TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS

(PREPARED BY ARJUN IYER – STUDENT DPU)

1) The maximum exemption in respect of HRA is Rs. (Refer below SS. The exemption is
mentioned in Section 10(13A) raw case book)

A) RS. 2000 per month

B) RS. 5000 per month
C) RS. 15000 per month
D) RS. 20000 per month

2) Mr. Mohit is a government employee. He is in receipt of transport allowance of

Rs. 1600 per month. What will be the tax treatment of transport allowance in the
hands of Mr. Mohit? (Refer below SS. This is outdated information. Please note, in
Budget 2018, Government introduced the Standard Deduction benefit for Salaried
employees, thus making transport allowance & medical allowance fully taxable. I
have marked as per the textbook information)

A) Rs. 1600 per month will be exempt from tax

B) Rs. 1000 per month will be exempt from tax
C) Rs. 800 per month will be chargeable to tax
D) Rs. 1600 per month will be charged to tax
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

3) Capital gains deposit account scheme is not available under (Refer below SS, CGAS
Schemes are available for all below mentioned sections but Section 54D deduction is
only available for Industrial Undertaking & not for Individual or HUF)

A) Section 54
B) Section 54F
C) Section 54B
D) Section 54D
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

4) While computing capital gain on sale of immovable property, full value of

consideration shall be: (Refer below SS)

A) Actual consideration agreed by the buyer

B) Actual consideration paid by the buyer
C) Actual consideration or stamp duty value of the property transferred,
whichever is higher
D) Stamp Value of the property transferred
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

5) What shall be the cost of acquisition of capital asset being immovable property
which has been acquired without consideration (gift) and taxed under section 56
of the Act? (Proof in extra attachment provided by DPU in Swayam)

A) Cost to the previous owner

B) Nil
C) Stamp duty value of the property as considered while computing income u/s
56(2)
D) Cost incurred by the assessee on execution of Gift Deed.

6) Surplus on sale of rural agricultural land is? (Refer below SS from Swayam)
A) taxable under the head “Income from Other Sources”.
B) taxable under the head “Profits and gains from business or profession”
C) not taxable as rural agricultural land is not a capital asset
D) taxable only if transferor is a company
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

7) Long term capital gain on sale of equity shares through stock exchange (Refer below
SS)
A) is exempt u/s 10(38)
B) is exempt u/s 10(37) (This is provision for acquisition of Urban Agriculture
Land)
C) is taxable @ 15% u/s 111A (This is for short term capital gain)
D) is taxable @ 10% u/s. 112A

8) Which asset is a specified asset for the purpose of section 54 EC? (Refer below SS)
A) NABARD Bonds
B) NHB Bonds
C) SIDBI Bonds
D) NHAI Bonds
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

9) A partnership firm will be treated as resident in India, if the control and management
of its affairs is in India. (Answer in Page No. 46 – 3.2 – Last Line - Receiving Deposits or
accepting deposits)
A) Partly
B) Wholly
C) Exclusively
D) Wholly/Partly

10) Section deals with the provisions relating to depreciation allowance while computing
income chargeable to tax under the head “Profits and Gains of business or profession”.
(Refer below SS)
A) 30
B) 31
C) 32
D) 35
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)
11) If a domestic servant is engaged by the employer and salary is paid by him, the
perquisite is (CS Inter MTP Source. Also note, if domestic servant is engaged by employee
& salary is given by employee then it is taxable in hands of all employees)
A) Taxable in the hands of all employees
B) Not taxable at all
C) Taxable in the hands of specified employees only
D) not taxable up to Rs. 500 p.m. servant

12) Assuming that the rate of Interest on employer’s contribution to Recognized

Provident Fund is 12.5% p. a., then, (CS Inter MTP Source. For confirmation refer Section 7
– Deemed Income which is taxable & Question 15 – Option A description)
A) entire interest accrued is taxable in the hands of employee
B) Total Interest accrued is exempt in the hands of employee
C) interest up to 9.5% is taxable in the hands of employee
D) interest up to 3% is taxable in the hands of employee
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

13) The salary for the purpose of calculation of perquisite in respect of residential
accommodation in the hands of private sector employee does not include: (Refer below
SS)
A) Bonus
B) Commission
C) Non-Monetary payment
D) Monetary payment

14) Identify the income that may be taxable in the hands of a non-resident in India (Income is
accrued & arise in India so it is chargeable to tax for a Non-Resident. Refer below SS)
A) Bank interest from State Bank of America, New Jersy
B) Rental Income from property located in Washington DC, USA
C) Rental income from hotel located in Switzerland
D) Rental income from property located in Ahmedabad
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

15) Which of the following incomes is not a deemed receipt as per section 7 of the
Income Tax Act? (Refer below SS)
A) Interest credited to recognised provident fund account of an employee in excess of
9.5% per annum.
B) Employer’s contribution to recognized provident fund in excess of 12%.
C) Transfer balance in case of reorganisation of unrecognized provident fund.
D) Gift in kind received from non-relative
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

16) The salary of Member of Parliament shall be chargeable to tax under the head (Refer
below SS from Swayam)
A) PGBP
B) Income from Other Sources
C) Salary Income
D) Capital Gains

17) Interest relating to pre-construction period is allowable under the head house
property? (Refer below SS. This is tricky question. Interest for pre-construction will be
allowed as deduction in 5 equal instalments from the date on which the house property is
fully constructed & not when expenses are incurred)
A) In 5 equal instalments from the year in which it was incurred
B) In the year in which it was incurred
C) In the year in which house property was constructed
D) In the year in which house property was bought
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

18) Out of followings who is not regarded as relative of Individual for the purpose of
section 40A (2)? (Refer below SS from Swayam)
A) Husband
B) Brother-in-law
C) Sister
D) Any lineal ascendant or descendant of an Individual

19) Income from a farm house is agricultural income (Not all farm house income is
agricultural income. In question they have not specified the purpose of use of farm house for
agriculture)
A) True
B) False

20) Personal property tax can be classified as direct tax? (Refer below SS from Swayam)
A) True
B) False
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

21) Income from salary in respect of service rendered outside India is treated as an
income deemed to accrue or arise in India in case of a resident and ordinarily resident.
(Refer the Table in SS)
A) True
B) False

22) Perquisite is an example of rent-free accommodation? (Refer below SS from

Swayam)
A) True
B) False
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

23) The term “Income” defined under section 2(24) includes - The fair market
value of inventory in case of conversion of inventory into capital asset (Refer
below SS for reference & also note the definition of income includes business
income)
A) True
B) False

24) The term “Income” defined under section 2(24) includes - Any compensation on
account of termination or modification of terms and conditions of employment. (Refer
below SS)
A) True
B) False
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

25) The amount withdrawn from Tea Deposit Account under section 33AB of the Act in
the event of_________ is taxable. (Refer below SS)
A) Death of the assessee
B) Partition of HUF
C) Liquidation of Company
D) Closure of Business

26) The amount withdrawn from Site Restoration Fund Account under section 33 ABA as
reduced by the amount payable to_________shall be deemed to be the business income
in the year in which it is withdrawn. (Refer below SS)
A) Associate Company
B) Local Authority
C) Central Government
D) State Government
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

27) The provisions of deemed income under section 35 AD (7B) of the Act regarding
misutilization of assets of specified business shall not apply to the ________ (Answer in
Page No.48 – Acceptance of Deposits by NBFC – Point No.5)
A) Partnership Firm
B) Sick Company
C) Government Company
D) Industrial Company

28) In order to claim deduction of expenditure under section 37(1), one of the conditions
is that it should not be in the nature as prescribed u/s. _______. (Refer below SS & Page
No.94)
A) 40
B) 41
C) 30 to 36
D) 29
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)
29) No disallowance will be attracted under section 40A (3) in respect of cash payment
made to an employee on account of gratuity, retrenchment compensation or similar
terminal benefit provided aggregate of such sums payable to an employee does not
exceed Rs. ____________. (Refer below SS from eBook. Page No.97)
A) 50000
B) 10000
C) 20000
D) 35000

30) As per section___________, long-term capital gain arising in excess of Rs. 1 Lakh on
transfer of equity shares or units of equity oriented mutual fund or units of business
trust is chargeable to tax @ in the hands of any person, if specific conditions are
satisfied in this regard (Refer below SS in Swayam)
A) 10(38), 10%
B) 112A, 20%
C) 112A, 10%
D) 111A, 15%
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

DISCLAIMER:

CASE BASED ASSIGNMENT ANSWERS ARE MARKED AS PER MY UNDERSTANDING. SO

KINDLY SOLVE THE ANSWERS FROM YOUR END & MARK. CHANCES OF HAVING
DIFFERENT ANSWERS IS POSSIBLE.

1) Mr. X wanted to file his return of income for the previous year 2021- 22. He
required assistance for which he has approached you. He has shared the
following details relevant to the P.Y. 2021-22. Mr. X owned a house property in
Mumbai and the same was rented out for ` 70,000 p.m. He claims that this was
the only income which he earned during the P.Y. 2021-22. However, when you had
sought for his bank statement, you observed the following information
additionally. There is a credit for ` 23,975 towards income-tax refund which
includes ` 5,775 towards interest on income-tax refund. On 15th August, 2021,
the bank statement showed a credit of ` 55,000 which he claimed to have
received as a gift from his grandchildren on his 60th birthday. On further
assessment you were able to understand that Mr. X and his wife had travelled to
Australia during the P.Y. 2021-22 to spend some time with their daughter, who is
staying in Australia, since her marriage. On scrutiny of their passport and
relevant documents you conclude that they had left India on 27th September,
2021 and retuned on 30th March, 2022. During the 4 years preceding previous
year 2021-22, both had stayed in India for 320 days. Prior to that, they had been
staying only in India.

ANSWERS:

2) What is the residential status of Mr. X for the P.Y. 2021-22? (SATISFYING THE
CONDITIONS OF 60 DAYS OR MORE IN PREVIOUS YEAR & ALSO 365 DAYS (320 DAYS IN 4
YEARS PRECEDING PY + 179 DAYS IN PY) & ALSO PRIOR TO THAT MR.X WAS STAYING IN
INDIA IN ALL PY. SO, THE BASIC AS WELL AS ADDITIONAL CONDITIONS ARE SATISFIED)

a) Resident
b) Ordinarily Resident
c) Non-Resident
d) Deemed resident but not ordinarily resident (Not the answer as for this
condition the assesse must be in India for a period of 120 days but less than
182 days for PY & 365 days or more in 4 years immediately preceding the PY)
 TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

3) There is a credit for_______ towards income-tax refund which includes ` _____

towards interest on income-tax refund. (REFER PARA 6TH LINE)

a) 22975
b) 5757
c) 23975
d) 5775

4) Identify the Previous year & Assessment Year. (REFER PARA 1st LINE)

a) 2021-22 – Previous Year

b) 2020-21
c) 2022-23 – Assessment Year
d) 2022

5) Mr. X had given the house property at Mumbai on rent to Mr. Y, a salaried
employee. Is there any requirement to deduct tax at source on such rent by Mr. Y,
if yes, what would be the amount of TDS to be deducted? (REFER CALCULATION &
ITS PROVISION)

a) No, there is no requirement to deduct tax at source

b) Mr. Y is a salaried employee
c) Yes, Mr. Y is required to deduct tax at source
d) Rs.42000 (As per Section 194, TDS must be deducted by salaried Individuals
for rent if it exceeds Rs.50000 per month. Here, the rent received by Mr. X is
Rs.70000 * 12 = Rs. 840000. The rate of TDS, assuming there is PAN
available for assesse is 5%. Thus, the TDS amount to be deducted is
Rs.42000 (Rs.840000 * 5/100)

6) Which of the following statements is correct with respect to advance tax liability
of Mr. X for P.Y. 2021-22? (REFER PARA LAST LINE)

a) Advance tax liability shall not arise, since Mr. X is a resident senior citizen
b) he has no income chargeable under the head “Profits and gains of business
or profession (Section 207 gives relief from payment of advance tax by senior
citizen who do not have income from Business & Profession)
c) Advance tax liability shall arise
d) His tax liability is not less than Rs.10000
TAXATION – FINANCIAL MANAGEMENT ASSIGNMENT ANSWERS
(PREPARED BY ARJUN IYER – STUDENT DPU)

THANKING-YOU

CREATED BY ARJUN IYER:

TO SUPPORT ALL DPU MBA FINANCE STUDENTS.