St.

Philomena’s College (autonomous)Mysore-15

III Sem BCom -Makeup exam: September/2023
Subject: Commerce Title: INCOME TAX-I
Time: 3 hrs Maxmarks:70

1. Residential Status:
1. Total Income of an assessee cannot be determined without knowing
his residential Status.
2. Residential Status shall be determined for every person for each
previous year
3. The onus of responsibility to prove the Residential Status is on the
Assessee.
A. Residential Status of Individual [ sec. 6]:

From the above chart we see that there are two primary classifications:
Resident and Non-Resident. Again, Resident is classified into: Ordinarily
Resident and Not-ordinarily Resident. For the purpose of determination
of Residential status we need to satisfy some conditions, as follows;
1. The Primary/Basic Conditions [sec. 6(1)]:
An individual is said to be resident in India in any previous year, if
he/she satisfies at least one of the basic condition;
(a) If the Individual stayed in India for a period of 182 days or
more during the relevant previous year [ie. 182 days during 2019-
20]. (OR)
 2. (b) If he stayed in India for a period of 60 days or more during the
previous year and 365 days or more during the four preceding previous
years. [ie. 60 days during 2019-20- and 365 days or more during 2015-16
to 2019-2020]
Note: The day in which he/she enters India, as well as the day on
which he/she leaves India, shall be taken into account.
Exceptions: In the following cases the condition No- (b) above becomes
in operative. Here an Individual will be Resident in India, only if he is in
India during the previous year for at least 182 days. (ie. 60days shall
not be applicable);
> When an Indian Citizen leaves India during the previous year for
employment outside India.
> When an Indian citizen leaves India during thr previous year as a
member of Crew of an Indian Ship.
> When an Indian Citizen or a person if Indian origin comes to visit
India.
2. The Secondary Conditions [sec. 6(6)]:
If, after applying the basic conditions, it is determined that the Individual
is a ‘Non-Resident’, then nothing is to be done further. On the other hand,
if it is determined that the individual is a ‘Resident’ then it remains
further to be decided, whether he/she is an ‘Ordinarily Resident” or ‘Not-
ordinarily resident’. For this purpose he/she has to satisfy the following
conditions;
i. He/ she has been resident in India in at least 2 out of 10 previous
years immediately preceding the relevant previous year
ii. He/ She has been in India for a period of 730 days or more during 7
years immediately preceding the previous year.
Rules of Residential status for individuals

Resident Resident Resident but Not- Non- Resident

and Ordinarily ordinarily Resident
Resident

He/ She must He/ She must satisfy at He/ She must satisfy at If he/she
satisfy at least least one of the basic least one of the basic satisfies none of the
one of the basic condition [ie. condition [ie. (a) or (b)] basic conditions.
condition. (a) or (b)] And at the same time he/ In short;
[ie. (a) or (b)] And at the same time she should satisfy one or [ None of (a) or (b)]
he/ she should none of the secondary
satisfy Two secondary condition.
condition. [ie.(i) or (ii) or none].
[ie.(i) and (ii)]. In short;
 In short; [(a) or (b)] + [(i) or (ii)
[(a) or (b)] + [(i) and or none]
(ii)]
2. Computation of Taxable income from the salary of Mr.Anil
For the Assessment year 2022-23
Sl.no. Particulars Amount Amount
(Rs.) (Rs.)
1. Basic salary(40,000*12) 480,000
2. Dearness allowance(4500*12) 54,000
3. Medical allowance(1200*12) 14400
4. Bonus(40,000*2) 80,000
5. Rent free accommodation 60,000
15% of Salary+ Bonus+
Commission on turnover taxable
allowances/rent paid by
employer wel
603200*15%=90480
5000*12=60000

6 Motor car large 2400*12 4,800

.
7 Leave travel concession Exempted
.
8. Servent 2000*12 24000
9. Children education allowance 28800
2500*1*12 30000
Exempted 100*1*12 1200

10 Contribution to RPF 67200 9600

14%*480,000 57600
-Exempted upto12%*480,000
11 Income tax 5000
12 Staff insurance from employer 10,000
Gross salary 770600
Less : Deduction under section
 16
i) Standard Deduction
50,000
6. ii) Entertainment Allowance Nil
(Exempted only for Govt.
employees)
iii) Profession Tax Nil 50,000
Net Salary / Income from 720600
Salary
Deductions u/s 80C:
Employee Contribution to RPF 67200
AT 14%
Taxable Income from salary 653400

2. Computation of Income from House property of Mr. Akshay

For the assessment year

Particulars House-1 House-2 House-3

GAV: Muncipal value or 16000 14000 35000
Fair rental value [w.e.h]
Value of step 1 or 16000 14000 35000
Standard rent [w.e.l] 18000 12000 ---
Value of step 2 or 16000 12000 35000
Actual rent -unrealised rent[w.e.h] 20,000 18000 ---
(24000-4000)
-vacancy allowance24000*2/12 4000 - -
GAV 16000 18000 35000
-Muncipal tax 1600 1400 3500
14400 16600 31500
NAV(-) Deductions u/s 24
1)Standard deduction 30% of NAV 6000
20000*30% 20000*30%
2)Interest on loan 1550
+Realisation of unrealised rent of
2017-18
(-)30%*2000 1600
 Income from House property 3150

3. Computation of Income from business of Mr.Chandni

For the assessment year

Particulars Amount(Rs.) Amount(Rs.)

Net profit as per P/L account 6,41,000
(+)Disallowed expenses/NBE dr.to P/L 12000
account: Salaries
Legal expenses 4,000
Depreciation: Unabsorbed depreciation 9,000
Income tax 14,000
Patents rights[26000*25%=26000-6500] 19,500
Donation 9,000
Provision for bad debts 8,000
General expenses: staff welfare fund 11,000 86,500
5,54,500
(-)Allowed expenses not debited and NBI
credited to p/l account:
Bad debts recovered[22,000-8000] 14,000
Dividend 14,000
Rent from house property 20,000 48,000

Taxable Income from business 5,06500

4. Assesses: [section2(7)]

According to section 2(7), an assessment is a person who is liable to pay any

tax, or fees. Fine, penalty, and interest under the IT Act of 1961 for the income
earned by him or by anyone else.

The Residential status of an assessee decides the extent of his taxable income.
The scope of the total income of an assessee along with his Residential status is
determined with reference to his residence in India throughout the previous
year. The resident and citizenship are two different aspects. The incidence of tax
has nothing to do with citizenship as per section 5 of the Income tax Act of
1961.
We know that tax is charged on Total Income. The computation of this total
income further depends upon the residential status. The followings are the
importance of residential status;

Part B
5.

Sl.no Different kinds of Income Ordinary Not Non-

. Resident Ordinary Resident
Resident

1. Interest on German 17000 17000 17000

Development Bonds (one-third
is received in India)Rs.51,000. 34000 - -

2. Income from agriculture in 31,000

Bangladesh, remitted to India
Rs.31,000.

3. Income from property in 1,10,000

Canada received in
U.S.A.Rs.1,10,000.

4. Income earned from business 25,000 25,000 25,000

in Kuwait,.business being
controlled from 35,000 35,000 -
Mumbai (Rs.25,000 is received
in India)Rs.65,000.

4. Dividend from an Indian EXEMPTED ------------ -----------

Company 15,000.

5. Royalty received in Singapore 25,000 25,000 25,000

from Mr. Gulfam, a resident in
India, for
technical services provided for
a business carried on in
 Singapore Rs.25,000.

6. Profit from a business in 1,25,000 1,25,000 -

Chennai; this business is
controlled from
SingaporeRs.1,25,000.

7. Profit on sale of a building in 2,50,000 2,50,000 2,50,000

India, but received in Nepal
Rs.2,50,000.

8. Income from agriculture in EXEMPTED ------------ ------------

Punjab, received in Mumbai
Rs.30,000.
9. Profit from business in 40,000 40,000 ----------
Indonesia; this business is
controlled by Delhi
(60% of the profit is deposited
in a bank there and 40% is
remitted to India)Rs.40,000.

10. Interest received from Mr. 28,000 28,000 28,000

Shyam, a non-resident, on the
loan provided to him for a
business in India.Rs.28,000.

TOTAL INCOME 9,72,000 5,45,000 3,45,000

6. Exempted income specified under Section 10 is as follows:

1.
Income earned through agricultural
Section 10(1)
means

2.
Section 10(2) Any amount received by an individual
 through a coparcener from an HUF
3.
Income received by partners of a firm, as
Section 10(2A)
shared between them
4.
Any interest that has been paid to a
Section 10(4)(i)
person who is not a resident Indian
5.
Any interest that has been paid to the
Section 10(4)(ii) account of a person who is not a resident
Indian
6.
Any interest that has been paid to a
Section 10(4B) person who is not a resident Indian, but of
Indian origin
7.
Concession on travel given to an
Section 10(5)
employee who is also a citizen of India
8.
Any income earned or received by a non-
Section 10(6)
Indian citizen
9.
Section 10(6A), (6B), (6BB), Government tax paid on the income of a
(6C) foreign firm
10.
Allowances received by government
Section 10(7)
employees stationed abroad

7. COMPUTATION OF CAPITAL GAINS

For the assessment year

Particulars Amount(Rs.) Amount(Rs.)

Sale proceeds 20,00,000

(-)selling expenses --------------

 Gross capital gain 20,00,000

(-)Indexed cost of acquisition

4,00,000*331/25

Capital gain

Part -C

9. 2016-17—stayed in India for 344 days

2017-18 Nil
2018-19 Nil
2019-20—10th sept. 2019 to 31st March 2020 = 203 days.
During the previous year, 2019-20. Anil stayed in India for 203 days. hence he
is a Resident u/s 6(l)(a) and he is ordinary resident u/s 6(6).

10.Allowances: Section 10 for salaried employees under the Income Tax Act covers a wide
range of allowances ranging from house rent and leave travel allowance to research/academic
allowance and uniform allowance.
Allowances covered in this category are:

1)Fully taxable allowance

2)Allowances exempted up to specified limit.

3)Fully exempted allowance.

 Daily Allowance
 Travel Allowance
 Research/ Academic Allowance.
 Conveyance Allowance.
 Helper Allowance
 Uniform Allowance

11.Pension:

 A pension plan is a retirement plan that requires an employer to make

contributions to a pool of funds set aside for a worker's future benefit.
 There are two main types of pension plans: the defined benefit and the
defined contribution plan.
 A defined benefit plan guarantees a set monthly payment for life (or a lump
sum payment on retiring).
12.

Particulars Amount(Rs.) Amount(Rs.)

Actual earned leave recieved 32,000
Least of the following is exempted:
Actual earned leave recieved 32,000

13.

Particulars Amount(Rs.)
Salary for working as MP 30,000
Daily allowance 10,000
Winning from crossword puzzles 8,000
Refund of money 10,000
Interest on post office exempted
Agriculture income 20,000
Rent received 12,000
Gross Total income from other sources 90,000

14.Deductions under section 80C:

Contribution to RPF

LIC Premium.
 St. Philomena’s College (autonomous)Mysore-15
IV Sem BCom -Make up exam : January 2023
Subject: Commerce Title: INCOME TAX-I
Time: 3 years Maxmarks:70

1. Computation of Total Income and tax liability of Miss Minal

For the assessment year 20222-23

Particulars Amount(Rs) Amount(Rs)

1.Net salary 6,68,000
2.Rent from HP:GAV 36,000

-30% of NAV 36000*30% 10,800

Income from HP 25200
2.Business Income 1,83,000
3.Capital gain (Long term) 28,000
4.Income from other sources:
Royalty 66,000
Dividend from Indian company Exempted
Income from minor son -------------
Bank interest on time deposit 16,500
Gross total income 9
Contribution to PPF 40,000
Medical Insurance premium 32,000
Donation 10000*50% 5,000
Total taxable income 9,20,500

Computation Of taxable liability of Ms.Minal

For the Assessment year 2022-23

PARTICULARS Tax rate Amount(Rs) Taxable

amount(Rs)
1.Tax on LTCG 20% 28,000
2.Tax on STCG 15% --- -----
3.Tax on casual income 30% --- -----
4.Tax on balance
Upto 2,50,000 Exempted

25,0,000-5,00,000 5%

5,00,000

2.Computation of Depreciation allowance under section 32

Particulars Amount(Rs) Dep. Allowance

Building: WDV as on 1-4-2021 9,40,000

-Dep (9,40,000*10%) 94,000 94,000

WDV as on 1-4-2022 8,46,000

Block 2:Building and plant: 37,10,000

WDV as on 1-4-2021 1,85,500 185500

-dep (4,10,000+33,00,000=37,10,000

37,10,000*5%)
WDV as on 1-4-2022 35,24,500
Block 3: P&M: WDV as on 1-4-2021 2,50,000

-Dep 2,50,000*30% 75,000 75,000

WDV as on 1-4-2022 1,75,000

Block 4: Type writers 155000
 (-)Sales 6500

(-)Selling expenses 500

148000

(-)depreciation 148000*15% 22,200 22,200

WDV as on 1-4-2022 1,25,800

Block 5:Scooters WDV as on 1-4-2021 2,10,000
-depeciation at 15% 31,500 31,500
WDV as on 1-4-2022 1,78,500
Block 6:WDV as on 1-4-2021 MC+FC+IC 7,65,000
3,25,000+1,80,000+2,60,000
1,93,000
+Claim from insurance
company(190,000+3000) 9,58,000

-Repairs 2000
9,56,000

-Depreciation 696000*15% 143400 143400

WDV as on 1-4-2022 812600
Block 7: Furniture
WDV as on 1-4-2021 1,20,0000
-depreciation 1200000*10% 12,000 12,000
WDV as on 1-4-2022 1,08,000
Plant purchased on 10-07-21 2,50,000

-depreciation @30% (full dep) 75,0000 75000

-depreciation @20% (Full dep) 50,000 50,000

WDV as on 1-4-2022 1,25,000
Block 8:Books 10,000

WDV as on 1-4-2021

-depretiation 10000*40% 4000 4000

WDV as on 1-4-2022 6000 6,92,000

3.

Particulars Amount(Rs.) Amount(Rs.)

Net profit asper p/l account 3,10,0000
+Remuneartion pid to working partners:

1)Interest on capital exepted upto 12%

Ram:100000*13/25 52000

Bheem:60000*13/25 31200

Som:40000*13/25 20800 104000

2)Commission:Ram 20,000 40,000

Bheem 15,000

Som 5,000
3)Bonus:Ram 15000 30,000

Bheem 15000
4)Salary:B 30,000 50,000

Som 20,000
Donations 20,000
RBD 20,000
Dep.reserve(40000-15000) 25,000
5,99,000
(-) Allowed expenses and NBI credited to P/L 30,000 96,000
account: Dividend
26,000
Rent from HP:
40,000
Interest on Gov.sec

BOOK PROFIT 5,03,000

(-)Deduction of remuneration paid to working 150,000
partners:

1.BP<3,00,0000 MAX deduction or 90% 0n

first 3,00,000*90% 270000

2.60% on remaining balance503000-300000 121800

203000*60%or 391000
 3.Actual remuneration to wk.partners

Sal+com+bonus of Bheem and Som 85,000 85000

Total Income 4,18,000

4.PAN: Permanent Account Number or PAN is a means of identifying various taxpayers in

the country. Pan Card is a 10-digit unique identification alphanumeric number (containing
both alphabets and numbers) assigned to Indians, mostly to those who pay tax.

The PAN system of identification is a computer-based system that assigns a unique

identification number to every Indian tax paying entity. Through this method, all tax-related
information for a person is recorded against a single PAN number, which acts as the primary
key for storage of information. This is shared across the country and hence no two people on
tax paying entities can have the same PAN.

Consequences:

1. If you do not furnish PAN, then tax is deducted at a much higher rate. For instance, if the
annual interest you earn on your bank fixed deposits is at least Rs. 10,000, then banks deduct
tax at source before crediting the interest to your account. Tax will be deducted at 10% if you
produce PAN but flat 20% or higher if you do not provide PAN.

2.One cannot make an application under section 197 or file declaration under section 197A
without PAN as under both the sections quoting of PAN is mandatory

. 3. There is penalty U/s 272B for non quoting of PAN of an amount Rs 10,000 4. One
cannot sale & purchase of motor vehicle other than two wheeler without quoting PAN 5.
Application to bank or other company/institution for issue of credit/debit card cannot be
made without mentioning PAN.

6. One cannot make payment of bill to hotel and restaurants in cash of an amount exceeding
fifty thousand rupees without PAN

7. One cannot make payment payment of amount exceeding Rs 50,000 to a mutual fund for
purchase of units without having PAN

8. Payment in connection with travel to any foreign country or payment for purchase of any
foreign currency at any one time in cash of an amount exceeding fifty thousand rupees cannot
be made without quotting PAN.
 9. Payment as life insurance premium to an insurer as defined in clause (9) of section 2 of
the Insurance Act, 1938 (4 of 1938) of an amount aggregating to more than fifty thousand
rupees in a financial year cannot be made without quoting PAN

10. Sale or purchase of any immovable property of an Amount exceeding ten lakh rupees or
valued by stamp valuation authority referred to in section 50C of the Act at an amount
exceeding ten lakh rupees can be undertaken without quoting PAN

PART- B

5.

Particulars Amount(Rs) Depreciation

allowance

1.Computers WDV as on 1-402021 2,40,000 1280000

+Purchase 80,000=320000

-depreciation @40(320000*40%) 128000

WDV as on 1-4-2022 192000

2.Type writer WDV as on 1-402021 50,000 7500

-dep 50000*15% 7500

WDV as on 1-402022 42,500

3.Ofice furniture WDV as on 1-402021 80,000 8000

-dep 80000*10% 8000

4.Office building WDV as on 1-402021 4,00,000

+purchases 30,00,000

-sold 34,00,000

(12,00,000)

22,00,000
 -dep 4,00,000*10% 40,000 40,000

30,00,000*5% 1,50,000 1,50,000

WDV as on 1-402022 2,10,000

6.Total income and tax liability of a Company

7.Computation of TDS

8.Ten Penalties: • PENALTY under the General Connotation • the suffering or the sum to be
forfeited to which a person agrees to be subjected in case of nonfulfillment of stipulations. •
A timely and consistent paying of taxes and filing of returns ensures the government to
generate money for public welfare at any point of time. To make sure that taxpayer does not
default in paying taxes or disclosing the information. • A penalty is the punishment which is
imposed on the taxpayer for being non-compliant. There are several penalties prescribed
under the Act. The most common as well as important penalties covers the following: •
Default in making payment of tax • Under-reporting of income • Failure to maintain books of
accounts and other documents • Audit and Audit Report • Penalty for false entry such as fake
invoices • Undisclosed income • Penalty for using modes other than Account payee cheque/
draft/ ECS • Failure to furnish statements/ information • Related to Search in respect of
undisclosed Income • Failure to comply on Notice/Summon etc. • TDS/TCS

PART C

9. As per the Section 32(1) (iia) of the Income Tax Act, 1961 the plants and machinery
engaged in the production of a thing are granted a deduction on additional depreciation at the
rate of 20% in the year they were purchased.

10.Computation of depreciation allowance asper sec 32

11.A profit which is calculated after adjusting the remuneration paid to partners in a
partnership firm,

12.Computation of remuneration to working partners.

Particulars Amount(Rs.) Amount(Rs.)

Net profit 6,00,000

+Interest on capital exempted upto 12% ---------

 salary 6,00,000

-------------

13.computation of Taxable income: Gross total income:706000

-deductions :7000

Taxable income 6,99,000

14.Interest payable under sec 234 A

Total income: 627500-Advance tax paid- 20720=606780*1%=6068