INDIAN SCHOOL OF BUSINESS AND FINANCE

TAX AND ESTATE PLANNING

Additional practice Questions

Q.1. Income tax extends to A. Whole of India except Jammu and Kashmir B. Whole of India except Sikkim C. Whole of India D. Whole of India except Jammu & Kashmir and Sikkim Q.2. Which of the following is included in person? A. Male/Female B. Minor child C. Insane person D. All of the above Q.3. Mr. Jaiswal, a chief executive of a company, finds that he had to undertake foreign tours for the companys work and had to remain out of India for as many as 310 days in FY 07-08. He has never been out of India for four years preceding the FY 2007-08.His residential status for previous year 07-08 would be ________. A. Foreigner B. Resident but not Ordinarily Resident C. Resident in India D. Resident outside India Q.4. In case of unexplained investments, the deemed income of the assessee of such financial year will be A. Amount not recorded in the books B. Amount of actual investments C. Value of such investments D. Either B or C Q.5. The tax paid by money market mutual fund on dividend distributed is A. 25% + SC @10% + education cess @3% B. 15% + SC @10% + education cess @3% C. 12.5% + SC @10% + education cess @3%

D. 20% + SC @10% + education cess @3% Q.6. A Will made by one of the owner of the joint property for the whole property is valid. A. True B. False Q.7. On the occasion of silver jubilee of S Ltd., Ashish an employee, is gifted a watch worth Rs. 3500. Is this gift taxable for Ashish? A. Yes B. No Q.8. Mrs. Saluja purchased future of Reliance Petroleum for Rs. 265000. Calculate the STT paid by her. A. Rs. 450.5 B. Rs. 662.5 C. Rs. 66.25 D. Nil Q.9. NRE account can be opened only by A. OBCs B. NRIs C. Both A and B D. None of the above Q.10. Deduction under section 80G on account of donation is allowed to A. HUF B. Individual C. Association of Persons D. Any assessee Q.11. Minimum ____ days should have passed after the testators death for the grant of probate. A. 10 B. 15 C. 7 D. 5

Q.12. Mr. Rajesh is a member of HUF. He owns a commercial building which he has transferred into the common pool of HUF. If the income generated by the said asset is Rs. 75000, calculate the taxable income in the hands of HUF? A. Rs. 75000 B. Rs. 37500 C. Rs. 60000 D. Rs. 0 Q.13. The minimum penalty for failure to deduct the whole or any part of tax under TDS provisions shall be: A. Rs. 10,000 B. Rs. 1, 00,000 C. Amount equal to tax which has not been deducted and 300% of such tax respectively. D. Amount equal to tax which has not been deducted. Q.14. Which of the following statement is/are true? I. Long term capital gain can be set off against short term or long term capital gains. II. Loss from speculation business can be carried forward for 8 assessment years immediately succeeding the year for which the loss was first computed. A. I B. II C. I and II D. Neither I nor II Q.15. Deduction under section 80D is allowed to: A. Any assessee B. Individual only C. Individual and HUF D. Individual and HUF who is resident in India Q.16. A non-resident receives rental income of Rs. 65000 in Germany but remits it to India. This income would be_____. A. Taxable in India B. Taxable to the extent it is remitted to India C. Non-taxable in India D. Partially taxable Q.17. Mr. Abhinav has a house in Pune used by him throughout the previous year 2007-08 for his residence. Municipal Value is Rs. 2, 70,000; fair rental value is Rs. 2, 95,000 and standard rent is Rs. 2, 50,000. The following expenses were incurred by

him: Repairs Rs. 20,000, Insurance Rs. 5,000, Municipal taxes Rs. 21,000. Calculate the annual value of Mr. Abhinavs house. A. Rs. 160300 B. Rs. 135300 C. Rs. 229000 D. Nil Q.18. Deepansh sold his residential house on 25-06-2006 and made a long term capital gain of Rs. 377885.He purchased a new house on 31-08-2006 for Rs. 350000 which is again sold for Rs. 575000 on 16-09-2007. He purchased another house on 20-11- 2007 for Rs. 620000. Calculate the exemption available u/s 54 for the AY 200809. A. Nil B. Rs. 575000 C. Rs. 620000 D. Rs. 350000 Q.19. Mr. Faraz is an employee with SS Ltd. During the PY 2007-08, he has been given a rent free unfurnished flat in Delhi which is owned by the company. The cost of furniture provided is Rs. 125000 and two air conditioners, which has been taken on hire by the company for Rs. 2500 p.a. each. Determine the value of the perquisite for the AY 2008-09 if the salary of Mr. Faraz is Rs. 360000 p.a. and he pays Rs. 500 p.m. as rent to the company. A. Rs. 71500 B. Rs. 65500 C. Rs. 89500 D. Rs. 83500 Q.20. The Total Income of Mr. Alok, resident in India, computed for the assessment year 2008-09 is Rs. 3, 40,000. He deposits Rs. 20,000 in a PPF account. Compute the tax payable by Mr. Alok assuming that he has agricultural income of Rs. 5,000. A. 46350 B. 52530 C. 44805 D. Nil Q.21. Rahim acquired a plot of land on 14-07-1979 for Rs. 350000. He converts the plot into stock in trade of his real estate dealing business on 12-03-2005 when the fair market value of the plot was Rs. 25, 00,000. The stock in trade is sold by Rahim on

12-03-2008 for Rs. 34, 00,000. (FMV as on 1-4-1981 was Rs. 300000) Calculate the capital gain for AY 2008-09. A. Rs. 9, 00,000 B. Rs. 31, 05,000 C. Nil D. Rs. 8, 20,000 Q.22. Mr. Satish, aged 46 years, has put 22 years of service in a public sector undertaking, voluntarily resigns under the scheme of Voluntary separation .He has 8 years and 9 month of services left and his last drawn salary is Rs. 18,000. He is paid Rs. 4, 00,000 as compensation. Calculate the taxable amount of compensation? A. Rs.1, 00,000 B. Rs.1, 92,570 C. Rs.5, 00,000 D. Nil Q.23. Ram and Shyam contribute Rs. 250000 each in a firm sharing profit and losses equally. What is the maximum remuneration allowed to the partners if the net profit for the previous year 2007-08 is Rs. 400000? A. Rs. 400000 B. Rs. 212500 C. Rs. 230000 D. Rs. 200000 Q.24. Mr. Salman is employed with Kothari Ltd. on a basic salary of Rs. 8,000 p.m. He is also entitled to D.A. of 20% of basic salary. 60% of the D.A. is included in salary for retirement benefits. The company gives him HRA of Rs. 3,500 p.m. He was staying with his parents till 31-10-2007. From 1-11-07 he takes an accommodation on rent in Kanpur and pays Rs. 2,500 p.m. as rent for the accommodation. Compute the exempted amount of HRA. A. Rs. 12500 B. Rs. 17500 C. Rs. 8020 D. Rs. 19248 Q.25. Ali and Mohan are partners in a firm sharing profits and losses in the ratio of 2:1. Ali contributes Rs. 300000 and Mohan contributes Rs. 450000. For the previous year ending on 31st March08, the profit of the firm is Rs. 360000. What is the tax liability of the firm for AY 2008-09?

A. Rs.108000 B. Rs.118800 C. Rs. 122364 D. Rs. 111240 Q.26. Mr. Ram retired from ABC Ltd. after completing service of 29 years and 9 months. His salary at the time of retirement was Rs. 10,500 per month, while the average salary for preceding 10 months worked out to Rs. 9,800 per month. The actual amount of gratuity received by him at the time of retirement was Rs. 3, 25,000. Calculate the amount of gratuity exempt from tax assuming that the provisions of Payment of Gratuity Act, 1972, cover him. A. 1, 81,731 B. 1, 75,673 C. 2, 94,000 D. 3, 25,000 Q.27. Rohit, who was born on 04-04-1978, submits the following information: 1. Rent from house (per month) Rs. 16000 2. Municipal taxes paid during the year Rs. 9000 3. Long term capital gains on sale of gold Rs. 40000 4. Interest on bank deposits Rs. 34150 5. Term deposit in a schedule bank for six years Rs. 20000 Compute the total income chargeable to tax for AY 200809 A. Rs. 182250 B. Rs. 202250 C. Rs. 237150 D. Rs. 257150 Q.28. What is power of attorney? A. It is authority given on behalf of one person to another to act on behalf of other person. B. It is an authority given by one person to another to do any lawful act on behalf of other. C. Both of the above D. None of the above Q.29. Mr. Shiraz deposited a sum of Rs. 250000 on 1-4-2007 in a scheduled bank @ 9% p.a. What amount will he receive after 1 year?

A. Rs. 250000 B. Rs. 272500 C. Rs. 270182.5 D. Rs. 269719 Q.30. Mr. Z earns a profit of Rs. 40000 from business in China which is controlled in India, half of the profit being received in India. What will be the income chargeable to tax in India for AY 2008-09 assuming he is non-resident in India? A. Rs. 40000 B. Rs. 20000 C. Nil D. None of the above

SOLUTIONS: 1. C 2. D 3. C 4. C 5. A 6. B 7. B 8. 265000*0.17% = 450.5; Ans- Option A 9. C 10. D 11. C 12. D 13. D 14. Long term loss can be set off against long term capital gain only and loss from speculative business can be carried forward for 4 assessment years; Ans- Option D 15. C 16. C 17. Since the house is self- occupied so NAV will be Nil; Ans- Option D 18. No exemption is available u/s 54 for AY 2008-09 as it is a short term capital gain; Ans- Option A

19. Value of unfurnished flat in Delhi (360000*15%) + 10% cost of furniture (125000*10%) + Rent of two air- conditioner (2500*2) 0 6000 65500

54000 12500 5000 7150

Less: Rent paid to the company (500*12) Ans Option B

20. Since agricultural income does not exceed Rs. 5000 so there will be no partial integration and tax will be calculated on Rs. 320000; Ans Option A 21. Full value of consideration - Rs. 2500000 Less: Indexed cost of acquisition- Rs. 1680000 Long term capital gain Ans- Option D (350000*480/100) Rs. 820000

22. Minimum of the following will be exempted i) VRS actually received Rs. 4, 00, 000 ii) The higher of the following amount: a) 3 months salary for each completed year of the service: (18000) X 3 X 22 = Rs. 11, 88,000 b) Salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation: 18000 X (8 X 12 + 9) = Rs. 18, 90,000 iii) Rs. 5, 00, 000 So minimum of the above three is Rs. 4, 00,000 is exempted; Ans- Option D 23. Maximum allowable remuneration: 90% of Rs. 75000 = 67500 60% of Rs. 75000 = 45000 40% of Rs. 250000 = 100000 67500 + 45000 +100000= 212500 ;Ans Option B 24. From 1-4-2007 to 31-10-2007, since no rent has been paid so no exemption shall be available. For Nov- Mar 2008 exemption shall be: a) Actual HRA received (3500*5) b) Rent paid 10% of salary [12500 10%(40000+4800)] c) 50% of salary Rs. 8020 will be exempt Ans- Option C 17500 8020 22400

25. Firm is taxed @ 30% i.e. 36000*30% = 108000 +3240 (3% cess) = 111240; Ans Option D 26. The minimum of the following amount will be exempt: i) Actual amount received ii) 15 days salary based on last drawn salary for every completed year of service (10500 X 15 X 26) / (30) 3, 25,000 1, 81,731

iii) Rs. 3, 50,000 Therefore, exempt amount is Rs. 1, 81,731; Ans Option A 27. Income from house property: Actual rent (16000*12) 192000 Municipal taxes 9000 183000 Less: Statutory deduction@ 30% 54900 128100 Long term capital gain on gold 40000 Interest on bank deposits 34150 Gross Total Income 202250 Less: Deduction u/s 80C 20000 Total income 182250 Ans- Option A 28. B 29. Interest received = 250000*9% = 22500*TDS @ 10.3% =2317.5 Net interest received = 22500 2317.5 = 20182.5 Net Amount received = 250000 + 20182.5 = 270182.5; Ans Option C 30. Ans Option B