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B.Com (Hons.

) Section A and H, Income Tax Laws and Practice Asha Rani

Questions for Income under the head Salary Chapter


Question:1. Mr. Dhruv (with 60% hearing impairment certified by medical authority) is 55
years old resident and is working as an assistant manager with Star Pvt. Ltd. in Chennai. He
furnishes the following information for the PY 2018-19. Compute his total income and tax
liability for the AY 2019-20.
Particulars Amount(Rs.)
Basic Salary 60000 p.m.
DA (60% form part of salary for retirement benefits) 20000 p.m.
Commission 8% on turnover of Rs.8,00,000 64000
Transport allowance (Actual Exp. 1500 p.m.) 4500 p.m.
Conveyance allowance (Actual Exp. 3000 p.m.) 3500 p.m.
HRA (Rent paid Rs. 20,000 p.m.) 32000p.m.
His employer provides him an interest Free loan on 30.08.2018 to 20000
purchase AC. Dhruv has to repay Rs.1000 p.m. from Nov., 2018.
(SBI lending rate is 10%)
Company contributed to his RPF to which he made a matching contribution. 9000p.m.
13% interest credited to RPF during the previous year 2018-19. 39000
Lunch allowance 2000 p.m.
Dividend received from Tata Corp., Indian company 10000
Interest with saving bank account with PNB 8800

Question-2. Anshika, aged 58 years with ABC Ltd., the remuneration includes:
Basic Salary Rs.80,000, Dearness Allowance- 10% of basic salary (forming part for retirement
benefits), HRA – Rs.24,000 p.m. (rent paid Rs.20,000 p.m. in Delhi), Employer’s contribution
to NPS – Rs.10,000 p.m. Anshika contributes an equal amount every month. Motor car facility
for official and private use. The car (1200 cc), the cost of car is Rs.7,00,000,which is owned by
the Employer. Running and maintenance cost of Rs. 1,10,000 p.a. is also incurred by the
employer. Anshika pays Rs.600 p.m. to the employer for the use of this facility. The only other
income of Anshika is interest from fixed deposit- Rs.82,000
She deposited: Tuition fee of Rs. 30,000 for 2 children, Rs.40,000 in Sukanya Samriddhi
Scheme, Paid Mediclaim premium of Rs.15,000 each for herself and husband.
Compute Anshika’s tax liability for the Assessment year 2019-20.
Question: 3. X (40 years) receives Rs. 7,90,000 as basic pay and Rs. 1,18,000 as bonus during
the previous year 2018-19. Besides, he gets Rs. 52,000 as dearness allowance (forming part of
basic pay) and 4% commission on turnover achieved by him. During the year, turnover achieved
by him is Rs. 90,00,000. His employer contributes Rs. 2,24,240 towards provident fund. The
amount of interest credited to provident fund on Nov. 15, 2018 at the rate of 10% comes to Rs.
40,000. His income from house property is Rs. 1,15,000. During the year he makes the following
contributions and investment –

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B.Com (Hons.) Section A and H, Income Tax Laws and Practice Asha Rani

Own contribution towards provident fund: Rs. 3,36,360


Insurance premium on own life: Rs. 9,000 (sum assured Rs. 80,000, policy taken in May
2018)
Tuition fees of daughter: Rs. 22,000
Contribution towards NSC VIII Issue: Rs. 11,000
Insurance premium on the life of major son (not dependent upon X): Rs. 4,000 (sum assured
in 2008 Rs. 1,00,000)
Insurance premium on the life of mother (aged 50 years) of X (dependent upon X): Rs. 2,000
(sum assured in 2000 Rs. 50,000)
Deposit in Sukanya Samriddhi Account: Rs.10,000 (approved for the purpose of Section
80C)
Repayment of loan taken to purchase house property: Rs. 21,000
Determine the taxable income and tax liability of X for the AY 2019-20 on the assumption that
the provident fund is (a) a statutory provident fund, (b) recognized provident fund, or (c)
unrecognized provident fund.
Question-4. Mr. X, an employee of PQR Co. Ltd. At Chennai and covered under Payment of
Gratuity Act, 1972, retires at the age of 63 years on 31-12-2018 after completing 34 years and
7 months of service. At the time of retirement, he is entitled for monthly pension of Rs.40,000.
He gets 80 % of pension commuted for Rs.9,00,000 on 1-2-2019. His employer also pays Rs.
20,51,000 as Gratuity and Rs. 6,00,000 as accumulated balance of RPF. Determine the salary
chargeable to tax for Mr. X for the Assessment year 2019-20 with help of following information:
Basic salary (80,000*9): Rs. 7,20,000, Bonus: Rs. 72,000, Employer’s contribution towards the
RPF: Rs. 1,10,000, Rent paid by Mr. X (12,000*12): Rs.1,44,000, Professional Taxes paid by
Mr. X: Rs.5,000.
Note: Salary and Pension falls due on the last days of each month.
Question-5. X (64 yrs.) is a director of A Ltd. Since 1981. He gets Rs.1,10,000 per month as
salary (up to September 30, 2018 prior to this it was Rs.1,00,000 per month) and Rs. 3,000 per
months as bonus. He owns a car which is used by him, for official and personal purposes. The
entire expenditure of car and driver of Rs.1,95,000 is borne by the company. As per logbook of
the car 70% of the expenditure is attributable towards the official use of the car. Company
reimburses Rs. 20,200 on account of personal telephone bills and Rs. 8,000 on account of
personal water bills for the financial year 2018-19. The company contributed 15% of salary
towards RPF (X made equal contribution), and credited Rs. 60,000 as interest @ 15% on 31 st
December, 2018.
X retired from the company on March 31, 2019 and gets a gratuity of Rs. 12,00,000 (the
employee is not covered with Payment of Gratuity Act). After retirement he gets a fixed pension
Rs.10,000 p.m.

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B.Com (Hons.) Section A and H, Income Tax Laws and Practice Asha Rani

Assuming the income of X from the other sources is Rs. 2,38,000 (including bank deposit
interest Rs. 25,000 from saving bank of Punjab National Bank). Find out his taxable income and
tax payable for the assessment year 2019-20.
Question 6. (age 56 years) receives the following incomes from Y Ltd. during the year ending
March 31, 2019:
a. Salary @ Rs. 65,000 p.m.
b. Tiffin allowance (Actual expenditure Rs. 20,000) @ Rs. 2,000 p.m.
c. Commission @ Rs. 2,000 p.m.
d. Reimbursement of ordinary medical expenditure for the treatment of X and his family
members: Rs. 20,000
e. Transport allowance @ Rs. 200 p.m.
Besides, X enjoys the following perks:
a. Unfurnished flat provided at Delhi at a nominal rent of Rs. 6,000 p.m. (Rent paid by
employer Rs. 18,000 p.m.)
b. Interest free loan for purchasing home appliances (Amount: Rs. 1,00,000; Date of
taking loan: 1-06-2013; Amount outstanding between April 2018 and Nov. 30, 2018:
Rs. 50,000 and after Nov. 30, 2018: Rs. 18,000. The SBI lending rate for similar loan
on April 1, 2018 is 18.50%.
c. The employer company sells the following assets to X on January 10, 2019:
Assets Sold Car Computer Fridge
Cost of asset to the employer Rs. 4,00,000 Rs. 60,000 Rs. 20,000
Sale price Rs. 2,00,000 Rs. 8,000 Rs.12,000
Date of purchase of all the assets (Put to use on same day): June 10, 2016.
d. He contributed 18% of his salary to a recognized provident fund account to which his
employer made matching contribution.
e. Interest @ 12.5% p.a. amounting to Rs. 50,000 has been credited to his aforesaid
provident fund account during the previous year on Dec. 10, 2018.
f. He donated Rs. 18,000 to National Defence Fund.
Determine the net income of Mr. X for the previous year 2018-19 relevant to the assessment
year 2019-20.
Question 7. Z is a public relationship officer of M/s. A Ltd. in Gurgaon. He has furnished the
following details of his income for the year ended 31-3-2019:
1. Basic salary Rs. 30,000 p.m.
2. Dearness allowance (50% forms part of salary for retirement purpose Rs. 8,000 p.m.
3. Commission Rs. 3,000 p.m.
4. Entertainment allowance Rs. 800 p.m.
5. Transport allowance (actual expenditure incurred on commutation
between office and residence is Rs. 500 p.m. only) Rs. 1,000 p.m.
6. Employer company provided him with rent free accommodation for which the company
was required to pay Rs. 15,000 p.m.
7. He raised interest free loan of Rs. 20,000 on 1-4-2018 to purchase a motor cycle.
8. Employer reimbursed medical bills amounting Rs. 20,000 during financial year 2018-19.
9. Company paid professional tax amounting to Rs. 2,500 on his behalf.
10. Company contributed Rs. 50,000 to his recognized provident fund account to which he
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B.Com (Hons.) Section A and H, Income Tax Laws and Practice Asha Rani

made similar contribution.


11. Received Rs. 20,000 as share of profit from a partnership firm.
12. Rs. 30,000 was credited to aforesaid provident fund account during 2018-19 @ 12% p.a.
by way of interest.
13. Dividend received from Tata Motors Ltd., an Indian company Rs. 10,000.
14. He paid LIC premium on the life policy (issued before April 1, 2013) of his major married
son amounting to Rs. 25,000 (sum assured: Rs. 1,00,000).
15. Donation to Prime Minister’s National Relief Fund: Rs. 10,000. Donation paid to
Government for promoting family planning: Rs. 80,000.
Determine the taxable income and tax liability of Mr. Z for the assessment year 2019-20.

Question-8. X (age 54 years), a director of LMN (P) Ltd., receives the following
emoluments during the previous year relevant for the assessment year 2019-20:
Basic salary: Rs. 1,80,000; Dearness allowance: Rs. 24,000 (not forming part of basic pay);
commission @ 1% of turnover (turnover achieved by X during the previous year 2018-
19: Rs. 10,00,000); arrears of the bonus of the previous year 2012-13: Rs. 6,000 (not
taxed earlier); employer’s contribution towards RPF: Rs. 30,000; interest credited in
provident fund account @ 13.5% on April 3, 2018: Rs. 900; conveyance allowance: Rs.
1,200 (60% of which is utilized for official purposes); education allowance for X’s three
sons @ Rs. 183.33 per month per child: Rs. 6,600; rent-free furnished house in Calcutta
(lease rent of unfurnished house paid by the employer: Rs. 90,000; rent of furniture:
Rs. 12,000); free services of gardener, cook and watchman (salary: Rs. 3,000, Rs. 4,000,
Rs. 5,000 respectively). On March 10, 2019, LMN (P) Ltd. sells imported furniture to X
for Rs. 20,000 (the furniture was purchased by the company on June 30, 2010 for Rs.
6,10,000 and since then it was used for business purposes). He runs a business. During the
previous year, income from business is Rs. 5,40,000.
He makes the following payments during 2018-19:
a. Own contribution to RPF: Rs. 32,000
b. Deposit in Home Loan Account of National Housing Bank: Rs. 4,000 (including
advance deposit of Rs. 1,000)
c. Contribution to NSC VIII issue: Rs. 24,000
Determine the net income and tax liability for the assessment year 2019-20.

Question: 9. X was general manager of ABC Ltd. He retired from service on 31-12-2018
after 30 years and 7 months of service. The following information has been provided by him:
a. Salary Rs. 18,000 p.m. from 1-1-2019.
b. House rent allowance Rs. 10,000 p.m. From 1-1-2019, he lived in his own house.
c. Medical allowances Rs. 2,400 p.m. Rs. 11,200 being the cost of first class rail-ticket for X
and his family for their visit to their home town were reimbursed by the employer.
d. A car of 1.4 litres engine cubic capacity is provided by the company for official and
personal use and all expenses of running and maintenance of car and salary of the driver
are borne by the employer.

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B.Com (Hons.) Section A and H, Income Tax Laws and Practice Asha Rani

e. X contributes 20% of his salary to a recognized provident fund and the employer
contributes 10%.
f. He has invested Rs. 10,000 in National Savings Certificate VIII Issue and Rs. 10,000 in
PPF account. He paid Rs. 8,000 towards life insurance premium.
g. He received Rs. 2,70,000 as gratuity. His salary for the preceding years were as under:
- Year ending 31-12-2016: Rs. 1,68,000
- Year ending 31-12-2017: Rs. 1,80,000
- Year ending 31-12-2018: Rs. 1,88,000
h. He received Rs. 2,16,000 for encashment of leave for twelve months unavailed leave.
He was entitled to one month’s leave for every year of service.
Compute his taxable income for the assessment year 2019-20.

Question: 10. Mr. X (age 58 years) is the manager of a private company at Delhi since March
1, 2015. He is in grade of Rs. 10,000 – 500 – 20,000, plus a dearness allowance @ 20%
of his basic pay, half of which enters into retirement benefits. He contributes 15% of his
salary to RPF to which his employer contributes an equal amount. He has been provided
with a rent-free house for which the company pays rent of Rs.80,000
p.a. He is getting transport allowance of Rs. 6,000 p.m. He is also getting fixed medical
allowance of Rs. 5,000 p.m. and tiffin allowance of Rs. 5,000 p.m. His club bills of
Rs. 40,000 were also paid by the company. A car of 1.4 litres engine cubic capacity is
provided by the company for official and personal use and all expenses of running and
maintenance of car and salary of the driver are borne by the employer.
On March 10, 2019, co. sells imported furniture to X for Rs. 20,000 (the furniture was
purchased by the company on June 30, 2009 for Rs. 6,10,000 and since then it was used
for business purposes).
He received Rs. 11,000 by way of encashment of leave on March 31, 2019. He has been
provided with the facility of a gardener and a cook who are paid each Rs. 5,500 p.m. by
the employer. He is also provided with a laptop costing Rs. 1,00,000 for use.
Two children of Mr. X are studying in the school run by the employer for which no fees
are paid. Expenditure per student is Rs. 1,500 per month.
His salary falls due on the first day of next month. His other incomes are:
Dividend from Indian Co. Rs. 10,000
Long-term capital gain Rs. 20,000
Bank interest Rs. 50,000
He paid LIC premium on the life of his major son Rs. 24,000 on a policy of Rs. 1,00,000
(policy is taken during 2012-13).
Compute his total income and tax payable for the assessment year 2019-20.

Question: 11. ‘Z’ retired from Reserve Bank of India, a statutory corporation on June 30,
2018. At the time of retirement his remuneration included:
a. Basic salary: Rs. 32,000 per month (annual increment of Rs. 4,000; given on 1-1- 2019)
b. Dearness allowance: 25% of basic salary (40% was part of retirements benefits)
c. Transport allowance: Rs. 4,200 per month
d. Entertainment allowance: Rs. 3,000 per month.
e. Rent free accommodation owned by the employer at Delhi. It was furnished with a cost
of Rs. 80,000 incurred by the employer 5 years ago.

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B.Com (Hons.) Section A and H, Income Tax Laws and Practice Asha Rani

On retirement, his pension was fixed at Rs. 18,000 per month. 40% of the pension was
commuted by employer on 1-10-2018 and a sum of Rs. 5,40,000 was paid in lieu thereof.
Z also received a sum of Rs. 2,96,000 for unavailed leave of 222 days. He was entitled
to a leave of 36 days for each completed year of service. Total service period of Z was 28
years and 9 months. After retirement ‘Z’ went back to his home town Assam and occupied
his own house. The employer gave him five tickets of ‘Air India’ flight, each worth Rs.
23,000. The tickets were meant for ‘Z’, his wife and three children (one of the child was
eight years old). Besides, the income from employment, ‘Z’ reported the following income:
a. Long term capital gains: Rs. 80,000
b. Gifts from friends on the occasion of retirement: Rs. 1,32,000
c. Gifts from relatives: Rs. 93,000
d. Income of minor child: Rs. 19,500
He invested Rs. 70,000 in PPF and Rs. 40,000 in Kisan Vikas Patra.
Compute the total income and tax liability ‘Z’ for the assessment year 2019-20

Question:12. Mrs. R (age 45 years), a finance manager in D Ltd., New Delhi furnishes
the following particulars for the previous year 2018-19:
1. Basic salary Rs. 16,000 p.m.
2. Dearness allowance Rs. 2,000 p.m.
3. Bonus 3 month’s basic pay
4. Commission Rs. 1,000 p.m.
5. Contribution of the employer and employee to RPF is Rs. 28,000 each.
6. Entertainment allowance is Rs. 12,000 per annum.
7. Allowance to meet cost of education and hostel expenditure of three children Rs. 5,000
p.a. each.
8. Rent free unfurnished flat in Delhi provided by the company for which company pays a rent
of Rs. 2,600 p.m.
9. Housing loan of Rs. 5,00,000 at the interest rate of 7.40% p.a. was advanced on 1-10- 2018
(no repayment made during the year). Assume SBI rate is 10.15% on April 1, 2018.
10. A Titan watch costing Rs. 4,800 was gifted by the company on the foundation day of the
company.
11. A Maruti Esteem car which was purchased by the company on 10-8-2013 for Rs.
4,00,000 was sold to the assessee on 16-9-2018 for Rs. 1,80,000.
12. Her minor son earned an interest of Rs. 8,470 on the deposits made with Punjab
National Bank.
13. Assessee earned dividends amounting to Rs. 16,000 from foreign companies. She made the
following payments and investment during the previous year:
• Medical insurance premium by cheque for self: Rs. 9,000 and for spouse: Rs. 7,000.
• LIC pension fund Rs. 11,000.
• Premium paid to insure the life of her major son Rs. 20,000.
• Infrastructure bonds of ICICI Rs. 40,000.
• Donation to a public charitable institution registered under section 80G Rs. 40,000.

Determine the taxable income and tax liability of Mrs. R for the A/Y 2019-20.

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