Computation of Total Income and Tax Payable – CA Inter Tax Study Material

Computation of Total Income and Tax Payable – CA Inter Taxation Study Material is designed strictly as per the latest syllabus and exam pattern.

Computation of Total Income and Tax Payable – CA Inter Taxation Study Material

Question 1.
State under which heads the following incomes are taxable:

1. Rental income in case of dealer in property.
2. Dividend on shares in case of a dealer in shares.
3. Salary by a partner from his partnership firm.
4. Rental income of machinery.
5. Winnings from lotteries by a person having the same as business activity.
6. Salaries payable to a Member of Parliament.
7. Receipts without consideration.
8. In case of retirement, interest on employee’s contribution if provident fund is unrecognized. [Nov. 2010, 4 Marks]

Answer:

S. No.	Item	Head of Income
1	Rental income in case of dealer in property.	Income from House Property
2	Dividend on shares in case of a dealer in shares	Income from other Sources
3	Salary by a partner from his partnership firm	Income from Business or Profession
4	Rental income of machinery	Income from other sources/’Income from Business or Profession
5	Winnings from lotteries by a person having the same as business activity	Income from other sources
6	Salaries payable to a Member of Parliament.	Income from other sources
7	Receipts without consideration	Income from other sources – as Casual Income
8	In case of retirement, interest on employee’s contribution if provident fund is unrecognized	Income from other sources

Question 2.
Mr. Ashok Kumar, an employee of a PSU furnishes the following particulars for the previous year ending 31.3.2021 :

1. Salary Income for the year (computed) ₹ 5,25,000
2. Salary (computed) for Financial Year 2010-11 received during the year. ₹ 40,000
3. Assessed Income for the Financial Year 2010-11 ₹ 1,80,000

You are requested by the assessee to compute relief under Section 89 of the Income-tax Act, 1961, in terms of tax payable for assessment year 2021 -22.

The Rates of Income Tax for the assessment year 2021-22 are as follows:

[May 2009, 7 Marks]
Answer:
(a) Computation of Total Income and Tax Liability for Assessment year 2021-22 after including arrears and without including arrears of ₹ 40,000/-

Particular	After Including Arrears	Without Including Arrears
Total Income	5,65,000	5,25,000                           .
Tax Due with cess	19,760	15,600

(b) Computation of Total Income and Tax liability for Assessment year 2011-12 after including arrear and without including arrears.

Particular	After Including Arrears	Without Including Arrears
Total Income	2,20,000	1,80,000
Tax Due with cess	6,240	2,080

(c) Excess Tax Payable in Assessment year 2021-22 ₹ 4,160
(19760-15600)
(d) Excess Tax Payable in Assessment year 2011-12 ₹ 4,160
(6240-2080)
(e) Answer: There is no difference. Hence no tax relief is available u/s 89.

Question 3.
From the following details compute the total income of Siddhant of Delhi and Tax payable for the Assessment year 2021-22 :

1. Salary including dearness allowance ₹ 3,35,000
2. Bonus ₹ 11,000
3. Salary of Servant provided by the employer ₹ 12,000
4. Rent Paid by Siddhant for his accommodation ₹ 49,600
5. Bills paid by the Employer for Gas, Electricity and Water Provided free of Cost at the above flat ₹ 11,000
6. Siddhant was provided with Company’s Car (Self driven) also for personal use and it is not possible to determine expenditure on per-sonal use and all expenses were borne by the employer.
7. Siddhant purchased a Flat in a Co-operative Housing Society for ₹ 4,75,000 in April, 1990, which was financed by a loan from Life Insurance Corporation of India of ₹ 1,60,000 @ 15% interest, his own savings of ₹ 85,000 and a deposit from a nationalized bank for ₹ 2,50,000 to whom this flat was given on lease for ten years. The rent payable was ₹ 3,500 per month. The following Particulars are relevant:

(a) Municipal Taxes Paid ₹ 4,300 (per annum)
(b) Society charges for passage lights, watchman’s salary ₹ 1,900 (per annum)
(c) Insurance ₹ 860
(d) He earned ₹ 2,700 in share speculation business and lost ₹ 4,200 in Cotton Speculation business.
(e) In the year 2005-06 he had gifted ₹ 30,000 to his wife and ₹ 20,000 to his son who was aged 11. The gifted amounts were advanced to Mr. Rajesh, who was paying interest @ 19% per annum.
(f) Siddhant received a gift of ₹ 25,000 each from four friends.
(g) He contributed ₹ 5,600 to Public Provident Fund and ₹ 4,000 to Unit Linked Insurance Plan.
(h) Received national award for humanitarian work from the Central Government in the form of a Land whose fair market value is ₹ 5,00,000 as on 31st March, 2021. [Nov. 2009, 16 Marks]
Answer:
Computation of Total Income and Tax liability of Mr. Siddhant for As-sessment Year

Question 4.
Mr. Dinesh Karthik, a resident individual aged 45, furnishes the fol-lowing information pertaining to the year ended 31.3.2021:

1. He is a partner in Badrinath & Co. He has received the following amounts from the firm:
   • Interest on capital at 15% ₹ 3,00,000
   • Salary as working partner (at 1% of firm’s sales) ₹ 90,000
2. He is engaged in a business in which he manufactures wheat flour from wheat. The Profit and Loss account pertaining to this business (summarized form) is as under:
   
   
   Opening WDV of assets are as under:
   
3. Of the total bonus amount ₹ 15,000 was paid on 11.10.2020.
4. One-fifth of the car expenses are towards estimated personal use of the assessee.
5. In March, 2014, he had sold a house at Chennai. Arrears of rent re-lating to this house amounting to ₹ 75,000 was received in February, 2021.
6. Details of his Savings and Investments are as under:
   

You are required to compute the total income of Mr. Dinesh Karthik for the assessment year 2021-22 and the tax payable by him. Computation of interest, if any, is not required. [May 2010, 16 Marks]
Answer:
Computation of Total Income and Tax liability of Mr. Dinesh Karthik for Assessment Year 2021-22

Working Notes :

Question 5.
Dr. Shuba is medical practitioner. Her age is 64 as on 1st Jan 2021. The receipts and payments account of 2020-21 of her is as under:

Other relevant information is as under:

1. She resides in her own house which was constructed in 2006-07 with a loan from LIC Housing of ₹ 10,00,000 out of which 6,00,000 was still due. She got it refinanced from SBI on 01.04.20 at the rate of 10%. One fourth portion of the house is used for clinic purposes.
2. She invested in term deposit ₹ 1,50,000 in Bank of Baroda on 01.07.20 for a period of 5 years in the name of her minor daughter at 9% interest p.a.
3. She purchased a commercial vehicle on 1 July 2020 at ₹ 4,00,000. A loan of ₹ 3,00,000 was taken to buy the van at 8% interest. One fourth use of vehicle is estimated to be personal.
4. She paid medical insurance premium for herself of ₹ 16,000 and for mother ₹ 16,000. Her mother is dependent on her.
5. She got her share from HUF’s income of ₹ 50,000. [Nov. 2010, 8 Marks]

Answer:
Computation of total Income and Tax liability of Dr. Shuba aged 64 years for Assessment Year 2021-22.




Note : Share from H.U.F is exempt u/s 10(2).

Question 6.
Mr. Vidyasagar, resident individual aged 64, is a partner in Oscar Musicals & Co., a partnership firm. He also runs a wholesale business in medical products. The following details are made available for the year ended 31-3-2021:

1. Interest on capital received from Oscar Musicals & Co., at 15% ₹ 1,50,000
2. Interest from bank on fixed deposit (Net of TDS ₹ 1,500) ₹ 13,500
3. IT refund received relating to assessment year 2020-21 (including interest of ₹ 2,300), ₹ 34,500
4. Net profit from wholesale business ₹ 5,60,000
   Amounts debited include the following:
   • Depreciation as per books ₹ 34,000
   • Motor car expenses ₹ 40,000
   • Municipal taxes for the shop ₹ 7,000 (For two half years; pay-ment for one half year made on 12-6-2020 and for the other on 14-11-2020)
   • Salary to manager for whom single cash payment was made for ₹ 21,000
5. The WDV of the assets (as on 1-4-2020) used in above wholesale business is as under:
   • Computers ₹ 1,20,000
   • Motor car ₹ 3,20,000 (20% used (for personal use))
6. LIP paid for major son ₹ 60,000
7. PPF of his wife ₹ 70,000

Compute the total income of the assessee for the assessment year 2021 -22. The computation should show the proper heads of income. Also compute the WDV of the different blocks of assets as on 31-3-2021. [May 2011, 8 Marks]

Answer:

Computation of total Income and Tax liability of Mr. Vidya Sagar for Assessment Year 202 1-22.

Working Note :

Question 7.
Ms, Purvi is a Chartered Accountant in practice. She maintains her accounts on cash basis. Her Income and Expenditure account for the year ended March 31, 2021 reads as follows:

Other Information:

1. Allowable rate of depreciation on motor car is 15%.
2. Value of benefits received from clients during the course of profession ₹ 10,500.
3. Incentives to articled assistants represent amount paid to two articled assistants for passing IPCC Examination at first attempt.
4. Repairs and maintenances of car include ₹ 2,000 for the period from 1-10-2020 to 30-09-2021.
5. Salary include ₹ 30,000 to a computer specialist in cash for assisting Ms. Purvi in one professional assignment.
6. The total travelling expenses incurred on foreign tour was ₹ 32,000 which was within the RBI norms.
7. Medical Insurance Premium on the health of dependent brother and major son dependent on her amounts to ₹ 5,000 and ₹ 10,000 respectively paid in cash.
8. She invested an amount of ₹ 10,000 in National Saving Certificate.
   Compute the total income and tax payable of .Ms. Purvi for the assessment year 2021-22. [May 2012, 10 Marks]

Answer:

Computation of Total Income and Tax liability of Ms. Purvi for As-sessment Year 2021-22.

Note : Medical Insurance Premium of Brother and major son is not deductible u/s 80D, paid in cash.

Question 8.
Mr. Y carries on his own business. An analysis of his trading and profit & loss for the year ended 31-3-2021 revealed the following information:

1. The net profit was ₹ 1,20,000.

2. The following incomes were credited in the profit and loss account:
(a) Dividend from UTI ₹ 22,000.
(b) Interest on debentures ₹ 17,500.
(c) Winnings from races ₹ 15,000.

3. It was found that some stocks were omitted to be included in both the opening and closing stocks, the value of which were:
Opening stock ₹ 8,000.
Closing stock ₹ 12,000.

4. ₹ 1,00,000 was debited in the profit and loss account being contribution to a University approved and notified under Section 35(1)(ii).

5. Salary includes ₹ 20,000 paid to his brother which is unreasonable to the extent of ₹ 2,500.

6. Advertisement expenses include 15 gift packets of dry fruits costing ₹ 1,000 per packet presented to important customers.

7. Total expenses on car was ₹ 78,000. The car was used both for business and personal purposes. 3/4th is for business purposes.

8. Miscellaneous expenses included ₹ 30,000 paid to A & Co., a goods transport operator in cash on 31.1.2021 for distribution of the com-pany’s product to the warehouses.

9. Depreciation debited in the books was ₹ 55,000. Depreciation allowable as per IT rules was ₹ 50,000.

10. Drawing ₹ 10,000.

11. Investment in NSC ₹ 15,000.

Compute the total income of Mr. Y for the assessment year 2021-22. [May 2012, 8 Marks]
Answer:
Computation of Total Income of Mr. Y for Assessment Year 2021-22

Note: Payment of ₹ 30,000/- in cashio a goods transport operator is admissible. Now cash payment of upto ₹ 35,000/- is allowed in this respect.

Question 9.
Mr. Hari provides the following information for the year ending 31-03-2021:

1. Rent from vacant site let on lease ₹ 1,12,000
2. Rent from house property at Delhi ₹ 20,000 pm
3. Turnover from retail trade in grains (No books of account maintained) ₹ 24,37,500
4. Arrears of salary received from ex-employer ₹ 8,40,000
5. Purchase of ₹ 10,000 shares of X Co. Ltd., on 01.01.2012 ₹ 1,00,000.
   He received a 1:1 bonus on 01.01.2013. Sale of 5,000 bonus shares in September, 2020 for ₹ 2,20,000
6. Received ₹ 1,50,000 on 12-02-2021 being amount due from Mr. A relating to goods supplied by Hari’s father, which was written off as bad debt by his father in Assessment Year 2017-18 and allowed as deduction. Hari’s father died in July 2016.
7. Brought forward business loss relating to discontinued textile business of Hari relating to the Assessment Year 2017-18. ₹ 1,97,500.
8. Brought forward depreciation relating to discontinued textile business of Hari, ₹ 1,50,000
9. Hari contributed ₹ 30,000 to Prime Minister’s National Relief Fund and ₹ 40,000 to Charitable Trust enjoying exemption u/s 80G.

Compute the total income and the tax thereon of Mr. Hari for the Assess-ment Year 2021-22. [Nov. 2012, 10 Marks]

Answer:

Computation of total Income and Tax Liability of Mr. Hari for As-sessment Year 2021-22

Working Notes :

1. Cost of Acquisition of Bonus Share is Nil.
2. Rent of vacant site is taxable as Income from other sources.
3. Brought forward unabsorbed Depreciation can be set off from income of any head or from Gross Total Income.
4. Donation to Prime Minister National Relief Fund is 100% Deductible, without any ceiling.
5. Donation to charitable Trusts is restricted to @ 50% of 10% of Adjusted Total Income.
6. Out of Total Income ₹ 3,42,000, basic exemption ₹ 2,50,000 is allowed. Hence long term capital gain tax is levied on balance ₹ 92,000 @ 20% flat.

Question 10.
Mr. Rahul an assessee aged 61 years gives the following information for the previous year 31-03-2021:

Compute the total income of Mr. Rahul for the assessment year 2021-22. [Nov. 2012, 8 Marks]
Answer:
Computation of Total Income of Mr. Rahul for Assessment year 2021 -22

Working Notes :

1. Short-term capital loss can be set off from long-term capital gain u/s 74.
2. Share of loss from firm is not eligible for set-off by an individual. The firm will carry forward its loss itself.
3. Loss from horse race is not allowed to be set off.

Question 11.
Mrs. Rani a resident aged 50 years is running acupuncture clinic. Her Income and Expenditure Account and other relevant information for the year ending 31st March, 2021 are given below:

Other Details:

1. Depreciation in respect of ail assets has been ascertained at ₹ 60,000 as per Income-tax Rules.
2. Medicines & needles of ₹ 22,000 have been used for her family.
3. Fees Receipts include ₹ 24,000 being honorarium for valuing acu-puncture examination answer books.
4. She has also received ₹ 57,860 on maturity of one LIC Policy, not included in the above Income and Expenditure Account.
5. She has paid an LIC premium of ₹ 12,000 for self (Sum Assured ₹ 50,000).
6. She has paid ₹ 2,500 for purchase of lottery tickets.

From the above compute the total Income and tax payable thereon of Mrs. Rani for the Assessment year 2021-22. [May 2013, 10 Marks]

Answer:
Computation of Total Income and Tax liability of Mrs. Rani for As-sessment year 2021-22

Working Notes :

1. Maturity Proceeds of L.I.C. Policy are exempt u/s 10(10D)
2. Amount spent on purchase of lottery tickets is not allowed as deduc-tion even from winning of lottery.

Question 12.
The following is the Profit and Loss Account of Mr. Aditya, aged 58 years, a resident, for the year ended 31.03.2021 : –

Other information:

1. Aditya bought a car during the year for ₹ 20,000. He charged depreci-ation @ 15% on the value of the car. The above car was sold during the year for ₹ 17,000. The use of the car was 3/4th for business and 1 /4th for personal use.
2. Medical expenses were incurred for the treatment of Nikita, his wife.
3. Salary had been paid on account of car driver.
4. Rent includes arrears of rent from April, 18 to October, 19 @ ₹ 5,000 p.m., paid in cash on 1.11.2020.
5. Mr. Aditya had also let out a house property at a monthly rent of ₹ 25,000. The annual letting value is considered to be ₹ 2,50,000. The municipal taxes are ₹ 6,000, out of which ₹ 3,000 are paid by the tenant and ₹ 3,000 are yet to be paid by Mr. Aditya, Interest on loan taken for the house property is ₹ 20,000
6. Mr. Aditya’s minor daughter received ₹ 75,000 from stage acting. Interest on company deposits of Mr. Aditya’s daughter (deposit was made out of income from stage acting) was ₹ 10,000.
7. Aditya incurred an expense of ₹ 50,000 on the medical treatment of his dependent son, who has disability of more than 80%.
8. Aditya had taken a loan during the year 2019-20 for the education of his son, who is pursuing B. Com in Delhi University. Interest paid on the same during the year was ₹ 10,000.

Compute the total income of Mr. Aditya for the assessment year 2021-22 [Nov. 2013, 10 Marks]
Answer:
Computation of Total Income of Mr. Aditya for Assessment year 2021-22

Working Note :

Income earned by minor daughter of Mr. Aditya from stage acting ₹ 75,000 / – plus interest earned on deposit of such income ₹ 10,000/- will be treated as personal income of minor. Hence not included in taxable income of Mr. Aditya u/s 64(A).

Question 13.
Compute the total income of Mr. Krishna for the assessment year 2021-22 from the following particulars:


During the previous year 2020-21, Mr. Krishna has repaid ₹ 1,67,000 to-wards housing loan from a scheduled bank, out of ₹ 1,67,000 ₹ 97,000 was towards payment of interest and rest towards principal payments. [Nov. 2013, 8 Marks]
Answer:
Computation of Total Income of Mr. Krishna for Assessment year 2021-22.

Working Note :
As per section 112A regarding taxation of long term capital gain on equity share /funds etc. is taxable at concessional rate of 10% on amount exceeding ₹ 1 lac. Due to withdrawal of section 10(38) long-term capital loss on sale a shares (STT paid) is not adjusted.

Question 14.
From the following details compute the total income of Kamal, A resident individual aged 54 years for the year ended 31-3-2021. Tax pay-able need not be calculated.

Following additional information is provided:

1. Kamal purchased a flat in a Co-operative Housing Society in Delhi for ₹ 10,75,000 in April, 2014 by taking loan from State Bank of India amounting to ₹ 5,00,000 @ 15% per annum interest, ₹ 65,000 from his own savings and a deposit from a Nationalized Bank to whom this flat was given on lease for 10 years at a monthly lease rental of ₹ 5,500. The outstanding amount of loan is ₹ 1,60,000.
2. Municipal Taxes paid by Kamal ₹ 4,500 pm.
3. Insurance in respect of the said flat ₹ 1,275.
4. Kamal earned a profit of ₹ 15,000 in shares speculation business and incurred a loss of ₹ 20,200 in speculation business of cotton.
5. In the year 2012-13, he had gifted ₹ 50,000 to his wife and ₹ 30,000 to his son who was aged 11 years then. These amounts were advanced to Mr. Mohan @ 15% per annum interest.
6. Kamal received a gift of ₹ 25,000 each from his four friends on the occasion of his birthday.
7. He contributed ₹ 10,500 to Public Provident Fund and ₹ 6,000 to Unit Linked Insurance plan.
8. He deposited ₹ 60,000 in tax saver deposit with a Nationalized Bank in the name of his married son.
9. He has taken a policy on life for his married daughter on 1.4.2019 and paid a premium of ₹ 25,000. The sum assured for policy is ₹ 2,00,000.

Answer:
Computation of Total Income of Mr. Kamal for Assessment year 2021-22

Working Notes :

1. Facility of Laptop is exempt
2. Balance speculation Business loss will be carried forward,
3. Interest income of minor and wife is deemed income.
4. Total gifts from outsiders are exempt up to 50,000. If exceed this limit, then full amount is taxable.
5. LIC premium is qualified for deduction u/s 80C up to 10% of sum assured.

Question 15.
Mr. Devansh an Indian Resident aged 38 years carries on his own business. He has prepared following Profit & Loss A/c for the year ending

Other information:

1. Mr. Devansh owns a House Property which is being used by him for the following purposes:
   • 25% of the property for own business
   • 25% of the property for self-residence
   • 50% let out for Residential purpose
2. Rent received from 50% let out portion during the year w as ₹ 1,65,000.
3. On 1.12.2018 he acquired a vacant site from his friend for ₹ 1,05,000. The State Stamp Valuation Authority fixed the value of the site at ₹ 2,80,000 for stamp duty purpose.
4. He received interest on Post office Savings bank Account amounting to ₹ 500.
5. Cash gift on the occasion of marriage includes gift of ₹ 20,000 from Non-relatives.
6. LIC premium paid (Policy value ₹ 3,00,000 taken on 01.06.2017) ₹ 60000 for his handicapped son. (Section 80U disability)
7. He purchased 10,000 shares of X Company Ltd on 01.01.2015 for ₹ 1,00,000 and received a 1:1 bonus on 01.01.2017. He sold 5,000 bonus shares in September 2020 for ₹ 2,20,000. (Shares are not listed and STT not paid).

Compute Total Income and Net Tax payable by Mr. Devansh for the As-sessment Year 2021-22. [Nov. 2014, 10 Marks]
Answer:
Computation of Total Income and Tax liability of Mr. Devansh for Assessment year 2021-22.

Working Notes:

1. Cash gift on the occasion of marriage is fully exempt.
2. Interest on debentures is less than ₹ 5,000/- hence it is presumed that no TDS.
3. Difference between stamp duty value and actual consideration is taxable u/s 56(2)(vii).
4. Cost of acquisition of bonus shares is Nil.

Question 16.
Dr. Shashank is a noted child specialist of Mumbai. His Income and Expenditure account for the financial year ended 31.03.2021 is given below:

1. Depreciation computed as per Income Tax Rules, 1962 has been ascertained at ₹ 75,000.
2. Medicines consumed include cost of medicine for self and family of ₹ 18,000 and for treating poor patients of ₹ 24,000 from whom he did not charged any fee either.
3. Salary includes ₹ 30,000 paid in cash to a computer specialist who computerized his patient’s data on 30th September, 2020 at 3 p.m.
4. Donation to National Children’s Fund has been made by way of an account payee cheque.
5. He has paid a sum of ₹ 25,000 for a Life Insurance Policy (Sum assured ₹ 2,00,000) of himself, which was taken on 1.07.2014.
6. He also contributed 20,000 towards Public Provident Fund.
7. Dr. Shashank also paid interest of ₹ 10,000 on loan taken for higher education of his daughter.
8. Dr. Shashank made investments in equity shares listed in a recognized stock exchange of ₹ 30,000 and units of equity oriented fund of Rajiv Gandhi Equity Savings Scheme of ₹ 40,000.
9. Dr. Shashank also made donation of ₹ 1,00,000 to a charitable trust registered & eligible for deduction under Income Tax Act, 1961.

You are required to compute the total income and tax payable by Dr. Shashank for the Assessment Year 2021-22. [May 2015, 10 Marks]
Answer:
Computation of Total Income and Tax Liability of Dr. Shashank for Assessment year 2021-22

Working Note:
Maturity Proceeds of life insurance policy are exempt u/s 10(10D)

Question 17.
From the following details furnished by Mr. Dinesh, a marketing manager of XL Corporation Ltd., Delhi. Compute the gross total income for the Assessment Year 2021-22.

Dinesh purchased a flat in a co-operative housing society in Dwarka. Delhi for self-occupation for ₹ 35,00,000 in April 2013, which was finance by a loan from Bank of India of ₹ 20,00,00 @ 1 1% interest and his own savings
of 5,00,000 and a deposit of ₹ 10,00,000 from Bank of Baroda, to whom he let out his another house in Rohini, Delhi on lease for ten years. The rent payable by Bank of Baroda is ₹ 35,000 per month.
Other relevant particulars are given below:

[May 2015, 8 Marks]
Answer:
Computation of Gross Total Income of Mr. Dinesh for Assessment year 2021-22

Working Notes:

1. Conveyance Allowance has been presumed as spent in performance of official duties, hence not taxable.
2. Insurance Premium of house property is not deductible separately.

Question 18.
Mr. Venus provides the following details for the previous year ending 31-3-2021.

1. Salary from HNL Ltd. (Computed) ₹ 6,00,000.
2. Interest on FD with SBI for the Financial Year 2020-21 ₹ 72,000 (Net of TDS).
3. Determined long term capital loss of AY 2020-21 (to be carried for-ward) ₹ 96,000.
4. Long term Capital gain ₹ 75,000.
5. Loss of minor son ₹ 90,000 computed in accordance with the provisions of Income tax Act.
6. Mr. Venus transferred his own house to his minor son without adequate consideration few years back and minor son let it out and suffered loss.
7. Loss of his wife’s business (₹ 2,00,000).

She carried business with funds which Mr. Venus gifted to her.
You are required to compute taxable income of Mr. Venus for the Assessment Year 2021-22. [Nov. 2015, 8 Marks]
Answer:
Computation of Total Income of Mr. Venus for Assessment year 2021 -22

Working Notes :

1. Mr. Venus is deemed owner of house property in the name of his minor son u/s 27(f).
2. Brought forward long – term capital loss can be set – off from long term capital gain only within following eight years u/s 74 (1) & 74 (2).
3. Income (or loss) from a business in the name of wife from funds gifted by Mr. Venus is deemed as of Mr. Venus. Hence loss can be set off by him. Out of his income (except) income from salary).

Question 19.
Mr. Vinod Kuniar, resident, aged 62, furnishes the following information pertaining to the year ended 31-3-2021:

Compute the total income of the assessee for the assessment year 2021 -22, under proper heads of income. Listed share were sold in recognized stock exchange. [May 2016, 10 Marks]
Answer:
Computation of Total Income of Mr. Vinod Kumar age 62 years for Assessment year 2021-22

Question 20.
Mr. Raghuveer, a resident individual-aged 35 years, furnished the following information from his Profit and Loss Account for the year ended 31st March 2021:

1. The net profit was ₹ 6,50,000.
2. The following incomes were credited in the Profit & Loss Account:
   (a) Interest on government securities ₹ 25,000
   (b) Dividend from a foreign company ₹ 18,000
   (c) Gold coins worth ₹ 55,000 received as gift from his father.
3. Depreciation debited in the books of account was ₹ 85,000. Depreci-ation allowed as per Income-tax Act, 1961 was ₹ 96,000.
4. Interest on loan amounting to ₹ 68,000 was paid in respect of capital borrowed for the purchase of the new asset which has not been put to use till 31st March 2021.
5. General expenses included:
   (a) An expenditure of ₹ 20,500 which was paid by a bearer cheque.
   (b) Compensation of ₹ 4,500 paid to an employee while terminating his services in business unit.
6. He contributed the following amounts by cheque:
   (a) ₹ 45,000 in Sukanya Samridhi Scheme in the name of his minor daughter Alpa.
   (b) ₹ 20,000 to the Swachh Bharat Kosh set up by the Central Gov-ernment.
   (c) ₹ 28,000 towards premium for health insurance and ₹ 2,500 on account of preventive health checkup for self and his wife.
   (d) ₹ 35,000 on account of medical expenses of his father aged 82 years (no insurance scheme had been availed on the health of his father).

You are required to compute the total income of Mr. Raghuveer for the Assessment Year 2021-22. [Nov. 2016, 10 Marks]
Answer:
Computation of Total income of Mr. Raghuveer for Assessment year 2021-22.

Working Notes :

1. Gold coins worth ₹ 55,000/- received as gift from father is not taxable being blood relation.
2. Interest on loan ₹ 68,000/- in respect of new asset, which could not be put to use is not deductible.
3. Expenditure ₹ 20,500/- paid by bearer cheque is not deductible.
4. Compensation ₹ 4,500/- paid to an employee while terminating his services in business units is treated in the interest of business, hence allowable expenditure.
5. U/s 80D maximum deduction is ₹ 25,000/- for medical insurance premium and preventive health checkup, both.

Question 21.
Ms. Rekha, a resident individual aged 50, provides the following information for the financial year 2020-21:

1. She is a partner in AK & Co. and received the following amounts from the firm:
(a) Share of profit from the firm ₹ 35,000
(b) Interest on capital @ 15% p.a. ₹ 3,00,000
(c) Salary as working partner ₹ 1,00,000 (fully allowed in the hands of the firm).

2. She is running a rice mill as proprietor. The Net profit as per Profit & Loss Account is ₹ 4,50,000. The following items are debited to Profit and Loss account:
(a) Advance Income-tax paid ₹ 1,00,000
(b) Personal drawings ₹ 50,000

The following items are credited to Profit and Loss Account:
(a) Interest on savings bank account with SBI ₹ 12,000
(b) Interest on savings account with post office ₹ 5,000
(c) Dividend from listed Indian Company ₹ 80,000.

3. She owned a house property in Mumbai which was sold in January, 2018. She received ₹ 90,000 by w-ay of arrear rent in respect of the said property, in October, 2020.

4. She made the following investments:
(a) Life insurance premium on a policy in the name of her married daughter ₹ 60,000. (The policy w as taken on 01.10.2015 and the sum assured being ₹ 5,00,000). Health insurance premium on a policy covering her mother aged 75. She is not dependent on Ms. Rekha. Premium paid by cheque ₹ 35,000.
Compute the Total Income and the tax liability of Ms. Rekha for the As-sessment Year 2021-22. [May. 2017, 10 Marks]

Answer:

Computation of Total Income and Tax liability of Ms. Rekha for Assessment year 2021-22

Question 22.
Mr. Rohan, a resident individual has Gross Total Income of ₹ 7,50,000 comprising of Income from salary and income from house property for the assessment year 2021-22. He provides the following information: Paid ₹ 70,000 towards premium on life insurance policy of his Handicapped Son (Section 80U disability). Sum assured ₹ 4,00,000; and date of issue of policy 1.8.2018. Deposited ₹ 90,000 in tax saver deposit in the name of his major son in State Bank of India. Contributed ₹ 25,000 to The Clean Ganga Fund, set up by the Central Government. Compute the Total Income and deduction under Chapter VI-A for the Assessment year 2021-22. [May 2017, 4 Marks]
Answer:
Computation of Total Income of Mr. Rohan for Assessment year 2021-22

Question 23.
Mr. Pandey, a resident individual aged 45 years, is a Chartered Accountant in practice. He maintains his accounts on cash basis. His Profit & loss Account for the year ended 31st March, 2021 is as follows:
Profit and Loss Account for the year ending March 31, 2021

Other Information:

1. Depreciation allowable under Income-Tax Act 1,25OOO.
2. Administrative expenses include ₹ 55,000 paid to a tax consultant in cash for assisting Mr. Pandey in one of the professional assignments.
3. Gifts represent fair market value of a LED TV which was given by one of the clients for successful presentation of case in the Income Tax Appellate Tribunal.
4. Last month’s rent of ₹ 50,000 was paid without deduction of tax at source.
5. Mr. Pandey had taken a loan of ₹ 32,00,000 for the purchase of a house property valuing ₹ 45,00,000 from a recognized financial institution on 1^st May, 2020. He repaid ₹ 1,50,000 on 31st March, 2021 out of which ₹ 1,00,000 is towards principal payment and the balance is for interest on loan. The possession of the property will be handed over to him in October 2021.
6. Mr. Pandey paid medical insurance premium of his parents (senior citizens and not dependent on him) by cheque amounting to ₹ 27,000. He also paid ₹ 8,500 by cash towards preventive health checkup for himself and his spouse.

Compute the total income of Mr. Pandey and tax payable by him for As-sessment Year 2021-22, assuming that Mr. Pandey does not want to opt for presumptive taxation scheme under Section 44ADA. [Nov. 2017, 10 Marks]

Answer:

Computation of Total Income and Tax Liability of Mr. Pandey for Assessment year 2021-22

Working Notes :

1. ₹ 55,000/- paid in cash to consultant is totally disallowed u/s 40A(3).
2. ₹ 50,000/- paid towards arrears of rent without TDS is disallowed @ 30%.
3. As per Finance Act, 2020, dividend from Indian companies if fully taxable.
4. Gifts from clients in due course of profession are fully taxable.
5. Medical Insurance premium for senior citizen parents is deductible, even when they are not dependent.
6. Preventive Health check up expenses are allowed maximum ₹ 5,000/-, even paid in cash.
7. Deduction u/s 80EE towards interest on housing loan in first year is not applicable in the subsequent previous year.

Question 24.
Mr. Hari aged 55 years, a resident individual and practicing Char-tered Accountant, furnishes you the receipts and payments account for the financial year 2020-21.

Other Information:

1. Motor car was put to use for both official and personal purposes. 1 /4lh of the motor car is for personal purpose. No interest on car loan was paid during the year.
2. Mr. Hari purchased a flat in Jaipur for ₹ 15,00,000 in July 2013 cost of which was partly financed by a loan from State Bank of India of ₹ 10,00,000 @ 10% interest, his own savings ₹ 1,00,000 and a deposit from Bank of Baroda for ₹ 4,00,000. The flat was given to Bank of Baroda on lease for 10 years @ ₹ 40,000 per month. The following particulars are relevant:
   (a) Municipal taxes paid by Mr. Hari ₹ 4,200 per annum .
   (b) House insurance ₹ 1,000
3. He earned ₹ 1,00,000 in share speculation business and lost ₹ 1,50,000 in commodity speculation business.
4. Mr. Hari received a gift of ₹ 15,000 each from four of his family friends.
5. He contributed ₹ 1,11,000 to Prime Minister Drought Relief Fund by way of bank draft.
6. He donated to a registered political party ₹ 3,00,000 by way of cheque.

Compute the total income of Mr. Hari and the tax payable for the Assessment year 2021-22. [May 2018, 10 Marks]

Answer:

Computation of Total Income and Tax Liability of Mr. Hari for As-sessment year 2021-22

Working Notes:

1. Calculation of eligible depreciation:
a. Motor Car (4,00,000 × 15/1oo × 1/2 year × 3) = 22,500
b. Books (22,000 × 40/100) = 8,800
c. Computer (25,000 × 40/100 × 1/2 year) = 5,000

2. Net Loss in speculation Business cannot be set off from Income of Profession. Hence to be carried forward to following previous years.

Question 25.
Miss Sakshitha, a resident individual, aged 32 years, furnishes the following particulars relating to the year ended 31-3-2021 :

1. Analysis of her bank account in her ledger reveals the under-mentioned data:
   
2. Donation given in cash to a charitable trust registered u/s 12AA ₹ 12,000
3. She owns agricultural lands at Colombo, Sri Lanka. She has derived agricultural income therefrom. ₹ 1,80,000
4. Public Provident Fund paid In the name of her minor daughter ₹ 75,000
5. Interest credited in the said PPF account during the year ₹ 8,900
6. Share of profits received from Vidyut & Co. ₹ 1,90,000

You are required to compute the total income of the assessee and the tax payable for the assessment year 2021 -22.
Computation should be made under proper heads of income. [Nov. 2018, 10 Marks]

Answer:

Computation of Total Income and tax Liability of Miss Sakshltha for Assessment year 2021-22

Working Notes:

1. 30% TDS presumed on winning from TV Games show.
2. Gift Received from mother’s father is treated under definition of relative u/s 56(2).
3. Gift from close friend is fully taxable because it exceeds ₹ 50,000/-
4. Interest on capital received from a firm as its partner is restricted upto 12% p.a.
5. Arrears of rent received is taxable because at the time of let Out Miss Sakshitha was owner.
6. Donation paid in cash above 2,000/- is not allowed as deduction.
7. Income from agricultural land situated in Sri Lanka (outside India) is taxable.
8. Interest on Public Provident Fund is exempt.
9. Share of Profit received from a firm as partner is exempt u/s 10(2A).

Question 26.
Mr. Rajat Saini, aged 32 years, furnishes the following details of his total income for the Assessment year 2021-22:
Income from Salaries ₹ 27,88,000
Income from House Property (Computed) ₹ 15,80,000
Interest income from FDR’s ₹ 7,22,000
He has not claimed any deduction under chapter VIA. You are required to compute the tax liability of Mr. Rajat Saini as per the provisions of Income Tax Act, 1961. [Nov. 2018, 5 Marks]
Answer:
Computation of Tax Liability of Mr. Rajat Saini for Assessment year 2021-22

Notes:

1. There is no TDS from any income.
2. Hence Total Tax Payable ₹ 13,80,600

Question 27.
From the following particulars of Shri Jagdish (Aged 59 years) for the Assessment Year 2021-22, you are required to find out his taxable income and net tax liability:

1. Basic Salary @ ₹ 51,000 per month, Dearness allowance @ ₹ 10,000 per month (Part of salary- for retirement benefits), House rent allow-ance ₹ 4,000 per month and rent paid for house in Mumbai is ₹ 7,000 per month.
2. He owns a commercial building at New Delhi, which is let out on 1-07-2020 at a monthly rent of ₹ 46,000. He paid for municipal taxes of ₹ 27,000 and ₹ 25,000 for the financial years 2018-19 and 2019-20 on 31-3-2020 and 20-4-2020 respectively.
3. He deals in shares. During financial year 2020-21 he earned ₹ 1,70,000 from his share business and paid ₹ 30,000 as security transaction tax.
4. He purchased 4000 unlisted shares of Shyam Limited on 16-1-2010 for ₹ 80,000. Company declared bonus in the ratio of 1:1 on 1st Feb-ruary, 2010. Shri Jagdish sold 3000 Bonus Shares on 28-12-2019 for ₹ 2,00,000 to his friend Mr, Mehul through unrecognized stock exchange. (Cost Inflation Index: 2008-09 : 137, 2020-21 : 301).
5. He received dividend of ₹ 13,00,000 as dividend income from listed domestic company, Interest from saving bank account deposits with IDBI Bank ₹ 15,000 and lottery winnings (Net of TDS @ 30%) is ₹ 21,000.
   He paid the following amount out of his taxable income:
   (a) Deposits in Public Provident Fund ₹ 2,00,000.
   (b) Medical insurance premium paid for health of his wife 119,000 and for health of dependent son ₹ 12,000 through cheque. [May 2019, 14 Marks]

Answer:

Computation of Total income and Tax liability of Shri Jagdish for Assessment year 2021-22

Working Notes:

1. Municipal Taxes paid during current financial year are deductible only.
2. Security Transaction Tax is deductible.
3. Cost of Acquisition of Bonus Share is Nil.
4. As per Finance Act, 2020, Income from Dividend from domestic company is taxable in the hands of shareholder (assessees) himself.

Question 28.
Mr. Madhvan is a finance manager in Star Private Limited. He gets a salary of ₹ 30,000 per month. He owns two houses, one of which has been let out to his employer and which is in-turn provided to him as rent free accommodation. Following details (annual) are furnished in respect of two house properties for the Financial Year 2020-21.

₹ 17,000 were paid as Interest on loan taken by mortgaging House 1 for construction of House 2.
During the previous year 2020-2 1, Mr. Madhvan purchased a rural agricultural land for ₹ 2,50,000. Stamp valuation of such property is ₹ 3,00,000.
Determine the taxable income of Mr. Madhvan for the assessment year 2021-22. All workings should form part of your answer. [May. 2019, 8 Marks]
Answer:
Computation of Total Income of Mr. Madhvan for Assessment year 2021-22

Working Notes:

1. In house property-2, no deduction is allowed except Standard Deduction and Interest on Loan.
2. Difference between Purchase consideration and stamp duty value of Rural Agricultural Land is not taxable, because it is not treated as § capital Asset u/s 56(2)(x).
3. Place of service has been presumed having population above 25 lakh.

Question 29.
Ms. Geeta, a resident individual, provides following details of her income/losses for the year ended 31.03.2021

Compute total income of Ms. Geeta for the assessment year 2021-22 and the amount of loss that can be carried forward.

For the above solution, you may assume principal repayment of loan as under:

1. Loan taken for purchase of house property in Delhi – ₹ 2,50,000
2. Loan taken for purchase of house property in Mumbai – ₹ 50,000
3. Loan taken for repair of house properties in Delhi and Mumbai – ₹ 75,000
   Working notes should form part of your answer. Wherever necessary, suitable assumptions may be made by the candidates and disclosed by way of note. [May 2019, 10 Marks]

Answer:

Computation of Total Income of Ms. Geeta for Assessment year 2021 -22

Working Notes :

1. Share of Loss ₹ 1,60,000/- in firm cannot be set off by a partner on individual basis. The firm will carry forward its total loss to following years.
2. Repayment of housing loan ₹ 2,50,000/- for house property in Delhi in not deductible u/s 80C, because loan was taken from a friend.
3. Repayment of housing loan ₹ 75,000/- for house property in Mumbai is not deductible u/s 80C, because loan was taken for repairs of house property.
4. Maximum Allowable loss in a previous year is 2 lac.
5. Textile Business loss can be set off from income of any head, except Income from Salary.
6. Lottery Income has been assumed as gross.

Question 30.
Mrs. Mitul, a resident individual, aged 63 years, is a qualified medical practitioner. She runs her own clinic. Income and Expenditure A/c of Mrs. Mitul for the year ending March 31^st 2021 is as under:

Explanatory Informations:

1. She is working part-time with True Care Hospitals (P) Ltd. Her salary details are as under:
Basic Pay – ₹ 13,000 p.m.
Transport Allowance – ₹ 2,000 p.m.
Total – ₹ 15,000 p.m.
Further, during P.Y. 2020-21, her son had undergone a medical treat-ment in True Care Hospitals (P) Ltd. free of cost. The hospital would have charged a sum of ₹ 60,000 for a similar treatment to unrelated patients.

2. She owns a residential house. Ground floor of the house is self-oc-cupied by her while first floor has been rented out since 01.10.2020. The reconstruction of the house was started on 01.04.2020 and was completed on 30.09.2020. The monthly rent is ₹ 10,000. The tenant also pays ₹ 3,000 p.m. as power back-up charges. She took a housing loan of ₹ 12 lakhs on 01.04.2020. Interest on housing loan for the period 01.04.2020 to 30.09.2020 was ₹ 60,000 and for the period 01.10.2020 to 31.03.2021 was ₹ 40,000. During the year, she also paid municipal taxes for the F.Y. 2019-20 ₹ 5,000 and for F.Y. 2020-21 ₹ 5,000.

3. Other informations:
(a) Conveyance expenses include a sum of ₹ 12,000 incurred for conveyance from house to True Care Hospitals (P) Ltd. and vice versa in relation to her employment.
(b) Power & fuel expenses include a sum of ₹ 6,000 incurred for generator fuel for providing power back-up to the tenant.
(c) Administrative expenses include a sum of ₹ 10,000 paid as Mu-nicipal Taxes for her house:
(d) Clinic equipments’ details are:
Opening .W.D.V. of clinic equipments as on 01.04.2020 was ₹ 1,00,000 and fresh purchase made on 28.08.2020 is ₹ 25,000 which was paid in cash.
(e) She also paid tuition fee of ₹ 40,000 for her grand-daughter, which has been debited to her Capital A/c.
(f) She availed a loan of ₹ 8,00,000 from bank for higher education of her son. She repaid principal of ₹ 50,000 and interest of ₹ 26,000 during P.Y. 2020-21.
You are required to compute her net taxable income and net tax Liability for the Assessment Year 2021-22. [Nov. 2019, 14 Marks]

Answer:

Working Notes :

1. Cost of employer ₹ 60,000/- for treatment of son is taxable.
2. Additional Income of ₹ 12,000/- from Power back up charger is taxable as other sources.
3. Depreciation on newly purchased clinic equipment for ₹ 25,000/- is j not allowable because purchase price was paid in cash.
4. Tuition fee ₹ 40,000/- paid for grand – daughter is not eligible for deduction u/s 80C. !