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Taxation Assignment

This document calculates Mr. B's taxable income and tax liability by considering various sources of income and deductions. It determines Mr. B's business income, lottery winnings, and other sources of income. It then calculates applicable deductions and arrives at the net taxable income and total tax liability.

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sadforhappy08
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27 views3 pages

Taxation Assignment

This document calculates Mr. B's taxable income and tax liability by considering various sources of income and deductions. It determines Mr. B's business income, lottery winnings, and other sources of income. It then calculates applicable deductions and arrives at the net taxable income and total tax liability.

Uploaded by

sadforhappy08
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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To calculate Mr.

B's taxable income and tax liability, we need to consider all sources of
income and the deductions available under the Indian Income Tax Act.

Income Sources:
1. Business Income: ₹75,00,000
2. Gift from Ex-Wife: ₹6,00,000 (Note: Gifts from specified relatives are not taxable,
hence this is not considered taxable income.)
3. Lottery Winnings: ₹19,00,000 (Taxable at a special rate)
4. Matured Life Insurance Policy: ₹32,00,000 (Subject to certain conditions for tax
exemption)

Expenditures and Investments:


1. Family Trip Expense: ₹15,00,000 (Not deductible)
2. Gift to Wife: ₹4,50,000 (Not deductible)
3. Life Insurance Premium: ₹50,000 annually (Eligible for deduction under Section 80C)
4. Tuition Fee for Daughter: ₹50,000 (Eligible for deduction under Section 80C)
5. PPF Investment: ₹80,000 (Eligible for deduction under Section 80C)
6. Medical Test: ₹6,000 (Not deductible)
7. Health Insurance Premium: ₹27,000 (Eligible for deduction under Section 80D)

Working Notes:
1. Calculate Gross Total Income
a. Business Income: ₹75,00,000
b. Lottery Winnings: ₹19,00,000 (Taxed at 30% flat rate, no deductions allowed)
c. Matured Life Insurance Policy: ₹32,00,000 (Assumed exempt if it qualifies
under Section 10(10D))
Total Gross Income (excluding non-taxable items):-
₹75,00,000 (Business Income) + ₹19,00,000 (Lottery Winnings) = ₹94,00,000

2. Deductions under Section 80C


 Life Insurance Premium: ₹50,000
 Tuition Fees: ₹50,000
 PPF Investment: ₹80,000
Total 80C Deductions:-
₹50,000 + ₹50,000 + ₹80,000 = ₹1,80,000
Note: Maximum allowable deduction under Section 80C is ₹1,50,000.

3. Deductions under Section 80D


 Health Insurance Premium: ₹27,000

4. Calculate Net Taxable Income


a. Income excluding Lottery Winnings:
₹75,00,000 (Business Income)
b. Deductions:
 Section 80C: ₹1,50,000 (Max allowed)
 Section 80D: ₹27,000
Total Deductions:-
₹1,50,000 + ₹27,000 = ₹1,77,000

Net Taxable Income excluding Lottery Winnings:-


₹75,00,000 - ₹1,77,000 = ₹73,23,000

c. Taxable Income including Lottery Winnings:-


₹73,23,000 + ₹19,00,000 (Lottery Winnings) = ₹92,23,000

5. Calculate Tax Liability


a. Tax on Regular Income: ₹73,23,000
 Income up to ₹2,50,000: Nil
 ₹2,50,001 to ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
 ₹5,00,001 to ₹10,00,000: 20% of ₹5,00,000 = ₹1,00,000
 Above ₹10,00,000: 30% of ₹63,23,000 = ₹18,96,900
Total Tax on Regular Income:-
₹12,500 + ₹1,00,000 + ₹18,96,900 = ₹20,09,400

b. Tax on Lottery Winnings: ₹19,00,000


 30% of ₹19,00,000 = ₹5,70,000
 Plus 4% Health and Education Cess on lottery tax: ₹5,70,000 4% =
₹22,800
Total Tax on Lottery Winnings:-
₹5,70,000 + ₹22,800 = ₹5,92,800

c. Total Tax Liability:-


₹20,09,400 (Regular Income Tax) + ₹5,92,800 (Lottery Tax) = ₹26,02,200

d. Add Health and Education Cess on Regular Income Tax:-


4% of ₹20,09,400 = ₹80,376

Final Total Tax Liability:


₹26,02,200 + ₹80,376 = ₹26,82,576

Conclusion
Mr. B's total taxable income is ₹92,23,000 and
his total tax liability is ₹26,82,576.

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