Computation of Total Income and Tax Payable

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

1. 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:

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/-

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

(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. 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. 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 5
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.
   Quality properties for rent

   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. 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.

   7. 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. 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.
      Quality properties for rent

      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. 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.
      Quality properties for rent

      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