Computation of Income from Salary : Exercises

1. The following particulars relate to the income of Sri Rajeev Mehta for the previous year 22-
23 :
He is employed in a cotton textile mill at Bangalore on a monthly salary of Rs. 25,000.
He is also entitled to a commission @ 1% of sales effected by him. The sale effected by him
during the previous year amounted to Rs. 40,00,000.
He received the following allowances and perquisites during the previous year :
(i) Dearness pay @ Rs. 6,000 per month.
(ii) Bonus @ two months basic salary.
(iii) Entertainment allowance @ Rs. 2,000 per month.
(iv) House Rent Allowance @ Rs. 5,000 per month.
(v) The employer paid Rs. 10,000 towards the income-tax liability of Sri Rajeev Mehta.
(vi) The employer provided him L.T.C. of Rs. 35,000 for going to Simla.
(vii) He has also been provided with gas, electricity and water facility and employer spent
Rs. 15,000 on these.
(viii) The employer gave him cotton worth Rs. 1,000 free of cost.
(ix) He and his employer both contributed 15% of his salary to his recognized provident
fund and interest credited to this fund @ 9% amounted to Rs. 30,000 during the
previous year.
(x) He spent Rs. 6,000 per month as rent of the house occupied by him in Bangalore.
Compute his taxable income under the head 'Salaries' for the assessment year 23-24.

Taxable Salary of Sri Rajeev Mehta for the previous year 22-23

Basic Salary (25,000 x 12) 300,000

Commission (1% on sales) 40,000
DP 72,000
Bonus 50,000
EA 24,000
HRA 60000
Less exemption (30800) 29,200
Actual HRA 60,000
Rent paid - 10% of salary (6000x12-41200) 30,800
40% of salary 164800

Employee obligation met by employer - Income tax paid 10,000

LTC (specified employee) less Actual Expenses 35,000
Free Gas, Electricity, water 15,000
Cotton (if considered as gift upto 5,000 exempted) Nil
RPF upto 12% exempted (3% of 412,000 is taxable) 12,360
Interest on RPF(upto 9.5% is exempted) Nil
587,560
Less: deductions
Standard Deduction (50,000)
Taxable salary 537,560
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2. Smt. Ravi is the manager of the Delhi Cloth Mill, Delhi. She receives every month Rs.
30,000 as basic pay, Rs. 500 as entertainment allowance and Rs. 7,000 as dearness
allowance.
(a) She owns a house, but the company has provided her the following amenities :
i. A gardener, a sweeper and a servant who are each paid Rs. 300 per month.
ii. Free use of the refrigerator costing Rs. 5,000.
(b) The following obligations of her were paid by the company :
i. Gas, electricity and water bills amounting to Rs. 2,000.
ii. Annual membership fee of Rotary Club Rs. 2,400.
(c) The company has provided the facility of a small car. The car is used for private
purposes also besides official purposes and all the expenses including the driver's salary
are borne by the company.
(d) Her son is studying in a school run by the company. The annual expenses incurred by
the company per student is Rs. 3,600 but he had been sent for education to a similar
schools sum of Rs. 1,200 would have been payable during the year.
(e) She proceeded on one month's leave to Shimla by car, where she stayed in the Holiday
Home maintained by the company. The value of such facility is Rs. 6,000.
(f) The company proposed to allot her 100 shares at Rs. 100 each. The fair market value
share on the date on which the option was exercised by the employee was Rs. 350.
Compute her taxable income from salary for the Assessment Year 2023-24.

Taxable income from salary of Mr. Ravi for the Assessment Year 2023-24 (Pvt employee)

Basic Pay 360,000

EA 6,000
DA 84,000
Gardner, sweeper and a servant (300x 3x 12) 10,800
Fridge (5000x 10%) 500
Gas, electricity and water bill 2,000
Annual Member Fee 2,400
Car Facility along with Driver (1800 x 12+ 900 x 12) 32,400
Education Facility
Similar Institution is less (1200pa - 1000 pm is exempted) Nil
Leave Travel 6,000
Share Allotment (concession 350-100 = 250 x 100 shares) 25,000
Gross Salary 529,100
Less Deductions u/s 16
Standard Deduction (50,000)
Taxable Salary 4,79,100