent. GAV 1,56,000 Illustration 14: Mrs. X aged 62 years is engaged in a business in her own building and furnishes the following information. Market rent of the building is `1,00,000 p.m. and expenses incurred on repairs are `37,000 and interest on loan taken for construction of the building is `65,000 and depreciation `30,000 and municipal tax paid `30,000 and land revenue paid `10,000 and premium paid for insurance of the house `7,000. ground rent paid `8,000. Income from business before debiting any expense of house property is `16,00,000.
Income Under The Head House Property
204
Compute her income tax liability for Assessment Year 2013-14. Solution: Income from business before debiting any expense of house property Less: Repair of Building Less: Interest on loan taken for construction of building Less: Depreciation Less: Municipal Taxes Less: Land revenue Less: Insurance premium of the house Less: Ground rent Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on `14,13,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
` 16,00,000.00 37,000.00 65,000.00 30,000.00 30,000.00 10,000.00 7,000.00 8,000.00 14,13,000.00 14,13,000.00 Nil 14,13,000.00 2,48,900.00 4,978.00 2,489.00 2,56,367.00 2,56,370.00
Illustration 15: Mr. Ankit Sharma constructed one house in 1985 and it is let out for 4 months and self occupied for 6 months and vacant for 2 months. Municipal valuation of the house is `20,000 p.m. and fair rent `18,000 p.m. Standard rent of the house is `19,000 p.m. It was let out @ `11,000 p.m. Municipal tax levied is `6,000 out of which `2,000 was paid by the tenant and `2,000 by the assessee and balance `2,000 yet to be paid. Interest on the capital borrowed for construction of the house is `30,000. Compute his income under the head house property for the assessment year 2013-14. Solution: ` Computation of income from House Property of Mr. Ankit Sharma Gross Annual Value 2,28,000 Working Note: ` (a) Fair Rent (18,000 x 12) 2,16,000 (b) Municipal Valuation (20,000 x 12) 2,40,000 (c) Higher of (a) or (b) 2,40,000 (d) Standard Rent (19,000 x 12) 2,28,000 (e) Expected Rent {Lower of (c) or (d)} 2,28,000 (f) Rent Received/Receivable (11,000 x 4) 44,000 If there was no vacancy, in that case rent received/receivable would have been `66,000 and it was still less than expected rent, therefore GAV shall be expected rent. GAV 2,28,000 Less: Municipal Taxes 2,000 Net Annual Value 2,26,000 Less: 30% of NAV u/s 24(a) 67,800 Less: Interest on capital borrowed u/s 24(b) 30,000 Income under the head House Property 1,28,200 Question 11: Write a note on computation of income of a House Property which is divided into different portions.
Income Under The Head House Property
205
Answer: If any house property is divided into different portions, every portion shall be considered to be a separate house and income shall be computed accordingly. Illustration 16: Mr. Hemant Kumar has one big house. 25% of it is being used by the assessee in his own business/profession and 50% of the house is let out @ `10,000 p.m. However, it remained vacant for one month and there is unrealised rent for 1½ month. Remaining 25% is self occupied throughout the year. Fair rent of the entire house is `25,000 p.m., municipal valuation `22,000 p.m. and municipal tax paid is `22,000. Insurance premium paid is `6,000, repair charges `8,000, land revenue paid `4,000, ground rent is `3,000 and depreciation of the house is `12,000. Assessee’s income under the head business/profession before charging expenditure relating to house property is `2,00,000. Compute his total income and tax liability for assessment year 2013-14.
Solution:
`
Computation of income under the head House Property Income from self occupied portion Income of self occupied portion Income of let out portion Gross Annual Value Working Note: ` (a) Fair Rent (12,500 x 12) 1,50,000 (b) Municipal Valuation (11,000 x 12) 1,32,000 (c) Expected rent {Higher of (a) or (b)} 1,50,000 (d) Rent Received/Receivable (10,000 x 9.5) 95,000 If there was no vacancy, in that case rent received/receivable would have been `1,05,000 and it was still less than expected rent, therefore GAV shall be expected rent GAV 1,50,000 Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
Nil 1,50,000.00
11,000.00 1,39,000.00 41,700.00 Nil 97,300.00
Computation of income under the head Business/Profession Income before debiting any expense of the house property Less: Municipal taxes Less: Insurance premium Less: Repairs charges Less: Land revenue Less: Ground Rent Less: Depreciation Income under the head Business/Profession
2,00,000.00 5,500.00 1,500.00 2,000.00 1,000.00 750.00 3,000.00 1,86,250.00
Computation of Total Income Income under the head House Property Income under the head Business/Profession
97,300.00 1,86,250.00
Income Under The Head House Property Gross Total Income Less: Deductions u/s 80C to 80U Total Income Computation of Tax Liability Tax on `2,83,550 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
206 2,83,550.00 Nil 2,83,550.00 8,355.00 167.10 83.55 8,605.65 8,610.00
Question 12: Write a note on Composite Rent. Answer Composite Rent and its taxability Sometimes a house property may be let out alongwith some facilities like furniture, air conditioner, generator, security staff, lighting etc and the assessee may charge the rent combined for the house property as well as the facilities, such rent is called composite rent. In such cases, rent charged for house property shall be considered to be the rent received or receivable for the house property and the remaining amount of the rent shall be considered to be income under the head income from other sources, but after deducting all the expenditures incurred in connection with the facility. Illustration 17: Mr. Akshat Jain has let out one house alongwith generator facility and has charged a sum of `25,000 p.m. as rent, out of which `3,000 p.m. is attributable to the generator. He has paid `2,300 and the tenant has paid `900 towards municipal taxes. The interest on the capital borrowed for construction of the house is `7,000. Mr. Akshat Jain has paid repair charge of the generator `3,400, fuel charges `5,600 and operator’s salary `300 p.m. Compute the tax liability of Mr. Akshat Jain for assessment year 2013-14. Solution: ` Computation of income under the head House Property Gross Annual Value (22,000 x 12) 2,64,000.00 Less: Municipal Taxes 2,300.00 Net Annual Value 2,61,700.00 Less: 30% of NAV u/s 24(a) 78,510.00 Less: Interest on capital borrowed u/s 24(b) 7,000.00 Income under the head House Property 1,76,190.00 Computation of income under the head Other Sources Income from generator (3,000 x 12) Less: Repair charges Less: Fuel charges Less: Operator Salary (300 x 12) Income under the head Other Sources Computation of Total Income Income under the head House Property Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income Tax Liability Nil
36,000.00 3,400.00 5,600.00 3,600.00 23,400.00 1,76,190.00 23,400.00 1,99,590.00 Nil 1,99,590.00
Income Under The Head House Property
207
Question 13: Discuss the tax liability in respect of arrears of rent. Answer: Tax liability in respect of arrears of rent Section 25B Where the assessee receives any amount by way of arrears of rent in respect of any property consisting of buildings or land appurtenant thereto, of which he is the owner, the amount so received shall be chargeable to tax under the head “Income from House Property”. It shall be charged to tax as the income of the previous year in which such rent is received even if the assessee is no longer the owner of such property. In computing the income chargeable to tax in respect of the arrears so received, 30% shall be allowed as a deduction and consequently 70% alone shall be chargeable to tax. The deduction of 30% is irrespective of the actual expenditure incurred. There is no specific provision given in the Income Tax Act relating to advance payment of rent. • Original Text Special provision for arrears of rent received Section 25B Where the assessee— (a) is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and (b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting a sum equal to thirty per cent of such amount, shall be deemed to be the income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not. Illustration 18: Mr. Sidhant Goel has let out his house to State Bank @ `20,000 p.m. The bank has increased the rent on 1st July, 2012 to `27,000 p.m. retrospectively w.e.f. 01.11.2011. The assessee has paid municipal taxes of `7,000 during the previous year 2012-13. Compute income under the head House Property for assessment year 2013-14. Solution: Computation of income under the head House Property Gross Annual Value (27,000 x 12) Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Add: Arrears of rent (Sec 25B) (7,000 x 5) Less: 30% of `35,000 Income under the House Property
`
35,000 10,500
` 3,24,000 7,000 3,17,000 95,100 Nil 2,21,900 24,500 2,46,400
Question 14: Write a note on taxability of the income from Subletting of House Property. Answer: Sub-Letting of House Property If any person has sub-let any house property, any income received shall be taxable under the head other sources as per section 56 and further total income shall be, rent received minus expenses incurred. Example Mr. Anurag Gupta has taken one house on rent `10,000 p.m. and he has sub-let 60% of the house for a rent of `9,000 p.m. He has incurred `300 p.m. for collection of the rent. In this case, his income shall be considered to be – ` Rent Received (9,000 x 12) 1,08,000
Income Under The Head House Property Less: Expenses incurred (300 x 12) Less: Rent Paid (10,000 x 60% x 12) Income under the head Other Sources
208 3,600 72,000 32,400
Question 15: How the property owned by co-owners is taxed? Answer: Property owned by co-owners Section 26 Where property consisting of buildings or buildings and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income. For the purposes of this section, in applying the provisions of section 23(2) for computing the share of each such person as is referred to in this section, such share shall be computed, as if each such person is individually entitled to the relief provided in that sub-section. Example A particular house property is owned by co-owners Mr. Mukesh Jain and Mr. Hitender Jain. It is selfoccupied: (i) Shares of each of the co-owners is not determinate and interest on capital borrowed is `1,00,000. In this case income of the co-owners shall be Loss under the head house property `30,000. (ii) Mr. Mukesh Jain has share of 20% and Mr. Hitender Jain has share of 80%. In this case, their income from house property shall be (a) Mr. Mukesh Jain loss under the head house property `20,000 (b) Mr. Hitender Jain loss under the head house property `30,000 Question 16 [V. Imp.]: Ownership is the criterion for assessment of income from property under section 22. However, there are instances in which the income from property is assessable in the hands of an assessee, who is not the legal owner thereof. Enumerate these cases. Or It is only the owner of the house property who is liable to pay income tax in respect of income from house property, but there are certain exceptions to this general rule. List the circumstances under which a person will be a deemed owner of house property under the Income Tax Act? Answer: Deemed Owner Section 27 Income from any house property is taxable in the hands of its owner under section 22. However, if the ownership is disputed, income shall be taxable in the hands of the beneficial owner. Example Mr. Ramesh and Mr. Abhishek, two brothers claim to be the owner of a particular house property which has been let out to Mr. Raman. The rent is being received by Mr. Ramesh, in this case, Mr. Ramesh is the beneficial owner and income is taxable in his hands. Income may be taxed in the hands of the deemed owner in the following situations under section 27: 1. Transfer of house property to the spouse/ minor child Section 27(i) An individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred. Example Mr. Ravi Prakash has gifted his house to his wife. In this case, Mr. Ravi Prakash shall be considered to be the deemed owner of the house property, but if the house was transferred for adequate consideration, deeming provisions shall not apply. Similarly, if the house has been transferred under an agreement to live
Income Under The Head House Property
209
apart, deeming provisions shall not apply and Mrs. Ravi Prakash shall be considered to the owner. 2. Holder of impartible estate Section 27(ii) The holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. 3. Property in the name of co-operative society etc. Section 27(iii) A member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof. 4. Part performance of a contract as per section 53A of the Transfer of Property Act, 1882 Section 27(iiia) 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, shall be deemed to be the owner of that building i.e. 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, still the proposed buyer shall be considered to be the deemed owner. Example Mr. Himanshu Bajaj has entered into a contract for sale of one house to Mr. Nitesh Jindal for ` 60 Lakhs. The agreement was entered into on 01.01.2013 and the sale was to be effected on 15.04.2013, but Mr. Nitesh Jindal has made full payment on 27.03.2013 and has taken the possession of the house. In this case, Mr. Nitesh Jindal is the deemed owner w.e.f. 27.03.2013, even if ownership in documents is in the name of Mr. Himanshu Bajaj. Question 17: Discuss the circumstances where a person has the income under the head house property without any house property in his hands? Answer: Income under the head house property without having any house property Sometimes a person has the income under the head house property even though he does not have house property. Such instances are: (1) Unrealised Rent – Section 25AA Where the assessee cannot realise rent from a property let out to a tenant and subsequently the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is realised whether or not the assessee is the owner of that property in that previous year. (2) Arrears of rent – Section 25B Where the assessee— (a) is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant and (b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting a sum equal to 30% of such amount, shall be deemed to be the income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not. (3) Deemed Ownership – Section 27(i) An individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a
Income Under The Head House Property
210
married daughter, shall be deemed to be the owner of the house property so transferred. So even in this case such an individual shall be deemed to be the owner of the property even though he is not actually owning the property. Other aspects of House Property Letting out of house property for a purpose which is incidental to and subservient to the assessee’s business/profession If any person has let out any house property for a purpose which is incidental to and subservient to the assessee’s Business/Profession i.e. it may help the business or profession of the assessee, income shall be taxable under the head Business/Profession. Example A public school has let out a part of its building to a bank, rent received is taxable under the head business profession. Similarly, if the assessee has constructed residential buildings within business premises and let out the same to the employees. The rent received is taxable under the head Business/Profession. Annual value how determined. (For Self Reading) 23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be— (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.—For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. (2) Where the property consists of a house or part of a house which— (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner 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, the annual value of such house or part of the house shall be taken to be nil. (3) The provisions of sub-section (2) shall not apply if— (a) the house or part of the house is actually let during the whole or any part of the previous year; or (b) any other benefit therefrom is derived by the owner. (4) Where the property referred to in sub-section (2) consists of more than one house— (a) the provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf; (b) the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let. Rule 4 of Income Tax Rules, 1962
Income Under The Head House Property
211
Unrealised rent. 4. For the purposes of the Explanation below sub-section (1) of section 23, the amount of rent which the owner cannot realise shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where,— ( a ) the tenancy is bona fide; ( b ) the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property; ( c ) the defaulting tenant is not in occupation of any other property of the assessee; ( d ) the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.
PRACTICE PROBLEMS TOTAL PROBLEMS 25 Problem 1: Mr. X has let out one building @ ` 90,000 p.m. and fair rent is ` 80,000 p.m. standard rent ` 1,00,000 p.m. Municipal valuation ` 81,000 p.m., Municipal Tax paid ` 70,000 p.a., Interest on loan for construction of house property ` 82,000. He is engaged in a business and is registered under DVAT and he purchased goods for ` 15,00,000 and paid DVAT @12.5% and the goods were sold in Delhi @ profit of 20% on sale price and output Delhi VAT is 12.5% Compute his tax liability for assessment year 2013-14 and also show the treatment for VAT. (ignore provisions of section 44AD) Answer: Tax Liability: `1,33,900; Net VAT Payable: `46,875 Problem 2: X Ltd. has let out one building to ABC Ltd. @ `3,00,000 p.m. and X Ltd. has paid municipal tax of `6,00,000 p.a. X Ltd. has paid interest of `3,00,000 on loan taken for construction of building. Fair rent of the building is `2,50,000 p.m. and Municipal Valuation is `2,75,000 p.m. and Standard Rent is `2,80,000 p.m. Compute Income Tax Liability for assessment year 2013-14. Answer: Income Tax Liability: `5,56,200 Problem 3: XYZ Ltd. is registered under Central Excise Act / Delhi Value Added Tax Act and is engaged in manufacturing activities and the company purchased raw material for ` 300,00,000 and paid excise duty @ 10% plus EC plus SHEC Plus Central Sales Tax @ 2%. XYZ Ltd. incurred `3,00,000 during the process of manufacturing during the year. All the goods manufactured by the company were sold at a profit of 20% on sale price and output excise duty rate is 10% plus EC plus SHEC and output VAT rate is 12.5%.
Income Under The Head House Property
212
The company has let out one building to ABC Ltd. @ `2,00,000 p.m. Fair rent is `1,80,000 p.m. and standard rent `2,20,000 p.m. The company paid municipal tax of `6,00,000 during the year. Compute income tax Liability of XYZ Ltd. and also show tax treatment for Cenvat credit and VAT credit. Answer: Income Tax Liability: `27,81,140 (b) Presume the goods were sold to a registered dealer in some other state and output Central sales tax was @ 2% and also raw material was purchased from Delhi and Delhi VAT was paid @ 12.5% Answer: Income Tax Liability: `27,30,020 Problem 4. Compute gross annual value in the following cases for the assessment year 2013-14: Particulars Fair Rent (p.m.) Municipal Valuation (p.m.) Standard Rent (p.m.) Rent received/ receivable (p.m.) Vacancy Unrealised rent
Situation 1 10,000 11,000 12,000 7,000 1 month
Situation 2 12,000 10,000 11,000 11,500 2 months -
Situation 3 13,000 8,000 7,000 20,000 1 month 3 month
Situation 4 15,000 17,000 16,000 16,000 3 month 1 month
Answer = Gross Annual Value: Situation 1: `1,32,000; Situation 2: `1,15,000; Situation 3: `1,60,000; Situation 4: `1,92,000 Problem 5. Mr. X has let out one house property @ `70000 per month and there is unrealised Rent of 2 months and there is vacancy of 3 month. Fair rent `60,000 per month, municipal valuation `55,000 per month and standard rent `80,000 per month. Municipal tax paid `62,000. Interest on loan for construction of the house property is `75,000.The assessee has unrealised Rent of `2,00,000 in P.Y. 2009-10 and he has recovered `1,50,000 in P.Y. 2012-13 and interest of `18,000 and he has incurred `11,000 as legal expense. He is registered under DVAT/CST and he has purchased goods for `20,00,000 from Punjab and paid CST @ 2% and goods were sold in Delhi at a profit of 30% on sale price and DVAT is charged @ 12.5%. Compute his tax liability for assessment year 2013-14 and show the treatment for VAT. (ignore provisions of section 44AD) Answer: Tax Liability: `2,66,120; Net VAT Payable: `3,64,286 Problem 6. Mr. Anil Kumar Bhaskar (non-resident) has one house with fair rent `20,000 p.m., municipal valuation `10,000 p.m., standard rent `18,000 p.m. It was let out for `12,000 p.m. but it remains vacant for 1½ months and there was unrealised rent for 2 months. Municipal taxes paid are `11,000 and interest on capital borrowed for construction of the house is `3,00,000. Mr. Anil Kumar Bhaskar has income under the head other sources `7,00,000. Compute his total income and tax liability for the assessment year 2013-14.
Income Under The Head House Property
213
Answer = Total Income: `5,43,500; Tax Liability: `39,860 Problem 7. Compute interest allowed under section 24(b) in the following cases for assessment year 2013-14. Situations Date of loan Amount of loan Rate of interest Date of completion/ Date of purchase Date of repayment
A 01.07.2009 5,00,000 6% 31.03.2012
B 01.07.2010 5,00,000 6% 31.03.2011
C 01.07.2010 5,00,000 6% 01.01.2012
D 01.04.2011 5,00,000 6% 01.07.2012
E 01.03.2012 5,00,000 6% 01.04.2012
01.04.2010
01.04.2013
01.01.2013
01.12.2012
Nil
Answer = Situation A: Current period interest: Nil; Pre-construction period interest: `4,500; Total interest allowed: `4,500 Situation B: Current period interest: `30,000; Pre-construction period interest: Nil; Total interest allowed: `30,000 Situation C: Current period interest: `22,500; Pre-construction period interest: `4,500; Total interest allowed: `27,000 Situation D: Current period interest: `20,000; Pre-construction period interest: `6,000; Total interest allowed: `26,000 Situation E: Current period interest: `30,000; Pre-construction period interest: `500; Total interest allowed: `30,500 Problem 8. Mrs. X has taken a loan of ` 11,00,000 on 01.07.2006 at a rate of 10% per annum for construction of one house which was completed on 31.03.2008 and the house was let out at a rate of `80,000 per month w.e.f. 01.11.2011 and fair rent is `1,00,000 per month. Municipal taxes paid in previous year 2012-2013 `30,000. She has taken a fresh loan of `11,00,000 on 01.07.2011 @ 11% per annum and it was utilized to repay the original amount. She is registered dealer under DVAT and has purchased goods for `11,00,000 which is inclusive of DVAT 12.5% and the goods were sold at a profit of 40% on sale price. Compute her income tax liability for assessment year 2013-14 and also show the treatment of VAT. (ignore provisions of section 44AD) Answer: Income Tax Liability: `2,42,000; Net VAT Payable: `81,482 Problem 9. Mr. X has taken a loan on 01.07.2009 from SBI @ 11% p.a. of `15,00,000 for construction of one house which was completed on 01.11.2011 and was self occupied and municipal taxes paid in previous year 2012-2013 `32,000. He has given repayment of loan of `70,000 on 01.01.2013. He has submitted a certificate confirming the amount of interest. He has income under the head Salary `6,00,000 Compute income tax liability for assessment year 2013-14. Answer: Tax Liability: `18,540
Income Under The Head House Property
214
Problem 10. Mrs. X has taken a loan on 01.11.2008 from PNB @ 10% p.a. of `10,00,000 for purchase of one house which was purchased on 01.01.2009 and was self occupied and municipal taxes paid in previous year 20122013 `30,000. She has repaid the loan amount in annual installments of `50,000 starting from 01.01.2011. The house was vacant for 1 month in 2012-13. She has submitted a certificate confirming the amount of interest. She has short term capital gains under section 111A `10,00,000. Compute Income Tax Liability for assessment year 2013-14. Answer: Tax Liability: `1,09,890 Problem 11. Mr. X is a Registered Dealer under Delhi Value Added Tax Act and he has purchased certain goods from Delhi for `22,50,000 which includes Delhi VAT @ 12.5% he sold all the goods in Delhi at a profit of 20% on sale price and output tax charged is 12.5%. He has taken a loan of `15,00,000 from State Bank on 01.07.2010 @ 10% p.a. and the house was completed on 01.05.2012 and was let out w.e.f. 01.06.2012 @ 40,000 p.m. and fair rent of the house is `50,000 p.m. He repaid half of the loan amount on 01.01.2013. Compute his Income Tax Liability for assessment year 2013-14 and also show tax treatment for Delhi VAT. (ignore provisions of section 44AD) Answer = Total Income: `6,01,250; Tax Liability: `51,760; VAT Payable: `62,500 Problem 12. Mr. X (Registered Dealer) has taken a loan of `11,00,000 on 01.07.2009 @ 10% p.a. for construction of one house which was completed on 01.09.2011 and the house is self occupied during the previous year 2012-13 and Mr. X has paid municipal tax of `12,000. The assessee has submitted a certificate confirming the amount of interest. Mr. X is a trader and he has purchased goods for `11,00,000 and has paid VAT @ 10%. The goods were sold by him for `18,00,000 and VAT payable is @ 10%. He is eligible for VAT credit. Other expenses incurred by him of `2,00,000. Compute his income from business and also income from house property and also show working of VAT and compute Income Tax Liability for the assessment year 2013-14. (ignore provisions of section 44AD) Answer: Income from Business: ` 5,00,000; Income From House Property: ` (1,48,500); Tax Liability: `15,600; Net VAT Payable: `70,000 Problem 13. Mr. X has let out one showroom building in Pitam Pura @ 1,00,000 p.m. and has paid municipal tax `85,000 and fair rent of the house is `98,000 p.m. He has received arrears of rent `3,00,000 relating to the previous year 2011-12.
Income Under The Head House Property
215
He has also received unrealized rent of `4,00,000 of previous year 2010-11 and also interest of `20,000 on such unrealised rent and he has paid `27,000 to the advocate in connection with recovery of unrealized rent. He is engaging in trading and has furnished informations as given below: Raw material purchased `50,00,000 plus VAT @ 4%. Manufacturing expenses (revenue nature) `10,00,000. Plant & machinery acquired for `10,00,000 plus VAT @ 4% eligible for input tax credit in the year of acquisition itself. Deprecation allowed on plant and machinery is `1,50,000. Sale price `80,00,000 plus VAT @ 4% He has delayed payment of VAT and has paid interest of `5,000 and penalty `10,000. Compute his income tax liability for assessment year 2013-14 and also show tax treatment for VAT under gross product variant. Answer: Tax Liability: `8,30,850; VAT Payable: `1,20,000 Problem 14. Mr. Aadish Talwar took a loan of ` 6,10,500 @ 7% p.a. on 01.09.2009 for construction of one house which was completed on 01.06.2012 and it was let out @ `9,000 p.m. It remained vacant for 1½ month and there is unrealised rent of `1,000. The fair rent of house is `10,000 p.m. Assessee has repaid half of the loan amount on 01.07.2011 and remaining amount on 01.02.2013. He has also paid municipal tax of `3,000. His income from salary `2,65,000. Compute his total income and tax liability for the assessment year 2013-14. Answer = Total Income: `2,96,220; Tax Liability: `9,910 Problem 15. Mr. Shashank Jain has let out one house @ `25,000 p.m., but this house was vacated on 01.11.2012. The house was self occupied w.e.f. 01.01.2013. Fair rent of this house is `30,000 p.m., municipal valuation is `27,000 p.m. and standard rent is `28,000 p.m. The assessee has paid municipal taxes @ 10% of municipal valuation. Interest on capital borrowed is `42,000. Land revenue paid by the assessee is `11,000 and ground rent paid by him is `3,000. The assessee has taken a loan for payment of municipal tax and interest paid on loan is `500. Compute his income under the head house property and tax liability for assessment year 2013-14. Answer = Income under the head House Property: `1,70,520; Tax Liability: Nil Problem 16. Mr. Mayank Garg has two houses one of which is self occupied throughout the year. Its fair rent is `10,000 p.m., municipal valuation `11,000 p.m. and standard rent is `10,500 p.m. Municipal taxes paid are `6,000 and interest on capital borrowed is `41,000. The assessee has taken the loan for construction of the house on 01.04.1998. Second house is self occupied for 4 months and let out for 8 months @ of `45,000 p.m. Its fair rent is `20,000 p.m., municipal valuation is `18,000 p.m. and standard rent `15,000 p.m. Municipal taxes paid are `20,000 and interest on capital borrowed is `45,000. The assessee has taken the loan for construction of the house on 01.04.1998.
Income Under The Head House Property
216
Compute his income under the head house property for the assessment year 2013-14. Answer = Income under the head House Property: ` 1,63,000 Problem 17. Mr. Yuvraj Singh has 2 houses. First is self occupied with fair rent `20,000 p.a., municipal valuation is `55,000 p.a.. Fair rent as per Rent Control Act is `50,000 p.a.. However the house remains vacant for 2 months Architect has issued completion certificate on 01.07.2010. Mr. Yuvraj Singh has taken loan for addition to house `3,50,000 on 01.04.2012 @ 13% p.a. The loan was repaid on 01.03.2013 and assessee has submitted a certificate from the person from whom he has taken the loan certifying that the amount of interest claimed by Mr. Yuvraj Singh is correct. In the earlier years, the house was let out and the assessee has recovered unrealised rent of `2,000 in the year 2012-13. The assessee has also received interest of `250 in connection with the unrealised rent. The assessee has also incurred legal expenses of `350. The second house is also self-occupied. However its similar building rent is `64,000 p.a. and rent determined by municipality for charging house tax is `66,000 p.a. Its standard rent is `6,000 p.m. municipal tax payable are `5,000. He has long term capital gains `20,00,000. Compute his income tax liability for Assessment Year 2013-14. Answer = Income Tax Liability: `3,69,830 Problem 18. Mr. Shivam Sharma occupied two flats for his residential purposes, particulars of which are as follows: Particulars Municipal Valuation Fair Rent Fair Rent under Rent Control Act Municipal taxes paid Fire Insurance paid Ground rent due Land revenue paid Interest payable on capital borrowed for purchase of flat
Flat I (in `) 95,000 p.a. 1,25,000 p.a. 85,000 p.a. 10% 1,500 700 600 45,000
Flat II (in `) 50,000 p.a. 45,000 p.a. Not available 10% 650 900 800 Nil
Income of Mr. Shivam Sharma from his proprietary business–warehousing corporation is `7,00,000. Determine the taxable income and tax liability for the assessment year 2013-14 on the assumption that he contributes `70,000 towards public provident fund account, you are informed that Mr. Shivam Sharma could not occupy flat for 2 months commencing from December 1 st, 2012 and that he has attained the age of 82 on 23.08.2012. Answer = Taxable Income: `6,31,500; Tax Liability: `27,090 Problem 19. Mr. Prateek Singhal and Mr. Yashpal Singh constructed their houses on a piece of land purchased by them at New Delhi. The built up area of each house was 1,000 sq. ft. ground floor and an equal area at the first floor. Mr. Prateek Singhal started construction of the house on 01.04.2011 and completed it on 31.03.2012. Mr. Prateek Singhal occupied the entire house on 01.04.2012. Mr. Prateek Singhal has availed a housing loan of
Income Under The Head House Property
217
`25 lakhs @ 12% p.a. on 01.04.2011 and has also submitted a certificate from the lender certifying the amount of interest. Mr. Yashpal Singh started construction on 01.04.2011 and completed it on 30.06.2012. Mr. Yashpal Singh occupied the ground floor on 01.07.2012 and let out the first floor for a rent of `20,000 per month. However, the tenant vacated the house on 31.12.2012 and Mr. Yashpal Singh occupied the entire house during the period 01.01.2013 to 31.03.2013. Mr. Yashpal Singh has availed a housing loan of `15 lakhs @ 10% p.a. on 01.07.2011 and has also submitted a certificate from the lender certifying the amount of interest. Following are the other information: (i) Fair rental value of each unit (Ground floor / first floor) (ii) Municipal value of each unit (Ground floor / first floor) (iii) Municipal taxes paid by (iv) Repair and maintenance charges paid by
` 1,20,000 Per annum 92,000 Per annum Prateek Singhal Yashpal Singh Prateek Singhal Yashpal Singh
-
10,000 10,000 30,000 32,000
No repayment was made by either of them till 31.03.2013. Compute income from house property for Prateek Singhal and Yashpal Singh for the previous year 2012-13 (assessment year 2013-14). Answer = Prateek Singhal: ` (1,50,000); Yashpal Singh: ` (92,000) Problem 20. Mrs. Kavita is the owner of a house property. She borrowed `60,000 from life insurance corporation of India on 1st September 2006 @ 15% p.a. for the construction of this house. The construction was completed on 31.03.2008. Since then the house is under her self-occupation. On 1 st June 2012 the house was let out @ `3,000 p.m. The tenant vacated the house on 1 st August 2012. She occupied the house for self-occupancy. The house is again let out @ `3,500 p.m. from 1st October 2012. Other particulars of the house for the previous year 2012-13. Municipal Valuation Municipal taxes disputed, hence not paid Ground rent for the previous year 2012-13 outstanding Insurance premium paid Refund of first loan instalment to LIC on 01.10.2012
` 22,000 p.a. 2,200 p.a. 3,200 1,200 15,000
Compute the income from house property for assessment year 2013-14. Answer = Income under the head House Property: `11,025 Problem 21. Bhupesh owns a residential house property. It has two identical units—unit I and unit II. Unit I is self– occupied by Bhupesh and his family members, unit II is let out (rent being `7,500 per month, this unit remained vacant for one month during which it was self-occupied). Municipal value of the property is `1,30,000. Standard rent is `1,40,000 and fair rent is `1,53,000. Municipal taxes is imposed @ 12% (on municipal value) which is paid by Bhupesh. Other expenses for the previous year 2012-13 being repairs `5,100 and insurance `6,300. Bhupesh borrowed `9,00,000 on 01.07.2009 from LIC @ 12% p.a. to construct the property. Construction
Income Under The Head House Property
218
of the house was completed on 30.06.2011. The entire loan is still unpaid. Compute the total income and tax liability of Mr. Bhupesh for the assessment year 2013-14 on the assumption that income of Bhupesh from other sources is `2,90,000. Answer = Total Income: `2,39,390; Tax Liability: `4,060 Problem 22. Dinesh has a house property situated in Mumbai which has two units. Unit I has a floor area of 70% whereas the unit II has a floor area of 30%. Both the units were self-occupied by the assessee. As the assessee was allowed a rent free accommodation by his employer w.e.f. 01.04.2011, he vacated both of the units and let out unit I at a rent of `13,000 p.m. and unit II for `5,000 p.m. unit I remained vacant for 1½ months whereas unit II was vacant for one month. Other particulars of the house property are asunder: ` Municipal Valuation 1,55,000 Fair Rent 1,75,000 Standard Rent 1,65,000 Municipal taxes paid 35,000 Ground rent due 15,000 Compute income from house property for the assessment year 2013-14. Answer = Income under the head House Property: `1,09,550 Problem 23. Saurabh is the owner of a residential house whose construction was completed on 31.08.2008. It has been let out from 01.01.2009 for residential purposes. Its particulars for the financial year 2012-13 are given below: ` (i) Municipal Valuation (p.a.) 68,000 (ii) (iii) 7,200
Expected Fair Rent (p.a.)
75,000
Standard Rent under the Rent Control Act (p.m.)
(iv) Actual Rent (p.m.)
7,200
(v) Municipal taxes paid (including `7,000 paid by tenant) (vi) Water/sewerage benefit tax, levied by State Government paid under protest
21,000 5,100
(vii) Interest on loan taken for the construction of the house. The interest has been paid outside India to a non-resident without deduction of tax at source (non-resident has agreed to pay income-tax on such interest direct to the Government)
20,000
(viii) Stamp duty and registration charges incurred in respect of the lease agreement of the house
2,500
(ix) The unrealised rent for previous year 2011-12 amounts to `42,000. There is recovery of `22,000 from the defaulting tenant. Legal charges for the recovery of rent
4,500
Compute income from house property for the assessment year 2013-14. Answer = Income under the head House Property: `72,680
Income Under The Head House Property
219
Problem 24. Mr. Surender Jaswal has three houses with details given below: House I It is self occupied with fair rent of `20,000, municipal valuation `55,000, rent as per Rent Control Act is `50,000. However the house remains vacant for 2 months. Architect has issued completion certificate on 01.07.2010. Loan taken for addition to the house `5,00,000 on 01.04.2012 @ 13% p.a. and loan amount was repaid on 01.03.2013. The assessee has submitted a certificate from the person from whom he has taken the loan certifying the amount of the interest claimed. In the earlier years the house was let out and the assessee has recovered unrealised rent of `2,000 in the previous year 2012-13 and interest on such unrealised rent also amounting to `250. However the assessee has incurred legal expenses of `350. House II It is self occupied. Its similar building rent is `64,000 and rent determined by municipality for charging house tax is `66,000 and its fair rent under Rent Control Act (p.m.) is `6,000. Municipal taxes payable `5,000. The assessee has also recovered unrealised rent of `2,000 in the previous year 2011-12 but the expenses thereon are paid in the year 2012-13 amounting to `200. House III It is let out @ `50,000 p.m. and fair rent is `60,000 p.m. Water tax and house tax paid to municipality is `11,000. Insurance premium paid `6,500 and expenses on repairs `3,000. Interest on capital borrowed for purchase of house is `55,000. He has long term capital gains of `3,50,000. Compute his total income and tax liability for assessment year 2013-14. Answer = Total Income: `7,68,970; Tax Liability: `94,650 Problem 25. Determine the income head under which the following incomes shall be taxable. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)
Mr. Atul Gandhi has income from letting out house property. Mr. Mandeep Singh has sold one house property. ABC Ltd. has 500 flats for the purpose of sale/purchase. Mr. Tushar Jain has let out an open land. ABC Ltd. has 500 flats for the purpose of letting out. ABC Ltd. has constructed flats within its premises for letting out to the employees. Mr. Amit Ahuja is engaged in the business of providing paying guest accommodation in his own building. Mr. Vinod Jain is engaged in the business of warehousing. Mr. Kuldeep has sublet one house property. Mr. Kartik Guglani has let out his hotel building.
Answer = (i) House Property; (ii) Capital Gains; (iii) Business/Profession; (iv) Other Sources; (v) House Property; (vi) Business/Profession; (vii) Business/Profession; (viii) Business/Profession; (ix) Other Sources; (x) House Property
Income Under The Head House Property
220
SOLUTIONS TO
PRACTICE PROBLEMS Solution 1: Computation of income under the head House Property Gross Annual Value Working Note: (a) Fair Rent ( ` 80,000 x 12) (b) Municipal Valuation (` 81,000 x 12) (c) Higher of (a) or (b) (d) Standard Rent (` 1,00,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent received (`90,000 x 12) GAV = Higher of (e) or (f) Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
` 10,80,000 ` 9,60,000 9,72,000 9,72,000 12,00,000 9,72,000 10,80,000 10,80,000
Computation of income under the head Business/Profession Income from business (` 15,00,000 x 20/80) Income under the head Business/Profession Income under the head House Property Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on `10,00,000 at slab rate
70,000 10,10,000 3,03,000 82,000 6,25,000
3,75,000 3,75,000 6,25,000 10,00,000 Nil 10,00,000 1,30,000
Income Under The Head House Property
221
Add: Education cess @ 2% Add: SHEC @ 1% Total tax liability
2,600 1,300 1,33,900
Calculation of VAT Goods purchased DVAT @ 12.5%
15,00,000 1,87,500
Purchase price Profit (` 15,00,000 x 20/80) Sale Price Output Tax 12.5%
15,00,000 3,75,000 18,75,000 2,34,375
Calculation of Net VAT Output VAT Less: Input VAT Credit Net VAT payable
2,34,375 1,87,500 46,875
Solution 2: Computation of income under the head House Property Gross Annual Value Working Note: (a) Fair Rent (2,50,000 x 12) (b) Municipal Value (2,75,000 x 12) (c) Higher of (a) or (b) (d) Standard Rent (2,80,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent received /receivable (3,00,000 x 12) GAV shall be higher of (e) or (f) Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
` 36,00,000.00 ` 30,00,000 33,00,000 33,00,000 33,60,000 33,00,000 36,00,000 36,00,000
Computation of Tax Liability Tax on `18,00,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Solution 3. Purchase Price Add: Excise Duty @ 10% Add: EC @ 2% Add: SHEC @ 1% Add: Central Sales Tax @ 2% Since, Profit is 20% of sale price, Cost of (300,00,000 + 6,61,800 + 3,00,000) `309,61,800 is 80% of Sale Price
6,00,000.00 30,00,000.00 9,00,000.00 3,00,000.00 18,00,000.00 5,40,000.00 10,800.00 5,400.00 5,56,200.00 ` 300,00,000.00 30,00,000.00 60,000.00 30,000.00 330,90,000.00 6,61,800.00 337,51,800.00
Income Under The Head House Property Hence, Sale Price shall be 309,61,800 x 100% / 80% = `387,02,250 Goods sold Add: Excise Duty @ 10% Add EC @ 2% Add :SHEC @ 1% Add: VAT @ 12.5% Selling Price
222 387,02,250.00 38,70,225.00 77,404.50 38,702.25 426,88,581.75 53,36,072.72 480,24,654.47
Net Tax Payable Output Tax Input Tax Net Tax Payable Rounded off
Excise Duty 38,70,225 30,00,000 8,70,225 8,70,225
EC @ 2% 77,404.50 60,000.00 17,404.50 17,405.00
SHEC @ 1% 38,702.25 30,000.00 8,702.25 8,702.00
Computation of income under the head House Property Gross Annual Value (2,00,000 x 12) Working Note: (a) Fair Rent (1,80,000 x 12) (b) Standard Rent (2,20,000 x 12) (c) Expected Rent (lower of (a) or (b) (d) Rent Received/Receivable (2,00,000 x 12) GAV = Higher of (c) or (d) Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
DVAT 53,36,072.71 Nil 53,36,072.71 53,36,073.00 24,00,000.00
` 21,60,000 26,40,000 21,60,000 24,00,000 24,00,000 6,00,000.00 18,00,000.00 5,40,000.00 Nil 12,60,000.00
Income under the head Business/Profession (387,02,250 – 309,61,800 )
77,40,450.00
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
90,00,450.00 Nil 90,00,450.00
Computation of Tax Liability Tax on `90,00,450 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
27,00,135.00 54,002.70 27,001.35 27,81,139.05 27,81,140.00
Solution 3(b): Purchase Price Add: Excise Duty @ 10% Add: EC @ 2% Add: SHEC @ 1% Add: VAT @ 12.5% Since, Profit is 20% of sale price,
` 300,00,000.00 30,00,000.00 60,000.00 30,000.00 330,90,000.00 41,36,250.00 372,26,250.00
Income Under The Head House Property Cost of (300,00,000 + 3,00,000) `303,00,000 is 80% of Sale Price Hence, Sale Price shall be 303,00,000 x 100% / 80% = `378,75,000 Goods sold Add: Excise Duty @ 10% Add EC @ 2% Add :SHEC @ 1% Add: CST @ 2% Selling Price
223
378,75,000.00 37,87,500.00 75,750.00 37,875.00 417,76,125.00 8,35,522.50 426,11,647.50
Net Tax Payable Excise Duty EC @ 2% SHEC @ 1% DVAT CST Output Tax 37,87,500 75,750 37,875 --8,35,522.50 Input Tax 30,00,000 60,000 30,000 41,36,250 --Net Tax Payable 7,87,500 15,750 7,875 --Nil Balance VAT credit ------33,00,727.50 (Tax credit for DVAT can be set off from output CST. 41,36,250 – 8,35,522.50 = 33,00,727.50) Computation of income under the head House Property Gross Annual Value (2,00,000 x 12) Working Note: (a) Fair Rent (1,80,000 x 12) (b) Standard Rent (2,20,000 x 12) (c) Expected Rent (lower of (a) or (b)) (d) Rent Received/Receivable (2,00,000 x 12) GAV = Higher of (c) or (d) Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
24,00,000.00 ` 21,60,000 26,40,000 21,60,000 24,00,000 24,00,000 6,00,000.00 18,00,000.00 5,40,000.00 Nil 12,60,000.00
Income under the head Business/Profession (378,75,000 – 303,00,000)
75,75,000.00
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
88,35,000.00 Nil 88,35,000.00
Computation of Tax Liability Tax on `88,35,000 @ 30% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
26,50,500.00 53,010.00 26,505.00 27,30,015.00 27,30,020.00
Solution 4: Situation 1 ` Computation of Gross Annual Value (a) Fair Rent (10,000 x 12) (b) Municipal Valuation
1,20,000 1,32,000
Income Under The Head House Property (11,000 x 12) (c) Higher of (a) or (b) (d) 1,44,000 (12,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (7,000 x 11) GAV = Higher of (e) or (f)
Standard
Gross Annual Value
224 1,32,000 Rent 1,32,000 77,000 1,32,000 1,32,000
Situation 2 ` Computation of Gross Annual Value (a) Fair Rent (12,000 x 12) (b) Municipal Valuation (10,000 x 12) (c) Higher of (a) or (b) (d) Standard 1,32,000 (11,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (11,500 x 10) In this case, if there was no vacancy, rent received/receivable would have been `1,38,000 hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent received/receivable. Gross Annual Value Situation 3 Computation of Gross Annual Value (a) Fair Rent (13,000 x 12) (b) Municipal Valuation (8,000 x 12) (c) Higher of (a) or (b) (d) Standard 84,000 (7,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (20,000 x 8) In this case, rent R/R is higher than the expected rent, GAV shall be Rent R/R Gross Annual Value Situation 4 Computation of Gross Annual Value
1,44,000 1,20,000 1,44,000 Rent 1,32,000 1,15,000
1,15,000 ` 1,56,000 96,000 1,56,000 Rent 84,000 1,60,000
1,60,000 `
Income Under The Head House Property (a) Fair Rent (15,000 x 12) (b) Municipal Valuation (17,000 x 12) (c) Higher of (a) or (b) (d) Standard 1,92,000 (16,000 x 12) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (16,000 x 8) If there was no vacancy, in that case rent received/receivable would have been `1,76,000 and it was still less than expected rent, therefore GAV shall be expected rent. Gross Annual Value Solution 5: Income under the head House Property Gross annual value Working Note: ` (a) Fair rent (60,000 x 12) 7,20,000 (b) Municipal valuation (55,000 x 12) 6,60,000 (c) Higher of (a) or (b) 7,20,000 (d) Standard Rent (80,000 x 12) 9,60,000 (e) Expected Rent {Lower of (c) or (d)} 7,20,000 (f) Rent Received (70,000 x 7) 4,90,000 If there was no vacancy , then Rent Receivable shall be 70,000 x 10 = 7,00,000, which is lower than the expected rent , hence the GAV shall be 7,20,000 Less: Municipal taxes paid Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Unrealised rent recovered of 2009-10 section 25AA Income under the head Business and Profession Sales (20,40,000 / 70%) Purchases (20,00,000 + 40,000) Profit Income under the head House Property Income under the head Business/Profession Income from other sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A Computation of Tax Liability Tax on `14,27,890 at slab rate Add: EC + SHEC @ 3% Tax Liability Rounded off u/s 288B
225 1,80,000 2,04,000 2,04,000 Rent 1,92,000 1,28,000
1,92,000 ` 7,20,000.00
62,000.00 6,58,000.00 1,97,400.00 75,000.00 3,85,600.00 1,50,000.00 5,35,600.00 29,14,286.00 20,40,000.00 8,74,286.00 5,35,600.00 8,74,286.00 18,000.00 14,27,886.00 NIL 14,27,886.00 14,27,890.00 2,58,367.00 7,751.01 2,66,118.01 2,66,120.00
Income Under The Head House Property
226
Treatment of DVAT Output VAT (29,14,286 x 12.5%) Input tax credit VAT Payable Rounded off
3,64,285.75 Nil 3,64,285.75 3,64,286.00
Solution 6: Gross Annual Value Working Note: ` (a) Fair Rent (20,000 x 12) 2,40,000 (b) Municipal Valuation (10,000 x 12) 1,20,000 (c) Higher of (a) or (b) 2,40,000 (d) Standard Rent (18,000 x 12) 2,16,000 (e) Expected Rent {Lower of (c) or (d)} 2,16,000 (f) Rent Receivable = (12,000 x 8.5) 1,02,000 If there was no vacancy, in that case rent received/receivable would have been `1,20,000 and it was still less than expected rent, therefore GAV shall be expected rent. GAV 2,16,000 Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Loss under the head House Property Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income
` 2,16,000.00
11,000.00 2,05,000.00 61,500.00 3,00,000.00 (1,56,500.00) 7,00,000.00 5,43,500.00 Nil 5,43,500.00
Computation of Tax Liability Tax on `5,43,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 39,861.00 Rounded off u/s 288B Solution 7: Situation A Computation of interest allowed under section 24(b) Current period interest Pre-construction period interest From 01.07.2009 to 31.03.2011 (but interest will be calculated upto 31.03.2010 because the loan has been repaid on 01.04.2010) 5,00,000 x 6% x 9/12 = 22,500 Instalment = 22,500/5 = 4,500 Total interest allowed Situation B Computation of interest allowed under section 24(b)
38,700.00 774.00 387.00 39,860.00 ` Nil
4,500
Income Under The Head House Property
227
Current period interest From 01.04.2012 to 31.03.2013 5,00,000 x 6% = 30,000 Pre-construction period interest Since there is no pre-construction period hence interest is nil Total interest allowed
30,000
Situation C Computation of interest allowed under section 24(b) Current period interest From 01.04.2012 to 31.12.2012 5,00,000 x 6% x 9/12 = 22,500 Pre-construction period interest From 01.07.2010 to 31.03.2011 5,00,000 x 6% x 9/12 = 22,500 Instalment = 22,500/5 = 4,500 Total interest allowed [22,500 + 4,500]
27,000
Situation D Computation of interest allowed under section 24(b) Current period interest From 01.04.2012 to 30.11.2012 5,00,000 x 6% x 8/12 = 20,000 Pre-construction period interest From 01.04.2011 to 31.03.2012 5,00,000 x 6% = 30,000 Instalment = 30,000/5 = 6,000 Total interest allowed [20,000 + 6,000]
26,000
Situation E Computation of interest allowed under section 24(b) Current period interest From 01.04.2012 to 31.03.2013 5,00,000 x 6% = 30,000 pre-construction period interest From 01.03.2012 to 31.03.2012 5,00,000 x 6% x 1/12 = 2,500 Instalment = 2,500/5 = 500 Total interest allowed [30,000 + 500]
30,500
Solution 8: Income under the head House Property Gross annual value Working Note: Fair rent (1,00,000 x 12) Rent received (80,000 x 12) Higher shall be the GAV i.e. Less: Municipal taxes paid Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b)
` 12,00,000.00 ` 12,00,000 9,60,000 12,00,000 30,000.00 11,70,000.00 3,51,000.00 1,21,000.00
Income Under The Head House Property Working Note: Preconstruction interest Current year interest 11,00,000 x 11% = 1,21,000 Income under the head House Property
228
Nil 6,98,000.00
Income under the head Business/Profession Sales (9,77,778/60%) Purchases (11,00,000/112.5%) Profit Gross Total Income (6,98,000 + 6,51,852) Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A
16,29,630.00 9,77,778.00 6,51,852.00 13,49,852.00 Nil 13,49,852.00 13,49,850.00
Computation of Tax Liability Tax on `13,49,850 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B 2,42,000.00
2,34,955.00 4,699.10 2,349.55 2,42,003.65
Treatment of DVAT Output VAT (16,29,630 x 12.5%) Less: Input tax credit (9,77,778 x 12.5%) VAT Payable Solution 9: Income under the head House Property Gross Annual Value Less: Municipal taxes paid Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Preconstruction interest 01.07.2009 to 31.03.2011 15, 00,000 x 11 % x 21/12= 2,88,750 Installment 2,88,750/5 = Current year interest 15,00,000 x 11% x 9/12 = 1,23,750 14,30,000 x 11% x 3/12 = 39,325 Subject to maximum of 1,50,000. Loss under the head House Property Income under the head Salary Gross Total Income Less: Deduction u/s 80C Total Income Computation of Tax Liability
2,03,704.00 1,22,222.00 81,482.00 ` NIL NIL NIL NIL 1,50,000.00 `
57,750 1,63,075 2,20,825 (1,50,000.00) 6,00,000.00 4,50,000.00 70,000.00 3,80,000.00
Income Under The Head House Property Tax on `3,80,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
229 18,000.00 360.00 180.00 18,540.00 `
Solution 10: Income under the head House Property Gross Annual Value Less: Municipal taxes paid Net Annual Value Less: 30% of NAV u/s 24(a) Less : Interest on capital borrowed u/s 24(b) Working Note: Preconstruction interest Current year interest 9,00,000 x 10% x 9/12 = 67,500 8,50,000 x 10% x 3/12 = 21,250 Loss under the head House Property Income under the head capital gains (STCG u/s 111A)
NIL NIL NIL NIL 88,750.00 ` Nil 88,750 (88,750.00) 10,00,000.00
Gross Total Income Less: Deduction u/s 80C Total Income
9,11,250.00 Nil 9,11,250.00
Computation of Tax Liability Tax on `7,11,250(`9,11,250 – 2,00,000) @ 15% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
1,06,687.50 2,133.75 1,066.88 1,09,888.13 1,09,890.00
Solution 11: Purchase Price VAT (22,50,000 x 12.5% / 112.5%) Purchase price net of Tax Input tax credit Since, Profit is 20% of sale price, Cost of `20,00,000 is 80% of Sale Price Hence, Sale Price shall be 20,00,000 x 100% / 80% = `25,00,000 Goods sold in Delhi Add: VAT @ 12.5% Selling Price Output tax Less: Input tax credit Net VAT Payable Computation of income under the head House Property Gross Annual Value Working Note: (a) Fair Rent (50,000 x 11) (b) Expected Rent (f) Rent Received/Receivable (40,000 x 10)
22,50,000.00 2,50,000.00 20,00,000.00 2,50,000.00
25,00,000.00 3,12,500.00 28,12,500.00 3,12,500.00 2,50,000.00 62,500.00 5,50,000.00
` 5,50,000 5,50,000 4,00,000
Income Under The Head House Property
230
If there was no vacancy, in that case rent received/receivable would have been `4,40,000 and it was still less than expected rent, therefore GAV shall be expected rent. GAV 5,50,000 Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Pre construction period interest From 01.07.2010 to 31.03.2012 = (15,00,000 x 10% x 1) + (15,00,000 x 10% x 9/12) = `1,50,000 + `1,12,500 = `2,62,500 Installment = `2,62,500/5 = `52,500 Current period interest From 01.04.2012 to 31.03.2013 = (15,00,000 x 10% x 9/12) + (7,50,000 x 10% x 3/12) = `1,12,500 + `18,750 = `1,31,250 Total interest on capital borrowed = `52,500 + ` 1,31,250 = `1,83,750 Income under the head House Property Income under the head Business/Profession (25,00,000 – 20,00,000) Gross Total Income Less: Deduction u/s 80C {Repayment of housing loan} Total Income (Rounded off u/s 288A) Computation of Tax Liability Tax on `6,01,250 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
2,01,250.00 5,00,000.00 7,01,250.00 1,00,000.00 6,01,250.00 50,250.00 1,005.00 502.50 51,757.50 51,760.00 `
Solution 12: Computation of VAT payable Output tax (18,00,000 x 10%) 1,80,000.00 Less: Tax credit (11,00,000 x 10%) Net VAT payable Computation of income under the head House Property Net Annual Value Less: Interest on capital borrowed u/s 24(b) Working Note: Current period interest 01.04.2012 to 31.03.2013 11,00,000 x 10% = Pre construction period interest From 01.07.2009 to 31.03.2011 11,00,000 x 10% x 21/12 = Instalment = 1,92,500/5 = Total interest = 1,10,000 + 38,500 =
Nil 5,50,000.00 1,65,000.00 1,83,750.00
1,10,000.00 70,000.00 Nil 1,48,500.00 ` 1,10,000 1,92,500 38,500 1,48,500
Income Under The Head House Property
231
Loss under the head House Property
(1,48,500.00)
Computation of income under the head Business/Profession Sale Less: Cost of goods sold Less: Expenses Income under the head Business Profession Less: Loss under the head House Property
18,00,000.00 11,00,000.00 2,00,000.00 5,00,000.00 (1,48,500.00)
Gross Total Income Less: Deduction u/s 80C to 80U Total Income
3,51,500.00 Nil 3,51,500.00
Computation of Tax Liability Tax on `3,51,500 at slab rate Add: EC @ 2% Add: SHEC @ 1% Tax liability Rounded off u/s 288B
15,150.00 303.00 151.50 15,604.50 15,600.00
Solution 13: Gross Annual Value Working Note: (a) Fair rent (98,000 x 12) (b) Rent receivable (1,00,000 x 12) GAV {Higher of (a) or (b)} Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b)
`
` 12,00,000.00
` 11,76,000 12,00,000 12,00,000
Add: Arrears of rent (Sec 25B) Less: 30% of `3,00,000 Add: Unrealised Rent Income under the head House Property Income under the head Other Sources Computation of income under the head Business/profession Sale price Less: Purchase price Less: Manufacturing expenses Less: Depreciation on plant and machinery Less: Interest on delayed payment of VAT Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C to 80U
85,000.00 11,15,000.00 3,34,500.00 Nil 7,80,500.00 3,00,000 90,000
2,10,000.00 9,90,500.00 4,00,000.00 13,90,500.00 20,000.00 80,00,000.00 50,00,000.00 10,00,000.00 1,50,000.00 5,000.00 18,45,000.00 32,55,500.00 Nil
Income Under The Head House Property Total Income Computation of Tax Liability Tax on `32,55,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
232 32,55,500.00 8,06,650.00 16,133.00 8,066.50 8,30,849.50 8,30,850.00
Raw material purchased Add : VAT @ 4%
50,00,000.00 2,00,000.00 52,00,000.00
Sale Price Add: VAT @ 4%
80,00,000.00 3,20,000.00 83,20,000.00
Plant and Machinery Purchased Add: VAT 4% Net Tax Payable Output Tax Less: Tax credit Net Tax Payable Solution 14: Gross Annual Value Working Note: ` (a) Fair Rent (10,000 x 10) 1,00,000 (b) Expected Rent 1,00,000 (c) Received/Receivable = 9,000 x 8.5 = 76,500 – 1,000 = 75,500 If there was no vacancy, in that case rent received/receivable would have been `89,000 and it was still less than expected rent, therefore GAV shall be expected rent. GAV 1,00,000 Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Current Period interest From 01.04.2012 to 31.01.2013 = 3,05,250 x 7% x 10/12 = `17,806.25 Pre construction period interest From 01.09.2009 to 31.03.2012 From 01.09.2009 to 30.06.2011 = 6,10,500 x 7% x 22/12 = `78,347.5 From 01.07.2011 to 31.03.2012 = 3,05,250 x 7% x 9/12 = `16,025.63 Total = `94,373.13
10,00,000.00 40,000.00 10,40,000.00 3,20,000.00 2,00,000.00 1,20,000.00 ` 1,00,000.00
3,000.00 97,000.00 29,100.00 36,680.88
Income Under The Head House Property
233
Instalment = `94,373.13/5 = `18,874.63 Total interest = `17,806.25 + `18,874.63 = `36,680.88 Income under the head House Property Income under the head Salary Gross Total Income Less: Deductions u/s 80C Total Income (rounded off u/s 288A)
31,219.12 2,65,000.00 2,96,219.12 Nil 2,96,220.00
Computation of Tax Liability Tax on `2,96,220 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 9,910.66 Rounded off u/s 288B
9,622.00 192.44 96.22 9,910.00
Solution 15: Gross Annual Value Working Note: ` (a) Fair Rent (30,000 x 12) 3,60,000 (b) Municipal Valuation (27,000 x 12) 3,24,000 (c) Higher of (a) or (b) 3,60,000 (d) Standard Rent (28,000 x 12) 3,36,000 (e) Expected rent {Lower of (c) or (d)} 3,36,000 (f) Rent Receivable (25,000 x 7) 1,75,000 If there was no vacancy, in that case rent received/receivable would have been `2,25,000 and it was still less than expected rent, therefore GAV shall be expected rent GAV 3,36,000 Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property Gross Total Income Less: Deduction u/s 80C to 80U Total Income Tax Liability Nil Solution 16: Income from self occupied house Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from self occupied house Income from partly self occupied and partly let out house Gross Annual Value Working Note: (a) Fair Rent (20,000 x 12)
` 3,36,000.00
32,400.00 3,03,600.00 91,080.00 42,000.00 1,70,520.00 1,70,520.00 Nil 1,70,520.00
` Nil Nil 30,000 (30,000) 3,60,000 ` 2,40,000
Income Under The Head House Property (b) Municipal Valuation (18,000 x 12) (c) Higher of (a) or (b) (d) Standard Rent (15,000 x 12) (e) Expected Rent (f) Rent Receivable (45,000 x 8) GAV = Higher of (e) or (f) Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from House Property Income under the head House Property [`1,93,000 + `(30,000)]
234 2,16,000 2,40,000 1,80,000 1,80,000 3,60,000 3,60,000 20,000 3,40,000 1,02,000 45,000 1,93,000 1,63,000
Solution 17: Option I House I is self-occupied Income from house I House II is deemed to be let out Gross Annual Value Working Note: (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (6,000 x 12) (e) Expected rent {Lower of (c) or (d)} GAV = Expected Rent Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from house II Income under option I [46,200 + (30,000)] Option II House I is deemed to be let out Gross Annual Value Working Note: (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} GAV = Expected Rent Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Current period interest From 01.04.2012 to 28.02.2013
` (30,000.00) 66,000.00 ` 64,000 66,000 66,000 72,000 66,000 66,000 Nil 66,000.00 19,800.00 Nil 46,200.00 16,200.00
50,000.00 ` 20,000 55,000 55,000 50,000 50,000 50,000 Nil 50,000.00 15,000.00 41,708.33
Income Under The Head House Property
235
3,50,000 x 13% x 11/12 = `41,708.33 Income from house I House II is self occupied Income from house II Income under option II Option II is better Income under the head House Property Add: Unrealised rent received Loss under the head House Property Income under the head Capital Gains (LTCG)
(6,708.33) Nil (6,708.33) (6,708.33) 2,000.00 (4,708.33) 20,00,000.00
Gross Total Income Less: Deduction u/s 80C Total Income Rounded off u/s 288A
19,95,291.67 Nil 19,95,291.67 19,95,290.00
Computation of Tax Liability Tax on `17,95,290 (`19,95,290 – `2,00,000) @ 20% Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 3,69,829.74 Rounded off u/s 288B
3,59,058.00 7,181.16 3,590.58 3,69,830.00
Solution 18: ` Option I Flat I is self occupied Income Flat II is deemed to be let out Gross Annual Value Working Note: (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) Expected Rent GAV = Expected Rent Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income Income under option I [(30,000) + 31,500] Option II Flat I is deemed to be let out Gross Annual Value
(30,000.00) 50,000.00 ` 45,000 50,000 50,000 50,000 50,000 5,000.00 45,000.00 13,500.00 Nil 31,500.00 1,500.00
85,000.00
Income Under The Head House Property Working Note: (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} GAV = Expected Rent Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income Flat II is self occupied Income Income under option II is `7,850 Hence Option I is better. Computation of Gross Total Income Income under the head House Property Income under the head Business Profession Gross Total Income Less: Deduction u/s 80C Total Income Computation of Tax Liability Tax on `6,31,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 27,089.00 Rounded off u/s 288B Solution 19: Computation of income from House Property of Mr. Prateek Singhal Net annual value is Nil (Since house is self – occupied) Less: Deduction u/s 24(b) Interest paid on borrowed capital 25,00,000 @ 12% = `3,00,000 As per second proviso to section 24(b) interest deduction restricted to `1,50,000 Loss under the head “House Property”
236 ` 1,25,000 95,000 1,25,000 85,000 85,000 85,000 9,500.00 75,500.00 22,650.00 45,000.00 7,850.00 Nil
1,500.00 7,00,000.00 7,01,500.00 70,000.00 6,31,500.00 26,300.00 526.00 263.00 27,090.00 ` Nil 1,50,000
(1,50,000)
Computation of income from house property of Mr. Yashpal Singh Ground Floor (Self Occupied) Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note:
Nil Nil 86,250
Income Under The Head House Property
237
Current period interest From 01.04.2012 to 31.03.2013 = 15,00,000 x 10% x 1/2 = `75,000 Pre-construction period interest From 01.07.2011 to 31.03.2012 = 15,00,000 x 10% x 9 / 12 = 1,12,500 1,12,500 allowed in 5 equal instalments = 1,12,500 / 5 = ` 22,500 per annum = 22,500 / 2 = `11,250 Total interest = `75,000 + ` 11,250 = `86,250 Income from house property
(86,250)
First Floor (Let Out) Gross Annual Value Working Note: ` (a) Fair Rent (1,20,000 x 9/12) 90,000 (b) Municipal Value (92,000 x 9/12) 69,000 (c) Higher of (a) or (b) 90,000 (d) Expected Rent 90,000 (e) Rent Received/Receivable = 20,000 x 6 1,20,000 GAV = Higher of (d) or (e) 1,20,000 Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Current period interest From 01.04.2012 to 31.03.2013 = 15,00,000 x 10% x 1/2 = `75,000 Pre-construction period interest From 01.07.2011 to 31.03.2012 = 15,00,000 x 10% x 9 / 12 = 1,12,500 1,12,500 allowed in 5 equal instalments = 1,12,500 / 5 = ` 22,500 per annum = 22,500 /2 = `11,250 Total Interest = `75,000 + `11,250 = `86,250 Income from house property Loss under the head “income from house property” of Mr. Yashpal Singh (Both ground floor and first floor) Loss under the head house property of Mr. Yashpal Singh Solution 20: Computation of income under the head House Property Gross Annual Value Working Note: (a) Municipal Valuation (b) Expected Rent (c) Rent Received/Receivable (3,000 x 2) + (3,500 x 6) GAV = Higher of (b) or (c) Less: Municipal taxes Net Annual Value
1,20,000
5,000 1,15,000 34,500 86,250
(5,750) (92,000) (92,000) ` 27,000
` 22,000 22,000 27,000 27,000 Nil 27,000
Income Under The Head House Property Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: = [(60,000 x 15% x 6/12) + (45,000 x 15% x 6/12)] = `7,875 Income under the head House Property
238 8,100 7,875
11,025
Solution 21: Computation of income of Unit-I Since the unit is self-occupied throughout the year. Hence its income shall be computed under section 23(2), accordingly there will be loss `30,000. Computation of income of Unit-II It will be considered to be partially self-occupied and partially let out and income shall be computed under section 23(3) in the manner given below: ` Gross Annual Value 82,500.00 Working Note: ` (a) Fair Rental Value 76,500 (b) Municipal Valuation 65,000 (c) Higher of (a) or (b) 76,500 (d) Standard Rent 70,000 Expected Rent {Lower of (c) or (d) 70,000 (e) Expected Rent 70,000 (f) Rent Received/Receivable (7,500 x 11) 82,500 GAV = Higher of (e) or (f) 82,500 Less: Municipal taxes 7,800.00 Net Annual Value 74,700.00 Less: 30% of NAV u/s 24(a) 22,410.00 Less: Interest on capital borrowed u/s 24(b) 72,900.00 Working note: Current period interest From 01.04.2012 to 31.03.2013 = 9,00,000 x 12% = `1,08,000 Pre-construction period interest From 01.07.2009 to 31.03.2011 = 9,00,000 x 12% x 21 / 12 =1,89,000 Installment = 1,89,000 / 5 = 37,800 Total interest= 1,08,000 + 37,800 = 1,45,800 Interest allowed for one unit = 1,45,800 / 2 = `72,900 Loss from house property (20,610.00) Loss under the head House Property is (`20,610) + (`30,000) (50,610.00) Income under the head Other Sources 2,90,000.00 Gross Total Income 2,39,390.00 Less: Deductions u/s 80C to 80U Nil Total Income 2,39,390.00 Computation of Tax Liability Tax on `2,39,390 at slab rate Add: Education cess @ 2% Add: SHEC @ 1%
3,939.00 78.78 39.39
Income Under The Head House Property
239
Tax Liability 4,057.17 Rounded off u/s 288B
4,060.00
Note: Since condition regarding certificate has not been complied with hence interest has been allowed maximum to the extent of `30,000. Solution 22:
`
Unit I Gross Annual Value Working Note: ` (a) Fair Rental Value (1,75,000 x 70%) 1,22,500 (b) Municipal Valuation (1,55,000 x 70%) 1,08,500 (c) Higher of (a) or (b) 1,22,500 (d) Standard Rent (1,65,000 x 70%) 1,15,500 (e) Expected Rent {Lower of (c) or (d)} 1,15,500 (f) Rent Received/Receivable (13,000 x 10.5) 1,36,500 In this case, if there was no vacancy, rent received/receivable would have been `1,56,000 hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent received/receivable. GAV 1,36,500 Less: Municipal taxes (35,000 x 70%) Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property Unit II Gross Annual Value Working Note: (a) Fair Rental Value (1,75,000 x 30%) (b) Municipal Valuation (1,55,000 x 30%) (c) Higher of (a) or (b) (d) Standard Rent (1,65,000 x 30%) (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (5,000 x 11) In this case, rent R/R is higher than the expected rent, GAV shall be Rent R/R GAV Less: Municipal taxes (35,000 x 30%) Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head house property Total income from house property (78,400 + 31,150)
1,36,500
24,500 1,12,000 33,600 Nil 78,400 55,000
` 52,500 46,500 52,500 49,500 49,500 55,000 55,000 10,500 44,500 13,350 Nil 31,150 1,09,550
Solution 23: Gross Annual Value Working Note: (a) Fair Rental Value
` 86,400 ` 75,000
Income Under The Head House Property
240
(b) Municipal Valuation 68,000 (c) Higher of (a) or (b) 75,000 (d) Standard Rent (7,200 x 12) 86,400 (e) Expected Rent {Lower of (c) or (d)} 75,000 (f) Rent Received/Receivable (7,200 x 12) 86,400 GAV = Higher of (e) or (f) 86,400 Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Interest paid to non-resident without deducting tax at source is not deductible Income from house property Add: Recovery of unrealised rent sec 25AA Income under the head House property
14,000 72,400 21,720 Nil 50,680 22,000 72,680
Solution 24: ` Option I House I It is assumed to be self-occupied Income from house property I (30,000.00) Interest on the capital borrowed = `59,583.33 (5,00,000 x 13% x 11/12 = 59,583.33). But subject to maximum of `30,000 Interest upto `1,50,000 is allowed only if the loan is taken for purchase or construction of the house i.e. if the loan is taken for reconstruction, higher amount is not allowed. House II Assumed to be let out house Gross Annual Value Working Note: (a) Fair rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (6,000 x 12) (e) Expected Rent {Lower of (c) or (d)} GAV = Expected Rent Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from house property II Option II House I Assumed to be let out Gross Annual Value Working Note: (a) Fair rent (b) Municipal Valuation (c) Higher of (a) or (b)
66,000.00 ` 64,000 66,000 66,000 72,000 66,000 66,000 Nil 66,000.00 19,800.00 Nil 46,200.00
50,000.00 ` 20,000 55,000 55,000
Income Under The Head House Property (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} GAV = Expected Rent Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from house property I
241 50,000 50,000 50,000 Nil 50,000.00 15,000.00 59,583.33 (24,583.33)
House II Assumed to be self occupied Income from house II Income under option I = (30,000) + 46,200 = `16,200 Income under Option II = (`24,583.33) Hence option II is better. House III Gross Annual Value Working Note: (a) Fair rent (60,000 x 12) (b) Rent Received/Receivable (50,000 x 12) (c) Expected Rent {Higher of (a) or (b)} GAV = Expected Rent Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from house III
Nil
7,20,000 ` 7,20,000 6,00,000 7,20,000 7,20,000 11,000.00 7,09,000.00 2,12,700.00 55,000.00 4,41,300.00
Income under the head House Property House I and II option II House III Recovery of unrealised rent (house I) Income under the head House Property
(24,583.33) 4,41,300.00 2,000.00 4,18,716.67
Computation of Total Income Income under the head House Property Income under the head Capital Gains (long term capital gain) Income from Other Sources Gross Total Income Less: Deduction u/s 80C to 80U Total Income Rounded off u/s 288A
4,18,716.67 3,50,000.00 250.00 7,68,966.67 Nil 7,68,966.67 7,68,970.00
Computation of Tax Liability Tax on `4,18,970 at slab rate Tax on `3,50,000 @ 20% u/s 112 Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
21,897.00 70,000.00 91,897.00 1,837.94 918.97
Income Under The Head House Property 94,653.91 Rounded off u/s 288B
242 94,650.00
Solution 25: (i) Income under the head House Property. (ii) Income under the head Capital Gains. (iii) Income under the head Business/Profession. (iv) Income under the head Other Sources. (v) Income under the head House Property. (vi) Income under the head Business/Profession. (vii) Income under the head Business/Profession. (viii) Income under the head Business/Profession. (ix) Income under the head Other Sources. (x) Income under the head House Property.
EXAMINATION QUESTIONS IPCC MAY – 2012 Question 2 (4 Marks) Explain the treatment of unrealized rent and its recovery in subsequent years under the provisions of Income Tax Act, 1961. Answer: Unrealised Rent [Explanation to Section 23(1) read with Rule 4] • While computing gross annual value of a let out property, the unrealized rent is to be deducted from actual rent received or receivable. • The unrealized rent is deductible only on the fulfilment of the conditions prescribed under Rule 4. • If the unrealized rent is subsequently recovered, it is taxable under section 25AA, in the year in which it is recovered and the deduction like legal expense etc is not allowed from unrealized rent so recovered. Rule 4 – Unrealised rent means the rent which the owner cannot realize. It shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where,— (a) the tenancy is bonafide. (b) the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property.
Income Under The Head House Property
243
(c) the defaulting tenant is not in occupation of any other property of the assessee. (d) the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless. Section 25AA – Where the assessee cannot realise rent from a property let to a tenant and subsequently the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head “Income from house property” and accordingly charged to incometax as the income of that previous year in which such rent is realised whether or not the assessee is the owner of that property in that previous year. If the assessee has incurred any expenditure on recovery, it will not be allowed to be deducted. If the assessee has received any interest, it will be considered to be income under the head other sources.
PCC MAY – 2012 Question 1 (5 Marks) Mr. Vaibhav owns five houses at Cochin. Compute the gross annual value of each house from the information given below: ` House-I House-II House-III House-IV House –V Municipal value 1,20,000 2,40,000 1,10,000 90,000 75,000 Fair rent 1,50,000 2,40,000 1,14,000 84,000 80,000 Standard rent 1,08,000 N.A. 1,44,000 N.A. 78,000 Actual rent received/ 1,80,000 2,10,000 1,20,000 1,08,000 72,000 receivable Answer: House I Computation of Gross Annual Value (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) 1,08,000 (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (g) Higher of (e) or (f) shall be GAV
`
Standard
1,08,000 1,80,000 1,80,000 `
House II Computation of Gross Annual Value (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (g) Higher of (e) or (f) shall be GAV House III Computation of Gross Annual Value (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d)
1,50,000 1,20,000 1,50,000 Rent
2,40,000 2,40,000 2,40,000 N.A 2,40,000 2,10,000 2,40,000 `
Standard
1,14,000 1,10,000 1,14,000 Rent
Income Under The Head House Property 1,44,000 (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (g) Higher of (e) or (f) shall be GAV
244 1,14,000 1,20,000 1,20,000 `
House IV Computation of Gross Annual Value (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (g) Higher of (e) or (f) shall be GAV
84,000 90,000 90,000 N.A 90,000 1,08,000 1,08,000 `
House V Computation of Gross Annual Value (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} (f) Rent Received/Receivable (g) Higher of (e) or (f) shall be GAV
80,000 75,000 80,000 78,000 78,000 72,000 78,000
IPCC NOV – 2010 Question 7 Explain briefly the applicability of section 22 for chargeability of income tax for:
(2 Marks each )
(i) House property situated in foreign country and (ii) House property with disputed ownership. Answer: Applicability of section 22 for chargeability of income-tax for – (i) House property situated in foreign country A resident assessee is taxable under section 22 in respect of annual value of a house property situated in foreign country. A resident but not ordinarily resident or a non resident is taxable in respect of income from such property if the income is received in India during the previous year. Once incidence of tax is attracted under section 22, the annual value will be computed as if the property is situated in India. (ii) House property with disputed ownership If the title of ownership of the house property is under dispute in a court of law, the decision about who is the owner lies with the Income tax Department. The assessment cannot be held up for such dispute. Generally, a person who receives the income or who enjoys the possession of the house property as owner, though his claim is under dispute, is assessable to tax under section 22.
IPCC NOV – 2009 Question 2 Mr. Raman is a co-owner of a house property alongwith his brother.
(6 MARKS)
Municipal value of the Property
1,60,000
Income Under The Head House Property
245
Fair Rent Standard Rent under the Rent Control Act Rent received
1,50,000 1,70,000 15,000 p.m.
The loan for the construction of this property is jointly taken and the interest charged by the bank is `25,000 out of which `21,000 have been paid. Interest on the unpaid interest is `450. To repay this loan, Raman and his brother have taken a fresh loan and interest charged on this loan is `5,000. The Municipal taxes of `5,100 have been paid by the tenant. Mr. Raman has 50% share in the house property. Compute the income from this property chargeable in the hands of Mr. Raman for A.Y. 2013-14.(Modified) Answer. Computation of income from house property of Mr. Raman for A.Y. 2013-14 ` ` Gross Annual Value 1,80,000 Working Note: (a) Municipal value of property 1,60,000 (b) Fair rent 1,50,000 (c) Higher of (a) and (b) 1,60,000 (d) Standard rent 1,70,000 (e) Annual Letting Value / Expected Rent [lower of (c) and (d)] 1,60,000 (f) Actual rent [15,000 x 12] 1,80,000 (g) Gross Annual Value [higher of (e) and (f)] 1,80,000 Less: Municipal taxes – paid by the tenant, hence not deductible Nil Net Annual Value (NAV) 1,80,000 Less: Deductions under section 24 (i) 30% of NAV u/s 24(a)
54,000
(ii) Interest on housing loan u/s 24(b) Interest on loan taken from bank Interest on fresh loan to repay old loan for this property
25,000 5,000
84,000
Income from house property
96,000
50% share taxable in the hands of Mr. Raman
48,000
Notes: Interest on housing loan is allowable as a deduction under section 24 on accrual basis. Further, interest on fresh loan taken to repay old loan is also allowable as deduction. However, interest on unpaid interest is not allowable as deduction under section 24..
PCC NOV – 2009 Question 3 (7 Marks) Mrs. Indu, a resident and ordinarily resident individual, owns a house in U.S.A. She receives rent @ $ 2,000 per month. She paid municipal taxes of $ 1,500 during the financial year 2012-13. She also owns a two storied house in Mumbai, ground floor is used for her residence and first floor is let out at a monthly rent of `10,000. Standard rent for each floor is `11,000 per month.
Income Under The Head House Property
246
Municipal taxes paid for the house amounts to `7,500. Mrs. Indu had constructed the house by taking a loan from a nationalized bank on 20.06.2010. She repaid the loan of `54,000 including interest of `24,000. The value of one dollar is to be taken as `45. Compute total income from house property and also tax liability of Mrs. Indu for assessment year 2013-14. (Modified) Answer. Computation of Income from House Property of Mrs. Indu for the Assessment Year 2013-14 ` GAV of the house in USA – Rent received ($2000 p.m. x `45 per USD x 12 months) 10,80,000.00 Less : Municipal taxes paid ($1500 x `45 per USD) 67,500.00 Net Annual Value (NAV) 10,12,500.00 Less : Statutory deduction under section 24(a) @ 30% of NAV 3,03,750.00 Income from House property
7,08,750.00
GAV of house at Mumbai (let out portion)- Ist Floor Rent received (`10,000 x 12) 1,20,000 Annual Letting Value/Expected Rent 1,20,000 Gross Annual Value Less : Municipal taxes paid (1/2 of `7,500) Net Annual Value (NAV) Less : Statutory deduction under section 24 @ 30% of NAV 34,875 Interest on Housing loan (1/2 of `24,000) 12,000 Income from House property
1,20,000.00 3,750.00 1,16,250.00 46,875.00 69,375.00
GAV of house at Mumbai (self occupied portion) – Ground Floor Less: Municipal taxes Net Annual Value (NAV) Less: Statutory deduction under section 24(a) @ 30% of NAV Interest on Housing Loan (1/2 of `24,000) Income from House property Income from House property
Nil Nil Nil Nil 12,000.00 (12,000.00) 7,66,125.00
Gross Total Income Less: Deduction u/s 80C (Repayment of housing loan) Total Income (rounded off 288A) 7,36,130.00
7,66,125.00 30,000.00
Computation of Tax Liability Tax on `7,36,130 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
77,226.00 1,544.52 772.26 79,542.78 79,540.00
PCC NOV – 2008 Question 3
(9 Marks)
Income Under The Head House Property
247
Mr. X owns one residential house in Mumbai. The house is having two units. First unit of the house is self occupied by Mr. X and another unit is rented for `8,000 p.m. The rented unit was vacant for 2 months during the year. The particulars of the house for the previous year 2012-13 are as under: Standard rent Municipal valuation Fair rent Municipal tax Light and water charges paid by the tenant Interest on borrowed capital Insurance charges paid by Mr. X Repairs
` 1,62,000 p.a. ` 1,90,000 p.a. ` 1,85,000 p. a 15% of municipal valuation ` 500 p.m. ` 1,500 p.m. ` 3,000 p.a. ` 12,000 p.a.
Compute income from house property of Mr. X for the A.Y. 2013-14. Answer. Computation of Income from house property for A.Y. 2013-14 (A) Rented unit (50% of total area) Gross Annual Value Working note: ` (a) Fair rent (`1,85,000 x ½) (b) Municipal valuation (`1,90,000 x ½) (c) Higher of (a) or (b) (d) Standard rent (`1,62,000 x ½) (e) Expected rent (lower of (c) or (d) (f) Rent received or receivable (`8,000 x 10) Since, owing to vacancy the actual rent received is lower than the annual letting value, the actual rent received is the Gross Annual value i.e. `80,000 Less: Municipal taxes (15% of `95,000) Net Annual value Less: Deductions under section 24 (i) 30% of net annual value u/s 24(a) (ii) Interest on borrowed capital (`750 x 12) u/s 24(b) Taxable income from let out portion (B) Self occupied unit (50% of total area) Annual value Less: Deduction under section 24 Interest on borrowed capital (`750 x 12) u/s 24(b) Income from House property
(Modified)
` 80,000
92,500 95,000 95,000 81,000 81,000 80,000
14,250 65,750 19,725 9,000
28,725 37,025
Nil 9,000
(9,000) 28,025
Notes: (i) It is assumed that both the units are of identical size. Therefore, the rented unit would represent 50% of total area and the self-occupied unit would represent 50% of total area. (ii) No deduction will be allowed separately for light and water charges, insurance charges and repairs.
PCC MAY – 2008
Income Under The Head House Property
248
Question 4 (6 Marks) Mr. Kalpesh borrowed a sum of ` 30 lakhs from the National Housing Bank towards purchase of a residential flat. The loan amount was disbursed directly to the flat promoter by the bank. Though the construction was completed in May, 2013, repayments towards principal and interest had been made during the year ended 31.03.2013. In the light of the above facts, state: (i) Whether Mr. Kalpesh can claim deduction under Section 24 in respect of interest for the assessment year 2013-14. (Modified) Answer. Interest on borrowed capital is allowed as deduction under section 24(b) Interest payable on loans borrowed for the purpose of acquisition, construction, repairs, renewal or reconstruction of house property can be claimed as deduction under section 24(b). Interest payable on borrowed capital for the period prior to the previous year in which the property has been acquired on constructed, can be claimed as deduction over a period of 5 years in equal annual installments commencing from the year of acquisition or completion of construction. It is stated that the construction is completed only in May, 2013. Hence, deduction in respect of interest on housing loan cannot be claimed in the assessment year 2013-14.
PCC MAY – 2007 Question 4 (14 Marks) Miss Charlie, an American national, got married to Mr. Radhey of India in USA on 02.03.2012 and came to India for the first time on 16.03.2012. She left for USA on 23.09.2012. She returned to India again on 27.03.2013. While in India, she had purchased a show room in Mumbai on 22.04.2012, which was leased out to a company on a rent of `25,000 p.m. from 01.05.2012. She had taken loan from a bank for purchase of this show room on which bank had charged interest of `97,500 upto 31.03.2013. She had received the following gifts from her relatives and friends during 01.04.2012 to 30.06.2012: - From parents of husband ` 51,000 - From married sister of husband ` 11,000 - From two very close friends of her husband, `1,51,000 and `21,000 `1,72,000 Determine her residential status and compute the total income chargeable to tax alongwith the amount of tax payable on such income for the Asst. Year 2013-14. (Modified) Answer. Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions: (i) He has been in India during the previous year for a total period of 182 days or more, or (ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the previous year. If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non-resident. Therefore, the residential status of Miss Charlie, an American National, for A.Y. 2013-14 has to be determined on the basis of her stay in India during the previous year relevant to A.Y. 2013-14 i.e. P.Y.201213 and in the preceding four assessment years. Her stay in India during the previous year 2012-13 and in the preceding four years are as under:P.Y. 2012-13
Income Under The Head House Property 01.04.2012 to 23.09.2012 27.03.2013 to 31.03.2013 Total Four preceding previous years P.Y. 2011- 2012 [01.04.2011 to 31.03.2012] P.Y. 2010- 2011 [01.04.2010 to 31.03.2011] P.Y. 2009- 2010 [01.04.2009 to 31.03.2010] P.Y. 2008- 2009 [01.04.2008 to 31.03.2009] Total
249
- 176 days - 5 days 181 days - 16 days Nil Nil Nil 16 days
The total stay of the assessee during the previous year in India was less than 182 days and during the four years preceding this year was for 16 days. Therefore, due to non-fulfilment of any of the two conditions for a resident, she would be treated as non-resident for the Assessment Year 2013-14. Computation of total income of Miss Charlie for the A.Y. 2013-14 Particulars Income from house property Show room located in Mumbai remained on rent from 01.05.2012 to 31.03.2013 @ `25,000/- p.m. Gross Annual Value [25,000 x 11] Less: Municipal taxes Net Annual Value (NAV) Less: Deduction under section 24 30% of NAV 82,500 Interest on loan 97,500
`
`
2,75,000 2,75,000 1,80,000
95,000
Income from other sources Gifts received from non-relatives on or after 01.04.2006 is chargeable to tax as per section 56(2) if the aggregate value of such gifts is in excess of `50,000. - `50,000 received from parents of husband would be exempt, since parents of husband fall within the definition of relative and gifts from a relative are not chargeable to tax.
Nil
- `11,000 received from married sister of husband is exempt, since sister falls within the definition of relative and gifts from a relative are not chargeable to tax.
Nil
- From two friends of husband `1,51,000 and `21,000 aggregating to `1,72,000. Since the aggregate of `1,72,000 exceeds `50,000, the entire amount is taxable under section 56(2). Total income Computation of tax payable by Miss Charlie for the A.Y. 2013-14 Particulars Tax on total income of `2,67,000 Add: Education cess @ 2% Add: SHEC @ 1% Total Tax Liability Less: Advance tax Tax Payable (Rounded off u/s 288B)
1,72,000
1,72,000 2,67,000 ` 6,700 134 67 6,901 Nil 6,900
Income Under The Head House Property
250
Notes – (i) Actual rent received has been taken as the gross annual value in the absence of other information (i.e. Municipal value, fair rental value and standard rent) in the question.
PE-II NOV – 2003 Question 2
(12 Marks)
Mr. A and B constructed their houses on a piece of land purchased by them at New Delhi. The built up area of each house was 1,000 sq. ft. ground floor and an equal area in the first floor. A started construction on 01.04.2011 and completed on 31.03.2012. A occupied the entire house on 01.04.2012. A has availed a housing loan of `20 lakhs @ 12% p.a. on 01.04.2011 and has also submitted a certificate from the lender certifying the amount of interest. B started construction on 01.04.2011 and completed on 01.07.2012. B occupied the ground floor on 01.07.2012 and let out the first floor for a rent of `15,000 per month. However, the tenant vacated the house on 31.12.2012 and B occupied the entire house during the period 01.01.2013 to 31.03.2013. B has availed a housing loan of `12 lakhs @ 10% p.a. on 01.07.2011 and has also submitted a certificate from the lender certifying the amount of interest. ` 1,00,000 per annum
Following are the other information: (i) Fair rental value of each unit (Ground floor / First floor) (ii) Municipal value of each unit (Ground floor / First floor)
72,000 per annum
(iii) Municipal taxes paid by
A B
-
8,000 8,000
(iv) Repair and maintenance charges paid by
A B
-
28,000 30,000
No repayment was made by either of them till 31.03.2013. But they have submitted a certificate confirming the amount of interest. Compute income from house property for A and B for the assessment year 2013-14.
(Modified)
Answer: Computation of income from House Property of Mr. A Net Annual Value Less: 30% of NAV 24(a) Less: Interest on capital borrowed u/s 24(b) Interest paid on borrowed capital = 20,00,000 @ 12 % = `2,40,000 Interest deduction restricted to `1,50,000 Loss under the head “House Property”
(1,50,000)
Computation of income from House Property of Mr. B Ground floor (self occupied) Net Annual Value Less: 30% of NAV u/s 24(a)
Nil Nil
` Nil Nil 1,50,000
Income Under The Head House Property Less: Interest on capital borrowed u/s 24(b) Working Note: Pre-construction period interest From 01.07.2011 to 31.03.2012 = 12,00,000 x 10% x 9 / 12 = 90,000 90,000 allowed in 5 equal instalments = 90,000 / 5 = ` 18,000 per annum = 18,000 / 2 = `9,000 Current period interest From 01.04.2012 to 31.03.2013 = 12,00,000 x 10% x 1/2 = `60,000 Total Interest = `60,000 + ` 9,000 = `69,000 Income from House Property First floor (Let out) Gross Annual Value Working Note: (a) Fair Rent (1,00,000 x 9/12) (b) Municipal Valuation (72,000 x 9/12) (c) Higher of (a) or (b) (d) Expected Rent (e) Rent Received/Receivable (15,000 x 6) GAV = Higher of (d) or (e) Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Pre-construction period interest From 01.07.2011 to 31.03.2012 = 12,00,000 x 10% x 9 / 12 = 90,000 90,000 allowed in 5 equal instalments = 90,000 / 5 = ` 18,000 per annum = 18,000 / 2 = `9,000 Current period interest From 01.04.2012 to 31.03.2013 = 12,00,000 x 10% x 1/2 = Rs.60,000 Total Interest = `60,000 + ` 9,000 = `69,000 Income from House Property Loss under the head “Income from House Property” of Mr. B (Both ground floor and first floor)
251 69,000
(69,000) 90,000 ` 75,000 54,000 75,000 75,000 90,000 90,000 4,000 86,000 25,800 69,000
(8,800) (77,800)
PE-II MAY – 2002 Question 3 (6 Marks) Mr. Ramesh owns a house property which is let out. During the previous year ending 31.03.2013 he receives (i) arrears of rent of `30,000 and (ii) unrealised rent of `20,000. You are requested to (a) state, how they should be dealt with as per the provisions of the Act, and (b) compute the income chargeable under the head “Income from house property”. (Modified) Answer: (a) As per provisions of section 25B, arrears of rent will be charged to tax as income from house property in the previous year in which such rent is received, after deducting a sum equal to 30% of such amount. The
Income Under The Head House Property
252
taxability shall be there whether Mr. Ramesh remains as the owner of the property in the concerned year or not. In this case, it shall be taxed as income from house property in the year of receipt of such arrear rent. (b) As per the provisions of section 25AA, the unrealised rent when received, it shall be deemed to be the income chargeable under the head “Income from house property” and shall be charged to tax in the year of receipt. In this case also, the taxability shall be there, irrespective of the fact whether Mr. Ramesh is the owner of property or not in the year of receipt. The section does not provide for any deduction thereunder. Computation of income from house property ` 30,000 9,000 21,000 20,000 41,000
Arrears of rent Less : Deduction @ 30% of `30,000/- u/s 25B Add : Unrealised rent received Income from house property
PE-II NOV – 2001 Question 1 (12 Marks) From the following particulars furnished by Mr. Kiran for the previous year ending 31.03.2013. Compute the taxable income and tax liability for assessment year 2013-14: (i) He owns a house property at metro city. The fair rental value per annum is ` 27,000 and the municipal value is ` 24,000. (ii) The house was let out from 01.04.2012 to 31.08.2012 @ `2,100 per month. From 01.09.2012 Mr. Kiran occupies the house for his residence. (iii) Expenditure incurred on property and paid: (a) Municipal tax (b) Fire insurance (c) Land revenue (d) Repairs
`4,000 `2,500 `4,600 `1,000
(iv) Interest paid on borrowings for construction: (a) For the current year (b) Instalment of pre-construction period
`21,600 `12,960
He has long term capital gains of `5,00,000. Answer: Computation of income under the head House Property Gross Annual Value Working Note: (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Expected rent (e) Rent Received/Receivable (2,100 x 5) GAV = Higher of (d) or (e) Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a)
(Modified) ` 27,000.00 ` 27,000 24,000 27,000 27,000 10,500 27,000 4,000.00 23,000.00 6,900.00
Income Under The Head House Property
253
Less: Interest on capital borrowed u/s 24(b) (21,600 +12,960) Loss from house property Income under the head Capital Gains (LTCG) Income under the head Capital gains after adjusting loss from house property Gross Total Income Less: Deduction u/s 80C to 80U Total Income
34,560.00 (18,460.00) 5,00,000.00 4,81,540.00 4,81,540.00 Nil 4,81,540.00
Computation of Tax Liability Tax on `2,81,540 (`4,81,540 – `2,00,000) @ 20% u/s 112 Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 57,997.24 Rounded off u/s 288B
56,308.00 1,126.16 563.08 58,000.00
PE-II MAY – 2000 Question 4 (7 Marks) Arvind commenced construction of a residential house intended exclusively for his residence, on 01.11.2011. He raised a loan from PNB of `5,00,000 at 16 per cent interest for the purpose of construction on 01.11.2011. Finding that there was an over-run in the cost of construction he raised a further loan of `8,00,000 at the same rate of interest on 01.10.2012. The assessee has submitted a certificate confirming the amount of interest. What is the interest allowable under section 24, assuming that the construction was completed by 31.03.2013? (Modified) Answer: Since the house was for self-occupation only, the annual value of the property would be ‘nil’ under section 23(2). The interest allowable for the current year has to be considered with respect to both the loans. Interest on loan borrowed after 01.04.1999 is eligible for deduction subject to a maximum of `1,50,000 in the case of self occupied property. Pre-construction interest (upto 31.03.2012) (5,00,000 x 16% x 5 / 12 ) This is to be allowed over 5 years beginning with assessment year 2013-14. Amount allowable for each year Interest eligible for deduction for the assessment year 2013-14 Pre-construction period interest : One-fifth of `33,333 Interest on first loan : Current year interest : 5,00,000 @ 16% Interest on second loan : 8,00,000 @ 16% x 6/12 Total interest Limited to
33,333 6,667 6,667 80,000 64,000 1,50,667 1,50,000
Therefore, interest allowable under section 24 would be `1,50,000.
PE-II NOV – 1999 Question 3 Pritam occupied two flats for his residential purposes, particulars of which are as follows: Particulars
Flat I(in `)
(14 Marks) Flat II(in `)
Income Under The Head House Property Municipal Valuation Fair Rent Fair rent under Rent Control Act (i.e. Standard Rent) Municipal taxes paid Fire insurance paid Interest payable on capital borrowed for purchase of flat
254
90,000
45,000
1,20,000
40,000
80,000
Not available
10% of municipal valuation 10% of municipal valuation 1,000
600
40,000
Nil
Income of Pritam from his Proprietary business–Pritam Warehousing Corporation is `6,50,000. Determine the taxable income and tax liability for the assessment year 2013-14 on the assumption that he contributes `70,000 towards public provident fund account, you are informed that Pritam could not occupy flat for 2 months commencing from December 1 st, 2012 and that he has attained the age of 65 on 23.08.2012. (Modified) `
Answer: Income shall be computed as per Section 23(4) Option I Flat I is Self Occupied Sec 23(2) Income Flat II is Let out Sec 23(1) Gross Annual Value Working Note: (a) Fair Rent (b) Municipal Valuation (c) Expected Rent {Higher of (a) or (b) GAV = Expected Rent Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income 28,350.00 Income under Option I Option II Flat I is Let out Sec 23(1) Gross Annual Value Working Note: (a) Fair Rent (b) Municipal Valuation (c) Higher of (a) or (b) (d) Standard Rent (e) Expected Rent {Lower of (c) or (d)} GAV = Expected Rent
(30,000.00) 45,000.00 ` 40,000 45,000 45,000 45,000 4,500.00 40,500.00 12,150.00 Nil (1,650.00)
80,000.00 ` 1,20,000 90,000 1,20,000 80,000 80,000 80,000
Income Under The Head House Property Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income 9,700.00 Flat II is Self occupied Sec 23(2) Income Income under Option II is Hence Option I is better. Computation of Gross Total Income Income under the head House Property Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C {Contribution in Public provident fund} Total Income Computation of Tax Liability Tax on `5,78,350 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
255 9,000.00 71,000.00 21,300.00 40,000.00
Nil 9,700.00
(1,650.00) 6,50,000.00 6,48,350.00 70,000.00 5,78,350.00 40,670.00 813.40 406.70 41,890.10 41,890.00
Deduction From Gross Total Income
256
DEDUCTION FROM GROSS TOTAL INCOME SECTION 80C TO 80U 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.
PARTICULARS
SECTIONS
Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. Deduction in respect of contribution to certain pension funds Deduction in respect of contribution to pension scheme of Central Government Limit on deductions under sections 80C, 80CCC and 80CCD Investment in notified Equity Saving Scheme Deduction in respect of medical insurance premia Deduction in respect of maintenance including medical treatment of a dependent who is a person with disability Deduction in respect of medical treatment, etc. Deduction in respect of interest on loan taken for higher education Deduction in respect of donations to certain funds, charitable institutions, etc. Deduction in respect of rents paid Deduction in respect of certain donations for scientific research or rural development Deduction in respect of contributions given by companies to political parties Deduction in respect of contributions given by any person to political parties Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste Deduction in respect of employment of new workmen Deduction in respect of royalty income, etc., of authors of certain books other than text books Deduction in respect of royalty on patents Deduction in respect of interest on deposits in savings account Deduction in case of person with disability
80C 80CCC 80CCD 80CCE 80CCG 80D 80DD 80DDB 80E 80G 80GG 80GGA 80GGB 80GGC 80JJA 80JJAA 80QQB 80RRB 80TTA 80U
SECTION 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, 80-IE, 80AC Deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development. etc. Deduction in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings Special provisions in respect of certain undertakings or enterprises in certain special category States Deduction in respect of profits and gains from business of hotels and convention centres in specified area Special provisions in respect of certain undertakings in North-Eastern States Deduction not to be allowed unless return furnished
80-IA 80-IAB 80-IB 80-IC 80-ID 80-IE 80AC
Deduction From Gross Total Income
257
THEORY QUESTION Q1 [V. Imp.]. Write a note on deduction under section 80C. Q2. Write a note on deduction in case of contribution to a pension fund. Q3. Write a note on deduction in case of contribution to pension scheme of Central Government. Q4 [V. Imp.]. Write a note on deduction in case of payment of premium for medical insurance/medi claim policy. Q5 [Imp.]. A taxpayer has a handicapped dependant and enquires from you whether he is eligible for tax relief. He intends to make provision by way of a deposit for the benefit of the handicapped dependant. Explain the scope of the relief and the conditions to which it is subject. Q6 [V. Imp.]. Briefly explain the provisions under the Income Tax Act relating to deduction from gross total income in the case of blind or physically handicapped persons. Q7 [Imp.]. Write a note on deduction in case of expenditure on the treatment of specified disease. Q8 [Imp.]. Write a note on deduction in case of payment of interest on loan taken for higher education. Q9 [V. Imp.]. Write a note on deduction in case of donations to the notified institutions. Q10. [V. Imp.]Write a note on deduction in case of payment of rent. Q11. Write a note on deductions under section 80GGA in respect of donations etc to certain notified institutions. Q12. Write a note on deduction in case of donation to the political parties. Q13. Write a note on deduction in case of income from processing etc of biodegradable waste. Q14. Write a note on deduction in case of employment by an Indian company. Q15. Write a note on deduction in case of royalty income from certain books. Q16. Write a note on deduction in case of royalty on patents. Q17. Write a note on deduction in respect of interest on deposits in savings account. Q18. Write a note on deduction in case of newly setup business. Q19. Write a note on deduction in respect of profits and gains from business of hotels and convention centres in specified area. Q20. Write a note on special provisions in respect of certain undertakings in north-eastern states.
Deduction From Gross Total Income
258
DEDUCTION FROM GROSS TOTAL INCOME SECTION 80C to 80U Deductions under section 80C to 80U are allowed from gross total income to compute total income. As per section 112, such deductions are not allowed from long term capital gains. As per section 58(4), such deductions are not allowed from casual income. As per section 111A, such deduction are not allowed from short term capital gains on the sale of short term equity shares or short term units of equity oriented mutual funds provided securities transaction tax has been paid. Example Mr. Mohit Kapoor has income under the head salary `75,000, income from long term capital gains `2,10,000 and casual income `35,000, in this case maximum amount of deductions allowed shall be `75,000. Question 1 [V. Imp.]. Write a note on deduction under Section 80C. Answer: Deduction under section 80C shall be allowed only to (i) an individual (ii) Hindu Undivided Family (Deduction under section 80C is not allowed to any partnership firm or a company etc.) Deduction shall be allowed to the extent of the following investments but subject to a maximum of `1,00,000 (Including deduction under section 80CCC and section 80CCD). 1. Subscription to National Savings Certificates issued under Government Savings Certificates Act 1959. (accrued interest shall also qualify for deduction under section 80C). Amount can be invested in the name of self, spouse or minor children and HUF can invest the amount in the name of any of its members. National Saving Certificate is issued by a post office and it is just like a fixed deposit with a bank. National Saving Certificate are issued in the denomination of `100, `500, `1,000, `5,000, `10,000 and such other denomination as may be notified by the Central Government. Accrued interest shall be considered to be income and shall qualify for deduction under section 80C but accrued interest for the last year shall not be considered for deduction under section 80C. Principal amount received on maturity shall be exempt 2. Deposit in Public Provident Fund account and the account can be opened in the name of self, spouse or children. HUF can open the account in the name of any of its members. Public Provident Fund (PPF): Public Provident fund is operated under Public Provident Fund Act, 1968. Membership of the fund is open to every individual. The individual may deposit the amount either in his own name or in the name of spouse or children. The individual may deposit minimum `500 in a year. Interest income is exempt from income tax and interest will not qualify for deduction under section 80C. Principal amount received on maturity shall be exempt. HUF can open the account in the name of any of its members. 3. Investment in fixed deposit for a period of 5 years or more with scheduled banks, provided the term deposit are issued in accordance with a scheme notified by the Central Government. (Bank Term Deposit
Deduction From Gross Total Income
259
Scheme, 2006 – depositor can be individual or Hindu Undivided Family. The deposit should be for a minimum period of 5 years. Interest income shall be taxable on accrual basis and it will not qualify for deduction under section 80C.) Principal amount received on maturity shall be exempt. 4. Repayment of the amount borrowed by the assessee for the purposes of Purchase or Construction of a residential house property, the income from which is chargeable to tax under the head income from house property and the amount was borrowed from the Central Government, any Bank, Life Insurance Corporation or National Housing Bank and Other Notified persons. It will not include any payment towards Interest or payment towards loan taken for Addition, Alteration, or Repairs etc of the house property. If the assessee has transferred the house property before the expiry of 5 years from the end of the financial year in which possession of such properties was taken by him, no deduction shall be allowable in the previous year in which the house property has been transferred. The deduction allowed in the past years shall be considered to be income of the assessee of the previous year in which the house property is transferred. 5. Payment of Insurance Premium in connection with Insurance on the Life of self, spouse and children and Hindu Undivided Family can take the policy in the name of any of its members however the premium paid can not exceed 10% of the sum assured, otherwise deduction shall be allowed only for 10%. (Children may be dependant or independent or may be married or unmarried or step or adopted.) Hindu Undivided Family can pay premium on the life of any of its members. If an assessee has discontinued a life insurance policy before paying premium for a period of atleast 2 years, no deduction will be allowed in respect of the premium paid in the year of termination. The deduction allowed in the earlier years shall be considered to be income of the assessee of the previous year in which the insurance policy is terminated. As per section 10(10D), any payment received on maturity of insurance policy shall be exempt from income tax i.e. even the amount of bonus received shall be exempt from income tax. If the policy holder has paid premium of more than 10% of the sum assured in any of the years, amount received on maturity shall be chargeable to tax but if the amount has been received on the death of the policy holder, it will be exempt from income tax. 6. Payment of tuition fees to School, College, University or any other Educational Institution in India provided the fees has been paid in connection with the children of the assessee and further for maximum two children and it should be whole time education. Children shall include even adopted and step children also. 7. Employees contribution to statutory provident fund. (It should not be a repayment of loan) 8. Employees contribution to a recognised provident fund. (It should not be a repayment of loan) 9. Employees contribution to approved superannuation fund. (It should not be a repayment of loan) 10. Investment in Unit Linked Insurance Plan 1971 of UTI (ULIP) amount can be invested in the name of self, spouse or children. 11. Investment in Unit Linked Insurance Plan of LIC Mutual Fund (i.e. Dhanraksha scheme of LIC
Deduction From Gross Total Income
260
Mutual Fund) amount can be invested in the name of self, spouse or children. 12. Payment for notified Annuity Plan of LIC i.e. Jeevan Dhara, Jeevan Akshay, New Jeevan Dhara and New Jeevan Akshay, New Jeevan Dhara 1, New Jeevan Akshay 1 and Jeevan Akshay -IV and investment should be in the name of self and Hindu Undivided Family can make investment in the name of any of its members and further there is no limit for investment. 13. As subscription to any Units of Mutual Fund Notified under section 10(23D) or the Units of UTI. 14. Contribution to Notified Pension Fund set up by Mutual Fund or UTI (i.e. retirement benefit unit scheme of UTI and Kothari pioneer pension plan of Kothari Mutual Fund) and amount can be invested only by an individual. 15. Subscription to Notified Deposit Schemes of NHB e.g. subscription to Home Loan Account Scheme of NHB. Even accrued interest shall qualify for deduction under section 80C. Amount can also be invested in any notified Pension fund set up by the National Housing Bank. 16. Investment in equity shares or debentures etc forming part of an eligible issue. Eligible issue means an issue made by an Indian Public Ltd Company or a Public Financial Institution, a Mutual Fund Notified under section 10(23D) provided entire proceeds of the issue are utilised for Developing, Maintaining and Operating Infrastructure Facility. If any equity shares or debentures for which deduction was taken under section 80C have been sold or otherwise transferred to any person within a period of 3 years from the date of their acquisition, the aggregate amount of the deduction allowed shall be deemed to be the income of the assessee of the previous year in which the shares or debentures have been sold or otherwise transferred. 17. As subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by notification in the Official Gazette, specify in this behalf. 18. Five Year Post Office Time Deposit Account. Payment of interest shall be given on annual basis and interest received is taxable. Pre-mature payment is allowed but amount received on pre-mature payment shall be taxable. 19. Senior Citizens Savings Scheme. 20. Any other investment notified under section 80C. Other aspects 1. Deduction under section 80C is not allowed either from Long term capital gain (section 112) or from casual income (section 58(4)) or from short term capital gain (section 111A). 2. If the assessee has invested the amount out of his past savings or out of his income exempt from tax, even in such cases deduction under section 80C is allowed. 3. Deduction shall be allowed only if the amount has been actually paid by the assessee i.e. if the amount is due but not paid deduction is not allowed. Example Premium of `25,000 was due on 27.03.2013 but it was paid on 10.04.2013, in this case no deduction is allowed in the previous year 2012-13, rather deduction shall be allowed in the previous year 2013-14.
Deduction From Gross Total Income
261
Illustration 1: Mr. X has income under the head Business/Profession `19,90,000. His investments are as given below: 1. Investment in NSC `50,000 2. Investment in PPF in name of Mrs. X ` 5,000 3. Payment of premium for LIC policy taken in the name of dependent father and its premium paid is `11,000 4. Payment of premium for LIC policy taken in the name of independent son and its premium paid is `6,000 (sum assured `1,00,000) 5. Payment of premium for LIC policy taken in the name of independent married daughter and its premium paid is `21,000 (sum assured `1,00,000) Compute Income Tax liability for the A.Y. 2013-14. Solution: Income under the head business/profession Gross Total Income Less: Deduction u/s 80C 1. Investment in NSC 2. Investment in PPF in the name of Mrs. X 5,000 3. Payment of premium for LIC policy taken in the name of dependent father 4. Payment of premium for LIC policy taken in the name of independent son 5. Payment of premium for LIC policy taken in the name of independent married daughter (allowed 10% of sum assured) Total Income Computation of Tax Liability Tax on `19,19,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B Illustration 2: Mr. X furnishes you the following information: Raw material purchased `5,00,000 plus VAT @ 4%. Manufacturing expenses (revenue nature) `2,00,000. Sale price `18,00,000 plus VAT @ 4% Plant & machinery acquired `2,50,000 plus VAT @ 4%. Depreciation is allowed @ 15%.
` 19,90,000 19,90,000 50,000
NIL 6,000 10,000 19,19,000 4,05,700 8,114 4,057 4,17,871 4,17,870
Deduction From Gross Total Income
262
He has made the investments as given below: (i)
Fixed deposit with State Bank for two years `5,000.
(ii)
Investment in National Saving Certificates `5,000.
(iii)
Deposit in Public Provident Fund Account in the name of major married independent son `5,000.
(iv)
Deposit in Public Provident Fund Account in the name of minor son `5,000.
(v)
Payment of premium for LIC policy in name of major married independent daughter `5,000. (sum assured `1,00,000).
(vi)
Payment of premium for LIC policy in name of major married independent son `5,000. (sum assured `20,000)
(vii)
Investment in Home Loan Account Scheme of National Housing Bank `5,000 (Investment was made out of past savings).
(viii)
Investment in units of Mutual Funds notified under section 10(23D) `5,000. (Investment was made out of current income exempt from income tax).
(ix)
Investment in Equity Shares of Infrastructure Companies `5,000.
(x)
Payment of Tuition fees of his son to a private coaching centre for coaching in taxation `5,000.
Compute his income and tax liability for assessment year 2013-14 and also show VAT treatment in two situations (i) Gross Product Variant. (ii) Consumption Variant. (ignore provisions of section 44AD) Solution: ` ` (i) Computation of VAT liability under gross product variant Sale price 18,00,000.00 Output VAT @ 4% 72,000.00 Less: Input tax credit -on Raw material (5,00,000 x 4%) 20,000.00 Vat Liability 52,000.00 Note: No tax credit is available on input tax paid on capital goods under gross product variant. Computation of income under the head Business/profession Sale price Less: Purchase Price Less: Manufacturing expenses Less: Depreciation on plant and machinery (2,60,000 x 15%) Income under the head Business/profession Gross Total Income Less: Deduction u/s 80C National Saving Certificate Public Provident Fund LIC Premium (allowed 10% of sum assured) Home Loan Account Scheme Units of Mutual Funds Equity Shares of Infrastructure Companies Total Income
18,00,000.00 5,00,000.00 2,00,000.00 39,000.00 10,61,000.00 10,61,000.00 37,000.00 5,000 10,000 7,000 5,000 5,000 5,000 10,24,000.00
Deduction From Gross Total Income
263
Computation of Tax Liability Tax on `10,24,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (Rounded off u/s 288B)
1,37,200.00 2,744.00 1,372.00 1,41,320.00
(ii) Computation of VAT liability under consumption variant Sale price Output VAT @ 4% Less: Input tax credit -on Raw material (5,00,000 x 4%) -on capital goods (2,50,000 x 4%) VAT Liability Computation of income under the head Business/profession Sale price Less: Purchase Price Less: Manufacturing expenses Less: Depreciation on plant and machinery (2,50,000 x 15%) Income under the head Business/profession Gross Total Income Less: Deduction u/s 80C National Saving Certificate Public Provident Fund LIC Premium Home Loan Account Scheme Units of Mutual Funds Equity Shares of Infrastructure Companies Total Income
18,00,000.00 72,000.00 20,000.00 10,000.00 42,000.00 18,00,000.00 5,00,000.00 2,00,000.00 37,500.00 10,62,500.00 10,62,500.00 37,000.00 5,000 10,000 7,000 5,000 5,000 5,000
Computation of Tax Liability Tax on `10,25,500 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability (Rounded off u/s 288B)
10,25,500.00 1,37,650.00 2,753.00 1,376.50 1,41,780.00
Question 2: Write a note on deduction in case of contribution to a Pension Fund. Answer: Deduction in respect of contribution to certain pension Funds Section 80CCC 1. Deduction is allowed only to an individual. 2. Deduction is allowed if the assessee has paid any amount towards any annuity plan of LIC or any other insurer for receiving pension from the pension fund. 3. The amount is to be paid out of the income chargeable to tax. 4. Deduction allowed shall be equal to the amount paid but subject to a maximum of `1,00,000. 5. Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, deduction with reference to such amount shall not be allowed under section 80C.
Deduction From Gross Total Income
264
6. If the assessee has surrendered the policy, amount received on account of surrender shall be considered to be income of the assessee under the head Other Sources. 7. If any pension has been received under this policy, it will be considered to be income under the head Other Sources. Illustration 3: Mr. X is a dealer registered under DVAT Act and he has purchased goods for `5,00,000 plus DVAT @ 5% processing expense `3,00,000. He purchased one plant and machinery for `2,50,000 paid DVAT @ 12.5% and sold the goods at a profit of 40% of cost price. Tax credit on plant and machinery is allowed in three equal installments and rate of depreciation is 15% and output VAT is 12.5%. He has made the following investments:•
NSC `10,000
•
Investment in post office 5 year time deposit account `15,000
•
Payment of premium for life policy in the name of major married independent son ` 30,000 (sum assured `90,000)
•
Paid premium of ` 11,000 for Jeeven Suraksha policy taken in name of Mr. X.
Compute income tax liability for A.Y 2013-14 and also show the working of VAT. Answer Purchase Price Add: VAT @ 5% Total Computation of sales value Purchase Processing expense Depreciation on Plant and Machinery (2,50,000 x 15%) Total Profit @ 40% Assessable Value Add: DVAT @ 12.5% Selling price Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C NSC 10,000 Investment in 5 years post office 15,000 Payment of premium of LIC 9,000 Less: Deduction u/s 80CCC Total Income Computation of Tax Liability Tax on `2,90,000 at slab rate Add: EC @ 2% Add: SHEC @ 1% Tax Liability
` 5,00,000.00 25,000.00 5,25,000.00 5,00,000.00 3,00,000.00 37,500.00 8,37,500.00 3,35,000.00 11,72,500.00 1,46,563.00 13,19,063.00 3,35,000.00 3,35,000.00
34,000.00 11,000.00 2,90,000.00 9,000.00 180.00 90.00 9,270.00
Deduction From Gross Total Income
265
Calculation of VAT Output Tax Less Input tax credit (25,000 + 1/3 x 31,250) Net VAT Payable
1,46,563.00 35,417.00 1,11,146.00
Question 3: Write a note on deduction in case of contribution to Pension Scheme of Central Government. Answer: Deduction in respect of contribution to Pension Scheme of Central Government Section 80CCD Deduction is allowed to an individual who may be an employee or may be engaged in business/profession. In case of an employee deduction shall be allowed equal to the amount contributed by the employee towards the Pension Scheme (also called New Pension System) but maximum to the extent of 10% of retirement benefit salary. If the employer has contributed any amount towards Pension Scheme, it will be added to the gross salary of the employee and also deduction shall be allowed for such contribution but maximum to the extent of 10% of retirement benefit salary. If the individual is not an employee and he has contributed to the Pension Scheme, deduction shall be allowed for such contribution but maximum to the extent of 10% of gross total income. Any pension received under this scheme shall be taxable. If the individual has received any amount out of the pension account because of closure of the such account or because opting out of the scheme, the amount so received shall be considered to be his income. For the purposes of this section, the assessee shall be deemed not to have received any amount in the previous year if such amount is used for purchasing an annuity plan in the same previous year.". Illustration 4: Mrs. Mridula Jain is employed in Central Government since 01.01.2012 and is getting basic pay of `30,000 p.m. She has contributed `3,000 p.m. to the notified pension scheme of Central Government and employer has also contributed an equal amount. She has paid premium of Jeevan Suraksha Policy `3,000. Compute her tax liability for the assessment year 2013-14. Solution: Basic Pay (30,000 x 12) Contribution to the pension fund by Central Government (3,000 x 12) Gross Salary Income under the head Salary Gross Total Income Less: Deduction u/s 80CCC Less: Deduction u/s 80CCD 72,000.00 Contribution of the Central Government Contribution by Mrs. Mridula Total Total Income
`
` 3,60,000.00 36,000.00 3,96,000.00 3,96,000.00 3,96,000.00 3,000.00
36,000 36,000 72,000 3,21,000.00
Deduction From Gross Total Income Computation of Tax Liability Tax on `3,21,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 12,463.00 Rounded off u/s 288B
266
12,100.00 242.00 121.00 12,460.00
Illustration: Mr. X has income under the head Business/Profession `7,00,000 and income under the head house property `2,00,000 and he has deposited `1,00,000 in notified pension scheme, in this case his income and tax liability shall be Income under the head Business/Profession Income under the head House Property Gross Total Income Less: Deduction u/s 80CCD Total Income
7,00,000 2,00,000 9,00,000 90,000 8,10,000
Computation of Tax Liability Tax on `8,10,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
92,000 1,840 920 94,760
Limit on deductions under sections 80C, 80CCC and 80CCD Section 80CCE The aggregate amount of deductions under section 80C, section 80CCC and employee contribution under section 80CCD shall not, in any case, exceed `1,00,000, however deduction for employer’s contribution under section 80CCD shall be in addition to `1,00,000. Investment in notified Equity Saving Scheme
Section 80CCG
Newly inserted Section 80CCG provides deduction w.e.f assessment year 2013-14 in respect of investment made under notified equity saving scheme. The deduction under this section is available if following conditions are satisfied: (a) The assessee is a resident individual (may be ordinarily resident or not ordinarily resident) (b) His gross total income does not exceed `10 lakhs; (c) He has acquired listed shares in accordance with a notified scheme; (d) The assessee is a new retail investor as specified in the above notified scheme; (e) The investor is locked-in for a period of 3 years from the date of acquisition in accordance with the above scheme; (f) The assessee satisfies any other condition as may be prescribed. Amount of deduction –The amount of deduction is at 50% of amount invested in equity shares. However, the amount of deduction under this provision cannot exceed ` 25,000. If any deduction is claimed by a taxpayer under this section in any year, he shall not be entitled to any deduction under this section for any subsequent year.
Deduction From Gross Total Income
267
Withdrawal of deduction – If the assessee, after claiming the aforesaid deduction, fails to satisfy the above conditions, the deduction originally allowed shall be deemed to be the income of the assessee of the year in which default is committed. Question 4 [V. Imp.]: Write a note on deduction in case of payment of premium for Medical Insurance/Mediclaim Policy. Answer: Deduction in respect of Medical Insurance Premia Section 80D 1.
Deduction shall be allowed only to an individual or Hindu Undivided Family.
2.
Deduction shall be allowed if the assessee has made payment towards (i) Medical Insurance or (ii) Central Government Health Scheme or (iii) Preventive Health Check-up.
3.
Individual can make payment for wife or husband or dependent children and deduction shall be allowed equal to the amount paid but subject to a maximum of `15,000 but in case of senior citizen deduction shall be allowed upto `20,000 and further deduction for preventive health checkup shall be maximum `5,000. If the individual has taken policy in the name of parents (dependent or independent), additional deduction shall be allowed to the extent of the premium paid but maximum `15,000, however, if the policy has been taken in the name of senior citizen, deduction shall be allowed to the extent of `20,000 and further deduction for preventive health check-up shall be maximum `5,000. Hindu Undivided Family can take the policy in the name of any of its members and deduction shall be allowed in the similar manner. Payment should be made otherwise than in cash but payment for preventive health check-up can be made in any manner.
4. “Senior citizen” means an individual resident in India who is of the age of 60 years or more at any time during the relevant previous year. 5. Medical insurance shall be in accordance with a scheme framed in this behalf by the General Insurance Corporation of India or by any other insurer as approved by the Insurance Regulatory and Development Authority (IRDA). Illustration 5: Mr. X is a Dealer in Delhi and is registered under DVAT Act/ CST Act and he has submitted the information as given below:•
Purchased goods ‘A’ from Punjab for `2,04,000 and it is inclusive of CST at the applicable rate and local VAT at Punjab is 12.5%.
•
He sold goods ‘A’ in Delhi at a profit of 20% on purchase price and charged DVAT @12.5%.
•
Purchased goods ‘B’ from Delhi for `12,00,000 plus DVAT @12.5% and sold goods at a profit of 40% on sale price and output DVAT is 12.5%. 1/3 rd of the goods were sold in Delhi, 1/3 rd to a dealer registered under CST Act in U.P. and 1/3rd to a consumer in M.P.
Deduction From Gross Total Income •
268
Purchased goods ‘C’ from Delhi ` 3,60,000 inclusive of VAT @ 4% and goods were sold under interstate sale, to dealer in U.P. who is registered under Local VAT but not under CST Act, at a profit of 40% on Purchase price.
Mr. X has paid premium of `4,000 of medi-claim policy by cheque for each of the persons given below: (i) Self (ii) Spouse (iii) Dependent son (iv) Dependent daughter (v) Independent son (vi) Dependent brother (vii) Independent father (viii) Independent mother (ix) Dependent grand father who is a senior citizen. Compute his total income and tax liability for A.Y. 2013-14 and also show the treatment for VAT. (ignore provisions of section 44AD) Solution: Goods ‘A’ Purchase price Sale in Delhi Sale Price (2,04,000 x 120%) (Cost + Profit) Output Tax @12.5% Goods ‘B’ Purchase Price DVAT @12.5% Sale in Delhi Sale Value (Cost + Profit) (12,00,000 x 1/3 x 100/60) Output Tax @ 12.5% Sale in U.P. Sale Value (Cost + Profit) (12,00,000 x 1/3 x 100/60) CST @ 2% Sale in M.P. Sale Value (Cost + Profit) (12,00,000 x 1/3 x 100/60) CST @ 12.5% Goods ‘C’ Purchase price (Exclusive of VAT) (3,60,000 x 100/104) Add: DVAT @ 4% Purchase price Tax Credit allowed Sale in UP to a dealer registered under Local VAT but not under CST Act. Sale Price (Cost + Profit) (3,46,154 x 140%) CST @ 4%
` 2,04,000.00 2,44,800.00 30,600.00 12,00,000.00 1,50,000.00 13,50,000.00 6,66,667.00 83,333.00 6,66,667.00 13,333.00 6,66,666.00 83,333.00 3,46,154.00 13,846.00 3,60,000.00 13,846.00 4,84,616.00 19,385.00
Deduction From Gross Total Income
269
Calculation of VAT Payable DVAT Output Tax Goods A Goods B Goods C Total Less: Tax Credit Goods A Goods B Goods C Net Payable
CST
30,600 83,333 1,13,933
96,666 19,385 1,16,051
1,13,933 NIL
36,067 13,846 66,138
Computation of Total Income Profit on Sale of Goods Goods A (2,44,800- 2,04,000)
40,800.00
Goods B (6,66,667+6,66,667+6,66,666-12,00,000)
8,00,000.00
Goods C (4,84,616 – 3,46,154) Total Profit
1,38,462.00 9,79,262.00
Gross Total Income Less: Deduction u/s 80D (i) Self (ii) Spouse (iii) Dependent son (iv) Dependent daughter (v) Independent son (vi) Dependent brother
9,79,262.00 23,000.00 `4,000 `4,000 `4,000 `4,000 Not Allowed Not Allowed
(vii) Independent father (viii) Independent mother (ix) Grand father
`4,000 `4,000 Not Allowed
TOTAL DEDUCTION ALLOWED (15,000 + 8,000)
Maximum `15,000
`23,000
Total Income Rounded off u/s 288A
9,56,262.00 9,56,260.00
Computation of Tax Liability Tax on `9,56,260 at slab rate Add: Education Cess @ 2% Add: SHEC @1% Total Tax Liability Rounded off u/s 288B
1,21,252.00 2,425.04 1,212.52 1,24,889.56 1,24,890.00
Deduction From Gross Total Income
270
Question 5 [Imp.]: A taxpayer has a handicapped dependant and enquires from you whether he is eligible for tax relief. He intends to make provision by way of a deposit for the benefit of the handicapped dependant. Explain the scope of the relief and the conditions to which it is subject. Answer: Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability Section 80DD 1. Deduction is allowed only to a resident individual and a resident Hindu Undivided Family. 2. Deduction is allowed if the assessee has incurred any expenditure for the medical treatment, training and rehabilitation etc. of a dependant disabled person, or has deposited any amount with LIC or any other insurer for the benefit of such dependant. 3. “Dependant” in the case of an individual, means the spouse, children, parents, brothers and sisters who are dependant on the individual and in the case of Hindu Undivided Family means any member of the Hindu Undivided Family who is dependant on such Hindu Undivided Family and has not claimed any deduction under section 80U. 4. Deduction allowed shall be `50,000 irrespective of the expenditure incurred by the assessee and in case of severe disability, deduction allowed shall be `1,00,000. 5. If such disabled person, has expired, an amount equal to the amount deposited shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee. 6. The deduction shall be allowed only if deposit scheme of the insurance company provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual or the member of the Hindu Undivided Family in whose name subscription to the scheme has been made and the assessee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability. 7. The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner, along with the return of the income under section 139, in respect of the assessment year for which the deduction is claimed. Illustration 6: Mrs. Geetanjali, aged 65 years a retired Central Government employee, is a dealer registered under DVAT Act and CST Act and she has submitted the information as given below:1. Purchased goods ‘A’ within Delhi for ` 10,00,000 plus DVAT @ 10%. 2. Purchased goods ‘B’ within Delhi for ` 5,00,000 plus DVAT @ 4%. 3. Purchased goods ‘C’ within Delhi for ` 4,00,000 plus DVAT @ 5%. 4. Purchased goods ‘D’ from Punjab for ` 6,00,000 plus Central Sales Tax @ 2%. 5. Goods ‘A’ were sold at a profit of 30% on purchase price and charged DVAT @ 10%. 6. Sold goods ‘B’ at a profit of 20% on sale price plus DVAT @ 4%. 7. Sold goods ‘C’ at a profit of 30% on purchase price plus DVAT @ 5%. 8. Goods ‘D’ were sold at a profit of ` 1,00,000 plus DVAT @12.5%.
Deduction From Gross Total Income
271
She has one house property which is let out @ 10,000 p.m. Winning from lottery (gross): `60,000 Contribution to public provident fund: `25,000 Medical insurance premium – Paid by cheque : `8,000 – Paid in cash : `6,000 Expenditure incurred on medical treatment of her dependant son being a person with disability `35,000. Compute the total income and tax liability for the assessment year 2013-14 and Compute Output tax/ tax credit/ Net Tax. (ignore provisions of section 44AD) Solution: ` Goods ‘A’ Cost DVAT @ 10% Input Tax Credit Sale Price(10,00,000 x 130%) Output Tax @ 10% Goods ‘B’ Cost DVAT @ 4% Input Tax Credit Sale Price (5,00,000 x 100/80) Output Tax @ 4% Goods ‘C’ Cost DVAT @ 5% Input Tax Credit Sale Price (4,00,000 x 130%) Output Tax @ 5% Goods ‘D’ Cost CST @ 2%
` 10,00,000 1,00,000 11,00,000 1,00,000 13,00,000 1,30,000 14,30,000 5,00,000 20,000 5,20,000 20,000 6,25,000 25,000 6,50,000 4,00,000 20,000 4,20,000 20,000 5,20,000 26,000 5,46,000
Input Tax Credit
6,00,000 12,000 6,12,000 NIL
Sale Price (6,12,000 + 1,00,000) Output Tax @ 12.5%
7,12,000 89,000
Deduction From Gross Total Income
272 8,01,000
Output Tax Goods ‘A’ Goods ‘B’ Goods ‘C’ Goods ‘D’ Total Less: Input Tax Credit Goods ‘A’ Goods ‘B’ Goods ‘C’ Goods ‘D’ Net Tax payable
1,30,000 25,000 26,000 89,000 2,70,000 1,00,000 20,000 20,000 NIL
Computation of income under the head Business/Profession Goods ‘A’ (13,00,000 – 10,00,000) Goods ‘B’ (6,25,000 – 5,00,000) Goods ‘C’ (5,20,000 – 4,00,000) Goods ‘D’ Income under the head Business/Profession Computation of income under the head House Property Gross Annual Value (10,000 x 12) Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property Computation of income under the head Other Sources Winning from lottery Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C {Contribution to public provident fund} Less: Deduction u/s 80D Less: Deduction u/s 80DD Total Income Computation of Tax Liability Tax on casual income `60,000 @ 30% u/s 115BB Tax on `6,46,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
(1,40,000) 1,30,000 3,00,000 1,25,000 1,20,000 1,00,000 6,45,000 1,20,000 Nil 1,20,000 36,000 Nil 84,000 60,000 60,000 7,89,000 25,000 8,000 50,000 7,06,000 18,000 54,200 72,200 1,444 722 74,366 74,370
Question 6 [V. Imp.]: Briefly explain the provisions under the Income Tax Act relating to deduction from gross total income in the case of blind or physically handicapped persons. Answer:
Deduction From Gross Total Income
273
Deduction in case of handicapped person Section 80U (1) In computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of `50,000. Provided that where such individual is a person with severe disability, the provisions of this sub-section shall have effect as if for the words “`50,000”, the words “`1,00,000” had been substituted. (2) Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the form and manner, as may be prescribed, alongwith the return of income under section 139, in respect of the assessment year for which the deduction is claimed. Question 7 [Imp.]: Write a note on deduction in case of expenditure on the treatment of Specified Disease. Answer: Deduction in respect of medical treatment, etc. of specified disease Section 80DDB 1. Deduction is allowed only to a resident individual or resident Hindu Undivided Family. 2. Deduction is allowed if the assessee has incurred any amount for treatment of such disease as are specified in the rule 11DD. 3. The expenditure can be incurred for himself or a dependant person, and in case of an individual, such person may be spouse, children, parents, brothers or sisters who are dependant on such individual and in case of Hindu Undivided Family such person may be any member of the Hindu Undivided Family who is dependant on the Hindu Undivided Family. 4. Deduction allowed shall be the amount incurred or `40,000 whichever is less and if the amount has been paid with regard to a Senior Citizen, deduction allowed shall be upto `60,000. 5. Deduction allowed shall be reduced by the amount received under medi claim insurance and also by the amount which has been paid by the employer. 6. No deduction shall be allowed unless the assessee furnishes with the return of income, a certificate in such form, as may be prescribed from a neurologist, an oncologist, a urologist, a haematologist, an immunologist or such other specialist, as may be prescribed working in a Government hospital. 7. “Senior Citizen” means an individual resident in India who is of the age of 60 years or more at any time during the relevant previous year. Example Mr. Ankit Mathur has incurred `35,000 on the treatment of a specified disease for himself, in this case deduction allowed shall be `35,000 but if a claim of `10,000 has been received under medi-claim policy, deduction allowed shall be `25,000. Question 8 [Imp.]: Write a note on deduction in case of payment of interest on loan taken for Higher Education. Answer: Deduction in case of payment of interest on loan taken for pursuing Higher Education Section 80E 1. Deduction is allowed only to an individual. 2. Deduction is allowed if the assessee has paid interest on loan taken by him from any financial institutions or any approved charitable institution. 3. Payment of interest should be given out of the income chargeable to tax.
Deduction From Gross Total Income
274
4. The loan should have taken for pursuing higher education which means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so. 5. Education can be either of self or spouse or children. 6. The entire amount of interest paid by an individual is allowed as deduction. 7. No deduction shall be allowed for repayment of the principal loan amount. 8. Deduction is allowed for a maximum period of 8 years starting from the year in which first payment of interest was given. 9. Approved charitable institution means the institution notified by the Central Government. Financial institution means banking company or other financial institution notified by the Government. 10. No deduction is allowed after the period of 8 years. Example Mr. Anup Tyagi has taken a loan of `2,00,000 from State Bank on 01.10.2003 for pursuing MBBS course & after becoming a doctor he has given payment of interest of `45,000 on 01.10.2012, in this case deduction allowed shall be `45,000. Question 9 [V. Imp.]: Write a note on deduction in case of donations to the Notified Institutions. Answer: Deduction in respect of donations to certain Funds, Charitable Institutions, etc. Section 80G Deduction is allowed to all the assessees if they have given any donation or contribution to any of the below mentioned institutions or funds and deduction allowed shall be either 100% or 50% of the donation given. 1. The Prime Minister’s Drought Relief Fund (50%) 2. The National Children’s Fund (50%) 3. The Jawaharlal Nehru Memorial Fund (50%) 4. The Indira Gandhi Memorial Trust, (50%) 5. The Rajiv Gandhi Foundation (50%) 6. The Prime Minister’s National Relief Fund (100%) 7. The Prime Minister’s Armenia Earthquake Relief Fund (100%) 8. The National Foundation for Communal Harmony (100%) 9. The National Defence Fund set up by the Central Government (100%) 10. The Africa (Public Contributions - India) Fund (100%) 11. A University or any educational institution of national eminence as may be approved by the prescribed authority in this behalf (100%) 12. The Maharashtra Chief Minister’s Relief Fund during the period beginning on the 1st day of October,
Deduction From Gross Total Income
275
1993 and ending on the 6th day of October, 1993 or to the Chief Minister’s Earthquake Relief Fund, Maharashtra (100%) 13. The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996 (100%) 14. Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of earthquake in Gujarat (100%) 15. The Chief Minister’s Relief Fund (100%) 16. The Lieutenant Governor’s Relief Fund in respect of any State or Union territory (100%) 17. Zila Saksharta Samiti. (100%) 18. The National Blood Transfusion Council (100%) 19. Any State Blood Transfusion Council. (100%) 20. The National Illness Assistance Fund (100%) 21. The Army Central Welfare Fund (100%) 22. The Indian Naval Benevolent Fund (100%) 23. The Air Force Central Welfare Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants (100%) 24. The National Sports Fund to be set up by the Central Government (100%) 25. The National Cultural Fund set up by the Central Government (100%) 26. The Fund for Technology Development and Application set up by the Central Government (100%) 27. Any fund set up by a State Government to provide medical relief to the poor (100%) 28. The National Trust for Welfare of Persons suffering with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities. • Deduction in case of donation to other institutions If the donation has been given to any other institution or fund notified under section 80G, deduction allowed shall be 50% of the qualifying amount. However, deduction allowed shall be 100% of the qualifying amount if the donation has been given to: (i) The Government or to any such local authority, institution or association as may be approved in this behalf by the Central Government, to be utilised for the purpose of promoting family planning. (ii) Any sums paid by the assessee, being a company, in the previous year as donations to the Indian Olympic Association or to any other association or institution established in India, as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf for— (a) the development of infrastructure for sports and games or (b) the sponsorship of sports and games, in India.
Deduction From Gross Total Income
276
Qualifying amount = 10% of the adjusted gross total income or the donation given whichever is less. Adjusted gross total income = Gross Total Income – Long term capital Gains – Short term capital gains u/s 111A – All Deduction under section 80C to 80U except section 80G Other institutions, which may be notified are as given below: (i) The Government or any local authority, to be utilised for any charitable purpose other than the purpose of promoting family planning. (ii) An authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. (iii) Any corporation referred to in clause (26BB) of section 10. Section 10(26BB), any income of a corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community. “Minority community” means a community notified as such by the Central Government in the Official Gazette in this behalf. (iv)Any sums paid by the assessee in the previous year as donations for the renovation or repair of any such temple, mosque, gurdwara, church or other place as is notified by the Central Government in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States. (v) Any other fund or any institution to which this section applies. No deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money i.e. if donation is given in kind, deduction is not allowed. No deduction shall be allowed under this section in respect of donation of any sum exceeding ten thousand rupees unless such sum is paid by any mode other than cash. Illustration 7: Mr. X is a dealer registered under DVAT and CST and purchased goods ‘A’ from Haryana for `20,00,000 and paid CST at the applicable rate and Local rate in Haryana is 12.5%. He sold the goods at a profit of 40% on sale price and rate of DVAT is 12.5%. 1/4th of the goods were sold in Delhi. 1/4th to a registered dealer under CST in UP. 1/4th to an un-registered dealer in M.P. 1/4th of such goods is in stock. He purchased goods B from Delhi for `15,00,000 plus DVAT @12.5% and sold at a profit of 20% on purchase price. 1/3rd of the goods were sold in Delhi 1/3rd in U.P. to an un registered dealer 1/3rd in M.P. to a registered dealer. Output DVAT is 12.5%.
Deduction From Gross Total Income
277
Mr. X has long term capital gain `1,35,000 and casual income `47,000. He has paid premium of a mediclaim policy amounting to `20,000 taken in the name of his dependant grand father who is senior citizen and payment was made by a cheque. He has given premium of Jeevan Suraksha policy `7,000, has donated `12,000 to the National Defence Fund, `4,000 to Rajiv Gandhi Foundation and `45,000 to a charitable institution notified under section 80G. (payment was made by cheque) Compute his total income and tax liability for A.Y. 2013-14 and also show the treatment for VAT. (ignore provisions of section 44AD) (b) Presume in the above question the assessee has given donation of `25,000 by cheque to Birla Temple notified under section 80G and he has also given a donation of `10,000 for family planning to the Government. Compute his total income and tax liability for the assessment year 2013-14. (c) Presume in part (b), donation to government for family planning is `50,000 by cheque. Solution 7(a): Goods’A’ Purchased CST @ 2% Total Sale in Delhi (1/4th) Cost (20,40,000 x ¼) Add: Profit (5,10,000 x 40/60) Total Output DVAT @ 12.5% Sale to a dealer Registered under CST Act in U.P.(1/4th) Cost (20,40,000 x ¼) Add: Profit (5,10,000 x 40/60) Total Output CST @ 2% Sale to an un-registered dealer in M.P.(1/4th) Cost (20,40,000 x ¼) Add: Profit (5,10,000 x 40/60) Total Output CST @ 12.5% Goods ‘B’ Purchases 15,00,000.00
` 20,00,000.00 40,000.00 20,40,000.00 5,10,000.00 3,40,000.00 8,50,000.00 1,06,250.00 5,10,000.00 3,40,000.00 8,50,000.00 17,000.00 5,10,000.00 3,40,000.00 8,50,000.00 1,06,250.00
Deduction From Gross Total Income Add: DVAT @ 12.5% Total Tax Credit allowed
278 1,87,500.00 16,87,500.00 1,87,500.00
Sale in Delhi(1/3rd) Cost (15,00,000 x 1/3) Add: Profit (5,00,000 x 20%) Total
5,00,000.00 1,00,000.00 6,00,000.00
Output DVAT @ 12.5%
75,000.00
Sale to an un-registered dealer in U.P.(1/3rd) Cost (15,00,000 x 1/3) Add: Profit (5,00,000 x 20%) Total Output CST @ 12.5%
5,00,000.00 1,00,000.00 6,00,000.00 75,000.00
Sale to a dealer Registered under CST Act in M.P.(1/3rd) Cost (15,00,000 x 1/3) Add: Profit (5,00,000 x 20%) Total Output CST @ 2%
5,00,000.00 1,00,000.00 6,00,000.00 12,000.00
Calculation of VAT Payable DVAT Output Tax Goods A Goods B Total Less: Tax Credit Goods A Goods B Net Payable
CST
1,06,250 75,000 1,81,250
1,23,250 87,000 2,10,250
1,81,250 NIL
6,250 2,04,000
Computation of income under the head Business/Profession Profit on Sale of Goods Goods A [8,50,000 + 8,50,000 + 8,50,000 - (20,40,000 x ¾ )] (Since, 1/4th of the goods ‘A’ is in stock hence profit shall be calculated on ¾th goods) Goods B (6,00,000 + 6,00,000 + 6,00,000 -15,00,000) Income under the head Business/Profession Income under the head Capital Gain (LTCG) Income under the head Other Sources (casual income) Gross Total Income Less: Deduction u/s 80CCC Less: Deduction u/s 80G
10,20,000.00 3,00,000.00 13,20,000.00 1,35,000.00 47,000.00 15,02,000.00 7,000.00
Deduction From Gross Total Income (i) National Defence Fund (ii) Rajiv Gandhi Foundation (iii) Charitable Institution Working Note: AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 15,02,000 – 1,35,000 – 7,000 = 13,60,000 Qualifying amount = 10% of AGTI or donation whichever is less = 1,36,000 or 45,000 whichever is less = 45,000 50% of the qualifying amount = 22,500 Total Income Computation of Tax Liability Tax on casual income `47,000 @ 30% u/s 115BB Tax on LTCG `1,35,000 @ 20% u/s 112 Tax on normal income `12,76,500 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,61,671.50 Rounded off u/s 288B Solution 7(b): Computation of Total Income Gross Total Income Less: Deduction u/s 80CCC Less: Deduction u/s 80G (i) National Defence Fund (ii) Rajiv Gandhi Foundation (iii) Other Donations u/s 80G Working Note: Charitable Institution Birla temple Family planning
` 45,000 25,000 10,000 80,000 AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 15,02,000 – 1,35,000 – 7,000 = 13,60,000 Qualifying amount = 10% of AGTI or donation whichever is less = 1,36,000 or 80,000 whichever is less = 80,000 50% of the qualifying amount (i.e. 35,000) = 35,000 + 10,000 = 45,000 Total Income Computation of Tax Liability Tax on casual income `47,000 @ 30% u/s 115BB Tax on LTCG `1,35,000 @ 20% u/s 112 Tax on normal income `12,54,000 at slab rate
279 12,000.00 2,000.00 22,500.00
14,58,500.00 14,100.00 27,000.00 2,12,950.00 2,54,050.00 5,081.00 2,540.50 2,61,670.00
15,02,000 7,000 12,000 2,000 45,000
14,36,000 14,100 27,000 2,06,200
Deduction From Gross Total Income Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,54,719 Rounded off u/s 288B
280 2,47,300 4,946 2,473 2,54,720
Solution 7(c): ` Computation of Total Income Gross Total Income Less: Deduction u/s 80CCC Less: Deduction u/s 80G (i) National Defence Fund (ii) Rajiv Gandhi Foundation (iii) Other donations u/s 80G Working Note: Charitable institution Birla temple Family planning
` 45,000 25,000 50,000 1,20,000 AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 15,02,000 – 1,35,000 –7,000 = 13,60,000 Qualifying amount = 10% of AGTI or donation whichever is less = 1,36,000 or 1,20,000 whichever is less = 1,20,000 50% of the qualifying amount (i.e. 35,000) = 35,000 + 50,000 = 85,000 Total Income Computation of tax liability Tax on casual income `47,000 @ 30% u/s 115BB Tax on LTCG `1,35,000 @ 20% u/s 112 Tax on normal income `12,14,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,42,359 Rounded off u/s 288B
15,02,000 7,000 12,000 2,000 85,000
13,96,000 14,100 27,000 1,94,200 2,35,300 4,706 2,353 2,42,360
Question 10 [V. Imp.]: Write a note on deduction in case of payment of rent. Answer: Deduction in case of payment of rent Section 80GG 1. Deduction is allowed only to an individual. 2. He should not be getting any house rent allowance and also he is not being provided with Rent Free Accommodation by his employer. 3. He should not have any house in his name or in the name of the spouse or in the name of minor child
Deduction From Gross Total Income
281
or in the name of Hindu Undivided Family of which he is a member, at a place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession. 4. Also he should not have house even at any other place which he has declared to be self occupied. 5. He has paid rent for the accommodation taken by him for his residence. 6. Deduction shall be allowed to such individual in case of payment of rent and deduction shall be allowed to the extent of the least of the following: (i) Rent paid over 10% of the adjusted gross total income (ii) `2,000 p.m. (iii) 25% of the adjusted gross total income Adjusted Gross Total Income = Gross Total Income – Long term capital gains – Short term capital gains u/s 111A – All Deduction of section 80C to 80U except section 80GG • Deduction can be allowed, even where the employer has provided accommodation at concessional rent. • Deduction can be allowed even where the assessee is not an employee i.e. the persons having business/profession can also avail deduction under section 80GG. Illustration 8: Mr. X has income under the head Business/Profession `5,00,000 and LTCG of ` 2,00,000, STCG 111A `3,00,000 and casual income of ` 1,00,000. He is paying rent for a house of ` 40,000 p.m. He has deposited ` 30,000 in home loan account scheme of National Housing Bank. He has complied with all the condition of section 80GG. Compute income tax liability for A.Y. 2013-14. Solution: Income under the head Business/Profession Computation of income under the head Capital Gain Long Term Capital Gain Short Term Capital Gain 111A Income under the head capital gain Computation of income under the head Other Sources Casual income Income under the head Other Sources Gross Total Income Less: Deduction u/s 80C Deduction u/s 80GG Working Note: Least of the following: 1. 24,000 2. 25% x 5,70,000 = 1,42,500 3. `4,80,000 – 57,000 = 4,23,000 AGTI = GTI – LTCG – STCG 111A – Deduction u/s 80C to 80U (exempt 80GG)
` 5,00,000 2,00,000 3,00,000 5,00,000 1,00,000 1,00,000 11,00,000 30,000 24,000
Deduction From Gross Total Income = 11,00,000 – 2,00,000 – 3,00,000 – 30,000 = 5,70,000 Total Income Computation of Tax Liability Tax on casual income ` 1,00,000 @ 30% Tax on LTCG `2,00,000 @ 20% Tax on STCG 111A ` 3,00,000 @ 15% Tax on `4,46,000 at slab rate Tax before Education Cess Add EC @ 2% Add SHEC @ 1% Tax Liability Rounded off u/s 288B
282
10,46,000 30,000 40,000 45,000 24,600 1,39,600 2,792 1,396 1,43,788 1,43,790
Question 11: Write a note on deductions under section 80GGA in respect of donations etc to certain notified institutions. Answer: Deduction in case of certain donation Section 80GGA 1. Deduction is allowed to all the assessees except the assessees whose gross total income includes income which is chargeable under the head “Profits and gains of business or profession”. 2. Deduction is allowed in case of donation or contributions to any of the below mentioned institutions. Deduction allowed is equal to the amount of donations. (i) Any sum paid by the assessee to a research association which has as its object the undertaking of scientific research or to a University, college or other institution to be used for scientific research and the institution is approved under section 35. (ii) Any sum paid by the assessee in the previous year to a research association which has as its object the undertaking of research in social science or statistical research or to a University, college or other institution to be used for research in social science or statistical research and is approved under section 35. (iii)
Any sum paid by the assessee in the previous year to a public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme, approved under section 35AC.
(iv)To an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved for the purposes of section 35CCA. (v) To an association or institution which has as its object the training of persons for implementing programmes of rural development approved under section 35CCA. (vi)Any sum paid by the assessee in the previous year to a rural development fund set up and notified by the Central Government under section 35CCA. (vii) Any sum paid by the assessee in the previous year to the National Urban Poverty Eradication Fund set up and notified by the Central Government under section 35CCA. No deduction shall be allowed under this section in respect of any sum exceeding ten thousand rupees unless such sum is paid by any mode other than cash. Question 12: Write a note on deduction in case of donation to the political parties or an Electoral
Deduction From Gross Total Income
283
trust. Answer: Deduction in respect of contributions given by companies to political parties Section 80GGB In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party or an electoral trust. Deduction in respect of contributions given by any person to political parties Section 80GGC In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust. Question 13: Write a note on deduction in case of income from processing etc. of Biodegradable Waste. Answer: Deduction in case of person engaged in the business of collecting or processing Biodegradable Waste Section 80JJA 1.
Deduction is allowed to all the assessees.
2.
The assessee should have the income from the business of collecting and processing or treating of bio-degradable waste for generating power or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure.
3.
Deduction allowed shall be equal to the amount of whole of such profits and gains.
4.
Deduction shall be allowed for a period of 5 consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences.
Question 14: Write a note on deduction in case of employment by an Indian Company. Answer: Deduction in case of new employment Section 80JJAA 1. Deduction is allowed to an Indian company. 2. The gross total income of the company should include profits and gains derived from any industrial undertaking engaged in manufacture or production of an article or thing. 3. Deduction shall be allowed equal to 30% of additional wages paid to the new regular workmen employed by the assessee in the previous year. 4. Deduction is allowed for 3 assessment years including the assessment year in which such employment is provided. 5. “Additional wages” means the wages paid to the new regular workmen in excess of 100 workmen employed during the previous year. Provided that in the case of an existing undertaking, the additional wages shall be nil if the increase in the number of regular workmen employed during the year is less than 10% of existing number of workmen employed in such undertaking as on the last day of the preceding year. 6. “Regular workman”, does not include— (a) a casual workman; or
Deduction From Gross Total Income
284
(b) a workman employed through contract labour; or (c) any other workman employed for a period of less than 300 days during the previous year. 7. No deduction is allowed if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking. 8. Deduction is allowed only if the assessee furnishes along with the return of income the report of the Chartered Accountant giving such particulars in the report as may be prescribed. Question 15. Write a note on deduction in case of royalty income from certain books. Answer: Deduction in respect of royalty income, etc., of authors of certain books other than text books Section 80QQB 1.
Deduction is allowed only to a resident individual who is an author.
2.
He should have income through his copyright in a book which is a work of literary, artistic or scientific nature. Further “books” shall not include brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, text-books for schools, tracts and other publications of similar nature, by whatever name called.
3. Deduction allowed shall be equal to the amount of royalty income or `3,00,000 whichever is less. 4. If the income by way of such royalty or the copyright fee, is not a lump sum consideration so much of the income, before allowing expenses attributable to such income, as is in excess of 15% of the value of such books sold during the previous year shall be ignored. 5. In respect of any income earned from any source outside India, so much of the income shall be taken into account for the purpose of this section as is brought into India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year in which such income is earned or within such further period as the competent authority may allow in this behalf. 6. No deduction under this section shall be allowed unless the assessee furnishes a certificate in the prescribed form and in the prescribed manner, duly verified by any person responsible for making such payment to the assessee, along with the return of income, setting forth such particulars as may be prescribed. Illustration 9: Mrs. X is author of one book of scientific nature and its print price is `500 and total copies sold are 2000 and she has received royalty @ 50%. She has taken a loan from State Bank in 2002 for pursuing bachelor’s degree in Engineering and she has given repayment of principal amount `80,000 and interest `20,000 to State Bank. (payment of interest was given for the first time in financial year 2009-10) She has paid tuition fee of her son for whole time education ` 3,000 in India Compute Income Tax liability A.Y. 2013-14. Solution: ` Income under the head Other Sources
Deduction From Gross Total Income
285
500 x 50% x 2000
5,00,000.00
Gross Total Income Less: Deduction u/s 80C Tuition Fee Less: Deduction u/s 80E Payment of Interest Less: Deduction u/s 80QQB 500 x 15% x 2000
5,00,000.00
Total Income
3,27,000.00
3,000.00 20,000.00 1,50,000.00
Computation of tax liability Tax on `3,27,000 at slab rate Add: Education Cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
12,700.00 254.00 127.00 13,081.00 13,080.00
Question 16: Write a note on deduction in case of Royalty on Patents. Answer: Deduction in respect of royalty on patents Section 80RRB 1. Deduction is allowed only to resident individual. 2. His gross total income should include royalty in respect of a patent registered on or after 01.04.2003. 3. Deduction allowed shall be equal to the amount of royalty or `3,00,000 whichever is less. 4. In respect of any income earned from any source outside India, so much of the income, shall be taken into account for the purpose of this section as is brought into India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year in which such income is earned or within such further period as the competent authority may allow in this behalf. Question 17: Write a note on deduction in respect of interest on deposits in savings account. Answer: Deduction in respect of interest on deposits in savings account Section 80TTA 1. If the gross total income of an assessee, being an individual or a Hindu undivided family, includes any income by way of interest on deposits (not being time deposits) in a savings account with— (a) a banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act); (b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or (c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction as specified hereunder, namely:— (i) in a case where the amount of such income does not exceed in the aggregate ten thousand rupees, the whole of such amount; and
Deduction From Gross Total Income
286
(ii) in any other case, ten thousand rupees. 2. If the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body. “Time deposits” means the deposits repayable on expiry of fixed periods. Question 18: Write a note on deduction in case of Newly Setup Business. Answer: Deduction for Newly Setup Business 80-IA/80-IAB/80-IB/80-IC Deduction in case of newly setup business Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Section 80 IA Deduction is allowed in case of newly setup business and for this purpose various assessee are divided into four categories. 1.
Assessees engaged in the business of developing and maintaining infrastructure facilities.
2.
Assessees engaged in the telecommunication services.
3.
Assessees engaged in developing and maintaining industrial parks
4.
Assessees engaged in power generation.
1. Assessee engaged in the developing and maintaining of Infrastructure Facilities Deduction is allowed only to an Indian company or consortium of Indian companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. The assessee should start operating and maintaining infrastructure facilities w.e.f 01.04.1995 onwards. Deduction is allowed if the assessee is engaged in the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :— The assessee should enter into an agreement as per the notified schemes like BOOT (build own operate transfer) or BOLT (build own lease transfer.) with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. Deduction allowed shall be to the extent of 100% of the profits for a period of 10 years and for this purpose the assessee can choose any ten continuous years out of first 15 years. If the assessee is engaged in developing and maintaining road, highway projects or water supply project, assessee can choose any 10 continuous years out of first 20 years. Example If an Indian company begins to operate and maintain an infrastructure facility in the previous year 2012-13,
Deduction From Gross Total Income
287
the company can claim deduction from 2012-2013 to 2021-2022 or 2013-2014 to 2022-2023 or 2014-2015 to 2023-2024 or 2015-2016 to 2024-2025 etc. “Infrastructure facility” means— (a) a road including toll road, a bridge or a rail system. (b) a highway project including housing or other activities being an integral part of the highway project. (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system. (d) a port, airport, inland waterway or inland port.
2. Assessees engaged in providing Telecommunication Services Deduction is allowed to all the assessee provided they have been providing telecommunication services from 01.04.1995 onwards but up to 31.03.2005. Telecommunication service shall include cellular services, radio paging services, internet services etc. Deduction allowed shall be 100% for first 5 years and 30% for next 5 years and for this purpose the assessee can choose any 10 continuous years out of first 15 years.
3. Assessees engaged in Developing and Maintaining Industrial Parks Deduction is allowed to all the assessee provided they have started operating and maintaining industrial parks from 01.04.1997 but up to 31.03.2011. Deduction allowed shall be to the extent of 100% of the profits for the period of 10 years. For this purpose assessee can choose any 10 continuous years out of first 15 years.
4. Assessees engaged in power generation 1.
Deduction is allowed to all the assessees.
2.
The assessee should be
engaged in power generation or generation and distribution of power and for this purpose assessee should start power generation from 01.04.1993 but up to 31.03.2013 should start transmission or distribution by laying a network of new transmission or distribution lines at any time between 01.04.1999 and 31.03.2013 or undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on the 01.04.2004 and ending on the 31.03.2013. “Substantial renovation and modernization” means an increase in the plant and machinery in the network of transmission or distribution lines by at least 50% of the book value of such plant and machinery as on the 01.04.2004. 3. Deduction allowed shall be 100% of the profits and for this purpose the assessee can choose any 10 continuous years out of first 15 years.
Deduction From Gross Total Income
288
Deduction in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone Section 80-IAB 1. Deduction under section 80-IAB is allowed, if the gross total income of an assessee, being a Developer, of SEZ includes any profits and gains derived by an undertaking or enterprise from any business of developing a Special Economic Zone, notified on or after 01.04.2005 under the Special Economic Zones Act, 2005. 2. The deduction allowed shall be of an amount equal to 100% of the profit and gains derived from such business. 3. The assessee can claim deduction for any 10 consecutive assessment years out of 15 years beginning from the year in which a Special Economic Zone has been notified by the Central Government. 4. If a developer who has developed a Special Economic Zone on or after 01.04.2005 and transfers the operation and maintenance of such Special Economic Zone to another Developer, the deduction under this section shall be allowed to such transferee Developer for the remaining period of the 10 consecutive assessment year as if the operation and maintenance were not so transferred to the transferee Developer. 5. The profits and gains of an eligible business for the purposes of determining the quantum of deduction shall be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 6. Deduction is allowed only if accounts have been audited by a Chartered Accountant and audit report has been submitted along with return of income. 7. In case of amalgamation, deduction for the remaining years shall be allowed to the amalgamated company. 8. In case of demerger, deduction for the remaining years shall be allowed to the resulting company. Deduction in respect of profits and gains from certain industrial undertakings other than Infrastructure Development Undertakings Section 80 IB Deduction is allowed in case of newly setup business and for this purpose various assessee shall be divided into 10 categories. 1. Assessees engaged in industrial activities 2. Assessees engaged in shipping business 3. Assessees engaged in running a hotel 4. Assessees engaged in developing and maintaining multiplex theatres 5. Assessees engaged in developing and maintaining convention centers 6. Assessees engaged in industrial research 7. Assessees engaged in production of mineral oil 8. Assessees engaged in developing and building housing projects
Deduction From Gross Total Income
289
9. Assessees engaged in handling, storage and transportation of foodgrains 10. Assessees engaged in operating and maintaining a hospital in a rural area 11. Assessee engaged in operating and maintaining a hospital in India other than the excluded area 1. Assessee engaged in industrial activities Deduction is allowed to the assessees who are engaged in industrial activities and for this purpose, industrial activities may be divided into six categories: (i) Small scale industrial under-taking The unit should commence production from 01.04.1991 upto 31.03.2002. Deduction shall be allowed in the manner given below: (i) In case of a company 30% for first 10 years. (ii) In case of co-operative societies 25% for first 12 years. (iii) In case of any other person 25% for first 10 years. (ii) Industrial undertaking in the backward states The unit should commence production from 01.04.1993 upto 31.03.2004. Deduction shall be allowed in the manner given below: (i) In case of a company 100% for first 5 years and 30% for next 5 years . (ii) In case of co-operative societies 100% for first 5 years and 25% for next 7 years. (iii) In case of any other person 100% for first 5 years and 25% for next 5 years. (iii) Units setup in backward district category A The unit should commence production from 01.04.1994 upto 31.03.2004. Deduction shall be allowed in the manner given below: (i) In case of a company 100% for first 5 years and 30% for next 5 years. (ii) In case of co-operative societies 100% for first 5 years and 25% in next 7 years. (iii) In case of any other person 100% for first 5 years and 25% for next 5 years. (iv) Industrial units in backward district category B The unit should commence production from 01.04.1994 upto 31.03.2004. Deduction shall be allowed in the manner given below: (i) In case of a company 100% for first 3 years and 30% for next 5 years. (ii) In case of co-operative societies 100% for first 3 years and 25% for next 9 years . (iii) In case of any other person 100% for first 3 years and 25% for next 5 years. (v) Industrial undertakings providing cold chain facilities The unit should commence production from 01.04.1999 upto 31.03.2004. Deduction shall be allowed in the
Deduction From Gross Total Income
290
manner given below: (i) In case of a company 100% first 5 years and 30% for next 5 years. (ii) In case of co-operative societies 100% for first 5 years and 25% for next 7 years. (iii) In case of any other person 100% for first 5 years and 25% for next 5 years. (vi) Any other industrial undertaking The unit should commence production from 01.04.1991 upto 31.03.1995. Deduction shall be allowed in the manner given below: (i) In case of a company 30% for first ten years. (ii) In case of co-operative societies 25% for first 12 years. (iii) In case of any other person 25% for first 10 years. 2. Assessee engaged in shipping business The amount of deduction in the case of the business of a ship shall be 30% of the profits and gains derived from such ship for a period of 10 consecutive assessment years including the initial assessment year provided that the ship— (i) is owned by an Indian company and is wholly used for the purposes of the business carried on by it. (ii) was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India and (iii) is brought into use by the Indian company at any time during the period beginning on the 01.04.1991 and ending on the 31.03.1995. 3. Assessee engaged in running a hotel Deduction is allowed only to an Indian company provided the assessee is engaged in the business of running a hotel and further the business of the hotel is not formed by the splitting up, or the reconstruction, of an existing business. Also there should not be transfer of any building to this business which was being used as a hotel earlier. Similarly there should not be transfer of any old plant and machinery. For this purpose the hotels shall be divided into two categories: (i) Hotels located in hills area, rural area and place of pilgrimage. The assessee should start operating hotels from 01.04.1990 to 31.03.1994. The assessee can also start the functioning from 01.04.1997 to 31.03.2001 but the hotel cannot be in metropolitan city. Deduction allowed shall be 50% of the profits for a period of ten years. (ii) Any other hotel The Assessee should start functioning from 01.04.1991 but up to 31.03.1995. The assessee can also start functioning from 01.04.1997 but up to 31.03.2001 and such hotel should not be setup at metropolitan city.
Deduction From Gross Total Income
291
Deduction allowed shall be 30% of the profits for a period of 10 years.
4. Multiplex theatres Deduction is allowed to all the assessees. They should be engaged in developing and maintaining multiplex theatres. Assessee should start construction at any time from 01.04.2002 to 31.03.2005. The multiplex theatres shouldn’t be in any metropolitan city. Deduction shall be 50% of the profit for a period of 5 year. The period shall start from the assessment year in which any cinema hall which is part of the multiplex theatres starts operating on a commercial basis. 5. Convention centers Deduction is allowed to all the assessees. They should have started construction at any time from 01.04.2002 to 31.03.2005. Deduction allowed is 50% of the profits for a period of 5 years. “Convention center” means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed. 6. Assessee engaged in industrial research Deduction is allowed to an Indian company provided the assessee has its main object as scientific or industrial research and development. Deduction allowed shall be 100% of the profits for first 10 years provided the company has been approved by the prescribed authority from 01.04.2000 to 31.03.2007. 7. Assessee engaged in production of mineral oil Deduction is allowed to all the assessees. The assessee should setup the unit in North Eastern Region upto 31.03.1997. The unit can be setup after 31.03.1997 at any place in India. Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated the 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a State Government in any other manner. The assessee can start refining of mineral oil after 30.09.1998 but not later than the 31.03.2012 at any
Deduction From Gross Total Income
292
place in India. Deduction shall be 100% of the profits for a period of 7 years. No deduction shall be allowed to an undertaking engaged in refining of mineral oil, if it begins refining on or after the 01.04.2009. 8. Developing and building housing projects The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31.03.2007 by a local authority shall be 100% of the profits derived in the previous year relevant to any assessment year from such housing project if, such undertaking has commenced or commences development and construction of the housing project on or after the 01.10.1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 01.04.2004, on or before the 31.03.2008. (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 01.04.2004, but not later than 31st day of march, 2005 within four years from the end of the financial year in which the housing project is approved by the local authority. (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority. The project should be on the size of a plot of land which has a minimum area of one acre. 9. Assessees engaged in handling, storage and transportation of food grains 1. Deduction is allowed to all the assessees. 2. The assessee should begin to operate such business on or after the 01.04.2001. 3. Deduction is allowed if the assessee is deriving profit from the integrated business of handling, storage and transportation of food grains. 4. Deduction allowed shall be 100% of the profits and gains derived from such undertaking for first 5 years and 25% for next 5 years but in case of company 30%. The period shall start from the year in which the business has commenced. 10. Assessees engaged in operating and maintaining a hospital in a rural area The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area shall be 100% of the profits and gains of such business for a period of 5 consecutive assessment years, beginning with the initial assessment year if— (i)
such hospital is constructed at any time during the period beginning on the 01.10.2004 and ending on the 31.03.2008.
(ii)
the hospital has at least 100 beds for patients.
(iii)
the construction of the hospital is in accordance with the regulations, for the time being in force, of the local authority and
Deduction From Gross Total Income
293
(iv) the assessee furnishes along with the return of income, the report of an audit in such form and containing such particulars as may be prescribed, and duly signed and verified by a Chartered Accountant, certifying that the deduction has been correctly claimed. A hospital shall be deemed to have been constructed on the date on which a completion certificate in respect of such construction, is issued by the concerned local authority. 11. Assessee engaged in operating and maintaining a hospital in India other than the excluded area The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India, other than the excluded area, shall be 100% of the profits and gains derived from such business for a period of 5 consecutive assessment years, beginning with the initial assessment year, if– (i)
the hospital is constructed and has started or starts functioning at any time during the period beginning on the 01.04.2008 and ending on the 31.03.2013.
(ii)
the hospital has at least 100 beds for patients;
(iii)
the construction of the hospital is in accordance with the regulations or bye-laws of the local authority.
(iv) the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as may be prescribed, and duly signed and verified by an accountant, certifying that the deduction has been correctly claimed. Special provisions in respect of certain undertakings or enterprises in certain Special Category States Section 80 IC Special provisions in respect of certain undertakings situated in the states of Sikkim, Himachal Pradesh, Uttaranchal or North Eastern States 1. Deduction is allowed to all the assessees. 2. Assessee should commence manufacturing of the articles other than the articles mentioned in Schedule XIII of the Income Tax Act and the unit should be setup in the notified specified area in the States of Sikkam, Himachal Pradesh, Uttaranchal or North Eastern States or 3. It should commence manufacturing in any area in the said states but it should manufacture the items or take up an operation given in Schedule XIV of the Income Tax Act. 4. It begins to manufacture or produce any article or thing or undertakes substantial expansion during the period beginning: (i)
on 23.12.2002 and ending before 01.04.2012, in the State of Sikkim.
(ii)
on 07.01.2003 and ending before 01.04.2012, in the State of Himachal Pradesh or the State of Uttaranchal.
(iii)
on 24.12.1997 and ending before 01.04.2007, in any of the North Eastern States.
5. The Deduction shall be
Deduction From Gross Total Income
294
(i)
in the case of any undertaking or enterprise in the State of Sikkim or North Eastern Region, 100% of such profits and gains for 10 assessment years commencing with the initial assessment years.
(ii)
in the case of any undertaking or enterprises in the State of Himachal Pradesh or Uttaranchal, 100% of such profits and gains for 5 assessment years commencing with the initial assessment year and thereafter, 25% (or 30% where the assessee is a company) of the profits and gains.
Question 19: Write a note on deduction in respect of profits and gains from business of hotels and convention Centres in Specified Area. Answer: Deduction in respect of profits and gains from business of hotels and convention centres in specified area Section 80-ID Deduction is allowed to all the assesses provided the assessee is engaged in the business of hotel, business of building, owning and operating a convention centre and it should be in the specified area which means the National Capital Territory of Delhi and the districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad and hotel etc should start functioning from 01.04.2007 to 31.07.2010. The assessee may be engaged in the business of hotel located in the specified district having a World Heritage Site, and such hotel should be constructed and should start functioning at any time during the period from 01.04.2008 to 31.03.2013. Deduction shall be allowed to the extent of 100% of the profits for the continuous period of 5 years from the date of starting the business Question 20: Write a note on special provisions in respect of certain undertakings in North-Eastern States. Answer: Special provisions in respect of certain undertakings in North-Eastern States Section 80-IE Deduction is allowed to all the assessees who are engaged in any of the business mentioned below and also the business should commence from 01.04.2007 to 31.03.2017 and business should be in the North Eastern States i.e. the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. (a) hotel (not below two star category); (b) adventure and leisure sports including ropeways; (c) providing medical and health services in the nature of nursing home with a minimum capacity of 25 beds; (d) running an old-age home; (e) operating vocational training institute for hotel management, catering and food craft, entrepreneurship development, nursing and para-medical, civil aviation related training, fashion designing and industrial training; (f) running information technology related training centre; (g) manufacturing of information technology hardware; and (h) bio-technology. (i) manufacture or produce different goods except the goods specified by the Government. Deduction shall be allowed to the extent of 100% of the profits for a period of 10 years starting from the year in which business was commenced.
Deduction From Gross Total Income
295
Deduction not to be allowed unless return furnished Section 80AC Where in computing the total income of an assessee any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.
PRACTICE PROBLEMS TOTAL PROBLEMS 17 Problem 1. Mr. X has taken a loan of `10,00,000 from S.B.I @ 10 % p.a. on 01.07.2008 for construction of one residential house which was completed on 01.07.2010. It was let out @ ` 55,000 p.m. w.e.f 01.04.2012 and Mr. X has paid Municipal tax of `20,000 though the amount due is `30,000. He has repaid Principal amount of `70,000 on 01.07.2012. He has Agricultural income of ` 3,00,000 and unadjusted loss of house property of P.Y. 2003-04 `10,000 and P.Y. 2004-05 `21,000 He has invested `10,000 in NSC and `5,000 in Public Provident Fund and `5,000 in Post Office 5 Year Time Deposit. Compute his Income Tax Liability for the A.Y. 2013-14. Answer: Tax Liability: `1,490 Problem 2. Mr. X has taken a loan of `12,00,000 @ 10 % p.a. on 01.07.2008 and the house completed on 01.05.2012. It was let out @ ` 30,000 p.m. w.e.f 01.08.2012 and the loan was repaid in annual installment of `40,000 starting from 01.01.2010. Mr. X has STCG 111A `10,00,000. He has paid premium of life policy `40,000 and sum assured is `1,00,000. He has paid premium of Jeevan Suraksha Policy `20,000. Compute his Total Income and Tax Liability for the A.Y. 2013-14. Answer: Total Income: `9,74,000; Tax Liability: `1,19,580 Problem 3. Mr. X is a Practicing Chartered Accountant and he started his practice from 01.04.2012 and he has income from profession `8,00,000. He has LTCG of `3,00,000, STCG 111A of `1,00,000, casual income `2,00,000. Investment and donations are as given below:•
NSC `10,000.
•
Medi-claim premium (by cheque) of `15,000.
•
Prime Minister’s National Relief Fund `10,000. (Paid by cheque)
Deduction From Gross Total Income •
Rajiv Gandhi Foundation `8,000. (Paid by cheque)
•
Donation to Birla Temple (Notified u/s 80G) `1,60,000. (Paid by cheque)
•
Charitable institution (Notified u/s 80G) `40,000. (Paid by cheque)
•
Social organization (Notified u/s 80G) `20,000. (Paid by cheque)
•
MCD `10,000. (Paid by cheque)
296
Compute income tax liability for A.Y. 2013-14. Answer: Tax Liability: `2,13,670 (b) Presume in the above question the assessee has given donation to the Government also for family planning is ` 20,000. Answer: Tax Liability: `2,11,610 (c) Presume in the above question the assessee has given donation to the Government also for family planning is ` 3,00,000. Answer: Tax Liability: `2,03,630 Problem 4. Mr. X has income from business `7,00,000. Mr. X has incurred `65,000 on the treatment of his dependent brother who is suffering from a disease notified under Rule 11DD and he has received claim under medi-claim policy `35,000. Compute his income and tax liability for assessment year 2013-14. Also show treatment for service tax. Answer: Total Income: `6,95,000; Tax Liability: `71,070 (b) Presume assessee incurred `65,000 on the treatment of his independent brother. Answer: Total Income: `7,00,000; Tax Liability: `72,100 Problem 5. Mrs. X has let out one house property @ `1,00,000 p.m. and she has paid municipal tax of `1,00,000. She has taken a Medi-claim policy in the name of Mr. X and paid premium of `18,000 by cheque She has also taken a Medi-claim policy in the name of her Father in law. Who is aged 66 years and paid premium of `16,000 by cheque. She has incurred `21000 on the treatment of her brother who is dependent on her and suffering from severe disability. She has purchased N.S.C. in P.Y. 2010-11 and there is accrued interest of `30,000 and also there is accrued interest of PPF `10,000
Deduction From Gross Total Income
297
She has taken Jeevan Suraksha Policy in the name of Mr. X and paid premium of `19,000. She has taken a loan in 2006-07 from SBI for the education of his son who is studying in B.com (Hons) in SRCC and she had paid principal amount of `60,000 and interest `10,000 in P.Y.2012-13. She has Agricultural Income `1,00,000 Compute her Income Tax Liability for the A.Y.2013-14. Answer: Tax Liability: `71,070 Problem 6. Mrs. X is registered under DVAT Act/Central Excise Act and CST and she has submitted the information as follows:Purchased Raw Material-R1 for `2,00,000 plus custom duty @10% plus EC @ 2% plus SHEC @ 1%. She has purchased Raw Material-R2 for ` 3,00,000 plus Excise Duty @ 12% plus EC @ 2% plus SHEC @ 1% plus DVAT @ 10%. She has purchased Plant & Machinery for `10,00,000 plus Excise Duty @ 12% plus EC @ 2% plus SHEC @ 1% plus DVAT @ 10%. She has taken services for `3,00,000 plus Service Tax @ 12% plus EC @ 2% plus SHEC @ 1%. Other processing charges were `5,00,000. Profit @ 40% on total cost. Entire goods were sold and output Excise Duty @ 12% plus EC @ 2% plus SHEC @ 1% and DVAT @ 10% was charged. Tax credit for Excise Duty on Plant & Machinery is allowed in two installments and tax credit for DVAT on Plant & Machinery is allowed in three installments. Depreciation is allowed @ 20% on Plant & Machinery on SLM basis. She has spent `30,000 on the treatment and education of her sister who is a disabled person as per section 80U and she is dependent on Mrs. X. She has paid premium of medi-claim policy `18,000 by cheque and policy is taken in the name of her father who is not dependent on Mrs. X. She is holder of one patent right and has received royalty of `3,20,000 She has paid rent of `30,000 p.m. and she has complied with all the conditions of section 80GG You are required to compute Output Tax, Tax credit, Net Tax payable by Mrs. X and also compute her Income tax liability for the A.Y. 2013-14. (ignore provisions of section 44AD) Answer: Tax Liability: `38,980
Deduction From Gross Total Income
298
Problem 7. Mr. X has received royalty of `5,00,000 in connection with a patent right registered in his name (service tax is not applicable) Other informations are as given below: 1. He has donated ` 30,000 to a political party. 2. He donated `10,000 to Delhi University notified under section 80G 3. He donated `10,000 to Government for the purpose of promoting family planning. 4. He paid premium of medi-claim policy `6,000 by cheque in the name of his major married independent son. 5. LIC premium paid `25,000 (Policy value `1,00,000) 6. Repayment of housing loan to Indian Bank `50,000 7. Payment made to LIC pension fund notified under section 80CCC `20,000 Compute income tax liability for A.Y 2013-14. Answer: Tax Liability: Nil Problem 8. Mr. Mukesh Gandhi has incomes asunder: 1. Rent from letting out one house property 2. Long term capital gains
` 3,00,000 2,00,000
He has donated `5,000 to MCD which is notified under section 80G and has donated `4,000 to National Children’s Fund and `2,000 to the Government for promotion of family planning norms. He has invested `6,000 in NSC. He is aged about 67 years. Compute his total income and tax liability for the assessment year 2013-14. Answer: Total Income: `3,97,500; Tax Liability: `30,390 Problem 9. Mr. Mayank Bindal has short term capital gain of `6 lakhs and he has donated `20,000 by cheque to a charitable institution which is notified under section 80G and he has spent `25,000 on the treatment of his handicapped dependant brother. Compute his total income and tax liability for the assessment year 2013-14. Answer: Total Income: `5,40,000; Tax Liability `39,140 Problem 10. Mr. Ram Kumar has incomes asunder:
Deduction From Gross Total Income 1. 2. 3. 4.
299
He has received dividends from an Indian company of `11,000. He has income from Business/Profession `1,22,000. He has long term capital gains of `1,00,000. He has donated `10,000 to MCD for family planning and has donated `3,000 to a charitable institution notified under section 80G.
Compute his total income and tax liability for the assessment year 2013-14. Answer: Total Income: 2,10,900; Tax Liability: `2,250 Problem 11. Mr. Vijay Sukla has incomes asunder: 1. Short term capital gains on sale of a capital asset `5,00,000. 2. Mr. Vijay Sukla has donated `7,000 to the Prime Minister’s National Relief Fund and `20,000 to Birla temple which is notified under section 80G. (Paid by cheque) Compute his total income and tax liability for the assessment year 2013-14. Answer: Total Income: `4,83,000; Tax Liability: `29,150 Problem 12. Mr. Naveen Verma has incomes asunder: 1. 2. 5. 6. 7.
Income from Business/Profession He has long term capital gains He has income from other sources He has donated `10,000 to National Defence Fund He has donated ` 5,000 to charitable institution notified under section 80G.
` 1,00,000 2,50,000 1,10,000
Compute his total income and tax liability for assessment year 2013-14. Answer: Total Income: `4,47,500; Tax Liability: `50,990 Problem 13. Mr. Pradeep Kumar has incomes asunder: Long Term Capital Gains: `1,00,000 Short Term Capital Gains: `2,55,000 Casual income: `10,000 Donations given to charitable institutions notified under section 80G `45,000 paid by cheque and donation to MCD for family planning `3,000 paid by cheque. Compute his total income and tax liability for the assessment year 2013-14. Answer: Total Income: `3,50,250; Tax Liability: `27,840 Problem 14. Mr. Rahul Rai is engaged in the business of manufacturing chemicals and has income under the head business/profession of `5,00,000 and has paid rent of `10,000 p.m. for taking a house on rent because he did not have any house in his name or in the name of his spouse or minor child or the Hindu Undivided Family of which he is a member. He has invested `75,000 in NSC which were taken in the name of his spouse.
Deduction From Gross Total Income
300
Compute his total income and tax liability for assessment year 2013-14. Answer: Total Income: `4,01,000; Tax Liability: `20,700 Problem 15. During the previous year 2012-13, Mr. Ranjan Goyal has income under the head house property `4,00,000. He has donated `12,000 to a notified institution for the purpose of scientific research. Compute his total income and tax liability for the assessment year 2013-14. Answer: Total Income: `3,88,000; Tax Liability: `19,360 Problem 16. Mr. Rajat Sapra is engaged in the business of collecting and processing bio-degradable waste since 01.07.2011 and has income of `4,10,000 from this business. He has received income of `2,80,000 from subletting also. He has paid premium of medi-claim policy of `11,000. It was paid by cheque and the policy was taken in the name of his father. Compute his total income and tax liability for assessment year 2013-14. Answer: Total Income: `2,69,000; Tax Liability: `7,110 Problem 17. For the assessment year 2013-14, Mr. Rahul Yadav submits the following information: Income from business Property income
9,800 House I ` 75,000 78,000 76,000 13,000 3,500 2,000 2,500 1,600
Fair Rent Rent Received/Receivable Municipal Valuation Municipal Taxes (due but outstanding) Repairs Insurance Land Revenue (Paid) Ground Rent (due but outstanding) Interest on capital borrowed by mortgaging house I (Funds are used for construction of house II) 14,000 Nature of Occupation Let out for Residence Date of completion of construction 30.04.2006
House II ` 82,000 85,000 75,000 14,000 47,000 3,000 4,000 6,000 ——— Let out for Business 07.04.2008
Assume that standard rent is less than rent actually received. Mr. Rahul Yadav has brought forward losses of house property asunder Assessment year 1998-99 Assessment year 2008-09 Other incomes of Mr. Rahul Yadav
` 1,00,000 10,100
Deduction From Gross Total Income 1. Vacant site lease rent 2. Rent from house property at Chennai
301 4,12,000 3,000 p.m.
This house was constructed by taking a loan of ` 2,00,000 @ 10% from State Bank of India but it was repaid on 01.10.2012 by taking a loan of `2,00,000 from Punjab National Bank on 01.10.2012 @ 9.5% p.a. 3. He has also received `3,000 during the year from Calcutta University for acting as an examiner and `1,500 from Delhi University also, for acting as an examiner. 4. He has received from Life Insurance Corporation of India `1,20,000 being the maturity amount of life insurance policy. 5. He has received a reward of `5,000 from Central Government and the reward is notified under section 10(17A). He has invested `1,000 in the bonds of ICICI (tax saving) eligible for deduction under section 80C, but the investment is out of past savings and has invested `1,000 in master equity plan of Unit Trust of India. He is eligible for deductions under section 80D to 80U amounting to `1,005. Compute his income and also tax liability for assessment year 2013-14. Answer = Total Income: `4,21,000; Tax Liability: `22,760
Deduction From Gross Total Income
302
SOLUTIONS TO
PRACTICE PROBLEMS Solution 1: Computation of income under the head House Property Gross Annual Value Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Pre construction period interest From 01.07.2008 to 31.03.2010 = (10,00,000 x 10% x 9/12) + (10,00,000 x 10% x 1) = `75,000 + `1,00,000 = `1,75,000 Installment = `1,75,000/5 = `35,000 Current period interest From 01.04.2012 to 31.03.2013 = (10,00,000 x 10% x 3/12) + (9,30,000 x 10% x 9/12) = `25,000 + `69,750 = `94,750 Total interest on capital borrowed = `35,000 + ` 94,750 = `1,29,750 Income under the head House Property Brought forward Loss of P.Y.2004-05 Income under the head House Property Gross Total Income Less: Deduction u/s 80C Repayment of Housing loan NSC PPF Post Office Time Deposit Total Income Agricultural Income Computation of Tax Liability Step 1 Tax on (agricultural + non agricultural income) i.e. Tax on `5,07,250 at slab rates Step 2 Tax on (agricultural + 2,00,000) at slab rates Deduct Tax at Step 2 from Step 1
6,60,000.00 20,000.00 6,40,000.00 1,92,000.00 1,29,750.00
3,18,250.00 21,000.00 2,97,250.00 2,97,250.00 70,000.00 10,000.00 5,000.00 5,000.00 2,07,250.00 3,00,000.00
31,450.00 30,000.00 1,450.00
Deduction From Gross Total Income Tax before EC Add: EC @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
303 1,450.00 29.00 14.50 1,493.50 1,490.00
Solution 2: ` Computation of income under the head House Property Gross Annual Value Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Pre construction period interest From 01.07.2008 to 31.03.2012 = (12,00,000 x 10% x 6/12) + (12,00,000 x 10% x 1)+ (11,60,000 x 10% x 1)+ (11,20,000 x 10% x 1)+ (10,80,000 x 10% x 3/12) = `60,000 + `1,20,000+ `1,16,000+ `1,12,000+ `27,000 = `4,35,000 Installment = `4,35,000/5 = `87,000 Current period interest From 01.04.2012 to 31.03.2013 = (10,80,000 x 10% x 9/12) + (10,40,000 x 10% x 3/12) = `81,000 + `26,000 = `1,07,000 Total interest on capital borrowed = `87,000 + ` 1,07,000 = `1,94,000 Income under the head House Property STCG u/s 111A Gross Total Income Less: Deduction u/s 80C to 80U Total Income Computation of Tax Liability Tax on STCG @ 15 % ` 7,74,000 (9,74,000-2,00,000) u/s 111A Add: EC @ 3% Tax Liability Rounded off u/s 288B
2,40,000 NIL 2,40,000 72,000 1,94,000
(26,000) 10,00,000 9,74,000 NIL 9,74,000 1,16,100 3,483 1,19,583 1,19,580
Note: Deduction under section 80C to 80U is not allowed from STCG u/s 111A. Solution 3(a): Income under the head business / profession
` 8,00,000.00
Computation of income under the head Other Sources Casual income Income under the head other sources
2,00,000.00 2,00,000.00
Computation of income under the head Capital Gain Long term capital gain Short term capital gain 111A Income under the head capital gain
3,00,000.00 1,00,000.00 4,00,000.00
Deduction From Gross Total Income
304
Gross Total Income Less: Deductions Deduction u/s 80C for NSC Deduction u/s 80D for Mediclaim policy Deduction u/s 80G Prime Minister National Relief Fund Rajiv Gandhi Foundation (50% of `8,000) Donations Working Note: AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 14,00,000 – 3,00,000 – 1,00,000 – 25,000 = 9,75,000 Qualifying amount = 10% of AGTI or donation whichever is less = 97,500 or 2,30,000 whichever is less = 97,500 50% of qualifying amount = 48,750 Total Income
14,00,000.00
Computation of Tax Liability Tax on casual income `2,00,000 @ 30% u/s 115BB Tax on LTCG `3,00,000 @ 20% Tax on STCG 111A `1,00,000 @ 15% Tax on normal income `7,12,250 at slab rate Tax before education cess Add: Education Cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B Solution 3(b): Gross Total Income Less: Deductions Deduction u/s 80C for NSC Deduction u/s 80D for Mediclaim policy Deduction u/s 80G Prime minister national relief fund Rajiv Gandhi Foundation Donations Working Note: AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 14,00,000 – 3,00,000 – 1,00,000 – 25,000 = 9,75,000 Qualifying amount = 10% of AGTI or donation whichever is less = 97,500 or 2,50,000 whichever is less = 97,500 50% of qualifying amount = 77,500 x 50% + 20,000 = 58,750 Total Income
10,000.00 15,000.00 10,000.00 4,000.00 48,750.00
13,12,250.00 60,000.00 60,000.00 15,000.00 72,450.00 2,07,450.00 4,149.00 2,074.50 2,13,673.50 2,13,670.00 ` 14,00,000.00 10,000.00 15,000.00 10,000.00 4,000.00 58,750.00
13,02,250.00
Deduction From Gross Total Income Computation of Tax Liability Tax on casual income `2,00,000 @ 30% u/s 115BB Tax on LTCG `3,00,000 @ 20% Tax on STCG 111A `1,00,000 @ 15% Tax on normal income `7,02,250 at slab rate Tax before education cess Add: Education Cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
305
60,000.00 60,000.00 15,000.00 70,450.00 2,05,450.00 4,109.00 2,054.50 2,11,613.50 2,11,610.00
Solution 3(c): Gross Total Income Less: Deductions Deduction u/s 80C for NSC Deduction u/s 80D for Mediclaim policy Deduction u/s 80G (Working Note 1) Prime minister national relief fund Rajiv Gandhi Foundation Donations Working Note: AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 14,00,000 – 3,00,000 – 1,00,000 – 25,000 = 9,75,000 Qualifying amount = 10% of AGTI or donation whichever is less = 97,500 or 5,30,000 whichever is less = 97,500 100% deduction is allowed 97,500 Total Income Computation of Tax Liability Tax on casual income `2,00,000 @ 30% u/s 115BB Tax on LTCG ` 3,00,000 @ 20% Tax on STCG 111A `1,00,000 @ 15% Tax on normal income `6,63,500 at slab rate Tax before education cess Add: Education Cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
` 14,00,000.00 10,000.00 15,000.00 10,000.00 4,000.00 97,500.00
12,63,500.00 60,000.00 60,000.00 15,000.00 62,700.00 1,97,700.00 3,954.00 1,977.00 2,03,631.00 2,03,630.00
Solution 4: Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80DDB (40,000 – 35,000) Total Income Computation of Tax Liability
` 7,00,000 7,00,000 5,000 6,95,000
Deduction From Gross Total Income Tax on `6,95,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Solution 4(b): Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80DDB Total Income Computation of Tax Liability Tax on `7,00,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
306 69,000 1,380 690 71,070
` 7,00,000 7,00,000 Nil 7,00,000 70,000 1,400 700 72,100
Note: Deduction under section 80DDB is not allowed in case assessee incurred expenditure on treatment of his independent brother. Solution 5: ` Computation of income under the head House Property Gross Annual Value Less: Municipal Tax Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property Income under the head other sources Gross Total Income Less: Deductions Deduction u/s 80C for NSC Deduction u/s 80CCC for Jeevan Suraksha Policy Deduction u/s 80D for Mediclaim Policy Deduction u/s 80DD for Severe Disability Deduction u/s 80E for Education Loan Interest Total Income Agricultural Income Computation of Tax Liability Step 1 Tax on (agricultural + non agricultural income) i.e. Tax on `7,45,000 at slab rates Step 2 Tax on (agricultural +2,00,000) at slab rates Deduct Tax at Step 2 from Step 1 Tax before EC Add: EC @ 3% Tax Liability Solution 6:
12,00,000 1,00,000 11,00,000 3,30,000 NIL 7,70,000 30,000 8,00,000 30,000 NIL 15,000 1,00,000 10,000 6,45,000 1,00,000
79,000 10,000 69,000 69,000 2,070 71,070 `
Deduction From Gross Total Income Raw Material R1 Purchase price Add: Custom Duty @10% Education Cess @ 2% SHEC @ 1% Total
2,00,000.00 20,000.00 400.00 200.00 2,20,600.00
Raw Material-R2 Purchase price Add: Excise Duty @12% Education Cess @ 2% SHEC @ 1% Total 3,37,080.00 Add: DVAT @ 10% Total
3,00,000.00 36,000.00 720.00 360.00 33,708.00 3,70,788.00
Plant & Machinery Cost Add: Excise Duty @ 12% Education Cess @ 2% SHEC @ 1% Total 11,23,600.00 Add: DVAT @ 10% Total 12,35,960.00
10,00,000.00 1,20,000.00 2,400.00 1,200.00 1,12,360.00
Calculation of Output Tax Cost of product sold R1 (2,00,000 + 20,000 + 400 + 200) R2 (3,00,000) Plant & Machinery (10,00,000 x 20%) Services Processing 5,00,000.00
2,20,600.00 3,00,000.00 2,00,000.00 3,00,000.00 Charges 15,20,600.00 6,08,240.00
Add: Profit @ 40% Total 21,28,840.00 Add: Excise Duty @ 12% Education Cess @ 2% SHEC @ 1% Total 23,91,964.63 Add: DVAT @ 10% Total 26,31,161.09 Calculation of Tax Payable Excise Duty/ Service Tax Output Tax 2,55,460.80
307
2,55,460.80 5,109.22 2,554.61 2,39,196.46
Education Cess @ 2% 5,109.22
SHEC @ 1% 2,554.61
DVAT 2,39,196.46
Deduction From Gross Total Income Less: Input Credit R2 36,000.00 Plant & Machinery 60,000.00 Services 36,000.00 Net Tax Payable 1,23,460.80 Rounded off 1,23,460.00
720.00 1,200.00 720.00 2,469.22 2,469.00
Computation of Total Income Profit from business Income from Patent right Gross Total Income Less: Deduction u/s 80D Less: Deduction u/s 80DD Less: Deduction u/s 80RRB Less: Deduction u/s 80GG Working Note: Least of the following: 1. `24,000 2. 25% x 5,63,240 = `1,40,810 3. `3,60,000 – `56,324 = `3,03,676 (AGTI = `9,28,240 – 15,000 – 50,000 – 3,00,000 = `5,63,240) Total Income Computation of Tax Liability Tax on `5,39,240 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B Solution 7:
308 360.00 600.00 360.00 1,234.61 1,235.00
33,708.00 37,453.00 1,68,035.46 1,68,035.00 6,08,240.00 3,20,000.00 9,28,240.00 15,000.00 50,000.00 3,00,000.00 24,000.00
5,39,240.00 37,848.00 756.96 378.48 38,983.44 38,980.00 `
Income under the head Other Sources Royalty received in connection with a patent right
5,00,000.00
Gross Total Income
5,00,000.00
Less: Deduction u/s 80C LIC premium (allowed 10% of sum assured) Repayment of housing loan to Indian Bank
10,000.00 50,000.00
Less: Deduction u/s 80CCC LIC Pension Fund
20,000.00
Less: Deduction u/s 80D Premium of medi-claim policy by cheque in the name of his major married independent son. Less: Deduction u/s 80G Donation to Delhi University Family planning Working Note:
Nil 10,000.00 9,000.00
Deduction From Gross Total Income
309
Donation to Government for promoting family planning 10,000 AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (Except section 80G) = 5,00,000 – 10,000 – 50,000 – 20,000 – 30,000 – 3,00,000 = 90,000 Qualifying amount = 10% of AGTI or donation whichever is less = 9,000 or 10,000 100% of qualifying amount = `9,000 Less: Deduction u/s 80GGC Donation to a political party
30,000.00
Less: Deduction u/s 80RRB
3,00,000.00
Total Income
71,000.00
Tax Liability
Nil
Solution 8:
`
Computation of income under the head House Property Gross Annual Value Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed 24(b) Income under the head House Property Computation of Total Income Income under the head House Property Income under the head Capital Gains (LTCG) Gross Total Income Less: Deduction u/s 80C {NSC} Less: Deduction u/s 80G (i) National Children Fund {50% of `4,000} (ii) Other Donations u/s 80G Working Note: MCD Family planning AGTI = GTI – LTCG – STCG u/s 111A – 80C to 80U (Except 80G) = 4,10,000 – 2,00,000 – 6,000 = 2,04,000 Qualifying amount = 10% of AGTI or donation whichever is less = 20,400 or 7,000 = 7,000 Deduction = 50% of `5,000 + `2,000 = `4,500 Total Income Computation of Tax Liability Tax on LTCG `1,47,500 (2,00,000 – 52,500) @ 20% u/s 112 Tax on `1,97,500 at slab rate
3,00,000 Nil 3,00,000 90,000 Nil 2,10,000 2,10,000 2,00,000 4,10,000 6,000 2,000 4,500 ` 5,000 2,000 7,000
3,97,500 29,500 Nil
Deduction From Gross Total Income
310
Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 30,385 Rounded off u/s 288B
29,500 590 295 30,390
Solution 9: ` 6,00,000 6,00,000 50,000 10,000
Income under the head Capital Gains (STCG) Gross Total Income Less: Deduction u/s 80DD Less: Deduction u/s 80G Working Note: AGTI = GTI – LTCG – STCG u/s 111A – 80C to 80U (Except 80G) = 6,00,000 – 50,000 = 5,50,000 Qualifying amount = 10% of AGTI or donation, whichever is less = 55,000 or 20,000 = 20,000 Deduction = 50% of `20,000 = `10,000 Total Income
5,40,000
Computation of Tax Liability Tax on `5,40,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 39,140
38,000 760 380
Solution 10: Income under the head Other Sources Dividend from Indian company {exempt u/s 10(34)} Income under the head Other Sources Income under the head Business/Profession Income under the head Capital Gains {LTCG} Gross Total Income Less: Deduction u/s 80G Working Note: MCD for family planning Charitable institution Adjusted GTI = GTI – LTCG – STCG u/s 111A – 80C to 80U (Except 80G) = `2,22,000 – `1,00,000 = `1,22,000 Qualifying amount = 12,200 or 13,000 whichever is less = `12,200 Deduction = 50% of `2,200 + `10,000 = `11,100 Total Income Computation of Tax Liability Tax on Long term capital gain `10,900 (1,00,000 – 89,100) @ 20% u/s 112
` Nil Nil 1,22,000.00 1,00,000.00 2,22,000.00 11,100.00 ` 10,000 3,000 13,000
2,10,900.00 2,180.00
Deduction From Gross Total Income Tax on `1,10,900 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 2,245.40 Rounded off u/s 288B Solution 11: Income under the head Capital Gains {STCG} Gross Total Income Less: Deduction u/s 80G (i) Prime Minister’s National Relief Fund (ii) Other donations Working Note: AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 5,00,000 Qualifying amount = 10% of AGTI or donation whichever is less = 50,000 or 20,000 whichever is less = 20,000 50 % of the qualifying amount (i.e. 10,000) Total Income Computation of Tax Liability Tax on `4,83,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 29,149 Rounded off u/s 288B
311 Nil 2,180.00 43.60 21.80 2,250.00 ` 5,00,000 5,00,000 7,000 10,000
4,83,000 28,300 566 283 29,150
Solution 12: ` Income under the head Business/Profession Income under the head Business/Profession
1,00,000.00
Income under the head Other Sources Income under the head Other Sources
1,10,000.00
Income under the head Capital gains Long term capital gains Income under the head Capital Gains Gross Total Income Less: Deduction u/s 80G (i) National Defence Fund (ii) Charitable institutions Working Note: AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 4,60,000 – 2,50,000 = 2,10,000 Qualifying amount = 10% of AGTI or donation whichever is less = 21,000 or 5,000 = 5,000
2,50,000.00 2,50,000.00 4,60,000.00 10,000.00 2,500.00
Deduction From Gross Total Income 50% of the qualifying amount = 2,500 Total Income Computation of Tax Liability Tax on long term capital gains `2,47,500 (`2,50,000 – `2,500) @ 20% u/s 112 Tax on normal income `1,97,500 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 50,985.00 Rounded off u/s 288B
312
4,47,500.00 49,500.00 Nil 49,500.00 990.00 495.00 50,990.00
Solution 13: ` Computation of income under the head Capital Gains Short term capital gains Long term capital gains Income under the head Capital Gains Computation of income under the head Other Sources Casual income Income under the head Other Sources Gross Total Income Less: Deduction u/s 80G Working Note: Charitable institutions Family planning
` 45,000 3,000 48,000 AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G) = 3,65,000 – 1,00,000 = 2,65,000 Qualifying amount = 10% of AGTI or donation whichever is less = 26,500 or 48,000 = 26,500 Deduction = 50% of 23,500 + 3,000 = 11,750 + 3,000 = 14,750 Total Income Computation of Tax Liability Tax on LTCG `1,00,000 @ 20% u/s 112 Tax on casual income `10,000 @ 30% u/s 115BB Tax on normal income `2,40,250 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 27,835.75 Rounded off u/s 288B
2,55,000.00 1,00,000.00 3,55,000.00 10,000.00 10,000.00 3,65,000.00 14,750.00
3,50,250.00 20,000.00 3,000.00 4,025.00 27,025.00 540.50 270.25 27,840.00
Solution 14. Income under the head Business/Profession
` 5,00,000
Deduction From Gross Total Income Gross Total Income Less: Deduction u/s 80C Less: Deduction u/s 80GG Working Note: Least of the following: (i) `1,20,000 – 10% of `4,25,000 = `77,500 (ii) `24,000 (iii) 25% of `4,25,000 = `1,06,250 (AGTI = `5,00,000 – `75,000 = `4,25,000) Total Income Computation of Tax Liability Tax on `4,01,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 20,703 Rounded off u/s 288B
Solution 15: Income under the head House Property Gross Total Income Less: Deductions u/s 80GGA Total Income Computation of Tax Liability Tax on `3,88,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability 19,364 Rounded off u/s 288B
313 5,00,000 75,000 24,000
4,01,000 20,100 402 201 20,700
` 4,00,000 4,00,000 12,000 3,88,000 18,800 376 188 19,360
Solution 16: Income under the head Business/Profession
` 4,10,000
Income under the head Other Sources Income from subletting Income under the head Other Sources Gross Total Income Less: Deduction u/s 80JJA Less: Deduction u/s 80D Total Income
2,80,000 2,80,000 6,90,000 4,10,000 11,000 2,69,000
Computation of Tax Liability Tax on `2,69,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability
6,900 138 69
Deduction From Gross Total Income
314
7,107 Rounded off u/s 288B
7,110
Solution 17: ` Computation of income under the head House Property HOUSE I Gross Annual Value Working Note: (a) Fair Rent (b) Municipal valuation (c) Higher of (a) or (b) (d) Expected Rent (e) Rent Received or Receivable GAV = Higher of (d) or (e) Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property HOUSE II Gross Annual Value Working Note: (a) Fair Rent (b) Municipal valuation (c) Higher of (a) or (b) (d) Expected Rent (e) Rent Received or Receivable GAV = Higher of (d) or (e) Less: Municipal Taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income under the head House Property
` 78,000
` 75,000 76,000 76,000 76,000 78,000 78,000 Nil 78,000 23,400 Nil 54,600 85,000 ` 82,000 75,000 82,000 82,000 85,000 85,000
HOUSE AT CHENNAI Gross Annual Value (3,000 x 12) Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Working Note: Current period interest From 01.04.2012 to 30.09.2012 = 2,00,000 x 10% x 6/12 = `10,000 From 01.10.2012 to 31.03.2013 = 2,00,000 x 9.5% x 6/12 = ` 9,500 Total interest = 10,000 + 9,500 = 19,500 Income under the head House Property Brought forward house property loss of assessment year 2008-09 Brought forward of assessment year 1998-99 has not been taken into consideration
Nil 85,000 25,500 14,000 45,500 36,000 Nil 36,000 10,800 19,500
5,700 10,100
Deduction From Gross Total Income
315
because section 71B has been introduced from assessment year 1999-00 Income under the head house property after adjusting losses
95,700
Income under the head Other Sources Vacant site lease rent Remunerations from Calcutta University Remuneration from Delhi University Income under the head Other Sources
4,12,000 3,000 1,500 4,16,500
Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C Investment in bonds of ICICI Bank Investment in master equity plan of UTI Repayment of housing loan (Whether deduction u/s 80C on repayment of the loan by taking a fresh loan is allowed or not is not clear in the act) (but maximum upto `1,00,000) Less: Deductions u/s 80D to 80U Total Income (rounded off 288A)
9,800 5,22,000 1,00,000 1,000 1,000 1,00,000
Computation of Tax Liability Tax on `4,21,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
1,005 4,21,000 22,100.00 442.00 221.00 22,763.00 22,760.00
Explanations 1. Payments received from LIC on maturity of LIC policy is exempt under section 10(10D) 2. Investment under section 80C is allowed even from past savings and out of incomes exempt from tax. 3. Any award/reward of Central Government or State Government notified under section 10(17A) shall be exempt from income tax.
EXAMINATION QUESTIONS PCC MAY – 2012 Question 1 (a) (5 Marks) Ms. Vaishali, employed in a private sector company, furnishes following information for the year ended 31.03.2013 ` Income from salary (computed) 3,45,000 Bank interest
15,000
Tax on non-monetary perquisite paid by employer
20,000
Amount contributed by her during the year of given below: Contribution to recognized provident fund
60,000
Subscription to eligible infrastructure bond
25,000
Deduction From Gross Total Income Health insurance premium –on self (paid by crossed cheque) Medical expenditure for dependent sister with disability Compute the total income of Ms. Vaishali for the assessment year 2013-14. Answer:
316 7,000 20,000 (Modified) `
Computation of Total Income of Ms. Vaishali for the A.Y. 2013-14 Income under the head Salary Income under the head Other Sources (Bank Interest)
3,45,000 15,000
Gross Total Income
3,60,000
Less: Deduction u/s 80C – Contribution to Recognized Provident Fund Less: Deduction u/s 80D – Health Insurance Premium Less: Deduction u/s 80DD – Medical expenditure for dependent sister with disability Less: Deduction u/s 80TTA Total Income
60,000 7,000 50,000 10,000 2,33,000
Note: Tax on non-monetary perquisite paid by employer is exempt u/s 10(10CC) Question 7 (4 Marks) Explain how contributions to political parties are deductible in the hands of corporate and non-corporate assesses under the Income tax law. Answer: Deduction in respect of contributions given by companies to political parties Section 80GGB In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party or an electoral trust. Deduction in respect of contributions given by any person to political parties Section 80GGC In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust.
PCC NOV – 2011 Question 1 (5 Marks) The gross total income of Mr. Nepal for the Assessment Year 2013-14, was `12,00,000. He has made the following investments/payments during the year 2012-13. 1. L.I.C. Premium paid (Policy value `1,00,000)
25,000
2. P.P.F. amount paid
25,000
3. Repayment of housing Loan to Indian Bank
50,000
4. Payment made to L.I.C. pension fund
20,000
Deduction From Gross Total Income
317
5. Medical insurance premium for self, wife and dependant Children.
18,000
6. Mediclaim premium for parents (aged over 80 years)
30,000
Compute eligible deduction under Chapter VI A for the Assessment Year 2013-14. Answer: Computation of eligible deduction under chapter VI A for the assessment year 2013-14 Deduction u/s 80C L.I.C. Premium paid (Paid `25,000, but maximum allowed 10% of `1,00,000) P.P.F. amount paid Repayment of housing loan to Indian Bank
(Modified) ` 10,000 25,000 50,000
Deduction u/s 80 CCC L.I.C. pension fund Total 1,05,000 Maximum deduction allowed 80CCE
20,000 1,00,000
Deduction u/s 80D Mediclaim for self, wife and dependant children (Maximum allowed `15,000) (assumed amount paid through cheque) Mediclaim premium for parents (Maximum allowed ` 20,000) (assumed amount paid through cheque)
15,000 20,000
Total 35,000 Total deduction allowed under Chapter VI A
1,35,000
PCC MAY – 2011 Question 5 (7 Marks) Mr. Chaturvedi having gross total income of `6,35,000 for the financial year 2012-13 furnishes you the following information: (i)
Deposited `50,000 in tax saver deposit in the name of major son in a nationalized bank.
(ii)
Paid `25,000 towards premium on life insurance policy of his married daughter.
(iii)
Contributed `10,000 to Prime Minister’s National Relief Fund.
(iv)
Donated `20,000 to a Government recognized institution for scientific research.
Note: Assume that the gross total income of Mr. Chaturvedi does not include any income under the head ‘profits and gains of business or profession’. Compute the total income of Mr. Chaturvedi for the assessment year 2013-14. Answer. Computation of total income of Mr. Chaturvedi for the A.Y. 2013-14 Particulars Gross total income Less: Deductions under Chapter VI-A
`
` 6,35,000
Deduction From Gross Total Income Deposit of ` 50,000 in tax saver deposit in the name of major son in a nationalized bank – Fixed deposit in the name of son does not qualify for deduction under section 80C (ii) Premium on life insurance policy of his married daughter - Eligible for deduction under section 80C (iii) Contribution of `10,000 to PM’s National Relief Fund - Eligible for 100% deduction under section 80G (iv) Payment of `20,000 to a Government recognized institution for scientific research - Eligible for deduction under section 80GGA
318
(i)
25,000 10,000 20,000 55,000 5,80,000
Total Income
PCC JUNE – 2009 Question 4 (3 Marks) Mr. Abhik, an individual, made payment of health insurance premium to GIC in an approved scheme. Premium paid on his health is ` 10,000 and his spouse’s health is ` 15,000 during the year 2012-13. He also paid health insurance premium of ` 25,000 on his father’s health who is a senior citizen and not dependent on him. The payments have not been made by cash. Compute the amount of deduction under Chapter VI - A of the Act, available to Mr. Abhik from his gross total income for the assessment year 2013-14. (Modified) Answer. Mr. Abhik will be eligible to claim deduction under section 80D on payment of health insurance premium to GIC in a medical insurance scheme approved by the Central Government. The premium is paid otherwise than by way of cash and hence qualifies for deduction under section 80D. Therefore, the amount of deduction under section 80D would be – Particulars Amount (`) On health insurance premium paid on the health of himself and his spouse (`10,000 + `15,000 = `25,000, but restricted to `15,000) 15,000 On health insurance premium paid on the health of his father, `25,000 but restricted to `20,000 in the case of a parent, who is a senior citizen (whether dependent or not) 20,000 Total deduction under section 80D 35,000
PCC NOV – 2008 Question 4 (8 Marks) Mr. Prasad declares gross total income ` 4,00,000 for the assessment year 2013-14. The gross total income includes taxable long term capital gain ` 65,000 and short term capital gain ` 35,000 which is taxable @ 15% under section 111A of the Income-tax Act, 1961. The details of fund investment made during the year 2012-13 are: (i) Medical insurance premium paid by cheque – (a) in the name of Mr. Prasad (b) in name of Mrs. Prasad (ii) Contribution made to – (a) Indira Gandhi Memorial Trust (b) Delhi University (declared as an institution of national eminence) (c) Zila Saksharta Samiti (d) An approved charitable institute by cheque (e) Government for the purpose of promoting family planning (f) Hanuman Temple in Mohalla
`
`
4,000 5,000
9,000
7,000 3,000 5,000 30,000 10,000 20,000
75,000
Deduction From Gross Total Income Compute the total income of Mr. Parsad chargeable to tax for the Assessment year 2013-14. Answer. Computation of Total Income of Mr. Prasad for the A.Y. 2013-14 Particulars Amount (`) Gross Total Income Less : Deduction under section 80C to 80U (a) under section 80D Medical insurance premium paid by cheque (i) in the name of Mr. Prasad 4,000 (ii) in name of Mrs. Prasad 5,000 9,000 (b) under section 80G Donation to Indira Gandhi Memorial trust @ 50% of ` 7,000 3,500 Donation to Delhi University @ 100% 3,000 Donation to Zila Saksharta Samiti @ 100% 5,000 Other donations u/s 80G 19,550 Working Note: Donation to approved Charitable Institute 30,000 Donation to Government for promoting family planning 10,000 40,000 AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (Except 80G) = 4,00,000 – 65,000 – 35,000 – 9,000 = 2,91,000 Qualifying amount = 10% of AGTI or donation whichever is less = 29,100 or 40,000 50% of qualifying amount (i.e. 19,100) = 9,550 + 10,000 = 19,550 Total income
319 (Modified) Amount (`) 4,00,000
40,050
3,59,950
Question 5 (4 Marks) Briefly explain provisions of section 80U of the Income-tax Act, 1961, in respect of deduction available on permanent physical disability. Answer. Deduction under section 80U in case of a person with disability (i) This section is applicable to a resident individual, who, at any time during the previous year, is certified by the medical authority to be a person with disability. A deduction of `50,000 in respect of person with disability and `1,00,000 in respect of a person with severe disability is allowable under this section. (ii) The benefit of deduction under this section has also been extended to persons suffering from autism, cerebral palsy and multiple disabilities. (iii) The assessee claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the form and manner, as may be prescribed, alongwith the return of income under section 139, in respect of the assessment year for which the deduction is claimed. (iv) Where the condition of disability requires reassessment, a fresh certificate from the medical authority shall have to be obtained after the expiry of the period mentioned in the original certificate in order to continue to claim the deduction.
PCC MAY – 2008
Deduction From Gross Total Income
320
Question 1 (2 Marks) Deduction under Section 80CCD is available only to individuals employed by the Central Government. Discuss the correctness of this statement. Answer. The deduction under section 80CCD is available to the individuals employed by the Central Government or any other employer. Accordingly, the statement is incorrect.
PE-II NOV – 2002 Question 2 (12 Marks) For the assessment year 2013-14, the gross total income of Mr. Chaturvedi was `4,00,240 which includes long term capital gain of `45,000 and short term capital gain of `80,000.The gross total income also includes interest income (fixed deposits) from banks of `12,000. Mr. Chaturvedi has invested in public provident fund `60,000 and also paid medical insurance premium `11,000 by cheque. Mr. Chaturvedi also contributed `15,000 by cheque to public charitable trust eligible for deduction u/s 80G. Compute the total income and tax thereon of Mr. Chaturvedi, who is 70 years old as on 31.03.2013. (Modified) Answer: Computation of Total Income ` Long Term Capital Gain 45,000.00 Short Term Capital Gain 80,000.00 Bank Interest 12,000.00 Other Income 2,63,240.00 Gross Total Income 4,00,240.00 Less: Deduction u/s 80C {Public Provident Fund} 60,000.00 Less: Deduction u/s 80D 11,000.00 Less: Deduction u/s 80G 7,500.00 Working Note: AGTI = GTI – LTCG – STCG u/s 111A Deductions u/s 80C to 80U (Except 80G) = 4,00,240 – 60,000 – 45,000 – 11,000 = `2,84,240 Qualifying Amount = 10% of AGTI or Donation given whichever is less = `28,424 or 15,000 = 15,000 50% of qualifying amount = `7,500 Total Income 3,21,740.00 Computation of Tax Liability Tax on long term capital gain `45,000 @ 20% u/s 112 Tax on normal income `2,76,740 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax liability Rounded off u/s 288B
9,000.00 2,674.00 11,674.00 233.48 116.74 12,024.22 12,020.00
PE-II NOV – 2001 Question 3 (5 Marks) Mr. Pramod, a writer and a professional furnishes the following particulars for the previous year ended 31.03.2013:
Deduction From Gross Total Income (a) Royalty on books (eligible for deduction u/s 80QQB) (b) Expenditure on books (c) Income from profession (d) Deposited in public provident fund (15.03.2013) You are required to compute (i) Taxable income, (ii) Tax payable for assessment year 2013-14. Answer: Computation of total income and tax payable by Mr. Pramod Income from business/profession Income from profession Income from royalty Less: Expenses Income under the head Business/Profession Gross Total Income Less: Deduction u/s 80C Less: Deduction u/s 80QQB Total Income
321 ` 42,000 8,000 3,30,000 70,000
(Modified) ` 3,30,000 42,000 8,000 3,64,000 3,64,000 70,000 34,000 2,60,000
Computation of Tax Liability Tax on `2,60,000 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Payable
6,000 120 60 6,180
PE-II MAY – 2001 Question 1 (15 Marks) The particulars of income of Mrs. K. aged 55 years for the financial year 2012-13 are given below: ` (1) Gross salary received from M/s ABC Ltd. for the year 4,00,000 (2) Rental income received from a commercial complex (3) Arrears of rent received from the complex, which were not charged to tax in any earlier years
12,000 p.m. 30,000
(4) Interest paid on loan taken for the purchase of a house from a scheduled bank for use as own residence
1,20,000
(5) Repayment of instalments of loan taken from the bank for the purchase of the above property
60,000
(6) Deposits in public provident fund account (i) Towards loan taken from public provident account (ii) Out of current year’s income
20,000 40,000
(7) Investment made in units of a mutual fund approved by the board under section 80C of the Income-Tax Act.
40,000
Compute the total income of Mrs. K and the tax payable thereon in respect of assessment year 2013-14. (Modified)
Deduction From Gross Total Income
322
Answer: `
`
Computation of total income and tax liability payable by Mrs. K Income from salary Gross Salary Income under the head Salary
4,00,000.00 4,00,000.00
Income from house property Let out commercial complex Gross Annual Value (12,000 x 12) Less: Municipal taxes Net Annual Value Less: 30% of NAV u/s 24(a) Less: Interest on capital borrowed u/s 24(b) Income from let out property
1,44,000.00 Nil 1,44,000.00 43,200.00 Nil 1,00,800.00
Property self- occupied for residence Net Annual Value Less: Interest on capital borrowed u/s 24(b) Loss from self–occupied property
Nil 30,000.00 (30,000.00)
Arrears of rent Section 25B Less: (30% of `30,000) Income under the head House Property Gross Total Income Less: Deduction u/s 80C Repayment of loan taken to purchase residential house property Deposit in public provident fund out of current income Investment made in units of mutual fund for infrastructure facility (but maximum upto Rs.1,00,000) Total Income Computation of Tax Liability Tax on `3,91,800 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
30,000 9,000
21,000.00 91,800.00 4,91,800.00 1,00,000.00
60,000 40,000 40,000 3,91,800.00 19,180.00 383.60 191.80 19,755.40 19,760.00
PE-II MAY – 2000 Question 1 (12 Marks) Anand is a retired Government officer aged 65 years, who derived the following income in respect of financial year 2012-13. He resides in Cochin: ` Pension 1,95,000 Interest from bank deposits (fixed deposits) 1,52,000 Total income 3,47,000 He has paid `18,000 as premium to effect an insurance on his health and his dependant parents and it was paid by a cheque. He pays a rent of `3,000 per month in respect of furnished accommodation. What is his eligibility for deduction under Section 80GG? Compute his total income and tax liability for assessment year 2013-14.
Deduction From Gross Total Income
323
What are the conditions to be satisfied by him to qualify for the deduction? (Modified) Answer: ` 1,95,000.00 1,95,000.00 1,52,000.00 3,47,000.00 18,000.00 3,100.00
Pension Income under the head Salary Income under the head Other Sources {Bank Interest} Gross Total Income Less: Deduction under section 80D Less: Deduction under section 80GG Working Note: Least of the following: 1. `24,000 2. 25% x 3,29,000 = `82,250 3. `36,000 – `32,900 = `3,100 (AGTI = `3,47,000 – `18,000 = `3,29,000) Total Income
3,25,900.00
Computation of Tax Liability Tax on `3,25,900 at slab rate Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
7,590.00 151.80 75.90 7,817.70 7,820.00
Conditions to be fulfilled for grant of deduction under section 80GG : 1. The assessee should not be getting any house rent allowance and also he is not being provided with Rent Free Accommodation by his employer. 2. The assessee should not have any house in his name or in the name of the spouse or in the name of minor child or in the name of Hindu Undivided Family of which he is a member, at a place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession. 3. Also he should not have house even at any other place which he has declared to be self occupied. 4. The assessee has paid rent for the accommodation taken by him for his residence.
PE-II MAY – 1997 Question 1 (7 Marks) In respect of assessment year 2013-14, an author of text-books for schools furnishes the following particulars and request you to work out his tax liability: ` ` 1. Royalty from Printers Ltd. on publication of books 2,20,000 2. Capital gains long term
1,60,000
3. Other Sources: (a) Interest on Bank fixed Deposits (b) Dividend income from Indian company (c) Income from units of U.T.I.
12,000 3,000 5,000
20,000
Deduction From Gross Total Income
324
Deductions: (i) Contributions towards: (a) LIC Pension Scheme (b) LIC Premium
15,000 10,000
(ii) Contribution to public provident fund
10,000
(iii) Investment in National Savings Certificates
50,000
(iv) Medical treatment of handicapped dependent relative (Modified)
20,000
Answer: `
` 1,60,000
Income under the head Capital Gains (LTCG) Computation of income under the head Other Sources Royalty income Income under the head Other Sources Interest from bank deposits Dividend income {exempt u/s 10(34)} Interest from units of UTI {exempt u/s 10(35)} Gross Total Income Less: Deduction u/s 80C LIC Premium Contribution in Public provident fund National Saving Certificate Total Less: Deduction u/s 80CCC Less: Deduction u/s 80DD Total Income Computation of Tax Liability Tax on LTCG `57,000 (`1,60,000 – `1,03,000) @ 20% u/s 112 Tax on `97,000 at slab rate Tax before education cess Add: Education cess @ 2% Add: SHEC @ 1% Tax Liability Rounded off u/s 288B
2,20,000 12,000 Nil Nil 3,92,000 70,000 10,000 10,000 50,000 70,000 15,000 50,000 2,57,000 11,400 Nil 11,400 228 114 11,742 11,740
