B.

com Fifth Semester Valuation Script (Income Tax -1)

B.com Examination (March-April 2022)
Section A

a. Assessment year: [Sec.2 (9)]

Assessment year is a period of 12 months commencing on 1st April every year and ending on
31st march of next year. Assessment year is the financial year immediately succeeding the
previous year, e.g. for previous year 2020-21, assessment year will be 2021-22.
b. Direct Tax : Wealth Tax, Income Tax, Property Tax,
Indirect Tax : GST, VAT (Value Added Tax), Service Tax, STT
c. Casual income means an income which is casual in nature, i.e., which is unplanned, uncertain,
accidental, sudden income which occurs just by chance and the person cannot depend upon it
to produce income in future. Example: Winning from lotteries, gambling, betting, Horse Race.
d. PAN : Permanent Account Number
URPF : Un-Recognized Provident Fund
e. An individual is said to be resident in India in any previous year, if he satisfy any of the two
basic conditions and both the subsequent conditions.
f. Deduction U/s 16
Standard Deduction u/s 16 ia) = 50,000
Entertainment Allowances u/s 16 ii = Entertainment Allowances (only for Govt Employee)
Professional Tax u/s 16 iii = Professional Tax (only for Govt Employee)
g. According to section 17(2) of the income-tax Act the term “Perquisites” may be defined as any
casual emolument or benefit attached to an office or position in addition to salary or wages. It
represents personal benefit to an employee. Perquisites may be given in cash or kind.
h. The Annual value is the actual rent that is received in excess of the reasonable rent. The
annual value of the property must be calculated after deducting any taxes that the local
authorities have levied and have been paid by the owner.
i. Municipal Taxes paid by Land lord should be deducted from Gross Annual value of HP
Municipal Taxes paid by Tenant not to be taken.
j. Profession means the exploitation of one's skills and knowledge independently.
Professional Income is income from the exercise of any profession or vocation which calls for
an intellectual or manual skill. It covers Doctors, Lawyers, Accountants, Artists, Musicians,
Singers etc.
k. It is mandatory to file ITR for individuals If the gross total income is over Rs.2,50,000 in a
financial year. This limit exceeds Rs.3,00,000 for senior citizens and Rs.5,00,000 for super
senior citizens.
l. “Block of assets” means a group of assets falling within a class of assets comprising—
(a) Tangible assets, being buildings, machinery, plant or furniture;
(b) Intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises,
 Section B
2. Calculation of No of Days Stay in India of Mrs. Sanjana
Year Count of Days
2015-16 365
2016-17 365
2017-18 31 + 31 + 30 + 31 + 30 + 31 + 31 + 28 + 31 274
2018-19 30 + 31 + 30 + 31 122
2019-20 0

2020-21 15 -12 -2020 TO 31-03-2021(17 + 31+ 28+ 31) 107

1. Total No. of Days Stay in India during Previous Year = 107

2. Total No. of Days Stay in India during 4 Previous Year (Proceeding previous year) = 731
3. She is Resident for 2 Years out of 10 previous years (Proceeding previous year)
4. Total No. of Days Stay in India during 7 Previous Year (Preceding Previous year) = 1,856
Mrs. Sanjana satisfied Basic Condition-II and Both the Additional Conditions
Hence she is Ordinary Resident in India.

3. Computation of Taxable and Exempted Gratuity of Mr. Rao for the assessment year 2021-22
Particulars Amount
Actual Gratuity received 10,80,000
Less : Exempted Gratuity u/s 10(10)
Being Least of I or II or III
i) Actual gratuity received 10,80,000
ii) Maximum Limit 20,00,000
iii) Covered by Gratuity payment act.
15/26 x Basic salary x Service
15/26 x 26,520 x 35 5,35,500 5,35,500
Taxable Gratuity 5,44,500

4. Computation of Taxable Income from Salaries of Mr. Rohit for the assessment year 2021-22
Particulars Amount
Basic Salary (72,000 x 12) 8,64,000
Dearness Allowances (36,000 x 12) 4,32,000
Companies Contribution to RPF above 12% of Salaries (8% x 86,400
10,80,000) 5,500
Interest Credited to RPF above 9.5% p.a. (15,000 x 5.5 / 15)
Gross Salary 13,87,900
Less Deduction u/s 16
u/s 16(1) --
u/s 16(1a) (50,000)
U/s 16(2) Professional Tax --
Taxable income from Salary 13,37,900

Salaries for RPF Purpose = Basic Salary + Dearness Allowances = 8,64,000+ 2,16,000 = 10,80,000
5. Computation of Depreciation on Gross Block
Particulars Machinery
A ,B, C
WDV as on 01-04-2021
6,00,000 + 10,00,000 + 4,00,000 20,00,000
Add: Purchases (Machinery P on 01-10-2020) + 16,00,000
Less: Sales (Machinery C) - 3,20,000
WDV for calculation of Depreciation 32,80,000
Less: Depreciation @ 15% x 32,80,000 - 4,92,000
WDV as on 31-03-2022 27,88,000

6. Computation of Taxable Income from House Property for the assessment year 2021-22
Particulars LOP
Gross Annual Value 38,500
Less Municipal Tax 4,000
Annual Value 34,500
Less Deduction u/s 24
1) Standard deduction @ 30% 10,350
2) Interest on loan --
Taxable income from House property 24,150

Working Notes:
Computation Gross Annual Value
Particulars Rs
Municipal Value 41,000
Fair Rental Value 40,000
Actual Rent 42,000
Whichever more 42,000
Less: Rent of Vacancy Period - 3,500
Gross Annual Value 38,500

7. a) Income Tax is an Example of Direct Tax = True

b) Agriculture Income Earned in Pakistan – Fully Exempt = False
c) Annual value of Self Occupied Property is –Nil = True
d) Fine is allowable Expenditure = False
e) Entertainment allowances is allowable Deduction for all Employees = False
 Section C
8. Computation of Total Income of Mr. Kumar for the Assessment year 2021-22
SL Particulars Resident Not Ordinary Non
Resident Resident
I Income from Agriculture in USA
(1/2 Received in India) 80,000 40,000 40,000
ii Rent from House Property in Mumbai 1,00,000 1,00,000 1,00,000
iii Interest on FD in Bank of Baroda 1,50,000 1,50,000 1,50,000
iv Income from Business in Hubballi 50,000 50,000 50,000
v Dividend from Reliance Company 40,000 40,000 40,000
vi Profit from Business in Japan business
being controlled from India 70,000 70,000 --
vii Salary Earned and received in Russia 1,75,000 -- --
viii Salary Received as an Indian Embassy 10,000 10,000 10,000
ix Past year untaxed Foreign Income -- -- --
x Agriculture Income of India Exempt Exempt Exempt
xi Interest on P.OS.B -- -- --
xii Profit from Business in Raichur 1,85,000 1,85,000 1,85,000
Total Income 8,60,000 6,45,000 5,75,000

9. Computation of Taxable Income from Salaries of Mr. Gangadhar for the A.Y 2021-22
Particulars Amount
Basic Salary (50,000 X 12 ) 6,00,000
Dearness Allowances (30,000 X 12) 3,60,000
City Compensatory Allowances (5,000 x 12) 60,000
Education Allowances (1,000 x 3 x12) – (100 x 2 x 12) 33,600
House Rent Allowances (60,000 – 42,000) 18,000
Conveyance Allowances (Office Purpose) Nil
Employers Contribution to RPF above 12% of salaries
(15% - 12% = 3% x 7,80,000) 23,400
Interest credited to RPF above 9.5% p.a. 60,000x 5.5/15 22,000
Car Perquisite (2.4 Liters Big Car = 2,400 x 12 + 900 x 12) 39,600
Gross Salary 11,56,600
Less Deduction u/s 16
U/s 16(ia) Standard Deduction 50,000
U/s 16(iii) Professional Tax (200 x 12) 2,400
Taxable income from Salary 11,04,200

Mr Gangadhar does not Opt to be taxed U/s 115BAC.

Meaning of Salaries for RPF Purpose

Salaries = Basic salary + D.A (If) + Commission (If it is % based on Turnover)
= 6,00,000 + 50%x 3,60,000 = 6,00,000 + 1,80,000 = 7,80,000

Note: 2.4 Liters Car is Big Car (2.4CC Question Mistake)

10. Computation of Taxable Income from House Property of Mr. Hari Prasad for the A.Y 2021-22
Particulars SOP LOP
Gross Annual Value 3,50,000
Less Municipal Tax 30,000
Annual Value Nil 3,20,000
Less Deduction u/s 24
a. Standard deduction @ 30% x 3,20,000 - 96,000
b. Interest on loan for Construction
Previous Year - 30,000 -1,20,000
Pre- Completion Interest (1/5 x 1,50,000) -- - 30,000
Income from House property - 30,000 74,000

Taxable Income from House property = 74,000 – 30,000 = 44,000

Working Notes:
Computation Gross Annual Value
Particulars House II
1 Municipal Value 3,00,000
2 Fair Rental Value 3,60,000
Whichever More 3,60,000
3 Standard Rent 2,70,000
Whichever Least 2,70,000
4 Actual Rent – Unrealized Rent 3,50,000
Gross Annual Value Whichever More 3,50,000

1. Since Date of Loan and House Constructed within 5 years of loan taken are not Mentioned
in question therefore Maximum interest for SOP is 30,000 only.
2. Mr. Hariprasad does not Opt to be taxed U/s 115BAC.

11. Computation of Income from Business of Mr. Dhanpal Shetty For the A.Y 2021-22
Net Profit as per P&L A/c 1,02,600
Add Disallowed expenses
Personal Car Expenses (1/2 x 4,000) 2,000
Excess Depreciation (17,000 – 12,000) 5,000
Daughter’s College fees 1,000
P.D.D 2,400
Furniture Purchased 6,000
Donation 2,000
Wealth Tax 1,000 19,400
1,22,000
Less Disallowed Incomes/Exempted Incomes
Interest o P.O.S.B A/c 4,000
Agriculture Income 20,000 24,000
Income from Business 98,000

Bad debts recovered previously allowed is allowable Income

12. Income from Profession of Mr. Vikas for the Assessment year 2021-22
Particulars Rs Rs
Professional Income
Building Valuation fees 14,000
Blue Print charges 4,000
Supervision Charges 80,000
Site Visiting fees 6,000
Building Contract Fees 8,00,000
Gifts from Clients (in kind) 2,000
9,06,000
Less Professional Payments
Salary to staff 40,000
Office Rent 10,000
Periodicals 1,000
Expenses on Engineering Works 4,40,000
Allowable Depreciation 30,000 5,21,000
Income from Profession 3,85,000
Note: Gifts from clients in kind are Professional Income and Cost of New Telephone Inadmissible

13. Computation of Taxable Income from Salaries of Smt. Niharika for the A.Y 2021-22
Rent Free House Rent
Particulars House Allowances
Basic Salary (80,000 x 12) 9,60,000 9,60,000
Dearness Allowances (40,000 x 12) 4,80,000 4,80,000
City Compensatory Allowances (10,000 x 12) 1,20,000 1,20,000
Entertainment Allowances (4,000 x 12) 48,000 48,000
Medical Allowance (1,500 x 12) 18,000 18,000
Bonus (80,000 x 2) 1,60,000 1,60,000
Rent Free Accommodation 2,41,900 --
House Rent Allowances (2,40,000 – 72,000) -- 168,000
Gross Salary 20,27,900 19,54,000
Less Deduction u/s 16
u/s 16(ia) (50,000) (50,000)
U/s 16(iii) Professional Tax -- --
Taxable income from Salary 19,77,900 19,04,000
As Taxable Income is Low in Option II (HRA) Compared to Option I (Rent free House)
Its advised to Niharika to opt HRA because she pay less Tax (she save Tax)

W.N 1: Meaning of Salaries For Rent free Accommodation purpose

Salaries = Basic salary + D.A (If) + Bonus + All Taxable allowances + monetary payments
= 9,60,000 + 2,40,000 + 1,60,000 + 1,20,000+ 48,000 + 18,000 = 15,46,000
Value of unfurnished house (15% X 15,46,000) 2,31,900
Add: 10% of Cost of Furniture (10% x 1,00,000) 10,000
Value of Furnished house 2,41,900

W.N 2: Salaries for HRA Purpose = Basic salary + D.A (If)

= 9,60,000 + 50% (4,80,000) = 9,60,000 + 2,40,000 = 12,00,000
Actual HRA Received = 20,000 x 12 =2,40,000
Rent paid – 10% x Salaries = 1,92,000 – 1,20,000 =72,000
50% x 12,00,000 = 6,00,000
Exempted HRA is 72,000 (Least of the above)