KEY/SCHEME

1.Methods of Taxation

a.Progressive method b.Proportional method c. Regression method.

2.An assesse is any individual who is liable to pay taxesto the government against any kind of income
earned or any losses incurred by him for a particular assessment year.

3. Perquitie may be defined as any casual emolument or enefit attached to an office or position in
addition to salary or wages.”perquisite “is defined in the section 17(2) of the Income tax act .

4.Types of provident Funds

1.Statutory provident 2.Recognised provident Fund 3.Unrecognised provident Fund 4.Public provident
Fund.

5.Gross Annual Value

The annual value of the property is deemed to be the sum for which the property
might reasonably be expected to be let out from year to year.It is thus a notional income to be derived
from an imaginary tenant on a reasonable basis,The basis selected as measure of the income to be
assessed is ‘annual value’.

6.Standard Rent

Standard rent is derived from rent prescribed under Rent control Act.

7.profession;

A Profession is an occupation requiring purely intellectual skill or manual skill controlled by the
intellectual skill of the operator, e.g. Lawyer,Engineer,Accountant,and Doctor etc.

8. depreciation

Depreciation means a decrease in the value ofn assets by wear in tear caused by their
uses in the business over a period of time. An assets cost is spread over its anticipated life by charging
depreciation every year against the profits of the business.

9. capital Assets?

Capital assets is defined to include property of any kind whether fised or

10.long term capital gain;

Gain on sale of assets held for a period of 36 months (in case of listed shares ,debentures this
period more than 12n months).In case of land or building or both more than 24 months.Unlisted shares
held for more than 24 months are long term.

11.Capital Expenditure;
 Capital Expenditure means any expenditure incurred to acquire a fixed assets or in connection
with installation of fixed assets and a payment made to discharge a capital liability. For example
amount soent on perchaes of machinery or land etc.

12. Provisions relating to preliminary expenses?

Section 35D;preliminary expenses are deductible u/s 35D

Initial Expenses;preliminary expenses are incurred in respect of preparation of feasibility report,project

Five successive years :One fifth of the qualifying expenditure is allowable as deduction in each of five
successive years.

Part-B

Determine Mr. Rajendran’s Residential Status for PY 2022-23; AY: 2023-24

(a) (1) Stay in India during the previous year:

From 1-4-2022 to 31-3-2023

He stayed ‘‘1-4-22 to 15-12-22’’ & ‘‘2-2-23 to 31-3-23’’ : -

1-4-22 to 15-12-22 = 30 + 31 + 30 + 31 + 31 + 30 + 31 + 30 + 15 = 259 days

2-2-23 to 31-3-23 = 27 + 31 = 58 days

Total No. of days (During 2022-23) = 259 + 58 = 317 Days

First basic conditions under Sec 6(1) of 182 days or more stay is satisfied.

Mr. Rajendran is ‘Resident’.

(b) (i) Stay in India during 10 years preceding the previous year:

Since he left India for the first time on 15-12-2022, he would have been residing in

India for the 10 years preceding the previous year.

Additional conditions (i) of being resident for 2 out of 10 years preceding the previous

year is satisfied.

(ii) Stay in India for 730 days during 7 years preceding the previous year:

Since he left India for the first time on 15-12-2022, he would have stayed for 730 days

or more in preceding 7 years.

Additional conditions (2) of stay for 730 days during 7 years preceding the previous
year is also satisfied.

Conclusion:

Mr. Rajendran is ‘‘Resident’’ & ‘‘Ordinarily Resident’’ under Sec 6(1) for the

AY 2023-24.

Note:

The day on which the assessee leaves India shall be taken into account as stay of the

individual in India.

14 .

Computation of Taxable HRA

Particulars Rs. Rs.

House Rent Allowance 350  12 4,200

Less: Exempted* 2,400

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Taxable HRA 1,800

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* Working Note:

House Rent Allowance exempted is least of the following:

Rs.

1. HRA Received 4,200

2. 40% of salary* (3,000  12  40%) 14,400

(Basic + DASB + COT)

3. Rent Paid – 10% of Salary

6,000 (500  12) – 3,600 (3,000  12  10%)

2,400

Least of the above is Rs. 2,400

Rs.

Step 1: Expected rental value

Higher of 1,05,000 (or) 1,07,000 1,07,000

Step 2: Actual Rent 1,02,000

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Gross Annual Value – Higher of Step 1 or Step 2 1,07,000

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16. Computation of amount of depreciation of P & M 2022-23

Particulars Rs.

W.D.V as on 1-4-22 1,00,000

Add: New machine purchased on 1-1-23 (+) 60,000

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1,60,000

Less:Sold machinery 1-2-23 (–) 40,000

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Written down value 1,20,000

Less:Depreciation 15/100 X ½ X 60, 000

less than 180 days used 4,500

(1,20,000 – 60,000) =

15/100X 60,000 9,000 (–) 13,500

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W.D.V as on 31-3-23 1,06,500

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Note:

1. Rate of depreciation is 15%

2. Asset acquired and used for less than 180

P.Y. 2022-23; A.Y. 2023-24

Particulars Rs. Rs.

Net Sales Consideration 60,00,000

Less: Indexed Cost of Acquisition 9,84,513

331/117 X 3,48,000

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LTCG 50,15,487

Less: Exemption u/s 54

New House purchased 3,00,000

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Taxable LTCG 47,15,487

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18. FULLY EXEMPTED ALLOWANCES:

a) Allowances paid to Indian Govt. employees working in abroad:when employees of Government of

b) Sumptuary allowances:Sumptuary allowances paid to judges of High Court and Supreme Court are
fully exempted.

c) Allowance paid to employees of UNO:Allowances received by employees of United Nations

d) Compensatory allowance paid to judges:When a judge receives compensatory allowance, it is not

19 . Municipal Rental Valuation (MRV):Municipal Rental Valuation is for collecting municipal taxes, local
authorities survey and value buildings. This valuation is taken as evidence in determining the earning
potential of the building.

. Fair Rental Value (FRV):Fair rent is the rent, which similar properties in the same locality might
reasonably fetch.

. Expected Rent (ER): The reasonable expected rent is the sum for which a property might reasonably
expect to be let out from year to year. It is derived as higher of Municipal Valuation (MV) and Fair Rent
(FR) but subject to Standard Rent (SR).
20.Exemption u/s 54D

U/s 54-D, any capital gain arising from the transfer of land and buildings by way of com- pulsory
acquisition, is reinvested in the purchase or construction of similar asset within a period of 2 years from
the date of getting compensation, the amount of capital gain so invest- ed shall be exempted from tax.
Otherwise it should be deposited in the capital gain deposit scheme with a specified bank up to the last
date of filing or return, it shall be fully exempted. This amount must be utilised for the purchase or
construction of similar asset within the specified time

PART-C

21. Total income of a Resident and Ordinarily Resident [Sec. 5(1)]

The total income of a resident assessee would consist of:(1) Income received or deemed to be received
in India during the previous year irrespective of the place or date of its accrual or arisal. (1) Income
which accrues or arises or is deemed to accrue or arise in India during the previous year, the date or
place of its receipt being immaterial; and (ii) Income which accrues or arises outside India even if it is not
received or brought into India during the previous year.

Total Income of a Non-Resident [Sec. 5(23)]

A Non-Resident is liable to tax in respect of the following incomes:

(a) Income received or deemed to be received in India by or on his behalf.

(b) Income accrues or arises or is deemed to accrue or arise in India during

the previous year.

It, therefore follows that in the case of a 'non-resident', the following incomes

are not chargeable to tax:

(1) Income received or accrued outside India from a business controlled from or a profession set up in
India.

2)Income received and accrued outside India from a business controlled from outside India or a
profession set up outside India.

(3) Income (not being from a business/profession) received and accrued outside India.

22.