1 Unit Introduction To Income Tax (1) 2020-09-10 at 3.33.59 Am

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UNIT 1 INTRODUCTION TO INCOME TAX
Section-A (2Marks)
1. Give the meaning of Income
Income means any monetary receipts either in cash or kind coming in
form a definite source with some sort of expectations
2. Give the meaning of Income tax

Income tax is a compulsory levy under certain condition and it is
meant for the general purposes of the state
3. Give the meaning of Total Income

Total income means the amount left after making the deductions u/s
80 C to 80 U from the GTI
SECTION-B (6 Marks)
1.Discuss whether the following are agriculture income/
Non Agricultural Income
A) Compensation received for acquisition land for military purpose

B) Income from sale of forest trees of spontaneous growth
C) Income from interest on simple mortgage of land used for
agriculture purpose
D) Income derived from land used as stone quarries
E) Rent from house property situated in a village
F) Income from agricultural land situated in a village
Solution:
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A) Non-agricultural income
B) Non-agricultural income
C) Non-agricultural income
D) Non-agricultural income
E) Non-agricultural income
2.Discuss whether the following are Agricultural
Incomes/ Non Agricultural Incomes
A) Sale of plants from nursery
B) Income derived from land used as stone quarries
C) Income from sales of forest trees of spontaneous growth
D) Dividend from a company engaged in agricultural
E) Income from interest on simple mortgage of land used for
agricultural purpose
Solution:
A) Agricultural Income
B) Non-agricultural Income
C) Non-agricultural Income
D) Non-agricultural Income
E) Non-agricultural Income

SECTION C (14 Marks)
1. Mr Rajesh furnished the following particulars of his Income for the

P.Y. 2018-19.
1. Interest on German development Bonds 60,000(2/5th is received

in India.)
2. Income from agriculture in Bangladesh( received there but later

on 50,000 remitted to India ) 1,80,000.
3. Income from property in sri Lanka received there ( 80,000 is used

in sri Lanka and the balance remitted to India) 1,20,000.
4. Income from business Kenya which is controlled from Bangaluru

( 18,000 received in Bangaluru ) 78,000.
5. Dividend paid by an Indian company received in Canada 56,000.

6. Past untaxed profit 1,05,000 brought to India during 2018-19.
7. Profit from business in Mysore but controlled from London

72,000.
8. Profit on sale of building in Mangaluru but received in Dubai

1,48,000.
9. Pension from Indian company received in London 36,000.
10. Gift in cash from a relative received in India 60,000.

Find out Mr Rajesh’s Gross Total Income for the A.Y 2019-2020 If he is
1. Resident and Ordinarily resident
2. Resident but not Ordinarily resident and
3. Non- Resident.
Solution : Computation of Gross Total Income
Assessee: Mr Rajesh previous year: 2018-19

Assessment Year: 2019-2020
Types of Incomes R&OR NOR NR

1. Interest on 60,000 24,000 24,000
German
development

Bonds
2. Income from 1,80,000 ------ --------
agriculture in
Bangladesh
3. Income from 1,20,000 -------- --------
property in sri
Lanka received
there
4. Income from 78,000 78,000 18,000
business Kenya
which is controlled
from Bangaluru
5. Dividend paid by ------- ------- --------
an Indian company
received in Canada
6. Past untaxed ------- ------- --------
profit brought to
India during 2018-
19.
7. Profit from 72,000 72,000 72,000

business in Mysore
but controlled from
London
8. Profit on sale of 1,48,000 1,48,000 1,48,000
building in
Mangaluru but
received in Dubai
9. Pension from 36,000 36,000 36,000
Indian company
received in London
10. Gift in cash -------- -------- --------
from a relative
received in India
GROSS TOTAL 6,94,000 3,58,000 2,98,000
INCOME

UNIT 2 INCOME FROM SALARY

SECTION A 2 Marks
1. Wha is perq isi e.
Perq isi e means he al e of an benefi a ached o an office or posi ion in
addi ion o basic salar or ages. The perq isi e ma be in cash or in kind. If i is
in kind i m s be capable of being meas red in erms of mone .
2. Wha is Recognised pro iden f nd (RPF)

The pro iden f nd is recognised b he commissioner of Income Ta , is kno n
as RPF. F r her, in case of RPF , Emplo er s con rib ion o RPF in e cess of 12%
of emplo ee s salar is a able and in eres on RPF in e cess of 9.5% is a able.
3. Men ion an fo r Ta Free perq isi es.

a. Recrea ional facili ies.
b. Training facili .
c. Telephone facili .
d. RFA o High/ S preme co r J dges.
4. Wha is Allo ance.

I is a fi ed s m of mone recei ed b he emplo ees from he emplo er o mee
heir official or personal e penses. Allo ances are gi en in cash along i h
salar b he emplo er.
5. Name an fo r allo ances, hich are f ll a able.

a. Dearness Allo ance.
b. Ci compensa or Allo ance.
c. Medical Allo ance.

d. Projec Allo ance .
SECTION B 6 MARKS
1. Mrs Ranji a (Residen ) orking in a compan and ge ing a basic pa of Rs 8,000

P.M. D.A a 20% of basic pa , commission a 5% of basic pa , HRA a 12% of
basic pa and bon s eq al o o mon hs of basic pa . She is residing in a ren ed
ho se a Rs 1,800 P.M. De ermine her e emp ed amo n of HRA for he A.Y
2019-2020.
Sol ion: Comp a ion of Ta able HRA
Assessee: Mrs Ranji a Pre io s Year: 2018-19
S a s : Residen Assessmen Year: 2019-2020
Par ic lars Rs
Ac al HRA recei ed
(8000 12=96,000 12/100 11,520
Less: Leas of he follo ing :
1. Ac al HRA recei ed 11,520
2. E cess of Ren Paid
O er 10% of salar
1800 12 (21,600-9,600) 12,000
3. 40% of salar
(96,000 40%) 38,400 11,520
Ta able HRA NIL

2. Wha is Perq isi es. Men ion i s ario s pes.

Perq isi e means he al e of an benefi a ached o an office or posi ion in
addi ion o basic salar or ages. The perq isi e ma be in cash or in kind. If i is
in kind i m s be capable of being meas red in erms of mone .
T pes of perq isi es
Ren -free / concessional ren accommoda ion pro ided b he emplo er.
An amo n paid b he emplo er in respec of an obliga ion hich as ac all
pa able b he assessee.
Val e of an benefi / ameni gran ed free or a a concessional ra e o specified
emplo ees.
The al e of an specified sec ri or s ea eq i shares allo ed or ransferred,
direc l or indirec l , b he emplo er, or former emplo er, free of cos or a
concessional ra e o he assessee.
The amo n of an con rib ion o an appro ed s perann a ion f nd b he
emplo er in respec of he assessee, o he e en i e ceeds Rs. 1 lakh.
The al e of an o her fringe benefi or ameni as ma be prescribed.
Ta abili of perq isi es
There are o pes of a abili of perq isi es:
Ta on perq isi es Perq isi es added o he Head of Salaries hile filing Income a
re rn are a ed b he go ernmen /s 17(2) of he Income Ta Ac .
Ta -free perq isi es Some pes of perq isi es are a -free in he hands of he
emplo ee. For effec i e a planning and red c ion of a liabili , he emplo er and
emplo ee m s be a are of s ch a -free perq isi es
Ta -free perq isi es incl de:

Lea e ra el concession s bjec o condi ions and he onl ac al amo n spen .
Medical Facili ies & Reimb rsemen s
Comp er / Lap op for official / personal se.
Ini ial fees paid for corpora e membership
Refreshmen pro ided d ring orking ho rs in office premises.
Pa men of ann al premi m on personal acciden polic .
S bscrip ion o periodicals and jo rnals req ired for he discharge of ork.
Pro ision of Medical Facili ies.
Gif s no e ceeding Rs. 5000 per ann m.
Use of heal h cl b and spor s facili .

Child Ed ca ion Allo ance (Rs.100 per mon h. per child ma . 2 children)
Hos el Allo ance (Rs. 300 per mon h per child ma . 2 children) is e emp .
Transpor Allo ance: Rs. 800 per mon h Rs.1,600 per mon h. (If handicapped)
Free meal pro ided d ring ork ho rs or hro gh paid non- ransferable o chers
no e ceeding Rs. 50 per meal or free meal pro ided d ring ork ho rs in a
remo e area.
SECTION C 14 Marks
1. Mr Rajesh (residen ) a lec rer in he Delhi Uni ersi , s bmi s he follo ing
par ic lars of Income for he ear ended 31.3.2019
a. Basic salar 15,000 P.M
b. D.A 4,000 p.m
c. He dra s en er ainmen allo ance of 2000 p.m o of hich he spends
1500p.m. on en er aining c s omers of compan .
d. He has been pro ided i h a nf rnished ho se b he compan for hich
a s m of 800 p.m. is ded c ed from salar . The pa s a ren of 10,000
p.m. for he ho se direc l o he landlord.
e. D ring he ear he recei ed 18,000 medical reimb rsemen , for he
medical rea men in a pri a e n rsing home.
f. Mr Rajesh has aken in eres free loan of 16,000 o p rchase refrigera or
from he compan .
g. Professional a and he Life Ins rance Premi m of emplo ee ere paid
b emplo er. Professional a amo n ed o 200 p.m. and premi m on
ins rance polic as 8,000 p.a.
h. Ser ices of cook, a chman and gardener ere pro ided b he emplo er.
The salaries paid o he abo e amo n ed o 6,000 p.a, 3,000 p.a. and
4,500 p.a. respec i el .
i. Mr Rajesh and his famil en o his home o n on lea e and he
e penses of 5,600 being he cos of II class rail icke as reimb rsed
b he emplo er.
j. P rchase of air icke s 60,000 hro gh credi card pro ided b he

emplo er.
k. Cl b facili in remo e area 500 p.m.
l. Transfer allo ance 1,40,000 ( amo n spen 1,00,000)
Comp e a able Income from Salar for he Assessmen Year 2019-2020
Sol ion : Comp a ion of Ta able Salar

Assessee: Mr Rajesh Pre io s Year: 2018-19
S a s : Residen & Non Go emplo ee Assessmen Year: 2019-2020
Par ic lars

a. Basic salar (15000 12) 1,80,000

b. D.A (4,000 12) 48,000
c. En er ainmen Allo ance 24,000
d. Concessional Ren Accommoda ion
Salar ( 1,80,000+24,000) = 2,04,000
Ren 10,000 12= 1,20,000
Or 15% salar 30,600 .e.L 30,600
( 204000 15%)
Less Ren paid b he emplo ee 9,600 21,000
e. Medical Reimb rsemen ( 18,000-15,000) 3000

f. In eres free loan Ta free
g. i) Professional a paid b he emplo er 2,400
ii) Life Ins rance Premi m paid b emplo er 8,000
h. Salar of cook, a chman and gardener
( 6,000+3,000+4,500) 13,500
i. L. T.C Ta Free
j. Credi Card facili 60,000
k. Cl b facili in remo e area (500 12) 6,000
l. Transfer Allo ance (140000-100000) 40,000
Gross Salar 4,05,900

Less Ded c ions /s 16
Professional Ta /s 16 (iii) 2,400
TAXABLE INCOME FROM SALARY 4,03,500

UNIT 3 INCOME FROM HOUSE PROPERTY
SECTION-A
1. What is deemed o nership of house propert ?
As per the income ta act, 1961, under certain circumstances a
person is assumed to be the o ner of the propert even though he
is not legal o ner. For instance, one of the parents ill be deemed
to be the o ner of minor child s propert
2. State the meaning of annual value.

Sec. 23(1) Annual value means the sum for hich the building might
reasonabl be e pected to be let from ear to ear
3. What is Fair rental value.

(FRV)Fair rental value for the purpose of ta ing rent free
accommodation is the amount of rent a similar kind of
accommodation the same localit

SECTION-B (6 Marks)
1.Calculate Gross Annual value of Mr X (resident)from the particulars

given belo
FRV 90,000p.a
MRV 80,000p.a
Annual rent 75,000p.a standard rent 55,000p.a
Solution: Calculation of Gross Annual value
Assessee :mr previous ear:2018-19
Status: resident Assessment ear: 2019-20
Particulars AMOUNT
Fair rental value 90,000

Or hichever is higher
Municipal rental value 85,000
Notional rent 90,000
Or hichever is less
Standard rent 55,000
E pected rent 55,000

Actual rent 75,000
Gross annual value 75,000
2.Calculate ARV of Mr Ram (resident) from the particulars given

belo :
MRV 90,000
FRV 88,000

Annual rent 96,000
During the previous ear 2018-19 the assessee could not realise rent
for three months
Solution : Calculation of Gross Annual value

Assessee: Mr.Ram previous ear: 2018-19
Status: resident Assessment ear: 2019-
2020
Particulars Amount
MRV 90,000
FRV 88,000

Or hichever is less

Actual rent 72,000
Gross annual value 72,000

SECTION C (14 MARKS)
1.Mr Rahmath ( resident) is the o ner of 3 houses . The follo ing are
the particulars of his propert for the ear ended 31.3.2019.
Particulars 1 House 2 House 3 House

Year of 2008 2010 2012
construction
Purpose of use Let out to Bank Self occupied Let out to
residence
Actual rent 30000 - 24000
received
Municipal 32000 28000 30000
valuation
Municipal Ta paid 1200 1000 3000
b Rahmath
Municipal Ta paid 2000 1800 -
b tenant
Total Municipal 3200 2800 3000
Ta
Fire insurance 2% 20% 2%
premium
Interest on loan - 7000 5000
taken for rene al
of house.
Compute Ta able Income from House propert for the A.Y. 2019-2020.

Solution: Computation of Ta able Income From House Propert .

Assessee: Mr Rahmath previous ear: 2018-19
Status: resident Assessment ear: 2019-
2020
House I LET OUT PROPERTY
Particulars
Municipal value 32,000
Or .e.h
Fair rent value ----
Notional Rent 32,000
Notional Rent 32,000
Or .e.L
Standard Rent -----
E pected Rent 32,000
E pected Rent 32,000
Or .e.h
Actual Rent 30,000
Gross Annual Value 32,000
Less: Municipal ta paid b the assessee
during the P.Y 1,200
Net Annual Value 30,800

Less: Deduction u/s 24 9,240
a) Standard deduction @ 30% of NAV
(30800 30%)
INCOME FROM HOUSE I 21,560
HOUSE II SELF OCCUPIED PROPERTY
Particulars
GAV Nil
Less: Municipal ta Nil
NAV Nil
Less: Deduction u/s 24
a. Standard deduction Nil
b. Interest on borro ed capital ( ceiling
limit of 30,000) 7,000
INCOME FROM HOUSE II (-7,000)
Note : Ma imum deductible interest is 30,000 for repairs of HP. Ma imum deductible
interest on loan incase of loan taken for construction of HP is 2,00,000
HOUSE III LET OUT PROPERTY
Particulars
GAV 30,000
Less: Municipal ta paid b the assessee during the P.Y 3,000

NAV 27,000
Less: Deduction u/s 24
a. Standard deduction @ 30% of NAV
27,000 30%
8,100 13,100
b. Interest on borro ed capital
5,000
INCOME FROM HOUSE III 13,900
NET INCOME FROM HOUSE PROPERTY ( 21,560-7,000+13,900) 28,460

CHAPTER 1
PROFITS AND GAINS FROM BUSINESS AND PROFESSION
FORMAT FOR COMPUTATION OF INCOME FROM PROFESSION
IN CASE OF DOCTOR OR MEDICAL PRACTITIONER
PARTICULARS AMOUNT AMOUNT

PROFESSIONAL RECEIPTS:
1. Fees for conducting operations XX
2. Consultation fees XX
3. Visiting fees XX
4. Sale of medicines XX
5. Gifts received from patients XX
6. Examiners fees XX
7. Any other professional receipts XX
TOTAL PROFESSIONAL RECEIPTS XX
LESS: PROFESSIONAL EXPENSES
1. Rent, light, water charges, salary to staff, telephone expenses of clinic XX
2. Cost of medicines XX
3. Depreciation on surgical equipments and X-ray XX
4. Depreciation of books at prescribed rates XX
5. Motor car expenses XX
6. Depreciation on motor car XX
7. Expenditure incurred to increase professional knowledge XX
8. Hospital or clinic expenses XX
9. Any other expenditure pertaining to profession XX XX
TOTAL PROFESSIONAL EXPENSES XX
INCOME FROM PROFESSION XX
IN CASE OF CHARTERED ACCOUNTANT

1. Audit fees XX
2. Consultation fees XX
3. Gain from accounting work XX
4. Institute fees XX
5. Gifts received from clients XX
7. Any other professional receipts XX XX

1. Audit office expenditure XX

2. Institute fees XX
4. Motor car expenses XX
5. Depreciation on motor car XX
6. Membership fees XX
7. Hospital or clinic expenses XX
8. Stipend to trainees XX
9. Subscriptions XX
10.Depreciation on office equipments, office furniture XX
11. Any other expenditure pertaining to profession XX XX
IN CASE OF LAWYER OR ADVOCATE

1. Practicing fee XX
2. Legal fees XX
3. Special Commission XX
4. Gifts received from clients XX
6. Any other professional receipts XX
1. Office expenses XX
2. Salary to staff XX
4. Depreciation on office equipments, office furniture XX
5. Expenses incurred to increase professional knowledge XX
6. Subscriptions XX
7. Purchase of stamp paper and court fees XX
8. Any other expenditure pertaining to profession XX

INCOME FROM BUSINESS
FORMAT FOR COMPUTATION OF TAXABLE INCOME FROM BUSINESS

Assessee: Previous year:
Assessment year:
Net Profit as per profit and loss account XX
ADD: Inadmissible expenses debited to P/L a/c XX
Business Income not credited to P/L a/c XX
Overvaluation of opening stock XX
Undervaluation of closing stock XX
Notional Loss XX XX
XX
LESS: Admissible expenses not debited to P/L a/c XX
Tax –free incomes credited to P/L a/c XX
Non-business Incomes credited to P/L a/c XX
Undervaluation of opening stock XX
Overvaluation of closing stock XX
Notional Profit XX XX
TAXABLE INCOME FROM BUSINESS XX
2 MARKS THEORY QUESTIONS
1. What do you mean by business?

The term business means any trade, commerce or any adventure of concern in the
nature of trade, commerce or manufacture.
2. What do you mean by vocation?

Vocation means activities, which are performed in order to earn livelihood. Example:
music, dancing.
3. What are deemed business profits?

Deemed business profits are not incomes, but as per the IT act, they are regarded as
incomes and included in the taxable income from business/profession.
4. Mention any two examples of deemed incomes.

Cash credit, unexplained money, unexplained investment and unexplained expenditure.
5. How do you allow expenditure on patents in the case of a sole trader?

Any capital expenditure incurred in acquiring patent rights on or after 1/4/98, the
taxpayer can claim depreciation u/s 32 at the rate of 25%.

6. What is depreciation u/s (1) of the act?

The act specifies: 1. Assets eligible for depreciation are a building, machinery or plant
or furniture.
2. Asset should be owned whether partly or wholly by the assess.
3. Asset should be used in assesses business/profession during the previous year.
4. Depreciation is allowed on block of assets.
7. What do you mean by profession?

Profession refer to any occupation where intellectual skill and technical experts in a
specified field is acquired for earning livelihood.
8. List the expenditure on building, which are allowed as deduction u/s 30.
Rent paid as a tenant
Current repair expenses towards the premises
Land revenue or local rates or municipal taxes
Insurance premium paid in respect of damage or destruction of the building
9. What is speculative business or transaction?

Speculative transaction is one where profit is earned by fluctuations in prices of
securities or commodities.
10. What is cash system of accounting?

Cash system of accounting is an accounting in which payment receipts are recorded
during the period they are received, and expenses are recorded in the period in which they
are actually paid.
If accounts are kept by an assesses on the basis of cash system of accounting, income
received during the previous year is taxable whether it relates the previous year or a year
preceding or following the previous year.
Cash system of accounting, a record is kept of actual receipts and actual payments of
a particular year.
11. What is mercantile system of accounting?

Mercantile system of accounting, all the income and expenses are record on accrual
basis.
12. Name any two intangible assets on which depreciation is allowable under the
income tax, 1961?
Patents, copy rights, Technical know how, trade mark, licenses, franchise

CHAPTER 3
INCOME FROM OTHER SOURCES

FORMAT FOR COMPUTING TAXABLE INCOME FROM OTHER SOURCES
ASSEESSEE: PREVIOUS YEAR:

STATUS: ASSESSMENT YEAR:
SL PARTICULARS AMOUNT
NO
1. Dividends
2. Interest on securities
3. Bank interest on fixed deposits
4. Casual income
5. Income from Family pension
6. Composite rent
7. Income from subletting
8. Rental income from machinery. Plant or furniture
9. Gifts
10. Insurance commission
11. Deemed Incomes
12. Mining rent / Royalties / Ground rent
13. Withdrawal from National savings scheme
14. Agriculture income from a place outside India
15. Directors fees or commission
16. Salaries received by a member of parliament or MLA or MLC
17. Rent from land
18. Examination fees received by a teacher (not from the employer)
19. Interest on em l ee c n ib i n an URPF
20. In e e n em l ee c n ib i n an URPF
21. Remuneration received for writing articles in Journal / Magazine
22. Other incomes
LESS: Exemption U/S 57
1. Any expenditure incurred wholly for the purpose of earning the
income is deductible provided such expenditure is neither of
capital nature nor of personal nature
TAXABLE INCOME FROM OTHER SOURCES
FOLLOWING IS FULLY EXEMPTED FROM TAX

1. National defence gold bonds, 1980
2. National plan certificates (10 years)
3. National plan savings certificates
4. 12 year national savings annuity certificates
5. Treasury savings deposit certificates
6. Fixed deposit scheme governed by
7. Post office cash certificates (5 years)
8. Post office national savings certificates
9. Post office savings bank account to the exent Rs.3,500 in case of
individual accounts, Rs.7000 in case of joint accounts
10. Post office cumulative time deposit account
11. Public account in post office (up to Rs.5000)

12. Fixed deposit scheme governed by the post office fixed deposit rules
13. Deposits made by a retired government employee out of his
retirement benefits for the lock in period of three years
14. Special bearer bonds, 1991
15. Special deposit scheme, 1981
16. Capital investment bonds
17. Relief bonds
18. NRI bonds issued by RBI
19. Non resident rupee deposit scheme
20. Dividend on equity shares, preference shares
21. Daily allowances
22. Cash received on the occasion of marriage
23. Refund of money by LIC under money back policy
24. Income from units of mutual fund
25. Agricultural income
26. Interest on public provident fund
27. Interest on national savings certificate
28. Scholarship for research work
29. Political party registered with the election commission of India
RATE OF TDS
SL.NO INCOME PERCENTAGE
1 Interest on security issued by statutory bodies or local authority 10 %
2. Listed securities 10 %
3. Unlisted securities 10 %
4. Bank interest 10 %
5. Casual income 30 %
6. Insurance commission 10 %
7 Commission on sale of lottery tickets (no TDS, if amount does 10 %
not exceed in 1,000)
8 Commission (other than insurance commission ) (no TDS, if 10 %
amount does not exceed in Rs.5,000)
TAXABILITY OF GIFT
1. Gift from non-relatives Fully taxable if the aggregate of the gifts received exceeds Rs.50,000
2. Gift from relatives Gift received from relatives is fully exempted from the levy of tax
The term RELATIVE incl de:
a. Spouse of assesses
b. Brother and sister of assesses
c. Brother and sister of spouse of assessee
d. Brother and sister of either of the parents of assessee
e. Any lineal ascendants or descendants of the assessee
f. Any lineal ascendants or descendants of the spouse of the assessee
3. Gift received on account of specified events In below circumstances, gifts received from
non-relatives are not taxable even if value is
greater than Rs.50,000
a. On the marriage of individual
b. By will or inheritance
c. In contemplation of death of payer
d. From local authority

e. From a registered charitable Trust

f. From any trust, foundation etc, referred u/s 10 (23c)
NOTE: The list of relative does not include nephews/nieces/cousins
1. What is casual income?

An income becomes casual income, if it contains the following features: It is
unanticipated, it is non-recurring in nature, it arises form an unknown source, no specific
efforts were put in to earn such income.
2. Name any four examples for casual income
Winning from lottery

Income from cross word puzzles and card games
Tips given to taxi drivers
Prize awarded for coin or stamp collection
3. What do you mean by less tax securities?

Less tax securities refers to those securities where interest is paid to the assesses
after deducting tax at source. Whereas, tax free securities are those where the gross
interest is paid to the assesses without deducting tax are paid by the security issuing
authority (i.e, company) to the govt on behalf the assesses and the tax amount so paid is
deemed to the income to the assesses.
3. What do you mean by tax free securities?

Interest on tax-free securities is always net while on less tax securities may be
gross or net
4. Distinguish between listed and non listed securities

Listed securities are those which are listed on a recognized stock exchange in
India in accordance with the securities contracts regulation act 1956; whereas, non-listed
securities are those which are not listed in any recognized stock exchange in India.
Only companies whose securities are listed on a recognised stock exchange can sell
their securities through the stock exchange; where as, a company whose securities are not
listed cannot do this.
5. What are the general incomes taxable U/S 56 of income tax act.
Dividends incomes from winning from lotteries, cross word puzzles, races, card
games, gambling or betting. Interest on securities, Income from letting of machinery,
plant furniture and building, income from royalty, directors fees, commission, income
from undisclosed source, income form UT, income from subletting of house property
etc.,

6. Define the term security

A security is the document acknowledging the debt taken by a specific authority
from general public. It may be named as debt, loan, paper, debenture or security of
certificate
7. Mention the various kinds of securities

A security is the document acknowledging the debt taken by a specific authority
from general public. It may be named as debt, loan, paper, debenture or security of
certificate
8. Mention the various kinds of securities

The following are the various kinds of securities from tax point of view: Tax free
securities and less tax securities
9. Name four incomes chargeable under the head other sources

Interest on securities
Royalty income
Salaries of MP/ MLA/ MLC
Income from dividend
Family pension
Remuneration for dong examination work
10. What are bond washing transactions?

A bond washing transaction which consists of setting securities by high income
class assesses to the low income class assesses before the due date and acquiring back
the same securities after the due date of interest. This practice in adopted to evade the
tax.

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UNIT 1 INTRODUCTION TO INCOME TAX

2. Give the meaning of Income tax

3. Give the meaning of Total Income

1.Discuss whether the following are agriculture income/

Non Agricultural Income

A) Compensation received for acquisition land for military purpose

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SECTION C (14 Marks)

1. Mr Rajesh furnished the following particulars of his Income for the

1. Interest on German development Bonds 60,000(2/5th is received

2. Income from agriculture in Bangladesh( received there but later

3. Income from property in sri Lanka received there ( 80,000 is used

4. Income from business Kenya which is controlled from Bangaluru

5. Dividend paid by an Indian company received in Canada 56,000.

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6. Past untaxed profit 1,05,000 brought to India during 2018-19.

7. Profit from business in Mysore but controlled from London

8. Profit on sale of building in Mangaluru but received in Dubai

9. Pension from Indian company received in London 36,000.

10. Gift in cash from a relative received in India 60,000.

1. Resident and Ordinarily resident

2. Resident but not Ordinarily resident and

Solution : Computation of Gross Total Income

Assessee: Mr Rajesh previous year: 2018-19

Types of Incomes R&OR NOR NR

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7. Profit from 72,000 72,000 72,000

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UNIT 2 INCOME FROM SALARY

2. Wha is Recognised pro iden f nd (RPF)

3. Men ion an fo r Ta Free perq isi es.

d. RFA o High/ S preme co r J dges.

4. Wha is Allo ance.

5. Name an fo r allo ances, hich are f ll a able.

b. Ci compensa or Allo ance.

c. Medical Allo ance.

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d. Projec Allo ance .

1. Mrs Ranji a (Residen ) orking in a compan and ge ing a basic pa of Rs 8,000

Sol ion: Comp a ion of Ta able HRA

Assessee: Mrs Ranji a Pre io s Year: 2018-19

S a s : Residen Assessmen Year: 2019-2020

Ta able HRA NIL

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2. Wha is Perq isi es. Men ion i s ario s pes.

T pes of perq isi es

Ta abili of perq isi es

There are o pes of a abili of perq isi es:

Ta -free perq isi es incl de:

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Sol ion : Comp a ion of Ta able Salar

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a. Basic salar (15000 12) 1,80,000

e. Medical Reimb rsemen ( 18,000-15,000) 3000