UNIT 16 ASSESSMENT OF INDIVIDUALS Assessment of

Individuals

Structure
16.0 Objectives
16.1 Introduction
16.2 Steps in Computation of Total Income
16.3 Head wise Computation of Income
16.4 Computation of Gross Total Income
16.5 Deductions under Chapter VIA
16.6 Some Illustrations (Computation of Total Income)
16.7 Computation of Tax Liability of Individuals (with Illustrations)
16.8 Let Us Sum Up
16.9 Key Words
16.10 Answers to Check Your Progress
16.11 Terminal Question/Exercises

16.0 OBJECTIVES
After studying this Unit, you should be able to:

• Compute income under individual heads.

• Compute Gross Total Income.
• Calculate the losses to be set off and carried forward and set off in
succeeding years.
• Compute the total income.
• Compute the Tax Liability.

16.1 INTRODUCTION
You know the assessee is put to tax on the basis of his residential status.
Income taxis chargeable on the ‘total income’ of the previous year at the rate
prescribed in the Finance Act for the assessment year relevant to that
previous year. ‘Total income’ is defined as the income computed under the
provisions of Income Tax Act, 1961. The same forms the basis for computing
the tax payable by or refundable to the assessee.

In this unit, you will study how the income from different heads is computed,
what deductions are allowed and how income chargeable to tax is calculated.
You will also come to know calculation and ascertainment of tax liability of
the individual assessee.

187
Computation of
Total Income and 16.2 STEPS IN COMPUTATION TO TOTAL
Tax Liability INCOME
The following stages are involved in the computation of total income:

i) Computation of taxable income from each source under a particular

head;
ii) Computation of taxable income under each head;
iii) Computation of gross total income;
iv) Ascertaining the amount of deductions admissible under Chapter VIA;
and
v) Arriving at the Total Income and round off to nearest 10.

16.3 HEADWISE COMPUTATION OF INCOME

Under the scheme of Indian Income Tax Act, the income of a tax-payer falls
in one or more of the following heads of income: ,

• Income from salaries

• Income from house property
• Profits and gains of business or profession
• Income from capital gains
• Income from other sources.

Specific provisions are contained in the Act for computation of income under
each head of income. As a broad general principle, in the absence of any
specific mention of allowances or disallowances, income under each head is
computed by deducting from the gross profit/receipts, the expenses of
revenue nature which are incidental to business (Section 37)in case of
business income and which are incidental to earning the income in other
cases.
Income from different sources under each head of income is to be separately
computed. For example, a person may be the owner of more than one
business in this case, the profit of each business will be computed separately
and total of all will be the income under the head ‘profits and gains from
business or profession’ Similarly, a person may earn capital gains from more
than one transaction, in this case, gains arising-from each transfer is to be
separately computed and the total of such gains will come under the head
‘Capital gains’.

Ifthere is income from one source and loss from another source falling within
the same head of income, the loss will be adjusted (technically known as set
off) against the income of another source and only the net figure will be the
income under the head. For example, if there is profit of Rs. 50,000 from
188
business ‘A’ and loss ofRs. 30,000 from business ‘B’, it is only Rs. 20,000 Assessment of
Individuals
after such intra-head adjustment that will be ‘profit from businesses’.
Speculation loss is, however, allowed to be set off only out of profit from
another speculation business and not from profit of any other business.

16.4 COMPUTATION OF GROSS TOTAL

INCOME
Having computed income under individual heads, the next step is aggregation
of income under all the heads. If income computed under any head is a loss,
such loss is allowed to be adjusted against income under other heads. For
example, if computation under the head ‘Profit and gain of business’ is a
profit of Rs. l,00,000and there is a loss of Rs. 30,000 under the head ‘income
from house property’, the loss can be adjusted against the business income
with the result that there will be profit from business
Rs. 70,000 only.
The loss arising from speculation business cannot be set off either out of
profit of any other business or income under any other head.

After the inter-head set off, the next step is to allow set off of the past losses
which could not be set off in earlier years and hence, carried forward in those
years. Such a set off is, however, subject to the following conditions:
• Loss carried forward can be set off against income under the same head,
if any.
• Carried forward speculation loss can be set off against speculation profits
only.
• Business loss can be set off against the business income even if the same
business is discontinued.
• Loss under the head business can be carried forward to eight succeeding
assessment years only but unabsorbed depreciation can be carried
forward without any limitation as to time.
• Loss arising from long-term capital gain can be carried forward to eight
succeeding assessment years for set off against income under the head
‘capital gains’ only. However, set off of short term capital loss can be
made out of both long term capital gain and short term capital gain.

In the above example, if there was a carried forward business loss of Rs.
60,000, it will be set off against business income of Rs. 70,000, thus,
reducing the income under this head is Rs. 10,000 only.
In case, the carried forward business loss was Rs. 70,000, then the entire loss
would have resulted in nil income under the business head. If the carried
forward business loss was Rs. 80,000, it would have been set off to the extent
of Rs. 70,000 and the remaining loss of Rs. 10,000 carried forward for set off
189
Computation of in succeeding years. This presumes that the same business is still continued in
Total Income and
Tax Liability this year and the carried forward loss is not more than eight years old.
The income of each head after inter-head set off and set off of carried
forward losses mentioned above is then aggregated to give Gross Total
Income.

Income of a member of HUF as his share in the income of HUF is neither

included in the total income of the assessee nor taxed. However, if an
individual who is a member of H.U.F. receives any income from HUF on
account of his labour, technical services or special knowledge and
experience, is taxable and included in the total income of individual assessee.
Similarly, if any member of HUF converts his separate property into H.U.F.
property, income of such converted property shall be taxable income of such
individual member and is included in his total income.
Share of profit of a partner in the firm is not included in his total taxable
income. However, any income of a partner from firm by way of interest,
salary, bonus, commission or remuneration shall be included in the taxable
income of such partner who receives it.

Dividend income taxable in hands of shareholders w.e.f. 1-4-2020

The dividend income from a domestic company was exempted in the hands
of shareholder by virtue of exemption under section 10(34) of the Income
Tax Act till Assessment Year 2020-21 but in this case, the company was
liable to pay Dividend Distribution Tax (DDT) under section 115-O.
However, the Finance Act, 2020 has made provisions of section 115-O
ineffective which means that the domestic companies are no more liable to
pay DDT on such dividend paid by them. Thus, the dividend income shall be
taxable in the hands of the shareholders and the burden of tax payment is
shifted from company to the shareholders with effect from A.Y. 2021-22.

Note:
Section 115BBDA not relevant from A.Y. 2021-22

Due to this amendment, Section 115BBDA has also lost its relevance.
Section 115BBDA provides for taxability of dividend over Rs. 10 Lakhs in
the hands of the shareholders. Since from A.Y. 2021-22, the entire amount of
dividend income is taxable in the hands of the shareholders, the threshold
limit of Rs. 10 Lakhs as given u/s 115BBDA is of no effect.
Following rules shall be applicable in case an individual assessee who
receives income from Association of Persons (AOP) or Body of Individuals
(BOI) in which he is a member:

i) Where tax is payable on the total income of AOP or BOI at normal rate
of income tax applicable to individual etc, the share in income of a
member is included in his total income and a tax rebate is allowed at an
average rate of tax.
190
ii) Where no tax is payable by AOP or BOI on its total income, then, the Assessment of
Individuals
share of a member shall be included in his total income and the tax shall
be paid over it.

iii) If the income tax is payable on the total income of AOP or BOI at the
maximum marginal rate or any higher rate, the share of a member shall
be taxable and shall not be included in the total income of the member
assessee.

The agricultural income is exempt from income tax; however, if the

agricultural income exceeds Rs. 5,000 and assessee's income is taxable,
(excluding agriculture income), then, agricultural income shall be included in
assessee's total income for the purpose of ascertaining tax liability.
Deemed incomes as described between Section 60 to 64 are clubbed
(included) in the total income of the individual assessee.

The computation of total income of an individual assessee may be explained

by the following chart:

Table 16.1: Chart showing computation of total income of an individual

Rs. Rs.
Income from salaries -
Income from house property -
Profit and gains of business or -
profession
Capital gains:
i) Long Term Capital Gains -
ii) Short-term Capital Gains - -

Income from other sources: -

Gross total Income -

Less: Deduction u/s 80 c to u/s 80 U -

Total Income -

Total income rounded off -

(To the nearest multiple of Rs. 10)

Explanation:
i) This is not necessary that assessee should have income under all the five
heads of income. He may have income even in one or two heads.
191
Computation of ii) This is not compulsory that every assessee should have income. Only
Total Income and
Tax Liability when an assessee has deemed income, the clubbing rules of Section 60 to
64 will apply.

iii) Unabsorbed depreciation is deducted and losses are set off under the
rules while calculating total income of an assessee.

iv) If 'salary received' is given, deductions of entertainment allowance and

employment tax or business or profession tax (if given) shall be allowed
as deduction u/s 16. If computed amount of income from salary is given,
no deduction shall be allowed u/s 16 (for entertainment allowance or
employment or business or profession tax).

v) If amount of 'Rent Received' is given under the head income from house
property, the statutory deduction of 30% of it is allowed. However, no
statutory deduction is made if computed amount of income from house
property is given.

vi) Computed amount of winning from lottery or winning from horse race (if
given) should not be grossed up while calculating it under the head
income from other sources. However, if the Net Amount Received is
given then it should be grossed up while calculating income from other
sources.

16.5 DEDUCTIONS UNDER CHAPTER VIA

Next step for calculation of taxable income is the deduction. The Gross Total
Income is reduced by the deductions mentioned in Chapter VIA. It is
important to note that such deductions cannot exceed the Gross Total Income.
Rules of deductions of Chapter VI A, are given U/s 80 C to 80 U, of Income
Tax Act.

After the deductions are made, the resulting figure is total income which is
subjected to tax at the rate or rates mentioned in the Finance Act.

16.6 SOME ILLUSTRATIONS

Let us now study a few illustrations for clear understanding of computation
of total taxable income of an individual.

Illustration-1
Prof. Vijita Aggarwal declares the following particulars of income for the
A.Y. 2022-23.

192
Calculate her total income. Assessment of
Individuals
Rs.
i) Salary @ 5,000 p. m.
ii) Servant allowance @ 200 p.m.
iii) Royalty from books 18,000
iv) Net amount received from lottery 28,000
v) Expenses on lottery tickets 10,000
vi) Winning from card games 6,000

Solution:
Computation of total income of Prof. Vijita Aggarwal for the A.Y. 2022-
23

Rs. Rs.
1) Income from salaries 60,000
Servant allowance 2,400
Income from salary 62,400
Less: Standard Deduction 50,000 12,400
2) Income from other sources:
Royalty from books 18,000
Winning from card games 6,000
Lottery (grossed-up)
�������� 40,000
��
64,000
Gross Total Income 1,38,800
Less: Deductions under Chapter VI-A
Royalty from books u/s 80 QQ B 18,000
Total Income 1,20,800

Illustration-2
Income of Shri Hemendra for the year ended 31st March 2022 consists of the
following:
Rs.
a) Business profits (after setting off Rs. 20,000 paid as 50,000
donation to an educational institution and Rs. 7,000 as
deposit in National Saving Certificate).
b) (20%) 1/5th share of profit from a registered firm (which 8,000
has paid income tax)
c) Interest on government securities (gross) 10,000
d) Dividend on shares of foreign company (gross) 5,000
193
Computation of Compute the Total Income of Shri Hemendra for the A.Y. 2022-23
Total Income and
Tax Liability
Solution:

Computation of total income of Shri Hemendra for the AY2022-23

Rs.
1) Business profits (Rs. 50,000+20,000+7,000 ) 77,000
Share of profit from a firm Exempt
2) Income from other source:
Interest on Government securities (gross) 10,000
Dividend from foreign company (gross) 5,000

Gross Total Income 92,000

Less: Deductions:
i) u/s 80G: 50% of eligible donation of Rs. 9,200 4,600
ii) Rs. 7,000 as deposit in National Saving 7,000
Certificate
Total Income 80,400
��
Note: Deduction for donation = Adjusted income �Rs. 92,000 × ���� =
��
9,200 × ��� = 4,600

Illustration-3
Compute the total income of Mr. Amit Chaudhary from the following
particulars of his income for the A.Y. 2022-23.

Rs.
i) Salary (After Standard Deduction) 180,000
ii) Dividend received from Indian company 10,000
iii) Share of profits from HUF 12,000
iv) Dividend from a co-operative society 6,000
v) Rental income from house property 10,000

Solution:

Computation of total income of Mr. Amit Chaudhary for the A.Y. 2022-23

Rs. Rs.
i) Income from Salary 1,80,000
ii) Income from house property 10,000
Less: 30% statutory deduction 3,000 7,000
iii) Income from other sources:
Dividend from Indian company 10,000
Dividend from co-operative society 6,000
194 Gross Total Income 2,03,000
 Less: Deductions u/s 80 C to 80 U Nil Assessment of
Individuals
Total Income 2,03,000

Illustration-4
Computation of taxable income or Shri Pankaj Lathar for the A.Y. 2022-23

Rs. Rs.
i) Income of business (including Rs. 25,000 80,000
received as compensation for termination of
an agency)
ii) Interest on Government securities 1,500
(net)
iii) LTCG on sale of a machine 16,000
iv) Income received from units of UTI 2,000
v) Interest received on fixed deposits in a firm 3,000

He paid Rs. 2,500 for life insurance premium and invested Rs. 5,000 in
National Saving Certificates (VIII Issue).

Solution:
Computation of total income of Shri Pankaj Lathar for the A.Y. 2022-23

Rs.
1) Income from business 80,000
2) Income from other sources:
Interest on Government securities 1,500
Interest on fixed deposits 3,000
3) Capital Gain: LTCG on sale of machine 16,000
Gross Total Income 1,00,500
Less: Deduction U/s 80 C for LIP & NSC i.e. 7,500
Rs. (2,500 + 5,000)
Taxable Income 93,000

Illustration- 5
The following are the particulars of Shri Apoorva for the A.Y. 2022-23.
Compute the taxable income.

Rs.
i) Income from house property (computed) 25,000
ii) LTCG on building 30,000
iii) Winning from lottery 80,000
iv) Life insurance premium paid 1,000
v) Interest on Govt. securities 12,000
vi) Income from cloth business 1,25,000
195
Computation of vii) Profit from business of growing mushrooms 40,000
Total Income and
Tax Liability viii) Profit from business of dairy farming 15,000

Solution:

Computation of taxable income of Shri Apoorva for A.Y. 2022-23

Rs. Rs.
i) Income from house property 25,000
ii) Income from business:
Income from cloth business 1,25,000
Profit from business of growing mushrooms 40,000
Profit from business of dairy farming 15,000 1,80,000
iii) Capital Gain: LTCG 30,000
iv) Income from other sources:
Winning from lotteries 80,000
Interest on Govt. securities 12,000 92,000
Gross Total Income 3,27,000
Less: Deduction u/s 80 C for LIP paid Rs. 1,000
Taxable Income 3,26,000

Illustration-6
Determine the total income of Shri Sushil Kumar from the following
particulars for the year ending on 31st March 2022

Rs.
i) Interest received on 7% bonds of UP Govt. 5,000
ii) Income from house property 24,000
iii) Dividend received on preference shares of Indian company 10,000
iv) LTC Loss (Related to the year 2019-20) 7,000
v) LTC Gain 5,000
vi) STC Gain 6,000
vii) STC Loss 2,000

Solution:

Computation of Total Income of Shri Sushil Kumar for A.Y. 2022-23

Rs. Rs.
i) Income from house property 24,000
ii) Capital Gain:
LTC Gain 5,000
LTC Loss 5,000
196 (Related to the year 2019-20, remaining Nil
 LTC loss of Rs. 2,000 will be carried forward ) Assessment of
Individuals
STC Gain 6,000
STC Loss 2,000 4,000
iii) Income from other sources:
Interest from UP Govt. loan 5,000
Dividend received on preference shares of Indian 10,000
company
Gross Total Income 43,000
Less: Deductions u/s 80C to 80 U Nil
Total Income 43,000

Illustration-7
Following are the particulars of income of Smt. Santosh Aggarwal for the
A.Y. 2022-23.

Rs.
i) Rent received from house property let-out to SBI 1,00,000
ii) Royalty from books (Recommended in University course) 6,000
iii) Profits from cloth business 20,000
iv) Loss from cotton business 25,000
v) Loss from speculation business 30,000
vi) Interest on Bank deposit 20,000
vii) Lottery prizes (Net amount) 20,728
viii) Amount received on maturity of life insurance policy 40,000

Compute the total income of Smt. Santosh keeping the following points in
mind:

a) She spent Rs. 13,000 on treatment of handicapped dependent

b) Donation to P.M. National Defence Fund – Rs. 3,000

Solution:

Computation of Total Income of Smt. Santosh Aggarwal for the A.Y.

2022-23

Rs. Rs.
Income from house property 1,00,000
Deduction 30% of A.V. 30,000 70,000
Income from business:
Profit from cloth business 20,000
Less: Loss from cotton business 25,000 - 5,000
197
Computation of Income from other sources:
Total Income and
Tax Liability Interest from bank 20,000
��.������
Lottery prize [ ] 29,611
��
Royalty from books 6,000 55,611
Gross Total Income 1,20,611
Less: Deduction:
Treatment u/s 80 DD (Handicapped Dependent) 13,000
Donation u/s 80 G (National Defence Fund) 3,000 16,000
Total Income 1,04,611
Total Income Rounded off 1,04,610

Note:
i) Speculation loss can only be set off against the income of speculation
business.
ii) Amount received on maturity of life policy is capital receipt and it is
exempt u/s 10 (10D)

Illustration-8
The following particulars of income are submitted by Smt. Suman Garg for
the A.Y. 2022-23. She lives at Delhi.

i) Basic pay 10,000 p.m.

ii) Dearness allowance @ 10% of salary
iii) HRA 30% of basic salary.
iv) Medical allowance Rs 200 p.m. (amount actually spent on her own
treatment isRs. 2,000).
v) Wardenship allowance 400 p.m.
vi) Rent from house Property Rs. 3,000 p.m.
vii) Contribution to RPF 10% of basic salary.
viii) House rent paid Rs. 6,000 p.m.
ix) Donation to approved charitable institution Rs. 20,000

Compute her total income for assessment year 2022-23

Solution:

Computation of total income of Smt. Suman for the A.Y.2022-23

Rs. Rs.
Income from salary
Basic Pay 10,000 × 12 1,20,000
198
 Dearness Allowance 10% of BP 12,000 Assessment of
Individuals
Wardenship allowance 4,800
Medical allowance 2,400
HRA Nil 1,39,200
RPF (AS IT IS LESS THAN 12%) Nil
Less: Standard deduction 50,000
Income of salary 89,200
Income from House Property:
Rent from property 36,000
Less: Statutory deduction 30% of Rs. 36,000 10,800 25,200
Gross total income 1,14,400
Less: Deduction u/s 80G for donation 5,720
Less: Deduction u/s 80C i.e. contribution of RPF 13,400 19,120
Total Income 95,280

Note:
1. Qualifying limit for Section 80G shall be 10% of adjusted gross total
income i.e. 10% of Rs. 1,14,400which is Rs. 11,44050% of qualifying
amount is Rs.5,720 (50% of 11,440)
2. HRA calculated as done in Unit 5

16.7 COMPUTATION OF TAX LIABILITY OF

INDIVIDUALS (WITH ILLUSTRATIONS)
After computation of total income of an assessee in the manner discussed in
the preceding pages of this unit, tax liability of the assessee is ascertained.
Income tax is charged on the total income (taxable income) of previous year
as per the tax rates applicable for the relevant assessment year of such
previous year. Tax rates are fixed by the Finance Act of parliament every
year. Slab system is adopted in charging the income tax. Total income of an
assessee is divided into different slabs. Income falling under each slab is
taxed at a different rate. As the income slab goes high, the tax rate of the slab
also goes high.
Rates of Income Tax (For Individuals, HUFs, AOPs and BOIs)
The following are the rates of income tax for the assessment year 2022-23.
Rate of income tax may be classified (a) as General Rates and (b) Specified
Rates (Special Rates).

a) General Rate of Tax: -

These rates are applicable on net taxable income after excluding from total
income those incomes on which tax is charged according to special rates. The
following table shows these rates:
199
Computation of Table 16.2: General rates of income tax, surcharge and health and
Total Income and
Tax Liability education cess

Assessment year 2022-23

Net income Resident Resident Any
senior super other
citizen senior
citizens
First Rs. 2,50,000 Nil Nil Nil
Next Rs. 50,000 Nil Nil 5%
Next Rs. 2,00,000 5% Nil 5%
Next Rs. 5,00,000 20% 20% 20%
On balance amount (above Rs. 10,00,000) 30% 30% 30%
Surcharge Rate
a) Above Rs. 50 lakhs and upto Rs. 1
crore 10% 10% 10%
b) Above Rs. 1 crore and upto Rs 2 crore 15% 15% 15%
c) Above Rs 2 crore and upto Rs 5 25% 25% 25%
crore
d) Above Rs 5 crore 37% 37% 37%
Heath and Education Cess 4% 4% 4%

Resident Senior Citizen: Individual having age of 60 years and above at any
time during the previous year but not more than 80 years at the last day of the
previous year.

Resident Super Senior Citizen: Individual having age of 80 years or more

at any time during the previous year.

b) Specified Tax Rates or Special Tax Rate:-

Table 16.3: Besides general tax rates, there are some special tax rates which
are applicable on the following incomes:

i) Long term capital gainu/s 112 20%

ii) Short terms capital gainsu/s 111A 15%
iii) Casual incomes from winning from 30%
lottery or Horse race or crossword
puzzles or card games and other game of
any sort or from gambling or betting of
any form or nature, whatsoever

Rebate u/s 87 A
With a view to provide tax relief to lower income resident assessees whose
net income does not exceed Rs. 5,00,000, a rebate of income tax is allowed
u/s 87 A @ 100% of income tax or Rs.12,500 (whichever is less). This rebate
200 is deductible from income tax before calculating education cess.
Surcharge Assessment of
Individuals
'Surcharge' is additional tax levied by central government to generate revenue
for specific purposes. Surcharge is charged at a specific rate on the amount of
tax on taxable incomes. Thus, it is a tax on tax.
Rate of surcharge in case of non –resident individuals/HUF/AOP/BOI-

Amount of Dividend Section 195 Section 196C/196D

UP TO Rs 50lakhs Nil Nil

50lakhs-1 crore 10% 10%

1 crore-2 crore 15% 15%

2 Crore-5 crore 15% 25%

Above 5 crore 15% 37%

Rate of surcharge in case of Non resident companies-

Amt of dividend Rate of surcharge

Up to Rs 1 crore Nil

1 crore-10 crore 2%

Above 10crore 5%

Health and Education Cess

Health and Education Cess is an additional tax imposed and collected by
Central Government for meeting funds requirements of health and education
of the country. It is calculated @ 4% on the total of income tax and surcharge
(if applicable). However, if surcharge is not applicable, then it will be
calculated on the income-tax only.

Table 16.4: Format for computing tax liability of an individual assessee

Rs. Rs.
(A) Tax on Income on which Special Rates of
Income Tax are Applicable
i) Tax on casual income (winning from ××
lottery etc) @ 30%
ii) Tax on long term capital gain @ 20%u/s ××
112
iii) Tax on short term capital gain liable for ××
STT @ 15%
201
Computation of (B) Tax on Income On which General Rates of ××
Total Income and
Tax Liability Income Tax are applicable on slab basis
Total Tax Liability ××
Less: Rebate u/s 87 A (If applicable) ××

××
Add : Surcharge (If applicable) ××
××
Add: Health & Education Cess @ 4% ××
Tax payable ××

Less: Rebate of Tax u/s 86, if applicable, for - ××

share profit on AOP/BOI at average rate
××
Less: TDS / TCS ×× -
Advance Tax/self-assessment tax paid ×× -
Relief for double taxation ×× ××
Balance Payable/Refundable - ××

Note:
i) The tax liability must be rounded off to nearest multiple of Rupees Ten.
ii) Computation of tax liability is also subject to adjustments for the
following, if available.
a) Adjustment against capital gain for taxable income not exceeding
maximum exemption limit.
b) Agricultural income
c) Marginal relief for surcharge
d) Alternative minimum tax
e) Relief from tax liability
f) Interest for delayed submission of returns and short fall of advance tax

All these adjustments are discussed in the following pages of this unit.

STEPS FOR COMPUTATION OF TAX LIABILITY OR REFUND

Step- 1 : Calculate tax on incomes, taxable at special rates such

as short terms capital gains and long-term capital
gains etc.
Step- 2 : Calculate tax at normal rates on balance of taxable
income.
Step- 3 : Make sum of the tax calculated in Step-1 and Step-2.
202
Step- 4 : Deduct tax rebate underSection 87 A (if applicable) Assessment of
Individuals

Step- 5 : Add surcharge 10% or 15% (if applicable) as per

income slab.

Step- 6 : Add: Health and Education Cess @ 4% on the tax

payable (including surcharge)

Step 7 Deduct rebate of Section 86, if applicable

Step- 8 : Deduct Tax Deducted at Source (T.D.S.) or Tax

Collected at source (TCS), if any, from the total of tax
calculated upto Step-7. i.e. (income tax+ surcharge+
Cess).
Step- 9 : Deduct advance tax paid/tax paid on self-
assessment/double taxation relief.

Step- : Balance is Tax Payable or Net Refund. This amount

10 should be rounded off to nearest multiple of ten
rupees.

With effect from assessment year 2021-22, section

115BAC has been inserted by the Finance Act, 2020.
It provides an alternate tax regime for Individual and
HUFs. They can calculate tax at their option, between
the old and the new regimes. The new tax regime and
the simultaneous old regime are as follows:

Old Regime New Regime

Upto 2,50,000 Nil Up to 2,50,000 Nil

250000- 5% 2,50,000-5,00,000 5%
5,00,000

5,00,000- 20% 5,00,000-7,50,000 10%

10,00,000
7,50,000-10,00,000 15%

Above 30% 10,00,000 to 12,50,000 20%

10,00,000
12,50,000 to 15,00,000 25%

Above 15,00,000 30%

203
Computation of Exemption Limit for all Resident Individuals (Any Age or Gender) is Rs.
Total Income and
Tax Liability 2,50,000
Surcharge / Health & Education Cess are also applicable in the new regime.

There is no Change in Rebate u/s 87A (It is tax or Rs. 12500, whichever is
less, if income is up to Rs. 5,00,000)
If the assesse has incomes taxable at special rates (capital gains, lottery
income etc.), tax will be calculated on these incomes as per the old rates and
tax on balance amount of income will be calculated as per section 115BAC.
• If the assessee opts for the new tax regime, the following deductions
will not be allowed:
• Sec 16: Standard Deduction Rs. 50,000 (implemented in AY 2020-
21), Tax on Employment

• Sec 24: Interest on Loan in respect of Self-Occupied Residential

House Property; Max Rs. 2,00,000

• Sec 10(13A): House Rent Allowance (House taken on Rent)

• Sec 10(14): Children Education Allowance Rs. 100 per month/Child,
Hostel Allowance Rs. 300
• Sec 10(32): Income of Minor Child Rs. 1,500 per child

• Sec 57(ii)(a): Standard Deduction on Family Pension 1/3 or Rs.

15,000 whichever is lower

• Sec 80C / 80CCC / 80CCD (1): Max Limit Rs. 1,50,000 Sec 80CCD
(1B): Max Limit Rs. 50,000
• 80CCD(2) will continue

• Sec 80D: Rs. 25,000 (Non Senior) and / or Rs. 50,000 (Senior
Citizen)

• Sec 80DDB: Rs. 40,000 (Non Senior) Rs. 1,00,000 (Sr Citizen)

• Sec 80E: Interest on Education Loan taken for Higher Education

• Sec 80EEA: Additional Deduction for Housing Loan Rs. 1,50,000

(AY 2020-21)

• Sec 80EEB: Interest of Loan taken for Electric Vehicles

• Sec 80G / 80GGA / 80GGC: Donations to PMRF, Charitable,
Political Donation

• Sec 80GG: Deduction in respect of Rent Paid (Not in receipt of HRA)

• Sec 80TTA: Rs. 10,000 for Saving Bank Interest Sec 80TTB: Rs.
50,000 for Bank / Post office
204
Perquisites will be valued as per the old rule, but the assessee cannot claim Assessment of
Individuals
exemptions on perquisites as can be claimed under the old rule.

Illustration-9
Calculate income tax payable by Mr. Anuj in the following cases for the
assessment year 2022-23.

A) When his total income for the previous year is Rs. 1,80,000

B) When his total income for the previous year is Rs. 7,10,000

C) When his total income for the previous year is Rs. 10,70,000

Solution:

Computation of Tax liability of Mr. Anujfor A.Y. 2022-23

Case A Case B Case C

(Total Income (Total Income (Total Income
Rs. 1,80,000) Rs. 7,10,000) Rs. 10,70,000)
Amount Tax Tax Amount Tax Tax Amount Tax Tax
(Rs) Rate (Rs) (Rs) Rate (Rs) (Rs) Rate (Rs)
First Nil Nil First Nil Nil First Nil Nil
1,80,000 2,50,000 2,50,000
Next 5% 12,500 Next 5% 12,500
2,50,000 2,50,000
Balance 20% 42,000 Next 20% 1,00,000
Rs. 5,00,000
2,10,000

Next 30% 21,000

70,000
Total tax Nil Total tax 54,500 Total tax 1,33,500

Add: Health Nil Add: Health 2,180 Add: Health 5,340

&Education Cess &Education Cess &Education Cess
@ 4% @4% @4%
Net tax payable Nil Net tax payable 56,680 Net tax payable 1,38,840

Illustration-10
Taxable income of Mr. X (Age 55 years), Mr. Y (Age 63 years) and Z (Age
82 years) is Rs. 12,00,000, Rs. 15,20,000, and Rs. 18,00,000 respectively for
the assessment year 2022-23. Calculate tax liability of each of them.

205
Computation of Solution:
Total Income and
Tax Liability
Computation of Tax Liabilityfor A.Y. 2022-23

Mr. X (55 Years) Mr. Y (63 Years) Mr. Z (82 Years)

(Total Income Rs. 12,00,000) (Total Income Rs. 15,20,000) (Total Income Rs. 18,00,000)

Amount Rate Tax Amount Rate Tax Amount Rate Tax

(Rs) (Rs) (Rs) (Rs) (Rs) (Rs)

First Nil Nil First Nil Nil First Nil Nil

2,50,000 3,00,000 5,00,000

Next 5% 12,500 Next 5% 10,000 Next 20% 1,00,000

2,50,000 2,00,000 5,00,000

Next 20% 1,00,000 Next 20% 1,00,000 Next 30% 2,40,000

5,00,000 5,00,000 8,00,000

Balance 30% 60,000 Balance 30% 1,56,000

2,00,000 5,20,000

1,72,500 2,66,000 3,40,000

Add: Surcharge Nil Add: Surcharge Nil Add: Surcharge Nil

Total Tax 1,72,500 Total Tax 2,66,000 Total Tax 3,40,000

Add: Health & 6,900 Add: Health & 10,640 Add: Health & 13,600
Education Cess @ Education Cess @ 4% Education Cess @
4% of total Tax of total Tax 4% of total Tax

Net tax payable 1,79,400 Net tax payable 2,76,640 Net tax payable 3,53,600

SPECIAL TAX RATE:

a) Long Term Capital Gains (LTCG)
Tax rate for LTCG is 20% + Cess @ 4%, however, if LTCG arises on
the transfer of long term listed securities (other than units) or zero
coupon bonds, the assessee is given option for using tax rate on such
LTCG with indexation @ 20% + Cess @ 4% or without indexation @
10% + Cess @ 4%. Tax rate for NRI is 10% on LTCG without
indexation.
b) Short Term Capital Gains (STCG)
Short term capital gains (STCG) are taxed at normal/slab rate. However,
STCG covered under Section 111 A (Sale of securities liable for Security
Transaction Tax (STT) are taxed @ 15% + Cess @ 4%.

c) Rate of Tax on Winnings

Incomes of winnings from lottery, crossword puzzles, races (including
horse races), games show, and gambling or betting and card games etc.
are taxed @ 30% of such incomes + Cess @ 4%.
206
Illustration-11 Assessment of
Individuals
The gross total income of Mr. P for the assessment year 2022-23 is
Rs. 6,20,000 (including long term capital gain of Rs. 80,000 and short term
capital gain liable for payment of STT Rs. 70,000 and interest on saving bank
deposit Rs. 18,000). Calculate the tax payable by Mr. P assuming he
deposited Rs. 1,12,000 in P.P.F and paid premium for health insurance
amounting to Rs. 15,000. The health premium is paid by cheque.

Solution:
Computation of Taxable Computation of Tax Liability of Mr. P.
Income of Mr. P. A.Y. 2022-23
A.Y. 2022-23

Rs. Rs. Rs. Rs.

Gross Total Income (Taxable 4,70,000 LTCG @ 20% 16,000
��
by General Rate) �80,000 × ����
[Rs. 6,20,000 – (Rs. 80,000 +
Rs. 70,000)]
STCG (Liable for 10,500
S.T.T.) @ 15%
��
�70,000 × ����
Less:Deduction u/s 80 Tax on incomes 4,150
80 C (P.P.F. contribution) 1,12,000 chargeable by slab
rate/Gen. Rate
(3,33,000-2,50,000) =
83,000
5
= 83,000 ×
100

80 D (Health Insurance 15,000 30,650

Premium)
80 TTA(Interest in S.B. 10,000 1,37,000 Less: Rebate u/s 87 A:
a/c)
3,33,000 [Tax on taxable
income Rs. 30,650 or
Maximum limit Rs.
12,500 whichever is 12,500
less]
18,150

(Taxable income by Add: Health & Edu. 726

Special Rate) Cess @ 4%
18,150 × 4/100
Add: LTCG 80,000 Tax Liability 18,876
STCG 70,000 1,50,000 207
Computation of (Liable for STT)
Total Income and
Tax Liability
Total taxable income 4,83,000 Tax Liability 18,880
(Rounded off)

ADJUSTMENTS

i) Adjustment for shortfall of exemption limit in case of resident

individuals:
If the taxable income (on which tax is charged at general/slab rates) of
resident individual is less than the maximum exemption limit available to
the assessee i.e. (Rs. 2,50,000/ Rs. 3,00,000/ Rs. 5,00,000/ as the case
may be), the difference between the two can be adjusted against
LTCG/STCG. For example, the total income of an individual is
Rs. 2,55,000 which includes Rs. 15,000 LTCG or STCG. The amount of
LTCG or STCG chargeable to tax shall be Rs. 5,000 only (Rs. 2,55,000 –
Rs. 2,50,000) on which tax @ 20% (in case of LTCG) or 15% (in case of
STCG) shall be charged.

ii) Agricultural Income:

Agriculture income is exempt u/s 10 (1) of Income Tax Act. However, it
is included for tax rate purpose in computing the total income tax
liability if two conditions are cumulatively satisfied (i) Net Agricultural
Income is more than Rs. 5,000/- and (ii) Total Income excluding Net
Agricultural Income is more than basic exempt slab limit. If these two
conditions are satisfied following procedure shall be adopted:
a) Add Agriculture Income (Net) in Non-Agricultural total Income.

b) Calculate tax on the Aggregated Income as per (a) above.

c) Add Net Agricultural Income in the maximum exemption limit (Rs.
2,50,000/ Rs. 300,000/Rs. 5,00,000 as the case may be) applicable
on the assessee.

d) Calculate tax on the aggregated amount of (c) above

e) Deduct tax amount as calculated in (d) from as calculated in (b)

above (b - d)

f) Difference in the tax amount as calculated in (e) shall be the gross

tax on the total income. Add surcharge (if applicable) in the gross
tax. Similarly, add Health &Education Cess @ 4% on the gross tax +
surcharge (if applicable). The tax amount as calculated above shall
be the tax liability of the assessee.

Illustration-12
Net Agricultural Income and Non-agriculturalIncome of a resident individual
assessee of 40 years for the assessment year 2022-23 is calculated as
208 Rs. 1,00,000 and Rs. 6,00,000 respectively. He contributed Rs. 45,000 in
Public Provident Fund and Health Insurance Premium of Rs. 20,000. Assessment of
Individuals
Ascertain his tax liability for the assessment year 2022-23.

Solution:

Computation of Tax Liability for A.Y. 2022-23

Rs.
Aggregate of Income
a) Net agricultural income 1,00,000
Non- agricultural income 6,00,000
Aggregated Income 7,00,000

Tax on Aggregated Income of Rs. 7,00,000

Tax Rate
Upto Rs. 2,50,000 Nil Nil

On next Rs. 2,50,000 5% 12,500

On next Rs. 2,00,000 20% 40,000

52,500
b) Agricultural Income as increased

By exemption limit i.e.

Rs. 1,00,000+2,50,000 = Rs. 3,50,000

Less: Tax on Agricultural Income as increased by

Exemption Limit

Tax Rate Rs. Rs.

Upto Rs. 2,50,000 Nil Nil

On next 1,00,000 5% 5,000 5,000

Gross Tax Liability 47,500

Add: Health& Education Cess @ 4% on Rs. 47,500 1,900

Net Tax Liability 49,400

Marginal Relief
Marginal relief is given to the assessee to ensure that the additional income
tax payable including surcharge on excess of income over Rs. 50 lakhs or
1 crore (as the case may be) is limited to the amount by which the income is
above Rs. 50 lakhs or 1 crore. Thus, the marginal relief concept ensures that
amount of increase in income tax will not be more than increase in income.
209
Computation of Marginal relief is probably a relief of surcharge. The following steps explain
Total Income and
Tax Liability the computation of marginal relief:
Step-1: Calculate tax liability of assessee on total income including
surcharge but excluding Cess.

Step-2: Calculate the tax liability with surcharge (excluding Cess) on Rs. 50
Lakhs or Rs. 1 crore.

Step-3: Calculate marginal relief by using the following formula:

Marginal Relief = Surcharge calculated on total

Income (Step-1) – 70% of Income- Rs. 50,00,000 or
Rs. 1,00,00,000).

Step-4: Deduct Marginal Relief as calculated in Step-3.

Step-5: Calculate Cess @ 4% on the amount calculated after deduction as
per Step-4.

Illustration-13
Calculate the total tax payable by Mr. Ashish for the assessment 2022-23 in
each of the following cases:-

a) If his taxable income is Rs. 50, 30,000.

b) If his taxable income is Rs. 1,01,80,000.

Also show calculation of marginal relief.

Solution:

Computation of Tax Liability of Mr. Ashish Assessment Year 2022-23

Case (a) Case (b)
Taxable income Rs. 50,30,000 Taxable income Rs. 1,01,80,000
Income Calculation Tax Income Calculation Tax
Amount Amount
Rs. Rs. Rs. Rs. Rs. Rs.
Up to Nil Nil Up to Nil Nil
2,50,000 2,50,000
Next 250000×5% 12,500 Next 2,50,000×5% 12,500
2,50,000 2,50,000
Next 500000×20% 1,00,000 Next 5,00,000×20% 1,00,000
5,00,000 5,00,000
Above 40,30,000×30% 12,09,000 Above 91,80,000×30% 27,54,000
10,00,00 10,00,000
0
Total Tax before 13,21,500 Total Tax 28,66,500
surcharge &cess before
surcharge &cess
210
 Add : Surcharge 1,32,150 Add: Surcharge 4,29,975 Assessment of
Individuals
10% 15%
(13,21,500×10% (28,66,500×15
) %)
Total tax 14,53,650 Total tax 32,96,475
(excluding Cess) (excluding
Cess)
Less: Marginal 1,11,150 Less: 3,03,975
relief Note:
[(Surcharge - Calculation of
70% (Taxable Marginal relief
income – Marginal
50,00,000) = [(surcharge -
1,32,150 - (70% 70% (Taxable
of 50,30,000– income -
50,00,000) = 1,00,00,000)
21,000 = 4,29,975 –
1,32,150-21,000] 70%
= 1,11,150 (1,01,80,000-
1,00,00,000)
=4,29,975-
1,26,000] =
Rs. 3,03,975
Total tax before 13,42,500 Total tax before 29,92,500
Cess but after Cess but after
marginal relief. marginal relief.
Add: Health 53,700 Add: Health 1,19,700
&Education &Education
Cess Cess 4%
4%
Total tax 13,96,200 Total tax 31,12,200
payable payable
Total tax 13,96,200 Total tax 31,12,200
rounded off payable
rounded off

Alternate Minimum Tax (AMT) (Section 115-JC to 115 JF)

If the Adjusted Total Income of a Non-corporate Assessee exceeds
Rs. 20,00,000, the tax payable by such assessee cannot be less than 18.5 per
cent + (Surcharge+Cess) of Adjusted Total Income. When AMT provisions are
applicable, the tax liability calculated as per normal provisions and as per AMT
provisions is compared and the higher of the two is taken as tax liability of the
assessee. The Adjusted Total Income can be calculated as under.

211
Computation of Table 16.5: Calculation of Adjusted total Income
Total Income and
Tax Liability
Rs.
Total Income (as per normal provisions) -
Add :
i) Deduction claimed u/s 80 IA to 80 RRB (Except 80 P) -
ii) Deduction u/s 10 AA (If claimed) -
-
iii) Deduction u/s 35 AD (After deduction Depreciation u/s 32)
Adjusted Total Income -

Thus, AMT = (18.5% of Adjusted Total Income) + Surcharge + Cess. Tax

credit of the difference of AMT and Regular Tax (as per normal provision) is
allowed and is also allowed to be carried forward for the purpose of set off
against surplus of normal tax over AMT in subsequent 15 years.

Illustration-14
Taxable income of Mr. Jai aged 82 years is Rs. 19,00,000. He claimed a deduction
of Rs. 3,00,000 u/s 80 QQB. Calculate his tax liability for the assessment year
2022-23,keeping in view of provisions of Alternate Minimum Tax.

Solution:
Computation of Tax Liability for Computation of Adjusted Total
Assessment year 2022-23 Incomefor Assessment year2022-23
Income Rs. Calculation Tax Rs. Rs.
Tax on first Nil Nil Total Income (Given) 19,00,000
5,00.000
On Next 5,00,000 5,00,000×20% 1,00,000 Add: Deduction u/s 3,00,000
80QQB
On Balance 9,00,000×30% 2,70,000
9,00,000
3,70,000 Adjusted Total Income 22,00,000
Add: Health & Education Cess 14,800 Computation of
�
@ 4% �3,70,000 × � Alternate Minimum
���
Tax 4,07,000
Tax on Rs. 22,00,000
@18.5%
Add: health & 16,280
education Cess @ 4%
Tax Payable (×) 3,84,800 AMT (Y) 4,23,280

Tax payable (×) Rs. 3,84,800 or (y) Rs. 4,23,280, whichever is greater.
Hence, Tax Payable = Rs. 4,23,280
Tax Credit to be carried forward
= AMT – Normal Tax
= Rs. 4,23,280 (y) – Rs. 3,84,800 (×)
= Rs. 38,480
212
Relief from Tax Liability Assessment of
Individuals
Individual assessees specially who are employees are eligible for certain
reliefs from tax liability in respect of arrears of salary or advance salary
received or gratuity or termination compensation or commuted incomes
related to pension and other payments u/s 89.

Interest
Assessee is liable for payment of interest on his tax liability in the following
circumstances:

a) On late filing of Returns

b) On shortfall in Advance Tax paid.

Miscellaneous Illustrations

Illustration-15
Mr K, who is an Indian citizen and is a resident for income tax purposes,
submits the following information for the assessment year 2022-23.

Particulars Rs.
(a) Gross salary 3,90,000
(b) Profession tax paid 1,000
(c) Own contribution to recognized provident fund 10,000
(d) Employer's contribution to provident fund 10,000
(e) Dividend from Indian company 2,000
(f) Income on deposits with a company (gross) 40,000
(g) Long-term capital gains from house property 50,000
(h) Short-term capital gain from shares covered under 40,000
Section 111A

Compute the total income and tax payable by K.

213
Computation of Solution:
Total Income and
Tax Liability
Computation of Total Income of K for the assessment year 2022-23

Particulars Rs. Rs.

1. Income from Salary
Gross Salary 3,90,000
Less: Standard deduction u/s 16 (a) 50,000
Less: Deduction on account of 1,000 51,000 3,39,000
profession tax
2. Income from capital gains
Long-term capital gain from house 50,000
property
Short-term capital gain referred to in 40,000 90,000
Section 111A
3. Income from other sources
Dividend from Indian company Exempt
Taxable
2000
Interest on deposits with company 40,000 40,000
Gross Total Income 4,69,000
Less: Employee’s contribution to 10,000
recognized provident fund u/s 80 C
Total Income 4,61,000
Computation of tax
Rs.
LTCG – 50,000 @ 20% 10,000
STCG u/s 111A- Rs. 40,000 @ 15% 6,000
Tax on balance Rs. 3,71,000 (4,61,000-
50,000 + 40,000)
Tax calculated on 3,71,000
First 2,50,000- Nil
Next 1,21,000 @ 5% 6,050
Tax payable before rebate u/s 87 A (If 22,050
applicable)
Less: Rebate u/s 87A (Rs 12,500 as the 12,500
total income is less than Rs 5,00,000)
Tax payable after rebate u/s 87 A (if 9,550
applicable)
Add: Health and Education Cess @ 4% 382
Total Tax Payable 9,932
Tax rounded off 9,930

214
Illustration-16 Assessment of
Individuals
Mrs. Madhuri is a Professor in the Department of Sociology in Mumbai
University. Following are the particulars of her income for the assessment
year 2022-23:
i) Basis pay Rs. 60,000 per month;
ii) Dearness allowance @ 20% of salary;
iii) House Rent allowance 30% of basic salary;
iv) Medical Allowance Rs. 500 p.m. (amount actually spent on her own
treatment is Rs. 2,000);
v) Wardenship Allowance Rs. 2,000 p.m.;
vi) Rent from House property Rs. 3,000 p.m.;
vii) Interest received from Government securities Rs. 5,000;
viii) Dividend received from an Indian company Rs. 1,200;
ix) Interest on Saving Bank Deposits Rs. 52,000.
x) Contribution toRecognized Provident Fund 10% of basic salary;
xi) Premium paid by cheque on medical insurance policy on health of
dependent father Rs. 5,000, Rs. 2,000 for dependent father-in-law and
Rs. 1,000 for dependent brother;
xii) Donation to an approved charitable institution Rs. 1,00,000;
xiii) House rent paid Rs. 28,000 pm.
Compute her total income for assessment year 2022-23.

Solution:

Computation of Total Income of Mrs. Madhuri for the Assessment Year

2022-23
Particulars Rs. Rs.
1. Income from Salary
Salary @ Rs. 60,000 p.m. (60,000×12) 7,20,000
D.A. @ 20% salary 1,44,000
Wardenship allowance @ Rs. 2,000 p.m. 24,000
(2000×12)
House Rent allowance (see note below) Nil
Medical Allowance (Rs. 500×12) 6,000
8,94,000
Less: Standard deduction u/s 16 (a) 50.000 8,44,000
2. Income from House property
Rent from house property @ 3,000 p.m. 36,000
Less: Standard deduction 30% 10,800 25,200
3. Income from Other Sources
Interest from Government Securities 5,000
Dividend from an Indian company Exempt
1,200
Interest on Saving Bank Deposits 52,000 58,200
Gross Total Income 9,27,400
215
Computation of Less: Deductions:
Total Income and
Tax Liability U/s 80 C (RPF) 72,000
U/s 80 D for Medical Insurance 5,000
U/s 80 G for Donation– 50% of Rs. 84,040 42,020
(see note)
U/s 80 TTA 10,000
1,29,020
Total Income 7,98,380

Note:
1) As per Section 80 D, deduction is allowed only to the assesse or his
family or his parents, and to the maximum limit of Rs 25,000 or Rs
50,000 as the case may be.

2) Qualifying limit for Section 80G shall be 10% of Adjusted Gross Total
Income i.e. 9,27,400 – Rs. 72,000- Rs. 5,000 – Rs. 10,000 = Rs.
8,40,40010% of Rs 8,40,400 = Rs 84,040
3) HRA is exempt to the extent of the minimum of following three limits:

(1) Actual amount received (18,000×12) 2,16,000

(2) Rent paid – 10% of salary (Rs. 3,36,000 – 2,64,000
72,000)
(3) 50% of salary 3,60,000

• Since, minimum amount is equal to actual amount received i.e. 2,16,000,

hence, no value will be added in the gross total income

• It is assumed that DA is not payable under the terms of employment.

Illustration-17
The following particulars are submitted by Mr. Sumit, aged 64 years for the
assessment year 2022-23:

Particulars Rs.
½ share of profit of a firm 1,80,000
Income from House Property (computed) 1,25,000
Long term capital gains on transfer of equity shares sold on 40,000
2.12.2021 through a recognized stock exchange. (FMV as on
1.4.2002& 31.1.2021 was Rs. 12,000, Rs. 45,000 respectively)
Long-term capital gains on transfer of house 1,30,000
Lottery winning (Net, after TDS) 11,200
Life Insurance premium paid 25,000
Donations to National Children Fund 10,000
Royalty from books of literary nature 4,24,000

216 You are required to compute his total taxable income and his tax liability.
 Assessment of
Individuals
Solution:

Computation of Total Income of Mr. Sumit for the assessment year 2022-23

Particulars Rs. Rs.

1. Income from House property (computed) 1,25,000
2. Income from profession
Royalty from books 4,24,000
3. Capital Gains:
Long term capital gains on transfer of shares 40,000
Long term capital gains on transfer of 1,30,000 1,30,000
house

4. Income from other sources [Winning of 16,000

���
Lottery Grossed up Rs. 11,200 × �� ]
Gross Total Income 6,95,000
Less: Deduction
U/s 80 C 25,000
U/s 80 G (100% of Rs. 10,000) 10,000
U/s 80 QQB* 3,00,000 3,35,000
Total Income 4,00,000
Computation of tax
Tax on lottery – 30% of Rs. 16,000 4,800
Tax on long-term capital gain 8,800
[Rs. 1,30,000-86,000 (Rs. 3,00,000-
2,14,000) 20% of Rs. 44,000]
Tax on balance income of Rs. 3,00,000 Nil
Total Tax 13,600
Less: Rebate u/s 87 A (Nil as the total -
income exceed Rs. 3,50,000)
Total Tax (after rebate, if any) 13,600
Add: Health and Education Cess @ 4% 544
Total tax payable 14,144
Tax rounded off 14,140

Note:
i) Share of profit from a firm is exempt.
ii) The quantum of deduction u/s 80QQB is 100% of such income or Rs
3,00,000, whichever is less.

217
Computation of Illustration-18
Total Income and
Tax Liability
The income of an individual for the year ended 31.3.2022 consists of the
following.

Particulars Rs.
(a) Business profits computed after claiming deduction of Rs. 1,62,000
40,000 paid as donation to a college and Rs. 6,000 as
deposit in National Savings Certificates.
(b) Interest on capital from a partnership firm @ 24% p.a. 1,20,000
(c) Salary from partnership firm which was eligible for 1,50,000
deduction while computing the income of firm
(d) 1/4 th share of profit from a firm 80,000
(e) Interest on Government securities 30,000
(f) Dividends on shares of Indian companies 2,000
(g) Share of profit from Hindu Undivided family 40,000

Compute the total income and tax payable for the assessment year 2022-23,
assuming that he deposited Rs. 49,000 in PPF.
Solution:
Computation of Total Income for the Assessment Year 2022-23
Profits and gains of business or profession Rs. Rs.
(a) Business profits 2,08,000
[Rs. 1,62,000 + 40,000 + 6,000]
(b) Interest on capital from firm @ 12% 60,000
(c) Salary from partnership firm 1,50,000
(d) Share of profit from a firm [Exempt u/s 10 (2A)] Nil 4,18,000
Income from other sources
(i) Interest on government securities 30,000
(ii) Dividend from Indian company Exempt 32,000
2,000
Gross total income 4,50,000
Less: Deduction:-
(i) U/s 80C (Rs. 6,000 + 49,000) 55,000
(ii) U/s 80G: 50% of eligible donation of Rs. 39,500 19,750 74,750
Total income 3,75,250
Computation of Tax
Tax on Rs. 3,75,250
First 2,50,000- Nil
Next 1,25,250 @ 5% 6,262

218
Less: Rebate u/s 87 A (As the total income does not 6,262 Assessment of
Individuals
exceed Rs. 5,00, 000)
( Rs 12,500 or Actual Tax, Rs 6,262, whichever is less)
Nil
Add: Health and Education Cess @ 4% -
Total tax payable Nil

Note:
a) Interest on capital from partnership firm shall be taxable to the extent of
12% p.a. as the firm shall be allowed a deduction of such interest to the
maximum extent of 12% p.a.

b) Adjusted Gross Total Income forSection 80G will be Gross Total

Income- Deduction u/s 80C, i.e., Rs. 4,50,000 – 55,000 = 3,95,000.
Therefore, eligible donation will be 10% of Rs. 3,95,000 i.e. Rs. 39,500.

c) Share of profit from HUF is exempt as per Section 10 (2).

Tax calculation as per old and new regime

Illustration 19
X(52Years) works with ABC Ltd. During the previous year 2021-22, the
details of his income and investments are as follows:

Basic Salary 50,000pm 6,00,000

HRA 40,000 30,000

Less: Exempt -10000

Uniform allowance 36,000 NIL

Less: Official exp -36000

LTC 90,000 15,000

Less: Exempt 75,000

Income from let-out

House property

House I
80,000
House II
-1,20,000

Income from other

Sources

Interest on Savings 219

Computation of bank of X 40,000
Total Income and
Tax Liability
Interest on Savings
Bank of his minor
8,500
daughter

Interest on PPF
2,00,000

Deduction under section

80C
1,50,000
80D
20,000

Find out his taxable income and tax liability for the assessment year 2022-23
under both the tax regimes and advice X as to which is the better option for
him?

Income of X under both the regimes will be calculated as follows:

Income Old Regime (Rs.) New Regime (Rs.)

Basic Salary 6,00,000 6,00,000

HRA 30,000 40,000 (Exemption NA)

Uniform Allowance NIL 36,000(Exemption NA)

LTC 15,000 90,000(Exemption NA)

Gross Salary 6,45,000 7,66,000

Less: SD 50,000 NA

Net Salary 5,95,000 7,66,000

Income from House NIL (Loss cannot be set

property off against any other
head of Income)
House I 80,000
-40,000
House II -1,20,000

Income from other

Sources

Interest on Savings
40,000 40,000
bank of X

Interest on Savings
220
Bank of his minor 8,500-1,500=7,000 8,500 Assessment of
Individuals
daughter

Interest on PPF
2,00,000 (Exempt) Remains exempt

47,000 48,500

Gross Total Income 6,02,000 8,14,500

Less:Deductions

80C 1,50,000 (1,80,000) (NA)

80D 20,000

80TTA 10,000

Net Income 4,22,000 8,14,500

Alternately, income under new regime can be calculated as follows:

Net Income as per old 4,22,000

regime

Add: Incentives not 1,71,000

available under the new
regime
HRA 10,000
Uniform Allowance
36,000
LTC 75,000
Standard deduction
50,000

Loss under the head 40,000

House property

Exemption on income 1,500

of minor child

Deductions under 1,80,000

section 80C to 80U

Income as per new 8,14,500

regime

221
Computation of Tax liability under both the regimes
Total Income and
Tax Liability
Income Old regime Income New
regime

4,22,000 Nil 8,14,500 Nil

(2,50,000) (2,50,000)

1,72,000 5% 8,600 5,64,500 5% 12,500

(2,50,000)

Add:SHEC 4% of 344 3,14,500 10% 25,000

8,600 (2,50,000)

Total Tax 8,944 64,500 15% 9,675

47,175

Add:SHEC 4% of 1,887
47,175

Total Tax 49,062

Clearly, X benefits by choosing the old tax regime.

Check Your Progress A
1) Explain the provisions relating to Alternate Minimum Tax (AMT) as per
Section 115JC to 115JF
…………………………………………………………...........................
…………………………………………………………...........................
…………………………………………………………...........................
…………………………………………………………...........................
2) Write short note on Marginal Relief.
…………………………………………………………...........................
…………………………………………………………...........................
…………………………………………………………...........................
3) Explain the provision of Rebate under Section 87 A
…………………………………………………………...........................
…………………………………………………………...........................
…………………………………………………………...........................
…………………………………………………………...........................

222
4) Fill in the blanks: Assessment of
Individuals
a) ……………………….is the total of taxable income of Five heads of
the Income.
b) ……………………….is rounded off for tax purpose.
c) Maximum Deduction under Section 80TTA is………………..
d) Total Income is calculated after deducting deductions under Section
– from gross total income ……..

16.8 LET US SUM UP

The assessee pays tax on his total income. This total income is nothing but
the aggregate of taxable income from each head i.e., salaries, house property,
business and profession, capital gains and income from other sources.

From this aggregate income, the carried forward losses are set off and the
permissible deductions under Chapter VI A are allowed. The resulting figure
is the taxable income of the assessee. Income tax is charged on the taxable
income according to the tax rate specified by the Finance Act for that
assessment year.

16.9 KEY WORDS

Rebate : It is allowed to lower income resident assessees whose net income
does not exceed Rs. 5,00,000/, under Section 87 A @ 100% of income tax or
Rs. 12,500/ whichever is less.

Surcharge: It is additional tax levied by Central Government to generate

revenue for specific purpose. It is charge at a specific rate on the amount of
tax on taxable incomes.

Health & Education Cess: It is an additional tax imposed and collected by

Central Government for meeting funds required for health and education of
the country.

Alternate Minimum Tax:AMT is a minimum tax that is leviable alternative

to normal tax. Rate of AMT is 18.5% (plus applicable surcharge and cess).
AMT is a tax levied on ‘adjusted total income’ in a FY wherein tax on
normal income is lower than AMT on Adjusted total income. So, irrespective
of normal tax, AMT has to be paid by taxpayers to whom AMT provisions
apply.

16.10 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress A

4) a. Gross total Income, b. Total Income, c. Rs 10,000, d. 80 C to 80 U

223
Computation of
Total Income and 16.11 TERMINAL QUESTIONS/EXERCISES
Tax Liability
1) What steps are involved in calculation of total taxable income of an
individual?
2) What do you understand by Total Income? Is it different from Gross
Total Income? Explain with examples.

3) From the following information, compute the taxable income of Ms.

Sparsha for the A.Y. 2022-23 (calculate as per old tax regime).
Rs.
Business Income - 20,000
STCG 5,000
LTCG 1,05,000
Interest from banks 20,000
Deposit in Public Provident Fund 10,000
[Answer: Taxable Income Rs. 90,000
Deduction U/s 80C Rs. 10,000 and u/s 80TTA 10,000]
4) In respect of assessment year 2022-23, Shri Ramesh furnishes the
following particulars and requests you to work out his taxable income
(calculate as per old tax regime):

Rs.
Business income 1,20,000

LTC Gain 60,000

Interest from bank (on fixed deposit) 5,000
Interest on Debenture (Gross) 6,000

Contribution towards:-

a) LIC Pension scheme 10,000

b) LIC premium 10,000

Contribution to P.P.F 20,000

Investment in National saving certificate 40,000

Medical Treatment of Disabled Dependent 10,000

[Answer: Taxable Income Rs. 1,01,000, Deduction u/s 80C 80,000]

5) From the following information, compute the total income and the tax
payable by an individual for the assessment year 2022-23 (calculate as
per old tax regime).

i) Salary @ Rs. 40,000 p.m.

224 ii) Dearness allowance Rs. 12,000 p.m.
 iii) He contributes 20% of his salary and D.A. to a Recognized Assessment of
Individuals
Provident Fund.
iv) Employer’s contribution to provident fund is 14% of salary and
Dearness Allowances.
v) Rent from house property Rs. 12,000 p.m.

vi) Interest from an Indian company, Rs. 37,200 (Gross)

vii) Life Insurance premium paid Rs. 4,000.

[Answer: GTI Rs. 7,00,000, Taxable Income Rs. 5,70,000, Tax

payable 27,560]
6) Compute the total income and tax liability of Mr. X aged 60 years, a
professor of a college affiliated to Delhi University, for the assessment
year 2022-23 on the basis of the following particulars (calculate as per
old tax regime):

Particulars Rs.
i) Salary @ Rs. 50,000 per month 6,00,000
ii) Dearness allowance @ 50% of salary 3,00,000
iii) Wardenship allowance @ Rs. 1,500 per month 18,000
iv) Examinership remuneration from University 85,400
v) Royalty from books of artistic nature 2,73,000
vi) Income from card games 16,400
vii) Winnings from lottery (Gross) 30,000
viii) Expenses on lottery tickets 5,000
ix) Interest on saving bank deposit 17,000
x) Interest on term deposit with bank 1,00,000
xi) Deposit in recognized provident fund 1,22,000
xii) Life insurance premium paid 30,000

[Answer: Gross Total Income Rs. 13,89,800, Taxable Income 9,16,800,

Net Tax payable Rs. 1,01,920]
7) From the following particulars furnished by Shri K.R. Raman for the
assessment year 2022-23, compute his total income(calculate as per old
tax regime).

Particulars Rs.
One-third share from firm 1,50,000
Income from house property computed 1,20,000
Long-term capital gains 16,000
Lottery winnings from Sikkim State Lottery (Gross) 45,000
Life Insurance Premium paid on a policy of Rs. 1,00,000 12,000 225
Computation of taken on 1.4.2017
Total Income and
Tax Liability Interest on Government securities 15,000
Income from business 2,10,000
Profit from the business of growing mushrooms 60,000
Profit from the business of dairy farming 80,000
Term deposit in State Bank for 5 years (made on 15.3.2022) 1,00,000

[Answer: GTI Rs. 5,46,000, Deduction Rs. 1,10,000, Total income

Rs. 4,36,000 ]
The following are the particulars of the income of Sh. K.P. Birla, a
Government servant for the year ended 31.3.2022:

a) Salary at Rs. 25,000 p.m.

b) He contributed @ 10% to his provident fund to which the
Government contributed an equal amount.
c) He owns two flats one of which is let out at Rs. 1,500 p.m. and the
other is occupied by him for residence, the annual rental value of
which is Rs. 8,000. He has paid Rs. 750 as ground rent and
insurance charge in respect of the first flat and Rs. 850 in respect of
the second. The municipal taxes paid by him in respect of the two
flats amounted to Rs. 500 and 525 respectively and he spent Rs.
300 on white washing, petty repairs in respect of both the flats.

d) He received during the year Rs. 1,42,750 as interest on

Government securities and Rs. 700 as dividend from an Indian
company. He has insured his life and pays an annual premium of
Rs. 7,000 on the policies.

Ascertain his total income and the tax payable.(Calculate as per old tax
regime).

[Answer.: Gross total income (GTI) Rs. 4,05,000, Taxable

income Rs. 3,73,000, Tax payable Rs. Nil, after rebate u/s 87A]
8) Ram, who is an Indian citizen and a resident for income tax purposes,
submits the following information for the assessment year 2022-23:

PARTICULARS Rs

Gross salary 3,00,000

a)
Profession tax paid 2,000
b)
Own contribution to recognized 10,000
c)
provident fund
Employer’s contribution to provident 10,000
226 d)
 fund Assessment of
Individuals
Dividend from Indian Company 2,000
e)
Income on deposits with a company 47,000
f)
Long term capital gain from house 60,000
g)
property
Short term capital gain from shares 40,000
h)
covered u/s 111A

Compute the total income and tax payable by Ram, if he:

1. Does not opt to be taxed u/s 115BAC
2. Opts to be taxed u/s 115BAC

[Answer:

1. Does not opt to be taxed u/s 115BAC- Total Income- Rs.

3,87,000; Tax rounded off- Rs 7,640
2. Opts to be taxed u/s 115BAC- Total Income- Rs. 4,49,000; Tax
rounded off- Rs 10,870]

Note: These questions and illustrations are helpful to understand this

unit. Do efforts for writing answersto these questions but do not send
your answers to university. It is only for your practice.

227