Question 1 Computation of Total Income of Mr. Suraj Particulars Rs. Rs. Income from House Property (WN-1) Profits and gains from business or profession (WN-2) Capital gains -Short term capital loss (WN-3) Income from Other Sources (WN-4) Gross Total Income Less: Chapter VI-A deductions: Sec. 80D - Medical insurance premium (WN-5) Sec. 80DD - Severe disability (Note - 6) Sec. 80G - Donation to Clean Ganga Fund (100%) Total Income 54,000 1,25,000 20,000 Working Note 1: Income from House Property Particulars Rs. Rs. Annual let out value Actual rent (25,000 x 12) Gross Annual Value (Higher of the above) Less: Municipal taxes paid by the owner (Note - 1) Net Annual Value Less: i. Deduction at 30% of NAV u/s. 24 ii. Interest on borrowed loan Taxable Income 90,000 20,000 1,90,000 7,36,250 Nil 11,500 9,37,750 (1,99,000) 7,38,750 2,50,000 3,00,000 3,00,000 Nil 3,00,000 1,10,000 1,90,000 Working Note 2: Income under the head Profits and gains of business or profession Particulars Rs. Rs. Net Profit as per Profit & Loss A/c 6,94,500 Add: Inadmissible expenses Rent - 30% disallowance for non deduction of taxes Advance tax Depreciation (Note 2) Salary (18,000 x 1/4) (personal expenses) Repair ( x 1/4) (personal expenses) Donation to Clean Ganga Fund Less: Income taxable under other heads Gift received - Income from other sources Interest on Income-tax refund taxable under IFOS Sale of Car - Capital gains Profits and gains of business or profession 57,000 1,500 4,500 750 20,000 25,000 17,000 86,750 (45,000) 7,36,250 (1)
Working Note 3: Capital Gains Particulars Written Down Value of Car before depreciation Less: Sale Proceeds Short term Capital Loss [Note-3] Working Note 4: Income from Other Sources Particulars Monetary gift from friend (Note-4) Interest on Income tax refund Interest on Deposit (Rs. 10,000 less Rs. 1,500) (Note-5) Income from Other Sources Rs. 20,000 17,000 Rs. Nil 8,500 11,500 Working Note 5: Deduction u/s 80D Particulars For self, spouse and dependent children (up to Rs 25,000) 1. Medical Insurance Premium 2. Preventive health check up of self and spouse (up to Rs 5,000) For parents (up to Rs 30,000) 1. Medical Insurance Premium of mother 2. Medical expenditure for father (up to Rs 30,000) - Note 7 Notes: Total eligible deduction 19,000 5,000 7,000 2 Rs. 24,000 30,000 54,000 1. The municipal tax actually paid by the assessee during the previous year is eligible for deduction. In this case, part of the municipal taxes is paid by the tenant and hence the same is not eligible for deduction. Balance part is yet to be paid by the assessee and thus, not deductible. 2. Mr. Suraj is not entitled to depreciation where an-asset-is not held as on 31 st March and the block cease to exist. Accordingly, depreciation not claimed in respect of car sold during the previous year. 3. Short term capital loss of Rs. shall not be set -off against any other income, except long term and short term capital gains. Thus, the same shall be carried forward to subsequent year for set-off. 4. As per Sec. 56(2)(vii), where sum of money received as gift, aggregate of which during the year exceeds Rs. 50,000, entire amount shall be taxed. Here, Mr. Suraj received cash gift of Rs. 25,000 only. Therefore, the receipt is not chargeable to tax. 5. As per Sec. 64 (1A), income of a minor child shall be clubbed in the hands of the parent whose income is greater before clubbing. However, if the income is earned by application of skills, talent or specialized knowledge of the child the same cannot be clubbed. Any income earned out of the investments held in the name of the minor child shall be clubbed, without (2)
tracing the source with which such investment was made. Accordingly, interest on deposits made out of stage performance needs to be clubbed in hands of the parent. In this case it is assumed that the Income of Mr. Suraj is greater than his spouse. Exemption to the extent of Rs. 1,500 shall be allowed u/s. 10(32) 6. Deduction for severe disability u/s. 80DD shall be allowed at Rs. 1,25,000, irrespective of the actual sum incurred. Thus, in the given case, though Mr. Suraj has incurred Rs. 50,000, a flat deduction of Rs. 1,25,000 is allowed. 7. It is also provided that any payment made on account of medical expenditure in respect of a very senior citizen not exceeding Rs. 30,000 shall also be allowed as deduction u/s 80D. However such deduction is available only if no payment has been made to effect or keep in force an insurance on the health of such persons. Here, already Rs 7,000 has been claimed towards medical insurance premium of mother. Hence, only balance Rs 2 has been claimed even though the expenditure incurred is Rs 30,000. Question 2 (Rs Crore) (Rs Crore) (Rs Crore) (Rs Crore) Particulars 15% 40% 10% 10% Plant Plant Buildings Furniture Opening value of the Block 10.00-5.00 - Add: Additions made during the year Used for >= 180 days 30.00 5.00 12.50 1.00 Used for < 180 days 20.00 Less: Sale Consideration of assets sold - - - - WDV for the purpose of depreciation 60.00 5.00 17.50 1.00 Depreciation Normal depreciation on asset used >= 180 days 6.00 (40*15%) Normal depreciation on asset used < 180 days 1.50 (20*7.5%) Enhanced depreciation on additions >= 180 days 7.00 (20*35%) 2.00 1.75 0.10 - - - - - - Enhanced depreciation on additions < 180 days 3.50 (20*17.5%) - - - Total Depreciation which can be claimed 18.00 2.00 1.75 0.10 (3)
Note 1: Higher additional depreciation at the rate of 35% (instead of 20% as provided u/s. 32(1)(ii)) in respect of new plant and machinery (other than a ship or aircraft) acquired and installed during the period 1st April 2015 to 31st March 2020 in respect of acquisition and installation of plant and machinery for setting up of manufacturing units in the notified backward area In Andhra Pradesh, Bihar, Telengana or West Bengal. Note 2: Enhanced depreciation cannot be given on second hand plant and machinery Note 3 : Balance Enhanced Depreciation of Rs 3.5 crore relating to assets put to use for less than 180 days can be claimed in next A.Y. Deduction u/s 32AC (on new plant only) Since eligible additions are more than Rs 25 crore, deduction = 40*15% = Rs 6 Crore Deduction u/s 32AD (on new plant only) Since it is set up in a notified area in West Bengal, Amount of deduction = 40*15% = Rs 6 Crore Question 3 Deduction available to Mr. Ravi under Chapter VI-A Particulars Rs. Rs. 1. Deduction u/s. 80C (Max Limit Rs 1,50,000) -Public Provident Fund 80,000 - LIC Premium (upto 20% of sum assured) 20,000-5 year Term Deposit 30,000 Gross amount eligible u/s. 80C (fully allowed) 1,30,000 2. Deduction u/s. 80CCD Employee's Contribution to Central Govt. Pension Scheme - Note 1 1,40,000 (Restricted to 10% of salary = 2,10,000/15*10) Total Deduction under Sections 80C and 80CCD 2,70,000 Maximum Deductions u/s. 80CCE 1,50,000 Add: Additional employees contribution up to Rs 50,000 - Note 2 50,000 Add: Employer's contribution up to 10% of salary - Note 3 1,40,000 Total eligible deductions under Sections 80C and 80CCD 3,40,000 -- (1) (4)
3. Deduction u/s 80D Medical insurance premium for self 22,000 Preventive Health Check up of wife (restricted to) Total deduction for self, spouse and dependent children 25,000 25,000 Medical insurance premium for father (senior citizen) 26,000 Preventive Health Check up of father (restricted to) 2,000 Total deduction for self, spouse and dependent children 28,000 28,000 Total Deduction under Section 80D (Note 4) 5 -- (2) 4. Deduction u/s. 80DD Expenditure for the medical treatment of his mother (Note 5) 1,25,000 -- (3) Total deduction eligible under Chapter VI-A ( 1 + 2 + 3 ) 5,18,000 Notes to the above solution 1. Mr Ravi can claim deduction under Section 80CCD in respect of his contribution to an account under NPS not exceeding 10% of his salary but subject to overall cap of Rs. 1,50,000 as provided in Section 80CCE. Therefore, Rs 1,40,000 has been claimed as a deduction for his contribution. 2. An additional deduction in respect of assessee's own contribution is allowed subject to a maximum of Rs. 50,000. Mr Ravi has contributed Rs 2,10,000. Already Rs 1,40,000 has been claimed. Hence, out of balance Rs 70,000, Rs 50,000 can be claimed as an additional deduction. This is not considered for restriction u/s 80CCE. 3. Further, 10% of employers contribution can be claimed. Hence, Rs 1,40,000 has been claimed in this respect. This is not considered for restriction u/s 80CCE. 4. In view of continuous rise in the cost of medical expenditure, the Act has amended section 80D so as to raise the limit of deduction to Rs. 25,000. In the case of senior citizens the quantum of deduction is enhanced to Rs. 30,000. Total Preventive Health Check-up cost which can be claimed overall is Rs 5,000. 5. In case of persons suffering from severe disability, the quantum of deduction has been enhanced to Rs. 1,25,000 u/s 80DD. (5)
Question 4 (i) Where the payee contractor is engaged in the business of plying, hiring or leasing goods carriages, any freight charges payable to such contractor shall not be subject to tax deduction at source in case he furnishes PAN to the person responsible for deducting tax (upto 1st June 2015) From 01 st June 2015, this exemption from deduction of tax at source will be available only to such transporters who fulfill the following conditions: a. owns not more than 10 goods carriages at any time during the previous year; b. is engaged in the business of plying, hiring or leasing goods carriages; and c. has furnished a declaration to this effect along with his PAN. Since, in this case, Mr. R has 15 goods vehicles and the payment is made after 1st June 2015, S Ltd needs to deduct 1% of the amount paid under the TDS Provisions as the single payment exceeds Rs 30,000. (ii) The requirement to deduct tax at source in respect of fees for technical services or royalty is covered u/s. 194J in case the amount exceeds Rs. 30,000 in a financial year. The Proviso to section 194J contemplates independent limit of Rs. 30,000 each towards - a) fees for technical services and b) Royalty. Hence tax shall not be deducted. Question 5 i. Dividend of Rs. 84,000 received by Mr. Kapoor from an Indian company. Dividend from a domestic company up to Rs 10 lakh is exempt u/s 10(34) ii. Dividend of Rs. 1,84,000 received by Mr. Sunil from a foreign company. Taxable under Income from Other Sources at normal rates of tax iii. Rs. 25,200 won by Mr. Soham from a game show. Taxable under Income from Other Sources at a flat rate of 30%. No expense or loss may be set off against the same. iv. Rs. 84,000 received by Mr. Kumar from his friend on his birthday. Taxable under Income from Other Sources at normal rates of tax as it exceeds Rs 50,000 v. Rent of a plot of land of Rs. 20,000 received by Mr. Jagdish. Taxable under Income from Other Sources at normal rates of tax (6)
vi. Rent of a shop amounting to Rs. 1,00,000 per month received by Mr. Sohil. Taxable under Income from House Property at normal rates of tax. vii. Interest of Rs. 50,000 from bank fixed deposits received by a salaried employee. Taxable under Income from Other Sources at normal rates of tax viii. Loan given by A Ltd to Mr A. Mr A is an employee of A Ltd and holds 5% in A Ltd. Since Mr A holds less than 10% voting power, the loan is not deemed as dividend and hence not taxable in his hands. ix. Interest on compensation received for compulsory acquisition of land Rs 5,00,000 Taxable under Income from Other Sources at normal rates of tax. Deduction of 50% may be claimed. No other expenses shall be allowed. x. Pension of Rs 60,000 received by Mrs A, wife of Late Mr A. Family Pension is taxable under Income from Other Sources at normal rates of tax. A deduction of 1/3rd of the income or Rs 15,000 whichever is lower may be claimed. Question 6 A. Since the premium does not exceed 10% of the sum assured in any year, the amount received from the Insurance Company is exempt u/s 10(10D). If the maturity amount of Rs 10 lakh is received by Mr A in 2025, it will be exempt in his hands u/s 10(10D). If Mr A dies in January 2017 and the policy amount of Rs 50 lakh is received by his nominee, the same will be exempt u/s 10(10D). B. i. Gold jewellery purchased for Rs. 84,000; the fair market value of gold jewellery is Rs. 1,84,000. Taxable under the head "Income from Other Sources" as the difference between the cost of purchase and Fair Market Value exceeds Rs 50,000. Amount chargeable to tax = 1,84,000-84,000 = Rs 1,00,000 (7)
ii. Bullion purchased for Rs. 6,00,000; the fair market value of the bullion is Rs. 5,50,000. NOT taxable under the head "Income from Other Sources" as the difference between the cost of purchase and Fair Market Value does not exceed Rs 50,000. Amount chargeable to tax = NIL iii. A television purchased for Rs. 25,000, the fair market value of television is Rs. 1,00,000. NOT taxable under the head "Income from Other Sources" as Television is not defined as "Property" under Section 56. (8)