Income from Salary Short Answer Questions

Income from Salary Short Answer Questions

Question 1.
Give The meaning salary for various purposes.
Answer:
1) For Entertainment Allowance
Salary = Basic pay only.

2) For Gratuity under the Payment of Gratuity Act.
Salary = Basic Pay + Full D.A.

3) For Rent Free House
Salary = Basic + A (taxable allowances) + B (Bonus) + C (Commission of all types) + D (Dearness allowances, Which enters into benefits) + F (Fees) + L (Leave salary received during service period)

4) In Other Cases
Format for Computing Taxable Income from Salaries

Question 2.
Discuss basis of charges.
Answer:
Salary income is charged under the head “income from salaries” either on accrual basis or receipt basis, which ever is earlier. For the sake of easy understanding, the format for Computing Taxable Income from Salaries in given below:
Assessee : ……………….. A.Y.: ………………..
Residential Status : ……………….. P.Y. : ………………..
Category : ………………..

1. Basic Pay 2. Dearness pay 3. Bonus 4. Fees 5. Commission 6. Interim relief 7. Encashment of leave salary 8. Gratuity 9. Pension 10. Provident funds 11. Allowances 12. Perquisites 13. Profit in lieu of salary	Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx xxx
Gross Salary Deductions u/s 16 1. Entertainment allowance u/s 16(ii) 2. Professional tax paid u/s 16(iii)	Xxx xx xx xxx
Net Salary or Income from Salary	xxx

Note:
1. Any salary surrendered by the employee to the central government u/s(2) of voluntary surrender of salary act, 1961, is fully exempt from tax.

2. When an employee foregoes his/her salary to its employer, not under the surrender of salaries act, the salary so foregone shall be fully taxable.

3. When the employer bears the tax of employee, then the salary so paid is called as salary paid tax-free. As per section 17(2)(iv), any tax paid by employer on behalf of the employee is added to the salary income.

Question 3.
What are perquisites? Explain different types of perquisites with examples.
Answer:
Perquisites is any casual endowment, fee or profit attached to an office or position in addition to salary or wages.
The different types of perquisites are:
(i) Exempted perquisites: These perquisites are totally exempt from tax. The following are the exempted perquisites:

• Free medical facilities
• Free refreshments supplied during office hours.
• Free meals given during office hours
• Free recreational facilities provided by employers to its employees are fully exempted.
• Goods sold by the employer to his employees at concessional rate.
• Cost of refresher course attended by employee met by employers.
• Any rent free residential accommodation to Judge of High Court or Supreme Court.
• Free ration received by members of earned forces
• Value of any gift up to ‘ 5000 in a year (gifts in cash are fully taxable) is fully exempted.
• Perquisites allowed by govt to its employees posted abroad is fully exempted.
• Rent free house given to an officer of parliament, a union minister and leaders of opposition in parliament is fully exempted.
• Employees contribution to staff group scheme Is fully exempted.
• Computers, laptops given to an employee for official or personal use are fully exempted.
• Income tax on perquisites if paid by employees is fully exempted

(ii) Perquisites taxable in all cases:

• Rent free accommodation
• Concessional Rent House
• Obligation of employee met by employer
• Life insurance premium paid by employer on behalf of employee

(iii) Perquisites taxable in specified cases only.

• Free motor car facility
• Free transport
• Free education
• Free gas, light, water
• Free servants
• Any other bill for personal expenses of employee paid by employer is fully taxable

Question 4.
Explain different kinds of provident funds.
Answer:
The different kinds of provident funds are:
(i) Statutory Provident fund:
Statutory Provident fund is the oldest type of fund and it was started in the year 1925, through a Provident Fund Act of 1925. This fund was started with a view of providing savings amongst government employees. Generally this fund is maintained by government or semi government departments like Railways, RBI, college, universities etc. The employees contribution towards the employees statutory provident fund and the amount of interest earned on the accumulated balance is to be included in the income of employee. The employees over contribution will qualify for rebate u/s 88.

(ii) Recognized Provident fund:
It is a fund to which the Commissioner of Income Tax has given the recognition as required under the Income Tax Act. Generally this fund is maintained by industrial undertakings, business houses, banks etc. The employees contribution over and above 12% of employees salary, will be included in employees salary- income for tax purpose.

The employees contribution towards this fund will fully qualify for rebate under section 88. Interest on provident fund credit balance upto prescribed rate of 9.5% is exempted, but interest credited over and above such rate is deemed to be employees salary income of that previous year.

(iii) Unrecognised Provident Fund:
It is the provident fund which is not recognized by the Commissioner of Income Tax. The employer and the employees both contribute towards this fund. The employees contribution is added in the salary and he will not be allowed any rebate of tax while computing the total tax of the employee. The employee is entitled to relief under section 89(1).

Transferred Balance: When the unrecognized provident fund is recognized for the first time, the credit balance in the employees unrecognized provident fund is transferred to the recognized provident fund account. This balance is known as transferred balance. In such case, fund will be treated as RPF from the day of its inception and exception will be allowed in same manner.

(iv) Public Provident Fund:
On July 1, 1968 a new fund known as Public Provident Fund was started so that self employed people may also enjoy the benefits of rebate under section 88. Self employed people are doctors, lawyers, accountants, actors and traders. This fund can suit all types of pockets and its working is also very simple. Balances in the public provident fund are not liable to attachment by any court.

Practical Problems

Question 1.
Mrs. S. working in a company and getting a basic pay of’ 8,000 p.m. DA at 20% of basic pay, Commission at 5% of basic pay, HRA at 12% of basic pay and bonus equal to two months of basic pay. She is residing in a rented house at’ 1,800 p.m. Determine her exempted amount of HRA, for the A.Y. 2020-21.

Question 2.
Ms. Bhoomika resides in Kolkata. During the PY 2019-20 she get 12,0 p.a. as basic salary. She gets DA at 20% of basic salary (enters fro retirement benefits). She has also received a commission of 15,000 (calculated at 2% on turnover achieved by her). HRA received by her is 11,800 p.a. but rent paid is 14,800 p.a. Calculate the taxable HRA for the AY 2020-21. Dec 09

Question 3.
Mr. Madhavan of Chennai received 12,000 per month as basic pay and 2,000 per month as D.A (Forming part of salary for retirement benefits) He also received commission at fixed % of turnover achieved by him 40,000. Other allowances received by him are 2,800 per month. He is in receipt of HRA at 2,400 per month. But he has paid rent of 3,200 per month. He received advance salary for month of April and May 2019 in March 2020.
Compute the amount of HRA to be included in his salary income for P.Y. ending 31.3.2020.
Solution:
Salary

Basic pay = (12,000 x 12)	1,44,000
D.A. = (2,000 x 12)	24,000
Commission	40,000
Salary for HRA	2,08,000

(i) 10% of salary = 20,800
(ii) Actual rent paid (3,200 x 12) = 38,400
Computation of Taxable HRA

Question 4.
Mr. Praveen Kumar is the employee of Karnataka Government working in Hubli. He received the following emoluments for the financial year ending 31st March, 2020:
(i) Basic pay 8,000 p.m.
(ii) Dearness allowance – 20% of basic pay of which 40$ enters in to calculation of retirement benefit
(iii) Conveyance allowance 300 per month of which 2,000 was spent
(iv) House rent allowance 1,0 p.m.
(v) Mr. Praveen resided in a rented house on a monthly rent of 1,500 per month.
But he is allotted rent free quarter on 1st November 2016 from which date he is not entitled to get house rent allowance. Calculate the taxable house rent allowance for the assessment year 2020-21.

Question 5.
Mr. X is employed in Limited Co at Kanpur on salary of ‘ 8,000 per month and D.A. of 20% of Basic salary, 60% of D.A, is under the terms of employment i.e. it is included in salary for purpose of retirement benefits. He gets HRA from Co at 4,000 per month. His annual increment of’ 1,000 per month fall due on 1 Dec. 18. He also received arrears of Salary and D.A. of preceeding year amounting to 9,000 and 500 respectively.

Question 6.
Miss Roopashri, an employee of IT company Bangalore, submits the following information, compute the value of perquisite in respect of free Accommodation.
Answer:
Basic Salary 12,000 P.M., D.A. 40% of basic of which 80% enters into service benefits, Transport Allowance 1,250 P.M., Annual Bonus 25,000, Income Tax paid by the company on behalf the employee 750 P.M., Fair Rental value of accommodation 15,000 P.M., Rental charges of Furniture 18,500.

Question 7.
Sri Pramod an employee of PQR Ltd, draws 2,00,000 as basic salary, dearness allowance 15,000, bonus 20,000, education allowance to a son 300 per month. Besides company provides a rent-free unfurnished house in Chennai. Determine the taxable value of rent-free accommodation for the assessment year 2020-21 if the house is: a) owned by the company b) leased by the company on lease amount ‘ 20,000 per annum (as rent).
Solution:
(a) Value of rent free unfurnished house
(2,22,400 at 15%) 33,360
Here, salary = 2,00,000 + 20,000 + 2,400 = 2,22,400

(b) Lease of the following is the value of
Rent free house 33,360
OR
Rent paid by the company 20,000
Therefore, the value of rent free unfurnished house is 20,000

Question 8.
Mr. Suresh is an employee in a Bank at Bangalore, drawing a basic pay of 12,000 p.m. DA at 20% of basic pay, fixed medical allowance of ‘ 300 p.m. and special allowance of 250 p.m. He has been provided with rent free accommodation. The cost of furniture provided being 1,20,000.
Compute the taxable value of furnished accommodation for the A.Y.

Question 9.
Mr. Ramesh is an Non -Govt employee. He has been provided with a rent free house taken on lease for which the employer pays an annual rent of 40,000. He has also paid hire charges of ‘ 2,000 for rent and 1,000 for hire charges to the employer. Annual Salaries of the employee for the above purposes was 2,00,000.
Calculate value of rent free accommadation for the A.Y. 2020-21.

Question 10.
(A) From the following details calculate taxable HRA and income from salary, of Mr. RajeSh who is working and living at Mysore.
Basic salary P.A. – 78,000
Dearness allowance P.A. – 7,800
(Enters into retirment benefits)
House rent allowance P.a. – 11,700
Rent paid P.a. – 13,200
Entertainment allowance P.A. – 5,000
(B) From the following details calculate taxable gratuity of Mr. Prakash who retired in Septermber 2018 after having put in 38 years of service in the company. His average salary for 10 months proceeding Septermber 2018 is 50,000 P.M. He received the gratuity of ‘ 12,00,000 at the time of retirement. If
(a) Covered by the Act
(b) Not-covered by the Act.

Question 11.
Company has provided a residential accommodation to 13 empioyee. From the folio winginformation, findout the value of perquisite of accommodation.
Fair rental value of house annual 36,000 Salary 4,00,000
(i) House is situated in city whose population is more than 4 lakh.
(ii) House is situated in city whose population if less than 4 lakh.
Solution:
(i) If house is situated in city whose population is more than 4,00,000
Value of perquisite = 20% of salary
Value of perquisite= 4,00,000 x \(\frac {15}{100}\) = 60,000

(ii) If house in situated in city whose population is less than 4,00,000
∴ Value of perquisite = 15% of salary
∴ Value of perquisite= 4,00,000 x \(\frac {10}{100}\) = 40,000

Question 12.
Mr. Mahesh is getting a pension of 4,000 p.m. from a company. During the previous year 2018-19 he got his 2/3 pension commuted and received 2,46,000. Compute the exempted amount, if he has also received gratuity.
Solution:
Full pension = 2,46,000 x 3/2 = 3,69,000
If he receives gratuity
Exempted value of commuted pension = Full value x 1/3
Exempted amount = 3,69,000 x 1/3 = 1,23,000

Question 13.
Mr. Arun is getting a pension of 8,000 p.m from a company. During the previous year 2019-20 he got his 2/3 pension commuted and received 5,08,000. Calculate the total taxable pension, if he also receives gratuity.

Question 14.
Mr. Veeresh retired on 31.3.2020 after sewing in a company for 32 years and 10 months. He received ‘ 1,78,000 as gratuity. His average monthly salary in the immediately preceding 10 months was’ 28,000. Compute his taxable gratuity for the A.Y. 2020-21 (Gratuity is not covered under Gratuity Act).

Question 15.
Mr. Anand is getting a pension of 8,000 p.m., from a company. During the previous year 2019-20 he got his 2/3 pension commuted and received 4,92,000. Compute the exempted amount, if he has also received gratuity.
Solution:
Calculation of exempted amount, if Mr. Anand has also received gratuity
Full pension (4,92,000 x 3/2) 7,38,000
Therefore full pension is 7,38,000
If he has also received gratuity
Exempted value of commuted pension = Full value x 1/3
= 7,38,000 x 1/3 = 2,46,000
Therefore exempted amount = 2,46,000

Question 16.
Mr. Chandrashekar retires from LMN Ltd., on 30.06.2019. He gets pension of’ 2,000 p.m. upto 31.01.2019. With effect from 01.02.2019 he gets 60% of pension commuted for 40,800. Determine the taxable pension of Mr. Chandrashekar fro the AY 2020-21 assuming that he is also receiving gratuity.

Question 17.
Mr. Anand a non-governmentretired employee is getting a pension of 12,000 per month from a company.
During the previous year 2019-20 he got his half of pension commuted and received 5,00,000. Compute the exempted amount of commuted pension for the AY 2020-21 if:
(a) He receives gratuity
(b) He does not receive any gratuity

Question 18.
Mr. Sunder retired from services on 31st March 2020.
His pension was fixed at 6,000 p.m He commutes one-half of his pension amount received 3,00,000 Find out the taxable amount of commuted pension,
if:
(a) he is a Government employee.
(b) he is a Non-Govt, employee who also gets gratuity, and
(c) he is a Non-Govt, employee who does not get any gratuity.

Question 19.
Mr. Harish a General manager in a private company in Bangalore, retired from his service on December 15, 2018 after 28 years and 8 months of service and receives 3,50,000 as death cum retirement gratuity. At the time of retirement his basic salary was 18,200 per month. He has received’ 1,000 per month as D.A., 80% of which form part of salary for the purpose of computation of retirement benefits and 6% commission on turnover achieved by him. Total turnover achieved by him for 10 months ended 30th November 2019 1,50,000.
Assume he is not covered under Gratuity Act. Compute his taxable gratuity for the A.Y. 2020-21.

Question 20.
Mr. Anand Shankar retired from service in Mysore Minerals Ltd., on 31st December 2017. In this company, he has put in 33 years and 9 months of service. On retirement, the company paid him a gratuity of 3,25,000.
His monthly salary at the time of retirement (since 1-10-2016) was 12,000, D.A. 3,000 and H.R.A. 2,000.
Find out the exempted amount of Gratuity if he is:
a) Covered under the Payment of Gratuity Act 1972
b) Not covered under the Payment of Gratuity Act 1972
(Note: Question rewritten with change of date, question no.3 of Nov-02)

Question 21.
Mr. Vinodh retired from services on 31.3,2020. His pension was fixed at 8,000 per month. He commutes 3/4th of his pension and received 7,20,000 in P.Y. 2019-20. Find out the taxable amount of commuted pension when
(i) He is government employee
(ii) He is non-government employee receives gratuity
(iii) He is non-government employee who doesn’t receives gratuity.
Solution:

Question 22.
Mr. Akram retires from a Private Company on June 30.
He is paid a pension of 7,500 p.m. He commutes 75% of pension on December 1st 2017 and receives 4,50,000 as commuted pension. Compute taxable amount of commuted and uncommuted pension for the assessment year 2020-21 assuming
(a) He has received a gratuity of’ 5,40,000 at the time of retirement
(b) He has not received any gratuity at the time of retirement.
Also state the tax benefit would have been enjoyed by the assessee in respect of commuted pension, if he were to be an employee of the Government of Karnataka.
Solution:
Computation of Taxable amount of computed and uncomputed
pension for the A. Y. 2020-21

Particulars
I. If he receives pension along with gratuity 1. Commuted value of pension received 4,50,000 Exemption 1/3 of total commuted value (75% = 4,50,000, 100% = 6,00,000); (1/3 x 6,00,000) Taxable value of commuted pension	4,50,000   2,00,000 2,50,000
II. If he does not receive gratuity along with pension: 1. Commuted value of pension received Less: Exemption 1/2 of the pension (1/2 x 6,00,000) Taxable value of commuted pension Total Taxable Pension	4,50,000 3,00,000 1,50,000

If the assessee is an employee of the Government of Karnataka he is fully exempted in respect of commuted pension. Thus, he fully enjoys the tax benefits.
Note: Uncommuted pension is taxable in all cases.

Question 23.
Mr. Rajesh an employee of ABC Co. Ltd. Bangalore, retired on 31st
May 2019 after completing 28 years of service.
His monthly pension was fixed at 20,000. He commuted 60% of pension on 1st Jan. 2020 and received a sum of 5,40,000 as commuted pension. Calculate his taxable commuted and uncommuted pension for the assessment year 2020-21.

Question 24.
Mr. Srinidhi retires from service on 30.6.2019.
He is paid pension of 7,500 per month. He commutes 75% of his pension on 1.12.2019 and received 4,50,000 as commuted pension.
Compute the taxable amount of commuted pension for the assessment year 2020-2021.
(a) He is government employee
(b) He is non government employee who doesn’t receives gratuity
(c) He is non-government employee receives gratuity.

Question 25.
Mr. Ramesh retired from service on 31.01.2020.
His pension was fixed at 10,000 p.m. He commutes one-half of his pension and received 3,00,000. Find out the taxable commuted pension if:
a) he is a govt, employee
b) he is a non-govt, employee who also gets gratuity
c) he is a non-govt, employee who does not get gratuity

Question 26.
Mr. Kumar is a non-government employee getting pension of 16,0 per month from a company.
During the previous year 2019-20 he got his 2/3rd pension com muted and received 9,84,000.
Compute taxable pension for the Assessment Year 2020-21.

Question 27.
Briefly explain the tax treatment of leave encashment.
Answer:

Leave salary received during the service period.	Leave Salary received at the time of retirement.
Govt. Employee i.e. (employees of state or central government) Fully taxable	Non-Govt. Employee i.e. (other employees) Fully taxable	Govt. employee   Fully tax free	Non-Govt employee Least of the following is exempt from tax: 1. Leave encashment actually received. [Service period x actual earned leave – earned leave used x last drawn salary] 2. Leave salary as per I.T. law [1 month or actual earned leave, W.E.L x service period – earned leave used x average salary] 3. 10 months average salary 4. Maximum limit of 3,00,000

Question 28.
Sri Desikachar was manager in a company. He took premature retirement from service on 1.11.17. After completing 25 years of service his average salary for 10 month preceeding was retirement 3,690. He had 7 months leave to his credit on basis of 30 days per year which was approved and 23,100 as salary (at’ 3,300 per month) and 4,200 as D.A. (600 per month) D.A. forms the part of salary for retirement benefit. Compute the amount of encashment exempt from tax.

Question 29.
Mr. Monoharan was sales manager in a company.
He took voluntary retirement on 31st Dec. 2019. He joined this company on 1st January 1978. As per the terms of services, he was entitled to one month’s earned leave for every year of completed service. While service, he utilized 8 months earned leave and encashed another 8 months earned leave. On superannuation he received encashment amount’ 9,800. Compute the taxable part on encashment of earned leave for the assessment year 2020-21.
(Note: Question rewritten with change of date, question no.4 of April-02)

Question 30.
Mr. Keshava retired on 1.1.2020 after serving for 34 years and 9 months in loskar Ltd. From 1.1.2019 to 31.12.2019 his salary was 8,000 P.M. He was entitled for one and half months earned leave for every year of experience. Leave availed by him in service was 30 months. Leave salary received at the time of retirement was 1,68,000.
Compute the taxable amounted encasement of earned leave for the A.Y. 2020-21.

Question 31.
Sri Natesh was employed in a company.
He took voluntary retirement on 1st December 2018 after completing 25 years of service. On 1st January, 2018 his salary was ‘ 6,000 per month after adding the annual increment. In this company two months’ leave accrued every year. Compute the amount exempt regarding encashment of earned leave, if his other particulars were as under:

Question 32.
Mr. Nataraj is employed in a town (population 13 lakh). His particulars of income for the A.Y. 2020-21 are:
(i) Basic salary 8,000 per month
(ii) D.A. 2,000 per month (60% doesn’t enters Into service benefits)
(iii) Entertainment allowance ‘ 500 per month
(iv) Bonus ‘ 8,000 per annum.
(v) He has been provided with rent free accommodation, the cost of furniture provided being ‘ 20,000
Computer his taxable income from salary for the A.Y. 2020-21

Question 33.
Mr. Suresh is a govt, employee. His salary details for the P.Y. 2018-2019 are as follows:
(a) Salary at 5,500 p.m.
(b) DA at 2.000 p.m.
(c) CCA at 400 p.m.
(d) Entertainment allowance at 1,500 p.m.
Compute his net income from salary for the A.Y. 2020-21

Question 34.
From the following particulars, calculate the salary income of Mr. Rajan for the assessment year 2020-21.
Basic salary – 11,000 per month
House Rent Allowance – 4,800 per month
Dearness allowance – 5,000 per month
Entertainment allowance – 2,400 per month
Mr. Rajan and his employer contribute to Recognised Provident Fund 14% of salary.
One small car is allowed to him by his employer both for private and official use. Expenses of car are borned by the employer. He lives in a rented house monthly rent being 3,000 p.m. Mr. Rajan is working in Mysore.

Question 35.
Mr. Chethan is a production manager of a company in Chennai. His particulars of salary income are:
Basic salary 15,000 pm.
DA 5,000 pm (given under terms of employment)
Commission 12,000 pa on the turnover achieved
Bonus 4,000 pa
HRA 8,000 per month and
Travelling allowance 800 per month (fully spent for official purpose)
He lives in a rented house for which he pays 9,000 per month as rent
Find out his taxable salary income for the AY 2020-21.

Question 36.
Mr. X is working in a company of Hydrabad on a salary of 10,500 p.m.
And Dearness Allowance of 2,000 p.m. ana nalr df which is paid under terms of employment. He received 16,000 as bonus for the year 2020-21.
He is given a rent free unfurnished house owned by the company together with the facility of gardener on a monthly salary of 600. Company paid 5,000 during the year towards membership fee of a club for Mr. X.
During the year medical bills reimbursed by the company for treatment given in a nursing home to his mother 5,000.
He is contributing 15% of his salary to RPF and equal amount by the Co., and interest credited to this account during the previous year at 9.5% p.a. 10,000.
Compute his taxable income from salary of the assessment year 2020-21.
Solution:
Computation of Taxable salary for A.Y. 2020-21

Particulars
Basic Salary (10,500 x 12) D.A. (2,000 x 12) Bonus Club membership fees Reimbursement of medical bills Employee’s contribution to RPF in excess of 12% of salary (1,26,000+12,000 = 1,38,000 x 3/100) Value of RFA (1,26,000+12,000+16,000) = 1,54,000 x 20/100) Gross Salary Less: Standard Deductions u/s 16(ia) Income from Salary	1,26,000 24,000 16,000 5,000 5,000 4,140 30,800
	2,10,940 50,000
	1,60,940

Question 37.
Mr. Pratham Sales Manager of XYZ Ltd., Mumbai has furnished the following details of his income for the year ended 31.3.2019. Computer his income from salary for the A.Y. 2020-21
(a) Basic salary 20,000 p.m.
(b) Dearness allowance 6,000 p.m. (forming part of salary).
(c) Bonus equal to 3 months basic salary
(d) Entertainment allowance 2,500 p.m. (amount spent 12,000).
(e) Children hostel allowance for his three children 400 p.m. per child.
(f) Reimbursement of medical bills 7,000 for the treatment taken in a private nursing home
(g) He is provided with rent free furnished accommodation owned by the company. Cost of furniture 1,00,000, FRV of the house is 7,500 p.m.
(h) Free telephone at his residence 3,500.
(i) Medical insurance premium of Mr. Pratham paid by the company 4,000 p.a.
(j) Employment tax paid by the company 1,000 p.a.
(k) Own contribution and company’s contribution to RPF is 14% of salary. Interest credited to RPF at 14% 14,000

Question 38.
Mr. Akhii, an employee of ABC (P) Ltd., and receives the following salary and perquisites from his employer during the previous year 2019-2020. He holds 20% equity shares in the employer company.
(a) Basic pay – 96,000
(b) Profit Bonus – 4,500
(c) Commission on sales at 2% of turnover (turnover achieved by Mr. Akhii for the year 2019-2020 is 4,50,000)
(d) Advance salary of April, May and June 2018 – 24,000
(e) Employer’s contribution towards RPF – 13,220
(f) Interest credited in provident fund account at 14.5% is 8,700
(g) Rent free furnished house in Mumbai is provided by employer. Employer also pays hiring charge of furniture 23,500 and rent paid for house 1,00,000
(h) Free services of gardener – salary 6,000
(i) Free services of cook – salary 7,200
(j) Free supply of ration paid by employer – 4,500
(k) Mr. Akhil also took an interest free loan of 75,000 from his employer payable after three years. The loan is taken on 1st Nov. 2017 to finance the purchase of jewellery for his wife.
Compute Mr. Akhil’s taxable salary for the assessment year 2020- 2021. (Note: Question rewritten with change of date, question no.8 of Aprll-04)

Question 39.
Mr. X, a physically handicapped person working in ABC Company Ltd.
Bangalore had furnished the following details of his income for the year 2019-20. Compute his income from salary for the A.Y. 2020-21.
(a) Basic salary 40,000 p.m.
(b) Dearness allowance enters into retirement benefits 24,000 p.m.
(c) Fixed percentage of commission on sales 1,500 p.m.
(d) Bonus 65,000
(e) HRA 12,500 p.m (Rent paid 10,600 p.m.)
(f) Transport allowance 4,000 p.m.
(g) Reimbursement of medical expenses 2,500 for treatment taken in private hospital
(h) Management contribution and own contribution to RPF is 15% of salary.
(i) Interest credited to RPF is 11,000 at 11% p.a.
(j) Professional tax paid by employee is 400 p.m.
(k) He is provided with more than 1.6 liter capacity car by the company for official use. All the expenses including salary of the driver are met by the company.
(l) Children education allowance’ 600 p.m. per child for two children and children hostel allowance 1,000 p.m. for two children.

Question 40.
Mr. X is an employee in HMR Bangalore. He gives the following information for the previous year 2019-20.
(1) Basic salary 10,000 p.m.
(2) DA 6,000 p.m.
(3) Family allowance 600 p.m.
(4) City compensatory allowance 800 p.m.
(5) Education allowance for two children at 350 p.m. per child
(6) Entertainment allowance 750 p.m.
(7) House rent allowance 1,600 p.m. But he pays 3,000 p.m. as actual rent.
(8) Company has provided a telephone at his residence by meeting all the expenses amounting to 6,000 for the year.
(9) Company has paid his income tax of 6,420 during the previous year on his taxable income.
(10) Conveyance allowance of 8,000 for visiting the branches (fully spent).
(11) He and company contribute 14% of salary towards RPF.
(12) Interest on RPF was 15,000 at 15% p.a.
Compute income from salary for the A.Y. 2020-21.

Question 41.
Mr. Kiran is working in a private company in Bangalore. From the following details of his salary compute the income from salary for the A.Y. 2020-2021.
(a) Net basic salary 74,000. After deduction of tax at source of 8,000 in the year.
(b) D.A. 800 per month (not forming part of salary).
(c) Bonus equal to 3 months basic salary.
(d) House Rent allowances 800 per month, but he is paying rent of 1,200 per month for his residence in Bangalore.
(e) His son is studying in a residential school in Mysore and company paying education allowance of 4,000 and hostel allowances 4,000 yearly.
(f) He is contributing to RPF at 15% of salary and the company contributing an equal amount.
(g) Interest earned on RPF 4,200 at 14% p.a.
(h) Conveyance allowance 8,500 of which he spent 5,500 for official purpose.
(i) He is the member of Lions Club an annual membership fees 2,000 paid by company.
(j) Kiran has a telephone in his residence for personal and official use and its bill 5,000 paid by the company.
(k) He paid 510 professional tax.

Question 42.
Mrs. Rama is an employee of State Bank of Mysore; She furnishes the follow in information for computation of her taxable salary for the Assessment Year 2020-21.
(i) Basic Salary 12,500-500-18,000. p.m. from 1-1-2014
(ii) Dearness Allowance @ 15% of salary.
(iii) Entertainment Allowance, 250/- p.m., Bonus 4,000/-, Children Education Allowance for her three children 200/- p.m.per child and Travelling Allowance for tour’ 15,000/- (during the year she spent 14,000/- on these travels).
(iv) She and her family members took medical treatment in a private hospital during the year. The bank reimbursed 15,000/- regarding these expenditures.
(v) The bank has provided her an accommodation by deducting 1,000/- p.m from her salary, but the bank is paying a rent of 5,000/- p.m.to the owner of this house. Furniture costing 30,000 is also provided in this house by the bank.
(vi) Employee and employer contributed 15% of her salary and D.A. towards the SPF. The interest credited to the P.F.A/C is 3,300/- @ 10% during the year.
(vii) During the year the bank has paid her Employment Tax of’ 2,000 Income Tax of 8,000/-, and Health Insurance Premium of 1,500

Question 43.
Mr. Vikas is an employee of HCL Ltd. he supplies you the following particulars of his income.
(a) Basic salary 20,000 p.m.
(b) Dearness allowance 5,000 p.m. (50% enters into salary)
(c) Fixed medical allowance 1,000 p.m.
(d) Education allowance 500 p.m. per child for his three children
(e) Transport allowance 1,200 p.m.
(f) City compensation allowance (CCA) 100 p.m.
(g) employers contribution to RPF at 15% of salary
(h) Interest credited to RPF at 9.5% p.a. is 28,000
(i) He is provided with free lunch in office. The cost per meal is 50
(j) the employer has given him the use of a small car which he uses for both personal and official purposes. He meets the expenses for personal purpose from out of his pocket.
(k) He was also provided with rent free house at Bangalore for which the employer paid a rent of 9,000 p.m. He was allowed the use of furniture costing 28,000 respectively.
(l) Life insurance premium of 12,000 was paid by employer on an insurance policy of 2,40,000. Compute his taxable salary for the A.Y. 2020-21.

Question 44.
The following particulars relates to the income of Mr. Ganesh for the P.Y. 2019-20.
He is employed in a Cotton Textile Mill at Bangalore on a monthly salary of 25,000.
He is also entitled to a commission at 1% on sales effected by him.
The sales effected by him during the previous year amounted to 40,00,000.
He received the following during the previous year:
(a) Dearness pay 6,000 p.m.
(b) Bonus at two months basic salary
(c) Entertainment allowance 2,000 p.m.
(d) House rent allowance 5,000 p.m.
(e) Income tax of Mr. Ganesh paid by employer 10,000
(f) Free telephone installed at his residence 6,000
(g) He and his employer contribute 15% of his salary to his RPF and interest credited to RPF at 10% amounted to 30,000 during the year.
(h) He paid 6,000 p.m. as rent of the house occupied by him. Compute his income from salary for the A.Y. 2020-21.

Question 45.
Smt. Savita, an employee of Hindustan lever Ltd. Delhi received the following incomes during the year ending 31-03-2020.
(a) Basic Salary upto 31-08-2019 12,000 p.m. and there afterwards 12,500 p.m.
(b) Dearness pay 30,000 P.a.
(c) Dearness allowance 15,000 p.a. (it does not enter into retirement benefits)
(d) Children education allowance 250 p.m. for one child.
(e) Reimbursement of medical expenses 21,500 (Treatment was taken in private hospital)
(f) Smt. Savita has been provided with rent free flat at Delhi (Rent paid by the Company 80,000 p.a.)
(g) Facility of watchman and cook provided, each of whom is paid 700 p.m. as salary.
(h) Interest free loan for purchasing home appliances 1,20,000 (Date of loan borrowed 1-4-2019 and assume SBI lending rate for similar loan on 1-4-2019 @12% p.a.).
Determine salary income of Smt. Savita for the Assessment Year 2020-21 assuming that she paid ‘ 200 p.m. as professional tax.

Question 46.
Smt. Rekha, an employee of RKS Ltd., Delhi receives the following incomes during the year ending 31.03.2020.
Basic salary upto 31.08.2019 12,000 per month and thereafter at 12,500 per month. Leave travel concession 4,500 (entire amount spend). Dearness pay 30,000; dearness allowance 15,000 (it does not enter for retirement benefits); children education allowance 250 per month for 1 child. Reimbursement of medical expenses 31,500 (private hospital)
Smt Rekha has been provided with rent free flat at Delhi (rent paid by the company 80,000 per annum), facility of a watchman and a cook (each of whom is paid a salary of 700 per month), interest free loan for purchasing home appliances 1,20,000 (date of loan borrowed 01.04.18 and SBI lending rate for similar loan on 01.04.19 is 12% p.a.).
Determine Smt. Rekha’s salary income for the AY 2020-21 assuming that she has paid 200 per month as professional tax.

Question 47.
The following particulars’ are related to the income of Sri Ganesh for the previous year 2019-20.
Sri Ganesh is employed in a software company at electronic city Bangalore on a monthly salary of 30,000. He is also entitled to a commission at 0. 5% of sales effected by him. The sale effected by him during the previous year amounted to 80,00,000. He received the following allowances and perquisites during the previous year:
(i) Dearness pay at 6,000 per month
(ii) Bonus at two months basic salary.
(iii) Entertainment allowance at 2,000 per month
(iv) House rent allowance at 5,000 per month
(v) The employer paid 10,000 towards the income tax-liability of Sri Ganesh
(vi) The employer provided him LTC of 20,000 for going to Simla.
(vii) He has also been provided with gas, electricity and water facility and employer spent 10,000 on these facilities.
(viii) The employer gave him a personal computer at free of cost. The written down value of this personal computer on 1.4.2018 was 10,000.
(ix) He and his employer both contributed 15% of his salary to his recognised provident fund and interest credited to this fund at 10% per annum interest amounted to 30,000 during the P.Y.
(x) He spent 6,000 per month as rent of the house occupied by him in Bangalore.
Compute his taxable salary income for the assessment year 2020-21.
Solution:
Calculation of salary income of Sri Ganesh for the assessment year 2020-21

Particulars	Amount
(i) Salary (ii) Dearness pay (iii) Bonus (iv) Commission (v) Entertainment allowance (vi) House rent allowance (vii) Income tax paid by the company (viii) Gas, electricity and water facility (ix) Employer’s contribution to RPF (x) Interest on RPF Gross salary income Less: Standard deduction U/s 16(ia) Net salary income	3,60,000 72,000 60,000 40,000 24,000 35,200 10,000 10,000 14,160 1,500 6,26,860 50,000 5,75,860

Question 48.
Mr. Prabhakar is an employee of NSK Ltd. Bengaluru. Particulars of his income for the PY 2019-20 are as follows:
Basic salary 13,500 p.m.
DA 35% of basic salary (60% of it forms part of salary for retirement benefits).
HRA 4,000 per month (rent paid 5,000 per month)
Children education allowance 50 per month per child for 3 children. Helper allowance 300 per month (Actual amount spent 200 per month) Bonus 25,000. Leave encashment 13,500.
Advance salary of April 2020 14,000. Entertainment allowance 250 per month.
Mr. Prabhakr has been provided with free use of a small car for both official and personal use. During the year the company reimbursed 19,200 towards medical expenses incurred by him.
His contribution to RPF is 14% of salary and the company also makes a matching contribution. Interest credited by the company on the accumulated balance of RPF account at 12% p.a. amounts to 18,000.
Professional tax paid by him is 200 per month.
Compute Mr. Prabhakar’s salary income for the AY 2020-21.

Question 49.
Sri Yadunandan (age: 50 years), an employee director of Maruthi Udyog Ltd., submits the following information relevant for the assessment year 2019-20.
Salary 56,000, entertainment allowance 6,000, bonus 10,200, education allowance for a child 3,000, income tax penalty paid by the company 1,500, medical expenses reimbursed by the company for the treatment taken in private hospital 21,000, leave travel concession 1,3000 (first time in the current block period), free residential telephone provided by the company telephone bill paid by the company 1,2000, free refreshment during office hours 2,000, payment of electricity bills by the employer 1,000, reimbursement of gas bills by the company 1,900, furnished flat owned by the company at Cochin. (population;31 lakh) fair rent of the flat 40,800, salary of watchman 1,000. He is aiso provided with air condition which is obtained by the company on a rent of 2,000. Furniture costing 18,000 is also provided. He is provided with Maruti 800 CC car, which is used by him for both personal and official purposes and expenses are paid by the company. Company’s contribution towards recognised provident fund is 7,920, interest credited to it at 14% 14,000. Sri Yadunandana made the following payments during the financial year 2019-20.
(i) Own contribution to RPF at 14% of salary (ii) Professional tax 2,400 Calculate the net salary income of Sr Yadunandana for the assessment year 2020-21.

Question 50.
The following are the particulars of income from salary of Mr.Jayadev of Tumkur for the previous year ending 31.3.20
(a) Net salary (after deducting income fax, profession tax and contribution of Jayadev to his recognised provident fund) 66,000
(b) Income Tax deducted at source from Salary 13,000
(c) Profession tax deducted at source from Salary 2,000
(d) Jayadev’s contribution to provident fund 9,000
(e) Employer’s contribution tothe above fund 19,200
(f) Interest credited to provident fund at 121/2% P.A. was 2,500
(g) House rent allowance received (actual rent paid by him for the house occupied for his residence at 1,500 p.m.) 18,000
(h) Allowance for travelling on transfer received from employer 2,000
(j) Jayadev has paid life insurance premium on the following policies as under:
(a) On the policy of 20,000 on his own life 3,000
(b) On the policy of 20,000 on his wife life 2,000
Compute his income from salary for the A.Y. 2020-21.

Question 51.
Mr. Ganesh the manager of Marithi Suz following details of his income for the ltd., Mumbai, has furnished the ear ended 31st March 2020:
(i) Basic salary 21,000 per month
(ii) Bonus – 2 months basic salary
(iii) Commission is 3% on sales – during the year he reached a saies of 5,00,000
(iv) Dearness allowance forming part of salary 7,000 per month (Considered to retirement benefits)
(v) Medical allowance 1,400 per month
(vi) Entertainment allowance 3,00 per month
(vii) Childrens hostel allowance for his two children at 500 per month per chiid.
(viii) RPF – Company’s contribution 6,000 per month
(ix) RPF – own contribution 5,000 per month
(x) Interest on RPF at 11% p.a. 44,000
He has been provided rent free furnished accommodation at Mumbai whose fair rental value is 10,000 and cost of furniture 60,000. He paid professional tax of’ 2,400.
Compute his taxable salary for the assessment year 2019-2020.

Question 52.
Following are the particulars of salary of Mr. Kapoor
(a) Basic salary 35,000 per month
(b) Dearness allowances 50% of basic salary
(c) Entertainment allowances 10,000 per month (actual expenses 8,900 per month)
(d) Rent free furnished house is provided, which is owned by the company and its fair value 12,000 per month
(e) Furniture costing 2,50,000 is also provided.
(f) Services of the following servants (paid by company) are provided.
Watchman – 1,000 per month
Gardner – 750 per month
Sweeper – 800 per month
Cook – 600 per month
The company also provided free supply of gas, electricity and water worth 18,000 per annum. The company provides one large car (more than 1600 CC) with driver for both official and personal use expenses met by company. He paid employment tax 500 per month.
He works as MD of Royal Airways Ltd. Mumbai. Computer his net salary income for the A.Y. 2020-21.

Question 53.
Mrs. Smitha is working as Sales Executive in Maruthi Suzuki Ltd. Kolkata arid her salary details are as follows for the previous year 2019-20.
(a) Basic salary 21,000 per month
(b) Bonus equal to two months basic salary
(c) Commission 3% on sales (During the year she reached sales target of 5,00,000)
(d) Dearness allowance 7,000 per month. (Eligible for Retirement benefits)
(e) Medical allowance 1,400 per month (Medical Expenses 15,000 p.a.)
(f) Children Hostel Allowance for her two children at 500 per month per child.
(g) Children Education Allowance for her two children at 400 per month per child.
(h) RPF contribution by the company 6,000 per month.
(i) RPF contribution by employee 5,000 per month
(j) Interest credited on RPF at 11% 44,000
(k) She has been provided with company’s owned rent free furnished house in Mumbai and cost of furniture provided 60,000
(l) Mrs. Smitha paid her professional tax 2,400 p.a.
Compute Taxable Salary for the A.Y. 2020-21. Nov 2016

Question 54.
Mr. Yadav is an employee of State Bank of India Bangalore and he submits the following information relevant for the A.Y. 2020-21.
Compute his taxable income from Salary:
(a) Basic salary 8,000 per month
(b) Dearness allowance 1,500 per month (does not form part of salary)
(c) City compensatory allowance 300 p.m.
(d) Bonus 10,000 per annum.
(e) Conveyance allowance 2,000 p.m. (60% spent fro office duties)
(0 House Rent allowance 5,000 p.m. (Rent paid by employee 7,000 p.m.)
(g) Payment of LIC Premium by SBI 4,000 p.a.
(h) Services of sweeper paid by SBI 200 per month
(i) Leave Travel Concession 5,000 (First time in current Block period)
(j) Reimbursement of gas, electricity and water bill by the SBI 2,500 per annum.
(k) RPF contribution by the bank and own contribution of employee 14% of salary.
(l) Interest credited to RPF at 14% 14,000
(m) Professional tax paid by Yadav 5,000

Question 55.
Following are the particulars of salary of Mr. Gurumurthy.
(a) Basic salary 10,000 per month.
(b) Dearness allowances 50% of basic salary
(c) Entertainment allowances 20,000 per month (actual expenses 17,800 per month)
(d) Rent free furnished house is provided, which is owned by the company and its fair value 24,000 per month
(e) Furniture costing 5,00,000 is also provided
(f) Services of the following servants paid by company.
Watchman 2,000 per month
Gardener 1,500 per month
Sweeper 1,600 per month
Cook 1,200 per month
The company also provided free supply of gas, electricity and water worth 36,000 per annum. The company provides one large car (more than 1600 cc) with driver for both official and personal use expenses met by company. He paid employment tax 200 per month.
Compute his salary income for the A.Y. 2020-21.

Question 56.
Mr. Praveen is an employee of XYZ Ltd. at Bangalore. He furnishes the following information for the Assessment Year 2020-21.
(a) Basic salary 8,000 p.m.
(b) Dearness allowance 6,000 p.m. (‘ 1,000 enters into all retirement benefits)
(c) Educational allowance for 2 children at 350 p.m. per child.
(d) House Rent Allowance 1,600 p.m. but Actual Rent paid by him is 3,000 p.m.
(e) He and Company contributes 14% of salary towards RPF
(f) Interest on RPF was 15% P.a.
(g) Company paid 6,000 towards income tax and 3,000 towards professional tax of Mr. Praveen.
(h) He received bonus equals to 2 months salary.
(i) Children hostel allowance for 2 children @ 400 per child, per month.

Question 57.
From the following information calculate the income from salary of Mr. Anand for the A.Y. 2020-21.
(1) Basic salary 40,000 p.m.
(2) Dearness allowance 60% of basic forming part of salary
(3) Commission 18,000
(4) Bonus 60,000
(5) Employer and employee’s contribution to SPF is 15% of salary
(6) Interest credited to SPF is 12,000 at 10% p.a.
(7) CCA 500 p.m.
(8) Medical allowance 800 p.m.
(9) He is provided with a rent free furnished house by the employer for which his employer paid a rent of 5,000 p.m. to the owner of the house. Cost of furniture is 1,20,000.
(10) He is also provided with a car less than 1.6 litre capacity by the employer both for personal and official use. All the expenses of the car including salary of the driver are paid by the employer.
(11) Free telephone at his residence by the employer valued at 12,500
(12) Professional tax paid by him 450 p.m.
(13) Gift voucher worth 12,500 were issued by the employer.