SATHYABAMA UNIVERSITY

(Established under section 3 of UGC Act , 1956)

Jeppiaar Nagar, Rajiv Gandhi Salai , Chennai -119

DEPARTMENT OF MANAGEMENT STUDIES

TAX MANAGEMENT- SBAX5025

Unit – I

Section – A

1. Define Tax

2. Write short notes on a) person b) Income.

3. Define a) Previous year b) Assessment year

4. Define a) Direct taxes b) Indirect taxes.

5. Write a short note on residential status.

6. Define Total Income?

7. Who is an ordinary resident?

8. Mr. K, an Indian citizen leaves India for the first time on 31st May 2006 and comes back

on 15th May 2009. He again leaves India on 10th June 2010 to come back on 14th January

2011. He is living in India since then. Determine his status for the previous year 2011-12.

9. What is capital Expenses?

10. Explain capital Lessees?

Section – B

1.Which of the following incomes are taxable when the residential status of Mr. Umesh is :

(i) Resident, (ii) Not Ordinary Resident, (iii) Non – Resident.

Income accrued in Canada but received in India Rs. 2,000.

Rs. 5,000 were earned in Africa and received in India Rs. 2,000.

Rs. 5,000 earned in India but received in Canada.

Rs. 10,000 earned and received in Srilanka from a business controlled from India.

House property income (computed)from Srilanka Rs. 2,000.

Rs.4,000 was past untaxed foreign income which was brought to India during the

previous year.

Profit earned from a business in Kanpur Rs. 10,000.

2. Explain the term ’assessee’ of state the different classes of Assesses.

3. What is Agricultural Income as per Income as per income tax act?

4. What are different categories of assesses according to residential status?

5. What test would you distinguish capital receipts and revenue receipts?

6. Explain any ten items exempted from Income tax?

7.What are the tax free incomes ?give examples of any eight tax free incomes?

8.Give eight examples for income partially exempt from income tax U/S 86.

9.Enumarete the exception to the rule that income of the previous year is taxable in the

following assessment year.

10.Bring out the meaning of income received and income deemed to be received in India.

Unit – II

Section – A

1. Define salaries under the income tax act.

2. Write short note on ‘perquisites’.

3. What is profit in lieu of salary?

4. From the following details calculate taxable house rent allowance of Mr. Kannan who is

working and living in chennai.

Rs.

Basic Salary 78, 000

Dearness allowance

(Service benefit) 7, 800

H.R.A. 11, 700

Rent paid per annum 13, 200

5. Mr. Prakash retired in September 2010 after having put in 42 years of services in a

company. His average salary for 10 months preceding September was Rs. 2,500 p.m. He

receives gratuity of Rs. 60,000 compute his taxable gratuity.

6. What are allowances?

7. What are the items included under the head salary u/s 80 c?

8. How do you exempt House Rent Allowance?

9. What is Recognized provident Fund?

10. Explain who is specified employee.

Section – B

1. What are Allowances? How will you treat them?

2. Define Perquisites. Describe the fully exempted perquisites as per I.T Act.

3. Describe the methods of savings available to save the tax for salaried individual .

4. Following are the particulars of salary of Mr.R an employee of ABC Ltd of

Bangalore.

i. Basic Salary Rs.30,000 p.m

ii. DA Rs.5000 p.m ( 50% enters in retirement benefits )

iii. Transport Allowance Rs. 2000 p.m

iv. Helper Allowance Rs.2000 p.m. he is paying Rs.1600 p.m to a helper

which he got engaged for his office work.

v. Bonus Rs.10,000

vi. Commission Rs.40,000

vii. Reimbursement of medical bills Rs.60, 000 out of his wife and she

got her medical treatment from a private hospital.

viii. Amount paid by employee for free supply of gas, electricity at his

residence Rs.18,000

ix. Educational Allowance @ Rs.200 p.m per child for three children.

x. House Rent Allowance Rs.4000 p.m

Rent paid for the house Rs.5000 p.m

Compute income under the head of salary for the assessment year 2011-12.

5. Mr. A is an employee in PQR Ltd in a place where population is 15 lakhs. He

draws a basic salary of Rs . 2400 p. m ; D.A is Rs.1200 p. m ( enters for service

benefits ) ; Bonus is Rs.1600 p. m , Traveling Allowance Rs.1600 p. a ( actually

incurred Rs.1200 only ) He has been provided a rent free accommodation by the

company. The company provided furniture on hire for Rs.800 p.a. Calculate

taxable value of RFA if Rs.200 p. m is deducted as rent free accommodation from

his salary.

6.Form the particulars given below compute his salary income:

i. Basic Salary Rs. 13,000 p.m.

ii.Dearness Allowance Rs. 900 p.m. (Rs. 500 p.m. enters into pay for service benefits).

iii.Bonus Rs. 8,400.

iv.Salary in lieu of leave Rs. 3,000.

v. Entertainment allowance Rs. 1,500 p.m.

vi.Traveling expenses Rs. 1000 p.m.

vii.Furnished House at Concessional rent of Rs. 800 p.m. in Chennai [population above

25 lakhs] Fair Rental Value Rs. 2,500 p.m. Cost of furniture Rs. 35,000. Salary of

gardener Rs. 1,000 p.a.

viii.Club bill paid by employer Rs. 2,200 p.a.

ix.Contribution by employer to R.P.F. – 13%(each) of salary.

x. Advance salary Rs. 2,000.

xi.Life Insurance Premium (Paid by employee)

Own life = 3,000 p.a.

Wife’s life = 4,000 p.a.

Major son = 2,000 p.a.

xii. Professional tax Rs. 1020.

7. P and Q are officers in the State Bank of India. The bank has allotted free of rent

identical flats to both P and Q in Nariman Point Mumbai [population above 25 lakhs], the

fair market rent of each flat being Rs. 6,000 p.m. in April, 2010.P was promoted its Chief

officer but he continues to occupy the same flat.

The Bank has also furnished the above flat.

The original cost of furniture provided in each flat works out to Rs. 45,000. The salary

particulars of P and Q are as follows.

P Q

Rs. Rs.

Basic 9,000 p.m. 7,500 p.m.

Dearness Pay (enter) 1,750 p.m. 1,600 p.m.

Dearness allowance 1,500 p.m. 1,400 p.m.

Educational allowance 1,300 p.m. 1,300 p.m.

Children hostel allowance 1,800 p.m. 1,500 p.m.

Petrol allowance 900 p.m. 800 p.m.

Determine the perquisite value of the flat in the hands of P and Q. Two children are

studying and staying in hostel in each case.

8.The Following are the particulars of the income of Sh. Arvind for the previous year

ending on 31st March 2011

xiii.Salary Rs. 12,000 p.m.

xiv.Contribution to Recognized P.F. Rs. 1,610 per month.

xv. Employer contributes the same amount as the employee contributes towards P.F.

xvi.Dearness Allowance : Rs. 300 p.m. It is not considered for computation of his

retirement benefits.

xvii. Interest credited to P.F.@13% is Rs. 13,000.

xviii. Contribution to Public Provident Fund is Rs. 9,000.

xix.Bonus Rs. 3,000.

xx. His ration bill of Rs. 2,000 p.m. is paid by employer.

xxi.Premium of life Policy is Rs. 12,000 on a Policy of Rs. 1,00,000.

xxii. Employer company has provided him free club facility which costed 24000

and free lunch for 300 days cost being Rs. 450 per day

xxiii. Repayment of house building loan taken from HDFC (a Govt. agency) Rs.

20,500 during the year.

Find out taxable income of Shri Arvind for the assessment year 2011– 12.

9.Following details are available from Shri. P.N. Dutta, a resident individual for the year

ending on 31.03.2008. you are required to compute his taxable income under the head

‘Salaries’. Rs.

a. Salary received 71,800

b. Income-tax deducted at source 1,200

c. Own contribution to R.P.F. deducted from salary 8,000

d. Dearness allowance 50% of salary.

e. Employer’s contribution to R.P.F. 8,000

f. Interest on accumulated balance of R.P.F. @ 9.5% 2,400

g. He is provided with a furnished free quarter for residential purposes

in Calcutta [Population above 25 lakhs] owned by his employer, the fair rent of which

is at Rs. 4,000 p.m. Cost of Furnishing is Rs. 45,000. Gardener’s salary paid by

employer is Rs. 3,000 p.a.

h. He is provided with a car of 1.5 lt. capacity by his employer for both

personal and official use and expenses of maintaining and running the car with

chauffeur are borne by the employer.

i. He had two life insurance policies : one on his own life policy value

of Rs. 80,000 on which annual premium paid for his employer is Rs. 8,000 and other life

of his wife a policy value of Rs. 20,000 on which premium paid by him is Rs. 1,800.

Compute his salary income and Q.A. for deduction u/s 80C.

10. Compute the taxable salary of Mrs. Devi of Madurai for the assessment year 2011 – 12

from the following particulars.

a. Basic salary Rs. 8000 p.m.

b. D.A. (S.B.) 2000 p.m.

c. Bonus Rs. 8,000 p.a.

d. Rent free accommodation provided by the employer, the fair rent value of

which is Rs. 20,000 p.a. The cost of furniture provided there is Rs. 10,000

e. Entertainment allowance Rs. 500 p.m.

f. Her contribution to R.P.F. is at 15% if salary.

g. Employer’s contribution to R.P.F. is Rs. 15,000 p.a.

h. Interest credited to R.P.F. balance at Rs. 9.5% p.a. Rs. 1,900.

i. Free use of large motor car both official and personal purposes. Driver is also

provided by the employer.

Unit – III

1. Define Annual value.

2. Define gross annual value.

3. Write a note on self occupied property.

4. Calculate Net annual value of a house from the following.

Actual Rent received Rs. 6000 p.m.

Municipal rental value Rs. 60,000

Fair rental value Rs. 66,000

Standard rent Rs. 69,000

Municipal taxes paid 10% of municipal rental value.

5. The Net annual value of a House property is Rs. 12,000. The deductions claimed are

as follows.

Repairs – Rs. 2000

Ground rent Rs.600

Insurance premium due – Rs. 1,000

Find income from house property.

6. Write short notes on vacancy allowance.

7. How will you compute income from let out house property?

8. Mr. X owns two houses which are used by him for his residential purposes.

House I House II

Municipal valuation 30,000 35,000

Fair rent 38,000 40,000

Standard rent 25,000 42,000

Calculate the GAV of the house properties.

9. What is Expected Rental value?

10. Mr. X has constructed a multistory building at Delhi consisting of 40 flats. Each flat is

let out @ 1,000 p.m. the municipal authorities have fixed the rental value of this property

as Rs. 4,50,000 p.a. The owner bears the following expenses.

Rs.

i. Lift Maintenance 12,000 p.a.

ii. Pump maintenance 8,000 p.a.

iii. Salary of Gardener and Watchman 3,600 p.a.

iv. Swimming pool expenses 9,000 p.a.

Compute the Annual Rental Value for the property,

Sec – B

1. How you will determine Net Annual Value of house property?

2.What deductions are allowed from the annual value in computing taxable income from

house property?

3.Enumerate the incomes from house property which are wholly exempt from tax.

4.Explain the provisions relating to vacancy allowance under the head of “Income from

house property” With Examples.

5.Mr. X, the owner of two houses, occupies one for his own residence and the other he

lets to a tenant at a monthly rent of Rs. 500. The municipal valuation of the house

occupied is Rs. 2,600 and of the other is Rs. 5,200. The municipal taxes of the two

amounted to Rs.600. The other expenses in respect of the two houses are as follows.

Rs.

Insurance premium (for both houses) 1,200

Annual charge in respect of the house occupied 300

Ground rent for the house let 100

Repairs of the house let 700

Interest on loan taken to repair the two houses 400

Mr. X also had income from other sources amounting to Rs. 20,000 during the year,

Calculate Mr. X’s income from house property and total income.

6.What deductions are allowed from the annual value in computing taxable Income from

house property?

7.Mr. Parampal Singh owns a house property consisting of 4 equal independent units at

Chandigarh. It was completed on 1.11.2006 and is used as follows.

a. 25% of floor area is used for his own business.

b. 25% of floor area is self occupied for his own residence.

c. 25% of floor area is let out for residential purpose @ Rs. 1,00 p.m.

d. 25% of floor area was let out for non residential purposes @ Rs. 1,000 p.m.

with effect from 1-4-2010 to 28-2-2011 and self occupied from 1-3-2011 onwards.

The other expenses incurred by Mr. Singh is respect of house property are :

Municipal Taxes 4,000 p.a.

Fire Insurance Premium Rs. 1,200 p.a.

Repairs of House Property Rs. 3,200 p.a.

Interest on loan for construction of house Rs. 36,000.

Compute income under the head house property for the assessment year 2011 – 12.

8.Compute Income from house property from the particulars given below for the

assessment year 2011 – 12 :

Rs.

Municipal rental value 24,000 p.a.

Actual rent received 30,000 p.a.

Municipal taxes 2,400 p.a.

Date of completion 31-3-2004

Date of letting 1-4-2004

Fire insurance premium (due) 400 p.a.

Ground rent (due) 600 p.a.

Interest on loan taken to construct the house

2001 – 02 to 2006 – 07 @ Rs. 15,000 p.a.

2007-08 Rs. 10,000

Interest on delayed payment of interest 1,000

9. Ray who has income only from house property, submits the following information

about his house property income: Rs.

Rental income of the year (after deducting following items). 1,00,000

i. Depreciation 24,500

ii. Lift maintenance charges 7,500

iii. Municipal Taxes (10% of MRV of Rs. 1,50,000) 15,000

iv. Vacancy 10,000

v. Repairs 18,000

vi. Pay of chowkidar 1,000

vii Bank commission 500

viii Legal expenses on recovery of rent 8,000

ix. Salary of gardener 1,200

Compute Mr. Ray’s income from house property for the previous year ending on

31.03.2011

10. Mr. B. owns a house property at Cochin. It consists of 3 independent units and

information about the property is given below:

unit 1 : Own residence, Unit 2 : Let out, Unit 3 : Own business Rs.

MRV 1,20,000 p.a.

FRV 1,32,000 p.a.

Standard Rent 1,08,000 p.a. .

Rent 3,500 p.m.

Unrealized rent for three months

Repairs 10,000

Insurance 2,000

Interest on money borrowed for purchase of property 96,000

Municipal Taxes 14,400

Date of completion 1.11.1998

Compute income from house property

Unit – IV

Sec- A

1. Define clearly the term Business

2. Define the term profession

3. What are capital Assets? Where are its kinds?

4. What is cost of acquisition?.

5. What is casual Income?

6. Explain “Deemed Profit”?

7. Explain the method of computing income from business?

8. What are the provisions relating to preliminary expenses?

9. Explain long term and short term capital gains?

10. What is grossing up?

Sec – B

1.What are the assets eligible for depreciation ?What are the approved methods of

depreciation under the income tax act?

2.Explain the provisions relating to exempted capital gains.

3.What is cost of acquisition ?How would you determine cost of acquisition?

4.What are the incomes from other sources ? State any five such incomes and deductions

allowed while calculating income from other sources.

6.The following is the Profit and Loss Account of Mr. X for the year ended on 31.3.2011.

Compute his taxable Business income for the assessment year 2011 – 12.

Rs. Rs.

To opening Stock 15,000 By Sales 80,000

“ Purchase 40,000 “ Closing Stock 20,000

“ Wages 20,000 “ Gift from Father 18,000

“ Rent 6,000 “ Sale of Motor Car 9,000

“ Repair to Motor Car 3,000 “ Income Tax Refund 3,000

“ Wealth Tax Paid 3,000

“ Medical Expenses 3,000

“ General Expenses 10,000

“ Depreciation on Motor Car 3,000

“ Advance Income Tax paid 1,000

“ Profit for the year 26,000

1,30,000 1,30,000

Following further information is given:.

1. Mr. X carries on his business from rented premises at Delhi, half of which is used

as his residence.

2. Mr. X bought a car during the year for Rs.20,000. He charged depreciation on the

value of the car. The car was sold during the year for Rs. 9,000. The use of the car

was 3/4th for the business and 1/4th for personal purposes.

3. Medical expenses were incurred during sickness of Mr. X for his treatment.

4. Wages include Rs. 250 per month on account of Mr. X’s driver for 10 months.

7.Following is the Profit and Loss Account of Kesari Malya for the previous year 2011 –

12.

PROFIT AND LOSS ACCOUNT

Rs. Rs.

To Salaries 25,650 By Gross Profit 80,000

“ Rent 1,000 “ Bank Interest 450

“ Commission on sales 100 “ Bad Debts recovered (last

“ Income-Tax 2,600 year allowed 2,000

“ Entertainment expenses 600 “ Rent from house property 4,800

“ Commission paid to collect 25 “ Interest on commercial

interest on securities securities 2,000

“ Embezzlement by cashier 1,000

“ Municipal tax of H.P. 600

“ Bad Debts (allowed) 450

“ Repairs to house 1,625

“ Office expenses 9,180

“ Depreciation 5,000

“ L.I.C. premium 1,320

“ Net profit 40,100

89,250 89,250

Depreciation on the assets is Rs. 4,500

Compute the taxable business income for the assessment year 2011 – 12.

Rs.

8.(i) Sale Price of Jewellery in Oct. 2010 (C.I.I. : 711) 20,00,000

(ii) Cost of acquisition in 1983 – 84 (C.I.I. : 116) 3,00,000

(iii) Amount invested in construction of new house upto 31-7.2011 4,00,000

(iv) Amount deposited in Capital Gain Deposit Scheme for

completing the construction of house (Deposited on 27-6-2011)12,00,000

Compute the taxable capital gain assuming that he does not own any other house.

9.From the following particulars given below compute the taxable income of Shri.

A.K. Syal for the assessment year 2011 – 12.

Rs.

i. Sale price of shares of A Ltd., acquired on 1.6.2009and sold on 1.5.2010 2,00,000

cost price of these shares 1,00,000

ii. Sale price of shares of B Ltd acquired in

1989-90 (C.I.I. : 172) sold on 1.12.10(C.I.I. 711) 1,40,000

Cost price of shares of B Ltd. 60,000

iii. Sale price of Jewellery sold on 1.9.2010 3,50,000

Cost of Jewellery acquired in 1985-86

(C.I.I. : 133) 60,000

Long Term Capital loss of Rs. 86,000 has been B/F from assessment year 2009-10

10.From the following particulars of Mr. Edward for the previous year ended 31st March,

2011 compute his total Income for the Assessment year 2011 – 12.

He received Rs.

i. Director’s fee from a company 10,000

ii Interest on Bank Deposits 3,000

iii Income from undisclosed sources 12,000

iv Winning from lotteries (Net) 24,185

v Royalty on a book written by him 8,000

vi By giving lectures in functions 5,000

vii Interest on loan given to a relative 7,000

viii Interest on tax free debentures of a company 3,588

(listed in recognized stock exchange) (Net)

ix Divided on shares 6,400

x Interest on post office savings bank A/c 500

xi Interest on Government Securities 2,200

He paid Rs. 100 for collection of dividend and Rs. 1,000 for typing the manuscript of

book written by him.

Unit – V

Sec - A

1. What is carry forward and set-off of losses?

2. How are speculation Losses set off?

3. Explain Intra-hand and Inter-hand set-off

4. Mr. X discuses the following incomes from business or profession for the previous year

2010 – 2011

Rs.

i) Profit from ‘A’ business 5,00,000

ii) Loss from ‘B’ business 1,00,000

iii) Loss from profession C 1,50,000

iv) Profit from speculation business D 2,00,000

v) Loss from speculation business E 3,00,000

Determine the income from business / profession.

5.Sanjay submits the following information relevant for the Assessment year 2008-09

Salary income(Gross) 63,000

Business Income(Loss) 80,000

House property (Loss) 20,000

Determine the net income of Sanjay.

6.What is Inter Source Adjustment?

7.Write a short note on set-off business loss?

8.Write a short notes on set-off capital losses?

9.Explain the rules governing the sett-off of unabsorbed depericiation.

10. How is gambling losses set off?

Sec – B

1.Explain the provision relating to set off of losses.

2. What are the provisions regarding set-off of losses When a person has income from

different heads?

3. State losses which can be carried forward and set off in subsequent year.

4.Under What are the circumstances are losses allowed to be set-off?

5.State the order in which current and brought forward losses are to be adjust.

6.The assessment of M Co. Ltd., Indian Company, for the years 2010-11 and 2011-12 show

the following results:

Ass. year Ass.year

2010 – 11 2011-12

i. Interest on securities (-) 2,000 (+)2,000

ii Income from house Property (+)8,000 (+)8,000

iii Profit and Gains of Business or Profession

(a) dealing in fruits (-)30,000 (-)12,000

(b) manufacturing glass :

Profit before depreciation (+)50,000 (+)1,40,000

Depreciation 80,000 75,000

(c) Speculative transactions (+) 6,000 (-) 9,000

iv Income from other Sources :

Bank Interest (+) 2,000 (+) 5,000

v Short – term Capital Gains Nil (-)25,000

Compute the net assessable results for each of the two years giving full reasons for your

workings.

7.How would you determine the net income of an individual?

8..Given below is the profit and loss account of Shri Rajaram for the year ended 31-3-2011:

Dr. Rs. Cr. Rs.

To Salaries 7,000 By Gross Profit 50,000

“ Drawings 8,000 “ Interest on Post office

“ Insurance Premium on his life 1,000 Saving Bank Account 100

“ Depreciation 4,500 “ Proceeds from Life

“ Donation to the recognized Insurance Policy 6,900

institutions 500 “ Interest on Bank deposit 3,600

“ General expenses 2,600

“ Education expenditure on his three

dependent sons in England 6,600

“ Provisions for doubtful debts 1,500

“ Income - tax 2,000

“ Rent 1,700

“ Net profit 25,200

60,600 60,600

Compute his taxable income for current assessment year after taking the following

information into consideration:

(a) The amount of depreciation allowable is Rs. 4,000.

(b) General expenses include Rs. 600 for his private expenses.

9.From the following particulars, calculate the taxable income, tax and deduction available

under Section 80 for assessment year 2011-12:

Rs.

Salary per month 6,000

Dearness allowances per month 1,600

House rent allowance per month 1,000

(Rent paid Rs. 1,500 p.m.)

House property is let out on a monthly rent of Rs. 2,000. The annual value of the house

property is Rs. 30,000. Municipal tax paid is Rs. 1,800 for whole year. Interest payable on

capital borrowed for the construction of the house is Rs. 6,000. Repayment of house building

loans taken from friends is Rs. 5,000 and from Life Insurance Corporation is Rs.3,000

Rs.

Interest on Savings Bank A/c 7,000

Dividend on master shares of UTI 3,000

Interest on PPF A/c 2,000

Interest on Govt. securities 7,000

Life insurance premium 6,000

Contribution to public provident fund 6,000

Deposits in account under National Saving Scheme (1992) 10,000

Interest accrued on NSC’s VIII issue 4,000

10.The following are the particulars of the income of a lecturer for the financial year ending

31st March 2011.

a. Salary Rs. 10,000 p.m. from which 15% is deducted or provident fund to

which the college contributes 12%.

b. Hardenship allowance Rs. 1,200 p.m.

c. Rent free house of which the annual letting value is Rs. 20,000.

d. Dividend received from co-operative society Rs. 800.

e. 8% interest on Government loan of Rs. 5,000

f. Rent from house property Rs. 12,000.

g. Interest on postal savings Bank Account Rs. 500

h. LTCG on sale of old car Rs. 2,500 and Jewellery Rs. 10,500.

i. STCG on sale of shares Rs. 9,000

j. Examinership remuneration Rs. 3,700.

During the year, he deposited Rs. 6,000 in NSS. He also purchased books worth Rs. 650.

Compute his total income for the Assessment year 2011 – 12.