Home Assignment Questions

Illustration 1:
Mr. Santosh was employed in Silverstone Pvt. Ltd. getting basic pay Rs.20,000 p.m., dearness allowance
Rs.5,000 p.m. The employee retired at the age of sixty on 31.12.2020 after serving the employer for 20
years and 6 months. The employer has paid him gratuity of Rs.9,10,000 and the employee was covered
under Payment of Gratuity Act, 1972.
Compute taxable portion of gratuity and also tax liability for relevant assessment year.
Hint: Taxable gratuity: Rs. 6,21,538, Income from salary: Rs. 7,96,538
Total income: Rs. 7,96,540, Tax Liability: Rs. 72,080

Illustration 2:
Mr. Samadhan retired at the age of 58 because of health issue from Arihant Ltd. w.e.f. 15.11.2020 after
serving the employer for 20 years and 11 months. The employer has paid him gratuity of Rs.5,75,000. At
the time of retirement, employee’s basic pay was Rs.28,000 p.m. However upto 31.07.2020 it was
Rs.21,000 p.m. and the employee was getting dearness allowance of Rs.8,000 p.m. but it was Rs.5000 p.m.
upto 31.07.2020. 30% of dearness allowance forms part of salary for retirement benefits. Employee was
not covered under Payment of Gratuity Act, 1972. He was also eligible for entertainment allowance of
Rs.20,000/- p.m., out of which entire amount has been spent by him for entertainment of prospective
customers.
Compute taxable part of gratuity, Income from salary and tax liability for relevant assessment year.
Hint: Taxable gratuity: Rs. 3,26,300, Income from salary: Rs. 6,56,300
Total income: Rs. 6,56,300, Tax Liability: Rs. 45,510.

Illustration 3:
Mr. Rajesh Ranjan is employed in R & R Ltd. getting basic pay Rs.32,000 p.m., dearness allowance
Rs.18,000 p.m. and city compensatory allowance of Rs.6000/- p.m. He retired at the age of 60 on
1.12.2020 after completing service of 20 years and 11 months. Only 60% of dearness allowance forms part
of retirement benefit. The employer has allowed him pension of Rs.20,000 p.m. and the employee has
requested for commutation of 70% of his pension. The employer has allowed him such commutation on
01.02.2021 and has paid Rs.9,00,000. The employer has paid him gratuity of Rs.8,00,000. Employee was
not covered under Payment of Gratuity Act, 1972.
Compute Tax Liability for the relevant Assessment Year.
Hint: Taxable gratuity: Rs. 3,72,000, Income from salary: Rs. 12,93,429
Total income: Rs. 12,93,430, Tax Liability: Rs. 2,05,950

Illustration 4:
Mr. Ganesh is retired at the age of sixty from Surya Ltd. w.e.f. 01.12.2020 after serving the employer for
20 years and 10 months. The employer has paid him leave salary of Rs.6,50,000. The employee was
entitled for 20 days leave per year of service. Employer has allowed him 15 days leave for every year but,
he has availed only 45 days of leave and has encashed 15 days of leave during his entire service. The
employee was getting basic pay Rs.30,000 p.m. and dearness allowance of Rs.10,000 p.m. at the time of
retirement. Only 60% of dearness allowance is includible for retirement benefit. The employer has allowed
him pension of Rs.12,000 p.m. and employee was allowed commutation of 1/3rd of his pension on
01.03.2021 amounting to Rs.8,50,000, as his only retirement benefit.
Compute his Tax Liability for the relevant Assessment Year.
Hint: Taxable leave salary: Rs. 3,50,000, Uncommuted pension: Rs. 44,000, Taxable commuted pension:
Nil, Income from salary: 6,64,000, Tax liability: Rs. 44,510

Illustration 5:
Calculate the taxable amount of annual accretion to RPF and income taxable as salary if following
information is provided by assessee:
a) Basic Salary Rs. 7,500 per month
b) Medical Allowance Rs.5,000 per month. He has spent entire amount for medical expenses of his
wife & children.
 c) Commission received by him on the basis of percentage of turnover achieved by him during the
year Rs.6,000.
d) Employer’s contribution to RPF @ 14% of salary
e) Interest credited during the year to RPF balance @12% is Rs.24,000
Hint: Taxable employer’s contribution to RPF: Rs. 1,920, Taxable interest on RPF: Rs. 5,000, Income
from salary: Rs. 1,12,920

Illustration 6:
Mr. Ram received voluntary retirement compensation of 8,00,000 after 30 years 7 months of service. He
still has 3 years left. His basic Salary was Rs.10,000 pm; Dearness Allowance Rs. 4,000 pm . Compute his
taxable income from salary for relevant assessment year assuming he retired on 31st March 2021.
Hint: Taxable VRS: Rs. 3,00,000, Taxable salary: Rs. 4,18,000

Illustration 7:
Mr. Chandra Mohan has joined as director in Ashtavinayak Pvt. Ltd. on 01/09/2020. He provides you the
following information for the year ended 31st March, 2021.

1) Basic Salary per month Rs.80,000/-

2) Dearness Allowance per month Rs.45,000/-
3) Ex- gratia (Received in Cash) Rs.1,05,000
4) Entertainment Allowance Rs.3,000 p.m.
(Amount actually spent Rs.7,000/- during the year)
5) Perquisite Value of Car in respect of personal use. Rs.9,000/-
6) Arrears of salary pertaining to PY 2019-20, received now, it was not taxed earlier. Rs.28,000/-
7) Profession Tax was deducted at source from salary Rs.2,000/-
8) Commission on sales Rs.47,000/-
9) Transport Allowance per month Rs.2,500/-
On the Basis of the above information you are required to compute his taxable Income from salary.
Hint: Income from salary: Rs. 10,50,500

Illustration 8:
Mr. Arvind an employee of Gaye Guzre Ltd. is a handicapped and he is paying a rent of Rs. 6,000 pm for a
house in Kolkata. He retired on 31st October 2020 from the company after serving for 20 years and 9
months and was covered under Payment of Gratuity Act. After retirement he gets a monthly pension of Rs.
8,000. With effect from 1st January 2021 he gets 50% of his pension commuted for Rs. 1,50,000. Turnover
achieved by him during the PY 2020-21 was Rs. 20 lakhs. The amount of Gratuity received by him was Rs.
1,20,000. He also received Rs. 80,000 for encashment of earned leave during the previous year which was
fully taxable.

While in service his monthly salary structure was as follows:

a) Basic Salary Rs. 30,000,
b) Dearness Allowance provided in terms of employment and forming part of retirement benefits Rs.
4,000,
c) House rent allowance Rs. 4,000,
d) Transport allowance Rs. 4,800,
e) Night duty allowance Rs. 1,000,
f) Entertainment Allowance Rs. 1,000,
g) Uniform allowance Rs. 5,000 which was fully utilized for the purpose of maintenance of uniform
during the performance of duties.
He also received 4% commission on turnover achieved by him during the period of employment.
Professional Tax of Rs. 1,500 was deducted by the company from his salary during the employment period
and was paid on his behalf. You are required to compute Mr. Arvind’s income from salaries for the
relevant assessment year. Also compute Mr. Arvind’s income from salaries for the relevant assessment
year assuming that he has opted for payment of tax u/s 115BAC.
Hint: Taxable HRA: Rs. 17,800, Taxable commuted pension: Rs. 50,000, Taxable gratuity: Nil, Taxable
salary: Rs. 4,67,500.
If opting for payment of tax u/s 115BAC
Taxable HRA: Rs. 28,000, Taxable commuted pension: Rs. 50,000, Taxable gratuity: Nil, Taxable salary:
Rs. 5,64,200.