Shree Chanakya Education Society’s

INDIRA INSTITUTE OF MANAGEMENT, PUNE
Master of Business Administration
Semester -II

Subject- Direct Taxation
 
 
Group No. Name Roll No.
Ajinkya Chimote 02
10.1 Banti Gupta 13
Disha Marape 16
Q1.
From following details, compute taxable HRA for FY 20-21
Particulars Karan Arjun
Basic Salary 1020000 630000
DA 459000 378000
HRA 288000 240000
Commission on sales (on fixed percentage) 144000 162000
City of residence Mumbai Delhi
Rent Paid for the year 240000 216000

Solution:
HRA exemption lowest among the following
1. HRA Received
2. 50% of salary
3. Rent paid – 10% of Salary
Particular Karan Arjun
Basic Salary 1020000 630000
DA 459000 378000
Commission 144000 162000
Salary for HRA (Basic Salary+ DA+ Commission) 1623000 1170000
     
1. HRA received 288000 240000
     
2. 50% of salary for HRA (50% of salary for Mumbai, Calcutta,
Chennai and Delhi and 40% for other cities) 811500 585000
     
3. Rent Paid- 10% of salary 77700 99000
     
Taxable HRA (Least of above three) 77700 99000

Notes:
Karan-
1. Actual HRA received:
=288000

2. 50% of salary for HRA (50% of salary for Mumbai, Calcutta, Chennai and Delhi and
40% for other cities) Karan’s residence is in Mumbai thus 50%
= 50% of 1623000 = 811500

3. Rent Paid- 10% of salary:

=240000 - (10% of 1623000) = 77700
Arjun-
1. Actual HRA received:
=240000

2. 50% of salary for HRA (50% of salary for Mumbai, Calcutta, Chennai and Delhi and
40% for other cities) Arjun’s residence is in Delhi thus 50%
= 50% of 1170000 = 585000

3. Rent Paid- 10% of salary:

=216000 - (10% of 1170000) = 99000

Q2.
From Following Details Compute Taxable Gratuity For FY 20-21
Particulars Amit Sumit
Last Drawn salary (per month) 84500 84500
30 Years 7 30 years 10
Service Period months months
Gratuity Received 2619500 2619500
Covered under Payment of Gratuity Act Yes No

Solution:
Particulars Amit
A) Gratuity Received 2619500
   
1) Gratuity Actually Received 2619500
   
2) Standard Amaount
2000000

3) Last 10-month average salary * Number of years of

employment or
part thereof * 15/26 (W.N. 1) 15112500
   
B) Exempt- least of above three 2000000
   
TAXABLE GRATUITY = A-B 619500
 Particulars Sumit
A) Gratuity Received 2619500
   
1) Gratuity Actually Received 2619500
   
2) Standard Amaount 2000000

3) Last 10-month average salary * Number of years of

employment* 1/2 13097500
   
B) Exempt- least of above three 2000000
   
TAXABLE GRATUITY = A-B 619500

Note:
Amit-
Last 10-month average salary * Number of years of employment or part thereof * (15/26)
= (84500*10) *31*15/26 = 15112500

Sumit-
Last 10-month average salary * Number of years of employment* ½
= (84500*10) *31* ½

Q4
Define person as per income tax act with example?
Answer:
There are seven types of person in income tax act:
 Individual
 Hindu undivided family (HUF)
 A company
 A firm
 Local Authority
 Association of person (AOP) / Body of individual
 Every artificial person
 i. Individual: Individual includes any natural persons like any male female.

ii. HUF: According to the law the HUF is consists of all persons lineally
descendent from a common ancestor and includes their wives and
unmarried daughter. HUF is a separate unit under the eye of the law and
distinct from its member.

iii. A Company: A company may be public or private it may be domestic or

foreign company

iv. A firm: A firm means partnership firm; it came into existence by a

partnership agreement between two or more persons and it includes limited
liability partnership (LLP)

v. Association of person (AOP) / Body of individual (BOI) : AOP means two

or persons who joins for standard purpose with a view to earn income
BOP means that only individual can form a BOI

vi. Local authority: The authority which is established under the local law of
land
Example: Municipal, co-corporation
Gram panchayat

vii. Every juridical person: The entities who are not natural persons but
separate entities as per law they can be sued through person managing
them.
Examples: Charitable Institutions, an idol