Unit 5
Computation of Total Income for Individual
Q1) How do you compute total income and tax liability of an individual? (8 Marks)
A1) Computation of Total Income & Tax Liability of an Individual
Step 1: Compute the income of an individual under 5 heads of income on the basis of his residential status.
Step 2: Income of any other person, if includible u/s 60 to 64, will be included under respective heads.
Step 3: Set off of the losses if permissible, while aggregating the income under 5 heads of income.
Step 4: Carry forward and set off of the losses of past years, if permissible, from such income.
Step 5: The income computed under Steps 1 to 4 is known as Gross Total Income from which deductions under sections 80C to 80U (Chapter VIA) will be allowed. However, no deduction under these sections will be allowed from short-term capital gain covered under section 111A, any long-term capital gain and winning of lotteries etc., though these incomes are part of gross total income.
Step 6: The balance income after allowing the deductions is known as total income which will be rounded off to the nearest Rs. 10.
Step 7: Compute tax on such Total Income at the prescribed rates of tax.
Step 8: Allow rebate of maximum Rs. 2,500 under section 87A in case of resident individual having total income upto Rs. 3,50,000.
Step 9: Add surcharge @ 10% on total income exceeding Rs. 50,00,000 and upto Rs. 1 crore and 15% of such income tax in case of an individual having a total income exceeding Rs. 1 crore.
Step 10: Add education cess @ 2% and SHEC @ 1% on the tax (including surcharge if applicable).
Step 11: Allow relief under section 89, if any.
Step 12: Deduct the TDS, advance tax paid for the relevant assessment year and double taxation relief under section 90, 90A or 91. The balance is the net tax payable which will be rounded of nearest ten rupees and must be paid as self-assessment tax before submitting the return of income.
Rebate of maximum Rs. 2,500 for resident individuals having total income up to Rs. 3,50,000 [Section 87A]
With a view to provide tax relief to the individual tax payers who are in lower income bracket, the Act has provided rebate from the tax payable by an assessee, if the following condition and satisfied:
- The assessee is an individual,
- He is resident in India,
- His total income does not exceed Rs. 3,50,000.
Quantum of Rebate:
The rebate shall be equal to the amount of income-tax payable on the total income for any assessment year, or Rs. 2,500, whichever is less.
Q2) Define Taxable income? Show the table of computation of total income of an individual. (5 Marks) (2018)
A2) Taxable income refers to any individual’s or business’ compensation that is used to determine tax liability. The total income amount or gross income is used as the basis to calculate how much the individual or organization owes the government for the specific tax period.
Types of Taxable Income
Every taxpayer knows that failure to file a report for one’s income tax can lead to serious consequences. So, to be sure about paying taxes, here’s a list of the types of income:
1. Employee compensation and benefits
These are the most common types of taxable income and include wages and salaries, as well as fringe benefits.
2. Investment and business income
For people who are self-employed, they are also subject to tax liability, specifically through their business’ income. For example, net rental income and partnership income qualify as taxable income.
3. Miscellaneous taxable income
This includes income that doesn’t fit into the other types. It includes things such as death benefits, life insurance, and canceled debts. Alimony, items involved in barter trading, and income from one’s hobby are also miscellaneous taxable income.
Computation of Total Income
Particulars | Amt (Rs) | ||||
Income from Salary | XX | ||||
Income from House Property | XX | ||||
Profits & Gains from Business & Profession | XX | ||||
Capital Gains | XX | ||||
Income From Other Sources | XX | ||||
Gross Total Income | XX | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total |
| XX | XX | XX | XX | XX |
Less: Deduction under chapter VI A |
|
|
| (XX) | (XX) |
Net Taxable Income |
|
|
|
| XX |
Q3) From the following Profit & Loss Account of Mr. Swaraj, Pune, compute his total taxable income & Tax Liability from for A.Y 2020-21
Particulars | Rs | Particulars | Rs |
To Salary | 40,000 | By Gross profit B/d By Bad debts Recovered By Commission (Business Related)
By Dividend from Domestic company
By FD Interest | 5,22,400 |
To Rent | 46,000 | 15,000 | |
To Advertisement | 15,000 | 85,000 | |
To Int. On loan (Business) | 16,000 |
| |
To Depreciation | 95,000 | 15,000 | |
To Printing & Stationery | 24,000 |
| |
To Postage | 2,400 | 40,000 | |
To General Expenses | 15,000 |
| |
To Patents | 20,000 |
| |
To Bad debts | 5,000 |
| |
To Income Tax | 2,000 |
| |
To Wealth Tax | 1,000 |
| |
To R.D.D. | 15,000 |
| |
To Penalty on GST | 4,000 |
| |
To Charity to poor | 2,000 |
| |
To LIP (Self) | 12,000 |
| |
To Net Profit | 3,63,000 |
| |
|
|
| |
| 6,77,400 | 6,77,400 |
Additional Information:
- Printing Stationery & Advertisement Expenses is 50% related to Private purpose.
- Allowable Depreciation as per Income Tax Act Rs 90,000.
- Business receipts Rs 90,000 is not entered into Profit & Loss Account.
- Depreciation on Patents @ 25% is allowed as deduction.
(8 Marks)
A3)
Mr. Swaraj
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Net Profit as per Profit & Loss Account |
| 3,63,000 |
| ||||
Add: Disallowed Expenses |
|
|
| ||||
Advertisement for Private Purpose (15,000 x 50%) | 7,500 |
|
| ||||
Printing & Stationery for Private Purpose (24,000 x 50%) | 12,000 |
|
| ||||
Depreciation as per P/L A/c | 95,000 |
|
| ||||
Patents (capital expenditure) | 20,000 |
|
| ||||
Income Tax | 2,000 |
|
| ||||
Wealth Tax | 1,000 |
|
| ||||
R.D.D | 15,000 |
|
| ||||
Penalty on GST | 4,000 |
|
| ||||
Charity to Poor (Personal Expense) | 2,000 |
|
| ||||
Life Insurance Premium Self (Personal Expense) | 12,000 | 1,70,500 |
| ||||
|
|
|
| ||||
Less: Non Business Incomes |
|
|
| ||||
Dividend from Domestic Company | 15,000 |
|
| ||||
FD Interest | 40,000 | (55,000) |
| ||||
|
|
|
| ||||
Add: Unrecorded Business Incomes |
|
|
| ||||
Business receipts not recorded |
| 90,000 |
| ||||
|
|
|
| ||||
Less: Unrecorded Business Expenses |
|
|
| ||||
Depreciation as per Income Tax Act | 90,000 |
|
| ||||
Depreciation on Patents (20,000 x 25%) | 5,000 | (95,000) | 4,73,500 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Dividend from Domestic Company (Exempt) |
| - |
| ||||
FD Interest |
| 40,000 | 40,000 | ||||
|
|
|
| ||||
|
|
|
| ||||
Gross Total Income |
|
| 5,13,500 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | - | - | 5,13,500 | 5,13,500 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80C- LIC Premium |
|
|
| (12,000) | (12,000) | ||
|
|
|
|
|
| ||
Net Taxable Income | - | - | - | 5,01,500 | 5,01,500 | ||
Notes:
- Income tax, wealth tax and penalty on GST are expressly disallowed.
- Patents made during the year are of capital nature, hence disallowed.
- Bad debts recovered are assumed as business incomes in absence of information.
- Dividend on shares & FD interest are non business incomes.
Q4) Mrs. Sharma is working in Mahendra Ltd. Delhi. She was furnished the following details of her income for the year 20l9-20.
- Basic salary Rs. 28,000 p.m.
- D.A. Rs. l7,200 p.m. (not considered for retirement benefit)
- Bonus Rs. l,00,000.
- Entertainment allowance Rs. 600 p.m.
- Transport allowance (for coming to office & going back to her residence) Rs. l800 p.m.
- Agricultural income from land situated at Sri Lanka Rs. 30,000.
- Income from business Rs. 45,000.
- Income from unit of UTI Rs. 4,500.
- Interest on Debentures Rs. 12,000
- She has taken life insurance policy of Rs. 2,00,000. LIC premium of Rs. 25,800 & professional tax Rs. 2,500 is paid by employer.
- Repayment of loan borrowed for higher education of her son Rs. 59,000 including interest Rs. 29,000.
- Compute the total taxable income & Tax payable by Mrs. Sharma for AY 2020-21. (8 Marks)
A4)
Mrs. Sharma
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Income from Salary |
|
|
| ||||
Basic Salary (28,000 x 12) |
| 3,36,000 |
| ||||
Dearness Allowance (17,200 x 12) |
| 2,06,400 |
| ||||
Bonus Received |
| 1,00,000 |
| ||||
Entertainment allowance (600 x 12) |
| 7,200 |
| ||||
Transport Allowance (1,800 x 12) |
| 21,600 |
| ||||
Gross Taxable Salary |
| 6,71,200 |
| ||||
Less: Deduction u/s 16 |
|
|
| ||||
Standard Deduction |
| (50,000) |
| ||||
Profession Tax |
| (2,500) |
| ||||
Net Taxable Income from Salary |
|
| 6,18,700 | ||||
|
|
|
| ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Income from Business |
|
| 45,000 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Agricultural income from land in Sri Lanka |
| 30,000 |
| ||||
Income from units of UTI(Exempt) |
| - |
| ||||
Interest on Debentures |
| 12,000 | 42,000 | ||||
|
|
|
| ||||
Gross Total Income |
|
| 7,05,700 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | - | - | 7,05,700 | 7,05,700 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80C |
|
|
|
|
| ||
Life Insurance Premium (Note 1) |
|
|
| 25,800 | 25,800 | ||
|
|
|
|
|
| ||
Section 80E |
|
|
|
|
| ||
Interest on repayment of Higher Education Loan |
|
|
| 29,000 | 29,000 | ||
|
|
|
|
|
| ||
Net Taxable Income |
|
|
| 6,50,900 | 6,50,900 | ||
Note:
- LIC Premium- Lower of
- Premium Paid Rs 25,800
- Limit of 20% of sum assured (2,00,000 x 20%) Rs 40,000 Rs 25800
Q5) How do you compute Tax Liability? (5 Marks)
A5) Computation of Tax Liability
Particulars | Amt (Rs) | ||||
Income from Salary | XX | ||||
Income from House Property | XX | ||||
Profits & Gains from Business & Profession | XX | ||||
Capital Gains | XX | ||||
Income From Other Sources | XX | ||||
Gross Total Income | XX | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total |
| XX | XX | XX | XX | XX |
Less: Deduction under chapter VI A |
|
|
| (XX) | (XX) |
Net Taxable Income |
|
|
|
| XX |
Apply Tax | 15% | 20%/10% | 30% | Slab rate |
|
Gross Tax Liability |
|
|
|
| XX |
Add: Surcharge |
|
|
|
| XX |
Add: Health & Education Cess (4%) |
|
|
|
| XX |
Total Tax Liability |
|
|
|
| XX |
Less: Relief |
|
|
|
| (XX) |
Less: TDS/TCS |
|
|
|
| (XX) |
Less: Tax paid |
|
|
|
| (XX) |
Net Tax Liability/Refund |
|
|
|
| XX/(XX) |
Q6) Mr. Avinash aged 50 years working in PQR Ltd., Mumbai. He has furnished the following details on his income for the year ended 31.3.2020.
Particulars | Rs |
Salary | 6,80,000 |
Dearness Allowance | 1,20,000 |
Bonus Received | 1,20,000 |
Taxable Income from Let out property | 1,72,000 |
Municipal Tax paid |
|
Current Year | 4,000 |
Last Year | 2,000 |
Free car (1800 CC) uses both purpose office as well as private |
|
Cost of expenses is born by employee himself. | 22,000 |
Share of profit from |
|
20% share of profit from partnership firm | 40,000 |
A Hindu undivided Family | 38,000 |
Income from Business | 6,20,000 |
Dividend received from Domestic company | 60,000 |
Interest received on FD | 80,000 |
Income from Lottery | 80,000 |
Interest received on Saving Bank A/c. | 16,000 |
Long Term Capital gain | 1,60,000 |
His Saving & Investment |
|
1) LIC premium | 60,000 |
2) Donation to National Defence Fund | 20,000 |
3) Repayment of Higher Education Loan |
|
(Including Interest Rs. - 20,000) | 60,000 |
4) Repayment of Housing Loan |
|
(Including Interest Rs 30,000) | 90,000 |
5) Medical Insurance Premium |
|
Mother (by cheque) (Age 69 years) | 32,000 |
Himself (by cash) | 15,000 |
6) National saving certificate | 60,000 |
7) Deposited in PPF Account | 60,000 |
He paid Professional Tax | 2,500 |
Company has deducted TDS from his salary for the year | 2,40,000 |
Compute total taxable Income of Mr. Avinash for the A.Y. 2020-2021. (12 Marks)
A6)
Mr. Avinash
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Income from Salary |
|
|
| ||||
Basic Salary |
| 6,80,000 |
| ||||
Dearness Allowance |
| 1,20,000 |
| ||||
Bonus Received |
| 1,20,000 |
| ||||
Perquisite value of Motor Car | 22,000 |
|
| ||||
Value calculated as per Income Tax Act (1800 x 12) | 21,600 | 22,000 |
| ||||
Gross Taxable Salary |
| 9,42,000 |
| ||||
Less: Deduction u/s 16 |
|
|
| ||||
Standard Deduction |
| (50,000) |
| ||||
Profession Tax |
| (2,500) |
| ||||
Net Taxable Income from Salary |
|
| 8,89,500 | ||||
|
|
|
| ||||
Income From House Property |
|
|
| ||||
Gross Annual Value (Actual Rent received) |
| 1,72,000 |
| ||||
Less: Municipal Tax Paid (4,000+2,000) |
| (6,000) |
| ||||
Net Annual Value |
| 1,66,000 |
| ||||
Less: Deduction under section 24 |
|
|
| ||||
Standard Deduction @ 30% of NAV |
| (49,800) |
| ||||
Interest on Housing Loan |
| (30,000) | 86,200 | ||||
|
|
|
| ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Income from Business |
| 6,20,000 |
| ||||
Share of Profit from Partnership Firm (Exempt) |
| - |
| ||||
Share of Profit from HUF (Exempt) |
| - |
| ||||
Total Income from Business & Profession |
|
| 6,20,000 | ||||
|
|
|
| ||||
Capital Gains – LTCG |
|
| 1,60,000 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Dividend received from Domestic company (Exempt) |
|
|
| ||||
Interest received on FD |
| 80,000 |
| ||||
Income from Lottery |
| 80,000 |
| ||||
Interest received on Saving Bank A/c |
| 16,000 | 1,76,000 | ||||
|
|
|
| ||||
Gross Total Income |
|
| 19,31,700 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | 1,60,000 | 80,000 | 16,91,700 | 19,31,700 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80C |
|
|
|
|
| ||
Life Insurance Premium |
|
|
| 60,000 |
| ||
Repayment of Housing Loan |
|
|
| 60,000 |
| ||
Investment in NSC |
|
|
| 60,000 |
| ||
Investment in PPF |
|
|
| 60,000 |
| ||
Total |
|
|
| 2,40,000 |
| ||
Maximum Deduction allowed |
|
|
| 1,50,000 | 1,50,000 | ||
Section 80D |
|
|
|
|
| ||
Medical Insurance Premium of Mother (Senior citizen) |
|
|
| 32,000 | 32,000 | ||
Section 80E |
|
|
|
|
| ||
Interest on repayment of Higher Education Loan |
|
|
| 20,000 | 20,000 | ||
Section 80G |
|
|
|
|
| ||
Donation to National Defense Fund |
|
|
| 20,000 | 20,000 | ||
Section 80TTA |
|
|
|
|
| ||
Interest received is 16000 but maximum deduction allowed is 10000 |
|
|
| 10,000 | 10,000 | ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Net Taxable Income | - | 1,60,000 | 80,000 | 14,59,700 | 16,99,700 | ||
Q7) (PGBP + IFHP + IFOS + Deduction)
The following is the Profit & Loss account for previous year furnished by Mr. Sagar for financial year ended 31st March, 2020. (AY 2020-21)
Particulars | Amount Rs. | Particulars | Amount Rs. |
To salary | 78,000 | By Gross Profit | 2,23,000 |
To general Expenses | l2,500 | By Sundry Receipt | 8,400 |
To Advertisement | 8,000 | By Gift from father | 25,000 |
To Fire insurance | 3,500 | By Interest on saving |
|
To Depreciation | l5,800 | Bank deposit | 6,000 |
To office expenses | 4,500 | By Bad debts |
|
To Bonus | l2,800 | Recovered | 5,400 |
To Income tax | 8,600 | (Not allowed earlier |
|
To VAT | 4,500 | As deduction) |
|
To interest on Bank Loan To Municipal Tax of House To Interest on Loan for House Property | 5,600 10,000
1,08,000 | By Rent from House Property |
2,40,000 |
To Donation to Educational |
|
|
|
Institution | l0,500 |
|
|
To Interest on Income Tax | 3,500 |
|
|
To Net Profit | 2,22,000 |
|
|
| 5,07,800 |
| 5,07,800 |
Additional Information:
- Salary includes Rs. 4,200 paid to domestic servant.
- Advertisement includes Rs. 550 as expenditure incurred for selling house hold furniture.
- Allowable depreciation as per Income Tax Rules Rs. l4,000.
- VAT includes Rs. 500 as penalty for not filling return in time.
- General expenses include Rs. 5850 as the gift given to friend on his marriage ceremony.
- You are required to compute total Taxable income for relevant A. Y. 2020-21 of Mr. Sagar. (12 marks)
A7)
Mr. Sagar
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Net Profit as per Profit & Loss Account |
| 2,22,000 |
| ||||
Add: Disallowed Expenses |
|
|
| ||||
Salary to domestic servant | 4,200 |
|
| ||||
Gift to Friend (general expense) | 5,850 |
|
| ||||
Advertisement for personal purpose | 550 |
|
| ||||
Depreciation as per P/L A/c | 15,800 |
|
| ||||
Income Tax | 8,600 |
|
| ||||
Penalty for late filing of VAT returns | 500 |
|
| ||||
Interest on Housing Loan | 1,08,000 |
|
| ||||
Municipal Tax Paid for House Property | 10,000 |
|
| ||||
Interest on Income Tax | 3,500 | 1,57,000 |
| ||||
|
|
|
| ||||
Less: Non Business Incomes |
|
|
| ||||
Sundry Receipts | 8,400 |
|
| ||||
Gift from Father | 25,000 |
|
| ||||
Bad Debts recovered | 5,400 |
|
| ||||
Rent from House Property | 2,40,000 |
|
| ||||
Interest on Bank deposit | 6,000 | (2,84,800) |
| ||||
|
|
|
| ||||
Add: Unrecorded Business Incomes |
|
|
| ||||
|
|
|
| ||||
Less: Unrecorded Business Expenses |
|
|
| ||||
Depreciation as per Income Tax Act |
| (14,000) | 80,200 | ||||
|
|
|
| ||||
Income From House Property |
|
|
| ||||
Gross Annual Value (Actual Rent received) |
| 2,40,000 |
| ||||
Less: Municipal Tax Paid |
| (10,000) |
| ||||
Net Annual Value |
| 2,30,000 |
| ||||
Less: Deduction under section 24 |
|
|
| ||||
Standard Deduction @ 30% of NAV |
| (69,000) |
| ||||
Interest on Housing Loan |
| (1,08,000) | 53,000 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Sundry Receipt |
| 8,400 |
| ||||
Gift from Father (Exempt) |
| - |
| ||||
Interest on Savings bank deposit |
| 6,000 | 14,400 | ||||
|
|
|
| ||||
Gross Total Income |
|
| 1,47,600 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | - | - | 1,47,600 | 1,47,600 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80TTA- Saving Bank Interest |
|
|
| 6,000 | (6,000) | ||
Section 80G- Donation to Educational Institution |
|
|
| 10,500 | (10,500) | ||
|
|
|
|
|
| ||
Net Taxable Income | - | - | - |
| 1,31,100 | ||
Notes:
- Personal expenses like salary to domestic servant, advertisement for personal sale of asset and gift to friend is disallowed.
- Income Tax and any penalties are expressly disallowed.
- Depreciation as per P/L A/c is disallowed.
- Bad debts recovered (not allowed earlier as deduction) is not taxable. Hence deducted.
Q8) (PGBP + IFOS + Deduction)
From the following Profit & Loss Account of Mr. Hanspal, Pune, compute his total taxable income & Tax Liability from for A.Y 2020-21
Particulars | Rs | Particulars | Rs |
To Salary | 40,000 | By Gross profit B/d By Bad debts Recovered By Commission (Business Related)
By Dividend from Domestic company
By FD Interest | 5,22,400 |
To Rent | 46,000 | 15,000 | |
To Advertisement | 15,000 | 85,000 | |
To Int. On loan (Business) | 16,000 |
| |
To Depreciation | 95,000 | 15,000 | |
To Printing & Stationery | 24,000 |
| |
To Postage | 2,400 | 40,000 | |
To General Expenses | 15,000 |
| |
To Patents | 20,000 |
| |
To Bad debts | 5,000 |
| |
To Income Tax | 2,000 |
| |
To Wealth Tax | 1,000 |
| |
To R.D.D. | 15,000 |
| |
To Penalty on GST | 4,000 |
| |
To Charity to poor | 2,000 |
| |
To LIP (Self) | 12,000 |
| |
To Net Profit | 3,63,000 |
| |
|
|
| |
| 6,77,400 | 6,77,400 |
Additional Information:
- Printing Stationery & Advertisement Expenses is 50% related to Private purpose.
- Allowable Depreciation as per Income Tax Act Rs 90,000.
- Business receipts Rs 90,000 is not entered into Profit & Loss Account.
- Depreciation on Patents @ 25% is allowed as deduction.
A8) Mr. Hanspal
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Net Profit as per Profit & Loss Account |
| 3,63,000 |
| ||||
Add: Disallowed Expenses |
|
|
| ||||
Advertisement for Private Purpose (15,000 x 50%) | 7,500 |
|
| ||||
Printing & Stationery for Private Purpose (24,000 x 50%) | 12,000 |
|
| ||||
Depreciation as per P/L A/c | 95,000 |
|
| ||||
Patents (capital expenditure) | 20,000 |
|
| ||||
Income Tax | 2,000 |
|
| ||||
Wealth Tax | 1,000 |
|
| ||||
R.D.D | 15,000 |
|
| ||||
Penalty on GST | 4,000 |
|
| ||||
Charity to Poor (Personal Expense) | 2,000 |
|
| ||||
Life Insurance Premium Self (Personal Expense) | 12,000 | 1,70,500 |
| ||||
|
|
|
| ||||
Less: Non Business Incomes |
|
|
| ||||
Dividend from Domestic Company | 15,000 |
|
| ||||
FD Interest | 40,000 | (55,000) |
| ||||
|
|
|
| ||||
Add: Unrecorded Business Incomes |
|
|
| ||||
Business receipts not recorded |
| 90,000 |
| ||||
|
|
|
| ||||
Less: Unrecorded Business Expenses |
|
|
| ||||
Depreciation as per Income Tax Act | 90,000 |
|
| ||||
Depreciation on Patents (20,000 x 25%) | 5,000 | (95,000) | 4,73,500 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Dividend from Domestic Company (Exempt) |
| - |
| ||||
FD Interest |
| 40,000 | 40,000 | ||||
|
|
|
| ||||
|
|
|
| ||||
Gross Total Income |
|
| 5,13,500 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | - | - | 5,13,500 | 5,13,500 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80C- LIC Premium |
|
|
| (12,000) | (12,000) | ||
|
|
|
|
|
| ||
Net Taxable Income | - | - | - | 5,01,500 | 5,01,500 | ||
Notes:
- Income tax, wealth tax and penalty on GST are expressly disallowed.
- Patents made during the year are of capital nature, hence disallowed.
- Bad debts recovered are assumed as business incomes in absence of information.
- Dividend on shares & FD interest are non business incomes.
Q9) (PGBP + IFHP + IFOS + Deduction)
The following is the Profit & Loss account for previous year furnished by Mr. Mukherjee for financial year ended 31st March, 2020. (AY 2020-21)
Particulars | Amount Rs. | Particulars | Amount Rs. |
To salary | 88,500 | By Gross Profit | 2,23,000 |
To general Expenses | l2,500 | By Sundry Receipt | 8,400 |
To Advertisement | 8,000 | By Gift from father | 25,000 |
To Fire insurance | 3,500 | By Interest on saving |
|
To Depreciation | l5,800 | Bank deposit | 6,000 |
To office expenses | 4,500 | By Bad debts |
|
To Bonus | l2,800 | Recovered | 5,400 |
To Income tax | 8,600 | (Not allowed earlier |
|
To VAT | 4,500 | As deduction) |
|
To interest on Bank Loan To Municipal Tax of House To Interest on Loan for House Property | 5,600 10,000
1,08,000 | By Rent from House Property |
2,40,000 |
|
|
|
|
|
|
|
|
To Interest on Income Tax | 3,500 |
|
|
To Net Profit | 2,22,000 |
|
|
| 5,07,800 |
| 5,07,800 |
Additional Information:
- Salary includes Rs. 4,200 paid to domestic servant.
- Advertisement includes Rs. 550 as expenditure incurred for selling house hold furniture.
- Allowable depreciation as per Income Tax Rules Rs. l4,000.
- VAT includes Rs. 500 as penalty for not filling return in time.
- General expenses include Rs. 5850 as the gift given to friend on his marriage ceremony.
You are required to compute total Taxable income & tax liability thereon for relevant A. Y. 2020-21 of Mr. Mukherjee.
A9)
Mr. Mukherjee
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Net Profit as per Profit & Loss Account |
| 2,22,000 |
| ||||
Add: Disallowed Expenses |
|
|
| ||||
Salary to domestic servant | 4,200 |
|
| ||||
Gift to Friend (general expense) | 5,850 |
|
| ||||
Advertisement for personal purpose | 550 |
|
| ||||
Depreciation as per P/L A/c | 15,800 |
|
| ||||
Income Tax | 8,600 |
|
| ||||
Penalty for late filing of VAT returns | 500 |
|
| ||||
Interest on Housing Loan | 1,08,000 |
|
| ||||
Municipal Tax Paid for House Property | 10,000 |
|
| ||||
Interest on Income Tax | 3,500 | 1,57,000 |
| ||||
|
|
|
| ||||
Less: Non Business Incomes |
|
|
| ||||
Sundry Receipts | 8,400 |
|
| ||||
Gift from Father | 25,000 |
|
| ||||
Bad Debts recovered | 5,400 |
|
| ||||
Rent from House Property | 2,40,000 |
|
| ||||
Interest on Bank deposit | 6,000 | (2,84,800) |
| ||||
|
|
|
| ||||
Add: Unrecorded Business Incomes |
|
|
| ||||
|
|
|
| ||||
Less: Unrecorded Business Expenses |
|
|
| ||||
Depreciation as per Income Tax Act |
| (14,000) | 80,200 | ||||
|
|
|
| ||||
Income From House Property |
|
|
| ||||
Gross Annual Value (Actual Rent received) |
| 2,40,000 |
| ||||
Less: Municipal Tax Paid |
| (10,000) |
| ||||
Net Annual Value |
| 2,30,000 |
| ||||
Less: Deduction under section 24 |
|
|
| ||||
Standard Deduction @ 30% of NAV |
| (69,000) |
| ||||
Interest on Housing Loan |
| (1,08,000) | 53,000 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Sundry Receipt |
| 8,400 |
| ||||
Gift from Father (Exempt) |
| - |
| ||||
Interest on Savings bank deposit |
| 6,000 | 14,400 | ||||
|
|
|
| ||||
Gross Total Income |
|
| 1,47,600 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | - | - | 1,47,600 | 1,47,600 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80TTA- Saving Bank Interest |
|
|
| 6,000 | (6,000) | ||
|
|
|
|
|
| ||
Net Taxable Income | - | - | - |
| 1,41,600 | ||
Notes:
- Personal expenses like salary to domestic servant, advertisement for personal sale of asset and gift to friend is disallowed.
- Income Tax and any penalties are expressly disallowed.
- Depreciation as per P/L A/c is disallowed.
- Bad debts recovered (not allowed earlier as deduction) is not taxable. Hence deducted.
Q10) (IFS + IFHP + PGBP + CG + IFOS + Deductions)
Mr. Angad aged 50 years working in PQR Ltd., Mumbai. He has furnished the following details on his income for the year ended 31.3.2020.
Particulars | Rs |
Salary | 6,80,000 |
Dearness Allowance | 1,20,000 |
Bonus Received | 1,20,000 |
Taxable Income from Let out property | 1,72,000 |
Municipal Tax paid |
|
Current Year | 4,000 |
Last Year | 2,000 |
Free car (1800 CC) uses both purpose office as well as private |
|
Cost of expenses is born by employee himself. | 22,000 |
Share of profit from |
|
20% share of profit from partnership firm | 40,000 |
A Hindu undivided Family | 38,000 |
Income from Business | 6,20,000 |
Dividend received from Domestic company | 60,000 |
Interest received on FD | 80,000 |
Income from Lottery | 80,000 |
Interest received on Saving Bank A/c. | 16,000 |
Long Term Capital gain | 1,60,000 |
His Saving & Investment |
|
1) LIC premium | 60,000 |
2) Repayment of Higher Education Loan |
|
(Including Interest Rs. - 20,000) | 60,000 |
3) Repayment of Housing Loan |
|
(Including Interest Rs 30,000) | 90,000 |
4) Medical Insurance Premium |
|
Mother (by cheque) (Age 69 years) | 32,000 |
Himself (by cash) | 15,000 |
5) National saving certificate | 60,000 |
6) Deposited in PPF Account | 60,000 |
He paid Professional Tax | 2,500 |
Compute total taxable Income & Tax liability of Mr. Angad for the A.Y. 2020-2021.
A10)
Mr. Angad
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Income from Salary |
|
|
| ||||
Basic Salary |
| 6,80,000 |
| ||||
Dearness Allowance |
| 1,20,000 |
| ||||
Bonus Received |
| 1,20,000 |
| ||||
Perquisite value of Motor Car | 22,000 |
|
| ||||
Value calculated as per Income Tax Act (1800 x 12) | 21,600 | 22,000 |
| ||||
Gross Taxable Salary |
| 9,42,000 |
| ||||
Less: Deduction u/s 16 |
|
|
| ||||
Standard Deduction |
| (50,000) |
| ||||
Profession Tax |
| (2,500) |
| ||||
Net Taxable Income from Salary |
|
| 8,89,500 | ||||
|
|
|
| ||||
Income From House Property |
|
|
| ||||
Gross Annual Value (Actual Rent received) |
| 1,72,000 |
| ||||
Less: Municipal Tax Paid (4,000+2,000) |
| (6,000) |
| ||||
Net Annual Value |
| 1,66,000 |
| ||||
Less: Deduction under section 24 |
|
|
| ||||
Standard Deduction @ 30% of NAV |
| (49,800) |
| ||||
Interest on Housing Loan |
| (30,000) | 86,200 | ||||
|
|
|
| ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Income from Business |
| 6,20,000 |
| ||||
Share of Profit from Partnership Firm (Exempt) |
| - |
| ||||
Share of Profit from HUF (Exempt) |
| - |
| ||||
Total Income from Business & Profession |
|
| 6,20,000 | ||||
|
|
|
| ||||
Capital Gains – LTCG |
|
| 1,60,000 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Dividend received from Domestic company (Exempt) |
|
|
| ||||
Interest received on FD |
| 80,000 |
| ||||
Income from Lottery |
| 80,000 |
| ||||
Interest received on Saving Bank A/c |
| 16,000 | 1,76,000 | ||||
|
|
|
| ||||
Gross Total Income |
|
| 19,31,700 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | 1,60,000 | 80,000 | 16,91,700 | 19,31,700 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80C |
|
|
|
|
| ||
Life Insurance Premium |
|
|
| 60,000 |
| ||
Repayment of Housing Loan |
|
|
| 60,000 |
| ||
Investment in NSC |
|
|
| 60,000 |
| ||
Investment in PPF |
|
|
| 60,000 |
| ||
Total |
|
|
| 2,40,000 |
| ||
Maximum Deduction allowed |
|
|
| 1,50,000 | 1,50,000 | ||
Section 80D |
|
|
|
|
| ||
Medical Insurance Premium of Mother (Senior citizen) |
|
|
| 32,000 | 32,000 | ||
Section 80E |
|
|
|
|
| ||
Interest on repayment of Higher Education Loan |
|
|
| 20,000 | 20,000 | ||
Section 80TTA |
|
|
|
|
| ||
Interest received is 16000 but maximum deduction allowed is 10000 |
|
|
| 10,000 | 10,000 | ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Net Taxable Income | - | 1,60,000 | 80,000 | 14,79,700 | 17,19,700 | ||
Q11) (IFS + PGBP + IFOS)
Mrs. Sen is working in Mahendra Ltd. Delhi. She was furnished the following details of her income for the year 20l9-20.
- Basic salary Rs. 28,000 p.m.
- D.A. Rs. l7,200 p.m. (not considered for retirement benefit)
- Bonus Rs. l,00,000.
- Entertainment allowance Rs. 600 p.m.
- Transport allowance (for coming to office & going back to her residence) Rs. l800 p.m.
- Agricultural income from land situated at Sri Lanka Rs. 30,000.
- Income from business Rs. 45,000.
- Income from unit of UTI Rs. 4,500.
- Interest on Debentures Rs. 12,000
- She has taken life insurance policy of Rs. 2,00,000. LIC premium of Rs. 25,800 & professional tax Rs. 2,500 is paid by employer.
- Repayment of loan borrowed for higher education of her son Rs. 59,000 including interest Rs. 29,000.
Compute the total taxable income & Tax payable by Mrs. Sen for AY 2020-21.
A11)
Mrs. Sen
Statement showing calculation of total income & tax liability for AY 2020-21
Particulars | Amount (Rs) | Amount (Rs) | Amount (Rs) | ||||
Income from Salary |
|
|
| ||||
Basic Salary (28,000 x 12) |
| 3,36,000 |
| ||||
Dearness Allowance (17,200 x 12) |
| 2,06,400 |
| ||||
Bonus Received |
| 1,00,000 |
| ||||
Entertainment allowance (600 x 12) |
| 7,200 |
| ||||
Transport Allowance (1,800 x 12) |
| 21,600 |
| ||||
Gross Taxable Salary |
| 6,71,200 |
| ||||
Less: Deduction u/s 16 |
|
|
| ||||
Standard Deduction |
| (50,000) |
| ||||
Profession Tax |
| (2,500) |
| ||||
Net Taxable Income from Salary |
|
| 6,18,700 | ||||
|
|
|
| ||||
Profits & Gains from Business & Profession |
|
|
| ||||
Income from Business |
|
| 45,000 | ||||
|
|
|
| ||||
Income From Other Sources |
|
|
| ||||
Agricultural income from land in Sri Lanka |
| 30,000 |
| ||||
Income from units of UTI(Exempt) |
| - |
| ||||
Interest on Debentures |
| 12,000 | 42,000 | ||||
|
|
|
| ||||
Gross Total Income |
|
| 7,05,700 | ||||
Subdivision of GTI | STCG u/s 111 | LTCG | Winnings, lottery Etc | Remaining GTI | Total | ||
| - | - | - | 7,05,700 | 7,05,700 | ||
Less: Deduction under chapter VI A |
|
|
|
|
| ||
Section 80C |
|
|
|
|
| ||
Life Insurance Premium (Note 1) |
|
|
| 25,800 | 25,800 | ||
|
|
|
|
|
| ||
Section 80E |
|
|
|
|
| ||
Interest on repayment of Higher Education Loan |
|
|
| 29,000 | 29,000 | ||
|
|
|
|
|
| ||
Net Taxable Income |
|
|
| 6,50,900 | 6,50,900 | ||
Note:
- LIC Premium- Lower of
c. Premium Paid Rs 25,800
d. Limit of 20% of sum assured (2,00,000 x 20%) Rs 40,000 Rs 25800