Practice Questions with different case

Case-I

For the Assessment Year 2023-24, Mr. Ram, who is 58 years old, resident in India, furnishes the following information:

Basic salary 15000 pm

Dearness Allowance (20% forming part for retirement benefits) 40% of basic salary

City Compensatory Allowance . 300 pm

Children education allowance 200 pm per child

for 2 children
Transport allowance 2000 pm

House Rent Allowance 6000 pm

Actual rent paid for a house in Delhi 7000 pm

He travels via Delhi metro from his residence to office and back . 1500 pm
in which he spends
Medical allowance . 1000 pm

Lunch allowance . 200 pm

He owns a house property in Mumbai whose construction is completed in 2005 and which is let out for Rs. 40,000 pm. The
standard rent as per Rent Control Act is Rs. 3,10,000. He pays Rs. 32,000 for municipal taxes and interest on capital borrowed
for construction of house Rs. 75,000. Further, he incurs Rs. 10,000 on repairs of the house.
Long-term capital gains Rs. 225,000
Short term capital gains for the year Rs.1,01,000 (STT not applicable).
Dividend received from Indian Company X Ltd. Rs. 12,000.
Interest received @10% on listed debentures of face value 14,00,000 Diwali
Gift of gold coins received from a friend. Market value Rs. 50,000 Share of
profit from:

Firm 40,000

HUF 34,000

Income from Lotteries (gross) 50,000

Mr. Ram invested in PPF Rs.1,50,000 and also paid a life insurance premium of Rs. 21,000. Donation to National Defence Fund
Rs.10,000.
Compute the total income and Tax liability of Mr. Ram for the Assessment year 2023-24.
Option 1 : Assessee has not opted for Section 115BAC
Option 2 : Assessee has opted for Section 115BAC
Solution:
Option 1: Assessee has not opted for Section 115BAC
(A) Computation of Total Income

Particulars Amount Rs. Amount Rs.

Income from Salary

Basic salary (15000 *12) 180,000

Dearness Allowance (180,000*0.40) 72,000

CCA (fully taxable) (300*12) 3600

Children Education Allowance 4800

Less: Exempt (2400) 2400

Transport allowance 24000

Less: Exempt (Exemption withdrawn by Finance Act, 2018) NIL 24000

House Rent Allowance (Note) 7440

Lunch Allowance 2400

Medical Allowance 12000

Less: Deduction under section 16 (ia) Standard Deduction (50,000)

Taxable Salary 2,53,840

Income from house property

Gross annual Value (Rent Received 40,000*12) 4,80,000

Less: Municipal Taxes (32,000)

Net annual Value 4,48,000

Less: Standard Deduction @ 30% of 4,48, 000 (1,34,400)

Less: Interest on capital borrowed (75,000)

Income from House property 2,38,600

Income from Business/Profession

Firm (Exempt) NIL

HUF (Exempt) NIL

Income under the head Capital Gains

Long-term capital gains u/s 112 2,25,000

Short term Capital Gain 1,01,000

Income from other sources

Dividend received from Indian Company X Ltd. 12,000

Interest received on listed debentures 1,40,000

Winning from Lotteries 50,000

Gift in kind 50,000 252,000

Gross Total Income 10,70,440

Less: Deduction under section 80C to 80U

(i) Under section 80C (maximum) (150,000)

(ii) Under section 80G (10,000)

Total Income 9,10,440

(B) Computation of Tax on Total Income

Tax on winning from lotteries (30% of Rs. 50,000) 15,000

Tax on long-term capital gains (20% of Rs. 2,25,000) 45000

 Balance of Total Income Rs. 6,35,440 39,588

Total tax 99,588

Add: Health and Education cess at 4% 3,983.52

Total liability 1,03,571.52

Total liability (round off) 1,03,570

Notes:
1. House Rent Allowance: Least of three is exempt
i. 50% of the salary* because the house is in Delhi = 0.50 * 194400 = Rs. 97,200
ii. HRA received = Rs. 72,000
iii. Rent paid – 10% of the salary = (7000 * 12) – 0.10 * 194400 = 84000 - 19440= Rs. 64,560
Exempted HRA = Rs. 64,560
Taxable HRA = 72,000 – 25,680 = Rs. 7,440
*Salary here = Basic salary + Dearness allowance (forming part only) = 180,000 + 180000 *0.40* 0.20
= Rs. 1,94,400
2. The tax liability is subject to set-off of TDS for winning from lotteries and interest from listed debentures.
Option 2: Assessee has opted for Section 115BAC
(A) Computation of Total Income

Income from salary Rs. Rs.

Basic salary (15000 *12) 180,000

Dearness Allowance (180,000*0.40) 72,000

CCA (fully taxable) (300*12) 3600

Children Education Allowance 4800

Less: Exempt NA 4800

Transport allowance 24000

Less: Exempt NA 24000

House Rent Allowance (Note) 72,000

Lunch Allowance 2400

Medical Allowance 12000

Less: Deduction under section 16 NIL

Taxable Salary 3,70,800

Income from house property

Gross annual Value (Rent Received 40,000*12) 4,80,000

Less: Municipal Taxes (32,000)

Net annual Value 4,48,000

Less: Standard Deduction @ 30% of 4,48,000 (1,34,400)

Less: Interest on capital borrowed (75,000)

Income from House property 2,38,600

Income from Business/Profession

Firm (Exempt) NIL

HUF (Exempt) NIL NIL

Income under the head Capital Gains

Long-term capital gains u/s 112 2,25,000

Short term Capital Gain 1,01,000

Income from other sources

Dividend received from Indian Company X Ltd. 12,000

 Interest received on listed debentures 1,40,000

Winning from Lotteries 50,000

Gift in kind 50,000 252,000

Gross Total Income 11,87,400

Less: Deduction under section 80C to 80U NA

Total Income 11,87,400

(B) Computation of Tax on Total Income

Tax on winning from lotteries (30% of Rs. 50,000) 15,000

Tax on long-term capital gains (20% of Rs. 2,25,000) 45000

Balance of Total Income Rs. 9,12,400 61,860

Total tax 1,21,860

Add: Health and Education cess at 4% 4874.40

Total liability 1,26,734.40

Total liability (round off) 1,26,730

Notes:
1. Exemption from House Rent Allowance / Children Education allowance, Standard Deduction, Deduction under
section 80C & 80G is not allowed
2. The tax liability is subject to set-off of TDS for winning from lotteries and interest from listed debentures.

Illustration 4:

Mr. X aged 62 years, resident individual furnishes the following particulars relevant for the assessment year 2023-24:

Profit and Loss Account

Particulars Amount (Rs.) Particulars Amount (Rs.)

Salaries 30000 Gross profit 436000

General Expenses 45000 Commission 120000

Bad Debts 15000 Sundry Receipts 40000

Reserve for losses 3000 Short term capital gain 30000

Insurance 5200 Discount 2000

Advertisement 10000 Profit on sale of import license 100000

Add: outstanding 2000 12000

Interest on capital 4500

Interest on bank loan 12500

Expenditure on acquisition of patent 16000

and put to use on 30.06.21

Depreciation on Plant 24000

Depreciation on building 10000

Depreciation on Furniture 4000

Provision for outstanding GST 12000

liability

Taxation reserve 12000

Loss by fire of a part of building 8000

(Uninsured)

Net profit 514800

Total 728000 Total 728000

Other information
1. Bank loan is used for business purposes.
2. The amount of depreciation as per tax rates, in respect of plant, building, furniture, amounts to Rs. 20000, 12000,
7400 respectively.
3. Salary include payment to a relative which is unreasonable to the extent of Rs. 5000.
4. Out of GST liability Rs. 2000 is paid on 04.07.22 and Rs. 6000 is paid on 03.10.22. The balance is still outstanding.
Due date of filling the return of income is 31.7.22
5. Income of X from other sources is Rs. 24000.
6. X paid medical insurance premium Rs. 16000 for himself and Rs. 16000 for his mother (dependent)
7. X repaid housing loan to the extent of Rs. 45000.
Determine the taxable income and tax liability of Mr. X for the assessment year 2023-24 assuming STT is not applicable on STCG.
Assume Assesee has not opted for section 115BAC.
Solution:
Computation of total income of Mr. X for the AY 2023-24

Particulars Rs.

Profit and gain from business profession (Note) 537900

Income under the head capital gain [STCG] 30000

Income from other sources 24000

Gross Total Income 591900

Less: Deduction

80C Repayment of Housing Loan (45000)

80D Medical Insurance Premium (32000)

Total Income 514900

Computation of Tax on Total Income

Tax on Rs. 300000 Nil

Tax on Rs. 200000 @ 5% 10000

 Balance of Total Income 14900 @ 20% 2980

Total tax 12980

Add: Health and Education cess at 4% 519.2

Total liability 13499.2

Total liability (round off) 13,500

Working Note:
Calculation of Business Income

Particulars Rs.

Profit as per P&L A/C 514800

Add: Inadmissible Expenses

Reserve for losses 3000

Interest on capital 4500

Patent right [16000- 25% of 16000] 12000

Excess salary paid to relative 5000

Outstanding GST liability [12000-2000] 10000

Taxation reserve 12000

Loss by fire of part of building 8000

Less : Admissible Expenses Depreciation [39400-38000] (1400)

Less : Income taxable under head capital gain (STCG) (30000)

Business Income 537900